Clark v. Kawasaki Motors Corp., U.S.A., 23395

• Decision Date: 16 July 1997
• Docket Number: No. 23395,23395
• Citation: 200 W.Va. 763,490 S.E.2d 852
• Parties: Timothy W. CLARK, Jr. and Brian K. Cunningham, Plaintiffs Below, Appellees, v. KAWASAKI MOTORS CORP., U.S.A., and Kawasaki Heavy Industries, Ltd., Defendants Below, Appellants.
• Court: West Virginia Supreme Court

Page 852

490 S.E.2d 852

200 W.Va. 763

Timothy W. CLARK, Jr. and Brian K. Cunningham, Plaintiffs Below, Appellees, v. KAWASAKI MOTORS CORP., U.S.A., and Kawasaki Heavy Industries, Ltd., Defendants Below, Appellants.

No. 23395.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 22, 1997.

Decided July 16, 1997.

Syllabus by the Court

1. "Defendants in a civil action against whom a verdict is rendered are entitled to have the verdict reduced by the amount of any good faith settlements previously made with the plaintiff by other jointly liable parties. Those defendants against whom the verdict is rendered are jointly and severally liable to the plaintiff for payment of the remainder of the verdict. Where the relative fault of the nonsettling defendants has been determined, they may seek contribution among themselves after judgment if forced to pay more than their allocated share of the verdict." Syl. pt. 7, Board of Education of McDowell County v. Zando, Martin & Milstead, Inc., 182 W.Va. 597, 390 S.E.2d 796 (1990).

2. "The law favors and encourages the resolution of controversies by contracts of compromise and settlement rather than by litigation; and it is the policy of the law to uphold and enforce such contracts if they are fairly made and are not in contravention of some law or public policy." Syl. pt. 1, Sanders v. Roselawn Memorial Gardens, 152 W.Va. 91, 159 S.E.2d 784 (1968).

3. In reducing a jury verdict in a negligence action by the amount of the plaintiff's prior settlement with a joint tortfeasor, in light of the percentage of the plaintiff's comparative negligence later found by the jury at trial, this Court adopts the "settlement first," rather than the "fault first" method; under the "settlement first" method, the trial court in making the reduction first credits the amount of the prior settlement against the jury verdict, and then reduces the remainder by the percentage of the plaintiff's comparative negligence; whereas, under the "fault first" method, the trial court in making the reduction first reduces the jury verdict by the percentage of the plaintiff's negligence, and then credits against the remainder the amount of the prior settlement.

John R. Fowler, James C. Stebbins, Huddleston, Bolen, Beatty, Porter & Copen, Charleston, Terrance M. Miller, Douglas L. Anderson, Porter, Wright, Morris & Arthur, Columbus, OH, for Appellants.

P. Rodney Jackson, Franklin S. Fragale, Jr., DiTrapano & Jackson, Charleston, Gilbert H. Robinette, Henry E. Dugan, Jr., Bruce J. Babij, George S. Tolley, III, Robinette, Dugan & Jakubowski, Baltimore, MD, for Appellees.

McHUGH, Justice:

This action is before this Court upon an appeal from the final order of the Circuit Court of Kanawha County, West Virginia, entered on August 21, 1995. In this action, the appellants, Kawasaki Motors Corp., U.S.A. and Kawasaki Heavy Industries, Ltd., defendants below, were found liable by a jury to the appellees, Timothy W. Clark, Jr., and Brian K. Cunningham, plaintiffs below, with regard to an accident involving a four-wheel ATV (all-terrain vehicle). At issue is the method by which the amount of the appellants' liability was calculated by the circuit court following the verdict, in view of a prior settlement between the appellees and another defendant and in view of the appellees' respective percentage of comparative negligence.

This Court has before it the petition for appeal, all matters of record and the briefs and argument of counsel. As indicated in the April 23, 1996, order of this Court, this appeal was granted solely on the issue of the proper manner of reducing a verdict by the amount of a plaintiff's prior settlement with a joint tortfeasor, in view of the percentages of comparative fault found by the jury at trial. Two methods of so reducing a verdict, i.e. the "settlement first" method, adopted by the circuit court and favored by the appellees, and the "fault first" method, favored by the appellants, have been recognized in other jurisdictions. For the reasons stated below, this Court is of the opinion that the "settlement first" method should be adopted in this State. Accordingly, the final order of the circuit court is affirmed.

I.

On September 1, 1988, appellees Timothy W. Clark, Jr., and Brian K. Cunningham, both under the age of 16, were among several individuals visiting the farm of Loyal D. and Donald R. Canfield in Randolph County, West Virginia. At the farm was a four-wheel Kawasaki KLF-185 ATV (all-terrain vehicle) owned by the Canfields. The ATV had been designed, manufactured and sold by the appellants. While riding double on the vehicle, allegedly with the permission of the Canfields, Clark and Cunningham were seriously injured when the vehicle wrecked in a wooded area of the farm.

Thereafter, in June 1990, an action on behalf of Clark and Cunningham was instituted in the circuit court concerning the incident. The complaint included allegations of negligence against the Canfields and allegations of negligence, product liability and breach of contract against the appellants. Prior to trial, however, a settlement was reached with the Canfields. Specifically, Clark received $825,000 in settlement from the Canfields, and Cunningham received $475,000.

On June 14, 1994, the action proceeded to trial against the appellants. At the conclusion of the trial, the jury returned a verdict in favor of Clark and Cunningham. Specifically, the jury determined Clark's damages to be $3,526,302, before any reduction for comparative negligence, and Cunningham's damages to be $1,021,142, before any reduction for comparative negligence. The jury determined Clark to be 35% at fault and Cunningham to be 15% at fault.

Following the jury verdict, the circuit court calculated the amount of the appellants' liability to appellees Clark and Cunningham by taking into account the prior settlement with the Canfields and, in addition, Clark and Cunningham's respective percentage of comparative negligence. The method selected by the circuit court in making that calculation was consistent with the "settlement first" formula, described below. That method, advanced by Clark and Cunningham before this Court, was reflected in the order of the circuit court entered on September 16, 1994, and resulted in a net recovery of damages for Clark in the amount of $1,755,846.30 and a net recovery of damages for Cunningham in the amount of $464,220.70.

Pursuant to the final order of August 21, 1995, the appellants' post-trial motions contesting the use of the "settlement first" method were denied. This appeal followed.

II. The Settlement First Method

In applying the "settlement first" method to this action, the comparative fault reduction for each plaintiff, Clark and Cunningham, was based upon an amount already reduced by the circuit court by the Canfield settlements. In other words, the circuit court credited the amount of the prior settlements against the jury verdict and then reduced the remainder by the percentage of the plaintiffs' comparative negligence. Thus, in the case of Clark, the circuit court subtracted the Canfield settlement from the jury verdict ($3,526,302--$825,000 = $2,701,302). Then, Clark's 35% fault was subtracted from $2,701,302 to equal a net judgment against the appellants of $1,755,846.30. Similarly, in the case of Cunningham, the circuit court subtracted the Canfield settlement from the jury verdict ($1,021,142--$475,000 = $546,142). Then, Cunningham's 15% fault was subtracted from $546,142 to equal a net judgment against the appellants of $464,220.70. ¹

The Fault First Method

On the other hand, the "fault first" method is more advantageous to the appellants. Under that method, the circuit court reduces the jury verdict by the percentage of the plaintiffs' comparative negligence, and then credits against the result the amount of the prior settlements. Thus, in the case of Clark, Clark's 35% fault would first be subtracted from the jury verdict ($3,526,302--35% = $2,292,096.30). Then, the $825,000 Canfield settlement would be subtracted from $2,292,096.30 for a net judgment of $1,467,096.30. Similarly, in the case of Cunningham, Cunningham's 15% fault would first be subtracted from the jury verdict ($1,021,142--15% = $867,970.70). Then, the $475,000 Canfield settlement would be subtracted from $867,970.70 for a net judgment of $392,970.70.

Had the "fault first" method been applied by the circuit court in this action, the net judgment against the appellant would have been $288,750 less with regard to Clark ($1,755,846.30--$1,467,096.30), and $71,250 less with regard to Cunningham ($464,220.70--$392,970.70).

III.

As this Court stated, generally, in syllabus point 4 of Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114 (1996): "This Court reviews the circuit court's final order and ultimate disposition under an abuse of discretion standard. We review challenges to findings of fact under a clearly erroneous standard; conclusions of law are reviewed de novo." See also syl. pt. 4, Laney v. State Farm Mutual Automobile Insurance Company, 198 W.Va. 241, 479 S.E.2d 902 (1996); syl. pt. 1, Shrader v. Shrader, 196 W.Va. 649, 474 S.E.2d 579 (1996). Nevertheless, although the facts herein are uncontroverted, the issue of the method of reducing a verdict by the amount of a plaintiff's prior settlement with a joint tortfeasor, in view of the percentage of comparative fault found by the jury at trial, is one of first impression in this State.

According to the appellants, the reduction for the percentage of the appellees' comparative negligence, 35% and 15%, respectively, should have been based upon the total damages sustained by the appellees and not upon an amount already reduced by the Canfield settlement. Thus, the appellants assert, the circuit court's use of the "settlement first" method unjustly resulted in 35% of the $825,000 settlement received by Clark, and 15% of the $475,000 settlement received...