Opinion ID: 1202658
Heading Depth: 2
Heading Rank: 2

Heading: The Reliance Issue

Text: Of course, in response to all of the arguments that militate in favor of retroactivity, one may justly recall that one party's gain is another party's loss. Proposition 51 purported to remedy an inequity in the existing joint-and-several doctrine by abrogating the rule as it applied to noneconomic damages. Though the Act placed no limit on the amount of noneconomic damages that plaintiffs could be awarded, it restricted plaintiffs' right to full recovery of such damages in some instances by allowing recovery as to those damages from defendants only in proportion to their fault. Courts may properly consider whether the retrospective application of a statute would affect substantial rights, or substantially alter rules on which the parties have detrimentally relied. ( Hoffman v. Board of Retirement (1986) 42 Cal.3d 590, 593 [229 Cal. Rptr. 825, 724 P.2d 511].) [2] The question presented, therefore, is whether an application of the Act to all cases not tried prior to its effective date would, as the majority asserts, unfairly deprive plaintiffs of a legal doctrine on which [they] may have reasonably relied in conducting their legal affairs prior to the new enactment. (Majority opn. at p. 1194.) The majority concludes that an application of the Act to cases not tried before its effective date would place persons who acted in reliance on the old law in a worse position than litigants under the new law. (Majority opn. at p. 1215.) Two examples of such detrimental reliance are suggested. First, the majority opines that plaintiffs whose causes of action arose before Proposition 51 will often have reasonably relied on the preexisting joint and several liability doctrine in deciding which potential tortfeasors to sue and which not to sue. (Majority opn. at p. 1215.) Thus, the majority suggests that in reliance on the old joint and several rule, plaintiffs' attorneys often refrained from filing suit against potentially liable defendants in order to save their clients the added expense of service of process. (Majority opn. at p. 1215.) There is no evidence that this occurred in any substantial number of cases. On the contrary, general experience teaches that plaintiffs usually sue everyone who might be liable for damages. Indeed, in most cases the former rule of joint and several liability encouraged plaintiffs to name as many defendants as possible because the entire judgment could be recovered from any one defendant, no matter how minimally liable. In the unlikely event, however, that a potentially liable defendant was actually omitted from a complaint in reliance on the former rule, it obviously constituted a tactical decision by the plaintiff to take advantage of a part of the old rule that was entirely unfair to marginally liable, deep-pocket defendants, a part of the very unfairness Proposition 51 was intended to remedy. The other reliance factor cited by the majority concerns settlements. The majority suggests that plaintiffs in pre-Proposition 51 cases may frequently have settled with some defendants for a lesser sum than they would have accepted if they were aware that the remaining defendants would only be severally liable for noneconomic damages. (Majority opn. at p. 1216.) A moment's thought reveals that this contention, like the first, contains far less than meets the eye. First, the argument again runs counter to common experience. In a case with multiple defendants of varying degrees of solvency, plaintiffs rarely settle first with the deep-pocket defendants in order to pursue the defendants who are effectively judgment-proof. Where the deep pocket defendant does settle first, however, it is not likely to be for substantially less than the case is worth, since there is little likelihood of substantial recovery from the remaining defendants. Second, it is well to recall exactly what Proposition 51 provides. It repeals the joint and several rule only as applied to noneconomic damages, i.e. pain and suffering, emotional distress, loss of consortium and the like. (Civ. Code, § 1431.2, subd. (b)(2).) It has no effect whatsoever on the joint and several rule as applied to the more common tort damages  medical expenses, loss of earnings, loss of property, costs of repair or replacement, and loss of employment or business opportunities. (Civ. Code, § 1431.2, subd. (b)(1).) Thus, whatever reliance a settling plaintiff may have placed on the former rule of joint and several liability, that reliance remains largely undisturbed by the enactment of Proposition 51. Finally, it is clear that with or without the former joint and several rule, a good faith settlement (at least since our decision in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 [213 Cal. Rptr. 256, 698 P.2d 159]) must fall within a reasonable range of the settlor's proportionate share of liability. ( Id. at p. 499.) As this court further recognized in Tech-Bilt, every settlement involves a multitude of factors which could reasonably impel a plaintiff to settle for less than the settling defendant's proportionate share of fault. For example, `a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.' ( Id. at p. 499, quoting from Stambaugh v. Superior Court (1976) 62 Cal. App.3d 231, 238 [132 Cal. Rptr. 843].) Other factors include the recognition that a settlor should pay less in settlement than he would if he were found liable after a trial, as well as the obvious avoidance of the risk, costs and inconvenience of trial. ( Ibid. ) We do not mean to suggest by this that the former deep pockets rule may not have influenced some plaintiffs to settle for less than a defendant's proportionate share of noneconomic damages. To the extent any such settlement was for substantially less than the settling defendant's estimated range of liability, however, it was unfair to nonsettling defendants and should not have been sanctioned by the trial court in the first place. ( Tech-Bilt, supra, 38 Cal.3d at p. 499.) Moreover, when the former rule is viewed as only one out of a myriad of factors that may have legitimately influenced plaintiffs' decisions to settle for less than a defendant's proportionate share of liability, the question of reliance becomes rather hopelessly speculative. The role that the former joint-and-several rule may have played in the overall decisionmaking process is certainly far less significant than the majority implies. In light of the foregoing, it is no surprise that the majority itself studiously ignored the reliance argument when formulating its holding in this matter. For the majority broadly holds that the Act shall not apply to any cause of action that accrued prior to its effective date, regardless of whether plaintiffs have manifested even the slightest potential reliance on the former law. If the reliance argument had any merit, the majority surely would have tailored its decision to hold, at a minimum, that the Act would be inapplicable only to cases filed prior to its effective date. Its failure to do so reveals the makeweight nature of its reliance and unfairness arguments. In sum, I am not persuaded by the majority's assertion that a retrospective application of Proposition 51 would result in a significant diminution of plaintiffs' rights or expectations under the former law. [3] On the contrary, it is clear that the purposes of the Act and the interests of the public as a whole would be served only by an application of the Act to all cases not yet tried prior to its effective date. I would note, finally, that our earlier discussion of Li v. Yellow Cab Co., supra, 13 Cal.3d 804 and American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, also bears directly on the issue of fairness to parties who might have relied on the preexisting law. As the majority acknowledges, our decision to apply the principles of Li and American Motorcycle retrospectively affected substantial rights and expectations arising out of transactions that occurred before those decisions. The relatively limited reform affected by Proposition 51 pales in comparison. Yet the same court that unhesitatingly determined to apply retroactively the sweeping changes effected by Li, now purports to be offended when the same broad application is urged for the limited reform contained in Proposition 51. It is a puzzlement. It is an irony, as well. For although, as the majority notes, Li, supra, 13 Cal.3d 804, served to reduce much of the harshness of the original all-or-nothing common law rules, the retention of the common law joint and several liability doctrine in American Motorcycle, supra, 20 Cal.3d 578, nevertheless perpetuated other inequities. Proposition 51 was addressed, the majority observes, to these remaining problems. (Majority opn. at pp. 1197-1198.) If the inequities in the rule of contributory negligence compelled a retrospective application of Li, notwithstanding its impact on settled expectations, surely the injustice inherent in the unlimited rule of joint and several liability compels an equally broad application of Proposition 51. The majority, however, concludes otherwise, arguing that because Li, supra, 13 Cal.3d 804, was a judicial decision the court was the appropriate body to determine whether or not the new rule should be applied retroactively.... (Majority opn. at p. 1222.) No one suggests otherwise. The point, however, concerns the fairness of the court's decision to apply Li retroactively, not its power to do so. The majority also attempts to distinguish Li on the ground that statutes operate ... prospectively, while judicial decisions operate retrospectively. (Majority opn. at p. 1221.) This not only misstates the general rule as applied to statutes (the intent of the enacting body governs the interpretation of statutes, not the presumption of prospectivity), but distorts the rule as to judicial decisions, as well. For judicial decisions are not automatically governed by a mindless presumption of retroactivity any more than statutes are governed by a presumption of prospectivity. As this court carefully explained in Peterson v. Superior Court (1982) 31 Cal.3d 147, 152 [181 Cal. Rptr. 784, 642 P.2d 1305], [T]he question of retroactivity [of judicial decisions] depends upon considerations of fairness and public policy. ( Id. at p. 152; accord Safeway Stores, Inc. v. Nest-Kart, supra, 21 Cal.3d at p. 333; In re Marriage of Brown (1976) 15 Cal.3d 838, 850 [126 Cal. Rptr. 633, 544 P.2d 561, 94 A.L.R.3d 164].) As we further explained, the issue comprehends such considerations as the extent of the public reliance upon the former rule, the purpose to be served by the new rule, and the effect on the administration of justice of a retroactive application. ( Id. at pp. 152-153; see also Isbell v. County of Sonoma (1978) 21 Cal.3d 61, 74-75 [145 Cal. Rptr. 368, 577 P.2d 188]; Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 193 [98 Cal. Rptr. 837, 491 P.2d 421].) If considerations of fairness, public policy and the purposes of the new rule announced in Li, supra, 13 Cal.3d 804, compelled its retroactive application, notwithstanding the extensive reliance placed by insurers and others upon the former rule, surely the same broad application of Proposition 51 is compelled here. It is a strange logic indeed which can justify the retrospective application of a virtual revolution in the common law of civil liability, yet later deny similar scope to an enactment of the electorate designed to redress certain lingering inequities in that selfsame revolution. Perhaps the commentators will be able to reconcile these differing results. I cannot. For the foregoing reasons, I would affirm the decision of the Court of Appeal in its entirety. [4]