Minnesota Court of Appeals allows uncollectible damages award to be reallocated to severally liable co-defendants
The Minnesota Court of Appeals’ decision in O’Brien v. Dombeck, Case No. A12-0984, published December 3, 2012, marks the first time in the nearly ten years since the Minnesota legislature modified Minnesota’s joint and several liability statute that Minnesota courts have spoken on the ambiguous relationship between the statute’s joint and several liability requirements and the provision allowing reallocation of uncollectible amounts. Under this decision, uncollectible amounts may be reallocated to other parties without regard to whether they are jointly liable.
O’Brien v. Dombeck offers the Court of Appeals’ first interpretation of the interplay between Minnesota’s joint and several liability laws, which were modified by the legislature nearly a decade ago, and Minnesota’s laws allowing reallocation of uncollectible amounts to other parties. While many practitioners expected the Court to interpret the reallocation provisions in light of the legislature’s changes to the joint and several liability requirements, the Court viewed the provisions entirely independent of one another.
In this case, the jury attributed 10% of the fault to one defendant and 90% of the fault to a second defendant. A significant portion of the second defendant’s share of the judgment was uncollectible. The plaintiff filed a motion seeking reallocation of the uncollectible amount pursuant to Minnesota Statutes Section 604.02, subdivision 2. The district court granted the plaintiff’s motion and reallocated an additional 10% of the uncollectible amount to the first defendant. The Minnesota Court of Appeals affirmed the reallocation.
Minnesota law on apportionment of damages
Since 2003, subdivision 1 of Minnesota Statutes Section 604.02 has made clear that the general rule in Minnesota is several liability: a party is responsible for contributing to an award based on the percentage of fault attributed to the party. The 2003 modification of subdivision 1 also established four exceptions to the general rule, permitting a party to be held both severally and jointly liable – responsible not just for the percentage of fault attributed to the party but also for any uncollectible amount allocated to other defendants – under any of those four exceptional circumstances.
Subdivision 2 of Minnesota Statutes Section 604.02, which was left unchanged by the legislature in 2003, permits a court, upon motion made within one year after judgment is entered, to determine whether all or a portion of a party’s share of the judgment is uncollectible and to reallocate any uncollectible amount among the other parties according to their respective percentages of fault. It was not clear, however, whether the changes made to subdivision 1 in 2003 any way affected Minnesota courts’ interpretation of subdivision 2. Subdivision 2 applies to reallocation of uncollectible amounts generally and makes no mention of a distinction between jointly or severally liable parties.
O’Brien v. Dombeck
In 2005, a car driven by William Dombeck collided with a truck driven by Robert Hareid. Hareid was driving the truck in the course and scope of his employment with Central Valley Cooperative. A passenger in Dombeck’s car, Gail O’Brien, was injured. O’Brien sued Dombeck, Hareid, and Central Valley Cooperative and sought damages arising out of their alleged negligence and vicarious liability.
The jury found Dombeck and Hareid negligent and attributed 90% of the fault to Dombeck and 10% of the fault to Hareid. The district court entered an order for judgment in the amount of $283,662.82. Dombeck was liable for 90% of the total judgment ($255,296.54) and Hareid and his employer Central Valley Cooperative were liable for 10% of the total judgment ($28,366.28).
Though Dombeck was liable for $255,296.54, he lacked insurance coverage for amounts in excess of $30,000 and the remainder of the judgment was deemed uncollectible. O’Brien filed a motion seeking to reallocate a portion of Dombeck’s uncollectible share to co-defendants Hareid and Central Valley Cooperative.
Reallocating uncollectible shares to severally liable co-defendants
The Minnesota Court of Appeals affirmed that the uncollectible share of the judgment against Dombeck was properly reallocated to co-defendants Hareid and Central Valley Cooperative pursuant to Minnesota Statutes Section 604.02, subdivision 2.
Minnesota Statutes Section 604.02 (2012) governs the apportionment of damages.
604.02 APPORTIONMENT OF DAMAGES
Subdivision 1. Joint liability.
When two or more persons are severally liable, contributions to awards shall be in proportion to the percentage of fault attributable to each, except that the following persons are jointly and severally liable for the whole award:
- a person whose fault is greater than 50 percent;
- two or more persons who act in a common scheme or plan that results in injury;
- a person who commits an intentional tort; or
- a person whose liability arises under chapters 18B – pesticide control, 115 – water pollution control, 115A – waste management, 115B – environmental response and liability, 115C – leaking underground storage tanks, and 299J – pipeline safety, public nuisance law for damage to the environment or the public health, any other environmental or public health law, or any environmental or public health ordinance or program of a municipality as defined in section 466.01.
This section applies to claims arising from events that occur on or after August 1, 2003.
Subdivision 2. Reallocation of uncollectible amounts generally.
Upon motion made not later than one year after judgment is entered, the court shall determine whether all or part of a party’s equitable share of the obligation is uncollectible from that party and shall reallocate any uncollectible amount among the other parties, including a claimant at fault, according to their respective percentages of fault. A party whose liability is reallocated is nonetheless subject to contribution and to any continuing liability to the claimant on the judgment.
Subdivision 3. Product liability; reallocation of uncollectible amounts.
In the case of a claim arising from the manufacture, sale, use or consumption of a product, an amount uncollectible from any person in the chain of manufacture and distribution shall be reallocated among all other persons in the chain of manufacture and distribution but not among the claimant or others at fault who are not in the chain of manufacture or distribution of the product. Provided, however, that a person whose fault is less than that of a claimant is liable to the claimant only for that portion of the judgment which represents the percentage of fault attributable to the person whose fault is less.
Hareid and Central Valley Cooperative argued that reallocation of uncollectible amounts is only permissible when the defendants are jointly and severally liable under subdivision 1. Given that none of the four situations in which defendants are jointly and severally liable under subdivision 1 are present in this case, Hareid and Central Valley Cooperative asserted that Dombeck’s uncollectible amount could not be reallocated to them because they were not jointly and severally liable.
The Minnesota Court of Appeals affirmed the district court’s interpretation of subdivision 2 to allow reallocation of uncollectible amounts in any case where a plaintiff has been damaged by two or more defendants, regardless of whether the co-defendants were found jointly and severally liable. In reaching its decision, the Court considered:
- Plain language of the text – Subdivision 2 does not contain any language that limits reallocation to parties who have been found jointly and severally liable under subdivision 1;
- Legislative history – If the legislature intended to limit reallocation to parties who have been found jointly and severally liable, the legislature could have expressly provided for such a limitation (as it did in subdivision 1); and
- Prior case law – Earlier case law holding that there was no basis for reallocating uncollectible amounts to other parties unless the parties were jointly liable is inapplicable because it relied on an earlier version of the statute, which applied only to jointly liable parties, whereas the current version of the statute applies to severally liable parties.
Implications of O’Brien v. Dombeck
For now, the Minnesota Court of Appeals decision in O’Brien v. Dombeck is the only Minnesota case law to consider a request to reallocate uncollectible amounts to severally liable parties since the modified joint and several liability law went into effect in 2003. Parties and practitioners will continue to watch closely to see whether the Minnesota Supreme Court or the Minnesota legislature will revisit whether uncollectible amounts may be reallocated to severally liable parties.