Whalen v. Kawasaki Motors Corp., 92 N.Y.2d 294 (1998)

In cases involving both comparative fault and settlement with some defendants, the settlement amount should be deducted from the gross verdict before applying the plaintiff’s percentage of fault.

Summary

Robert Whalen was injured while driving an ATV manufactured by Kawasaki and sold by Robinson Cycle Sales. Whalen settled with Kawasaki before trial. At trial against Robinson, the jury found Whalen 92% at fault and Robinson 8% at fault, awarding $2,415,000 in damages. Robinson sought a set-off for the Kawasaki settlement under General Obligations Law § 15-108(a). The court addressed whether the set-off should be applied before or after reducing the verdict by Whalen’s comparative fault. The Court of Appeals held that the settlement amount should be deducted first, before calculating the reduction for comparative fault to align with statutory goals of encouraging settlements and equitable apportionment.

Facts

Robert Whalen suffered injuries when the Kawasaki ATV he was driving crashed. The ATV was designed and manufactured by Kawasaki and sold by Robinson Cycle Sales to Whalen’s friend. Whalen sued both Kawasaki and Robinson, alleging negligence, strict products liability, and breach of warranty.

Procedural History

Whalen settled with Kawasaki for $1,600,000 during jury selection, withdrawing all claims against Robinson derivative of Kawasaki’s liability. The trial proceeded against Robinson alone. The jury found Whalen 92% negligent and Robinson 8% negligent, awarding $2,415,000. Robinson then moved to amend its answer to assert General Obligations Law § 15-108 set-off, which the trial court initially denied. The Appellate Division reversed, allowing the amendment and applying the set-off *after* reducing the verdict by Whalen’s fault, resulting in no monetary responsibility for Robinson. The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether Robinson waived the benefits of General Obligations Law § 15-108(a) by failing to seek apportionment of liability against Kawasaki before the verdict.

2. Whether, in cases involving both comparative fault and settlement, the settlement amount should be deducted from the gross verdict before or after applying the plaintiff’s percentage of fault.

Holding

1. No, because Robinson did not waive all benefits of General Obligations Law § 15-108(a) as the statute provides three modes of setoff, and failing to seek apportionment against Kawasaki only foreclosed one of them.

2. Yes, the settlement amount should be deducted from the gross verdict first, because this approach best promotes the statutory goals of encouraging settlements and ensuring equitable apportionment of responsibility.

Court’s Reasoning

The Court reasoned that Robinson’s failure to seek apportionment against Kawasaki only foreclosed the possibility of using Kawasaki’s equitable share of fault as a setoff; the other two setoff options (amount stipulated or paid) remained available. Regarding the timing of the setoff, the Court adopted the “settlement-first” approach. This method aligns with the statutory purpose of encouraging settlements. The court noted, “the Kawasaki settlement in turn may be said to approximate the parties’ intuitive assessment of Kawasaki’s fault and damages.” Deducting the settlement first provides a more precise allocation of loss, as it accounts for the settling defendant’s share before determining the remaining liability based on comparative fault. The Court also emphasized that settlement-first provides an incentive for defendants to settle, because nonsettling defendants risk increasing their liability as others settle. The Court explicitly rejected the “fault-first” approach, noting that it could allow a nonsettling defendant to escape responsibility altogether, undermining the goals of General Obligations Law § 15-108. The court found that the settlement-first approach, “results in defendant Robinson being liable to plaintiff in an amount reached after deducting the settlement amount from the gross jury verdict and then discounting the remainder by plaintiffs comparative fault”.