Court Opinion

ID: 9505633
Source: CourtListenerOpinion
Date Created: 2023-08-06 20:13:28.387865+00
Date Added: 2024-06-11T09:04:39.769961
License: Public Domain

BOEHM, Justice,
concurring in result.
As I understand it, the majority holds, and I agree, that if a party settles and becomes a nonparty, in order- to get credit for the settlement amounts the remaining defendants must assert a nonparty defense based on the settling defendant’s potential liability.
*146The majority, however, does not limit itself to the situation before the court where a named defendant has settled and becomes a nonparty. Rather, the majority announces a general rule that any defendant seeking credit for another’s settlement payments must have asserted a non-party defense. This broader rule seems to me to raise some fairly complex problems that are better left for another day.
Consider the situation where the third party (TP) has not been named as a defendant at the time the named defendant (D) is obligated to assert any nonparty defense. D must assess whether there are any other potential defendants and then decide whether to assert a nonparty defense. If D does assert it, a likely consequence is that TP will be named by plaintiff (P) as a defendant and become an antagonistic co-defendant who will considerably complicate the case and perhaps prejudice a successful defense by D. On the other hand, if D does not assert the defense, D forfeits any contribution by TP as a credit against D’s liability. It seems likely that under this rule some defendants, or their attorneys, will be intimidated by fear of being judged in hindsight and will assert a third party defense even though they are not inclined to do so.
I expect there are more angles to this. At a very minimum, unless TP has already settled at the time D must assert a non-party defense, the tactical considerations from the defense’s point of view are not usually those identified by the majority, 728 N.E.2d at 143-45, as an assessment of the likely attribution of liability to TP. Rather, many defendants will focus principally on an assessment of the risk of TP’s becoming an adversary versus the potential benefit of dividing the exposure. Often D must make this choice without knowing the reasons why TP is not a defendant. These could be many. One of them may be the fact that TP has already settled before suit was filed. D may or may not be able to learn whether this has happened, and if so for how much, before the deadline for asserting or risking waiver of a nonparty defense.
In this case, Skinner and Broadbent says it took the view that Stewart had no liability and therefore Skinner could not ethically assert a nonparty defense. This is certainly a defensible position under the Rules of Professional Responsibility. It seems to me to be a poor policy to force conflicts between the client’s financial interest and the lawyer’s professional obligations by requiring D to assert a position with which it disagrees in order to preserve its right to setoff. From the client’s point of view, the attorney’s ethical concerns prohibit the assertion of a nonparty defense and result in giving away the client’s money if a third party later settles and thereis no setoff under the rule of this case. Asserting a nonparty defense in the context where P has already sued TP is less problematic. D at least has P’s word for it that there is a basis for a claim against TP.
In short, I think the net result of the majority’s broad ruling may be more multiparty litigation. This is not a goal to be fostered. I would restrict today’s holding to situations where TP has been dismissed with prejudice, and perhaps also where D is charged with knowledge that TP has been given a release. We can resolve this issue in other contexts as litigation arises and we deal with real sets of facts.
I also do not understand the claim that this rule fosters settlement between P and the remaining defendant. The majority says P is more likely to settle for a net $65,000 than a net $40,000. This is presumably true if P’s claim is of equal value under each scenario. But that is not the case. The “one satisfaction” rule applies to judgments where the parties have not reached an agreement, not to agreed settlements. Where the parties have to reach an agreement, they will do so on the basis of their relative present dollar valuations of the claim after costs of litigation .and after any setoffs the law will allow. In the future, every set of litigants will live under *147a regime that either does or does not produce a setoff against a judgment against D for amounts received from TP. Resolution of that legal issue affects the value of P’s claim against D and the amount of D’s net exposure. Assume, as the majority does, that D and P have perfect information and value the total claim at $X. If the law gives D a setoff for the $Y received from TP, then P’s remaining claim is worth $X minus $Y. If not, it is worth $X. Either way, both parties will know that and bargain on that assumption. P has no reduced incentive to settle a claim for less because the claim might be worth more under a different legal rule. Similarly, D has no incentive to pay more than the claim would be worth if the law were different. As a result, resolution of this issue seems to me to be a null factor in terms of fostering agreedi resolutions between P and D.
The rule the majority announces may be of some value in promoting the initial settlement between P and TP, because P will be able to retain that amount and not suffer reduction of any judgment P may later obtain from D. This is another way of saying that multiparty litigation can produce a sum of the parts result for P that is greater than the whole. It is not obvious that this is a policy goal that should be furthered because it encourages adding fringe parties with marginal ultimate exposure. Parties who see their costs of litigation as a major portion of their ultimate exposure are often more inclined to settle. This, in turn, adds proportionally more to the transactional costs of resolving the litigation than it does to the transfer of payments from wrongdoers to injured parties. ■ P’s incremental incentive to settle with TP is also counterbalanced by the fact that the total cost to D of going to trial and losing is higher if the “one satisfaction” rule does not apply. As a general proposition, the effect of this will be that the cost of litigation is a smaller percentage of D’s total exposure and also a smaller percentage of P’s potential net recovery. That reduces the incentive of both to settle for the same reason that increased costs of litigation raise that incentive.
Thus, although the majority’s rule does add to the net recovery of P, ánd may encourage P 'to settle with TP, it is not without a cost to the overall goal of simplifying litigation. It does not seem to me that there is a parallel effect on TP’s willingness to settle with P. Unless TP has some unusual indemnity or recoupment agreement with D or P or both, it will be a matter of indifference to TP whether or not D gets a setoff for the amounts P receives from TP.
This rule does result in a bigger net transfer to P if no third party defense is asserted. Another way to say the same thing is that it penalizes D for not asserting a third party defense. For the reasons stated, I believe there is a significant risk that it will do so unfairly in some circumstances. All of the foregoing, and a great deal of the majority opinion, ultimately turns on speculation as to how parties will behave in settings that will vary with the number of parties, the amount of the exposure of each, the procedural posture of the case, who has asserted what against whom, and undoubtedly other factors. I would leave these to be resolved on a case-by-case basis as they arise.