Joint and several liability
Encyclopedia
Where two or more persons are liable
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...

in respect of the same liability, in most common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...

 legal systems they may either be:
  • jointly liable, or
  • severally liable, or
  • jointly and severally liable.

Joint liability

If parties have joint liability, then they are each liable up to the full amount of the relevant obligation
Obligation
An obligation is a requirement to take some course of action, whether legal or moral. There are also obligations in other normative contexts, such as obligations of etiquette, social obligations, and possibly...

. So if a husband and wife
Marriage
Marriage is a social union or legal contract between people that creates kinship. It is an institution in which interpersonal relationships, usually intimate and sexual, are acknowledged in a variety of ways, depending on the culture or subculture in which it is found...

 take a loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

 from a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

, the loan agreement
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 will normally provide that they are to be "jointly liable" for the full amount. If one party dies, disappears or is declared bankrupt
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

, the other remains fully liable. Accordingly, the bank must sue all living co-promisors, for the full amount. However, in suing, the creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

 has only one course of action, i.e., the creditor can sue for each debt only once. If, for example, there are three partners
Partnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...

, and the creditor sues all of them for the outstanding loan amount and one of them pays the liability, the creditor cannot recover further amounts from the partners who did not contribute to the liability.

Several liability

The converse is several or proportionate liability, where the parties are liable for only their respective obligations. A common example of several liability is in syndicated loan
Syndicated loan
A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment banks known as arrangers....

 agreements, which will normally provide that each bank is severally liable for its own part of the loan. If one bank fails to advance its agreed part of the loan to the borrower, then the borrower can sue only that bank, and the other banks in the syndicate
Syndicate
A syndicate is a self-organizing group of individuals, companies or entities formed to transact some specific business, or to promote a common interest or in the case of criminals, to engage in organized crime...

 have no liability.

Joint and several liability

Under joint and several liability or all sums, a claimant may pursue an obligation against any one party as if they were jointly liable and it becomes the responsibility of the defendants to sort out their respective proportions of liability and payment. This means that if the claimant pursues one defendant and receives payment, that defendant must then pursue the other obligors for a contribution to their share of the liability.

Joint and several liability is most relevant in tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...

 claims, whereby a plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...

 may recover all the damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...

 from any of the defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...

s regardless of their individual share of the liability. The rule is often applied in negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...

 cases, though it is sometimes invoked in other areas of law.

In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, 46 of the 50 states have a rule of joint and several liability, although in response to "tort reform
Tort reform
Tort reform refers to proposed changes in common law civil justice systems that would reduce tort litigation or damages. Tort actions are civil common law claims first created in the English commonwealth system as a non-legislative means for compensating wrongs and harm done by one party to...

" efforts, some have limited the applicability of the rule.

Examples

If Ann is struck by a car driven by Bob, who was served alcohol in Charlotte's bar (and the state has dramshop laws), then both Bob and Charlotte may be held jointly liable for Ann's injuries. The jury
Jury
A jury is a sworn body of people convened to render an impartial verdict officially submitted to them by a court, or to set a penalty or judgment. Modern juries tend to be found in courts to ascertain the guilt, or lack thereof, in a crime. In Anglophone jurisdictions, the verdict may be guilty,...

 determines Ann should be awarded $10 million and that Bob was 90% at fault and Charlotte 10% at fault.
  • Under proportionate liability, Bob would have to pay $9M and Charlotte would have to pay $1M. If Bob does not have any money, Ann only gets the $1M from Charlotte.
  • Under joint and several liability, Ann may recover the full damages from either of the defendants. If Ann sued Charlotte alone, Charlotte would have to pay the full $10M despite only being at fault for $1M. Charlotte would then either have to join
    Joinder
    Joinder is a legal term, which refers to the process of joining two or more legal issues together to be heard in one hearing or trial. It is done when the issues or parties involved overlap sufficiently to make the process more efficient or more fair...

     Bob as defendant in Ann's suit against her or would have to pursue a separate action against Bob for $9M. Regardless of the outcome of that action, Charlotte would remain liable to Ann for the full $10M.


In a Wisconsin case (Zimmer v. City of Milwaukee), an uninsured driver of a car with faulty brakes hit and killed a six year old boy at a school crossing. The school crossing had a stop sign and a crossing guard. The plaintiff lawyer argued that the accident might have been avoided if the crossing guard, instead of signalling the car to stop, had attempted to get the child out of the car's path. The city (the crossing guard's employer) was found to be one percent at fault. Under proportionate liability (sometimes also called comparative negligence), the city would only have been liable for their one percent of the damages. However because the driver was uninsured (and thus insolvent), the city had to pay 100% of the damages.

In a Florida case, involving an injury on the Grand Prix bumper-car ride at Walt Disney World, the jury found the plaintiff 14% responsible for her own injury, her then-fiance to be 85% responsible (he rammed his car into the back of hers) and the Disney Corporation to be only 1% liable for the injury. The court ordered Disney to pay 86% of the damages - its percentage plus the husband's percentage - because the husband was unable to pay his portion.

Arguments for and against joint and several liability

Joint and several liability is premised on the theory that the defendants are in the best position to apportion damages amongst themselves. Once liability has been established and damages awarded, the defendants are free to litigate amongst themselves to better divide liability. The plaintiff no longer needs to be involved in the litigation and can avoid the cost of continuing litigation. As Dean Prosser observed:
Defenders of the principle of joint and several liability further argue that it protects victims from being under compensated if one of the defendants cannot pay his or her share of proportionate liability. A tortfeasor, even if only 1% at fault, is the better party to shoulder the burden if the primarily responsible party is unable to compensate the victim fully.

Opponents of the principle of joint and several liability note that its use (instead of proportionate responsibility) has led to cases in which a party with a very minor part of the responsibility unfairly shoulders the burden of damages. The classic example is the uninsured drunk driver who injures someone; the plaintiff will sue both the insolvent drunk driver and the state highway department (or automobile manufacturer), hoping to hold the latter 1% or 2% responsible, thereby forcing them to pay the entire award. Joint and several liability, reform supporters argue, leads to lawyers searching for "deep pocket
Deep pocket
Deep pocket is an American slang term; it usually means "extensive financial wealth or resources". It is usually used in reference to big companies or organizations , although it can be used in reference to individuals .In the context of a lawsuit, the deep pocket is often the target defendant,...

s" to sue (in the expectation that they will settle rather than risk trial), even though those defendants may only be remotely related to an incident.

Richard Wehe, Assistant Chief Counsel at the California Department of Transportation
California Department of Transportation
The California Department of Transportation is a government department in the U.S. state of California. Its mission is to improve mobility across the state. It manages the state highway system and is actively involved with public transportation systems throughout the state...

, said:
Where a financially wealthy party can be joined
Joinder
Joinder is a legal term, which refers to the process of joining two or more legal issues together to be heard in one hearing or trial. It is done when the issues or parties involved overlap sufficiently to make the process more efficient or more fair...

 as a defendant, a plaintiff has a greater chance of recovering damages than when the defendants have very limited economic resources or are financially insolvent, or "judgment proof
Judgment proof
The term judgment proof is most commonly used in tort law contexts to refer to defendants or potential defendants who are financially insolvent...

".

Variations

As noted above, some jurisdictions have imposed limits on joint and several liability. For example,
  • In Ohio after April 2003, only defendants who are responsible for more than 50% of the tortious conduct can be held jointly and severally liable for economic losses. A defendant who is responsible but whose tortious conduct was less than 50% is only responsible for his/her share of the plaintiff's economic loss. Non-economic losses (such as pain and suffering or loss of companionship) can only be assigned proportionately.
  • California allows joint and several liability but only for economic damages.
  • Hawaii allows joint and several liability for all economic losses but only for non-economic losses when the underlying tort is intentional, related to environmental pollution or selected other classes.

Microfinance

In trying to achieve its aim of alleviating poverty, Microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....

 often lends to group of poor, where each member of the group is jointly liable to each other. This means that each member is responsible for ensuring that all the other members of the group repay too. If one member fails to repay, the members of the group are also held in default. Joint liability solves the information and enforcement problems associated with credit markets by encourage screening
Screening
One meaning of screening is the investigation of a great number of something looking for those with a particular problem or feature....

, monitoring
Monitoring
To monitor or monitoring generally means to be aware of the state of a system. Below are specific examples:* to observe a situation for any changes which may occur over time, using a monitor or measuring device of some sort:...

, costly state verification
Costly state verification
Costly State Verification approach in contract theory considers contract design problem in which verification of enterprise performance is costly and a lender has to pay a monitoring cost....

 and contract enforcement.

See also

  • Tort reform
    Tort reform
    Tort reform refers to proposed changes in common law civil justice systems that would reduce tort litigation or damages. Tort actions are civil common law claims first created in the English commonwealth system as a non-legislative means for compensating wrongs and harm done by one party to...

  • Walt Disney World v. Wood
    Walt Disney World v. Wood
    Walt Disney World Co. v. Wood, 489 So. 2d 61 is a court decision by the Florida District Court of Appeal illustrating the principle of joint and several liability when combined with comparative negligence....

    , 489 So. 2d 61 (Fla. Dist. Ct. App. 1986).
  • Walt Disney
    Walt Disney
    Walter Elias "Walt" Disney was an American film producer, director, screenwriter, voice actor, animator, entrepreneur, entertainer, international icon, and philanthropist, well-known for his influence in the field of entertainment during the 20th century. Along with his brother Roy O...

    CA No. 15452

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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