How the Defense of Set-Off Applies

Posted by David Adelstein on December 25, 2015
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Set-off is a popular topic or defense raised in civil disputes.

In contract actions, set-off must be raised as an affirmative defense and proven at trial (and determined by the trier of fact) or else the defendant waives the right to assert set-off. See Felgenhauer v. Bonds, 891 So.2d 1043, 1045 (Fla. 2d DCA 2004).

What about tort actions such as negligence actions in disputes involving personal injury or property damage? For instance, say a plaintiff sues three defendants in negligence for the same damage. Prior to trial, the plaintiff settled with two of the defendants for a total of $100,000 and gave the defendants releases. The remaining defendant proceeds to trial but a) thinks its liability is no more than $100,000 and b) wants to reap the benefit of the $100,000 already obtained by the plaintiff from the other two defendants. In tort actions, set-off is not an affirmative defense to be determined by the trier of fact “but is a determination regarding damages to be made by the court after the [jury] verdict is rendered [in a jury trial].” Felgenhauer, 891 So.2d at 1045.

On this point, Florida Statutes s. 46.015 and 768.041 similarly state:

 

s. 46.015

(1) A written covenant not to sue or release of a person who is or may be jointly and severally liable with other persons for a claim shall not release or discharge the liability of any other person who may be liable for the balance of such claim.

(2) At trial, if any person shows the court that the plaintiff, or his or her legal representative, has delivered a written release or covenant not to sue to any person in partial satisfaction of the damages sued for, the court shall set off this amount from the amount of any judgment to which the plaintiff would be otherwise entitled at the time of rendering judgment.

(3) The fact that a written release or covenant not to sue exists or the fact that any person has been dismissed because of such release or covenant not to sue shall not be made known to the jury.

 

s. 768.041

(1) A release or covenant not to sue as to one tortfeasor for property damage to, personal injury of, or the wrongful death of any person shall not operate to release or discharge the liability of any other tortfeasor who may be liable for the same tort or death.

(2) At trial, if any defendant shows the court that the plaintiff, or any person lawfully on her or his behalf, has delivered a release or covenant not to sue to any person, firm, or corporation in partial satisfaction of the damages sued for, the court shall set off this amount from the amount of any judgment to which the plaintiff would be otherwise entitled at the time of rendering judgment and enter judgment accordingly.

(3) The fact of such a release or covenant not to sue, or that any defendant has been dismissed by order of the court shall not be made known to the jury.

 

Typically, these set-off statutes apply when the plaintiff received money from a defendant / tortfeasor who was vicariously liable for the other defendant’s acts. Felgenhauer, 891 So.2d at 1045-46.   (The vicariously liable party is responsible to the plaintiff to the same extent as the primary [defendant] actor; both are jointly liable for all of the harm that the primary actor has caused. See Grobman v. Posey, 863 So.2d 1230 (Fla. 4th DCA 2003)). Stated differently, “[s]ettlement proceeds must be set off against the jury verdict where defendants [the settling defendant and non-settling defendant] are liable for the same injury.” Yellow Cab Co. of St. Petersburg, Inc. v. Betsey, 696 So.2d 769, 772 (Fla. 2d DCA 1996).

The objective is to prevent the plaintiff from obtaining a windfall by obtaining overlapping compensation for the same damages. Cornerstone SMR, Inc. v. Bank of America, N.A., 163 So.3d 565, 569 (Fla. 4th DCA 2015). But, where there are separate and distinct claims involving different elements of damages, set-off is inappropriate. Gordon v. Marvin M. Rosenberg, D.D.S., P.A., 654 So.2d 643, 645 (Fla. 4th DCA 1995). For this reason, when settling with one defendant in a dispute under different theories of liability /claims involving different elements of damages, it is important to allocate the settlement amount in the release agreement between the claims. “Where a settlement is undifferentiated and general [and not allocated amongst the claims], the aggregate of the amount of the settlement should be set off against the judgment [to prevent the appearance of double recovery for the same damages].” Cornerstone SMR, 163 So.2d at 569.

Let’s break this down as applied to the above hypothetical. First, releasing the two defendants prior to trial does not operate as a release of the remaining defendant. Second, the court shall set-off any amount the plaintiff received from the other two defendants in the judgment the plaintiff receives since it involves the same damage, meaning the set-off would reduce the jury verdict and would be embodied in the final judgment. And, third, the fact that the other two defendants were released and then dismissed from the action in consideration of $100,000 prior to trial shall not be disclosed to the jury because this does not need to be proven at trial by the remaining defendant or impact any rulings at trial.  

On the other hand, if there was an argument that there were separate theories of liability / claims against the other two defendants and potentially different elements of damages, the plaintiff would want to allocate the settlement consideration in the release agreement to these separate theories of liability / claims to create the argument that set-off is not appropriate. (See also this article for an example regarding the application of set-off in a multiparty construction dispute.) 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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