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McDermott, Inc. v. Amclyde - 511 U.S. 202, 114 S. Ct. 1461 (1994)

Rule:

The effect of the two rules on judicial economy is also ambiguous. The pro tanto rule, if adopted without the requirement of a good-faith hearing, would be easier to administer, because the relative fault of the settling defendant would not have to be adjudicated either at a preliminary hearing or at trial. Nevertheless, because of the large potential for unfairness, no party or amicus in this suit advocates the pro tanto rule untamed by good-faith hearings. Once the pro tanto rule is coupled with a good-faith hearing, however, it is difficult to determine whether the pro tanto or proportionate share approach best promotes judicial economy. Under either approach, the relative fault of the parties will have to be determined. Under the pro tanto approach, the settling defendant's share of responsibility will have to be ascertained at a separate, pretrial hearing. Under the proportionate share approach, the allocation will take place at trial. 

Facts:

A construction accident in the Gulf of Mexico gave rise to this admiralty claim. An oil platform owner filed an action for damages under admiralty law against respondents, manufacturers and designers of a crane. The oil platform owner settled with three defendants. However, respondents manufacturers and designers of a crane did not settle and the case went to trial. A jury assessed petitioner's loss at $2.1 million and allocated the damages between respondents. On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the damage award for the owner but reduced the award by deducting the amount the owner received from settlements made with other parties. 

Issue:

Did the court of appeals err in reducing the award by the amount the owner received from settlements made with other parties?

Answer:

Yes

Conclusion:

The court stated that the proportionate share approach would have made one respondent responsible for precisely its share of damages. There was no reason to allocate any shortfall to other defendants who were not parties to the settlement. Just as other defendants were not entitled to a reduction in liability when petitioner negotiated a generous settlement, so they were not required to shoulder a disproportionate liability when petitioner negotiated a meager one. The judgment of the court of appeals was reversed and the case remanded for further proceedings.

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