U.S.: Joint and Several Liability Under the General Maritime Law

December 2001

(Sea Venture Volume 20)

In multi-party maritime personal injury cases, Defendants will whenever possible seek to share their risks or losses. In the absence of risk or loss shifting mechanisms such as contractual indemnity and/or additional assured provisions, the primary methods of risk sharing are settlement or trial and contribution.

When a Defendant in a multi-party maritime personal injury case settles in advance of trial, it is essentially sharing and liquidating the risk of trial with the Plaintiff in exchange for the certainty of an agreed upon sum. A Defendant who opts to proceed to trial instead of settling hopes to spread the risk among the Plaintiff and the other Defendants, whether through the jury’s negligence findings or through a contribution action.

By way of background, joint and several liability has been a part of the maritime law for well over a century. The principle in essence allocates liability between non-settling joint tortfeasors in proportion to their respective fault, and allocates the risk of uncollectibility from a joint tortfeasor among the other non-settling parties in proportion to their faults.

McDermott¹ stands for the proposition that a non-settling Defendant pays only its percentage or proportionate share of responsibility for a Plaintiff’s loss as assessed at trial. The settling Defendant’s negligence must be submitted to the jury so that its percentage of responsibility can be established. If the percentage of responsibility apportioned to the settling Defendant represents a larger portion of Plaintiff’s damages than the amount of the agreed settlement, the non-settling Defendants are not required to make up the difference. Conversely, if the percentage of responsibility apportioned to the settling Defendant is less than the amount of the settlement, the non-settling Defendants are not entitled to a reduction.

Stated differently, just as the non-settling Defendants are not entitled to a reduction in liability when the Plaintiff negotiates a "generous settlement", so they are not required to shoulder disproportionate liability when the Plaintiff negotiates a "meager settlement". In the latter situation, the Plaintiff’s recovery has not been limited by "outside forces", but by the Plaintiff’s own desire to enter into a voluntary settlement. The following examples will illustrate how this might work in actual practice:

 

Example 1

Plaintiff sues Defendants A, B and C. In advance of trial he settles with Defendant A for $500,000.00. At trial, the negligence of all three Defendants is submitted to the jury and a verdict is returned apportioning fault equally among the Defendants (i.e., 1/3 to each) and awarding Plaintiff total damages of $750,000.00. Plaintiff recovers the following: $500,000.00 from Defendant A by virtue of the settlement; $250,000.00 from Defendant B; and, $250,000.00 from Defendant C. In other words, Plaintiff recovers a total of $1,000,000.00 when his actual damages were found to be only $750,000.00. In this scenario, Plaintiff negotiated a "generous settlement" and the non-settling Defendants are not entitled to a reduction in the amounts they are obligated to pay under the verdict.

 

Example 2

Plaintiff sues Defendants A, B and C. In advance of trial he settles with Defendant A for $50,000.00. At trial, the negligence of all three Defendants is submitted to the jury and a verdict is returned apportioning fault equally among the Defendants (i.e., 1/3 each) and awarding Plaintiff total damages of $750,000.00. Plaintiff recovers the following: $50,000.00 from Defendant A by virtue of the settlement; $250,000.00 from Defendant B; and, $250,000.00 from Defendant C. In this situation Plaintiff recovers a total of $550,000.00, even though the jury determined his actual damages to be $750,000.00. Here Plaintiff has negotiated a "meager settlement" and the non-settling Defendants are not required to make up the difference.

However, problems arise when one or more of the non-settling Defendants do not bear their proportionate share of responsibility for a Plaintiff’s judgment due to "outside forces", rather than by virtue of a settlement voluntarily entered into by the Plaintiff. In such instances the principle of joint and several liability makes the other non-settling Defendants, rather than an innocent Plaintiff, responsible for the shortfall. The following are some common examples of exceptions to McDermott’s rule of proportionate fault:

1. A Defendant who is entitled to limit its liability pursuant to the Limitation of Liability Act;

2. A Defendant who is protected by sovereign immunity;

3. A Defendant who is insolvent; and,

4. A foreign Defendant against whom a judgment cannot be enforced/collected.

In each of the foregoing situations, the other non-settling Defendants will likely be required to make up the difference represented by the failure of a joint tortfeasor to bear its percentage share of fault.

In conclusion, non-settling Defendants in multi-party maritime personal injury cases must be wary. The Defendant who chooses to proceed to trial may be left "holding the bag" due to the principle of joint and several liability in situations where "outside forces" prevent a Plaintiff from recovering damages apportioned to a co-Defendant/joint tortfeasor. Prudent trial preparation and risk analysis mandate that due consideration be given to the ability of co-Defendants to actually satisfy any portion of a judgment which may ultimately be rendered against them.

With thanks to Robert Klawetter of Eastham, Watson, Dale & Forney, Houston for preparing this article.

1McDermott, Inc. v. AmClyde & Don River Castings Ltd., 511 U.S. 202, 1994 AMC 1521 (1994)