These are the times that try lawyer's souls. In March of 1998, after some 700 years or so of the development of English common law, and eight years after the adoption of comparative negligence in South Carolina, I tried a case in which my client had the benefit of a contributory negligence defense against the plaintiff, and the benefit of comparative liability - based on fault and not merely "pro-rata" apportionment as under the South Carolina Contribution Among Tortfeasors Act - against the co-defendant. I did not bother to try to explain to my client why this was so.
In South Carolina, we are in a slow process of transition when it comes to deciding how to fairly apportion liability between multiple parties. Many of the questions raised (if not their solutions) by Professors Hubbard and Felix in 1992 are still with us. See F. Patrick Hubbard & Robert L. Felix, Comparative Negligence in South Carolina: Implementing Nelson v. Concrete Supply Co. 43 S.C.L. Rev. 273 (1992) (hereinafter, "Hubbard & Felix"). Why we are still where we are at this point in the development of the law is an interesting question of legal history. Whatever the answer to that question, given the passage of time and the fact that these issues have been around in the products liability context for decades, we should not be where we are. There are, in fact, systems of apportionment of liability that are fair to plaintiffs and to defendants (and to statutorily immune non-defendants like employers). As attorneys, we should engage in the debate concerning fair apportionment of liability, and find acceptable solutions for the sake of fairness to our present and future clients.
THE EFFECT OF COMPARATIVE NEGLIGENCE ON JOINT AND SEVERAL LIABILITY
The law balances several factors in its attempt to do justice to those who seek redress from the courts. The longstanding regime of contributory negligence, which held that a plaintiff's negligence, however slight, precluded recovery against all others who proximately caused the injury, was rightly viewed as draconian by many. And indeed it did lead to unfair results at trial (although it probably led to some juries adopting an ad hoc version of comparative negligence, or, put another way, "jury nullification" of contributory negligence). But this dark doctrine was mollified by the doctrine of joint and several liability, which held that each defendant's negligence, however great or slight, made it liable for a single, indivisible, injury. Rourk v. Selvey, 252 S.C. 25, 28, 164 S.E.2d 909, 910 (1968); Collins v. Bisson Moving & Storage, Inc., No. 2870 (S.C.App. July 20, 1998).
In 1984, the Court of Appeals was ready to rid us of at least one half of these long established tort policies, and tried to take matters into its own hands by abrogating contributory negligence in Langley v. Boyter, 284 S.C. 162, 325 S.E.2d 550 (Ct.App. 1984). Noting that South Carolina was in a backwater in this area of apportionment law, the Court of Appeals took upon itself the authority to overrule the doctrine of contributory negligence. (Nothing was said about the effect of its decision on joint and several liability). The Supreme Court, however, quashed the ruling on procedural grounds, since it had already denied counsel the right to argue against precedent before the case was transferred to the Court of Appeals. Langley, 286. S.C. 85, 332 S.E.2d 100 (1985).
Then along came Nelson v. Concrete Supply Co., 303 S.C. 243, 399 S.E.2d 783 (1991). With South Carolina being one of the last remaining citadels of traditional contributory negligence, the Court in one short paragraph put us on the road to modernity in the apportionment field:
For all causes of action arising on or after July 1, 1991, a plaintiff in a negligence action may recover damages if his or her negligence is not greater than that of the defendant. The amount of the plaintiff's recovery shall be reduced in proportion to the amount of his or her negligence. If there is more than one defendant, the plaintiff's negligence shall be compared to the combined negligence of all defendants. Id. at 245, 399 S.E.2d at 784. The Court referred to Langley v. Boyter for its rationale. There are now only five American jurisdictions - Alabama, North Carolina, Virginia, Maryland, and the District of Columbia - which still cling to contributory negligence.
What has been widely noted is that the judicial adoption of comparative negligence left open several issues concerning apportionment of liability. See Hubbard & Felix, supra. These gaps are slowly being filled decision by decision, because the General Assembly has not acted to provide a more intricate roadmap.
For example, assumption of the risk has now gone the way of contributory negligence, and is no longer a complete defense, but rather a matter for the jury to consider when apportioning fault. Davenport v. Cotton Hope Plantation Horizontal Prop. Reg., 325 S.C. 507, 482 S.E.2d 569 (Ct.App.)(en banc), cert. granted in part, (1997). Similarly, the doctrine of last clear chance has met its demise with the onset of comparative negligence. Spahn v. Town of Port Royal, 330 S.C. 168, 499 S.E.2d 205 (1998). That "demise," however, is only partial, as the Supreme Court adopted Professor Hubbard & Felix's suggested jury charge on last clear chance.
The primary question unresolved by Nelson was its effect on the doctrine of joint and several liability when there is an insolvent or "phantom" defendant. If indeed joint and several was the "basis for the bargain" for contributory negligence, why should marginally liable defendants be left with paying the entire judgment when there may be no practical right to contribution against other tortfeasors? As the commentators to the Proposed Restatement on Apportionment of Liability have noted:
The adoption of comparative responsibility, which permits plaintiffs to recover from defendants even though plaintiffs are partially responsible for their own injuries, has had a drastic impact on the near-universal rule of joint and several liability. The rationale for employing joint and several liability and thereby imposing the risk of insolvency on defendants - that as between innocent plaintiffs and culpable defendants the latter should bear this risk - does not coexist comfortably with comparative responsibility. Id. '20, Comment a. As discussed below, there has as yet been no "drastic impact" in South Carolina, and we remain in an uncomfortable limbo in which joint and several liability is not "coexisting comfortably" with comparative responsibility.
For example, assume that three people died in a kerosene heater fire. The evidence revealed the fire was caused when the heater was knocked over by one of the decedents, who was inebriated at the time. The heater, made in Korea, and distributed by a company in Georgia, did not have an automatic shut-off valve newly required by ANSI standards. If the jury found for the plaintiff in the amount of $500,000, and that the plaintiff was 50% at fault, the manufacturer 45% at fault, and the distributor 5% at fault, what is the result under current South Carolina law? If the judgment was based on negligence, the verdict would be reduced by fifty percent, and the plaintiff's family can collect $250,000.00 from the distributor because of joint and several liability. If the judgment was also based on strict liability, however, the family can most likely collect the full $500,000.00 from the distributor. The best the distributor can do is hope for a pro-rata recovery against the Korean manufacturer, which could be highly unlikely given Korean law which requires the plaintiff in a collection action to post a significant percentage of the amount sought just to file suit.
This is a patently unfair result under a tort system based on comparative fault. The quick answer is for distributors to buy "sufficient" products liability insurance; the real life response to the quick answer is that such insurance is extremely expensive, and the distributor may not be able to spread the cost to its purchasers. Because of our joint and several rule and 402A liability, it can be a "bet the company" proposition.
The continuing validity of joint and several liability was directly before the Court of Appeals in Fernanders v. Marks Construction of South Carolina, Inc., 330 S.C. 470, 499 S.E.2d 509 (Ct.App.), petition for certiorari pending (1998). Fernanders involved a case in which a six year old at an amusement park fell from a bumper boat into a pond. She was trapped underneath the boat by the propellers, and drowned in three to four feet of water. She could not be seen because the amusement park used colored water in the pond. The manufacturer of the bumper boat did not submit to personal jurisdiction and did not appear at trial. After deliberations began, the jury asked if the amusement park would be responsible for paying the manufacturer's portion of liability. The trial judge instructed the jury not to consider that issue as a factor, despite counsel's request to charge the effect of joint and several liability. The jury returned a verdict of actual damages of $750,000.00 (and punitive damages against the manufacturer only), and found the manufacturer 80% negligent, the park 15% negligent, and the parent of the child 5% negligent. The amusement park appealed.
The Court of Appeals first held that the trial court was correct in not charging the jury on the effect of joint and several liability. The Court then addressed the central question, stating that "[c]ommentators have noted that joint and several liability is not consistent with the purpose of comparative negligence, which is to apportion damages on the basis of relative fault." Id. at 512, citing, among others, Victor E. Schwartz, Comparative Negligence '9-4(c)(5), at 217 (1994); and Hubbard & Felix, 43 S.C.L.Rev. at 306. Even though thirty-seven states have either abolished or partially abrogated joint and several liability in response to their adoption of comparative negligence, and only nine states have retained it, the Court of Appeals declined to modify the rule. The rationale was based on several factors:
- that the Supreme Court has reaffirmed the applicability of joint and several liability in different fact situations after Nelson (citing cases);
- the supreme court has applied the rationale of Nelson to other tort concepts like last clear chance and assumption of the risk (but has not applied it to joint and several liability);
- abrogating joint and several liability would involve the expansion and not the mere application of comparative negligence principles, and because the plaintiff's ability to collect a judgment has no bearing on the defendant's allocation of fault; and finally
- the Contribution Act was adopted under the regime of joint and several liability, and abolishing joint and several liability would in effect nullify the Contribution Act. Id. at 513.
The first three stated reasons are not persuasive. In neither case cited in Fernanders for the proposition that the South Carolina Supreme Court "reaffirmed" the applicability of joint and several liability after Nelson was that issue actually before the Court. American Federal Bank, FSB v. Number One main Joint Venture, 321 S.C. 169, 467 S.E.2d 439 (1996) did not involve joint and several liability in tort, but rather the contractual obligation of joint and several liability provided for on a note and guaranties. Nor did Summer v. Carpenter, 328 S.C. 36, 492 S.E.2d 55 (1997) address whether joint and several liability survived the adoption of comparative negligence. Rather, the question in Summer revolved around whether an attorney was negligent in not adding the Highway Department as a defendant in a single car accident claim against the paving contractor, and whether the value of the case would have been increased by adding the Department. The Court noted that the Highway Department would have had design immunity, and therefore joint and several liability would not have been an issue since only one tortfeasor existed. Clearly, this decision only tangentially relates to joint and several liability, and apparently the issue of its enduring existence was not addressed by the parties.
Therefore, for the Fernanders decision to state that the supreme court has "reaffirmed" the doctrine is misleading, and implying that the Court of Appeals is therefore reluctant to either "apply" or to "expand" the doctrine is inappropriate. Query whether the modification of joint and several liability, which is recognized as the counterpart of contributory negligence, could be in any sense an "expansion" of the doctrine of comparative negligence. Rather, it could just as easily be thought of as evening the scales of justice.
As to the relationship between the collection of the full judgment and the defendant's fault, it seems clear that when we are not dealing with "innocent" plaintiffs (here, the mother was 5% negligent), it is fundamentally unfair to hoist the entire burden of a phantom defendant on a marginally negligent co-defendant. The jury's question to the trial Court seems to recognize as much.
Finally, it is true that the Contribution Act is at odds with a modification or abrogation of joint and several liability. However, the Act is already at odds with the idea of comparative negligence, since joint tortfeasors. proportionate shares are divided pro-rata and not proportionally to their degree of fault. Thus, the Supreme Court in Nelson has already adopted a common law scheme whose policy basis is at odds with the Act. Further, the Act was obviously adopted during the regime of contributory negligence, and the General Assembly has done nothing to modify the Act in light of Nelson. The real question, then, is who should decide the fate of joint and several liability? The same question in regards to comparative negligence was before the Supreme Court in Nelson. There the Court modified the longstanding common law of contributory negligence (although most states did so by statute). Is the Court not now free to modify the other pillar of the tort system, joint and several liability?
POSSIBLE SOLUTIONS FROM THE PROPOSED RESTATEMENT ON APPORTIONMENT OF LIABILITY1
The American Law Institute has proposed a Final Draft of the Restatement of the Law of Torts: Apportionment of Liability (March 31, 1998). The Restatement adopts a pure comparative fault system ('7), which is followed in thirteen states (seven judicially adopted and six legislatively adopted). '7, Reporter's Note, Comment a.2 As to which system of apportioning liability is appropriate, the ALI takes no position on whether joint and several liability, several liability, or some hybrid scheme, should be adopted. That decision, says the Proposed Restatement, "is determined by the law of the applicable jurisdiction." Id. '20. The ALI, although "agnostic" on this point, proposes five alternatives ranging from one extreme (pure joint and several liability) to the other (pure several liability) with three mixed schemes (insolvent's shares are reallocated proportionally to the other parties; a hybrid system in which "a party whose percentage of comparative responsibility exceeds a threshold is jointly and severally liable, while those below the threshold are severally liable; and finally, a system in which there is joint and several liability only for plaintiff's economic loss, and only several liability for noneconomic loss). Reporter's Introductory Note at xxxi-xxxii; '26, Comment a.
The five different approaches are set forth below, with the proposed accompanying comments.
A. "PURE" JOINT AND SEVERAL LIABILITY
' 27A. Liability of Multiple Tortfeasors for Indivisible Harm
If the independent tortious conduct of two or more persons is a legal cause of an indivisible injury, each person is jointly and severally liable for the recoverable damages cause by the tortious conduct.
' 28 A. Assignment of Responsibility: Jointly and Severally Liable Defendants
If one defendant and at least one other party or settling tortfeasor whose comparative responsibility is legally relevant may be found responsible by the factfinder for plaintiff's indivisible injury, each of the parties and settling tortfeasors whose tortious conduct was a legal cause of plaintiff's injury is submitted to the factfinder for assignment of a percentage of comparative responsibility.
B. "PURE" SEVERAL LIABILITY
' 27 B Liability of Multiple Tortfeasors for Indivisible Harm
If two or more persons. independent tortious conduct is the legal cause of an indivisible injury, each defendant, subject to the exception stated in ' 22,3 is severally liable for the comparative share of the plaintiff's damages assigned to that defendant by the factfinder.
' 28 B Assignment of Responsibility: Severally Liable Defendants
If one or more defendants may be found severally liable for an indivisible injury, and at least two defendants, settling tortfeasors, or other identified persons may be found responsible by the factfinder for the plaintiff's injuries, the plaintiff, each defendant, and each other identified persons whose tortious conduct was a legal cause of the plaintiff's damages for which several liability is imposed are submitted to the factfinder for an assignment of a percentage of comparative responsibility.
C. HYBRID ONE: REALLOCATION FOR INSOLVENT DEFENDANT
' 27 C Liability of Multiple Tortfeasors for Indivisible Harm
If the independent tortious conduct of two or more persons is a legal cause of an indivisible injury, each person is jointly and severally liable for the recoverable damages caused by the tortious conduct, subject to the reallocation provisions of ' 30C.
' 28 C Assignment of Responsibility: Jointly and Severally Liable Defendants
If one defendant and at least one other party, settling tortfeasor, or employer described in ' 29C(a) whose comparative responsibility is legally relevant may be found responsible by the factfinder for plaintiff's indivisible injury, each of the parties and settling tortfeasors and, as permitted by ' 29C(a), employers whose tortious conduct was a legal cause of plaintiff's injury is submitted to the factfinder for assignment of a percentage of comparative responsibility.
' 29 C Effect of Responsibility Assigned to Immune Employer
In the event that a party alleges that the plaintiff's employer bears some responsibility for the plaintiff's injury:
(a) If the applicable law of the jurisdiction permits a reduction of recoverable damages based on the comparative responsibility of an employer otherwise immune from suit by the plaintiff-employee, or permits a contribution claim by a defendant against the employer, the employer is submitted to the factfinder for an assignment of a percentage of comparative responsibility and: (i) the recoverable damages are reduced as permitted by the applicable law; or (ii) contribution is awarded in accord with the applicable law and the factfinder's assignment of responsibility.
(b) If the applicable law of the jurisdiction does not permit either a reduction of recoverable damages based on the comparative responsibility of an employer because of the employer's immunity from suit by the plaintiff-employee or a contribution claim against the employer, the employer is not submitted to the factfinder for an assignment of a percentage of comparative responsibility.
' 30 C Reallocation of Damages Based on Unenforceability of Judgment
(a) Except as provided in Subsection (b), if a defendant establishes that a judgment for contribution cannot be fully enforced against another defendant, the court will reallocate liability. The unenforceable portion of a defendant's share of the damages is reallocated to all other parties, including the plaintiff, in proportion to the percentages of comparative responsibility assigned to the other parties.
(b) Defendants subject to joint and several liability pursuant to ' 22 (intentional tortfeasors) and ' 24 (persons acting in concert) may not obtain reallocation of the liability imposed by those sections.
D. HYBRID TWO: JOINT LIABILITY ABOVE THE "THRESHOLD" AND SEVERAL LIABILITY BELOW THE "THRESHOLD"
' 27 D Liability of Multiple Tortfeasors for Indivisible Harm
If the independent tortious conduct of two or more persons is a legal cause of an indivisible injury, each defendant who is assigned a percentage of comparative responsibility equal to or in excess of the legal threshold is jointly and severally liable, and each defendant who is assigned a percentage of comparative responsibility below the legal threshold is, subject to the exception of ' 22 (intentional tortfeasors), several liable.4
' 28 D Assignment of Responsibility: Both Jointly and Severally Liable and Severally Liable Defendants
(a) If one ore more defendants may be found severally liable for the recoverable share of an indivisible injury, each party and each other identified person whose legally culpable conduct was a legal cause of the plaintiff's damages for which several liability is imposed are submitted to the factfinder for an assignment of a percentage of comparative responsibility.
(b) If all defendants can only be found jointly and severally liable for the recoverable share of an indivisible injury, each party and each settling tortfeasor whose legally culpable conduct was a legal cause of the plaintiff's damages are submitted to the factfinder for an assignment of a percentage of comparative responsibility.
E. HYBRID THREE: JOINT AND SEVERAL LIABILITY FOR ECONOMIC DAMAGES, BUT SEVERAL LIABILITY FOR NONECONOMIC DAMAGES
' 27 E Liability of Multiple Tortfeasors for Indivisible Harm
If the independent tortious conduct of two or more persons is a legal cause of an indivisible injury, each defendant is jointly and severally liable for the economic damages portion of the recoverable damages for the indivisible injury and, subject to the exception stated in ' 22 (intentional tortfeasors), is severally liable for the comparative share assigned to that defendant by the factfinder of the remaining noneconomic damages recoverable for the indivisible injury.
' 28 E Assignment of Responsibility: Joint and Several Liability for Economic Damages and Several Liability for Noneconomic Damages
(a) When plaintiff seeks or is permitted by law to recover only economic damages for an indivisible injury and at least one defendant and another defendant, plaintiff, or settling tortfeasor may be found responsible by the factfinder for the plaintiff's indivisible injury, each party and each settling tortfeasor whose tortious conduct was a legal cause of plaintiff's indivisible injury are submitted to the factfinder for assignment of a percentage of comparative responsibility.
(b) When plaintiff seeks and is permitted by law to recover noneconomic damages, whether or not economic damages are also sought and recoverable for the same indivisible injury, each party and each identified person whose tortious conduct was a legal cause of the plaintiff's indivisible injury are submitted to the factfinder for assignment of a percentage of comparative responsibility.
We have today in South Carolina half of the old apportionment system and half of the new apportionment system. Whether it is up to the courts or the General Assembly to change this situation is an open question; in the meantime, however, we are left with half of the bargain in place, and are therefore guaranteed judgments - and settlements - that are patently unfair. To steal a phrase, "my brethren, these things ought not to be this way." James 3:10. The ALI has presented alternatives, none of which are completely satisfying, but all of which would be an improvement over our current system of apportionment of damages.
THE EFFECT OF THE EMPLOYER'S NEGLIGENCE IN A THIRD PARTY CLAIM
The issue of the "fairness" of whether joint and several liability should survive in a comparative scheme primarily relates to the problem of "phantom" defendants. The problem of the phantom defendant occurs when one or more potential defendants is not available to be reached by a plaintiff, whether because of a jurisdictional deficiency, insolvency, or immunity. This problem frequently arises in the product liability context when a protected negligent employer and a third party manufacturer contribute to a workplace accident.
The problem is easily illustrated in a typical product liability case involving a workplace accident caused by a defective product. Assume an employee was severely injured when he stuck his arm in an operating dye machine. The employer had removed the guard in an effort to increase production. The manufacturer had designed a machine which allowed the ram to operate with the guard off. The distributor sold the machine, knowing that the guard could be removed and that the machine would still operate. Amongst these parties, the employee could be found 30% "at fault" for his negligent operation of the machine. The employer, if not immune from suit by the employee under the exclusivity provision of worker's compensation, could have been 50% at fault for violating OSHA regulations. As it stands under South Carolina law, however, the employer's negligence is not considered, so the remaining 70% of "fault" must be divided in a third party suit between the manufacturer and seller. The jury could easily find the manufacturer 65% at fault and the seller 5% at fault on these facts.
Under our joint and several regime, either defendant may be forced to pay 70% of the employee's damages on a negligence verdict. If the manufacturer paid the entire verdict, it could then seek contribution on a pro-rata basis against the seller, which would then have to pay 35% of the verdict. If the manufacturer was insolvent, or if it was a foreign company that could not be forced to pay, the seller is left holding the bag. Considering the actual responsibility of the employer of 50% at fault, and then reallocating fault proportionally amongst the employer, manufacturer, and seller, the manufacturer would then have been 19% at fault and the seller only 1% at fault. Therefore, under South Carolina law, a product seller which was "actually" 1% responsible for an accident would be liable for 70% of the damages on a negligence claim when there are two "phantom" defendants - the employer and the insolvent or "unreachable" manufacturer. To top this off, the "at fault" employer can then recover the benefits paid, or at least a portion of those benefits, by virtue of its workers. compensation lien.
This situation is even more onerous to a manufacturer and seller which are found strictly liable and therefore presumably not entitled to any comparative fault offset. Under the facts above, the seller pays the entire judgment. Even if the manufacturer was solvent, the seller would have to pay 50% of the judgment. The employer, even though primarily "at fault," is still permitted to recoup the comparatively small benefit it initially paid the employee.
This system of apportionment of damages in such cases is unfair and is not supported by the underlying policy considerations of either comparative negligence or strict liability. Comparative negligence seeks to allocate responsibility based on degree of fault, which obviously is not enforced against employers under South Carolina law as it now stands. Strict liability seeks to impose the risk of defective products on the manufacturers, who can effectively spread the risk of such defects to all consumers. That economic bargain is greatly skewed by the triad of joint and several liability, worker's compensation exclusivity, and our pro-rata contribution statute.
The problem has a myriad of possible solutions. Other jurisdictions have opted for various systems of apportionment when confronted with similar situations in third party actions by an employee against a manufacturer when in reality there is a phantom defendant, the employer. The possible solutions range from the manufacturer bearing the entire liability to the employer contributing some portion of the plaintiff's recovery. The possible solutions also vary in a procedural aspect. Some of the solutions involve joining the otherwise protected employer as a third party defendant; some involve a contribution or indemnity action following the principal case; while others involve an adjudication of the employer's liability at the trial of the principal case, at which time the manufacturer would be liable only for the comparative negligence (or some other amount) attributed to him. South Carolina has not clearly adopted any one of these solutions.
The South Carolina Workers' Compensation Act (the "WCA") provides an employee with an exclusive remedy against his employer, but specifically allows employee suits against third party tortfeasors. S.C. Code Ann. ' 42-1-540 to 560 (Law. Co-op. 1976). Although this provision does not specifically abrogate a third party's right to seek contribution or indemnity from an employer, the WCA contains a provision which impacts the third party's rights against the employer:
When the facts are such at the time of the injury that a third person would have the right, upon payment of any recovery against him, to enforce contribution or indemnity from the employer, any recovery by the employee against the third person shall be reduced by the amount of such contribution of [sic, read or] indemnity and the third person's right to enforce such contribution against the employer shall thereupon be satisfied. S.C. Code Ann. ' 42-1-580 (Law. Co-op. 1976). This provision has not been interpreted by an appellate state court since the adoption of the Contribution Act.3
Because this provision clearly affords the third party a right to a verdict offset, but does not explain the procedural steps to enforce this right, the section has been recognized by practitioners in South Carolina as creating a "right without a remedy." Kelly M. Braithwaite & John A. Massalon, Right Without a Remedy: Set-off Under the South Carolina Workers' Compensation Act, South Carolina Lawyer, July/Aug 1995 at 40. The corresponding provision in the North Carolina Workers. Compensation Act, perhaps in recognition of the procedural quagmire, outlines, with some specificity, a procedure whereby an employer may be forced to appear in a third party action to defend its lien on the employee's third party recovery. N.C.G.S. ' 97-10.2 (Michie 1991).
Congress. recent attempt at passing "product liability reform" adopted an approach similar to North Carolina's. S. 2236, 105th Cong., 2d Sess. '112 (1998) (a copy of S. 2236 is attached). Under this scheme, a product seller would be entitled to a reduction of any award against it in the amount of workers. compensation benefits if the seller proved by clear and convincing evidence that the employer was a substantial cause of the employee's injuries. Id. No relief, however, would be provided to manufacturers.
Assuming that a third party tortfeasor would have no right to equitable indemnity from an employer under South Carolina law, a right of contribution may exist under the Contribution Act. The Act would, apart from the exclusivity provisions of the WCA, give a third party right of "contribution" against a negligent employer. The Act and the WCA, when read in conjunction, may either give a third party a right to contribution or a right to a verdict set off in the amount of such "contribution," as discussed below.
A "contribution" theory holds at least three possibilities:
- allow contribution up to the amount of the workers' compensation paid by the employer through either a reduction in the recovery by the amount paid through workers' compensation, or through a separate contribution action against the employer;
- allow a contribution action by the third party against the employer, or allow a reduction from the amount of the recovery, for up to the full amount of the judgment against the manufacturer based on relative comparative fault; or
- allow contribution to some arbitrary amount above the amount paid through workers' compensation.
Both possibilities (1) and (3) have support under the language of the Contribution Act and the WCA.
The first possible solution to the problem of the phantom defendant is a secondary suit against the employer for contribution or indemnity, or the joinder of the employer as a third party defendant. There is at least some precedent that an employer may be brought in as a third party defendant. See, e.g., Order of Judge Henderson granting motion to join employer in Terry v. Newbury Indus., Inc., C.A. No. 3:89-1862-16 (D.S.C. 1990) (granting motion to join employer on the ground that the WCA allows reduction of liability to plaintiff and that the third party was entitled to assert its contribution and indemnity claims against the employer)(Order attached); Lambertson v. Cincinnati Corp., 257 N.W.2d 679 (Minn. 1977)(allowing contribution from employer in the amount of workers' compensation benefits paid); Bjerk v. Universal Eng. Corp., 552 F.2d 1314 (8th Cir. 1977)(applying Minnesota law in holding employer liable in the amount proportional to its percentage of negligence, not to exceed the amount paid in workers' compensation). Several jurisdictions have allowed third parties to bring negligent employers into the employee's third party action. See, e.g., Hudson v. Snyder Body, Inc., 326 N.W.2d 149 (Minn. 1982) (holding third party tortfeasor may recover from employer in third party action despite the fact that employee would have been barred from recovery); Doyle v. Dow Chemical Co., 282 N.E.2d 288 (N.Y. 1972) (apportioning damages between manufacturer and employer in principal case).
However, because of the widespread acceptance of the breadth of the employer's "exclusivity" protection and because the employer has most often already paid the plaintiff through workers' compensation, it is unlikely a third party would be allowed to bring the employer into the third party action or maintain a secondary contribution action against the employer. Several courts have addressed this issue and found that a defendant manufacturer could not proceed against an employer. See, e.g., Davis v. Commercial Union Ins. Co., 892 F.2d 378 (5th Cir. 1990) (holding that employer's fault is not considered under Louisiana law when apportioning relative liability between manufacturer and plaintiff); Hamme v. Dreis & Krump Manuf. Co., 716 F.2d 152 (3d Cir. 1981) (applying Pennsylvania comparative negligence statute to bar manufacturer's third party complaint); McPike v. Die Casters Equip. Corp., 504 F. Supp. 1056 (W.D. Mich. 1980) (holding that manufacturer had no right of contribution against allegedly negligent employer where employee had brought claim under workers' compensation); Carter v. Guzzler Manuf., Inc., C.A. No. 2:92-2493-8 (D.S.C. 1993) see also Robert H. Brunson, Contribution in South Carolina -- Venturing into Uncharted Waters, 41 S.C.L. Rev. 533, 578 and n. 275 ("Courts in other jurisdictions overwhelmingly hold that a tortfeasor cannot obtain contribution from an employer shielded from an employee's direct suit.") (citing cases). The form of "contribution" would logically be more likely to come in the form of a reduction in the amount of any judgment by the plaintiff against the manufacturer, as appears to be contemplated by the language of the WCA.
Significantly, if the two relative statutory provisions of the Contribution Act and the WCA are read in conjunction, the third party could be entitled to a pro-rata reduction in the amount of any verdict without the employer's presence in the action. This is based on ' 42-1-580 which mandates reduction in amount of the recovery by the amount of such contribution, and on ' 15-38-30 which prescribes pro-rata contribution liability. Section 42-1-580 dictates that if a party would have a right of contribution against a party otherwise protected by the exclusivity rule, then the amount of any recovery against the party "shall be reduced by the amount of such contribution [or] indemnity and the third person's right to enforce such contribution against the employer shall thereupon be satisfied." S.C. Code Ann. ' 42-1-580 (Law. Co-op. 1976). The Contribution Act then dictates that in determining the pro-rata shares of tortfeasors in the entire liability, relative degrees of fault shall not be considered. S.C. Code Ann. ' 15-38-30 (Law. Co-op. 1976). This section further requires that "principles of equity applicable to contribution generally shall apply." Id. Thus, a reasonable interpretation would be that a manufacturer would be entitled to a pro-rata reduction in the amount of the verdict, possibly altered by "principles of equity."
These two provisions could also be interpreted to grant the manufacturer-defendant a reduction of recovery in the amount of the sum actually paid by the worker's compensation carrier in satisfaction of that claim (read "amount of such contribution" as "amount of such money paid under workers' compensation"). This solution has been hailed by some commentators as the "best result." W. Page Keeton, et al. Prosser & Keeton on the Law of Torts, (5th ed. 1984) 477 n.77 (stating "[a]t least in the products liability context, this appears to be the best possible solution.")(citing cases).
This was the result under the South Carolina Workers. Compensation Act in Burns (a pre-Contribution Act case), which held that "where an employer has paid compensation, the third party, when sued, shall be entitled to a deduction in that amount . . . ." Burns, 88 F. Supp. at 774.6 This interpretation was also adopted in North Carolina before North Carolina amended its workers. compensation act to specifically deal with this situation.7 See, e.g., Hunsucker v. High Point Bending & Chair Co., 75 S.E.2d 768 (1953)(holding that although third party could not implead employer, third party would be entitled to verdict set off in the amount of the workers' compensation benefits received by the employee); see also Rodgers v. Workers' Compensation Appeals Board, 682 P.2d 1068 (Cal. 1984).
The most tenuous aspect of the argument for obtaining an off-set via the Contribution Act is that for a "right of contribution" to exist, the employer must be "jointly or severally liable in tort for the same injury . . . ." S.C. Code Ann. ' 15-38-20. An employer, by virtue of the WCA, is not "liable in tort," much less "jointly or severally liable." Arguably, this would preclude any right of contribution at all. See Indemnity Insurance Company of North America v. Odom, 237 S.C. 167, 116 S.E.2d 22 (1960)(holding employer and third party defendant are not "joint tortfeasors"). This problem was recognized by Professors Hubbard and Felix in their treatise on the South Carolina law of torts. F. Patrick Hubbard & Robert L. Felix, The South Carolina Law of Torts 548 (2nd ed. 1997). In fact, this position has been accepted by a number of courts deciding the issue. See, e.g., Carter v. Guzzler Manuf., Inc., C.A. No. 2:92-2493-8 (D.S.C. 1993) (Order of Judge Blatt finding that employer could not be a joint tortfeasor as a matter of South Carolina law, attached hereto); Ramos v. Browning Ferris Indus. of South Jersey, Inc., 510 A.2d 1152 (N.J. 1986) (employer cannot be a joint tortfeasor as a matter of law); Thompson v. Stearns Chem. Corp., 345 N.W.2d 131 (Iowa 1984) (workers' compensation law precludes existence of common liability).
The most persuasive counter to this position appears to be that ' 42-1-580 must of necessity mean something. The Contribution Act must be interpreted in conjunction with ' 42-1-580 which requires that if an employer would be liable in tort, but for the application of the exclusivity doctrine, then the third party is entitled to a verdict set off in the amount of which the third party would otherwise be entitled through contribution. Thus, as long as the third party would have been entitled to contribution or indemnity, but for the employer's immunity under the WCA, it is entitled to the offset. Any other reading of ' 42-1-580 would render the statute meaningless and superfluous.
Still another possibility is to allow a reduction of any recovery of up to the full amount of the judgment depending on the degree of fault. Several other jurisdictions have considered this position and held that when apportioning negligence, a jury should consider the relative negligence of all parties whether or not they are parties to the lawsuit. Johnson v. Niagara Mach. & Tool Works, 666 F.2d 1223, 1226 (8th Cir. 1981)(applying Minnesota comparative negligence statute which required submission of degrees of fault of all parties to jury even where all of the "wrongdoers" were not parties to the lawsuit); Bowman v. Barnes, 282 S.E.2d 613 (W.V. 1981)(holding that "in order to obtain a proper assessment of plaintiff's contributory negligence under our comparative negligence rule, it must be ascertained in relation to all of the parties whose negligence contributed to the accident, not merely those defendants involved in the litigation"); Lines v. Ryan, 272 N.W.2d 896 (Minn. 1978). This approach is certainly consistent with the policy behind comparative fault, but there is no indication that South Carolina's current Workers. Compensation Statute and Contribution Act allow for such a scheme.
Although solutions may be unclear, the unfairness of the present system is not. Shielding employers from any form of third party liability while allowing them to recoup compensation payments from a third party does not promote safe workplaces, and does not allocate fault according to principles of fundamental fairness recognized by comparative negligence.
*article courtesy of Nexsen Pruet Jacobs & Pollard LLP.