Covenant not to execute, like a release, defeats joint and several liability
By Kirsten A. Schultz

A covenant not to execute in favor of a settling defendant is equivalent to a release and thereby ends joint and several liability, Division One of the Washington Court of Appeals has held.

In Maguire v. Teuber, No. 51894-9-I (March 2004), Steven Teuber was driving William Hadsall’s car when he rear-ended John Maguire. Maguire sued Teuber and Hadsall. Maguire later settled with Teuber and Hadsall for $100,000, but he did not release them. Instead, he executed a covenant not to execute against the settling defendants’ personal assets. Maguire thereafter amended his complaint to allege negligent road design against the State of Washington.

The State moved to dismiss Maguire’s claims against Teuber and Hadsall. The State sought to avoid being held jointly and severally liable for Teuber and Hadsall’s share of fault.

The superior court denied the State’s motion. The State moved for and obtained discretionary review by the Court of Appeals.

The Court of Appeals noted that the 1986 Tort Reform Act abolished joint and several liability in most circumstances. Generally, joint and several liability still applies among at-fault defendants against whom judgment is rendered, “except those who have been released.” The State argued that the covenant not to execute effectively “released” Teuber and Hadsall because it ended any further liability they might face in the action.

Maguire noted that the Tort Reform Act is in derogation of the common law and should be strictly construed. Since the statutory language providing that settlements eliminate joint and several liability refers only to “released” defendants, Maguire argued that the court should not infer that covenants not to execute have the same effect.

The Court of Appeals disagreed. The court noted that other Washington decisions have treated a settlement as synonymous with a release for purposes of joint and several liability.

Furthermore, "the settlement document in this case has the practical effect of releasing the defendants." It provides that the parties were settling for the purpose of avoiding the uncertainties and expense of litigation and that it was "intended to constitute a complete resolution of all claims by the plaintiffs against defendants Teuber and Hadsall." The covenant also stated that all contribution claims against the settling defendants would be extinguished.

The court also concluded that the statutory term “judgment” denotes an adverse ruling with actual, detrimental effects on the judgment debtor. A defendant who previously obtained a settlement with a covenant preventing execution of the judgment does not face those consequences, since the settlement constitutes a complete resolution of all claims.

The Maguire court reversed and directed the trial court to dismiss Teuber and Hadsall from the action.

Plaintiff’s suit does not toll limitations on separate cross-claim between co-defendants
By Carolanne D. McCaskill

A plaintiff's negligence suit against two defendants does not toll the statute of limitations on one defendant's independent cross-claim against the other, the Washington Court of Appeals has held.

In Bennett v. Dalton, No. 50864-4-I (Feb. 2004), Sherril Rieger, Robert Bennett, and Robin Dalton were involved in a September 1998 car accident. Bennett rear-ended Dalton's stopped vehicle on Interstate 405. The collision propelled Dalton's vehicle into Rieger's car. In April 2001, Rieger sued Bennett and Dalton. In September 2001, while Rieger's action was pending, the three-year statute of limitations ran.

In October 2001, Dalton answered Rieger's complaint. Dalton's answer included a cross-claim against Bennett for Dalton's own personal injuries and property damage. Bennett answered the cross-claim, denying it and asserting that the three-year statute of limitations had run on the cross-claim. Bennett moved for summary judgment of dismissal of Dalton's cross-claim based on the statute of limitations.

The trial court agreed and dismissed Dalton's cross-claim. But Dalton moved for reconsideration, and the trial court changed its mind and reinstated the cross-claim. The Court of Appeals accepted discretionary review of that order.

Bennett argued that no Washington case permitted a plaintiff's claim to toll the statute of limitations on a defendant's independent cross-claim. He cited cases from many other states that held that the statute of limitations was not tolled. Dalton responded that the plaintiff's commencement of an action tolls the statute of limitations as to a defendant's counterclaims against the plaintiff, and by the same token the defendant's cross-claims should be considered timely.

The Court of Appeals reviewed the Washington cases that involved the tolling of statutes of limitations as to counterclaims. The court noted that there were two reasons for such a rule. First, without such a rule, a plaintiff could wait until just prior to the expiration of the statute of limitations to sue, depriving the defendant of adequate time to counterclaim. Second, a counterclaim contemplates that the plaintiff and the defendants are competing for the same asset, so that by suing, a plaintiff waives his right to assert the statute of limitations.

But the Dalton court concluded that those rationales do not apply to cross-claims that are independent of, and go beyond, the plaintiff's initial claim. Dalton alleged his cross-claim as an attempt to recover his own damages, not for contribution as to Rieger's damages. Thus the subject matter of Rieger's claim and of Dalton's cross-claim were separate, even though they arose from the same accident.

The Dalton court also considered many out-of-state cases on the issue. Some of those states, unlike Washington, had statutes that expressly tolled the statute of limitations for cross-claims like the one Dalton alleged here. The other out-of-state cases sided with Bennett, holding that the plaintiff's suit did not toll the statute of limitations as to a cross-claim that sought damages that were independent of the plaintiff's. Only when the cross-claim was "defensive," seeking to blame the co-defendant for the plaintiff's damages, rather than for the cross-claimant's independent damages, did other states allow the statute to be tolled, and that was not the case here.

Dalton also argued that a Washington statute, RCW 4.16.170, tolled the statute of limitations. That statute tolls the running of the statute of limitations, giving the plaintiff 90 days after serving the summons and complaint to file the action, or vice versa. The Dalton court again disagreed. Tolling statutes are strictly construed because they run counter to Washington's policy favoring strict application of statutes of limitations. Since this statute did not explicitly address the present situation, the court held that it did not apply.

Release of tort claim against solvent agent ends vicarious liability of principal
By Nicholas L. Jenkins

The release of a solvent agent as a result of a settlement extinguishes the principal’s vicarious liability, the Washington Court of Appeals has held.

In Hogan v. Sacred Heart Med. Ctr., No. 21691-8-III (Feb. 2004), Nancy Hogan underwent shoulder surgery at Sacred Heart Medical Center. An anesthesiologist, who worked at Sacred Heart as an independent contractor, mistakenly placed a needle into Hogan’s spinal cord, which caused injuries that later required amputation of her right arm. Hogan later settled with and released the anesthesiologist for his $2 million insurance limit.

Hogan’s condition worsened so much that she was at risk of quadriplegia. She sued Sacred Heart. At trial, she alleged both negligence and vicarious liability of the hospital. The jury found the anesthesiologist was 60 percent, and Sacred Heart 40 percent, at fault for $7.3 million in damages and that the anesthesiologist was the hospital’s apparent agent.

The Hogan court extensively reviewed the financial condition of the anesthesiologist and his group and concluded that they were sufficiently solvent to pay their 60 percent share of the verdict. Hogan settled before determining those finances and had failed to pursue the anesthesia group’s additional $1 million in liability insurance.

Thus, the release of the anesthesiologist released both of his principals – the anesthesiology group and Sacred Heart. The hospital was liable only for its own share of fault.

Around The Firm

August G. Cifelli and Marc Rosenberg won summary judgment of dismissal of S.H. v. Corp. of the Catholic Archdiocese of Seattle, a personal-injury claim. Plaintiff alleged negligent supervision of a free-period baseball game at a parochial school in which the minor plaintiff was hit by a batted ball. The court agreed with Gus and Marc that plaintiff had failed to meet his burden of proving negligence or proximate cause.

David L. Martin obtained dismissal of a defendant wholesaler in Tobias v. Sanson Northwest. In that case, a worker sustained a severe hand injury after it was caught in a press brake. He alleged failure to install a hand guard. Dave persuaded plaintiff’s counsel that the wholesaler had no liability and to dismiss it voluntarily.

David L. Martin, Jeffrey P. Downer, and Alison H. Killebrew won the appeal of Byrd v. System Transport, in which plaintiff’s decedent, a truck driver, became ill and died while on a long haul. Her estate sued her employer, claiming that a co-worker ignored obvious signs of serious illness. Plaintiff claimed that this was enough to avoid employer immunity, based on an exception to that immunity for intentional injury by the employer or a co-worker. The trial court agreed that there was an issue of fact on that point and denied the employer’s summary judgment motion. The Court of Appeals granted discretionary review and reversed, holding that the employer was immune from suit.

Joel E. Wright, Michelle A. Corsi, and Marc Rosenberg won summary judgment of dismissal of Hansen v. Doe, a legal malpractice case. Hill Street Investment, a client of the defendant attorney client, sued plaintiff for specific performance of a purchase and sale agreement. The attorney acted as escrow agent as well as attorney for Hill Street. The court in that case granted summary judgment for specific performance. In that lawsuit, Hansen raised essentially the same claims that he later raised in the legal-malpractice case. In the second case, the court concluded that this was a classic case of collateral estoppel, which bars re-litigation of issues that were litigated previously. Further, the court stated that since Hansen received what he was due under the contract, he suffered no damage and was unable to show damages in the current action.

Tammy L. Williams, Alison Killebrew, and Jason C. Hawes successfully defended Hutson v. Costco, in which a co-defendant appealed the trial court’s denial of attorney fees. Plaintiff injured her hand on a shopping cart at Costco and later sued both Costco and Rehrig, the cart manufacturer. At mandatory arbitration, the arbitrator awarded the $35,000 limit against Costco only. Costco requested a trial de novo, at which the jury also found Costco to be solely at fault but found plaintiff’s damages to be only $15,000. The co-defendant argued that it was entitled to attorney fees because Costco failed to improve its position as to Rehrig. The trial court denied Rehrig’s request for fees. The Court of Appeals affirmed, rejecting Rehrig’s argument that fees are owing unless the party that seeks the trial de novo improves its position as to every other party to the action. The appellate court rejected this reasoning because it would discourage meritorious appeals and frustrate the purpose of the mandatory arbitration system.

The Lee Smart firm is in the midst of a baby boom. In recent months, several attorneys have become first-time parents. August G. Cifelli and wife Christa are parents of Augustine G. Cifelli, Jr. Ketia Berry Wick and husband Rando are parents of daughter Makena. Carolanne D. McCaskill and husband Randy are parents of son Jack. Marc Rosenberg and wife Yunhong Xu also have become second-time parents, with the birth of son Adam.