MULTIPLYING YOUR TORT RECOVERY BY ELIMINATING SETTLEMENT SET-OFFS UNDER PROPOSITION 51

Brian D. Chase and Scott D. Raphael

The Electorate’s Attack on the Perceived Common Law “Deep Pocket” Rule

On June 3, 1986, California voters approved Proposition 51, the so-called “Fair Responsibility Act of 1986." (Civil Code § 1431.2 - 1431.5) Its purpose was to remedy a perceived “deep pocket” injustice built into the doctrine of joint and several liability, whereby “if a defendant was found to be at all negligent, regardless of how minimally, under the joint and several liability rule he could be held responsible for the full damages sustained by the plaintiff, even if other concurrent tortfeasors had also been partially, or even primarily, responsible for the injury.” (See, Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1196.) This perceived injustice had been further complicated by the adoption of the pure comparative negligence doctrine in California in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, which abrogated the all-or-nothing contributory negligence doctrine and instead held that “the contributory negligence of the person injured...shall not bar recovery, but the damages awarded shall be diminished in proportion to the amount of negligence attributable to the person recovering.” (Id., 13 Cal.3d at 829.)

In American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, the Supreme Court attempted to diminish the hardship of this doctrine to defendants, by modifying the common law joint and several liability doctrine in several respects. First, plaintiffs would no longer have the unilateral right to determine which defendant or defendants should be included in an action. Second, defendants who were sued could bring other tortfeasors who were allegedly responsible for the plaintiff's injury into the action through cross-complaints. Third, any defendant could obtain equitable indemnity, on a comparative fault basis, from other defendants, thus permitting a fair apportionment of damages among tortfeasors. (Id., 20 Cal.3d at 591-598.) Subsequent decisions enabled defendants to pursue a comparative equitable indemnity claim either (1) by filing a cross-complaint in the original tort action or (2) by filing a separate indemnity action after paying more than its proportionate share of the damages through the satisfaction of a judgment or through a payment in settlement. (See, e.g., Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 496; American Bankers Ins. Co. v. Avco-Lycoming Division (1979) 97 Cal.App.3d 732, 736.) Where one or more tortfeasors proved to be insolvent and were not able to bear their fair share of the loss, the shortfall created by such insolvency was apportioned equitably among the remaining culpable parties--both defendants and plaintiffs. (See, e.g., Paradise Valley Hospital v. Schlossman (1983) 143 Cal.App.3d 87, Ambriz v. Kress (1983) 148 Cal.App.3d 963.)

Notwithstanding these developments, “the retention of the common law joint and several liability doctrine produced some situations in which defendants who bore only a small share of fault for an accident could be left with the obligation to pay all or a large share of the plaintiff's damages if other more culpable tortfeasors were insolvent.” (Evangelatos, supra, 44 Cal.3d at 1198.) Proposition 51 was intended to target this perceived inequity.

“While recognizing the potential inequity in a rule which would require an injured plaintiff who may have sustained considerable medical expenses and other damages as a result of an accident to bear the full brunt of the loss if one of a number of tortfeasors should prove insolvent, the drafters of the initiative at the same time concluded that it was unfair in such a situation to require a tortfeasor who might only be minimally culpable to bear all of the plaintiff's damages. As a result, the drafters crafted a compromise solution: Proposition 51 retains the traditional joint and several liability doctrine with respect to a plaintiff's economic damages, but adopts a rule of several liability for noneconomic damages, providing that each defendant is liable for only that portion of the plaintiff's noneconomic damages which is commensurate with that defendant's degree of fault for the injury.” (Evangelatos, supra, 44 Cal.3d at 1198.) Civil Code §1431.2(b)(1) and (b)(2) further specifically set forth definitions for economic (so-called “special” damages”) versus non-economic (so-called “general” damages”) damages, respectively.

Thus, “Section 1431.2, added by initiative (Proposition 51) in 1986, was intended to make the tort system more equitable by partially eliminating the ‘deep pocket’ rule of joint liability, which sometimes required ‘a tortfeasor which might only be minimally culpable to bear all of the plaintiff’s damages,” (Evangelatos, supra, 44 Cal.3d at 1198), and instead “ensure ‘defendants in tort actions shall be held financially liable in closer proportion to their degree of fault.” (Hoch v. Allied Signal, Inc. (1994) 24 Cal.App.4th 48, 64, citing, Civil Code § 1431.1.)

In the advent of Proposition 51, and with regard to those tortfeasors electing to settle their cases prior to trial or judgment, Code of Civil Procedure §877 (substantially similar in content prior its version in effect at the time the Initiative became law) provides in pertinent part as follows:

“Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, it shall have the following effect:

(a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater....”

(Code of Civil Procedure §877 [Emphasis added.])

The set-off provisions of Code of Civil Procedure § 877(a), by which nonsettling tortfeasors were entitled to a credit against any final judgment for any amounts paid by settling tortfeasors, thus were essentially left unaffected by Proposition 51.

A Glass Half Empty is Also a Glass Half Full

While Proposition 51 may have been initially perceived as a glass “half-empty” from Plaintiff’s perspective, it is in reality a “two-edged sword” for Defendants. On one hand, under § 1431.2(a), “a personal injury defendant [wa]s no longer liable for any amount of the plaintiff's non-economic damages which exceeds the percentage of those non-economic damages attributable to that defendant.” Espinoza v. Machonga (1992) 9 Cal.App.4th 268, 272.

However, from the perspective of nonsettling defendants’ credits for prior settlements, the glass can initially be seen as at least “half-full.” “[A] personal injury plaintiff’s valid ‘claim’ for damages against one tortfeasor for non-economic damages [after Proposition 51] can never be the liability of ‘the others’,” because all liability for non-economic damages after Proposition 51 was thereafter deemed to be “several” only. (Espinoza, supra, 9 Cal.App.4th at 274.) Thus, for the purposes of set-offs governed by C.C.P. § 877(a), “[t]he payment of such a claim (for non-economic damages) by one tortfeasor is not the payment of a claim for which ‘the others’ might ever be held jointly and severally liable. Thus, there is no longer any such claim ‘against the others’ to ‘reduce.’” (Id., 9 Cal.App.4th at 274-275 [emphasis supplied].) The Court in Espinoza thus explained the resulting significance:

“Section 1431.2 provides that the responsibility for the noneconomic portion of the damages allocated to each defendant shall be several and not joint. Therefore, each defendant is solely responsible for his or her share of the noneconomic damages. Thus, that portion of the settlement attributable to noneconomic damages is not subject to set-off. To do otherwise would, in effect, cause money paid in settlement to be treated as if it was paid as a joint liability. This could not properly be done on a verdict and we see no basis why it should be done on a settlement.”

(Id., 9 Cal.App.4th 276-277 [emphasis supplied].)

What this means is that a Plaintiff theoretically pressing a general damages-only case against multiple tortfeasors may settle with successive tortfeasors and leave nonsettling tortfeasors without any set-off rights for any sums previously paid to the plaintiff in prior settlements. The more difficult problem arises when Plaintiff seeks both economic and noneconomic damages against nonsettling tortfeasors who are entitled to a set off for prior settlements for economic damages but not non-economic damages. The Courts have proposed alternative solutions to this problem.

Plaintiffs who have realized pretrial settlements with certain settling tortfeasors may proceed to trial against the nonsettling tortfeasors, await the jury’s special verdict, and then use the pro-rata percentage of economic versus noneconomic damages apportioned by the jury’s special verdict form at trial to determine the percentage of economic damages from the prior settlement for which the nonsettling defendant is entitled to an offset as against the final award. This methodology has been well-established. (See, Ehret v. Congoleum Corp. (1999) 73 Cal.App.4th 1308, 1320; McComber v. Wells (1999) 72 Cal.App.4th 512, 517; Espinoza, supra, 9 Cal.App.4th at 276-277.)

In the alternative, Plaintiff may propose an allocation of economic versus noneconomic damages in the written settlement agreement with the settling tortfeasors brought before the Court on a motion for a good faith settlement determination under Code of Civil Procedure § 877.6. (See, Erreca’s v. Superior Court (1993) 19 Cal.App.4th 1475, 1491.) However, this is the more difficult of the two alternatives because Plaintiff is required to “make an evidentiary showing...to justify such an allocation” as part of that good faith settlement determination. (Ibid.; Knox v. County of Los Angeles (1980) 109 Cal.App.3d 825, 837.) The reasons for this are obvious: “In making an allocation between economic and noneconomic damages, a plaintiff has an interest in allocating as little as possible to economic damages and a settling defendant has "no incentive to oppose the plaintiff's allocation because [the settling defendant is] entirely unaffected by it." (Ehret, supra, 73 Cal.App.4th at 1322, citing Greathouse v. Amcord (1995) 35 Cal.App.4th 831, 841.) In practice, this presents potential tactical hazards since to convince the judge of the allocation suggested, Plaintiff may be required to make evidentiary admissions which could later undermine and/or significantly compromise his or her position against the nonsettling defendants at trial.

Where the allocation made in a settlement agreement has been brought before the Court on “a proper adversarial basis” is supported by competent evidence, and has thereafter been upheld as part of a good faith settlement hearing, the settlement agreement’‘s allocation will be binding even if the jury’s special verdict at tail later provides for a different allocation. (See, e.g., Erreca’s, supra, 19 Cal.App.4th at 1494-1495; Regan Roofing Co. v. Superior Court, (1994) 21 Cal.App.4th 1685, 1703.) On the other hand, where there has been no pretrial hearing on the fairness of the allocation, or the allocation is sought post-verdict, the jury’s actual allocation in its special verdict form is controlling. (Greathouse, supra, 35 Cal.App.4th at 841.) However, an allocation in the settlement agreement is not required to be brought before the Court and determined at the time of the settlement, because the final allocation (for set-off purposes) can always be made after trial based upon the jury’s allocation. (See Espinoza, supra., 9 Cal.App.4th at 276-277.)

Under these circumstances, and particularly for the reasons discussed below, the circumstances would appear rare in justifying seeking an otherwise unnecessary and premature allocation on a good faith settlement hearing. Rather, the Espinoza formula appears the most attractive, leaving all of Plaintiff’s options open until the close of trial.

Turning the Glass “Half-Full” Into the Cup Which “Runneth Over”

The truly fascinating potential of Proposition 51's impact on set-offs lies in the fact that nonsettling defendants are not entitled to any set-offs for prior settlements under C.C.P. § 877, unless economic damages are sought and obtained against them at trial. (See, Aetna Health Plans of California, Inc. v. Yucaipa-Calimesa Joint Unified School Dist. (1999) 72 Cal.App.4th 1175, 1191-1195; Hoch v. Allied Signal, Inc., supra, 24 Cal.App.4th at 62-64.)

Accordingly, where a plaintiff who has previously entered into one or more favorable pretrial settlements thereafter elects to proceed to trial against the remaining nonsettling tortfeasors seeking solely noneconomic damages, the nonsettling tortfeasors are not entitled to set-offs for even a single penny for the prior settlements under C.C.P. § 877(a), even if those prior settlements at the time were intended to include both economic and noneconomic damages. (See, Hoch v. Allied Signal, Inc., supra, 24 Cal.App.4th 48.

This is because “even though multiple tortfeasors may have caused an otherwise indivisible injury, joint and several liability is no longer the rule for noneconomic damages [as a result of Proposition 51].” (Aetna, supra, 72 Cal.App.4th at 1192.) Code of Civil Procedure § 877.6 “presupposes the existence of multiple defendants jointly liable for the same damages...Under the scheme of purely several liability created by section 1431.2(a) however, ‘a personal injury plaintiff’s valid ‘claim’ against one such tortfeasor for noneconomic damages can never be the liability of ‘the others’...Thus , there is no longer any such claim ‘against the others’ to ‘reduce.” (Hoch, supra, 24 Cal.App.4th at 63.) “Instead, ‘pursuant to section 1431.2(a), the noneconomic damages for which the settling and nonsettling defendants could be claimed liable were, by law, separate and distinct, allocated according to the defendants’ individual fault.’” (Aetna, supra, 72 Cal.App.4th at 1193, citing Hoch, supra, 24 Cal.App.4th at 64. )

Thus, where the Plaintiff at trial seeks only noneconomic damages, the nonsettling and settling tortfeasors by law cannot be joint (thanks to Proposition 51), but are instead only several, and C.C.P. § 877(a) (entitling only joint tortfeasors to set-offs for prior settlements) is therefore inapplicable. (Aetna, supra; Hoch, supra). Moreover, because even Plaintiff’s own comparative fault is several only as to his/her noneconomic damages, Plaintiff’s final award of noneconomic damages severally as against the nonsettling tortfeasor(s) cannot be further reduced by such comparative negligence. (Hoch, supra, 42 Cal.App.4th at 62-64.)

Consequently, as recently explained by the court in Wilson v. John Crane, Inc. (2000) 81 Cal.App.4th 847,

In determining settlement credits in actions governed by section 1431.2, " 'only that part of the settlement value attributable to plaintiff's economic damages may be credited against the nonsettling defendants' liability.' " [citations omitted]...[W]here the plaintiff has received a settlement which fails to differentiate between economic and noneconomic damages, the credit against the later judgment is calculated in proportion to the ratio of economic to noneconomic damages awarded by the trier of fact. [citations omitted] But where the damages ultimately awarded consist entirely of noneconomic damages...the logic and arithmetic of Espinoza permit no settlement credit whatsoever. There are no economic damages to apportion, the numerator of the governing ratio is zero, and the settlement credit resulting from the Espinoza formula is therefore also zero. “ Id., 81 Cal.App.4th at 863-864, citing, Torres v. Xomox Corp. (1996) 49 Cal.App.4th 1, 35-36, [again noting that in such cases, “the total from the settlement, plus the judgment against the nonsettling defendant for that defendant's several share of noneconomic damages, can exceed the total damages awarded” by the judgment].

The several nature of noneconomic damages under Proposition 51 potentially turns the glass merely “half-full” into the “cup which runneth over”: “Settling plaintiffs may recover more than the amount of damages ultimately determined...” (Hoch, supra, 24 Cal.App.4th at 66. [Emphasis added.]) In fact, superior negotiation could theoretically double or triple a potential global recovery at trial, through multiple pretrial piecemeal settlements followed by trial against the nonsettling tortfeasor on a voluntary waiver of economic damages. Hoch is very worthwhile reading and is instructive.

Hoch involved a survival and wrongful death product liability action brought by the decedent’s husband over a seat belt failure during a single-car accident. Plaintiff sued Ford Motor Company and Allied Signal, Inc., the manufacturers of the vehicle and subject restraints system, respectively. Plaintiff also sued the Ford dealership which sold the car and the supplier of the vehicle’s tires. Prior to trial, Plaintiff collected separate settlements from Ford, the dealer and the tire supplier in the collective sum of $382,500. In the trial against Allied Signal, Inc., at which Plaintiff waived all economic damages, the jury returned a verdict for $500,000, found Allied Signal 35 percent responsible, and Plaintiff 20 percent comparatively negligent. The Court entered judgment against Allied Signal for $175,000, i.e., 35 percent of the $500,000 verdict. Allied Signal cross-appealed from the trial court’s refusal to reduce the judgment to $ 17,500, consisting of the 20 percent for Plaintiff’s comparative fault and the $ 382,500 set off for the prior settlements. The Court of Appeal upheld the judgment as proper given the fact that Plaintiff had waived all economic damages at trial, and because noneconomic damages are assessed against Allied Signal severally only under Civil Code § 1431.2. Thus, Code of Civil Procedure § 877 did not apply, Plaintiff’s comparative fault was likewise several and had already been factored into the jury’s assessment of 35 percent against Allied Signal, and thus Allied Signal was severally liable for the entirety of its 35 percent of the $500,000 award, i.e., $175,000. (Hoch, supra, 24 Cal.App.4th at 61-64.)

It is interesting to note that, thanks to Proposition 51, the Hoch Plaintiff received a total recovery of $557,500 (consisting of $382,500 in settlements plus the $175,000 judgment at trial), yet received only a $500,000 award from the jury. Thus, it can be argued that through piecemeal pretrial settlements, followed by trial against the one nonsettling tortfeasor on a waiver of economic damages, Plaintiff Hoch earned an additional $57,500 which the jury would not have awarded globally on the same general damages case at trial, i.e., a 12 percent premium on the award at trial.

The analysis in Hoch has likewise been adopted and approved in Wilson, and Torres, supra, and in Aetna, supra, wherein Plaintiffs’ damages sought for bad faith were noneconomic only. Id., 72 Cal.App.4th at 1191-1194.

The First Appellate District Court in Hoch, supra, was fully aware and endorsed on sound policy grounds, Plaintiffs’ prospects under Proposition 51 to multiply their potential recoveries through shrewd piecemeal pretrial settlements. As the Court explained:

The trial court's approach is also fairer to plaintiffs, and more conducive to settlement of claims, than that advocated by Allied-Signal and the amicus. Allied-Signal's approach is unfair to plaintiffs because it would require them to bear the risk of divergence between the settlement and the jury's assessment of the settling party's liability, without allowing plaintiffs to reap the potential benefit of such divergence. For the same reason, it would discourage plaintiffs from settling with less than all defendants. The approach we adopt thus accords as well with the goals of section 877(a), to wit, an equitable sharing of costs among the parties at fault and the [24 Cal.App.4th 65] encouragement of settlements. (Arbuthnot v. Relocation Realty Service Corp. (1991) 227 Cal.App.3d 682, 687 ... [¶] Under a system of joint and several liability, in which nonsettling defendants are liable for all of the damages unsatisfied by pretrial settlement, the nonsettling defendants bear the risk the settlement was "low" compared to the amount the settling defendant would have been liable for according to the jury verdict. The nonsettling defendant may also obtain a benefit if the settlement was "high" and the settling defendant does not obtain equitable partial indemnity. (See Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 497...) The plaintiff, in the joint and several liability system, can neither lose nor win by divergence between the settlement and the verdict; whether the settlement was "high" or "low," the plaintiff's potential recovery from all solvent defendants is the same--the damages awarded by the jury. ([fn. omitted]) This system also provides all parties reasonable incentives to settle. (See American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 603-604...) [¶}Section 1431.2(a), as applied here by the trial court, reallocates the risks and potential benefits of settlement-verdict divergence as to noneconomic damages, but in a manner that remains fundamentally fair. If the settlement was "low," the plaintiff loses; he or she cannot recover the difference in noneconomic damages from the remaining defendants. If the settlement was "high," as here, the plaintiff wins; he or she retains the benefit of the settlement bargain as well as receiving the amounts allocated by the jury to the nonsettling defendants. The nonsettling defendants bear no risk and can reap no benefit from divergence; the settlement does not affect their liability for noneconomic damages. [¶] Allied-Signal's approach, however, places all of the risk on the plaintiffs and gives all the potential benefit to the nonsettling defendants. If the settlement was "low," the plaintiff will recover less than the noneconomic damages awarded by the jury. If the settlement was "high," the nonsettling defendants will reap the benefit, paying less than their fault-share of the noneconomic damages. ([fn. omitted]) This would be inequitable and would provide "little incentive for the injured person to settle with one or fewer than all of the tortfeasors." (Wilson v. Galt (Ct.App.1983) 100 N.M. 227, 668 P.2d 1104, 1109; see also In re Piper Aircraft, [(N.D.Cal.1992)], 792 F.Supp. [1189] at p. 1192 [allowing setoff "would engender situations in which nonsettling tortfeasors would be able to take advantage of the good faith efforts of settling tortfeasors," and hence would "discourage rather than encourage settlement."].) ([fn. omitted])
[¶] The amicus and Allied-Signal assert the trial court's approach awards plaintiffs an "impermissible double recovery" or a "windfall," because plaintiffs' total recovery is greater than the amount of recoverable damages awarded by the jury. This is unpersuasive for several reasons. [¶] First, as already discussed, the limitation of total recovery according to the jury verdict makes sense in a joint and several liability situation, where the plaintiff bears no risk the settlement will turn out to be ungenerous in comparison with the jury's assessment of the settling tortfeasor's fault. Where, however, that risk is placed on plaintiffs, so that they are bound by their pretrial estimate of the settling tortfeasor's proportionate liability, equity demands they also be entitled to retain the benefit of their bargain when the settlement is generous.
The fairness of disallowing a setoff in these circumstances has been recognized in cases from other jurisdictions. Holding a nonsettling tortfeasor was required to pay its proportionate share of the damages despite a settlement that "prove[d] to be more generous than the subsequent verdict" (resulting in a total recovery greater than the jury's verdict), the Supreme Court of Pennsylvania, quoting from a Texas case, explained, " 'A percent credit necessarily means that settling plaintiffs may recover more than the amount of damages ultimately determined, but they also may recover less. Plaintiffs bear the risk of poor settlements; logic and equity dictate that the benefit of good settlements should also be theirs.' " (Charles v. Giant Eagle Markets (1987) 513 Pa. 474, 522 A.2d 1, 3 (lead opn. of Nix, C.J.), quoting Duncan v. Cessna Aircraft Co. (Tex.1984) 665 S.W.2d 414, 430; accord, Wilson v. Galt, supra, 668 P.2d at p. 1109.) ([fn. omitted]) [¶] Second, the idea of a "double recovery" is inextricably linked to the joint liability of multiple tortfeasors. When multiple defendants are responsible for the same compensatory damages, a setoff is not only mandated under section 877(a), but is required by the fundamental principle that "a plaintiff may not recover in excess of the amount of damages which will fully compensate him for his injury. [Citations.]" (Jaramillo v. State of California (1978) 81 Cal.App.3d 968, 970...) The plaintiff cannot, by proceeding separately against each of several defendants, "'convert a joint into a several [injury], and thereby secure more than one compensation for the same injury.' " (May v. Miller, [(1991)], 228 Cal.App.3d [404] at p. 410...quoting Butler v. Ashworth (1895) 110 Cal. 614, 618, 43 P. 4.) In a case of joint liability, the damages for which each defendant is responsible to the plaintiff cannot be divided, and a settlement is rationally assumed to be intended to cover the entire damages.... [¶] That assumption loses its force under a scheme of several liability allocated by fault. "[T]he one recovery rule was originally adopted because the courts could not conceive of allocating liability. Injuries were considered indivisible; therefore, a settling defendant could only offer to pay for the whole injury, not just his part.... [¶] The reasoning behind the one recovery rule no longer applies.... Because each defendant's share can now be determined, it logically follows that each may settle just that portion of the plaintiff's suit. The settlement does not affect the amount of harm caused by the remaining defendants and likewise should not affect their liability." (Duncan v. Cessna Aircraft Co., supra, 665 S.W.2d at p. 431.) [¶] Finally, comparison of plaintiffs' total recovery to the jury's award is potentially misleading. "[S]ettlement dollars are not the same as damages. Settlement dollars represent a contractual estimate of the value of the settling tortfeasor's liability and may be more or less than the proportionate share of the plaintiff[']s damages. The settlement includes not only damages, but also the value of avoiding the risk, expense, and adverse public exposure that accompany going to trial. There is no conceptual inconsistency in allowing a plaintiff to recover more from a settlement or partial settlement than he could receive as damages. [Citations.]" (Duncan v. Cessna Aircraft Co., supra, 665 S.W.2d at pp. 431-432.) That Ford was willing to make a generous settlement in order to avoid a public trial on allegations of defects in its Bronco II does not change either the jury's assessment of total damages or its allocation of fault to Allied-Signal.” (Hoch, supra, 24 Cal.App.4th at 65-68.)

Concluding Thoughts

The now well-established strategy of multiplying your recovery utilizing Proposition 51 and piecemeal pretrial settlements, followed by trial on a waiver of economic damages (to eliminate any C.C.P. § 877 set-offs) is surprisingly little known by most judges and practitioners. It is ideally suited to wrongful death product liability cases where the general damages may conceivably dwarf the economic damages in some cases, and in product liability cases where numerous defendants within the chain of distribution all bear liability for defects in the product. See, e.g., BAJI 9.00 (Comment). These authors have enjoyed considerable success using this strategy in such cases. Often the absence of any right to a set-off comes as a complete and stunning surprise to nonsettling defendants who on the eve of trial had been expected to realize a substantial set-off and thus de minimis exposure at trial, only to find that they are potentially on the hook on a first dollar basis for all of Plaintiffs’ noneconomic damages in proportion to their fault.

Use of this pretrial strategy should be considered at the earliest possible date in appropriate cases. Assessment of the jury verdict potential must necessarily be measured against the collective gains associated with piecemeal pretrial settlements. When piecemeal settlements are realized, there should be no allocation offered in the good faith settlement paperwork, in the first place because none is necessary since the Espinoza formula is always available to effectuate an eventual computation of the allocation which can be applied retroactively, if necessary. In addition, any such an agreed-upon allocation could be binding against Plaintiff at trial (See discussion in Hoch, supra, 24 Cal.App.4th at 67, citing Wilson v. Galt, supra, 668 P.2d at 1109-1110), notwithstanding a waiver of economic damages. Most importantly, determination of such an allocation at a good faith settlement hearing is premature, and unnecessarily squanders potential future options.
Finally, given the complexity and non-intuitive nature of the Hoch strategy, time should be taken properly and thoroughly to brief the issue in writing for the Court well in advance of trial. The sudden perception that a Proposition 51 glass previously thought to have been “half-empty” for Plaintiffs may in fact be a “cup which runneth over” continues to be widely unknown, poorly understood, and contrary to many practitioners’ intuitive sense of “justice”. Careful and methodical education and explanation is essential to ensure the absence of perceived unfair surprise.

HOLDING WRONGDOERS ACCOUNTABLE FOR THE DAMAGES THEY CAUSE SINCE 1978

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