Just When You Think You’re Out, They Pull You Back In
A key concern in the resolution of any claim, whether prior or subsequent to the initiation of actual litigation, is whether the potential resolution proposed will bring final closure to the particular dispute. In a typical case, this may be easily accomplished by requiring a claimant to execute a general release of his or her claims, as consideration for the payment of consideration in the form of monetary remuneration and/or affirmative relief. In conjunction with unambiguous settlement agreements and stipulations of dismissal with prejudice, when applicable, the execution of a properly-worded release – which should include, of course, exculpatory language for the benefit of not only the defendant, but also the defendant’s agents, representatives, principals and insurers – will generally accomplish the critical goal of bringing final resolution and repose to a given dispute. Both the claimant/plaintiff and the respondent/defendant may move forward with their lives and businesses, secure in the knowledge that the dispute, its concurrent disruptions and the fear of possible negative financial consequences, is no more.
This ultimate goal is significantly affected, however, by the threat of claims sounding in contribution, indemnity and equitable subrogation. When representing a defendant in any action with multiple potential tortfeasors, or in any action in which there may have been multiple tortfeasors, it is vital to consider the potential for such claims. No counsel wants to see their client released by a plaintiff – who then continues to seek recovery against joint tortfeasors – only to have their client brought back into the case by way of a third-party claim sounding in indemnity or contribution. Such an outcome essentially eliminates the advantages of early settlement or other resolution, insomuch as costs of defense and attorneys’ fees continue to accrue and the danger of a finding of liability remains.
There are a number of potential ways to avoid this outcome. For example, a plaintiff may agree, as a condition of any settlement, to include a “hold harmless” provision in the release at issue. Such provisions contractually require a plaintiff to provide a defense to the released party, up to the amount of the settlement monies tendered. It should go without saying that such provisions are not common, and that plaintiffs are far from enthusiastic over the prospect of binding themselves to such terms.
Another possibility is to secure releases of potential third-party claims or cross-claims from the joint tortfeasors, as a condition for the payment of settlement monies. It may be emphasized to these parties that, by contributing to settlement of a portion of a larger claim, your client is reducing the potential exposure for all of the joint tortfeasors. Nevertheless, the securing of such releases requires additional negotiation and, to a large extent, depends upon the logic and reasonableness of third parties. It would be vastly preferable if there were a clear legal framework governing how a settlement by a single party affected multi-party litigation and potential apportionment of liability among joint tortfeasors.
The Florida legislature has addressed this problem, in the form of the Uniform Contribution Among Tortfeasors Act.1 While the initial subsections of this statute were motivated by a desire to allow for contribution between joint tortfeasors,2 the provision of §768.31(5) provides a protection of singular strength to parties who have determined that early resolution of multi-party litigation is the proper course. Specifically, this provision states:
RELEASE OR COVENANT NOT TO SUE. – When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death: (a) it does not discharge any of the other tortfeasors …, but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is greater; and (b) it discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.
The effects of this statutory language upon the conundrum described above should be immediately apparent. The Act provides that, in litigation in which a plaintiff is seeking recovery against multiple tortfeasors for a single injury, one party may extricate itself from said litigation via settlement, and may remain confident in the fact that they will not be brought before a court for the same incident by any of their joint tortfeasors in any action sounding in contribution.3
The Act does not, however, affect any rights arising from concepts of indemnity.4 Unlike contribution, indemnity is recognized as a valid cause of action at common law among joint tortfeasors, and may further arise from contractual commitments among joint tortfeasors.5 It should come as no surprise that claims for contractual indemnity will arise from agreements between joint tortfeasors, and any analysis of potential exposure to same should flow from the actual terms of the agreement. As for common law indemnity, it should be noted that a party seeking the same must overcome a difficult burden: (1) the party seeking indemnification must show that they are faultless and their liability must be solely vicarious for the wrongdoing of another; and (2) in order for the faultless party to shift liability to the other, the party against whom indemnification is sought must be at fault.6
Equitable subrogation presents another situation in which the UACTA protections for parties who make an early exit from a dispute do not apply. Rather than providing a mechanism for bringing a party who settles back into litigation, however, subrogation allows a party who has (1) resolved a matter prior to judgment, (2) has paid 100% of both its and the joint tortfeasor(s)’ obligations and (3) has secured a release or covenant to the benefit of joint tortfeasors, to seek compensation from said joint tortfeasors.7 Accordingly, this concept does not present the danger that §§(5) of UACTA seeks to avoid – i.e. a negotiated resolution that does not bring final closure to litigation for the party who settles.
In the final analysis, the UACTA should give considerable peace of mind to any party seeking to resolve its involvement in litigation featuring multiple tortfeasors and identical injuries. While third party actions sounding in indemnification or subrogation may still prevent full and final closure to a proceeding, a defendant who chooses to resolve a claim may avoid the greater danger of a quick third party claim of contribution from a joint tortfeasor, which prevents an effective exit from the dispute. So long as the resolution in question is made in good faith,8 joint tortfeasors will be limited to the comparatively difficult doctrines of indemnity and subrogation – which should be relatively easy to identify at an early stage in any matter – to state their claims. Even if liability is apportioned to the tortfeasor who settled the matter prior to disposition, and even if it be 100% liability in the eyes of the judge or jury, the UCATA provides enviable protection against concurrent or subsequent suit by a joint tortfeasor.
In short, by understanding and employing the protections of the UCATA, a defendant may be confident that, once they have gotten out, no one will be pulling them back in.
1 Florida Statute §768.31 (the “UCATA”).
2 See id. at §§(2)(a)-(b)(“…when two or more persons become jointly or severally liable in tort for the same injury to person or property, or for the same wrongful death, there is a right of contribution among them even though judgment has not been recovered against all or any of them … [b] …[n]o tortfeasor is compelled to make contribution beyond her or his own pro rata share of the entire liability.”) This language overruled prior common law rules denying an action in contribution between joint tortfeasors for a single harm. See e.g. St. Paul Fire & Marine Ins. Co. v. Shure, 647 So.2d 877 (Fla. 4th DCA 1994).
3 See id. It should be further noted that actions for intentional torts, breach or trust or breach of fiduciary duty are specifically excluded from the UCATA. See id. at §§(g); see also Bel-Bel Intern. Corp. v. Barnett Bank of South Florida, N.A., 158 B.R. 252 (S.D. Fla. 1993). Accordingly, an intentional tortfeasor, or a tortfeasor who is found to have breached a position of trust or fiduciary relationship cannot seek contribution from a joint tortfeasor. See id.; see also Robert L. Turchin, Inc. v. Cather Industries, Inc., 487 So.2d 850 (Fla. 4th DCA 1986).
4 See Fla. Stat. §768.31(2)(f). Very generally stated, a claim for indemnity essentially alleges that the party raising the claim should be held entirely harmless for the alleged wrongful act, with 100% of its judgment obligation, if any, paid by a third party/joint tortfeasor. See e.g. Dade County School Bd. v. Radio Station WQBA, 731 So.2d 638 (Fla. 1999).
5 The use of the term “indemnity” in the UCATA has been interpreted to include the closely related concept of subrogation. See McKenzie Tank Lines, Inc. v. Empire Gas Corp., 538 So.2d 482 (Fla. 1st DCA 1989). As with indemnification, subrogation may be either contractual or equitable. See id.
6 See generally Radio Station WQBA, 731 So.2d 638.
7 See id.
8 See Boca Raton Transp., Inc. v. Zaldivar, 648 So.2d 812 (Fla. 4th DCA 1995); see also International Action Sports, Inc. v. Sabellico, 573 So.2d 928 (Fla. 3d DCA 1991).