McDermott, Inc. v. AmClyde

Background

A construction accident in the Gulf of Mexico injured an offshore platform and a large crane. A company that bought the crane sued the crane seller, the hook supplier, and three companies that made the supporting slings. Before trial, the plaintiff settled with the three sling companies for $1 million. At trial a jury found $2.1 million in deck damages and assigned percentages of fault: 32% to the crane seller, 38% to the hook supplier, and 30% jointly to the plaintiff and the slings. The district court entered judgments based on those percentages. The Court of Appeals reduced the recoveries by treating the $1 million settlement as a dollar-for-dollar credit.

Reasoning

The Court addressed whether nonsettling defendants should have their liability reduced by the actual settlement amount in dollars or instead pay only their share based on the jury’s percentage allocation. The Court chose the proportionate-share approach: nonsettling defendants are responsible only for the percentage of fault the jury assigns to them. The opinion relied on prior admiralty decisions favoring allocation by fault, explained that a dollar-for-dollar credit (the pro tanto rule) can unfairly shift others’ shares, and noted problems and extra litigation that pro tanto credits and “good-faith” hearings can create.

Real world impact

Going forward in admiralty cases, a plaintiff’s settlement with some defendants will not automatically reduce other defendants’ liability by the settlement amount in dollars. Instead, remaining defendants will normally pay only the share of damages the jury attributes to them. The case was sent back to the lower court for further proceedings consistent with this rule.