If You Want Contribution, Get The Third Party Released

The maritime version of "Murphy's Law" can be a potential trap for participants in maritime tort litigation. The decision of the 11th Circuit Court of Appeals in Murphy v. Florida Keys Electric Co-op Assoc., Inc., 329 F.3rd 1311 (11th Cir. 2003) enunciated the rule that in order to preserve the right to pursue third parties for tort "contribution," a party must negotiate a release of those third parties when settling the underlying claim brought by the tort victim. The law enounced by the Murphy court was based upon the proportionate fault rule existing in the maritime law and the pro rata credit rule established by the U.S. Supreme Court in McDermott, Inc. v. AmClyde, et al., 511 U.S. 202 (1994). The logic of this version of Murphy's Law is that a settling tortfeasor is, per McDermott, deemed to have paid the tort victim only in accordance with the settlor's own proportionate share of fault. The settlement extinguishes the rights (and needs) of non-settling tortfeasors to pursue the settlor because it coincidentally limited the non-settlors' liabilitydespite the doctrine of "joint and several liability"to their own proportionate faults. The Murphy case held that unless the release negotiated between the settlor and the tort victim also releases the tort victim's claims against the non-settlors, the settlor is presumed to have paid only for its proportionate share and cannot seek contribution from others. This rule has subsequently been adopted by the Fifth Circuit Court of Appeals in Ondimar Transportes Maritimos v. Beatty Street Properties, Inc., 555 F 3rd 184 (5th Cir. 2009). The Fifth Circuit has also gone so far as to say that a formal assignment of claims from the tort victim to the settlor would not remedy the situation. See also, Lexington Insurance Company v. S.H.R.M. Catering Services, Inc., 2009 US. App. Lexis 9447 (5th Cir. 2009). Recall that the McDermott v. AmClyde case arose from a situation where one of the named defendants to a lawsuit had settled, but the case continued on against remaining named defendants. The question was how much settlement credit should be afforded to the remaining defendants. Given the existence in U.S. maritime law (since the Reliable Transfer case) of a tort system of proportionate fault, the Supreme Court decided in McDermott that the verdict against the remaining defendants would not be reduced simply by the dollar amount paid by the settlor, but would be reduced instead by the proportion of...