Bar News - August 19, 2011
Worker’s Comp and Personal Injury: Five Key Things to Remember When Pursuing a Post-Settlement Contribution Action
By: Catherine Costanzo and Paul Kleinman
Imagine that you are representing the premises owner or tenant in a slip-and-fall case involving catastrophic and permanent injuries to a respected professional, with no evidence of contributory negligence and very clear evidence that the fall occurred due a defect in the premises. In that scenario, the best defense is likely a good offense against others who caused the defect. If those other parties do not contribute to a settlement, you may find yourself bringing a contribution action against them under R.S.A. 507:7-f.
We recently represented co-plaintiffs under the auspices of the same insurance carrier in the above-described contribution action, which went to trial in June in the Merrimack County Superior Court. In our case, the plaintiff in the original action stumbled on a single step leading from a porch to a lower landing and then fell through a shoddily installed guardrail. Falling several feet to the ground, plaintiff suffered broken bones all over his body, including a fractured skull, internal injuries, profound hearing loss, and a traumatic brain injury. Our clients settled with him for nearly two million dollars. It was up to us to recover a fair proportion of that money from those who actually constructed the shoddy porch and landing area.
The premises owner (one of our clients) had overseen and managed renovations of the porch and landing area several months earlier. The general contractor was discharged before project completion, so maintenance workers employed by another company completed the fit-out on the project. Our clients, under direction of their insurance carrier, brought a contribution action against the general contractor and the other company that took over.Although the jury found the general contractor not liable, the jury assigned 45% liability to the other company and found the underlying settlement reasonable.
The Basics: What You Should Include in the Settlement Agreement
If you are settling a case in anticipation of bringing a contribution action, you must structure a settlement agreement that meets the requirements of the contribution statute. R.S.A. 507:7-f provides that, "Contribution is not available to a person who enters into a settlement with a claimant unless the settlement extinguishes the liability of the person from whom contribution is sought, and then only to the extent that the amount paid in settlement was reasonable." R.S.A. 507:7-g(III) requires that in cases involving settlement (i.e. cases in which "no judgment has been rendered"), the person bringing the action for contribution must have "discharged by payment the common liability" of the parties responsible for the tort in question. Thus, it is crucial that the settlement agreement require the plaintiff to release all the potential tortfeasors you anticipate suing in contribution, and that your client or his carrier is in fact paying the entire settlement on behalf of all such tortfeasors as well as on his own behalf. It is also wise to include a written acknowledgment that the plaintiff has not accepted payment from any of the other tortfeasors in consideration for the release. You should also include a clause requiring the plaintiff and, perhaps his attorney as well, to cooperate in preparing for trial in the contribution action and to testify truthfully. Early on, defense counsel raised the issue of whether we had to itemize the amount paid by each settling party who was seeking contribution where the release was general in nature and set forth the total consideration paid on behalf of both clients. The trial court denied their motion. The jury was instructed to consider whether the settlement as a whole was reasonable compensation to plaintiff for his injuries, to determine liability, and to allocate liability among the parties.
Proving the Reasonableness of Settlement
R.S.A. 507-7:f provides that settling parties who seek contribution can only recover "to the extent that the amount paid in settlement was reasonable." The trial court rejected the defense contention that an unreasonable settlement amount would preclude recovery altogether. Rather, a jury that found that a settlement was too high would be asked to determine how much would have been reasonable. The party seeking contribution would then recover a percentage of that reasonable amount based on the jury’s allocation of fault. Nonetheless, plaintiffs in a contribution action clearly want to prove that all the settlement was reasonable, or as much as possible.
Remember that reasonableness is an objective standard. It does not matter whether the subjective motivations of the settling parties were wise or foolish. It does not matter whether the settling tortfeasors could have obtained a more favorable settlement. The only question is whether the settlement amount was within the range of reasonableness based on the nature of the damages and the likelihood of a finding of liability. In our case, the trial court rejected defense motions to depose our carrier’s claims handler, produce the claims file,or to introduce the entire back-and-forth of the settlement negotiations.
It is an open question whether expert testimony is required but you should consider using an experienced litigator to establish reasonableness. An expert can explain the ins-and-outs of the litigation process to the jury, boil your argument down in an easily accessible way, and provide reassurance that the settlement was not outside the bounds of reasonable practice in New Hampshire.
Perhaps most importantly, the expert can also testify to facts or evidence that emerged in discovery in the underlying case even if you have not introduced them into evidence. This saves you from having to put on the full damages case that the original plaintiff would have presented if the underlying matter had gone to trial, and allows you to focus on establishing liability. You may not be in as good a position as the plaintiff to present a full damages case for a number of reasons: (1) Even with a cooperation agreement, you will likely not have as much access to the plaintiff to prepare for trial; (2) You may find it awkward to present certain of the plaintiff’s damages witnesses if you did too good a job undermining their testimony when you were deposing them in the underlying case; and (3) You may be facing more complex liability issues that you will need to focus on.
You should expect that the defense will present an expert as well. A battle of the legal experts, however, tends to work in favor of the party bringing the contribution action. The defense legal expert will likely have to admit that there is at least some reasonable settlement amount. In our case, although our expert (John Garvey) and the defense expert (Bill Mulvey) disagreed on the settlement range, Mr. Mulvey conceded that the top end of his range equaled the low end of Mr. Garvey’s range.
Don’t Forget to Focus on Liability
Notwithstanding the special requirements of a contribution action, ultimately you will have to prove tort liability. You will have to deal with the same issues as you would in a regular negligence or other tort case – such as establishing the standard of care, causation, and the other elements of the tort, and responding to the Debenedetto disclosures of the defendants.
Be Prepared to Concede Your Own Client’s Liability
Under R.S.A. 507-7:f, " a right of contribution exists between 2 or more persons who are jointly and severally liable upon the same indivisible claim, or otherwise liable for the same injury, death or harm . . ." Applying the plain language of the statute, the trial judge ruled that a finding of liability against our clients was required in order for them to recover in contribution.
We found it an advantage to concede liability. We did not have to react defensively when our opponents argued our clients’ role in causing the underlying accident. Acknowledging our clients’ role as responsible parties gave us credibility and helped to deflate many of the defense arguments.
Cope with Odd Relationships among the Parties
A contribution action, by definition, entails a lawsuit between people or entities who were closely related enough at one point to jointly cause or contribute to a tort. Sometimes an insurance carrier is driving the decision to sue. In our case, this resulted in the unusual circumstance of two companies owned by the same person suing each other, (the company that owned the property suing the company that completed the fit-out). We worried that a jury might not understand how a company could sue another company owned by the same person. It is also awkward when the person who embodies your client essentially tells the jury that the entity you are suing is not at fault. Why would a jury award a company damages when the company’s owner says it shouldn’t?
We surmounted these problems by stressing to the jury that the corporate entities involved were separate and distinguishable from each other, and from the individual who owns them. We also introduced helpful deposition testimony by the company owner as substantive evidence. As principal of the company, he was representative of a party opponent as well as a representative of one of the companies on our side. N.H. R. Evid. 801(d)(2).
This case and the experience of bringing a contribution action to trial before a jury exposed us to many issues we had not encountered before. We would each be happy to answer any questions from interested readers and members of the bar regarding this case or contribution actions in general.
Catherine Costanzo of Nelson Kinder + Mosseau, specializes in employment and civil rights litigation, most frequently representing municipalities and private employers.
Paul Kleinman of Bouchard Kleinman & Wright, is the firm’s managing partner and specializes in civil litigation, most frequently retained by insurers to represent their insured.