Big Change in California Torts: No More Release Rule

By Robyn Hagan Cain on August 24, 2012 | Last updated on March 21, 2019

We occasionally like to joke that a minor rule amendment changes everything.

All kidding aside, yesterday's California Supreme Court decision in Leung v. Verdugo Hills Hospital literally changes the face of tort law in the Golden State. The biggest news: The release rule is gone. Instead, the court has adopted the setoff-with-contribution approach.

Six days after his birth, Aidan Ming-Ho Leung suffered irreversible brain damage. Through his mother as guardian ad litem, he sued his pediatrician and the hospital in which he was born for not catching the problem earlier, despite reports of Aidan's symptoms.

Before trial, the Aidan and the pediatrician agreed to a settlement of $1 million, the limit of the pediatrician's malpractice insurance policy. At a jury trial, Aidan was awarded both economic and noneconomic damages. The jury found that the pediatrician was 55 percent at fault, the hospital 40 percent at fault, and the parents 5 percent at fault.

Verdugo Hills appealed, arguing that, under the common law "release rule," Aidan's settlement with the pediatrician also released the non-settling hospital from liability for Aidan's economic damages.

The Court of Appeal reluctantly agreed. It observed that the California Supreme Court had "criticized the common law release rule," but "not abandoned it." Bound by stare decisis, the Court of Appeal then applied the common law release rule, and reversed the portion of the trial court's judgment awarding plaintiff economic damages against the hospital.

Under the traditional common law release rule, a plaintiff's settlement with, and release from liability of, one joint tortfeasor also releases from liability all other joint tortfeasors. That rule, according to the California Supreme Court, can lead to harsh results. The court unanimously concluded, "In light of the unjust and inequitable results the common law release rule can bring about, as shown in this case, we hold that the rule is no longer to be followed in California."

So now there's a new rule, The Wall Street Journal reports.

The court adopted a "setoff-with-contribution approach." Here's the new rule, in the court's words:

When a settlement with a tortfeasor has judicially been determined not to have been made in good faith, nonsettling joint tortfeasors remain jointly and severally liable, the amount paid in settlement is credited against any damages awarded against the nonsettling tortfeasors, and the nonsettling tortfeasors are entitled to contribution from the settling tortfeasor for amounts paid in excess of their equitable shares of liability.

As applied to Aidan's case specifically, the California Supreme Court held that the evidence presented at trial was sufficient to support the jury's finding that Verdugo Hills' acts or omissions were a legal cause of Aidan's brain injury, and the hospital remained jointly and severally liable for Aidan's economic damages.

In lieu of the release rule, cases addressing liability between multiple defendants will now employ the setoff-with-contribution approach.

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