Opinion ID: 714797
Heading Depth: 2
Heading Rank: 3

Heading: The Maryland Set-Off Issue

Text: 23 With respect to the issue of what set-off rules would apply to the claims of plaintiff class members residing in Maryland, the Trial Courts held a trial prior to approval of the Settlement. At that trial, there was evidence that the Maryland set-off statute creates a right of contribution among two or more joint tortfeasors once one joint tortfeasor has discharged the common liability or paid more than its pro rata share of the judgment. There was evidence that the recovery of a judgment by the injured person against one joint tortfeasor does not discharge other joint tortfeasors from liability for the amount of the settlement unless the plaintiff executed a release so providing. In the latter event, the claim against the other joint tortfeasors is reduced by the amount of consideration paid for the release, or by a greater amount if the release so provides. Three types of such releases are in use: (1) a pro tanto release, which provides a set-off against liability in an amount equal to the consideration paid for the release if the settling party is found to be a joint tortfeasor; (2) a conditional pro rata release, which permits a set-off for the amount of the settling party's pro rata share of the judgment if the settling party is found to be a joint tortfeasor, see Swigert v. Welk, 213 Md. 613, 133 A.2d 428 (1957); and (3) an unconditional pro rata release, which provides for a pro rata set-off against the judgment regardless of whether the settling defendant is found to be a joint tortfeasor, see Jones v. Hurst, 54 Md.App. 607, 459 A.2d 219 (Ct.Spec.App.1983). One of the Maryland Plaintiffs' attorneys testified that the amount of the settlement would control the type of release given: where the settling tortfeasor pays an amount that is close to its pro rata share, the plaintiff will likely provide one of the two forms of a pro rata release; if the amount paid is significantly less than the pro rata share, the plaintiff will likely be willing to give only a pro tanto release. 24 The controversy for the Trial Courts centered on what type of release could be obtained by the Trust. The Maryland Plaintiffs' witness suggested that health claimants who obtained from the Trust only 10% of the value of their claims would be reluctant to execute a pro rata release of liability since the 10% received from the Trust would most likely represent significantly less than the Trust's pro rata share of liability. On the other hand, a witness for the Codefendant Manufacturers testified that the ability to obtain a pro rata release would be affected by a variety of factors, including plaintiffs' estimation of their ability to prove that it was Manville that to some extent had caused their asbestos-related injuries; the witness said it was typical in asbestos cases for a large gap to exist between the settlement amount and the settling tortfeasor's pro rata share of liability. Both sides submitted posttrial briefs to the Trial Courts, advancing proposals for an equitable compromise to resolve the Maryland set-off dispute, and urging the Trial Courts to adopt a standard set-off principle to be applicable to claims of the Maryland Plaintiffs. 25 In the Amended Memorandum, the Trial Courts decided that Maryland law in general would apply, but they reached no conclusion as to which of Maryland's various set-off rules would be applied to the asbestos-related claims involved in this class action. Noting that while Maryland's contribution rules generally provide for pro tanto reductions in the absence of a release signed by plaintiff permitting reduction by another amount, the Courts observed that 26 [u]nder Maryland law as it was conceived to operate through contribution actions, when all the dust has cleared each defendant should only be out of pocket to the extent of its pro rata share, and the plaintiff should have received the full amount of his or her judgment from the responsible tortfeasors. 27 Id. at 551. The Trial Courts stated that the assumption that non-settling codefendants can seek contribution from settling defendants appears to underlie the statutory scheme, id.; the Courts reasoned that in the present circumstances, where no contribution substantially over 10% of matrix values is ordinarily available from the Trust, the Maryland set-off scheme is subverted, id. They concluded that [i]t is not clear how the Maryland courts would treat a settling defendant such as the Manville Trust which stipulates to tortfeasor status ... but is unable to pay substantially for plaintiffs' damages, except possibly (but almost inconceivably) over the very long haul. Id. at 550. The Courts stated that to treat the Trust as a pro tanto releasee would force a codefendant to shoulder a larger share of the judgment than may be intended by Maryland law. See id. at 551-52. On the other hand, if the Trust were treated as a pro rata settlor, plaintiffs would remain uncompensated for the difference between the Trust's pro rata share of liability and the dollar amount paid for the release. 28 Deeming Maryland's policy interests in preserving the balances struck by its unique statutory and case law scheme between plaintiff's right to full recovery and defendant's right to an equitable offset for other parties' culpable conduct [to be] paramount, id. at 547-48, the Trial Courts declined either to accept any of the compromise proposals suggested by the parties or to fashion any rule of their own. Acknowledging that they possessed the power to vary the set-off rules established by Maryland law, see id. at 553, the Trial Courts declined to do so in deference to state courts, id. at 481, and instead ordered that the issue be left to resolution by the courts of Maryland. The question was not one of power, they stated, but of prudence. Id. at 553. They stated that 29 [i]t is not apparent what Maryland law is. It is unclear whether Maryland would fashion its law in the form of its statutes read literally, or in equity, or in some amalgam of both sources, and it is not apparent what the result would be under any of the myriad possible approaches. Prudence dictates leaving the issue for Maryland courts to resolve, either on a case-by-case basis, by some form of declaratory judgment, or by amendment to Maryland statutes. 30 Id. at 556. 31 Mindful of this Court's direction in Findley II that whatever provisions may ultimately be ordered respecting [codefendant manufacturer's] rights ... must be spelled out in the operative language of the Trial Courts' judgment, Findley II, 982 F.2d at 740, the Trial Courts concluded that allowing the Maryland courts to determine which set-off rules were to be applied on a case-by-case basis was sufficient: 32 Sufficient precision is provided by allowing the Maryland courts to apply Maryland law and equity, in light of the facts that: 1) plaintiffs settled with the Trust for the full amount of any Manville share of a recovery and can be considered, for purposes of computation of liability and rights of codefendants, to have received a promise from the Trust to pay that full amount as and if funds become available; 2) plaintiffs will immediately receive, under the Courts' present orders, 10% of the scheduled amounts. They have the opportunity to receive from the Trust future payments of the additional 90% without interest in the unlikely event that claims are much less than predicted and the value of the Trust corpus much greater. It is highly unlikely that Maryland Plaintiffs will receive much more than 10%, and that in the distant future; and 3) the Trust is prohibited from defending any case in the Maryland courts in order to prevent further dissipation of its limited funds. 33 Findley III, 878 F.Supp. at 556. 34 Judgment was entered leaving the decision of which Maryland set-off rules would apply undecided, but otherwise approving the Settlement and the TDP as fair, adequate, and reasonable. These appeals, along with two others decided this day by summary order, see In re Joint Eastern & Southern District Asbestos Litigation (O'Malley), 1996 WL 77954 and In re Joint Eastern & Southern District Asbestos Litigation (Saunders), 1996 WL 75879, followed.