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In a highly anticipated asbestos decision involving the Johns Manville Personal Injury Trust, the Pennsylvania Supreme Court has ruled that in apportioning the verdict in a products liability suit, the settling defendant’s pro tanto release should be honored, rather than reducing the verdict applying pro rata principles. The release at issue in Baker v. AC&S was part of a settlement between the plaintiff and the trust. The trust paid the plaintiff $30,000 in exchange for the release. By the time of trial, there was only one non-settling defendant remaining. After the jury returned with a $2.2 million verdict, the trial court declined to honor the pro tanto release and instead reduced the verdict to account for the trust’s pro rata share of liability, $310,000, treating it the same as the other settling defendants. The Superior Court reversed, finding Pennsylvania law favored victims over tortfeasors and that a defendant must bear the risk of rolling the dice at trial. All seven justices agreed that the Superior Court’s decision was proper. CASE HISTORY Albert Baker and his wife, Suzanne, sued a number of asbestos defendants after Albert developed pleural plaques, allegedly due to his work-related asbestos exposure. The case was dismissed without prejudice but later revived when Albert developed mesothelioma. At the first phase of the reverse bifurcated trial, the plaintiffs received a damage award of $2.2 million. Several defendants were dismissed on motions for summary judgment, and the plaintiffs had already settled with three others: Owens Corning Fiberglass Corp., Pfizer Inc. and Asbestos Claims Management Corp. (ACME), formerly National Gypsum. In addition, the plaintiffs settled their claim against the trust. The trust was established in 1988 to pay all claims against the Johns-Manville Corp. as a result of asbestos exposure. At the liability trial against AC&S, the only non-settling defendant, the trial court found AC&S and the four settling entities liable. It then turned to the issue of molding the verdict to account for the settlements. The three defendants had each obtained pro rata releases, but the trust — which had paid just $30,000 — took a pro tanto release in exchange for settlement. Nevertheless, in molding the verdict, the trial judge interpreted state law and the Manville Trust Distribution Process (TDP) to require a set-off against the plaintiffs’ verdict by a pro rata amount, or one-fifth, to account for the trust’s share, rather than the dollar-for-dollar reduction contemplated by the pro tanto release language. Under the TDP, a schedule or matrix of disease categories and associated dollar values was established, with the trust paying a small percentage of the assigned value. In this case, a mesothelioma was “rated” at $300,000, but the trust could pay only 10 percent of that amount. Contribution claims against the trust are precluded in most situations, but a co-defendant has the right to treat the trust as a “legally responsible tortfeasor” without further proof, and the co-defendant, if found liable, is entitled to a set-off with respect to the trust’s payment, measured by reference to local law. The TDP refers to the following methods of set-off: (1) pro tanto, (2) pro rata, (3) allocation or apportionment, (4) several liability and (5) multiple set-off rules. A court is supposed to determine which category its state law falls into and apply it. The trial court in Baker found that Pennsylvania is a pro rata state and, therefore, applied a pro rata reduction despite the pro tanto language of the defendant’s release. However, reversing the trial court’s finding, the Superior Court majority held that Pennsylvania is a “multiple set-off rule” state, where the method of set-off depends on the type of action and other factors. It was that decision that was the focus of the appeal. TORTFEASORS ACT Justice Ralph Cappy began his analysis in the majority opinion with the Contribution Among Tortfeasors Act (UCATA), which calls for reduction of a claim against a non-settling defendant by the amount paid or in any proportion provided for in the release. The act allows three set-off scenarios: � If the settlement is silent, the set-off defaults to pro tanto and the non-settling defendant is entitled to a reduction of the verdict in the amount paid by the settling tortfeasor. � If the settlement specifically provides for a pro tanto set-off, it will always be honored. � If the settlement specifies a form of set-off other than pro tanto, such as pro rata, it will be applied, unless it yields a set-off figure higher than the consideration paid by the non-settling tortfeasor. Cappy said it was obvious then that AC&S should receive a pro tanto set-off because the settlement agreement between the Bakers and the trust specified that it was a pro tanto release. “Furthermore, the release stressed that it ‘does not provide, and shall not be construed to provide, for a reduction, to the extent of the pro rata share of the [Manville] Trust, of [the Bakers'] damages recoverable against all other tortfeasors’ …,” Cappy said. “Thus, set-off is capped at the amount of consideration paid by the Manville Trust to the Bakers.” But AC&S claimed the UCATA had no place in a strict liability action. It said the act applies solely to negligence cases, relying on the 1993 Superior Court case Ball v. Johns-Manville Corp. Cappy said not only did the court not read Ball as limiting application of the act to negligence cases, but the justices have never before adopted such a position. As for the UCATA itself, Cappy said its language actually “is very broad and applies to all types of actions.” The court also rejected AC&S’ argument that set-off in strict liability actions can only be pro rata, asserting that joint tortfeasors in a strict liability action are liable only for their respective equally distributed shares of the verdict. AC&S said such tortfeasors could not pay more that those shares and have no right to contribution. Cappy said AC&S was forgetting that “the declaration that liability is to be apportioned equally in a strict liability matter is not synonymous with the proposition that a tortfeasor may be compelled to pay only its share of the judgment and no more.” Even in strict liability actions, joint tortfeasors are jointly and severally liable, he said. “Thus, the plaintiff may recover the entire damages award from only one of the joint tortfeasors,” Cappy said. “That joint tortfeasor’s recourse for paying more than its proportionate share of the verdict is to sue the nonpaying joint tortfeasors in contribution.” Lastly, Cappy turned down AC&S’ contention that the computation of the set-off was wrong. “We therefore find that the proper method in calculating set-off is first to apportion shares of liability,” he said. “In the matter sub judice, the trial court correctly determined that in this strict liability action, the verdict was to be apportioned equally among AC&S and the four settling defendants.” The next step for the court was to determine what type of set-off applies. “As the settlement agreements between Mrs. Baker and Owens Corning, Pfizer and ACME each provided for pro rata set-off, AC&S will be allowed to set-off each of these defendants’ apportioned shares of the verdict, or an aggregate of $1,320,000,” Cappy said. “As to the Manville Trust’s share, AC&S is entitled to a pro tanto settlement in the amount of $30,000. Thus, AC&S is jointly and severally liable for both its share of the verdict as well as the shortfall between the Manville Trust’s share and the $30,000 it paid in settlement, or for $850,000.” CONCURRENCE In a 24-page concurring opinion, Justice Thomas Saylor, joined by Justices Stephen Zappala and Sandra Schultz Newman, said he agreed the Superior Court should have been affirmed. However, he said he felt the majority should have given more attention to the terms of the TDP. “In summary, in conformance with the majority’s holding concerning the effect of Pennsylvania law in relation to written releases,” he said, “AC&S could obtain a full setoff in relation to the trust’s share of the verdict only if the release provided by the Bakers, or the provisions of the TDP, contained an express agreement to surrender the interest in pursuing full recovery from the trust’s codefendants pursuant to the doctrine of joint and several liability, thereby constituting a full pro rata release. “The release that the Bakers provided was pro tanto, and, although the terms of the TDP insulate the trust from substantial exposure to a contribution claim by AC&S, they simply do not reflect a commitment on the part of the Bakers to surrender their interest in pursuing full recovery against the trust’s codefendant, including AC&S.” Tracy Blitz Newman contributed to this report.

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