When more than one party is at fault: several liability, reallocation, and the settling defendant

Minnesota made several liability the general rule in 2003 and kept four exceptions. The Minnesota Supreme Court has since held that the rule applies even to a tortfeasor nobody sued, and that the statute's reallocation provision does not reach a severally liable defendant.

Two statutes divide the work when more than one person caused an injury, and they are frequently confused with each other. Minn. Stat. § 604.01 decides whether a claimant may proceed against a given defendant at all; that is the subject of the comparative fault guide. Minn. Stat. § 604.02 decides who pays what once liability exists. This page is about the second one, and about what happens when a claimant settles with some defendants and not others.

The default changed in 2003, and the change was the point

Minn. Stat. § 604.02, subd. 1:

When two or more persons are severally liable, contributions to awards shall be in proportion to the percentage of fault attributable to each, except that the following persons are jointly and severally liable for the whole award:

(1) a person whose fault is greater than 50 percent;

(2) two or more persons who act in a common scheme or plan that results in injury;

(3) a person who commits an intentional tort; or

(4) a person whose liability arises under chapters 18B - pesticide control, 115 - water pollution control, 115A - waste management, 115B - environmental response and liability, 115C - leaking underground storage tanks, and 299J - pipeline safety, public nuisance law for damage to the environment or the public health, any other environmental or public health law, or any environmental or public health ordinance or program of a municipality as defined in section 466.01.

This section applies to claims arising from events that occur on or after August 1, 2003.

The difference between several liability and joint and several liability is the whole subject. Staab v. Diocese of St. Cloud, 853 N.W.2d 713 (Minn. 2014), restates both in footnote 2, drawing on the earlier opinion in the same case: a person who is severally liable has “liability that is separate and distinct from another’s liability, so that the plaintiff may bring a separate action against one defendant without joining the other liable parties,” and is “responsible for only his or her equitable share of the [damages] award,” while a jointly and severally liable defendant “is responsible for the entire [damages] award.”

The 2014 opinion also traces how Minnesota got here, and the trajectory runs one direction. At 719 it records that under Minnesota common law “parties whose concurrent negligence caused injury were jointly and severally liable for the resulting damages,” that a 1969 comparative negligence statute did not abolish that rule, and that when the legislature enacted § 604.02 in 1978 subdivision 1 then read “When two or more persons are jointly liable, contributions to awards shall be in proportion to the percentage of fault attributable to each, except that each is jointly and severally liable for the whole award.” Amendments in 1986 and 1988 capped joint and several liability for particular categories of defendant. Then came 2003. As the court put it at 720, “With each amendment of the statute over the course of 25 years, the Legislature further curtailed joint and several liability in Minnesota.”

The rule reaches people who were never sued

The most counterintuitive holding in this area is that § 604.02, subd. 1 operates on a tortfeasor who is not in the lawsuit.

In the first Staab appeal, a jury found the sole defendant fifty percent at fault and attributed the other fifty percent to a person the plaintiff had chosen not to sue. The district court ordered the defendant to pay the entire award, reasoning that liability arises only from a judgment and that a nonparty cannot be held liable. The Minnesota Supreme Court rejected that premise, holding, 813 N.W.2d at 75, that “the principle of several liability limits the magnitude of a severally liable person’s contribution to an amount that is in proportion to his or her percentage of fault, as determined by the jury,” and reasoning from the common-law rule that “liability is created at the instant [a] tort is committed.”

The definitional bridge is at 76: the term “party” in subdivision 2 “means all persons who are parties to the tort, regardless of whether they are named in the lawsuit,” a reading the court had adopted in Hosley v. Armstrong Cork Co., 383 N.W.2d 289, 293 (Minn. 1986), and it would be illogical for “persons” in subdivision 1 to be narrower than “parties” in subdivision 2. The conclusion follows at 77: “[w]e therefore conclude that section 604.02 applies whenever multiple tortfeasors act to cause an indivisible harm to a victim, regardless of how many of those tortfeasors are named as parties in a lawsuit arising from that tort.”

The holding itself, restated in the 2014 opinion, is that subdivision 1 “applies when a jury apportions fault between a sole defendant and a nonparty tortfeasor, and limits the amount collectible from the defendant to its percentage share of the fault assigned to it by the jury.” The first Staab opinion drew three separate dissents.

Reallocation exists, and it does not reach a severally liable defendant

Minn. Stat. § 604.02, subd. 2 has been in the statute, unchanged, since 1978:

Upon motion made not later than one year after judgment is entered, the court shall determine whether all or part of a party's equitable share of the obligation is uncollectible from that party and shall reallocate any uncollectible amount among the other parties, including a claimant at fault, according to their respective percentages of fault. A party whose liability is reallocated is nonetheless subject to contribution and to any continuing liability to the claimant on the judgment.

Read alone, that provision looks like a complete answer to the insolvent-defendant problem, and on remand from the first Staab appeal the plaintiff used it that way: the nonparty’s share was uncollectible, so reallocate it to the defendant. The district court and the court of appeals both agreed.

The Minnesota Supreme Court reversed. Its reasoning, 853 N.W.2d at 719, is that the 2003 amendment set a general rule of several liability with four exceptions, and that reading subdivision 2 to reallocate onto a severally liable defendant would create a fifth:

The fact that one liable party is insolvent or cannot be collected from for other reasons is not one of the four exceptions in subdivision 1 to which joint and several liability still applies. Yet that would be the practical effect of permitting reallocation to severally liable parties under subdivision 2. The Legislature's expression of a general rule of several liability subject to four exceptions in subdivision 1 precludes an interpretation of subdivision 2 that would effectively create a fifth exception to the several liability rule.

The holding, at 722:

For the foregoing reasons, we hold that a party who is severally liable under Minn.Stat. § 604.02, subd. 1, cannot be ordered to contribute more than that party's equitable share of the total damages award under the reallocation-of-damages provision in Minn.Stat. § 604.02, subd. 2.

The court also explained what subdivision 2 was for when it was enacted. In 1978, when defendants were jointly and severally liable for the whole award, subdivision 2 was “a mechanism to limit the amount of damages that a jointly liable defendant could be required to pay” — a defendant could petition to have an uncollectible portion spread among all potentially liable parties, including the plaintiff. The provision was drafted as a limit on joint liability, not as a supplement to several liability. Two justices dissented.

Subdivision 3 is the exception the 2014 opinion left alone, and it works differently on purpose:

In the case of a claim arising from the manufacture, sale, use or consumption of a product, an amount uncollectible from any person in the chain of manufacture and distribution shall be reallocated among all other persons in the chain of manufacture and distribution but not among the claimant or others at fault who are not in the chain of manufacture or distribution of the product. Provided, however, that a person whose fault is less than that of a claimant is liable to the claimant only for that portion of the judgment which represents the percentage of fault attributable to the person whose fault is less.

Settling with some defendants and not others

Where a claimant resolves with fewer than all defendants, the general common-law rule would have been fatal. Frey ex rel. Frey v. Snelgrove, 269 N.W.2d 918, 921 (Minn. 1978), states it: “Where there are multiple defendants in a tort action, the general rule of law is that a release of one joint tortfeasor releases all others.”

Frey approved the drafting device that avoids that result and had already been in use in Minnesota practice, taking its name from a Wisconsin decision. The court set out the mechanism at 921:

In that decision the Wisconsin Supreme Court approved the release of a joint tortfeasor which reserved the plaintiff's right to maintain the cause of action against the remaining defendants and also held that the nonsettling defendants' right to contribution can be cut off by a plaintiff who agrees to indemnify the settling defendants against any claim of contribution. By the terms of this type of release the nonsettling defendant will never be required to pay more than his fair share as determined by the jury's finding of comparative negligence.

In footnote 1, Frey identifies the three basic elements:

(1) The release of the settling defendants from the action and the discharge of a part of the cause of action equal to that part attributable to the settling defendants' causal negligence; (2) the reservation of the remainder of plaintiff's causes of action against the nonsettling defendants; and (3) plaintiff's agreement to indemnify the settling defendants from any claims of contribution made by the nonsettling parties and to satisfy any judgment obtained from the nonsettling defendants to the extent the settling defendants have been released.

The holding, at 922:

We therefore hold that where the plaintiff has entered into a Pierringer-type release, settling his claims with some defendants and agreeing to pay any cross-claims of the nonsettling defendants, the settling defendants usually should be dismissed, but their negligence should nevertheless be submitted to the jury. If the release so provides, the indemnity cross-claims between all defendants should also be dismissed.

Frey then supplies guidelines for future cases, at 923. When a settlement or release is entered into, the trial court and the other parties “should be immediately notified, and the terms of the agreement made a part of the record.” Where the plaintiff has agreed to indemnify the settling defendant against all cross-claims, the settling defendant should ordinarily be dismissed and is “deemed also to have relinquished any cross-claims against the remaining defendants.” Where a nonsettling party has a cross-claim for contribution or indemnity not covered by the release, “the settling defendant should continue as a party for the limited purpose of defending against the surviving cross-claim.” And on submitting fault:

In almost every case the trial court should submit to the jury the fault of all parties, including the settling defendants, even though they have been dismissed from the lawsuit. If there is "evidence of conduct which, if believed by the jury, would constitute negligence [or fault] on the part of the person * * * inquired about," the fault or negligence of that party should be submitted to the jury.

On what the jury is told about the settlement, Frey draws a line. Where the release is executed during trial, the court should usually inform the jury that a settlement and release occurred, “if for no other reason than to explain the settling tortfeasor’s conspicuous absence from the court room,” and where a settling defendant is called as a witness the court should explain the effect of the release so the jury can weigh bias. But: “The jury should be given those facts necessary to arrive at a fair verdict to all parties, but as a general rule the amount paid in settlement should never be submitted.” The reason the court gives is that the figure “may have little relation to the actual damages of a plaintiff, since it may reflect a compromise, the evaluation of a defendant’s potential liability, and many other factors not relevant to a jury’s consideration of actual monetary damages.”

One caution about reading Frey today. The opinion quotes the version of Minn. Stat. § 604.01, subd. 1 then in force, which provided that where joint liability existed “contributions to awards shall be in proportion to the percentage of negligence attributable to each, provided, however, that each shall remain jointly and severally liable for the whole award.” That is not the current allocation rule. What survives from Frey is the release mechanism and the trial-practice guidelines; the background rule those guidelines operated against has since been replaced by the § 604.02, subd. 1 text set out at the top of this page. What a release does to the person signing it, as distinct from what it does among defendants, is the subject of the release guide.

Where this sits relative to the other fault rules

Three things happen in sequence in a case with several at-fault parties, and mixing them up produces wrong answers.

First, § 604.01, subd. 1 decides whether the claimant may recover from each defendant at all. That comparison is made against “the person against whom recovery is sought,” one defendant at a time, and the comparative fault guide works through what happens when the claimant’s percentage exceeds one defendant’s but not another’s.

Second, the claimant’s own percentage reduces the damages, and statutory subtractions come off before that reduction while advance payments are credited after it. That sequence is set out in the same guide.

Third, § 604.02 allocates what remains among the people at fault. Several liability is the rule, the four exceptions are the departures, and the reallocation provision does not extend the exceptions.

What this page is not

It describes how Minnesota apportions a damages figure among multiple at-fault parties, what the statute’s reallocation provision does and does not reach, and what a Pierringer release accomplishes procedurally. It does not assign percentages, evaluate anyone’s exposure, or advise whether to settle with one defendant and not another. Those are decisions made on evidence and on the terms of a specific document, neither of which is on this page.