Showing posts with label multiple liabilities. Show all posts
Showing posts with label multiple liabilities. Show all posts

Tuesday, May 5, 2020

Appeals court reviews fundamentals of multiple liabilities in remanding business tort case

A Massachusetts Appeals Court decision Friday reaffirmed the rule against double recovery, the finality of settlement, and other fundamentals in a business case of joint tortfeasors.  The case is a good refresher for law students and lawyers on multiple liabilities in tort.

A company sued its former secretary-treasurer and a tax consultant for breaches of fiduciary duty through fraudulent concealment, resulting in financial loss in excess of about $288,000.  The company president, a husband, and the former principal, a wife, were recently divorced, and the latter’s separation on both counts was settled upon a $50,000 payment.  The couple furthermore stipulated an allocation of about $40,000 for the purchase of the wife’s company shares.

The company prevailed against the tax consultant on default judgment.  However, the court determined that the terms of the settlement, and specifically the allocated share purchase, inclusively credited the company with the $288,000 of the wife’s liability.

Under widely accepted state doctrine of joint tortfeasor liability in American law, a joint tortfeasor at judgment is credited with the plaintiff’s past settlement against a departed joint tortfeasor.  The rule encourages settlement by encouraging a well bargaining defendant to settle out, while deterring needless litigation by respecting the common law maxim that “a party can have but one satisfaction for the same injury.”

In accordance with the doctrine, then, the trial court ruled that the plaintiff had been made whole, so would collect nothing more from the tax consultant, however negligent.

That was an error on the merits, the Appeals Court ruled.  “Settlements are motivated by a wide range of factors, some non-monetary, and may involve significant payments or no payment at all,” the court wrote.
Justice Desmond
[T]here are many reasons [the husband] could have agreed on behalf of [the company] to dismiss the complaint against [the wife].  To name just one, having in-depth knowledge of [her] financial status, [he] may well have concluded that [she] would be unable to pay any judgment against her.  In any event, it was clearly erroneous to conclude that the plaintiff had been made whole based on no more than (i) the mere existence of a settlement [on] multiple legal claims and (ii) hearsay assertions that a discount had been given.
The court remanded for the trial court to reassess the actual measure of credit against liability represented by the share allocation, thus the remaining liability owed to the plaintiff by the tax-consultant defendant.

The case is Custom Kits Co. v. Tessier, No. 19-P-503 (Mass. App. Ct. May 1, 2020).  Associate Justice Kenneth V. Desmond Jr. wrote for a unanimous panel with Justices Wendlandt and McDonough.

Sunday, September 29, 2019

Conn. adopts alternative liability in mill-fire suit against teen smokers

The Connecticut Supreme Court adopted alternative liability in a case seeking to hold three smoking teens responsible for a vacant-mill fire.  The case is Connecticut Interlocal Risk Management Agency v. Jackson, No. SC-19946 (Conn. Sept. 17, 2019).  Here are the facts from the court opinion:

At approximately 1 a.m. on June 2, 2012, the defendants, all of whom were teenagers at the time, entered an abandoned mill located in the town. Once inside, the defendants proceeded to explore the multistory structure while drinking alcohol and smoking cigarettes. Each of them smoked approximately five cigarettes, and each discarded the cigarette butts by tossing them onto the wooden floor of the mill without extinguishing them.  The defendants left the mill at approximately 1:45 a.m.  By about 2:20 a.m., the property was engulfed in flames, and the Somers Fire Department had been dispatched to the scene. The fire destroyed both the mill and the sewage line.

Law students usually encounter “alternative liability” in the classic California case, Summers v. Tice, 199 P.2d 1 (Cal. 1948).  This multiple-liability concept allows a plaintiff to charge multiple defendants with responsibility for a wrong without establishing that any one of them was in fact responsible.  In other words, the doctrine engages a fiction as preferable to letting all defendants off the hook.

Beaver Creek quail hunting (Torrey Wiley CC BY 2.0)
In Summers, plaintiff was struck in the eye by shot as his two fellow hunters fired at quail.  It could not be determined to a preponderance of the evidence, i.e., more than 50% likelihood, which of the hunters actually fired the shot that struck the plaintiff.  But because both bore equal moral culpability under the circumstances, relative to the position of the plaintiff, it makes more sense to hold them both liable then to let both prevail.  A little shy of that result, technically, the actual effect of alternative liability is to shift the plaintiff’s burden to prove a defendant’s responsibility to a burden of each defendant to prove non-responsibility.

Alternative liability, as articulated in the Second Restatement of Torts and the Court (quoted here), pertains when: (1) “all of the defendants acted negligently and harm resulted,” (2) “all possible tortfeasors have been named as defendants,” and (3) “the tortfeasors’ negligent conduct was substantially simultaneous in time and of the same character so as to create the same risk of harm.”  Alternative liability is a lawyer-at-cocktail-party favorite, but few cases have facts that can measure up to this stringent test.

Alternative liability had ramifications in the later development of narrow but important product liability doctrines, in cases in which plaintiffs struggle to link a single manufacturer among many with a particular injurious product—think in terms of a dangerous pesticide containing a mix of chemical compounds, each purchased from various sellers.  Some extension of the doctrine has been controversial in the scholarship and ill received in the courts, insofar as product liability is strict, that is, not arising upon proof of any legal or moral fault by a defendant seller.  It can seem, then, that strict product liability effectively penalizes participation in the marketplace.  Add to that the fiction of alternative liability, and it can be just too much for the conscientious economic conservative.

HT @ TortsProf Blog.  Images, by Jim Michaud, from the 2012 mill fire: