The Challenge to a Tortfeasor's Good Faith In Settling With an Injury Claimant
January, 2003
There is commonly a statutory or quasi-contractual right of contribution among joint tortfeasors where one has paid more than his fair share of the common liability. In Illinois the right is statutory and the contribution liability is extinguished when the tortfeasor from whom contribution is sought has settled in “good faith” with the injured party. 740 ILCS 100/2(d). The statute neither defines “good faith” nor the manner in which it is to be established or challenged. Johnson v. United Airlines (Ill. Sup. Ct. No. 91894) answers those questions.
In Johnson, the third party defendant, City of Quincy, settled with the wrongful death plaintiffs, paying each only $1,000. The prime defendant, third party plaintiff, Ratheon, noting the gross disparity between the amount paid and the injuries and noting further the prime plaintiffs' probable motive in eliminating the City of Quincy was to fix venue in a plaintiff friendly county, challenged the good faith of the settlements.
The trial court denied Ratheon’s request for discovery and an evidentiary hearing and held that the settling parties had established their good faith.
Affirming, the Illinois Supreme Court settled several different facets of a challenge to the good faith of a settlement.
The Burden of Proof
A contribution statute promotes two competing public policies: that favoring the settlement of lawsuits and the equitable apportionment of damages among tortfeasors. There is no reason to favor one policy over the other; shifting the burden of proof to the non-settling party and fixing that burden at the traditional preponderance of evidence standard protects both policies.
Accordingly, the court held that the non-settlor’s burden is a preponderance of the evidence rather than the stricter “clear and convincing” evidentiary standard. Also, although the settling parties seeking discharge from contribution liability bear the initial burden of making a preliminary showing of good faith, that burden is easily met. In most instances it is sufficient to simply prove the existence of a legally valid settlement agreement – that consideration was given and received. The court cautioned that in some instances factual evidence may be necessary before the courts may determine that a settlement is fair and reasonable. Once the preliminary showing is made, the burden of proof shifts to the party who challenges the good faith of the settlement.
Good Faith Defined
There is no simple, precise definition. Certainly there is no good faith if the settling parties engage in wrongful conduct, collusion or fraud – or the settlement conflicts with the terms or public policy of the contribution statute. Dubina v. Mesirow Realty Development, Inc., 197 Ill. 2d at 192 (assignment of plaintiff’s claims against non-settling tortfeasors to settling tortfeasors was contrary to the terms of and policies underlying the Act); In re Guardianship of Babb, 162 Ill. 2d 153 (1994) (settlement containing loan receipt provision conflicted with the terms of the Act and did not promote settlements or the equitable apportionment of damages).
The settling parties in Johnson convinced the trial judge that the wrongful death plaintiffs’ likelihood of success against the settling tortfeasor was, because of an immunity defense, marginal. That explained the gross disparity between the settlement amount and the ad damnum in the complaints. The amount of the settlement is not indicative of bad faith when there is a reasonable explanation for it. The amount must be viewed in relation to the probability of success. Also, there was no evidence that the parties were motivated by a desire to impede a legitimate claim for contribution. Certainly the plaintiffs may have been motivated by their desire to eliminate Quincy from the litigation and thereby preclude an unfavorable transfer of venue. That, according to the Supreme Court, is not bad faith: “The fact a settlement is advantageous to a party is not necessarily an indication of bad faith.” Because of the existence of the immunity defense there was no need for an evidentiary hearing on the relative culpabilities of the parties.
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