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Lloyd's Maritime and Commercial Law Quarterly

SETTLEMENT CREDITS—THE PROPORTIONATE SHARE RULE

McDermott Inc. v. AmClyde
If P sues A, B, and C, settles with A, and then obtains a trial verdict against B and C, the latter are clearly due some credit to account for P’s settlement with A. Until recently, the method to be employed under admiralty law in calculating the credit in the United States was subject to considerable uncertainty. That doubt has been removed by the U.S. Supreme Court’s opinion in McDermott Inc. v. AmClyde,1 which adopted a proportionate share credit and eliminated contribution rights between settling and non-settling tortfeasors.
The settlement credit controversy had its genesis in Leger v. Drilling Well Control Inc.2 The Court of Appeals for the Fifth Circuit approved the reduction of P’s judgment against a non-settling defendant by the combined proportionate fault of the plaintiff and two settling defendants. The plaintiff was 35% contributorily negligent, the settling defendants were, in combination, 20% at fault, and the non-settling defendant was 45% at fault. Accordingly, judgment was entered for 45% of the plaintiff’s damages. This became known as the Leger, or “proportionate fault”, credit. Because the plaintiff had received more than 20% of his proven damages in the two settlements, he ultimately recovered more than he would have received had he simply proceeded to trial against all three defendants.3 A different approach was taken in Self v. Great Lakes Dredge & Dock Co.4 The Court of Appeals for the 11th Circuit held that the credit should be measured by the amount paid in settlement, regardless of the degree of fault of the settling defendant. Thus, the plaintiff ended up with exactly his full proven damages5 even though the settlement proceeds were considerably less than the settling defendant’s 70% share of the proven damages. The non-settling defendant, who was only 30% responsible for the loss, was held liable for over half of the damages. This approach became known as the Self, or “pro tanto “, credit. Considerable debate ensued in the courts over the relative merits of these

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