Cite as: 511 U. S. 202 (1994)
Syllabus
about how that credit should be determined. The American Law Institute (ALI) has identified three principal alternatives for doing so: (1) pro tanto setoff with a right of contribution against the settling defendant; (2) pro tanto setoff without contribution; and (3) the "proportionate share approach," whereby the settlement diminishes the injured party's claim against nonsettling tortfeasors by the amount of the equitable share of the obligation of the settling tortfeasor. Pp. 207-211. (b) ALI Option 3, the proportionate share approach, best answers the question presented in this case. Option 1 is clearly inferior to the other two alternatives, because it discourages settlement and leads to unnecessary ancillary litigation. As between Options 2 and 3, the proportionate share approach is more consistent with the proportionate fault approach of Reliable Transfer, supra, because a litigating defendant ordinarily pays only its proportionate share of the judgment. Conversely, Option 2, even when supplemented with hearings to determine the good faith of the settlement, is likely to lead to inequitable apportionments of liability, contrary to Reliable Transfer. Moreover, although Option 2 sometimes seems to better promote settlement than Option 3, it must ultimately be seen to have no clear advantage in that regard, since, under the proportionate share approach, factors such as the parties' desire to avoid litigation costs, to reduce uncertainty, and to maintain ongoing commercial relationships should ensure nontrial dispositions in the vast majority of cases. Similarly, Option 2 has no clear advantage with respect to judicial economy unless it is adopted without the requirement of a good-faith hearing, a course which no party or amicus advocates because of the large potential for unfairness to nonsettling defendants, who might have to pay more than their fair share of the damages. Pp. 211-217. (c) Respondents' argument that the proportionate share approach violates the "one satisfaction rule"—which, as applied by some courts, reduces a plaintiff's recovery against a nonsettling defendant in order to ensure that the plaintiff does not secure more than necessary to compensate him for his loss—is rejected, since the law contains no rigid rule against overcompensation, and, indeed, several doctrines, such as the collateral benefits rule, recognize that making tortfeasors pay for the damage they cause can be more important than preventing overcompensation. The argument that the proportionate share approach is inconsistent with Edmonds v. Compagnie Generale Transatlantique, 443 U. S. 256, is also rejected, since Edmonds was primarily a statutory construction case, did not address the question at issue here or even involve a settlement, and can be read as merely reaffirming the well-established principle of joint and several liability, which was in no way
203
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007