Court Opinion

ID: 9485935
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:34:10.65897+00
Date Added: 2024-06-11T17:51:27.161208
License: Public Domain

EISELE, Senior District Judge,
concurring.
The majority states: “Last year in Matter of Oil Spill by the Amoco Cadiz, 954 F.2d 1279 (7th Cir.1992), we were able to avoid deciding under federal maritime law what effect the settlement of one defendant has on another. Able to escape this question no longer, we opt for a settlement-bar rule.” I disagree. We could, and should, “escape” the contribution rule question by deciding the case on a narrow issue.
Midwest Marine has waived any objection concerning whether its liability exceeds its proportionate share of fault by failing to submit proper jury instructions. Rule 51 states in part: “No party may assign as error the giving or failure to give an instruction unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection.” This has always been the rule in federal courts. Mill Owners Mutual Fire Insurance Co. v. Kelley, 141 F.2d 763, 765 (8th Cir.1944). Further, when dismissing Midwest Marine’s Cross-Complaint for Contribution, the trial court stated:
This does not in my judgment, leave [Midwest Marine] holding the bag either, because at trial you are entitled to have your liability, according to the cases, limited to your proportional fault. And I suppose that you take care of that by way of instruction to the jury at trial.
(T. of 11-1-91, P. 7). Yet, despite Rule 51 and the trial court’s admonitions, Midwest Marine did not submit a jury instruction or jury verdict form that would have directed the jury to apportion fault between it and Service Welding. In fact the jury verdict and special interrogatories form proposed by Midwest was submitted to the jury. The form does not provide for any allocation of fault to Service Welding. Indeed, it calls only for the apportionment of fault between the plaintiff, Rufolo and Midwest and makes *454it clear that the total of those percentages must equal 100%. Midwest argues, and the majority agrees, that for Midwest to submit an instruction limiting its liability to its proportionate fault or calling upon the jury to apportion fault between it and Service Welding would have been to invite error on the theory that “claim reduction is not the law of this circuit and could not be” under Amoco. See footnote 1 to majority opinion. But I disagree that claim reduction cannot be the law of the circuit. Indeed, in the discussion below I strongly urge the adoption of the claim reduction rule by this Circuit. Believing that Midwest has waived this issue, I concur in the result reached by the majority.
The majority arrives at the same result— excusing the settling tortfeasor, Service Welding, from contribution — by applying the settlement-bar rule. The majority justifies its adoption of the settlement-bar approach as follows:
We are at liberty, therefore, to choose any of these contribution systems and we opt for the settlement bar. Its advantages are obvious: parties can buy certainty. If they work out a deal sufficiently appealing to the plaintiff, defendants can evade the hazards of trial and the pitfalls of post-trial contribution. There is thus a huge incentive to settle cases. We are mindful that courts should not shirk their duty to decide genuine cases and controversies by tipping the scales so heavily in favor of settling that it never pays to adjudicate, but considering how clogged the court system is and how bulging the federal reporters have become, it is appropriate to encourage parties to negotiate their own solutions. One drawback to the settlement bar is that defendants who go to trial may be saddled with an unfair share of the liability merely because they are available to sustain the jury’s wrath for the defendants’ collective wrongdoing. But that logic would counsel against all settlements not joined in by every defendant. Also, the good faith requirement ensures that plaintiffs and settling parties do not scheme to put the onus unfairly on the remaining defendants, although having to ensure that settlements are in good faith can be a drawback if a mini trial is required to determine the true extent to a party liability. Amoco Cadiz, 954 F.2d at 1317.
While I agree with my brothers that federal law controls the contribution rules in admiralty eases such as this, I disagree with the majority’s choice of contribution rules.
The question of the appropriate federal maritime contribution rule to apply between joint tortfeasors, when one has settled with the plaintiff, has not been resolved by the United States Supreme Court. Since the Circuits are not in agreement, it is probable that the Supreme Court will eventually decide the question. In the meantime we are called upon to use our best judgment in choosing a rule which will most fairly and efficiently deal with the federal issue presented. Since the majority has reached this issue, it is my judgment that the claim reduction rule, rather than the settlement-bar rule, will more nearly meet these objectives.
The issue of how to best address the right of contribution against a settling joint tort-feasor in an admiralty action has resulted in several different approaches and considerable disagreement over which is the best. Before an analysis is made of the contribution rule that should be applied, it will be helpful to review some general tort principles.
The threshold question in cases involving multiple defendants is whether the negligence of the plaintiff, if any, is to be compared to each defendant or against the total of all the defendants. The majority and better view is to compare the combined negligence of all defendants against the plaintiffs negligence. Henry Woods, Comparative Fault 2d ed. § 13.1 (1987). At common law, once the judgment was entered against joint tortfeasors, the liability was joint and several. This concept was not initially changed by the introduction of comparative negligence. Each tortfeasor whose negligence was a proximate cause of an indivisible injury remained individually liable for all compensable damages attributable to that injury. Id. at § 13.4 [citing Prosser, The Law of Torts, § 47 (4th ed. 1871) ]. The rule was potentially harsh for defendants because, at common law, there was no contribution among joint *455tortfeasors. As a result, there have been judicial and statutory initiatives to avoid the consequences of the no contribution rule. One approach has been to eliminate joint and several liability — replacing that concept with an apportionment of individual liability on the basis of each joint tortfeasor’s percentage of fault. While this method is particularly fair to individual defendants, since each defendant’s liability is limited to the harm he or she caused, it subjects the plaintiff to the risk of each defendant’s solvency. The second inroad on the no contribution rule has been the development of various contribution formulas. An apportionment of damages among joint tortfeasors on an equitable basis has developed as a result of the growth and acceptance of comparative negligence in tort law. In fact, in admiralty actions, the rule of “no contribution” is no longer viable. Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 94 S.Ct. 2174, 40 L.Ed.2d 694 (1974). “[A] ‘more equal’ distribution of justice can best be achieved by ameliorating the common-law rule against contribution which permits a plaintiff to force one of two wrongdoers to bear the entire loss, though the other may have been equally or more to blame.” Id. at 110-111, 94 S.Ct. at 2177.
The question that remains, and the question before the Court in this case is: which of the possible contribution rules should this Circuit adopt? I agree with the majority that existing precedent, both from the Supreme Court and the Seventh Circuit, “offers no guidance about how to treat settling parties since each contribution rule already incorporates the notion that plaintiff compensation takes precedence” and “[w]e are at liberty, therefore, to choose any of these contribution systems....”
At the other end of the spectrum from no contribution is the rule of full contribution. This alternative would permit a contribution claim by tortfeasor A against joint tortfeasor B notwithstanding the fact that tortfeasor B had settled with the plaintiff. This full contribution approach, however, has the distinct disadvantage of discouraging settlement. The Matter of the Oil Spill By the Amoco Cadiz, 964 F.2d 1279, 1317 (7th Cir.1992). A defendant has little incentive to settle if, subsequent to his settlement, he can be held to additional liability in a contribution action by a nonsettling joint tortfeasor.
Once it is decided that neither a “no contribution” rule ñor a “full contribution” rule will be followed, two additional questions must be answered. First, the Court must determine whether fault should be distributed proportionately or on an equal pro rata basis among the joint tortfeasors. Second, the Court must determine what effect a settlement and release by one tortfeasor has on the remaining tortfeasor.
In answer to the first question, the better rule is to distribute fault among tortfeasors on a proportionate fault basis rather than on an equal pro rata basis. This is true even though the 1939 and 1955 versions of the Uniform Contribution Among Tortfeasors Act provided for pro rata contribution. The equal pro rata basis simply divides the total damages by the number of tortfeasors. As a result, the percentage of harm caused by each tortfeasor is not reflected in the distribution of liability among the tortfeasors. Such an outcome is inequitable. The early resistance to proportionate contribution is most likely explained by the prevailing negative attitude throughout the first half of this century towards any system that smacked of comparative fault. The optional provision of the 1939 Uniform Act, which permitted proportionate assessment of fault, has been uniformly approved by commentators and in recent years has received almost universal acceptance. Proportionate assessment of fault among defendants more accurately reflects the reality of wrongdoing. See generally Henry Woods, Comparative Fault 2d ed. § 13.4-7 (1987). Under an allocation system based upon relative fault, the more culpable tortfeasor will bear the greater share of the loss, but a less culpable joint tortfeasor will not escape all liability (as was the case under a no contribution system) and will not overpay as he or she would under an equal pro rata contribution system.
A second question the Court must ask is whether a settlement by one tortfeasor has any effect on other joint tortfeasors. At common law, a recovery and satisfaction of a judgment against one tortfeasor discharged *456all the others. This rule was abrogated by the Uniform Act which stated that a release by one joint tortfeasor does not release the others unless it specifically so provides. The effect of a settlement is to release the settling defendant, but the effect on the plaintiff and the nonsettling defendants has remained an open question to this point. The two most frequently suggested rules to apply when one tortfeasor has settled are the “settlement bar rule” and the “claim reduction rule.”
Under the settlement bar approach, assuming the settlement was made in good faith, the settling tortfeasor escapes any liability for contribution. Following settlement, the settling tortfeasor’s involvement in the action ends. He is discharged. The nonsett-lers receive credit for the dollar amount paid by the settlers. Thus, the plaintiff may recover the entire amount of the judgment, less the amount that the plaintiff had already collected from the settling tortfeasor. Under the settlement bar approach, defendants are encouraged to settle since settlement buys peace. Plaintiffs, likewise, will negotiate settlements since there is no disincentive from their perspective. A plaintiff may collect the full amount of his damage award regardless of whether the prior settlement reflected an accurate picture of the economic harm caused by the settling tortfeasor. To some extent, this resurrects some of the problems with the “no contribution” rule by allowing the plaintiff to pick and choose with whom to settle. One defendant may be forced to pay damages far in excess of the proportionate share of harm he or she caused. The settlement bar rule encourages quick, partial settlements but potentially frustrates complete and just settlements. A plaintiff can receive some money initially by settling, all the while knowing that the remaining nonsettling tort-feasor will be responsible for the balance of any damage award. Such an environment creates the opportunity for improper deal-making and collusive settlements. To a limited extent this problem can be overcome by requiring the settlement, which extinguish the other defendants’ right of contribution, to be subject to a good faith requirement. However, the monitoring and inquiry into good faith impose new burdens on the courts. Both from an administrative and practical standpoint, I respectfully disagree with the majority that “the good faith requirement ensures that plaintiffs and settling parties [will] not scheme to put the onus unfairly on the remaining defendants ...” A mini-trial concerning the merits of the settlement will usually be required to determine whether the liability assumed by the settling tortfeasor is reasonably related to the strength of the plaintiffs claims. And there may be hidden, and difficult to ferret out, considerations in such settlement agreements which such bob-tailed “good faith” hearings are not likely to identify.
The other approach is what Amoco Cadiz refers to as the claim reduction rule. Amoco Cadiz, 954 F.2d at 1315. This rule, like the settlement bar rule, bars contribution from the settling tortfeasor. Claim reduction, however, adopts the comparative fault approach in that it restricts the plaintiffs recovery against the nonsettling tortfeasor to that defendant’s proportionate share of fault. Under this rule, the plaintiff forgoes the right to collect from nonsettling defendants any damages attributable to the settling party’s share of fault. The plaintiffs total recovery consists of the amount he received from the settling tortfeasor plus the amount represented by the nonsettling tortfeasor’s proportionate share of fault. The majority states that the claim reduction rule complicates litigation and lowers recoveries for the injured. I disagree. It is true that recoveries under the claim reduction rule may be lower. The ultimate recovery by the plaintiff under the claim reduction rule (also known as the proportionate fault rule) depends upon the settlement the plaintiff reaches with a settling defendant and whether the plaintiff settles with the deep-pocket defendant or with the less affluent defendant. If the plaintiff settles with a defendant for that defendant’s proportionate degree of fault (or for more), then the claim reduction rule will not result in a lower recovery. If, however, the plaintiff settles with one defendant for less than his proportionate degree of fault, then the plaintiffs recovery will be for less than 100% of the damages since his recovery against the second defendant is limited to the second defendant’s proportionate fault. Such *457an outcome is simply a reflection of the risk of settling.
Additionally, I would suggest that if the claim reduction rule is not followed, collusive settlements will often result. A plaintiff would seldom settle with a deep-pocket defendant. Under the settlement-bar approach the plaintiff would settle, fairly or unfairly, with the less affluent defendant, knowing that the deep-pocket defendant was available to pick up the tab. While we do not want a plaintiffs injuries to go uncompensated, the result discussed above seems abusive to the nonsettling defendant when the plaintiff settles with the first defendant for substantially less than that defendant’s proportionate degree of fault. And, in my opinion, the good faith test is not an adequate protection against such abuses, the incentives for which are obvious.
The majority states:
None of the approaches is a panacea, id. at 1318, and there is certainly no uniformity among the circuits. Even the Restatement (Second) of Torts § 886A has not decided which rule to adopt. The only option we have on an earlier occasion ruled out is claim reduction because it complicates litigation and lowers recoveries for the injured. Id. at 1316 (quoting Edmonds, 443 U.S. at 268-273, 99 S.Ct. at 2760-2763).
It is clear that the Supreme Court still adheres to the principle that an injured party may collect the whole amount of his award from any defendant. United States v. Reliable Transfer Co., Inc., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251; Edmonds, 443 U.S. 256, 99 S.Ct. 2753. As the court noted in Edmonds,
Nothing is more clear than the right of the plaintiff, having suffered such a loss, to sue in a common-law action all the wrong-doers, or anyone of them, at his election; and it is equally clear, that, if he did not contribute to the disaster, he is entitled to judgment in either case for the full amount of his loss.
443 U.S. at 260 n. 7, 99 S.Ct. at 2756 n. 7 (quoting The Atlas, 93 U.S. 302, 315, 23 L.Ed. 863).
But does precedent rule out our adoption of the claim reduction rule? The majority acknowledges that the Circuit did not adopt the settlement bar approach in Amoco. In fact Amoco stated:
“Whether to follow Joia by allowing Amoco contribution from ABS, or Self by adopting the settlement bar rule, is a question for another day.”
And only in dicta did the panel state it would not have adopted the claim reduction approach.
If the majority reads Edmonds as advancing a full contribution rule, then neither the settlement bar rule nor the claim reduction rule would be available to this Court since both recognize the effect of settlement and prohibit the plaintiff from collecting the full damage amount from any one defendant. Under both rules, the plaintiffs recovery from the nonsettling tortfeasors is limited or reduced by an amount that is related to the settling tortfeasor (either the amount paid by him or her in settlement under the settlement bar approach or that tortfeasor’s proportionate share of fault expressed as a dollar amount under the claims reduction approach). If, however, the majority is reading Edmonds as allowing a settlement to reduce the amount that can be collected from a nonsettling tortfeasor, then either rule (the claim reduction rule or the settlement bar rule) is available to this Court. The latter reading is preferable since, as noted by the Eighth Circuit in Associated Electric Co-op v. Mid-America Transp., 931 F.2d 1266 (8th Cir.1991), Edmonds did not involve settlement issues and thus the.language quoted therefrom by the majority is dicta. The issue in Edmonds involved the avoidance of tort liability by payment of statutorily required benefits, rather than a negotiated settlement of claims between the plaintiff and defendant. “Thus, Edmonds does not involve the public policy considerations at issue in this case, such as the need to deter collusive settlements without deterring legitimate ones.” Id.
One criticism often levied against the claim reduction rule is that the plaintiff, by settling with one defendant, may receive less than the full compensation awarded in a final *458judgment since his recovery from the nonset-tling defendants is reduced by the settling defendant’s share of fault. That criticism only expresses one side of the equation, however. If the plaintiff recovers more money in settlement than is represented by the settler’s percentage of fault as found by the jury, he has made a favorable settlement; if less, a bad settlement. Since a settlement is an agreement reached between a plaintiff and defendant concerning the amount of money owed by the defendant to the plaintiff for the harm that he has caused, it is obvious that the parties may over or under estimate the value of the plaintiffs claim. Such an agreement naturally involves the tradeoff of a certain recovery in exchange for the relinquishment of a possibly more lucrative recovery at trial. Both parties must analyze the risk/return ratio of going to trial. When the plaintiff voluntarily chooses to settle, limiting the remaining nonsettling tortfeasors’ liability to an amount commensurate with the degree of fault of each does not unduly burden the plaintiff. More importantly it results in the fair and just disposition of the plaintiffs claims against the non-settling joint tortfea-sors. And it avoids the slippery “good faith” analysis required by the settlement-bar rule. As stated by the Eighth Circuit in Associated Electric Co-op v. Mid-America Transp., 931 F.2d 1266 (8th Cir.1991):
Unlike the contribution bar approach, the proportional fault approach deters collusive settlements by limiting the plaintiffs recovery against non-settling defendants to a sum accurately reflecting such defendants’ negligence. Unlike AEC’s preferred approach allowing contribution suits, the proportional fault approach does not discourage defendants from settling by subjecting them to the risk of contribution suits from non-settling defendants. Admittedly, the proportional fault approach creates some risk that plaintiffs might either receive double recovery from a generous settlement or be deterred from settling because a plaintiffs settlement could be offset by a reduction at trial of his or her recovery. See Leger, 692 F.2d at 1248-50 (rejecting non-settling defendant’s concerns about double recovery); Restatement § 886A comment m (expressing concern that proportional fault approach might deter settlement). Because some settlements are more favorable than others, we believe these risks balance each other out. Cf. Leger, 592 F.2d at 1250 n. 10 (noting that “[sjettlement dollars may be worth more or less than judgment dollars, depending on which party received the more favorable settlement.”)
In sum, we hold that when the Teasleys’ claims against AEC come to trial, the court should reduce “the claim that the injured party [Teasley] has against the other tort-feasors [AEC] by the amount of the equitable share of the obligation of the released tortfeasor [MATCO].” Restatement § 886A comment m.
Again, the claim reduction rule creates some risk for the plaintiff and a settling defendant. But no one should complain since the plaintiff and the settling defendants have resolved their differences by agreement and the nonsettling defendants will only have to bear the proportionate loss occasioned by their own fault. See Leger v. Drilling Well Control, Inc., 592 F.2d 1246, 1250 n. 10 (5th Cir.1979).
Yes, there are positives and negatives in any solution that we might adopt. But, if the most just and fair resolution of such admiralty eases is our prime concern, then we should opt for the claim reduction rule.