Monday, July 28, 2014

How Settlement Can Affect Contribution Claims and Apportionment in Multi-Party Cases

by Craig Brookes

Since apportionment is a relatively new concept in Georgia, the cases have not fully evolved to take into account all the potential interactions between apportionment, contribution and indemnity among alleged joint tortfeasors.  However, in Zurich Am. Ins. Co. v. Heard, 321 Ga. App. 325 (2013) , a decision from last year,  the Georgia Court of Appeals “clarified” certain concepts surrounding these issues.  Our analysis of Zurich, prior contribution/indemnity cases and subsequent cases lead us to  the conclusions that follow:

As an initial matter, if a defendant in a multi-party case resolves the case with Plaintiff, the Court would then enter an order allowing the dismissal of the settling defendant.  Theoretically, the remaining defendant could object to the dismissal, but it is unlikely any remaining defendant would want additional defendants in the case or have any viable legal claim to avoid the dismissal based on the settlement.  It would also be unlikely for the Court to deny a dismissal motion from the plaintiff and settling defendant, even if the remaining defendant objected for some reason.   As a practical matter, we believe in most circumstances, the remaining defendant would rather defend the case by blaming the settling defendant (i.e. the empty chair defendant) and arguing apportionment to the jury, than deal with the settling defendant as a potential adversary.  In other words, in most cases, there appear to be no viable legal claims that could be brought by the remaining defendant against the settling defendant.  Specifically, since a jury is allowed to apportion damages at trial, the common law contribution “cross claim” no longer exists in Georgia.  Under the apportionment statute, the apportionment by the jury defines the parties exposure, not a subsequent action seeking pro rata contribution.  As such, there would be no “cross claim” for contribution.  

As an aside, in determining whether or not claims may remain against a settling defendant, indemnification claims must be considered.  An indemnification claim exists when one defendant has a non-delegable duty (such as a property owner in a premises case) and the co-defendant caused the alleged injury (like a cleaning company who created a hazardous condition that caused the Plaintiff to fall).  In this example, the property owner would have an indemnification claim against the cleaning company, since the property owner can be held liable to Plaintiff based on his non-delgable duty to keep his premises safe.  Before settling in a multi-party case, potential indemnification claims should be evaluated separately from contribution claims. 

Interestingly, under Zurich, the settling defendant would have a contribution claim against the remaining defendant.  Specifically, any settlement by a defendant would result in the ability to seek contribution on a pro-rata basis from the remaining defendant(s).  In a two defendant case with one defendant settling, the settling defendant would have a contribution claim for 50% of the amount paid in the settlement.  For example, if the settling defendant paid $400,000 to resolve the case, it would have a potential contribution claim for $200,000.00.  Recent case law has confirmed that the contribution  claim will exist up through and including the time that the jury apportions fault.  So, if one defendant settles and the remaining defendant goes to trial, the remaining defendant’s liability is fixed (assuming any amount is awarded to Plaintiff) and the settling defendant’s contribution claim no longer exists.  Further, after apportionment, the remaining defendant (who tried the case) would no longer have any potential contribution claim against the settling defendant since its percentage of fault would have been determined by the jury. 

Theoretically speaking, if one defendant settles with Plaintiff and the remaining defendant settles at a later date with Plaintiff, there is a scenario where the defendant who settled last, could have a contribution claim against the defendant that settled first.  Specifically, this could happen if the defendant, who settled last, paid more than the defendant who settled first.  For example, if the first defendant settled for $100,000, the second defendant (in a two defendant case) would have to pay more than twice that amount to get any contribution, as contribution is calculated on a pro rata basis.  Assuming the first settling defendant paid $100,000 to resolve the case and the second defendant settled for $150,000, the first settling defendant’s pro rata share would be $125,000.  In that case, the first settling defendant is subject to a contribution claim for $25,000.00 (the difference between the settlement amount of $100,000 and its pro rata share of the $250,000 settlement (i.e. $125,000).   

The interaction between contribution claims and apportionment is an important consideration in the resolution of multi-defendant cases.  If you have any questions regarding these concepts, please feel free to contact Craig A. Brookes or any of our other attorneys at 404-892-1991.