Didner v. Keene Corp., 82 N.Y.2d 342 (1993)

In a multi-defendant tort action where multiple defendants settle prior to the jury verdict, General Obligations Law § 15-108(a) requires the application of the ‘aggregate method’ for calculating set-offs, not the ‘case-by-case’ method.

Summary

This case addresses how to calculate set-offs under New York General Obligations Law § 15-108(a) when multiple defendants in a tort action settle with the plaintiff before the case goes to the jury. The plaintiff sued multiple defendants for damages resulting from the decedent’s asbestos exposure. Prior to the liability phase, the plaintiff settled with several defendants, including Manville. The jury apportioned fault among all defendants, including the settling ones. The defendant, Keene Corp., argued that set-offs should be calculated on a case-by-case basis, which would have eliminated their liability. The court held that the aggregate method is the correct approach, preventing non-settling defendants from unfairly reducing their liability and ensuring the plaintiff receives fair compensation.

Facts

The plaintiff sued 18 defendants for damages resulting from her husband’s death due to asbestos exposure. During the trial, but before the liability phase, the plaintiff settled with 16 defendants, including Manville. The settlements were announced in open court. The jury then determined the percentage of fault attributable to each of the 18 defendants, including the settling defendants, with Keene Corp. found to be 15% responsible and Manville 60.167% responsible. A consent judgment for $800,000 was entered against Manville.

Procedural History

The trial court entered a judgment against Keene Corp. based on its 15% share of the reduced total verdict. Keene Corp. objected, arguing that the judgment should have reflected set-offs under General Obligations Law § 15-108(a), calculated on a case-by-case basis. The trial court denied Keene’s motion, holding the Manville agreement was not a settlement. The Appellate Division affirmed, concluding that General Obligations Law § 15-108(a) was inapplicable because plaintiff had not given Manville a release. The Court of Appeals granted Keene’s motion for leave to appeal.

Issue(s)

1. Whether an agreement announced in open court to enter a consent judgment with one defendant constitutes a “settlement” under General Obligations Law § 15-108(a), even if a formal release has not yet been executed.

2. Whether, in a multi-defendant tort action where multiple defendants settle before the verdict, the set-off against the non-settling defendant’s liability under General Obligations Law § 15-108(a) should be calculated using the case-by-case method or the aggregate method.

Holding

1. Yes, because the realities of trial practice show that settlements made in open court during trial are seldom formally consummated by the actual payment of the agreed sum in exchange for a release until after the trial has ended.

2. The aggregate method is the proper approach under General Obligations Law § 15-108(a) because it promotes the statute’s purpose of encouraging settlements and ensuring non-settling defendants do not pay more than their equitable share, while preventing them from unfairly reducing their liability.

Court’s Reasoning

The court reasoned that interpreting General Obligations Law § 15-108(a) to require an actual release before a settlement is recognized would be an unreasonable requirement, potentially halting trial proceedings until all settling defendants have releases in hand. The court stated that “the literal meanings of words are not to be adhered to or suffered to defeat the general purpose and manifest policy intended to be promoted”. The Court emphasized that settlements announced in open court are binding under CPLR 2104.

Regarding the choice between the case-by-case and aggregate methods, the Court found the aggregate method more consistent with the legislative intent of General Obligations Law § 15-108(a). The court emphasized that “the aggregate method is preferable. It promotes the general purpose of General Obligations Law § 15-108 (a) of encouraging settlements and ‘assuring that a nonsettling defendant does not pay more than its equitable share’”. The court contrasted this outcome with the potential injustice of the case-by-case method, where a non-settling defendant could exploit settlements to reduce its payment below its equitable share. In this case, application of the case-by-case method would have resulted in Keene, found responsible for 15% of the damages, paying nothing. The court noted that General Obligations Law § 15-108(a) does not explicitly address situations with multiple settling defendants, leaving the courts to interpret the statute in a way that aligns with its objectives and avoids absurd results.