Indiana Law Review


Comparative Negligence, Comparative Contribution,

and Equal Protection in the Trial and Settlement

of Multiple Defendant Product Cases

Clifford Davis*

I. Introduction

The multiplication of theories of recovery^ in product litigation

has been accompanied by a multiplication of the number of defen-

dants in almost every product suit as plaintiffs "shotgun," that is,

sue everyone connected with the product whether or not those

defendants' "fault" contributed to the injury.^ When the confusion of
the law of contribution and indemnity,^ such as the active-passive

distinction,* is imposed on the multiple theories of product liability,

Professor of Law, University of Connecticut; S.B., 1949, University of Chicago;

LL. B., 1952, Harvard University.

'In the literature devoted to product liability the terms explosion, revolution, and

even multiplication are used to describe a process perceptively described by Gilmore,

Products Liability: A Commentary, 38 U. Chi. L. Rev. 103 (1970) as a revolution that is
part of a much larger phenomenon where risks have been reversed between active and
passive parties. Under Professor Gilmore's analysis what is called a multiplication of

theories in products liability can more accurately be described as a use of the division

of civil obligations into the fields of tort and contract to resort to torts when there are
roadblocks in the contract doctrines and to come back to contract when tort doctrines
block the realignment of liabilities to meet changes in the society that the law reflects.

For the purposes of this Article the characterization of products liability as tort

or contract is obviated by an assumption that products liability cases fall into four

functional classifications: cases in which (1) a product was represented or warranted

and did not live up to the promises; (2) a product was defectively manufactured; (3) a
product was defectively designed; ;or (4) there were inadequate or defective warnings.

And, to make the following discussion free of discussion of whether products liability is
tort or contract, it is assumed that all four functional classifications can be characteriz-

ed as cases of "fault."

This does not mean that shifting back and forth between contract and tort is
meaningless. It simply means that cases in which such problems have sharp

significance, such as where a product damages itself, e.g., Jig, The Third Corp. v.

Puritan Marine Ins. Und. Corp., 519 F.2d 171 (5th Cir. 1975), are explored elsewhere, in

articles such as Wade, Is Subsection U02A of the Second Restatement of Torts
Preempted by the U.C.C. and therefore Unconstitutional?, 42 Tenn. L. Rev. 123 (1974).

*Just as the color red may be "defined" by pointing to a stop light, the term
"shotgunning" might best be understood by looking at the paradigm cases described in

the text accompanying notes 22-35 infra.

'The confused history of contribution and indemnity and its literature is explored

in a later section of this Article. See notes 76-86 infra and accompanying text.

*When contributory negligence barred a plaintiff from recovery against a
negligent defendant it was logical to hold as a corollary that a negligent defendant

sued by an injured plaintiff could not cross claim over against a codefendant tortfeasor



832 INDIANA LAWREVIEW [Vol. 10:831

the rights of the defendants among themselves seem beyond ra-
tional resolution. Yet litigation does come to a close, generally by
settlement.

The major premise on which the following discussion is built is
that settlements are, or at least have been and should be, effected

by distributing costs in proportion to fault.^ As courts and
legislatures in over one-half the states have moved toward adoption
of the distributive principle in trials the focus has generally been on

comparative negligence (where the fault of the plaintiff is compared

with that of all defendants) rather than on comparative contribution

(where the degrees of fault of each defendant are compared to deter-

mine the share each should pay). Using the terms comparative

negligence and comparative contribution invites a distinction be-

tween those concepts, and suggests that courts or legislatures can

adopt one and not the other. If both are seen as logical deductions

from the distribution principle, then the adoption of either com-

parative negligence or comparative contribution requires that the

other be adopted. Unfortunately, little attention has been given to

how the distribution principle can be preserved in settlements.'

for contribution. It perhaps illustrates Professor Gilmore's suggestion discussed in

note 1 supra— that there is a larger phenomenon shifting responsibility to active parties
from passive ones — that, even when there was a rule of no contribution between tort-
feasors, the courts would allow a passive tortfeasor to recover indemnity from an ac-

tive tortfeasor. This mitigation of the harsh and unjust effect of the no contribution

rule, however, seems to have done a poor job. Efforts to apply the distinction were

confused, and it has been observed that "as applied by a court or jury, the 'ac-

tive'
—

'passive' test usually becomes a search for the more reprehensible, better in-

sured, or more solvent defendant." Comment, Contribution in Collision Cases, 68 Yale
L.J. 964, 977-78 (1959). As will be seen in the discussion of Dole v. Dow Chemical Co.
in notes 10 and 11 infra, the use of percentages of fault allowed courts to abandon the

unsatisfactory all-or-nothing rule of indemnity based on the active-passive distinction

and sweep the problem of when to give "indemnity" into the distribution of costs ac-
cording to findings of degrees of fault.

'One of the clearest statements of the distribution principle is found in Bielski v.

Schulze, 16 Wis. 2d 1, 114 N.W.2d 105 (1962), in which the court established "pure"
contribution between concurrent tortfeasors and brought the gross negligence of the

automobile guest case within the comparative negligence approach. The court said:

"[W]e are stressing the basic goal of the law of negligence, the equitable distribution of

the loss in relation to the respective contribution of the faults causing it." Id. at 10, 114

N.E.2d at 113. For a fuller discussion, see Davis, Third-Party Tortfeasors' Rights

Where Compensation Covered Employers Are Negligent— Where Do Dole and
Sunspan Lead?, 4 HoFSTRA L. Rev. 571 (1976) [hereinafter cited as Davis, Third-Party

Tortfeasors' Rights].

'The indispensable writings on the subject of settlements by one of the multiple

parties under comparative negligence are Fisher, Nugent, & Lewis, Comparative
Negligence: An Exercise in Applied Justice, 5 St. Mary'S L.J. 655 (1974); Raskoff,
Comparative Negligence in California: Multiple Party Litigation, 7 Pac. L.J. 770

(1976); Thode, Comparative Negligence, Contribution Among Tort-Feasors, and the Ef-



1977] PRODUCTS LIABILITY 833

Even the Uniform Comparative Fault Act, as now proposed/ would
sacrifice distribution in settlements as it moves to make com-
parative fault logically consistent in trials. A minor premise is that
workers* compensation statutes are settlements between employers
and employees for fault within the compensation system/ Where
plaintiffs have settled with one or more actors, either directly or
under a compensation statute, an argument will be made that equal
protection as well as the distribution principle requires both types

of settlements to be treated similarly, with a pro-rata distribution

according to degrees of fault.

It will be suggested that the distinction between comparative
negligence and comparative contribution should serve primarily as a
description of alternate routes to the recognition of the distribution

principle. This will be illustrated by what has happened in New
York and what should happen in Connecticut. And the major
premise will be applied to various forms of currently used settle-

ment arrangements, such as the loan receipt and covenants not to
sue. Questions will be raised about the right of a plaintiff at fault

(and of a defendant subrogated to a plaintiffs rights under a loan

receipt) to use the doctrine of joint and several liability to make the
defendant(s) left in a suit after settlement with another pay for pro-

portions of damages that exceed their proportionate degree of fault.'
Here the major and minor premise interact to ask why the costs of
fault within the compensation system should be passed out to third

feet of a Release—A Triple Play by the Utah Legislature, 1973 Utah L. Rev. 406; and
Berg, Comparative Contribution and Its Alternatives: The Equitable Distribution of
Accident Losses, 1976 Ins. Couns. J. 577.

The proposed draft of the Uniform Comparative Fault Act contained in Wade, A
Uniform Comparative Fault Act— What Should it Contain?, 10 U. MiCH. J. L. Ref. 220
(1977) is the draft discussed in this article. Although section 5 of the draft set out in

Professor Wade's article proposed that a release given in good faith bars suits against
the person to whom it was given and allows the remaining defendants only a pro tanto
reduction in any recovery against them, the National Conference of Commissioners on

Uniform State Laws in their August 1977 meeting adopted the pro rata approach. The
final draft allows a non-settling defendant in a case in which a party has settled to

reduce any recovery by the percentage of negligence of the settling party.

*This minor premise is fully stated in Davis, Third-Party Tortfeasors' Rights,

supra note 5, and is based on N.Y. Central R.R. v. White, 243 U.S. 188 (1917), which

upheld the compensation scheme against constitutional attack saying the tradeoff of no

fault liability of employers under compensation for their common law tort liability was
a basis for upholding such statutes.

'See note 71 infra and the related text, in which the question is asked whether

the doctrine of joint and several liability among tortfeasors should not be abandoned
under comparative negligence when the plaintiff is at fault as well as the defendants.
The leading case is American Motorcycle Ass'n v. Superior Court, 65 Cal. App.3d 694,
135 Cal. Rptr. 497 (1977).



834 INDIANA LAWREVIEW [Vol. 10:831

party tortfeasors, and it will be suggested that equal protection

arguments may offer courts a way to rationalize incomplete com-
parative negligence systems.

II. Comparative Negligence and Comparative Contribution
AS Alternate Routes to the Distribution Principle:

Legislative vs. Judicial Change

Dole V. Dow Chemical Co.,^^ perhaps the leading New York case
of this decade, can, I believe, fairly be characterized as a landmark

case on comparative contribution. The principal significance of Dole
is that it swept away the active-passive distinction and made indem-
nity and contribution a simple comparison of fault." Decided when a
plaintiffs contributory negligence was still a bar to recovery. Dole
was followed by legislative adoption of comparative negligence for
the two-party suit.^^

In Connecticut, on the other hand, comparative negligence be-

tween plaintiffs and defendants has been legislated,^' but the
legislature did not speak on whether the rule of no contribution

among tortfeasors should be changed." One Connecticut lower court
has declined to extend the distribution principle and apply it among
defendants,^^ while another Connecticut lower court opinion says

once a plaintiff at fault can recover from others at fault, it is no

longer logical to say a defendant at fault cannot recover contribution

from another defendant also at fault.^" When and if comparative con-
tribution comes to Connecticut, the full application of the distribu-

tion principle will have been reached by a different route from that

of New York.
Although a majority of states now have comparative negligence,

the most by statutes" and some like California by judicial action,"
states like Indiana and Illinois — which have neither comparative

^"30 N.Y.2d 143, 282 N.E.2d 288, 331 N.Y.S.2d 382 (1972). See note 43 infra and

related text for a full statement of this case.

"Phillips, Contribution And Indemnity In Products Liability, 42 Tenn. L. Rev. 85
(1974), describes this signal achievement of Dole and places it in perspective.

^^N.Y. Civ. Prac. Law § 1411 (McKinney 1976).
'^CONN. Gen. Stat. Rev. § 52-572h (1977), discussed in James, Connecticut's Com-

parative Negligence Statute: An Analysis Of Some Problems, 6 Conn. L. Rev. 207
(1974).

"Smith V. Boccuzzi, 33 Conn. Supp. 187, 369 A.2d 635 (1976).

"Hays V. Hazard, 3 Conn. L. Tribune No. 14.

"See Heft & Heft, note 52 infra.
"Comparative negligence was adopted judicially in California in Li v. Yellow Cab

Co., 13 Cal. 3d 804, 532 P.2d 1226, 119 Cal. Rptr. 858 (1975).



1977] PRODUCTS LIABILITY 835

negligence nor contribution — may want to consider these routes to
change. As Illinois has "flirted" with the adoption of comparative
negligence/' but ultimately left the problem for legislative action,^

and a federal court in Indiana has required contribution," the Con-

necticut experience to date should be described to illustrate how
much less satisfactory some legislative solutions are than judicial
ones. This seems particularly true because comparative fault

statutes generally fail to deal with settlements; thus even though

costs are distributed in proportion to fault at trials, when one defen-
dant settles the remaining defendant(s) gets only the benefit of a

right to offset that settlement, not a pro-rata reduction.

Now that routes of change have been described, it is necessary
to describe various forms of settlements and trace the effects of

these settlement arrangements on the policy of encouraging set-

tlements while seeking to distribute costs.

iii. a paradigmatic (side by side) display of
Settlement Arrangements

In the hope that later discussion will be easier to follow if a few

relatively complex settlement cases can be referred to in the discus-

sion by name rather than a recitation of their facts or even their
holdings, consider the following cases. Note in each not only

whether the state had either or both of the emerging rules of com-
parative negligence and comparative contribution but whether the

plaintiff was an employee plaintiff, and thus entitled to receive com-
pensation benefits, or was a consumer plaintiff and had no compen-
sation benefits. Note also whether any or all of the multiple defen-
dants had settled with the plaintiff.

1. Payne v. Bilco Co. ^— from Wisconsin, a comparative
negligence state with comparative contribution.

'"The "flirting" with comparative negligence in Illinois is the subject of a Sym-
posium with articles by leading torts scholars entitled, Comments on Maki v.
Frelk— Comparative v. Contributory Negligence: Should the Court or Legislature
Decide?, 21 Vand. L. Rev. 891 (1968), where James, Kalven, Keeton, Leflar, Malone
and Wade discuss Maki v. Frelk.

=^Maki V. Frelk, 40 111. 2d 193, 239 N.E.2d 445 (1968).

"Kohr V. Allegheny Airlines, 504 F.2d 400 (7th Cir. 1974) rejected Indiana's no
contribution rule for air collision cases.

"54 Wis. 2d 345, 195 N.W.2d 641 (1972). The working out of the distribution in
settlements can be seen in other cases. In Laster v. Gottschalk, 255 N.W.2d 210 (Mich.
Ct. App. 1977), one of two defendants in an automobile case paid for a pro rata release
without admitting liability. The remaining defendant successfully kept the settling
defendant in for the apportionment of fault. The dissenting opinion, perhaps correctly,
points out the real reason to keep the settling defendant in. "In order for a pro rata

share to be found then there must be at least two culpable parties." The dissent then



836 INDIANA LA WREVIEW [Vol. 10:831

Plaintiff, injured when a door hit his arm on his employer's
premises, received compensation from the employer (Blackhawk),

sued the manufacturer of the doors (Bilco), and the contractor that
built the building (Permanent Construction Company). Bilco cross-

complained against Permanent and impleaded the architect who
designed the doors for the owner (Sommerville), the subcontractor
that installed the doors (Skobis), and the manufacturer's represen-

tative for Bilco (J. M. Mitchell Products).

The plaintiff settled with Permanent, Sommerville and Skobis
for $6,000. At trial the special verdict apportioned the fault as
follows:

40% to Sommerville, the architect
10% to Permanent, the contractor
15% to Skobis, the subcontractor

to Bilco, the door manufacturer

to Mitchell, the manufacturer's rep.

20% to Payne, the plaintiff
15% to Blackhawk, the compensation covered employer

100%

argues that as the settlement was arrived at before the verdict there could be no

determination of pro rata shares, and suggests that the way to let the jury know of
possible fault of the settling party is to subpoena that defendant and get his

testimony.

Although the majority opinion does not exploit this inconsistency in the dissent,

it does arrive at the same result as Payne v. Bilco when it says that on the trial with
the settling party in: (1) if the jury finds the settling defendant solely liable the re-

maining defendant will be discharged; (2) if the remaining defendant is solely liable

that defendant will be entitled to a pro tanto reduction; but (3) if the jury finds both

liable the non-settling defendant will be responsible for only its share and the settling

defendant's share will be satisfied by the settlement.

Letting the jury find out about the settling defendant's fault, if any, under a sub-

poena, the solution suggested by the dissent, would not allow the determination of

shares if that defendant was not a party. Because the release did not admit liability,

the court said it could not be introduced. Keeping the settling party in was the only

practical way to achieve a pro-rata distribution.
Other cases include Leger v. Drilling Well Control. Inc., 69 F.R.D. 358 (W.D. La.

1976) and Fruge v. Damson Drilling Co., 423 F. Supp. 1276 (W.D. La. 1976), where the
working out of the distribution rule in maritime torts was deemed to require that

when one defendant settled the remaining defendant could be held responsible only for
its pro rata share. The Fruge opinion says this will require a detailed and complex

determination by the jury of the degrees of fault of all — the defendants who have set-
tled as well as those who have not — and questions whether the complexities and ex-
penditure of judicial time can be justified by the benefits that would stem from achiev-

ing a true pro rata distribution according to degrees of fault. This may well be true in
Fruge where the working out of pro rata effect saved the defendant only $1,200.

However, the principle may have greater impact in other cases.



1977] PRODUCTS LIABILITY 837

Because Sommerville, Permanent, and Skobis had settled with the

plaintiff, and Blackhawk was covered under compensation, judgment
was entered against Payne on Bilco's motion.

To the plaintiffs objections that it was error to include the
employer and the settling defendants the court concluded failure to

do so would have been "prejudicial" to Bilco and that "it was
necessary that all the alleged tortfeasors be included in the special

verdict for comparison purposes."^'

2. Castillo Vda Perdomo v. Roger Construction Co."— from
Pennsylvania, a contribution state with "joint tortfeasor" releases —
ie., releases that operate to release other defendants to the extent

of pro-rata share of common liability of person released.
Five people died as a result of inhalation of carbon monoxide

fumes emitted from a propane gas generator that did not cut off

when normal power service was resumed and was not adequately
vented. The administrators of their estates sued the Friedman in-
terests (that is, the owners of the apartment, and the principal con-

tractors) and the electric contractor (Bohem), the heating contractor

(D'Anjollel), the contractor that graded the site and may have
obstructed the exhaust (Main Line Contractors), the manufacturer of

the switch (Zenith Automatic Controls), the suppliers of the switch

and generator (Maris Equipment and Rose Electric), and the manu-
facturer of the generator was added (Kohler Company).

The Friedman interests paid $500,000 for a joint tortfeasor or
pro-rata release; the other defendants then settled as follows:

Zenith $100,000

Main Line 20,000
Rose Electric 5,000
Maris Equipment 5,000
Kohler 27,500
D'Anjollel 20,000

Bohem 82,500

$260,000

Having paid $500,000 of the total of $760,000, the Friedman in-
terests asked for contribution from the other defendants who set-
tled for what seemed far less than their "pro-rata" share. Contribu-

"54 Wis. 2d at 345, 195 N.W.2d at 646.
"418 F. Supp. 529 (E.D. Pa. 1976), rev'd and remanded, 560 F.2d 1146 (3d Cir.

1977), in an opinion which stresses the distribution principle. The opinion also states
that the primary purpose in settlements is to get money in the hands of the victim and
the secondary reason is to reduce the burdens on courts. This opinion offers the view
that all parties must settle together.



838 INDIANA LA WREVIEW [Vol. 10:831

tion was denied. This opinion appears to be a case of first impres-
sion denying to a tortfeasor who settled a right to contribution from
those who settled thereafter.^^

Like Payne v. Bilco, Castillo has a discussion of the mechanics of
settlements, and language that indicates that courts should follow

the practice of attorneys who settle by allowing the costs to be
distributed among the defendants in proportion to perceived
relative degrees of fault.'^'

3. Reese v. Chicago, Burlington & Quincy R.R."— from Illinois,
a no contribution state.

A railroad employee supervising a crew loading with a crane
manufactured by Koehring was killed when a brake pedal "jumped
off the floor." Suit was brought against the railroad under the
Federal Employees Liability Act and against Koehring under pro-
duct theories. The railroad got a loan receipt from the plaintiff, pay-
ing $57,500 secured by rights against Koehring. Only if the plaintiff

recovered more than $57,500 from Koehring could she keep the ex-
cess.^®

The suit proceeded against Koehring and not the railroad
despite evidence of the railroad's improper maintenance of the

crane. The jury verdict was $149,000. The trial court set off the
railroad's payment. The appellate court reversed, holding that a loan
receipt agreement is enforceable according to its terms.

For the sake of completeness, even though Reese involved a pay-
ment to the plaintiff by the railroad, if a state approves "loan
receipts" and allows one tortfeasor to shift all the loss to a co-

tortfeasor, some courts have gone on and used "Mary Carter" set-
tlements. A Mary Carter does not provide a cash "loan" but merely
limits liability and provides for extinguishment of that agreed

liability to the extent of recovery against co-tortfeasors.^

It is easy to understand how loan receipts came to be used in
states which barred contribution between tortfeasors. In the typical

case involving multiple defendants, one of those defendants with an

insurance policy with low limits will rush to the plaintiff and settle

for the policy limit, providing that the plaintiff will use every effort

to recover more from the defendants that have high limits or hap-
pen to be very solvent. Faced with a defendant with limited

resources to offer, and who offers all, a plaintiff might well take the

''Id.

''Id.

"55 111. 2d 356, 303 N.E.2d 382 (1973).

="566 the excellent Annotation at 62 A.L.R.3d 1111 (1975).

^Mary Carters are the subject of an Annotation at 65 A.L.R.3d 602 (1975) and the

Comment, 25 Fla. L. Rev. 762 (1973).



1977] PRODUCTS LIABILITY 839

money offered and agree to allow that defendant to be subrogated
to the plaintiffs rights against third parties to the extent of the

payment. For compensation-covered employers, most statutes pro-

vide this remedy for the employer'" when it gives the injured
employees the benefits of the compensation statute.

4. Compensation Analogies

a. Iowa Power & Light Co. v. Abild Construction Co." — from
Iowa, a contribution state.

IN IPALCO, an employee was injured when an iron bar he was
holding came into contact with a power line. The power company
settled for $177,090.79 and sought to recover from the plaintiffs

compensation-covered employer all or half of the settlement by in-

demnity or contribution. Unlike the Dole v. Dow court, the Iowa
court, as have a majority of courts in this country, held that the full

responsibility for the employee's injuries could be cast upon the

third party defendant power company despite employer fault.
To show the effect of the loan receipt and its analogy to

IPALCO in diagrammatic form, assume that the compensation, or
loan receipt amount, is $2,500; assume the common law damages
recoverable by the plaintiff are $10,000. Under IPALCO and under a
loan receipt the effect would be:

EmployerJOR LOAN RECEIPT Product Manufacturer
DEFENDANT)

2,500

Reimbursement

2,500 X 10,000
Comp/V \^

Employ!
/

Be

Employer (OR LOAN RECEIPT
DEFENDANT) Pays -0-
Product Manufacturer Pays 10,000
Employee Gets 10,000

With the reimbursement or subrogation features of compensation
and loan receipts the compensation carrier, and the defendant that
takes a loan receipt, can push all the costs onto a remaining defen-
dant.

For completeness, consider also the analogy of the settling

^See Davis, Third-Party Tortfeasors' Rights, supra note 5.
^'259 Iowa 314, 144 N.W.2d 303 (1966).



840 INDIANA LAWREVIEW [Vol. 10:831

defendant who takes a covenant not to sue with the compensation
carrier, or employer, that does not have subrogation or reimburse-

ment rights. The use of IPALCO in a state, such as Ohio,^^ which
does not have reimbursement rights can be diagrammed as follows:

Employer Product Manufacturer

2.500^ ^10,000
Comp.

Employee
Employer Pays 2,500
Product Manufacturer

Pays 10,000

Employee Gets 12,500

Where a defendant settles for $2,500, and the plaintiff covenants
not to sue that defendant, the usual result would be analogous to

what can be called, in compensation, "load sharing." This is shown
in:

b. Santisteven v. Dow Chemical Co.^^ In Santisteven, again a
product liability defendant sued on a defective warning theory by an

injured employee was denied the right to sue the employer for con-
tribution. The Santisteven court, however, recognized the inequity
of casting the whole burden on Dow Chemical and noted that the
recovery against Dow would be reduced by the amount of compensa-
tion benefits, thus effecting a "load sharing."

Santisteven:

Employer (or Defendant Who Product Manufacturer
Gets Covenant Not to Sue) ^/^

2,50ff^^ ^ 7,500
Comp.

Employee

(or Plaintiff that gives Covenant)

Employer Pays 2,500
Product Manufacturer

Pays 7,500

Employee Gets 10,000

The diagram for Santisteven shows what happens when a defen-
dant pays for a covenant not to sue and the plaintiff proceeds to

"^Ohio Rev. Code Ann. § 4123.74 (1973).

""•SOe F.2d 1216 (9th Cir. 1974).



1977] PRODUCTS LIABILITY 841

judgment against a remaining defendant. Even in a no contribution
state the amount received in the settlement will be deducted from

the amount of the jury verdict.*^

The foregoing discussion has not treated "releases" because
some states still hold that a release of one joint tortfeasor releases
all."** Therefore our building blocks are "pro rata" or Pennsylvania

joint tortfeasor releases, covenants not to sue, and loan receipts.

These and their compensation analogies are:

1. Loan receipts and IPALCO;
2. Covenants not to sue and Santisteven;

3. Pro-rata releases of the settling party's proportionate degree

of fault and Payne v. Bilco,
These are the basic patterns for settlements. It should not be

forgotten that variations exist, such as the practice of paying some
money to a plaintiff while the suit is pending, without asking for
anything but a credit against whatever is ultimately recovered. This

practice does not involve a true release or settlement, so it is not

treated here. It will be relevant when asking what the jury should
know.** It is obvious that if such payments are known to the jury,
that may affect their verdict.

IV. A Theory of Settlements
A. Tests

With the spread of comparative negligence and comparative con-
tribution the Wisconsin case of Payne v. Bilco is the paradigm for
the future, in the sense that it is the model or ideal. The court in
Payne v. Bilco distributed responsibility among multiple defendants
in proportion to their respective degrees of fault. It approved the

submission of the degrees of fault of actors who have either settled
by taking a pro rata release for their own degree of fault or settled
under compensation. The opinion points out that such a distribution
of costs in proportion to degrees of fault is the way parties settle,
and it is the way the court allowed the litigation to be closed.

This is a model for the future in that each defendant before the
court has either settled for a proportionate degree of fault or will

suffer a judgment for that degree of fault. However, no defendant
has paid or can be made to pay for more than that defendant's pro-
portionate part.

'^Dwy V. Connecticut Co., 89 Conn. 74, 92 A. 883 (1915).

»«Annot., 73 A.L.R.2d 403 (1960).

^See Taylor v. Yellow Cab Co., 548 S.W.2d 528 (Mo. 1977). This case involves the

admissibility of evidence of advanced payments predicated on possible tort liability

and holds that such evidence shall not be admitted before the jury although there can

be a credit against the plaintiffs ultimate recovery.



842 INDIANA LAWREVIEW [Vol. 10:831

It is a model under the principle of distribution. Any scheme of
settlements that fails to distribute costs in proportion to perceived

fault will fail a threshold test, which can be stated as a question:

Does the settlement scheme distribute costs in proportion to fault?
Settlement schemes which flunk this test, such as loan receipts and

Mary Carters, violate the distribution principle. With the working
out of the distribution principle, those practices will be rejected.'^

As will be seen, it can be argued that the offset approach can satisfy
this threshold test in a rough fashion. Therefore, the later discussion

will compare the dollar offset in settlements with pro rata releases,
and little or no attention will be given to loan receipts or Mary
Carters.

Payne v. Bilco did not adjudicate the rights of the defendants
among themselves or suggest motivational tests for a scheme of set-
tlements; therefore it is necessary to look to Castillo where a defen-
dant (or group) had settled, paying approximately two-thirds of the

total the plaintiff received from all defendants in settlement, and

sought contribution. The defendants that paid $500,000 argued that
allowing them to recover contribution from the remaining defen-
dants that settled for $260,000 would "encourage all parties to settle

at the same time."^*
Firmly committed to a policy of encouraging settlements, the

court set out three principal motivations for settlement: "(1) to avoid

the risk of payment of a potentially larger sum in damages if they
are found liable; (2) to eliminate the expense of further proceedings,

including trial; and (3) to avoid the possibility of a formal, adverse

judicial determination such as a finding of fault."''^

In attempting to set out and test schemes of settlement, these

can be rephrased as questions and called motivational tests. The
Castillo opinion suggests these are stated in descending order of im-

portance. It should be generally agreed that limiting expenses is

more important than the other two tests; however, a product
manufacturer may well put the final above the penultimate one
because of the potentially destructive impact of an adverse finding

in one case upon future cases.

Although Castillo involved a defendant that settled first and

then sought contribution from defendants that settled later, the

policy reasons for holding that the former could not recover con-

tribution apply with equal force to a defendant that settles later, or

suffers a large judgment, and sues those who settled first seeking

''Other objections to the loan receipt are discussed in Annot., 62 A.L.R.3d 1111

(1975).

»«418 F. Supp. at 535.

''Id.



1977] PRODUCTS LIABILITY 843

contribution. At the heart of the matter is the court's discussion of

the idea that allowing contribution on these facts will encourage all

parties to settle at once rather than one at a time. To this argument

the court says: "In our experience, however, things just do not hap-

pen that way, in the real world. It is always much less likely that

three or more parties will come to a meeting of the minds than two

will."*°

This conclusion in Castillo can be read as stating a procedural

requirement for settlement practice, which can be added to the

three motivations enumerated by the court to test the desirability

of various settlement schemes. Any workable scheme of settlements
must permit one defendant to settle if that defendant and the plain-

tiff can agree even though other defendants refuse to join. This goal,

or test, can be met in product suits only if indemnity implied at law

is swept into a comparison of degrees of fault as the New York
court has done in Dole v. Dow.*^

Finally, the Castillo opinion discusses the need for "benefits"" to

the party from whom contribution is sought. Where pro rata
releases are used benefits cannot appear. If a reluctant defendant

"holds out" when others are settling, especially if they get pro rata
releases, the fact the holdout pays far more to settle a given per-
centage of fault still does not benefit the defendant that settled

earlier for fewer dollars for the same percentage of fault.
With covenants not to sue, a holdout defendant enjoys a dollar

offset. A holdout that does not settle cannot confer a true benefit on
the defendant that did obtain a covenant not to sue. But if enough
was paid for a covenant from a defendant anxious to settle, a benefit
might be conferred on a subsequent holdout. Thus, a further test of

settlement schemes is; Can the scheme result in one defendant
benefiting from what another pays?

Pro rata settlements pass this test while the covenant and offset

scheme may occasionally fail because it is not distributional. Before
attempting to compare the offset and pro rata approaches further,
and test them further under the six stated principles, it is ap-
propriate to trace briefly the history of both pro rata releases and

the offset approach. In doing this a full description of each can be

made, using New York as the distributional model and the proposed
Uniform Comparative Fault Act as the dollar offset model.

B. New York— The Working Out of the Distribution Principle

Dole V. Dow Chemical Co.*'^ is the leading New York case which

*°I(L at 536.

"See the discussion in note 11 supra and accompanying text.

«418 F. Supp. at 537.

"30 N.Y.2d 143, 282 N.E.2d 288. 331 N.Y.S.2d 382 (1972).



844 INDIANA LAWREVIEW [Vol. 10:831

knocks down the compensation arrangement that allowed an
employer at fault to pass all responsibility out to another. Like the

Iowa case that said loan receipts must fall as a violation of that
state's contribution principles," Dole v. Dow can be read as saying
that an employer's compensation immunity under the statute must
fall because it violates comparative contribution. To diagram Dole v.
Dow as earlier cases were diagrammed, that is, assuming compensa-
tion responsibility of $2,500 and common law damages of $10,000,
and that the employer and Dow were each 50% at fault, then this
leading case can be described as follows: The New York Court of
Appeals allowed Dow Chemical— a product liability defendant sued
on a defective warning theory by the widow of a deceased employee
of the Urban Manufacturing Company— to sue Urban for contribu-
tion despite the argument that the compensation act gave the
employer immunity.

(A) A Dole approach in a state which does not give the
employer subrogation or reimbursement rights:

(Contribution)

Employer ' 5,000 » Product Manufacturer

2,500^ 10,000

Comp.

Employee

The result (disregarding the cost of shifting):
Employer Pays 7,500
Product Manufacturer Pays 5,000

Employee Gets 12,500

(B) A Dole approach where the employer has subrogation
or reimbursement rights:

(Contribution)

Employer—^—^— 5,000 » Product Manufacturer
\ \2,500. \ 2,2,500. \ 2,500 J0,000
CompX^ Reimbursement^

Employee'

Employer Pays 5,000

Product Manufacturer Pays 5,000

Employee Gets 10,000

"Bolton V. Ziegler, 111 F. Supp. 516 (N.D. Iowa 1953).



1977] PRODUCTS LIABILITY 845

Parties in other states wishing to attack IPALCO and urge the
adoption of a principle of distribution should consider whether their

facts are as appealing as those in Dole. Someone working for the

employer probably had removed Dow's warning. To follow IPALCO
and permit the plaintiff to recover one hundred percent common law
damages from Dow would be malapportioned justice. It was especial-
ly malapportioned when the employer under IPALCO would be en-
titled to subrogation. In other cases it has been held that where a

defendant interferes with a codefendant manufacturer's warnings,

the manufacturer escapes all the responsibility." Yet IPALCO would
put all the losses on the manufacturer. Perhaps the ultimate reason

for Dole was that the New York Court of Appeals could not accept
this form of malapportioned justice. This is supported by that part

of the opinion which expressly states the case should be governed

by a principle of distribution.*" To examine this working out of the
distribution principle of Dole consider what followed Dole in New
York, especially the provision for settlements.

C. Pro Rata Releases

After Dole, New York adopted comparative negligence in the
two-party suit,*^ extending the principle that costs should be shared

among parties in proportion to their respective degrees of fault to
include the plaintiff. For the New York lawyer, the legislature also
gave guidance on how the principle of sharing costs in proportion to
respective degrees of fault would be applied when one of many
defendants settled with the plaintiff. Section 15-108 of the New York
General Obligations Law provides:

(a) Effect of release of or covenant not to sue tort-

feasors. When a release or a covenant not to sue or not to en-
force a judgment is given to one of two or more persons
liable or claimed to be liable in tort for the same injury, or
the same wrongful death, it does not discharge any of the
other tortfeasors from liability for the injury or wrongful

death unless its terms expressly so provide, but it reduces

the claim of the releasor against the other tortfeasors to the

extent of any amount stipulated by the release or the cove-
nant, or in the amount of the consideration paid for it, or in-

"Magee v. Wyeth Labs, Inc., 214 Cal. App. 2d 340, 29 Cal. Rptr. 322 (1963);
Harper v. Remington Arms Co., 156 Misc. 53, 280 N.Y.S. 862 (Sup.Ct. 1935).

"See that part of Dole v. Dow Chemical Co., 30 N.Y.2d 142, 150; 282 N.E.2d 288,
293; 331 N.Y.S.2d 382, 389 (1972), which quotes Werner, Contribution and Indemnity,
57 Cal. L. Rev. 490, 516 (1969), to state: "tort policy goals" include an "equitable loss

sharing by all the wrongdoers" in multiple party cases.

*^See note 12 supra.



846 INDIANA LAWREVIEW [Vol. 10:831

the amount of the released tortfeasor's equitable share of

the damages under article fourteen of the civil practice law

and rules, whichever is the greatest."

The pro rata approach has been criticized as a deterrent to set-
tlements, and it has been argued that no plaintiffs lawyer can settle

with a defendant and go to trial against the other defendants

because if, after the ultimate judgment (and determination of the
settling defendant's percentage of fault), the plaintiff receives less

than the total indicated by the verdict the client will be un-
satisfied."

Certainly from the plaintiffs viewpoint it would be' desirable to

be able to settle with one defendant and have to offset against the

verdict recovered from other defendants only the actual sum re-
ceived—especially if that defendant was underinsured — and not
have to reduce the judgment by the percentage of fault attributable

to the settling defendant. That would put great pressure on the

defendant who refused to join in a settlement by a codefendant.
However, if the defendant who refuses to settle can file a cross ac-
tion against a defendant that has settled (a right cut off by the New
York General Obligations Law) the defendant that has settled has
gained nothing by paying for a settlement, and will have provided

financing for the plaintiffs suit, which can boomerang when the suit
for contribution or indemnity is prosecuted, as it did in Dole and

continues to do in the employee-plaintiff cases.^ And, if the defen-

dant that does not settle cannot sue for contribution or sharing of

the costs in excess of what the plaintiff accepted from the defendant

that settled, but still must pay for more than the proportionate
share of damages fixed by the jury in determining the percentages
of fault, the principle of sharing costs in proportion to degree of

fault suffers. It can be said that joint and several liability is used to

"N.Y. Gen. Oblig. Law § 15-108 (McKinney Supp. 1976).
"Wilner & Farrell, Dole v. Dow Chemical Co.: The Kaleidoscopic Impact of a

Leading Case, 42 Brooklyn L. Rev. 457, 465 (1976).
^Examples of Dole's application to pierce the compensation-covered employer's

limitation of liability to the compensation settlement are legion, but a recent case.

Nelson v. Dykes Lumber Co., 52 App. Div. 2d 808, 383 N.Y.S.2d 335 (1976), deserves
special attention for what it hints at in the approtioning of responsibility in many close
cases. The case involved a compensation-covered employer that had its hoist protec-
tively screened by a third party. An employee who was injured when a brick came
through the screen sued the third party. The screen contractor then sued over against
the employer and the jury split the responsibility 50-50! It is interesting that the

United States Supreme Court abandoned the divided damages rule when it decided
United States v. Reliable Transfer Co., 421 U.S. 397 (1975), but that juries that have

difficulty in approtioning damages may come back to the 50-50 split.



1977] PRODUCTS LIABILITY 847

provide coverage for underinsured defendants." However, to state

that points out a practical objection to a scheme which holds the

defendant that doesn't settle is responsible for all damages, offset-

ting only what was received in the settlements. A local defendant
guilty of a substantial degree of fault can buy out early in a sweet-

heart settlement, or for low policy limits in the case of underinsured

defendants. This would let foreign defendants or fully insured defen-

dants pay the plaintiff all the damages in excess of what the plain-

tiff accepted from the settling defendant even if the degree of fault

attributable to these defendants was small in comparison to that of
the defendant that settled.

The Wisconsin experienced^ suggests that lawyers who are
familiar with the theories of products liability and who have experi-
ence with comparative fault can work out settlements that satisfy
their clients. As the plaintiffs lawyer tries to explain a settlement
that releases the settling defendant's percentage of fault to the

client, the obvious analogy is the landowner who has given an oil
and gas lease where the lessee is about to drill and wants to buy

some of the landowner's royalty. If the landowner sells some and
keeps some, there will be some cash even if the well is dry, although

less if the well is a producer. The client who settles gets some cash
even if the well is dry, so that offsets getting a little less than the

full amount if the suit is successful.

D. Settlements in the Proposed Uniform Comparative Fault Act

New York is not the only model for handling settlements under
the distribution principle. The proposed Uniform Comparative Fault
Act^ in attempting to make comparative fault consistent, has chosen
the offset approach. When one defendant settles, the plaintiffs
recovery against the remaining defendant(s) is reduced by the
amount received in or stipulated in the settlement.^* Giving credit to
the remaining defendants only for the amount received, or stipu-
lated in a settlement, is contrary to a principle that the costs of in-

jury be distributed in proportion to fault. Thus in the application of
the distribution principle, the New York solution is clearly pref-
erable to the proposed Uniform Act because it, like Wisconsin and

"The view that joint and several liability provides insurance coverage for unin-

sured defendants that might better be the result of legislative choice rather than

judicial inertia can be found in James, Connecticut's Comparative Negligence Statute:

An Analysis of Some Problems, 6 Conn. L. Rev. 207 (1974).
"See C. Heft & C. Heft, Comparative Negligence Manual §§ 4.200.220 (1971),

which argues that approtioning damages makes settlements easier and describes the

working out of the implications of apportionment.

"Wade, supra note 7.



848 INDIANA LAWREVIEW [Vol. 10:831

Pennsylvania, requires the plaintiff to release the pro rata propor-

tion of fault of the party that obtains a settlement and does not shift

to the remaining defendant(s) responsibility for the degree of fault

of the settling defendant.

The solution of the proposed Uniform Comparative Fault Act is
grounded in the past in the Uniform Contribution Act which was
adopted prior to the spread of comparative negligence. It needs to

be rethought in light of the adoption of comparative negligence and

comparative contribution. Such a rethinking is required, if for no
other reason, because on the face of the proposed Act there is an ob-
vious inconsistency. Further, the goal of encouraging settlements by

letting a settling defendant be dropped from the trial, which might

be thought to be served by the dollar offset provisions of the pro-

posed Uniform Act, should be considered in light of the practical

consequences that flow from use of the dollar offset, especially the

risk of "sweetheart" settlements, and the question should be asked

whether the Uniform Act, in order to encourage settlements by
dropping the defendant that settles, pays too high a price in terms

of the other tests for settlements.

The inconsistency in the proposed Act which shows a failure to
consider the settlement provision in relation to distribution of costs

in proportion to fault is that settlements before judgment reduce

the remaining defendant's responsibility by a dollar offset,^^ not by a
percentage. However, after judgment has been entered and a plain-

tiff finds that one defendant is underinsured, the proposed Act

redistributes that uncoUectable part of the underinsured defendant's

responsibility among the remaining parties, plaintiff and defendants,
in proportion to their respective degrees of fault!^' Thus the proposed
Act encourages plaintiffs to accept the policy limits of underinsured,

or asset poor, defendants before judgment because the failure to set-
tle with such a defendant before judgment will require a sharing of
the uncollectible portion of fault of an underinsured defendant by a

plaintiff found to be at fault in even a slight degree.

E. Using a "Good Faith" Standard in the Uniform Act To Deny
Contribution (and Indemnity) from a Defendant that Settles

One way in which the Uniform Comparative Fault Act could be
amended to avoid "sweetheart" settlements with one defendant
while the plaintiffs suit continues against others is to test such set-

•^The position taken by the proposed act is that suggested in Campbell, Ten

Years of Comparative Negligence, 1941 Wis. L. Rev. 289, 297. For a further working

out of the implications of sharing, see discussion of American Motorcycle in note 71 in-

fra.



1977] PRODUCTS LIABILITY 849

tlements by a standard of "good faith." If the settlement is not made
in good faith that defendant may be required to contribute to the
payment of any ultimate recovery. Such a provision is found in sec-
tion 15-108 of the New York General Obligation Law**^ where such
protection seems unnecessary for the defendant that refuses to set-

tle because that defendant's responsibility is limited. A reason for
providing that a defendant that has settled may be required to con-
tribute if the settlement was in "bad faith" might be that, with joint
and several liability, a defendant that does not settle may suffer a
judgment for percentages of fault that exceed the percentage of

fault found by the jury. Thus a test of good faith may have to in-
quire whether a defendant that gets a release of its own share of
fault should have expected to have to share responsibility for a

share of fault attributable to another defendant that may be bank-
rupt if the matter goes to trial.

There is a history of the use of good and bad faith tests in con-

tribution suits. Some cases suggest that when one defendant settles,
the bad faith of a defendant that refuses to settle can bar the lat-

ter's suit for contribution from the defendant that settled."^ There is

a certain logical reciprocity in arguing that if a defendant who
refuses to settle in bad faith cannot recover contribution when, after

judgment, that defendant pays a disproportionate share of the costs,

then it logically follows that if a defendant settles in good faith

other defendants that refuse to settle are impliedly not acting in

good faith.

However, practice experience, for which I cannot cite reported
cases, teaches me that the relation of verdicts and settlements is
often tenuous at best. That is, cases that could be settled for $15,000
or less often end with jury verdicts that exceed $150,000. Cases in-
volving an insurer's negligent failure to settle within the insured's
policy limits^* suggest that virtually any figure in a settlement can
be a good faith figure, but such cases have disturbing implications
about the duties that multiple defendants may owe each other when
one defendant wants to settle and another refuses and each can "in-
jure" the other if neither can make a separate peace, or if, in set-
tlements, each owes a duty of "good faith" conduct to the other.

"N.Y. Gen. Oblig. Law § 15-108(b) (McKinney Supp. 1976), provides that a release
given under subdivision (a) will relieve all liability for contribution if "given in good

faith."

"Bad faith bars a right to contribution. American Export Isbrandtsen Lines, Inc.
V. United States, 390 F. Supp. 63 (S.D. N.Y. 1975); New Amsterdam Cas. Co. v. Lund-
quist, 198 N.W.2d 543 (Minn. 1972).

"See note 57 supra; Keeton, Liability Insurance and Responsibility for Settle-

ment, 67 Harv. L. Rev. 1136 (1954); Schwartz, Statutory Strict Liability for an In-

surer's Failure to Settle: A Balanced Plan for an Unresolved Problem, 1975 DuKE L.J.
901.



850 INDIANA LA WREVIEW [Vol. 10:831

There are other objections to the use of a "good faith" standard.

First, a subjective standard like good faith will always be difficult to

use. Subjective standards create uncertainty, unlike pro rata set-

tlements where a party that settles gets a release of the percentage
of fault attributable to the settling party. The pro rata release is ob-
jective if all parties, including the one that settles, are kept in the

suit until the jury's verdict fixing of fault percentages are known.

This approach, keeping the settling party in the suit, would also

resolve the indemnity problem if it has not been resolved by accep-

ting the great contribution of Dole v. Dow. the concept that indem-
nity and contribution are merged into the principle of comparative
fault. Without such a merger, no manufacturer can obtain a settle-

ment and be free from claims that the manufacturer must indemnify
a seller that refuses to settle. Under distributional fault if the
retailer of a product was without fault, the jury should find no per-
centage of fault attributable to the retailer that refused to settle,

while fixing all the fault on the manufacturer that settled, or the

plaintiff. This might distress retailers who claim that when they
pass on a manufacturer's product they are entitled to indemnity in

the full sense: attorney fees,"" as well as protection against amounts
paid out in satisfaction of claims; but one of the complicating factors

in products litigation is that the plaintiff not only sues the manu-

facturer, but sues the retailer as well, as permitted by present doc-

trine." Plaintiffs do this to keep the foreign manufacturer from

removing cases filed in state courts to the federal courts, as well as
for other reasons. Also, there may be independent grounds for
recovery against local defendants. They have duties to warn and can
appraise the use the buyer intends to make of the product, so when
the law of indemnity with its provision of attorney fees for the

defendant entitled to indemnity is used, there will be inevitable

tenders of the defense to the manufacturer and refusals when the
manufacturer sees the plaintiff making direct or independent claims
against the retailer or when such grounds are suspected. When it is
the plaintiff that elects to sue the retailer as well as the manufac-

turer, and an obvious additional reason for this joinder is to increase

the number of defendants that can be expected to contribute to a
settlement, it seems odd to allow this plaintiff tactic to be used to

fasten the cost of the retailer's attorney fees on the manufacturers.

It seems appropriate to allow each defendant to handle its own
defense unless there are contractual indemnity agreements, and not

to allow adherence to indemnity at or implied by law to give the

retailer the right to recover attorney fees and threaten such

•"See Sendroff v. Food Mart Inc., Conn. L. Tribune, March 21, 1977, at 24, col. 2.

"Restatement (Second) of Torts § 402A (1965).



1977] PRODUCTS LIABILITY 851

recovery to coerce the manufacturer to assume the defense and pay-

ment of all settlement costs.

Second, even with a "good faith" test the proposed act fails the

distribution test; even though the Uniform Comparative Fault Act

could be claimed to roughly satisfy the threshold test of distribu-

tional justice. Plaintiffs who want to pick up a readily available set-
tlement from the underinsured defendant will suggest that the off-

set solution is best."^ They would drop from the trial the defendant
that settles and allow the suit to proceed with the jury instructed to

proportion the damages or fault among the remaining parties only.'^
This could be said to distribute the percentage of fault of a party

that settles between the plaintiff and defendants that remain in the
suit. While this may solve the problem of making the Uniform Act
consistent in a fashion, provided the amount received in settlement
is used to reduce the total damages that will be divided among the
parties in proportion to fault, such a solution does not obscure its

impact. It still makes the remaining defendants provide coverage for
risk of the settling party's underinsurance. Further it requires a

belief that a plaintiffs degree of fault will be increased when a
defendant who seems at fault is absent. The reasoning of Payne v.
Bilco points in the opposite direction. In order to fairly determine

the respective degrees of fault the jury should consider and fix the

respective degrees of fault of all parties.

Dropping the defendant that settles not only conflicts with what
Payne v. Bilco teaches us, it makes civil litigation more like the
criminal case described in An Anatomy of a Murder, where the
defense seeks to point the finger of blame not only at plaintiff, but
at an absent party. Some defendants might like this, since it creates
the possibility that jurors will suspect that where a party clearly at
fault is not before the court the plaintiff will have settled with that

defendant. If one of the underlying reasons for adopting com-

parative negligence is that it was thought that when contributory
negligence was a bar the jury was acting in an "outlaw" fashion
when they compared negligence and reached compromise verdicts
on damages while finding the plaintiff free of negligence, this ap-
proach (thinking that the jury will speculate about possible set-

tlements with a party not before the court) is also an "outlaw" ap-

proach. Should not the jury be given all the facts?

The third is that by dropping the defendant that settles, the only

"See note 49 supra.

•^he answer to this suggestion that juries will apportion the fault of absent

defendants among the plaintiff and the remaining defendants can be found not only in

the decisions collected in note 22 supra, but also has been perceptively analyzed by

Fisher, Nugent, & Lewis, supra note 6, at 666.



852 INDIANA LAWREVIEW [Vol. 10:831

test of "fairness" is lost. Should not the party that settles be before

the court and jury to get a final appraisal of the degree of fault at-
tributable to the settling party as well as the party that has not set-

tled? And, when this is done, and the figure of settlement does not
nearly approach the figure determined by multiplying the damages
by the settling party's degree of fault, cannot it be argued that the
figure was not a "good faith" settlement?

F. Problems Under the New York Pro Rata Release
The New York solution, which makes a settlement with one

defendant a release of that defendant's percentage of fault, en-

courages the opposite tactic in settlement negotiations from the off-

set approach. A plaintiff will not willingly accept the policy limits of
an underinsured defendant before trial, but will settle with that

defendant only after the main (in the sense of assets as well as
possible degree of fault) defendant has settled. If the main defen-

dant does not settle, the plaintiff will not take the policy limits of

the underinsured defendant in prejudgment settlement, but will

wait until after judgment. This is a logical result when the principle
of joint and several liability permits the plaintiff to shift to any

defendant able to respond in damages the whole loss, including the
costs attributable to the fault of the underinsured defendant. Unfor-

tunately it also promotes sharp practice: the plaintiff may not settle
with the underinsured defendant, but may make a collateral agree-
ment not to collect on any judgment in excess of the underinsured
defendant's policy limits; or the plaintiff may bargain with that
defendant for other cooperation in fixing responsibility on the sol-

vent defendants or increasing their degree of fault.

In the rush to adopt comparative negligence in order to give

plaintiffs at fault a right to collect damages and remove the last real
contingency, the consequences of adopting a principle that

distributes the losses in proportion to fault were not fully con-
sidered. Too little consideration was given to how this principle af-
fects settlements. Only the effect in trials seems to have been con-

sidered. Now, however, the risk of an increase in sharp practice by
the lawyers who want to zero in on the defendant that can respond
in damages and let those with little or no resources escape must be
considered. There must be some way to control misuse of the settle-
ment provisions and the malapportioned results obtained by loan
receipts, and even from covenants not to sue. The practical way is
to limit the responsibility of defendants that go to trial (or settle) to

responsibility for their own degrees of fault. If all actors are not
made parties, those before the court could share the fault of defen-
dants not made parties, but only by limiting the responsibility of



1977] PRODUCTS LIABILITY 853

parties before the court to such an expansion from their own
degrees of fault can sharp practices be controlled.

Another method might be to let the jury know everything. Let
the jury know that a defendant is underinsured and that when
percentages of fault are assigned to that defendant they are really

fixing responsibility on the remaining defendants. A jury that knows
everything might well apportion the underinsured defendant's

responsibility between the plaintiff and the remaining defendants,

and, of course, may decide to help a plaintiff recover "all" from a
defendant guilty of some lesser degree of fault.

If juries are not told the fact of settlement and its effect, they

may guess that a plaintiff employee gets compensation and the car-
rier will reach part of the proceeds of the suit by subrogation** or

"In a recent jury case in Conneticut Bernier v. National Fence Co., No. 42408

(Sup. Ct., New London County, Conn. June 28, 1976) (motion for new trial denied), a
state employee was killed when attempting to rescue employees of a contractor work-

ing on state property. The suit was similar to IPALCO. The decedent's plaintiff could
not sue the state, which paid compensation, so suit was brought against the third-party

defendant on the theory there was negligence in failing to cut off the electric power in

the area where the men were working.
At the outset of the jury trial it came to the attention of the attorneys that

members of the jury may have read an account of the suit in the local paper. In the ex-
amination of the jurors it was found that a juror had read an account of the suit and

that the juror knew the ad damnum figure mentioned in the article. After discussion,
the attorneys accepted the juror and the judge instructed the juror not to discuss the

article with other jurors.

After the trial, which resulted in a verdict for the third-party defendant, it was
discoverd that among the newspaper articles on the trial there was one that concluded
by stating that the State was a party seeking reimbursement of compensation.

In overruling the plaintiffs motion in arrest of judgment based on this discovery,

the trial court concluded that the right to object was waived. Although this case may
ultimately be reported, it will probably not explore the impact that a juror's knowing

that the decedent's employer was going to be subrogated to the claim against the
third-party defendant had on the verdict. However, the fact jurors are not wholly ig-

norant cannot be ignored. Many jurors are employees and may well know that in their
state cases like IPALCO permit even a negligent employer to cast all the costs of
employee injury, including reimbursement for the compensation paid, on the third-

party defendant. If that legal rule is known, or even guessed at, jurors might well

return a verdict for a third-party defendant because jurors could easily disapprove of a

negligent employer getting reimbursement from the relatively less blameworthy third-

party.

One such case may not be sufficient to support a generalization, but there is a
great temptation to conclude that where an employer is negligent a jury would not like
the IPALCO results and that trying to keep the jury in the dark may be worse than
letting them know the effect of their verdict. For attorneys engaged in suits by
employees against third-parties, the plaintiffs' attorneys might pause as they consider

whether to take a fairly knowledgeable employee who might know that the employer
will seek reimbursement from the jury verdict, and attorneys for the third-party

defendant might more willingly take such employees as jurors in the hopes that



854 INDIANA LA WREVIEW [Vol. 10:831

they may guess that the plaintiff has settled for a small sum with an
obviously-at-fault defendant just because that defendant was
underinsured. A plaintiff would not want the jury to know such
facts because the jury might use the settlement figure and what
they find to be the settling defendant's degree of fault to determine

the extent of damages.

G. What Should A Jury Know About Settlements?

It is in the area of how much the jury should know that there is
the least guidance. Would it be grounds for reversal to learn from a
juror after trial that the jury discussed the probability that one

defendant had settled, or that the compensation carrier of the

employer of the injured plaintiff would reach part of the proceeds of

a suit?*"^ It can be argued that no plaintiff will settle if that settle-

ment will be made known to the jury; however, the lawyers and
judges know or should know such facts, and they may play a role in
pretrial settlements. If this is so, why shouldn't the jury know too?
Further, there are ethical dilemmas for a defendant's lawyer who
has settled with the plaintiff, perhaps with a loan receipt and

subrogation agreement. Is it ethical for this defendant to come
before the court and jury to argue that the remaining defendant is

really at fault and should respond in damages, without also reveal-

ing that the defendant will profit by the bigger award against the
other defendant?**

Perhaps some practical considerations in the controversy over
letting the jury know about compensation benefits and settlements
should be mentioned. If the jury is allowed to know what dollar
amount the plaintiff will receive from the compensation carrier,
employers might object because this will lead to pressure to raise

compensation benefits. Unions might be in a dilemma: if the

evidence were introduced, the jury might index off the compensa-
tion benefits to estimate the damages due one plaintiff under the
common law, but if employers object they might well see that in the

evidence of the employer's fault can be coupled with the juror's knowledge that a ver-

dict for the plaintiff may serve to shift losses from the "at fault" employer to a
relatively less blameworthy third-party.

Finally, courts unwilling to let juries in IPALCO states know what will be the ef-
fect of an employee's verdict against a third party might well wonder at the

desireability of the IPALCO rule if it must be kept from the jury out of fear that
jurors might not want to let an "at fault" employer recover from the third-party defen-

dant.

'^Id.

"A recent Indiana decision, City of Bloomington v. Holt, 361 N.E.2d 1211 (Ind.Ct.
App. 1977) shows a defendant unhappy with having to defend with a loan-receipt

defendant who is a "wolf in sheep's clothing."



1977] PRODUCTS LIABILITY 855

long run the interest of the unions in getting increased compensa-

tion benefits is more important than what an individual plaintiff
gets.

Letting the jury know what the plaintiff received in a settle-
ment with a defendant while the plaintiff proceeds with another
defendant presents a much sharper controversy, one with few com-
pensations for the plaintiff if the settlement is a bad one. Plaintiffs

will object to letting the jury know that the plaintiff has settled
with one defendant because it is far more likely that if the amount
is known or even guessed at by the jury, the jury will index off that
figure by estimating what percentage of fault the settlement
covered and fix the amount of damages using the plaintiffs own acts
to estimate them. Plaintiffs will surely say this discourages set-

tlements in which they accept the policy limits of the underinsured

or seemingly reasonable sums from asset-poor defendants. It will be
said to require the making of side agreements between the plaintiff
and such defendants not to execute on any judgment against such
defendants in excess of some agreed upon sum rather than the pay-
ment of the available money to the plaintiff when the agreement is
reached. The possibility of such back door tactics might support the
argument that under a distribution principle there need not be joint

and several liability among multiple defendants before the court. So
long as there is joint and several liability, plaintiffs will be tempted

to negotiate with some asset-poor or underinsured defendants to get
their cooperation and guarantees similar to Mary Carter
agreements, when Mary Carters and their substitutes should fall as
inconsistent with the distribution principle. Here, the decision in

Israel Aircraft*'' might help. Courts have ways to compel the parties
to keep all their actions aboveboard and open to judicial review.

To the extent that the desire to promote settlements can be said
to require that a party be able to buy its way out of litigation ex-
penses as well as limit exposure, it will be objected that keeping a
party in a suit once it has settled defeats two of the three motiva-
tional tests. Defendants want to avoid litigation expenses and
adverse findings, as well as limit their exposure. But if the defen-
dant has settled for the percentage of negligence ultimately at-

tributed to that defendant, and the jury knows this, the expense of
defending such a party must surely be less than what it would be if
that defendant had a continuing exposure. The jury would unders-
tand why a defendant was not active if it knew that defendant had

•Israel Aircraft Indus, v. Standard Precision, 72 F.R.D. 456 (1976). The failure of

Israel Aircraft to reveal payments in exchanges for releases from the defendant to the

court and the jury was deemed under Rule 37 and Rule 60(b) to warrant the reversal

of the $1.2 million verdict.



856 INDIANA LAWREVIEW [Vol. 10:831

settled. Thus the avoiding litigation expense test could be substan-
tially satisfied without sacrifice of the distribution principle if the

jury was told that a given defendant had settled even if the jury
was not told how much that defendant had paid. A compromise that
might help keep the jury from becoming "outlaws" would be to tell
them of the fact of settlement even if the amount was kept from the
jury so they would not index off the figure. This could be done even

in the case of compensation benefits. The jury could know the
scheme, without knowing the amounts involved, and be told to fix
total damages and percentages, leaving with the court the respon-
sibility to look at the figures and apply the percentages.

Finally, it will be argued that even if the dollar figure is not

disclosed, the mere fact that a settling defendant is kept in and a
verdict may come down fixing some percentage of fault will defeat
the final stated reason why defendants settle, the desire to avoid a
determination they were at fault. Here again, if the figure is disclosed
this purpose will be defeated, but if the figure is kept from the jury,

not reported by the courts, and not discoverable by subsequent

plaintiffs who sue that defendant, the mere fact that a defendant
bought its way out, and did not actively defend, should cut the edge
off any verdict fixing some degree of fault on the defendant that set-
tled.««

These slight disadvantages of the pro rata approach in damaging
the two secondary motivations for settlement, can be said to offset
the clear advantage the pro rata system has over the offset provi-

sion in achieving distribution of costs in proportion to fault.

However, I believe the adverse effects of a true pro rata system on

the lesser motivations are far fewer than the disadvantages of the

offset approach in failing the distribution test. The offset approach
denies distribution in proportion to fault, promotes sweetheart set-

tlements, and can only devise a poor method of policing them. The
offset method does not keep all parties in the suit to permit the use
of Dole comparative fault to cover the problem of indemnity which

will always complicate product cases because the rights of all par-

ties are not adjudicated in one comparison of fault, but may require
further litigation.

For all these reasons, it is suggested that the percentage scheme
(and not the dollar amount) of the New York statute makes sense. It

"Courts serious about promoting settlements cannot fail to see that letting other

plaintiffs use discovery rules to look at prior settlements can have a chilling effect.

The plaintiff seeking to find out about prior settlements wishes to find an index of that
experience. The discovery issue and its effect on settlements cannot be explored here,

but it is an area that will have to be worked out as part of a full theory of settlements

under the distribution principle.



1977] PRODUCTS LIABILITY 857

will force the plaintiff to look for a settlement with the "main"

defendant, as was apparently done in Castillo, and then the little or
underinsured defendants can settle. Settlements with the underin-

sured first will cause a malapportionment of the percentages of fault

if the plaintiff compares fault with the main defendant alone.

H. Reasons Pure Pro Rata Settlements Are Preferable

The New York statute provides that a settlement by one defen-
dant will reduce the liability of the remaining defendants by either

the degree of fault or the amount received,"" whichever is larger.
Settlements are more likely to be encouraged if percentages alone

are used. If a plaintiff stands to lose by a disadvantageous settle-

ment (one where the cash received was less than the percentage of
that defendant's fault times the total verdict), giving the plaintiff

the benefits of a good settlement (one where the cash received was
greater than the settling defendant's degree of fault times the ver-

dict) might encourage settlements.

Under an analysis of the settlement as a contract, it is difficult
to conceive that there would ever be an intent, by either the plain-

tiff or one defendant who settles, to give any dollar benefit to the
remaining defendant when settling parties agree to a pro rata
reduction. If those bargaining parties think of a benefit when the
dollar amount of the settlement exceeds the settling defendant
degree of fault times the ultimate verdict, they would consider that

a benefit for the plaintiff.

For these reasons, it is suggested that a pro rata release should
not be coupled with a dollar offset. Pro rata settlements carry out
the principle of distributing fault. A plaintiff that runs the risk of a
bad settlement and getting too little when releasing a percentage of
fault can reap the benefit of a good settlement under a pro rata only
provision. Finally, it is difficult to believe the defendant that refuses
to settle should be considered a third party beneficiary of a good
settlement by the plaintiff with a defendant that settles. The only
possible reason for keeping the dollar offset in pro rata schemes is
that in some cases the presence of judgment-proof defendants will,
under joint and several liability, result in a defendant that refuses
to settle having to bear costs that exceed the jury determination of
that party's percentage of fault. If each party bears only its own
degree of fault, no reason exists to continue the dollar offset.^"

•»N.Y. Gen. Oblig. Law § 15-108 (Supp. 1976).
^"Fisher, Nugent, & Lewis, supra note 6, at 665-66, discuss how Texas lawyers

have the option to include the defendant settling to achieve a pro rata distribution or

not include the settling defendant and have a pro tanto credit. This requires tactical

thinking and an evaluation of whether the settlement was excessive or inadequate.



858 INDIANA LAWREVIEW [Vol. 10:831

Before leaving New York to look at other states, it might be a§ked
why the scheme of section 15-108 as applied to a consumer product
defendant that settled was not legislatively applied to the negligent
compensation covered employer who has "settled" with the plaintiff
employee under the compensation act. For the New York lawyer
perplexed by this lack of coordination, the obvious suggestion is that

compensation covered employers sued on a Dole theory should

argue equal protection brings them within the provisions of section
15-108. Authorities that may be relevant to this argument will be
discussed in a later section of this paper.

/. Avoiding Responsibility for the Fault of Others as a Motivation

for Settlement

The principle of distributing costs in proportion to respective
degrees of fault seems to call for the abandonment of joint and
several liability among parties before the court unless one defendant
can be said to be responsible for the fault of the other as, for exam-

ple, under respondent superior. When plaintiffs as a group were
anxiously awaiting the day that contributory negligence would no

longer be a bar, they argued it was wrong to have an all or nothing
principle apply to them. It was argued that even if the plaintiff was
only slightly at fault and a defendant's fault far exceed the plain-

tiffs, it was not proportioned justice to allow the defendant to

escape responsibility. It is just as logical to suggest that the princi-

ple of joint and several liability among codefendants before the
court is an "all or nothing" principle (possibly based on the concept

that any cause of an innocent plaintiffs injury was sufficient to war-
rant the imposition of liability for all damages on that cause) that
should be rejected and not applied to make a fiscally able defendant
guilty of two percent fault pay for the judgment proof defendant's

ninety percent of the fault now that the plaintiff escapes the all or
nothing principle of contributory negligence as a bar. It is equally a

malproportioned form of justice.

This is not the place to mount an extended attack on joint and
several liability or consider what may be the landmark case, Amer-
cian Motorcycle Association v. Superior CourW^ however, joint and

"American Motorcycle Ass'n v. Superior Court, 65 Cal. App. 3d 694, 135 Cal.
Rptr. 497 (1977) should be the subject of a plethora of writing even if not discussed

here. It is a thoughtful and logical working out of the distribution principle. If the life

of the law is not logic the case may not be approved by the highest court in California.
Yet it still is worthy of study because it concludes that the adoption of comparative

negligence requires a distribution of the loss among multiple tortfeasors in proportion
to their respective degrees of fault and refuses to permit the use of the doctrine of



1977] PRODUCTS LIABILITY 859

several liability is an all or nothing principle that is often inconsis-

tent with a principle calling for distribution of costs. It is suggested

here that if all parties are present, costs can be distributed among

the parties to the suit, and that a problem arises in settlements

when one defendant seeks to avoid responsibility for more than a

pro rata share of costs by settling. If one defendant settles for only

the pro rata share, and others whose conduct contributed to the

plaintiffs injury are not before the court, a plaintiff can use joint

and several liability to fasten upon the defendant that does not set-

tle all responsibility for the defendants who are not present in the
suit.

To use an area of tort law that is not as emotional as personal
injury, consider the problem of one of a number of defendants who
put salt water in a stream and is sued by an injured plaintiff. The
classic Texas cases are Sun Oil Co. v. Robicheaux''^ and Landers v.
East Texas Salt Water Disposal Co.''^ Rohicheaux held that a plain-
tiff could recover from a given defendant only for the damages ap-
portioned to the salt water that defendant added to the stream.

Landers overruled Rohicheaux and held that where an injury "can-
not be apportioned with reasonable certainty" among the individual
wrongdoers, all the wrongdoers will be held jointly and severally
liable for the entire damages. It is suggested that both are extreme

solutions, with Landers being preferable so long as the plaintiff was
without fault, and Rohicheaux when the plaintiff shares fault.^* This

joint and several liability. If it is not already known as the "joint and several liability"

case, it will be so known.

Where joint and several liability is ended, as it is in Vermont, Vt. Stat. Ann. tit.

12, § 1036 (Supp. 1977), there is no need for contribution because no defendant pays

more than the proportion of damages allocated in the jury's verdict fixing degrees of

fault. This raises an interesting problem of what courts should do when comparative
negligence is adopted in the two party suit, and nothing else is done; should they then

allow contribution? See the discussion of Hayes v. Hazard, in note 16 supra. Should

they go further and adopt the result in American Motorcycle? Perhaps at another time

it will be possible to state more fully why a rule of contribution between tortfeasors
seems appropriate where the plaintiff is not at fault because the plaintiff keeps the

right to hold the defendants jointly and severally liable. But when the plaintiff is at
fault, as well as the defendant, then all are "active." If logic says the plaintiff can hold

defendants jointly and severally liable, then one of multiple defendants required to pay

more than a proportionate share under the doctrine of joint and several liability should

be able to recover contribution on a joint and several basis from all active parties,

even the plaintiffs, less only the share of the defendant.

"23 S.W.2d 713 (Tex. Com. App. 1930).
"151 Tex. 251, 248 S.W.2d 731 (1952).

^*Continuity with the past might justify the retention of joint and several liability

when the plaintiff is not at fault. However, when comparative negligence is introduced
so that an "at fault" plaintiff can recover from others at fault, especially in a pure com-

parative negligence jurisdiction, the possibility that a defendant — guilty of a lesser



860 INDIANA LAWREVIEW [Vol. 10:831

is a middle ground, distributing the costs among parties in the suit
in proportion to their degrees of wrongdoing as perceived by the
jury when the plaintiff as well as the defendants are at fault. No
plaintiff could then shift the risk of one defendant's being underin-

sured or unable to respond to damages to another defendant, so long
as all defendants are in the suit, even those who have settled. The
risk of one defendant being unable to pay for the share determined

by the jury should be spread between the plaintiff and the remain-
ing defendants in proportion to their respective degrees of fault,

after all degrees of fault have been determined, much as the
Uniform Comparative Fault Act provides in cases in which a judg-
ment against one defendant cannot be collected.^^

Until all the implications of comparative negligence and com-

parative contribution are worked out, and so long as defendants are
operating under the rules of joint and several responsibility and no

contribution, but merely a setoff for prior settlements, there will

always be a holdout in multiple party situations. There will be at

least one defendant who does not want to contribute anything.
Perhaps there has been a tender of the defense to another defen-

dant and the hope that the ultimate loss can be shifted to the

manufacturer even though the holdout may have been guilty of
failure to warn. Or the holdout may merely believe that the plaintiff
was guilty of misuse of the product and should not recover. If courts
are really serious about promoting settlements, that defendant can

be seen as a "dog-in-the-manger" and maybe needs to be allowed to
go the whole route. He can get off scot free if he wins but may lose
and suffer a judgment for all the damages with only a setoff for
what the settling defendant paid. Having taken the chance, I believe
the "reluctant-to-settle" defendant should be cut off from all rights

against any party who settles even in the confused state of the law
at present.

The theory is there to effect this result in the employee-plaintiff
cases. Many courts, such as the Iowa court in IPALCO,'"^ have held
that when the employee has no direct cause of action against the
employer, the third party tortfeasor cannot sue the employer for

contribution. It would be simple to extend this immunity of the

employer who settled under the compensation act to the consumer
product defendant that settled privately while the action proceeds

degree of fault than a plaintiff and sued with other defendants unable to respond in

damages — might be required to bear all the degrees of fault of others, seems to re-
quire some relief, perhaps the relief provided in American Motorcycle.

''^See Wade, supra note 7.
'^59 Iowa 314. 144 N.W.2d 303 (1966).



1977] PRODUCTS LIABILITY 861

against the other defendants. The obvious reference is to an equal
protection argument rather than an appeal to courts to merely apply

this requirement of contribution (that the plaintiff have a direct

right) as a matter of consistent application of contribution doctrine.

The equal protection authorities discussed in a later part of this

paper should be helpful here as they might be in efforts to let com-

pensation covered employers in New York come in under section
15-108. Before reaching the equal protection arguments, some
analysis of contribution and indemnity is necessary.

V. The Confused History of Contribution When a Plaintiff's
Contributory Negligence Was a Bar

If the rule that contributory negligence of a plaintiff is a bar was
based on the assumption that courts need not look out for someone
who does not look out for himself, the same assumption could be the
basis of the rule of no contribution among joint tortfeasors. Elemen-
tary logic suggests a rule that a tortfeasor at fault cannot collect

contribution has to fall when the rule that a plaintiff at fault cannot
recover falls.

The common law rule of no contribution among tortfeasors is
generally recognized as having its origin in Merryweather v. Nixan,''''
and was the subject of many analytical writings in the 1930's.^* One
of the writers of the 1930's proposed a statute proportioning or
distributing liabilities in accordance with the degrees of fault.^' This

suggestion was referred to a proposed statute for Wisconsin®" and in
turn was relied on by Arthur Larson in a lengthy article.*^ In

"8 Term. Rep. 186, 101 Eng. Rep. 1337 (K.B. 1799). However, it could be placed

earlier, as suggested in Reath, Contribution Between Persons, 12 Harv. L. Rev. 176

(1898) in a discussion of Battersey's Case, Winch's Rep. 48, decided almost a century

before.

'Terhaps the landmark work is C. Gregory, Legislative Loss Distribution in

Negligence Actions (1930). An argument against apportionment, James, Contribution
Among Tortfeasors: A Pragmatic Criticism, 54 Harv. L. Rev. 1156 (1941) led to a
debate between Gregory and James in volume 54 of the Harvard Law Review.

The work of other eminant writers in this period should not be overlooked, in ad-
dition to Professor Larson's article cited in note 81 infra, there was Leflar, Contribu-

tion and Indemnity Between Tortfeasors, 81 U. Pa. L. Rev. 130 (1930), and Bohlen,
Contribution and Indemnity Between Tortfeasors, 21 CORNELL L.Q. 552 (1936) (Part I)
and 22 Cornell L.Q. 469 (1937) (Part II).

^'Note, Contribution Between Tortfeasors: A Legislative Proposal, 24 Cal. L.
Rev. 702 (1936). This article looked to a New York Law Revision Committee report,
Legis. Doc. (1936) No. 65 (K)4, which proposed a statute distributing liabilities in accor-

dance with degrees of fault.

^"Note, Contribution-Joint Tortfeasors—A Proposed Act, 1938 Wis. L. Rev. 580.
**Larson, A Problem in Contribution: The Tortfeasor with an Individual Defense

Against the Injured Party, 1940 Wis. L. Rev. 467.



862 INDIANA LAWREVIEW [Vol. 10:831

reading Professor Larson's treatise and critizing it when I wrote on
this subject*'^ I debated asking why had Professor Larson dropped
from his treatise the suggestion he so forcefully urged in 1940, and
which was enacted for all but compensation covered employers
when New York enacted section 15-108 of its General Obligations
Law.

Perhaps Larson abandoned his proposal because the works cited
above had no immediate effect because of judicial and legislative

adherence to the rule that contributory negligence was a bar to a
plaintiffs recovery. It has only been with the spread of comparative

negligence to more than half the states that we have been forced to
relive and rewrite the work done in the 1930's, and that the Wiscon-
sin courts, in cases like Payne v. Bilco,^^ have done what Larson urged
the legislature to do forty years ago. I suggest that many of the
leading articles of today®* are rooted in the debate of the 1930's.

Finally, it is only fair to acknowledge that Larson's 1940 Wisconsin

article proposed a solution quite similar to the one I proposed in
1976.«^

Unfortunately the Uniform Contribution Among Tortfeasors Act
did not clarify the problem, and the practicing lawyer is probably

more interested in looking at an annotation collecting cases not
decided under the Uniform Act^ than one dealing with cases decided
under the Act.*^ A review of the few cases collected in these annota-
tions, and the supplements, shows that the cases decided in the
absence of a statute spelling out the effect of a settlement on the

right of the remaining defendants to contribution, are divided. Some
allow contribution from the defendant that settled,®* a result changed

by statute in New York, while others do not. Unlike Professor Lar-
son, who in his 1940 Wisconsin Law Review piece concluded there
should be a right to contribution from a defendant who set-
tled—despite his initial conclusion there should not be a right to

contribution — I believe that the policy reasons discussed in cases
such as Castillo Vda Perdomo, especially the desire to end exposure,

as well as equal protection arguments looking to the treatment of

compensation covered employers, require that one defendant's set-

tlement with the plaintiff be a bar to suit for contribution in the ex-

*^Davis, supra note 5.
'"'54 Wis. 2d 345, 195 N.W.2d 641 (1972).

^*E.g., those collected in note 6 supra,

*^Davis, supra note 5.

««Annot., 8 A.L.R.2d 196 (1949).

«'Annot., 34 A.L.R.2d 1101 (1954).

««Blauvelt v. Village of Nyack, 141 Misc. 730, 252 N.Y. 746 (Sup. Ct. 1931).



1977] PRODUCTS LIABILITY 863

panded Dole v. Dow sense by defendants that do not settle, provided
that the settlements are pro rata settlements.

Another conclusion from a review of the literature is that urging

legislatures to work out a solution came to very little. However, the
implications and suggestions of such pieces as Larson's 1940 article

have been realized in Payne v. Bilco and show that the logic of con-
forming the rules of contribution and implied indemnity to the prac-

tice of settlement requires that a settling tortfeasor be able to ob-

tain protection from suits for contribution and indemnity implied at

law.

VI. Equal Protection

A. Background

Notions of equal protection may have played some role in the
adoption of comparative negligence because settlements have long

been made on a comparative basis even in states where contributory
negligence was stated to be a bar. The difference between such set-
tlements and litigation where the jury applied comparative
negligence may have offended equal protection notions and may help
bring about wider adoption of comparative negligence.

It is not the purpose here to trace the evolution of equal protec-

tion from a constitutional guarantee limited to undoing discrimina-

tion against persons on the basis of race** to use in an expanding

number of other areas*" (including worker's compensation).*^
However, some background on equal protection seems necessary. It
generally involves a claimant, or a group of claimants, who find a
factually similar situation which state or federal law treats more
favorably than their own, and then urge the courts to place a

carpenter's level (equal protection) on these two similar cases and
bring them up "equal." Sometimes the efforts are limited to
evidence of inequality on the face of a statute, and sometimes
evidence is brought forward to show inequality in the impact of a
statute.

The analogy of the carpenter's level was suggested by a col-
league. Professor Alan Cullison, at a time when the author was put-
ting down a stone walk. We visualized the carpenter's level as a
rather short tool, useful to bring up one stone when it had sunk, or
was laid, a little below its neighbor (by the legislature and, in impact

'*The Slaughter-House Cases, 83 U.S. 36 (1872).

^Developments in the Law—Equal Protection, 82 Harv. L. Rev. 1065 (1969) and
Gunther, Forward: In Search of Evolving Doctrine on a Changing Court: A Model for
a Newer Equal Protection, 86 Harv. L. Rev. 1 (1972).

*'E.g., Weber v. Aetna Cas. & Sur. Co., 406 U.S. 164 (1972).



864 INDIANA LAWREVIEW [Vol. 10:831

cases, perhaps by administrators although almost never by courts)'''^

but not useful for leveling over long distances — for example, from
inside the compensation system to the common law system^^ or when
the slope of the ground indicated that there be steps as in the "one

step at a time" doctrine of Jefferson v. Hackney^* permitting

benefits for permanently and totally disabled to differ from benefits

for Aid to Families with Dependent Children. Further, judicial
repairs made under equal protection, like stone walk repairs with a
carpenter's level, require that the courts ask whether, when two
stones are uneven, the claimant's stone should be raised or the

other lowered."^ And finally, where a statute treats dissimilar cases
alike — for example, gives the same benefits to persons suffering dif-
ferent degrees or kinds of incapacity — equal protection cannot be used
to proportion differences in treatment.^

Although the focus here will be on equal protection, there is an

interaction with due process. Equal protection has been less con-

cerned with motivation than due process, unless the widow's tax ex-

emption case^^ which may be viewed as a remedy for past
discrimination can be cited as a motivation case. If it can, perhaps

motivation may fit into the anology of the carpenter's level to the
extent that it may help reach the conclusion that improperly
motivated classifications, or steps, are arbitrary, and do not rest on

a rational basis.

B. Arguing From the Compensation Statute To Give the Defendant
Who Settles Equal Protection

Let us now consider Iowa, a state which unlike Connecticut,
even though it held to the rule that a plaintiffs negligence was a

*Terhaps one of the difficulties with the impact cases is that impacts are often

judicial. The author collected all of the Connecticut compensation decisions involving

"Arising and in the Course" including court opinions as well as commissioners' deci-

sions and pointed out that there were real questions of equality of treatment within

factually similar cases as well as across roughly similar cases. If the article — assuming
it correctly stated what the courts had done — were enacted as a statute, would the
courts strike the statute on the grounds it denied equal protection?

, '"Kaznoski v. Consolidation Coal Co., 368 F. Supp. 1022 (1974).

"406 U.S. 535, 546 (1972).

'^This is the problem considered in Mr. Justice Harlan's concurring opinion in

Welsh v. United States, 398 U.S. 333, 344 (1970).

^See Davis, Schedule Injuries—Equal Protection, 33 Atla L.J. 196 (1970).

"Kahn v. Shevin, 416 U.S. 351 (1974). An annual property tax exemption for
widows was provided by Florida statute since at least 1885. In suit by widower claim-

ing a denial of "equal protection," the court declined to give widowers a similar exemp-

tion. The majority opinion speaks in terms of reparations or compensation for widows

who have been denied equal access to jobs and pay in the past, but it would not be

unrealistic to see this as a case involving "good" motivation, not a classification made

merely for administrative convenience.



1977] PRODUCTS LIABILITY 865

bar to recovery, did not hold to the corollary rule barring suits for

contribution." When the Iowa Supreme Court decided IPALCO it
rejected the passive-active basis for allowing contribution or indem-

nity and held that a third party tortfeasor could not sue a negligent

employer for contribution or indemnity when the employer had pro-
vided compensation coverage. Reasoning from the fact that the

employee had no direct action against the employer, the Iowa court

held*^ that a third party tortfeasor could not sue the negligent

employer for contribution.

The Iowa requirement that the plaintiff in the suit from which
the right of contribution or indemnity develops must have a direct
right against the defendant against whom contribution or indemnity
is sought is also the basis for decision in Blunt v. Brown,^'^ a case

which involved both marital immunity and the automobile guest
statute, and it denied the defendant sued by the auto guest a right

to seek contribution from the driver of the plaintiffs car.

Admittedly in both IPALCO and Blunt v. Brown, the defendant
against whom contribution was sought had been immunized by
statute from direct suit by the injured plaintiff: in IPALCO the com-
pensation statute, and in Blunt the guest statute as well as the

marital immunity. However, Iowa did not have a compulsory com-

pensation statute; either the employer or the employee could elect

out.^°^ Is there a rational basis to distinguish an Iowa employer that

"settles" with an employee by voluntarily coming under compensa-

tion and the employer that does not come under compensation but
settles with an employee on an individual basis? Should not equal

protection say that if the compensation covered employer cannot be

sued for contribution or indemnity because the employee (the in-

jured party who sues the third party defendant) has no direct right,
then the employer who did not elect coverage but voluntarily settled
should also enjoy protection from actions for contribution or indem-

nity when the third party defendant sues? In both cases the injured
party has no direct action. Finally, where one of multiple product
defendants is sued, should not the product defendant that settles be

accorded the same protection against suits for contribution and in-
demnity that the court has accorded the employer that voluntarily

settles?

Despite the general tendency to not consider equal protection

arguments in such cases, there is at least one third party tortfeasor

**See Furnish, Distributing Tort Liability: Contribution and Indemnity in Iowa,
52 Iowa L. Rev. 31 (1966).

^See note 31 supra.
"*«225 F. Supp. 326 (S.D. Iowa 1963).

'"See Davis and Others, The Iowa Law of Workmen's Compensation (1967).



866 INDIANA LAWREVIEW [Vol. 10:831

opinion that offers some help in considering this argument. In Col-
eman V. General Motors Corp.,^^^ an employee was injured while in-
stalling equipment in a General Motors plant. The employee sued
General Motors who in turn sued the employer who was allegedly at
fault. In granting the employer's motion for summary judgment the
court cited cases holding that where the injured party has no direct
right against defendant, another defendant cannot sue such a defen-

dant for contribution or indemnity.

The court then went on to consider claims of a violation of equal
protection by such a decision, which the court said is:

[T]he proposition that because it voluntarily chose to deal

with an employer with greater than five employes, . . . [and

subject to madatory compensation coverage] and is sued for

its alleged negligence by an employee of such employer, then

it is denied equal protection because if it had chosen to deal

with an employer with less than five employees who did not
voluntarily elect to be covered by workmen's compensation,
and was similarly sued, then it could maintain a third-party
suit. The classification complained of by General Motors then
would have to be third-party joint tortfeasors who deal with
. . . employers not mandatorily covered and who voluntarily
chose not to be covered as the other class."^

The court concluded: "Such a classification first is not created by
the statute and secondly is too tenuous a classification on which to

hang an equal protection argument.""*

I suggest that there is a classification and that the real reason

General Motors lost its equal protection argument was that there is
a rational basis for distinguishing a defendant sued for contribution

that has settled with the injured party and a defendant that has not.

The Coleman court does not say this, but its opinion helps focus
the issue, which is: Is there a rational basis for different treatment

of a defendant that settles, either individually or by voluntarily ac-

cepting compensation responsibility, to an employee and one of

multiple product defendants that settles with the plaintiff? Coleman

does not face this issue, and I have not been able to find, albeit in a

hurried search, any case that has; however, the compensation

statute in Iowa classifies employer's compensation settlements as a

defense to suits for contribution and indemnity (as it is construed)

and thus creates two classes: Compensation covered employers (and

'"KSSQ F. Supp. 87 (N.D. Ga. 1974).

'""/d. at 91 (emphasis added).

"Vd at 91.



1977] PRODUCTS LIABILITY 867

probably non-compensation covered employers who voluntarily set-
tle) that need not respond in contribution or indemnity to a third

party on the one hand, and one of multiple product defendants that

settles with the plaintiff on the other.

Is there a rational basis to let employers have such a benefit and

deny it to others that voluntarily settle with a product plaintiff? I

suggest there is not, but would have to look to other situations

where classifications in exculpatory legislation in tort situations

have been held to deny equal protection.

Such a situation arose in Illinois, when Illinois courts held that
landlords could have exculpatory clauses in leases that were effec-

tive to exempt the lessor from liability for the lessor's negligence or
negligence attributable to the lessor. In response to this, Illinois

legislature enacted a statute making exculpatory clauses in all
leases, except those where the lessor was a municipal corporation,
government unit, or corporations regulated by state of federal com-

missions, void.^°^ In Sweney Gasoline & Oil Co. v. Toledo, P. & W.
R.^^ the Illinois Supreme Court struck down this statute holding
there was no reasonable basis for the exemptions in the statute.

One way to view Sweney is to say that it granted other
landlords equality with governmental or regulated landlords. It did

this by striking down the statute so non-governmental landlords
were given the same right to protect themselves as those landlords
excluded from the statute. The analogy of the settlement by one of
multiple defendants to Sweney is that where an employer gains im-
munity to an employee's suit because the employer has settled for

common law claims by assuming compensation liability, it would be
a denial of equal protection to hold that one of multiple defendants

who settles voluntarily should be denied the immunity from liability
or contribution while the employer who voluntarily assumed com-
pensation has such immunity. There is no reasonable basis for allow-

ing one set of possible multiple party defendants, employers, to

elect compensation coverage (and the right to settle and obtain im-

munity from suits for contributions) from other multiple defendants

and not allow other defendants to settle and obtain immunity from
suits for contribution.

In view of the fact that in Iowa the employer in IPALCO could
not only get immunity but could get back out of the employee's

recovery against a third party whatever the employer, or the car-

rier, had paid in the settlement, the multiple defendant who settled
has stronger equities to be held immune to contribution actions than

'"^ILL. Rev. Stat., ch. 80, § 15a (repealed 1971).
•»*42 111. 2d 265, 247 N.E.2d 603 (1969).



868 INDIANA LAWREVIEW [Vol. 10:831

the employer. It is only in the load sharing states, states which

follow Santisteven, that the equities are even for the compensation

covered employer and the defendant that settled.

C. In New York, Getting the Compensation Covered Employer
Under Section 15-108, and Out of Dole, by Equal Protection

The ultimate issue in New York is whether there is a rational
basis for granting immunity to contribution suits when one of multi-
ple defendants settles (with a reduction of the plaintiffs recovery

against other defendants by the degree of fault attributed to the

defendant that settles) and the treatment of employers under Dole,

considering that they have settled their fault with the plaintiff, and

must still suffer suits for contribution. From the plaintiffs view-
point, is it rational to classify a non-employee who settles as distinct
from the employee that settles under compensation, and reduce the

recovery of the plaintiff who settles with one defendant by the
degree of fault of the settling defendant, and treat employees dif-

ferently, letting them get compensation, sue the third party and not
be held to recovery from the third party only to the degree of the

third-party's fault?

As New York's compensation statute is compulsory, it could be
suggested that the settlement by the employee with the employer is

not strictly analogous to a plaintiffs voluntary settlement with one

of many third-party defendants. However, this flies in the face of
the "trade-off basis for upholding the compensation act found in the

Supreme Court's opinion in White
}°'^

I urge you to follow the New York situation. Dole spawned the
New York comparative negligence statute and section 15-108. It will
undoubtedly be argued that the New York Court of Appeals should
defer to the legislature to act on Dole to bring the treatment of

employers in line with section 15-108. I merely suggest here that

despite such arguments, if the New York Court of Appeals sees that
Dole has done its work,^°® comparative negligence now obtains, and

"•^N.Y. Central R.R. v. White, 243 U.S. 188 (1917).

^°«In Klingler v. Dudley, 41 N.Y.2d 362, 393 N.Y.S.2d 323, 361 N.E.2d 874 (1977).

the New York Court of Appeals refused to allow a Dole plaintiff to reach the third-
party defendant directly when the main defendant could not satisfy the plaintiffs judg-
ment. One plaintiff in these suits was limited to the compensation benefits and a small

amount from the main defendants and held not to be entitled to reach the employer

directly or indirectly when the third-party was unable to respond in damages.
One way of looking at these cases is that the Court of Appeals may be beginning

to see that Dole has done its work and that the apportionment process called for under

comparative fault requires a rethinking of the plaintiff-employee's right to pierce the

compensation act because the employer has settled for fault within the compensation

system.



1977] PRODUCTS LIABILITY 869

section 15-108 has been enacted, the court of appeals might want to

blunt the economic disadvantage that Dole puts New York
employers under when almost no other state makes the employer
covered by compensation bear such risks, covered in New York by
workman's compensation and employer liability "B" coverage, if at

all. If it does, the equal protection argument gives the court the

chance to rationally resolve the hottest issue in New York personal
injury practice, the compensation-piercing aspect of Dole; it can be

done by saying that the Constitution tells the court to do so. This

would let the Constitution take the wrath the plaintiffs bar would

feel when their verdicts are reduced so that the plaintiff injured in a
compensation situation is treated like section 15-108 plaintiffs.

VI. Conclusions

When parties settle multiple party suits they settle in propor-
tion to relative degrees of fault. Courts and legislatures are working

toward the application of the same distribution principle in trials.
Until courts, or legislatures, work out the implication of this
distributive principle in a consistent manner for settlements as well
as trials, as the Wisconsin court did in Payne v. Bilco, courts faced
with a situation where one defendant has settled are going to face
problems that should be answered by asking how they want set-
tlements to be effected.

The first problem is whether they want to let one of many
defendants settle or whether they want to coerce all defendants to
settle at once. If they want to coerce all defendants to settle at once
they can let a holdout defendant that refused to settle, go ahead and

force the other defendants to try the suit because if a holdout defen-

dant suffers a disproportionate judgment the court will let that
defendant sue a defendant that settled for contribution or indemnity.

However, if courts see that common sense suggests that a defendant
willing to settle with a plaintiff willing to accept from that defen-
dant what cash is offered for a pro rata release, no reason exists to
prevent such a separate peace, then they will deny the defendant
who refuses to settle a right to both contribution and indemnity.

In 1940, Professor Larson said that when one of multiple defen-
dants is considering settling "what the practicing lawyer wants to
know is whether he can be assured that an individual settlement
will enable him to wipe the case from his books. The answer to his
problem can be given with confidence: there is enough doubt on the
matter to make it hardly worthwhile. . . ."^°® The adoption of com-

^^See Larson, supra note 81, at 480.



870 INDIANA LA WREVIEW [Vol. 10:831

parative negligence and the sweeping of indemnity into the com-

parison of negligence by Dole v. Dow and the use of the pro rata
release should permit one of multiple parties that wants to buy out

to do so with confidence. Courts have the tools to supply that con-

fidence and to encourage settlements. If this is desired, then it must
be asked whether a defendant who settles should be able to cast
costs onto a defendant who refuses to settle. I suggest that nothing
in the distribution principle supports the right of one party at fault

to buy out by a loan receipt, Mary Carter or a covenant not to sue
or even under the applicable compensation act, and cast costs on the

remaining defendant. The only distributional method is the pro-rata
settlement. Under the pro-rata settlements neither the defendant
who refuses the settlement nor the defendant who settles can cast
costs on the other.

Finally, when one party settles, and another refuses, should the
settling party remain in the litigation and special verdicts be used

to see if the jury finds the plaintiff can recover from the "holdout"

on some independent grounds? If a party settles and is dropped
from the trial, the plaintiff and the remaining defendant will worry

about the jury knowing something was up and will speculate about
what it is. Should the jury be told? I tend to believe that the jury
might as well be told all the facts of a settlement short of the actual

figures.^^" The jury might as well be told what will be the effect of
their verdict.^^^

""M at 501.
"'Consider Apelgren v. Agri Chem. Inc., 562 P.2d 766, 767 (Colo. Ct. App. 1977),

where the comparative negligence statute provides the jury must be charged on the
effect of its findings, and the court says: "[I]t would be mere speculation on our part to
hold that the jury verdict would not have been altered had the jury known of the ef-
fect of its finding . . . ."