The California Supreme Court has determined that settlement with one joint tortfeasor does not bar a plaintiff from recovering economic damages from a non-settling defendant; thus, the court abandoned the “common law release rule.” Leung v. Verdugo Hills Hosp., No. S192768 (Cal., decided August 23, 2012). The court considered the matter within the context of injuries sustained by a newborn—irreversible brain damage—from unaddressed jaundice in the days following his birth and the alleged negligence of his pediatrician and the hospital where he was born.

The claim against the pediatrician was settled for $1 million, the limit of his malpractice insurance; the parties agreed that he would participate as a defendant at trial, and the plaintiff released him from all claims. The trial court refused to limit the pediatrician’s liability to the amount of the settlement, finding it “‘grossly disproportionate to the amount a reasonable person would estimate’ the pediatrician’s share of liability would be.” A jury found both the pediatrician and hospital negligent and awarded the plaintiff $250,000 in noneconomic damages, $78,375 for past medical costs, $82.78 million for future medical costs, and $13.3 million for loss of future earnings. The jury also found the pediatrician 55 percent negligent, the hospital 40 percent negligent and the mother and father each responsible for 2.5 percent of the harm. “The judgment stated that, subject to a setoff of $1 million, representing the amount of settlement with the pediatrician, the hospital was jointly and severally liable for 95 percent of all economic damages awarded.”

An intermediate appeals court agreed with the hospital that under the common law release rule, the plaintiff’s settlement with and release of the liability claims against the pediatrician also released the hospital from liability for the plaintiff’s economic harms. The court apparently did so reluctantly, but was compelled to apply a still viable rule. Finding that the rule’s rationale was supported by an unjustified assumption, that is, that the amount paid in settlement in return for releasing one joint tortfeasor provides full compensation to the plaintiff, the high court reversed and specifically held that the rule was no longer to be followed in California.

The court also determined that, where the settlement is not made in good faith—as determined here by the trial court—the apportionment approach to be taken is the “setoff-with-contribution” approach under which “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.” The court also determined that the evidence was sufficient to prove that the hospital’s negligence was a legal cause of the plaintiff’s injuries, disagreeing that hospitals cannot be held liable for failing to provide non-negligent medical advice. The case was remanded for the intermediate appellate court to consider issues it had not addressed.