Much has been made about the injustice of plaintiffs being able to game the system by potentially seeking excess recovery through a combination of claims asserted against bankruptcy trusts and in civil litigation. This has led to bankruptcy transparency legislation at the state and federal level, because defendants in asbestos litigation were being denied a full and fair opportunity to assess a plaintiff’s claim of asbestos exposure and to identify all the companies, both viable and bankrupt, that are allegedly responsible. The fundamental principles are that defendants are entitled to full disclosure and plaintiffs should be afforded full and fair, but not excessive, compensation.
These principles apply with equal force to settlements plaintiffs receive from other defendants in the pending lawsuit. In an era of full disclosure and litigation transparency, why should defendants be forced to try a case to verdict to gain access to offset information to which it is legally entitled? Withholding settlement information has two significant consequences: (1) it prevents defendants from fairly assessing its proportionate responsibility; and (2) it unfairly allows plaintiffs to potentially obtain excessive recovery through concealment of prior settlements.
For defendants, pre-trial valuation analysis typically includes projecting potential verdict ranges, assessing a defendant’s proportional percentage of responsibility if found liable and calculating potential offsets a defendant would be entitled to post-verdict. Without access to those settlement offsets, defendants cannot conduct a full and accurate valuation analysis, which inhibits them from making informed decisions about whether to proceed to trial. In these mass tort settings, there have been cases where defendants take a verdict but then find out that after offsets there is no recovery. In those cases, disclosure of settlement amounts would certainly have facilitated a resolution without the need for a trial.
Moreover, the concealment of settlement amounts potentially allows plaintiffs to manipulate the nature of the exposure in negotiations with defendants to maximize recovery from individual defendants. Then, at trial plaintiffs can change the emphasis of the claimed exposure and shift the burden to the remaining defendants to establish this alternative exposure. The Garlock litigation revealed this precise problem. In many cases, plaintiffs have the opportunity to recover through settlement more than they could ever hope to recover at trial simply because they exclusively control the numbers.
Short of defendants agreeing to share settlement amounts, this becomes an issue for legislative reform. Why not have a system where defendants who are on the verge of starting a trial can gain access to settlement information, even if on a confidential basis? This certainly would provide defendants with meaningful disclosure and prevent excessive recovery, consistent with the public policies being furthered through the current bankruptcy transparency legislative effort.