Crediting payments by concurring tortfeasors: the decline and fall of the jury rule?

• Author: Dolan, Jr., James B.

A recent trend deprives defendants of their traditional right to inform juries about amounts already paid in settlement

THE tort rule crediting defendants for payments by concurring tortfeasors causes an evidentiary problem. Should this credit be administered by the court or by the jury? Many reported cases have considered the issue, but legal scholarship has given it limited attention.

While the theoretical aspects of this somewhat perplexing topic are certainly of intellectual interest, its study is more than an academic pastime. The rights of defendants may be affected in a practical way by whether the damage credit is administered by the court or by the jury. Most defense counsel believe that this evidence does more than merely mitigate damages. It often gives non-settling defendants in personal injury cases significant protection against jury misconduct.

In the ordinary personal injury case, learning about these payments probably has little effect on the jury's behavior. However, there is at least one disturbing situation in which this information does influence the outcome of trials. The example that readily comes to mind is as follows: A case involves catastrophic injuries, such as third-degree burns, brain damage, quadriplegia or the like. There are two defendants--one, more or less clearly at fault; another, remotely involved. The plaintiff settles with the party clearly at fault for substantially the full settlement value of the injuries. The plaintiff then proceeds to trial against the remaining defendant.

The plaintiff might do this for a variety of reasons. First, if the plaintiff wins, the credit for the prior payment may not substantially diminish the verdict against the second defendant. Unless verdict expectancy is several multiples of the settlement amount, there would have been no voluntary payment. Prejudgment interest will be added to the verdict before the credit is granted. In a state such as Massachusetts, with a 12 percent rate and a three-year delay before trial, this interest adds up to 36 percent of the verdict.

Thus, if there is a case in which the verdict expectancy is in the $1 million range, settlement should be in the range of $300,000 or so. If the plaintiff goes to trial in a "pro tanto" jurisdiction and gets lucky, the arithmetic might look like this: $1 million verdict, plus $360,000 in prejudgment interest, equals $1,360,000, minus $300,000 settlement, equals $1,060,000 additional payment to the plaintiff.

Readers of the Defense Counsel Journal will be familiar with many instances in which this settlement strategy has been used. The facts of reported decisions attest to its popularity with the plaintiff's bar.(1) Given the type of bootstrapping that can be involved, it's surprising that this technique is not more prevalent.

But a scenario like this makes sense only if the plaintiff can count on jury sympathy to substitute for the lack of a convincing liability case against the remaining defendant. This emotion will be a potent factor in the trial unless the jury learns that the supposedly uncompensated "victim" already has received a substantial payment. In at least this instance, the court rule is outrageously unfair to some defendants. It forces them to choose between paying more than a fair share of the alleged joint liability and running the risk of a verdict so large that its share becomes much larger than the party principally at fault.

These considerations of fairness to defendants are never mentioned in the infrequent scholarly discussion of the subject. Except for occasional preposterous assertions that the evidence might be prejudicial to the defendants who are trying to introduce it, the literature concerns itself only with possible prejudice to plaintiffs.(2)

This article will highlight a recent and largely unheralded trend toward withholding this evidence from juries. It will consider the reasons for or against the court and jury approaches, suggesting that the court rule may be based on questionable views about tort law or clearly mistaken speculations about jury psychology.

HISTORICAL BACKGROUND

This area of the law began its development as a consequence of a 17th century English case, Cocke v. Jenner,(3) which announced the proposition that a release given to one joint tortfeasor discharged all others from any further liability to the plaintiff. This rule was applied in generations of American litigation in which the issue typically was whether the court interpreted the plaintiff's settlement document as a "release" of another tortfeasor. The alternative was that the document was a covenant not to sue. If it clearly was a release, a verdict would be directed for the defendant as a matter of law. If the settlement document was considered ambiguous, the case was submitted to the jury. The jury was given a definition of a release and instructed that (1) the plaintiff's recovery was barred if the document was one; and (2) the plaintiff's recovery was to be reduced by the amount already paid if the document was not a release. A 1918 Massachusetts case, O'Neil v. National Oil Co.,(4) is typical of this American case law.

English and American common law thus conferred on a "release" a sort of magical power to destroy other claims, a position not supported by convincing reasoning. This traditional rule probably reflected a conservative distaste for litigation and a corresponding willingness to curb it by more or less arbitrary technicalities. When claimants acted in ignorance of these technical distinctions between a release and a covenant not to sue, serious injustices could result. Claimants almost certainly had no intent of discharging a party not specifically named in a release. Allowing unnamed parties to benefit from a settlement with someone else gives them something for nothing and deprives claimants of a valuable right without any reason. To make claimants' rights to recover depend not on the substance of the prior settlement but on the format of the papers that memorialized it rendered the traditional analysis even more offensive.

With the onset of the 20th century, the common law rule came to be widely criticized.(5) It was finally abolished in most jurisdictions either by statute or judicial decision.(6)

"JURY" OR "COURT" RULE?

Whether a settlement discharged another non-settling defendant was a tort question. After widespread abandonment of the common law discharge rule, another problem came to the attention of courts and commentators. This was the evidentiary issue of how to administer the credit now given instead of a dismissal.

With minor exceptions, courts have divided between two basic positions. One, known as the "jury rule," informs the jury of the fact and amount of the settlement. Jurors are instructed to reduce any plaintiff's verdict by the amount paid and to use the settlement evidence for no other purposes. The other, known as the "court rule," conceals the amount and even the fact of the settlement from the jurors. If damages are awarded, the judge hears evidence about the settlement and deducts the amount from the plaintiff's judgment.

Historically, the jury rule could be shown to be the earlier way to administer the credit. At common law, the jury had to learn about the settlement. There was no other way it could decide whether the plaintiff had intended to "release" the claim. The abandonment of the common rule discharging non-settling defendants made the court rule a possibility.

There are dozens of reported cases about whether a particular jurisdiction follows the court or jury rule or a combination. A few courts have left the area to judicial discretion or allow the jury to be told about the fact of settlement but not the amount. Dozens of others consider how to apply either rule to particular situations.(7)

Law review discussion of the controversy has been infrequent. The most recent treatment appeared in the FICC Quarterly in 1991.(8) As of then, a substantial minority of the states adhered to the jury rule. Most federal cases had long followed the court rule.(9) However, since the issue was usually treated as substantive for Erie purposes, the admissibility of settlements in diversity cases often depended on applicable state law.(10)

Neither case law nor scholarship does much to provide a rationale for either rule. A perfunctory style of analysis prevails.(11)

Jury rule courts rarely offer any justification other than stare decisis. The ordinary approach is to cite a few older cases where the jury rule had been applied in the forum state and leave it at that. For example, in Tritsch v. Boston Edison Co.,(12) the court's rationale is contained in this single sentence: "In mitigation of damages, a defendant is entitled to show in evidence that amount of money paid or promised to the plaintiff by a joint tortfeasor on account of the same injury." The sentence is followed by a string cite to cases decided...