Opinion ID: 2589857
Heading Depth: 1
Heading Rank: 7

Heading: Viability of the equitable offsets

Text: On appeal, the Estate argues that equitable offsets based upon the restitution payments should have been limited to payments made in connection with the Dean Witter losses, not losses in connection with the Allen F. Gardner Trust and the FIB accounts. [10] In addition to its claim of error that the equitable offsets should have been limited, the Estate contends in the alternative that any offset based upon restitution settlements made in response to the claims of intentional misconduct was improper under NRS 17.225 et seq., the Nevada Contribution Among Tortfeasors statute. Whether offsets should be permitted in any amount in the context of joint liability for intentional misconduct is the subject of a nationwide split of authority. Some courts have prohibited offsets under contribution statutes similar to those enacted by the Nevada legislature. See Klosterman v. Fussner, 99 Ohio App.3d 534, 651 N.E.2d 64, 68 (1994) (likening the imposition of equitable credit to the collateral source rule). But see Hampton v. Safeway Sanitation Services, Inc., 725 S.W.2d 605 (Mo.Ct.App.1987) (offsets applied in context of conversion claim under contribution statute). Other courts have split, as a matter of public policy, over whether general principles of equity prevent parties with unclean hands from obtaining equitable relief by way of offset. See generally Income Investors v. Shelton, 3 Wash.2d 599, 101 P.2d 973, 974 (Wa.1940) (discussing the doctrine of unclean hands). In response, courts applying offsets have concluded that the potential for double recovery by the claimant mandates that such offsets be imposed, even in the context of intentional misconduct of the party seeking relief. See Krusi v. Bear, Stearns & Co., 144 Cal.App.3d 664, 192 Cal.Rptr. 793, 798 (1983) (conversion of securities by two stockbrokers). We conclude that, as a matter of law, intentional tortfeasors, including persons found liable in conversion and persons in conspiracy with them, may not apply credit from settlements by their joint tortfeasors (here, Jack Gardner) in reduction of judgments against them arising from the intentional misconduct. See Harriss v. Elliott, 207 Ill.App.3d 384, 152 Ill.Dec. 359, 565 N.E.2d 1041, 1044 (1991). First, and fundamentally, payments made in settlement of an intentional tort claim and applied to reduce another tortfeasor's payment of the claim by one of the joint tortfeasors would constitute equitable relief by way of an equitable setoff. Under the maxim that one seeking equity may not do so with unclean hands, an intentional tortfeasor by definition seeks such relief from a position of ineligibility for it. See Shelton, 101 P.2d at 974. Secondly, we conclude that NRS 17.225 prohibits the application of such credit. [11] The act provides that where two or more persons become jointly or severally liable in tort for the same injury to person or property..., there is a right of contribution among them. NRS 17.225(1). Section (a) of NRS 17.245(1) provides that payments in settlement by one of two or more persons liable for the same injury does not discharge the liability of non-settling parties unless the terms of the settlement so provide. However, the payments reduce the claim against the others to the extent ... of the consideration paid for it. Id. While NRS 17.245(1) seems to mandate some of the credit sought by Dean Witter and applied by the district court, NRS 17.255 specifically provides that no right of contribution exists in favor of any tortfeasor who has intentionally caused or contributed to the injury sustained. [12] Reading NRS 17.225, NRS 17.245, NRS 17.255, and NRS 17.305 together, the prohibition against contribution in favor of persons liable in tort for intentional misconduct would make no sense if intentional tortfeasors were entitled to an equitable offset for settlements made by joint offenders. This is because the credit under NRS 17.245(1) would indirectly provide the non-settling intentional tortfeasor the same protection against overpayment that a direct right of contribution would provide. Thus, the contribution statute renders any reduction in the verdict, regardless of its source, invalid. Accordingly, the district court erred in its admission of mitigation evidence and in the imposition of post-verdict equitable setoffs. Our ruling on this issue has further significance to the dictum in Bader regarding restitution as evidence in mitigation of conversion damages. Not only is such evidence inadmissible under Moore, restitution payments by third parties cannot be utilized as an equitable offset to the verdict. Thus, insofar as Bader implies that a non-settling defendant in a conversion case may seek credit for third-party settlements post-verdict, it is expressly overruled. [13] We conclude that the legislative statement of policy in the Nevada contribution statutes prohibits one intentional tortfeasor from taking advantage of restitution made by another. To the extent that this long-standing public policy should to be overturned, we defer to the Nevada State Legislature. Based upon our conclusions that the restitution evidence was inadmissible and that the verdict rendered should not have been reduced via the equitable offsets, we remand this matter for reinstatement of the verdict rendered in the amount of $2,600,000.00, and for additur to increase the recovery of compensatory damages to a total of $4,173,079.00, plus interest. [14]