Novel settlement coupled with assignment of contribution claim against co-defendant in D.C.

In Estate of Kurstin v. Lordan, No. 07-CV-1221 (D.C. July 21, 2011), the D.C. Court of Appeals approved an unusual settlement arrangement in a medical malpractice action, in which the settlement agreement preserved the settling anesthesiologist's claim of contribution from the non-settling surgeon, but solely for the purpose of assigning that claim back to the plaintiff for her ultimate benefit.

The surgeon, Dr. Kurstin, had performed abdominal hernia repair on the plaintiff, assisted by an anesthesiologist, Dr. Lordan. To avoid deep venous thrombosis to the patient, the surgeon directed the anesthesiologist to administer an anti-clotting drug during surgery. The anti-clotting drug caused spinal bleeding that brought paralysis to the plaintiff's right foot, impaired sensation and caused chronic pain in both legs, and brought loss of bowel control.

The plaintiff sued both the surgeon and the anesthesiologist for medical negligence as joint tortfeasors. On the first day of trial, plaintiff's counsel and counsel for the anesthesiologist disclosed the existence of an agreement by their clients providing for dismissal of "all claims" by the plaintiff against both the anesthesiologist and the surgeon. The agreement further provided an express reservation by the anesthesiologist of the right to pursue "contribution/indemnification" from the surgeon. Plaintiff's counsel announced that he would represent the anesthesiologist against the surgeon on a cross-claim for contribution. The jury trial for malpractice was therefore converted into a bench trial on the anesthesiologist's equitable cross-claim. Under the settlement agreement with plaintiff, the anesthesiologist had agreed to pay the plaintiff $2 million. The anesthesiologist agreed to fully cooperate with counsel in bringing the contribution claim against the surgeon, and retained no interest in any proceeds.

After the bench trial, the trial court issued findings of fact and conclusions of law, stating that the surgeon had breached the national standard of care and, as the proximate cause of the plaintiff's injuries, was a joint tortfeasor. The trial court awarded the anesthesiologist $1 million from the surgeon as a pro rata contribution on the cross-claim, i.e., half of the amount the anesthesiologist paid the plaintiff pursuant to their agreement. Thus, the plaintiff received the total amount of $3 million.

The surgeon appealed, arguing among other things that the explicit terms of the plaintiff's settlement agreement with the anesthesiologist released both doctors "from all claims and demands of whatever nature" without effectively reserving a claim for contribution. Essentially, the argument was that by releasing all claims against both defendants in the settlement agreement's release clause, the plaintiff left no liability on the part of the surgeon to which the anesthesiologist's right of contribution could attach. The reservation of the contribution claim was accomplished in a later paragraph of the settlement agreement, and the argument was that such a reservation was hollow.

The Court rejected that argument, finding that the parties intended only the release of all claims by the plaintiff against the anesthesiologist and the surgeon, leaving the anesthesiologist free to pursue his own, separate claim for contribution against the surgeon.

The Court also rejected the argument that this settlement arrangement was unlawful. Based on D.C. precedent, the Court confirmed the legality of the following arrangement:

(1) a plaintiff's complete release of two joint tortfeasors as consideration for payment of money damages by a settling defendant, (2) coupled with reservation of the settling defendant's claim for contribution (not just indemnification), (3) accompanied by assignment of the contribution claim back to the plaintiff as a way of, (4) achieving full consideration for the releases, that is, a package of money in hand plus a money claim calculated, in combination, to afford complete relief.

In addition, on appeal the surgeon challenged whether the settling anesthesiologist had been judicially determined or stipulated by all parties to be a tortfeasor. The Court of Appeals noted that the present case is the first to address the question whether something less than a judicial ruling or an all parties stipulation can serve to establish a settling defendant's join liability with the non-settling defendant for purposes of determining the settler's right of contribution against a joint tortfeasor.

In the present case, in his settlement agreement with the plaintiff, the anesthesiologist acknowledged that he was "a joint tortfeasor." The Court held that a settling defendant can establish a claim for contribution by acknowledging joint tortfeasor status in his settlement with the plaintiff, coupled with the establishment of the liability of the non-settling tortfeasor and the reasonableness of his settlement with the injured person.

The Court noted that in this cae, rather th erebut the anesthesiologist's stipulation that he was a joint tortfeasor, the surgeon took the position throughout the trial that the anesthesiologist was the sole responsible tortfeasor, a litigation strategy tantamount to stipulating the anesthesiologist's culpability.

The Court of Appeals also outlined for future cases a shifting burden of persuasion that will govern the analysis of the trial court:

First, because the settling defendant/cross-plaintiff must establish that he or she is a tortfeasor, the settler has the burden of persuasion to do so. Second, the admission of liability in a formal settlement agreement, coupled with valuable consideration payable to the injured plaintiff, establishes, as we have said, a prima facie showing we hold sufficient to shift the burden of production to the non-settler who would question the settler's status as a joint tortfeasor. Third, because the settler has the burden to prove reasonableness of the settlement (subject to reduction for failure of proof), the settler will present in court evidence which the non-settler may attack with a view to rebutting (if desired) the settler's prima facie showing of culpability, as well as the reasonableness of the settlement. Finally, the factfinder, properly informed about the parties' respective burdens of persuasion and production, can be asked to resolve separately, if contested, whether the settling defendant/cross-plaintiff was a joint tortfeasor.

The lesson this case teaches is that there is a new procedure for a joint tortfeasor to "settle around" a co-defendant who intends to go to trial. From the point of view of plaintiff's counsel, this mode of settlement prevents the remaining defendant from using the "empty chair" argument, by pointing to the absent defendant and attempting to shift all the blame to absent defendant. Under this arrangement, the settling defendant's liability is admitted and the issue is whether the remaining defendant is also liable. In addition, the contribution claim is an equitable claim, tried to the court, not a jury.