On Thursday, Plaintiffs attorneys throughout the state of California were jumping for joy as the California Supreme Court discarded the common law "release rule," which held that a plaintiff who settles with one joint tortfeasor releases all the others from liability, according to Law.com.

The majority opinion in the case, Leung v. Verdugo Hills Hospital, 12 C.D.O.S. 9646, also held that plaintiffs who settle with one defendant for a disproportionately small amount, can recover the full amount of any subsequent judgment against other defendants, with the caveat being that the settlement is subtracted from the subsequent judgment.

Justice Kennard, writing for a unanimous court, wrote that holding otherwise would be inconsistent with California's joint and several liability laws and could lead to harsh results for plaintiffs. If that means nonsettling defendants get stuck with a disproportionate share of liability, they can bring an action for contribution against the settling defendant, Kennard concluded.

The defendant in Leung represented by attorney Robert Olson, felt the brunt of this newly instituted rule, as his client is now forced to pay for $14 million of a $15 million judgment, notwithstanding the fact that it was found only 40 percent% at fault at trial.

Incentive to Seek Contribution or to Settle Before Trial?

"You can't come after the settling defendants for perhaps years, until the nonsettling defendant knows what their liability is going to be," said Olson of Greines, Martin, Stein & Richland in Los Angeles. "You've got to find them, see if they still have resources. The whole burden [of the settlement] is carried by the party that had no say in it."

By contrast, plaintiff Aidan Leung's attorney Stuart Esner,  believes that the threat of a contribution action incentivizes defendants to settle in good faith. "Without this ruling, it would be very difficult for anyone to structure a settlement that makes any sense," said Esner, of Pasadena's Esner Chang & Boyer.

This seems to be a somewhat curious decision that does not lend itself to a judicially efficient use of the court's resources, as it incentivizes defendant's to initiate claims for contribution against other defendants that have already settled. Yet, the decision on the other hand seems to encourage all defendants to settle before trial, even more so than under previous law, in order to avoid the threat of bringing a post-judgment contribution action against the settling joint tortfeasor.

Time will tell as to the effect that this rule will have on the log-jammed state court system in California.

What do you think?

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