§15.22 Financial Impact of Settlement With One of Multiple Tortfeasors

The Case: Williams Holding Co. v. Willis , 166 S.W.3d 707 (Tenn. 2005).

The Basic Facts: Plaintiff was owner and landlord of an apartment who brought negligence action against a tenant, tenant’s son and son’s friend after the friend accidentally lit a fire which caused extensive damage to Plaintiff’s property. The parties agreed to submit the litigation to arbitration. Before the arbitration hearing, the tenant and her son reached an agreement with Plaintiff to pay 50% of the damages cause by the fire.

The Bottom Line:

• “[W]e hold that the arbitrator did not exceed his scope of authority by finding that defendant Leavy was 100% at fault and thus liable for the full amount of the plaintiff’s damages.” 166 S.W.3d at 711.
• “In reaching this conclusion, we disagree with defendant Leavy’s position, and the Court of Appeals’ conclusion, that the arbitrator exceeded his scope of authority or that the trial court ‘clearly erred’ by refusing to grant defendant Leavy a credit based on the amount the plaintiff received in the settlement with defendants Willis and Brown.” Id.
• “Our conclusion is based on the fact that there is no authority in Tennessee that supports defendant Leavy’s argument that a non-settling defendant who is found 100% at fault is entitled to a credit or set-off for the amounts paid to the plaintiff by other settling defendants. To the contrary, under principles of comparative fault, a non-settling defendant is not entitled to a credit for amounts paid by a settling defendant because the non-settling defendant is required to pay damages based on his or her percentage of fault. Varner v. Perryman, 969 S.W.2d 410, 413 (Tenn. Ct. App. 1997); see also McIntyre v. Balentine, 833 S.W.2d 52, 58 (Tenn. 1992) (emphasizing that the goal of comparative fault is to link one’s liability to one’s degree of fault).” Id. at 712.
• “Although defendant Leavy places great emphasis on the need to avoid granting a windfall to the plaintiff, the mere possibility that plaintiffs may, by settling with some defendants, receive more than their actual damages does not change the fact that non-settling defendants are obligated to pay damages based on the percentage of their fault. As the United States Supreme Court has explained:

  we must recognize that settlements frequently result in the plaintiff’s getting more than he would have been entitled to at trial. Because settlement amounts are based on rough estimates of liability, anticipated savings in litigation costs, and a host of other factors, they will rarely match exactly the amounts a trier of fact would have set. It seems to us that a plaintiff’s good fortune in striking a favorable bargain with one defendant gives other defendants no claim to pay less than their proportionate share of the total loss . In fact, one of the virtues of the proportionate share rule is that . . . it does not make a litigating defendant’s liability dependent on the amount of a settlement negotiated by others without regard to its interests.

  McDermott, Inc. v. AmClyde , 511 U.S. 202, 219-20 (1994) (emphasis added).” Id.
• “In addition, there is no authority in Tennessee that supports defendant Leavy’s claim that a credit is appropriate under a theory of contribution. A statutory ‘right of contribution exists only in favor of a tort-feasor who has paid more than the proportionate share of the shared liability between two (2) or more tort-feasors for the same injury . . . .’ Tenn. Code Ann. § 29-11-102(b) (2000) (emphasis added). In such cases, ‘the tort-feasor’s total recovery is limited to the amount paid by the tort-feasor in excess of this proportionate share.’ Id.” Id.
• “Here, the arbitrator found defendant Leavy to be 100% at fault in causing the plaintiff’s damages. As a result, requiring Leavy to pay 100% of the plaintiff’s total damages does not result in him paying more than his proportionate share. Instead, his liability is linked to his percentage of fault under the principles of comparative fault. McIntyre, 833 S.W.2d at 58.” Id.