The Wall Street Journal is reporting (here) that the California Supreme Court has changed a long-standing rule on liability among multiple defendants. In a case called Leung v. Verdugo Hills Hospital (available here), the court ruled that a plaintiff who settles with one defendant among several does not release the rest from liability. Although apparently this is a break from a long standing rule, it is not surprising to me since this is the generally accepted rule.
The new rule is fair and attempts to advance the public policy of encouraging settlements. The court explained that the recovery from defendants other than the one who settles will be adjusted by the amount of the settlement, not the percentage of fault of the party that settled, thus preserving the use of the doctrine of joint and several liability and creating an incentive for the non settling defendants to settle.
The incentive to settle is also preserved because once a party settles, the non settling party is not allowed to go after the settling party for contribution. This is the rule in Illinois and it makes a lot of sense. Once a party settles, that party should be considered to be out of
the picture entirely. Otherwise, there would be no incentive to settle.
However, in Leung, the California Supreme Court explained that this should not be the case if the settling party and the plaintiff were found to have settled the case in bad faith. In such a case, defendants who don’t settle and find themselves with an excess share
of liability can sue for contribution against the defendant who did
settle. In combination with the previous rule, this encourages parties to settle and to do it in good faith.