Amicus Update

Supreme Ct. affirms pro tanto set-off applies in asbestos case

Copies of the 15-page majority opinion and 24-page concurring opinion are available to PaTLA members by contacting Kara Lafty of the Philadelphia office at 215-546-6451 [email protected]

In an important asbestos litigation decision that involves the Johns-Manville Personal Injury Trust, the Pennsylvania Supreme Court has ruled that a pro tanto, not pro rata, set-off applies when apportioning the verdict in this strict liability matter. The Supreme Court’s decision in Baker v. AC&S (June 26, 2000) highlights the most recent activity of PaTLA’s Amicus Curiae Committee, which represented PaTLA on behalf of the plaintiff.

In Baker, the Supreme Court unanimously affirmed the order of the Superior Court to mold the verdict pursuant to the pro tanto release between the plaintiff and settling defendant Manville Trust. The decision allows the plaintiff to recover from AC&S (the only non-settling, remaining defendant) the shortfall between the consideration the plaintiff received from the Manville Trust in the settlement and the amount of the trust’s share of the damages.

In a 15-page opinion, Justice Ralph Cappy wrote: "As the settlement agreements between plaintiff Baker and defendants Owens Corning, Pfizer, Inc., and Asbestos Claims Management Corp. (ACME), each provided for a pro rata set-off, AC&S will be allowed to set-off each of these defendants’ apportioned shares of the verdict, or an aggregate of $1,320,000. As to the Manville Trust’s share, AC&S is jointly and severally liable for both its share of the verdict as well as the shortfall between the Manville Trust’s share and the $30,000 it paid in settlement, or for $850,000."

In a 24-page concurring opinion, Justice Thomas Saylor, joined by Justices Stephen Zappala and Sandra Schultz Newman, said he agreed the Superior Court should have been affirmed. However, he did say that he felt the majority should have given more attention to the Manville Trust Disposition Process (TDP).

The majority decision is significant because it rejects the opinion of the trial court that state law mandates that AC&S should receive a pro rata set-off, and holds that Pennsylvania is a "multiple set-off rule" state, where the method of set-off depends on the type of action and other factors. David B. Rodes, of the Pittsburgh firm of Goldberg Persky Jennings & White, P.C., wrote the amicus brief for PaTLA.

In the case, plaintiffs Albert and Suzanne Baker filed a civil action against several manufacturers and/or sellers of asbestos-containing products, seeking damages resulting from Baker’s exposure to asbestos and Mrs. Baker’s loss of consortium. The first complaint was dismissed without prejudice on Jan. 13, 1994 as Mr. Baker had not manifested any symptons, impairment, or disability due to his exposure.

Mr. Baker subsequently developed malignant mesothelioma. The Bakers amended their complaint and reactivited their case on March 31, 1995. The trial was reverse-bifurcated, with the medical causation and damages phase being tried before a jury. On June 2, 1995, the jury entered an award of $2 million in favor of Mr. Baker and $200,000 for Mrs. Baker’s loss of consoritum claim.

Prior to the start of the liability phase, several defendants were dismissed from the case on motions for summary judgment. Additionally, the Bakers settled with four of the remaining defendants. The joint tortfeasor settlement agreements the Bakers executed with Owens-Corning, Pfizer, and ACME.

The Bakers also settled with the Manville Trust pursuant to a joint tortfeasor release. The Manville Trust was created in 1988 to pay all health claims brought against the Johns-Manville Corporation as a result of asbestos exposure. The settlement agreement the Bakers and the Manville Trust executed specified that the release was a pro tanto release, for which the Manville Trust paid $30,000 in consideration.

Prior to the commencement of the liability phase, Mr. Baker died. Mrs. Baker was thereafter substituted as a party for Mr. Baker. At the liability phase of the trial, the only remaining defendant was AC&S, against whom Mrs. Baker proceeded on a strict liability theory only. The trial court, sitting without a jury, found AC&S, Owens Corning, Pfizer, ACME, and the Manville Trust jointly liable. The trial court proceeded to apportion the damages among each of these defendants, determining that each was responsible for an equal, one-fifth share of the award, or $440,000.00.

The trial court then turned to the question of which set-off method should apply in determining how much of the Manville Trust’s portion of the verdict AC&S could set-off. The trial court rejected Mrs. Baker’s contention that the pro tanto method applied, and instead applied the pro rata method, thereby setting off the Manville Trust’s entire $440,000.00 share of the verdict. Thus, it entered judgment against AC&S (the only non-settling, remaining defendant) in the amount of $440,000.

Both Mrs. Baker and AC&S appealed to the Superior Court. Mrs. Baker claimed that the terms of the pro tanto release between her and the Manville Trust should be enforced. The effect of enforcing the terms of the release would be that AC&S would be liable for the $410,000 shortfall between the consideration the Manville Trust paid in settlement (i.e., $30,000) and the Manville Trust’s allocated share of the damages awarded to the plaintiff (i.e., $440,000). AC&S appealed to the Superior Court on the basis that the evidence was insufficient to show that it was liable.

In the Superior Court’s en banc opinion, which was filed on March 30, 1999, the Superior Court rejected AC&S’ claim that the evidence was insufficient to support the verdict; it therefore affirmed that portion of the trial court’s order which denied AC&S’ motion for judgment notwithstanding the verdict.

The majority of the Superior Court, however, found that the trial court erred when it did not enforce the terms of the pro tanto release, and therefore reversed the trial court’s denial of Mrs. Baker’s request to mold the verdict pursuant to the pro tanto release. Thus, the Superior Court directed that Mrs. Baker could recover from AC&S the shortfall between the consideration she received from the Manville Trust in the settlement and the amount of the Manville Trust’s share of the damages.

AC&S subsequently filed a petition for allowance of appeal. AC&S abandoned its sufficiency of the evidence claim in its request that this court hear its appeal, and instead presented the sole issue of whether the Superior Court’s determination of the set-off issue was correct. The Supreme Court then granted allocatur and the Court’s ultimate ruling followed.

 

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