‘Deep Pockets’ : Liability: Who Should Pay Most?

The lawsuit was the kind that officials of cities, counties and other local government agencies have come to dread--one involving a blameless, severely injured plaintiff and a co-defendant with no money.

Jeffrey C. Melgaard of Covina was a passenger in the car of a friend who had been drinking. The driver lost control and rolled the vehicle on the eastbound side of winding Covina Hills Road in eastern Los Angeles County.

Melgaard, a 16-year-old athlete and scholar, suffered permanent brain damage in the 1975 crash. He sued his friend for negligent driving and Los Angeles County for failing to post adequate warnings on the curve and for maintaining a dangerous road.

County Paid 99%

In the 1980 trial, a jury awarded Melgaard $1.77 million in damages. The jurors ruled that the driver was 70% at fault and that the county was 30% at fault, yet through an age-old legal doctrine known as joint-and-several liability, Los Angeles County paid 99% of the award.

In practical terms, joint-and-several liability means that a wealthy defendant--one with “deep pockets,” such as a governmental agency or its insurers--ends up paying most of the judgment when a co-defendant lacks funds, regardless of the degree of blame.

The rationale is that if three defendants are found to cause a plaintiff’s injuries and two of the defendants have no money, fairness dictates that the innocent plaintiff should get the entire award, not just one-third.

The doctrine, developed over centuries by English and American courts, provides that a person injured through the joint acts of several people can collect damages from one or all the defendants. It also holds that basic fairness requires full recovery by the plaintiff, regardless of whether a single defendant must make a disproportionate contribution.

‘Ultimate Insurer’

In reality, those who have studied the issue say, plaintiffs’ lawyers have simply learned that cities and other public entities have the “deep pockets” to pick. Those who run local government in California and other states want the rule abolished--as Kansas, New Hampshire, New Mexico, Ohio and Vermont have already done--so that they will pay only for their share of the fault. Nine other states have limited the way the rule can be applied.

“The entire public treasury is considered available to each and every plaintiff. They’re treating government as the ultimate insurer,” said Jay Biggins, a consultant to New York City’s office of management and budget, which is mounting an assault on the joint-and-several rule in New York.

In California, where the Legislature has defeated four bills introduced since 1979 in which joint-and-several liability would be abolished or limited, local government officials say the situation is coming to a crisis point, and they have vowed to keep fighting for a change.

According to the League of California Cities, the doctrine led 134 of the state’s cities to pay injured people more than $15.5 million in settlements and judgments in the fiscal year that ended last June 30. The previous year, the amount was $13.2 million, and it was $4.5 million the year before that, according to the cities’ league.

“Joint-and-several liability is one of the two top priorities for the league this year,” said Kenneth Emanuels, who heads the league’s lobbying team.

“We’re very confident that at some time, we will succeed, because the joint-and-several problem becomes more severe every year,” he said. “Change in this area is absolutely inevitable.”

It is the innocent victim with catastrophic injuries who provides the biggest obstacle to abolishing joint-and-several liability, city attorneys and officials said.

“If we go to the Legislature with all potential allies on our side, and we don’t have an answer for how we can take care of innocent victims, we’ll have a hard road ahead,” said San Diego City Atty. John W. Witt, who with his counterparts from six of the state’s other largest cities has formed an ad hoc group to support the league’s efforts.

It is precisely because of the failure to come up with an adequate plan to help innocent victims that the California Trial Lawyers Assn., whose members represent the injured people who sue cities and other public entities, is so opposed to change, its officers say.

“Who should suffer--the innocent victim or one of the wrongdoers who can afford to pay?” asked James Frayne, executive director and chief lobbyist for the association.

“Insurance companies have sold public entities a bill of goods that would have them saving millions and millions of dollars if they could have the joint-and-several rule changed,” Frayne charged.

Frayne and Robert B. Steinberg of Los Angeles, president of the trial lawyers’ group, contend that the joint-and-several doctrine also acts as a deterrent--forcing cities, for instance, to trim trees that could obscure a motorist’s vision and lead to an accident--and keeps a penniless victim from going on welfare.

Cases ‘Not That Easy’

“These cases are not that easy to win,” Steinberg said. “So when the city is included, the jury has got to be pretty darned convinced the city was at least partially liable.”

Frayne, however, noted that the association faces its toughest battle this year over the issue because insurers are pushing for changes in the law, the league has better organized its attack and more legislators are sensitive to the needs of local governments, in which many of them once held office.

The legislative strategy appears to be a war of attrition on the joint-and-several issue.

“I’ve never seen a bill as controversial as this one pass in the first or second session,” said state Sen. John F. Foran (D-San Francisco), who has twice introduced bills that would abolish the joint-and-several doctrine in the one area of damages--pain and suffering--that usually provides plaintiffs with their heftiest awards.

“As more flagrant cases come to the forefront, people will come to realize this isn’t free money,” Foran said. “It’s taxpayer money. And if we don’t do something, we’ll have to curtail other services.”

Divides Liability

Foran’s bill provides that all defendants would pay for pain and suffering losses “based on their fault rather than on the size of their pocketbooks.”

In other words, if a city is 20% at fault, it would pay 20% of any award for pain and suffering. The Foran bill would not limit the amount of money defendants would have to pay for such damages as medical expenses or lost wages.

An identical bill Foran introduced in February, 1983, was amended to apply only when a defendant was found to be 40% or more at fault. The bill passed the Senate but died last June in the Assembly Judiciary Committee. Sen. Robert G. Beverly (R-Manhattan Beach) saw his colleagues defeat similar bills he carried in 1979 and 1981.

“There must be comparable degrees of fault,” Foran said. “Equity demands that a defendant found 10% at fault pay only 10% of the verdict. One injustice shouldn’t provoke another injustice.”

Foran said it is only fair and equitable to include all defendants, not just public entities, in the proposed legislation. State Sen. Ed Davis (R-Valencia) introduced a bill in 1982 that would have provided relief for only public entities, but other defendants with “deep pockets,” such as manufacturers and insurance companies, joined forces with the trial lawyers’ group to kill the bill.

Troubled by Proposal

Assemblyman Elihu M. Harris (D-Oakland), who chairs the Judiciary Committee that killed Foran’s previous bill, is troubled by the proposal.

First, he said, potential “deep pockets” defendants, including doctors and hospitals, are better able to handle the burden of paying damages than injured victims are.

Arguments to abolish the joint-and-several rule may have more merit, he said, if they are limited to the public sector and to cases in which liability is only incidental or passive, such as when a speeding drunk driver causes an accident on a road others have used safely.

Harris also believes that statistics are misleading.

“I want hard examples,” he said. “Statistics on cases settled could mean defense lawyers are lazy. There are not many cases. And those cases that exist are decided by jurors who will have to pay the verdicts in taxes.”

League of California Cities lobbyist Connie Barker, San Diego’s Witt and other officials acknowledge that there are relatively few joint-and-several cases, compared to the host of other lawsuits facing public entities, but they said those few cases always involve victims with catastrophic injuries and expose local governments to their biggest losses.

Fear Brings Settlements

Although they could not cite any case in which a jury found a local governmental body less than 10% at fault in a major-award case, they said the fear of such an event has forced the governments to settle most cases over the years.

In San Diego, for instance, two college students were killed and a third was paralyzed from the neck down in a 1981 head-on collision with a drunk driver who crossed the center line on a curve on scenic Torrey Pines Road. The drunk driver, later convicted of misdemeanor manslaughter, was going nearly 70 m.p.h. and had ignored his passenger’s warnings, a posted 45 m.p.h. speed limit and a posted 35 m.p.h. speed limit on the curve, City Atty. Witt said.

The paralyzed victim sued the drunk driver for negligence and the city for faulty road design. The driver, who had few assets, turned over his insurance policy, which had a limit of $25,000. The city, fearing a multimillion-dollar judgment, settled for $1,623,390 even though, Witt said, it believed its liability to be slight.

“Many situations are extremely dangerous financially, and if we can work out a deal where we have a sure loss rather than the potential for an extraordinary loss, we’ll take it,” said Deputy Los Angeles County Counsel Charles V. Tackett, who defended the county in the Melgaard case.