New York Law Review

Tag: Settlement Set-Off

  • Whalen v. Kawasaki Motors Corp., 92 N.Y.2d 294 (1998): Determining Set-Offs in Cases with Comparative Fault and Settlement

    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”.

  • Didner v. Keene Corp., 82 N.Y.2d 342 (1993): Calculating Set-Offs with Multiple Settling Defendants

    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.