Proportionate-share approach

The hospital urged the Court to apply the proportionate-share approach, while the plaintiff urged the setoff-with-contribution approach. The Court adopted the latter system. It held that the proportionate-share approach was not consistent with California’s law of joint and several liabilities. If the settlement turns out to be less than the settling tortfeasor’s proportionate share, the plaintiff may not recover the difference from any of the other tortfeasors and is precluded from obtaining full compensation. For the corporate defense lawyer visit the law firm in California.

The settling tortfeasor’s liability is not its actual proportionate share, but only the amount paid in settlement. By contrast, the setoff-with-contribution approach does not change the respective positions of the parties. The plaintiff can recover full compensation and the defendants each pay their relative share of the loss based on their degree of fault (this occurs in two steps; with the settlement with the plaintiff and then in the contribution action when the settling defendant pays the non-sending defendants based on the allocation of fault.)

The Court also determined that the public policy of encouraging good-faith settlements is encouraged by the setoff- with-contribution approach, but not the proportionate-share approach. The former does not change the relative liability of the parties, and therefore contains no incentive to enter into a settlement that is not made in good faith. By contrast, the proportionate-share approach would encourage settlements not made in good faith, by limiting the liability of the settling tortfeasor (to the settlement amount) and the liability of non-settling tortfeasors (who would not be liable for the settling tortfeasor’s proportionate share.)

The Court noted that the U.S Supreme Court in McDermott, adopted the proportionate-share approach in federal courts and that the Restatement Third of Torts, section 16, later adopted this view. The Court noted that in McDermott, unlike the case before it, there had been no pretrial determination that the settlement had not been made in good faith. Because there was no federal analog to the Code of Civil Procedure section 877, the U.S. Supreme Court was not faced with the same constraints in choosing which method to adopt. 

The absence of this option, in the California Supreme Court’s view, “fundamentally changes the analysis.” Of the two options available to the California Supreme Court, it chose the setoff-with-contribution rule. In dealing with the plaintiff’s cross-appeal, the Supreme Court also rejected the hospital’s argument that because a hospital does not practice medicine, as a matter of public policy its conduct should not be considered a legal cause of the plaintiff’s injuries. It asserted it should not be required to provide medical advice “beyond directing the patient to call the doctor with concerns.” The Court disagreed, noting that, “Although hospitals do not practice medicine in the same sense as physicians, they do provide facilities and services in connection with the practice of medicine, and if they are negligent in doing so they can be held liable.” Since the plaintiff’s evidence was sufficient to find that the hospital had been negligent, the Court rejected the hospital’s causation argument.