Whalen v. Kawasaki Motors Corp.

• Decision Date: 15 October 1998
• Citation: 92 N.Y.2d 288,680 N.Y.S.2d 435,703 N.E.2d 246
• Parties: , 703 N.E.2d 246, Prod.Liab.Rep. (CCH) P 15,380, 1998 N.Y. Slip Op. 8696 Robert M. WHALEN, Appellant, v. KAWASAKI MOTORS CORP., U.S.A., et al., Defendants, and Robinson Cycle Sales, Inc., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 435

680 N.Y.S.2d 435

92 N.Y.2d 288, 703 N.E.2d 246,

Prod.Liab.Rep. (CCH) P 15,380,

1998 N.Y. Slip Op. 8696

Robert M. WHALEN, Appellant, v. KAWASAKI MOTORS CORP., U.S.A., et al., Defendants, and Robinson Cycle Sales, Inc., Respondent.

Court of Appeals of New York.

Oct. 15, 1998.

Faraci & Lange, L.L.P, Rochester (Stephen G. Schwarz, of counsel), for appellant.

Saperston & Day P.C., Rochester (Dennis R. McCoy, of counsel), for respondent.

OPINION OF THE COURT

CIPARICK, Judge.

In this personal injury action involving multiple defendants, plaintiff before trial settled with the Kawasaki defendants/manufacturers, and at trial was found to share comparative fault with the remaining nonsettling defendant/retailer, Robinson Cycle Sales, Inc. We must decide whether plaintiff's recovery by verdict should be first reduced in accordance with the comparative fault provisions of CPLR 1411, or by the settlement set-off rule codified in General Obligations Law § 15-108(a). A threshold issue, however, is whether under the circumstances of this case the nonsettling defendant, Robinson, should have been permitted to invoke the General Obligations Law § 15-108(a) setoff. We hold that the setoff was properly allowed, but that the "settlement-first" method of computation should apply.

I.

Plaintiff Robert M. Whalen suffered serious injuries when the three-wheel all-terrain vehicle (ATV) he was driving crashed into a tree. The ATV in question was designed and manufactured by defendants Kawasaki Motors Corporation, U.S.A., Kawasaki Motors Manufacturing Corporation, U.S.A., and Kawasaki Heavy Industries, Ltd. (collectively Kawasaki), and had been sold to plaintiff's friend by defendant Robinson. Plaintiff thereafter brought this action in Supreme Court, seeking compensatory and punitive damages under theories of negligence, strict products liability, and breach of express and implied warranties.

During jury selection, plaintiff settled with Kawasaki for $1,600,000. As part of the settlement agreement, plaintiff withdrew all claims against Robinson which were derivative of Kawasaki's liability, and proceeded to trial against Robinson, the lone remaining defendant, solely on a theory of negligence. Robinson, in turn, declined to seek any apportionment of liability against Kawasaki, preferring instead that the jury apportion fault solely between Robinson and plaintiff. The jury returned a verdict of $2,415,000 against Robinson; it found plaintiff 92% comparatively negligent and Robinson 8% at fault.

Following the verdict, Robinson moved to amend its answer to assert General Obligations Law § 15-108's setoff provisions as an affirmative defense. Reasoning that Robinson had waived its rights to a General Obligations Law § 15-108 setoff of the Kawasaki settlement by choosing to limit apportionment of liability at trial solely to itself and plaintiff, Supreme Court denied the motion. The trial court then discounted the $2,415,000 jury verdict by plaintiff's 92% comparative fault, and held Robinson liable to plaintiff for $193,000. ¹ Robinson appealed.

The Appellate Division reversed, holding that Supreme Court had erred in denying Robinson's motion to amend its answer to include General Obligations Law § 15-108 as an affirmative defense (Whalen v. Kawasaki Motors Corp., 242 A.D.2d 919, 662 N.Y.S.2d 339). The Appellate Division reasoned that defendant's invocation of General Obligations Law § 15-108(a), even postverdict, would not prejudice plaintiff, and that Robinson had not waived its right to a setoff. Citing Williams v. Niske, 81 N.Y.2d 437, 599 N.Y.S.2d 519, 615 N.E.2d 1003, the Appellate Division first discounted the jury verdict of $2,415,000 by plaintiff's 92% comparative fault--leaving $193,200, and then subtracted plaintiff's $1,600,000 Kawasaki settlement. This method of calculation left a negative balance, thus relieving Robinson of all monetary responsibility. We granted plaintiff's motion for leave to appeal, and now modify the order of the Appellate Division.

II.

We begin by reviewing the provisions of the governing statutes. New York's comparative fault rules are codified in CPLR 1411, which provides for the discounting of a plaintiff's damages in proportion to his or her equitable share of blame in causing injury. In tort actions involving multiple defendants where a plaintiff settles with one or more defendants before trial, and proceeds to trial against the remaining defendants, General Obligations Law § 15-108(a) permits nonsettling defendants a monetary offset against the amount of a verdict. The permitted reduction is the greatest of three items: (a) the amount stipulated as consideration for the release; (b) the amount actually paid for the release; or (c) the settling tortfeasor's equitable share of plaintiff's damages (General Obligations Law § 15-108[a] ). The purpose of the statute is to encourage settlement, although the statute is also concerned with ensuring equity. Plaintiffs should be fairly compensated, but nonsettling defendants should not bear more than their fair share of a plaintiff's loss. Moreover, the possibility of double recovery should be avoided (see, Williams v. Niske, supra, 81 N.Y.2d, at 442-444, 599 N.Y.S.2d 519, 615 N.E.2d 1003; accord, Dudick v. Keene Corp., 82 N.Y.2d 821, 605 N.Y.S.2d 3, 625 N.E.2d 588, affg. for reasons stated at 188 A.D.2d 214, 218, 593 N.Y.S.2d 43; Didner v. Keene Corp., 82 N.Y.2d 342, 351, 604 N.Y.S.2d 884, 624 N.E.2d 979; Pollicina v. Misericordia Hosp. Med. Ctr., 82 N.Y.2d 332, 604 N.Y.S.2d 879, 624 N.E.2d 974).

III.

We must first address plaintiff's threshold argument, adopted by Supreme Court, that Robinson waived the benefits of section 15-108(a) altogether by failing to seek an apportionment of liability against Kawasaki before verdict. Specifically, plaintiff argues that Robinson's failure to seek an apportionment of liability against Kawasaki at trial may have inflated plaintiff's comparative share of liability and skewed the verdict against plaintiff. Plaintiff suggests that to allow Robinson to assert the statute under these circumstances would be unfair.

By failing to seek apportionment against Kawasaki, Robinson foreclosed any possibility of the jury determining Kawasaki's equitable share of the fault, and in that respect foreclosed use of that prong of the statute's benefits (see, Bonnot v. Fishman, 88 A.D.2d 650, 650-651, 450 N.Y.S.2d 539, affd. on opn. below 57 N.Y.2d 870, 456 N.Y.S.2d 47, 442 N.E.2d 445). Section 15-108(a), however, affords the nonsettling defendant the greatest of three modes of setoff, and the remaining two--the amount stipulated or paid by the settling defendant--were still properly available to Robinson, notwithstanding its failure to put before the jury the question of Kawasaki's equitable share of fault (see, id., at 651, 450 N.Y.S.2d 539; see also, Audrieth v. Parsons Sanitarium, 588 F.Supp. 1380, 1381 [S.D.N.Y.] [citing Bonnot ]; Williams v. Niske, 81 N.Y.2d 437, 599 N.Y.S.2d 519, 615 N.E.2d 1003, supra ). Thus Robinson cannot be said to have waived all of General Obligations Law § 15-108's benefits.

Notably, as an affirmative defense,General Obligations Law § 15-108(a) must be pled by a tortfeasor seeking its protection (see, CPLR 3018[b]; Hill v. St. Clare's Hosp., 67 N.Y.2d 72, 84-85, 499 N.Y.S.2d 904, 490 N.E.2d 823). In this case, Robinson did not plead General Obligations Law § 15-108(a) as a defense in its original answer, as Kawasaki did not settle until the eve of trial. However, Robinson did not move to raise section 15-108(a) as a defense until after the jury returned its verdict and the question is thus whether Robinson should have been permitted to delay in amending its answer. It cannot be said that the Appellate Division abused its discretion in allowing the amendment.

Under the CPLR's liberal pleadings practice, a party may amend its pleadings to raise General Obligations Law § 15-108 as a defense at any time, even after trial, provided that the late amendment does not prejudice the other party (see, CPLR 3025[b] ). Prejudice may be found where a party has incurred some change in position or hindrance in the preparation of its case which could have been avoided had the original pleading contained the proposed amendment (see, Loomis v. Civetta Corinno Constr. Corp., 54 N.Y.2d 18, 23-24, 444 N.Y.S.2d 571, 429 N.E.2d 90; Ward v. City of Schenectady, 204 A.D.2d 779, 781, 611 N.Y.S.2d 932). In this case, immediately after the Kawasaki settlement, plaintiff stipulated that he would proceed at trial solely against Robinson on the basis of Robinson's alleged negligence, and would not seek to attribute any blame to Kawasaki. Thus, there was no prejudice in permitting Robinson to assert General Obligations Law § 15-108(a) after the jury verdict, as plaintiff had already irretrievably set his course for trial, and could not under the circumstances have sought any apportionment of fault against Kawasaki even if Robinson had raised General Obligations Law § 15-108(a) earlier.

In short, we see no basis to disturb the conclusion of the Appellate Division that, under the circumstances, Robinson should have been permitted to amend its answer to plead section 15-108(a) as an affirmative defense.

IV.

Having determined that Robinson should be entitled to the statutory setoff, we next must answer the question of the proper interplay of General Obligations Law § 15-108 and CPLR 1411 in a case involving comparative fault. Since the statutes themselves do not answer this question, we must apply them in the manner that will harmonize and further their purposes of encouraging settlements while promoting equity and fairness in apportioning responsibility.

Two possible approaches present themselves, sometimes referred to as the "settlement-first" and "fault-first" approaches (see, e.g., Shelby v. Action Scaffolding, 171 Ariz. 1, 827 P.2d 462). The fault-first method, urged by Robinson and adopted by the Appellate...