Appeals court reviews fundamentals of multiple liabilities in remanding business tort case

A Massachusetts Appeals Court decision Friday reaffirmed the rule against double recovery, the finality of settlement, and other fundamentals in a business case of joint tortfeasors.  The case is a good refresher for law students and lawyers on multiple liabilities in tort.


A company sued its former secretary-treasurer and a tax consultant for breaches of fiduciary duty through fraudulent concealment, resulting in financial loss in excess of about $288,000.  The company president, a husband, and the former principal, a wife, were recently divorced, and the latter’s separation on both counts was settled upon a $50,000 payment.  The couple furthermore stipulated an allocation of about $40,000 for the purchase of the wife’s company shares.

The company prevailed against the tax consultant on default judgment.  However, the court determined that the terms of the settlement, and specifically the allocated share purchase, inclusively credited the company with the $288,000 of the wife’s liability.

Under widely accepted state doctrine of joint tortfeasor liability in American law, a joint tortfeasor at judgment is credited with the plaintiff’s past settlement against a departed joint tortfeasor.  The rule encourages settlement by encouraging a well bargaining defendant to settle out, while deterring needless litigation by respecting the common law maxim that “a party can have but one satisfaction for the same injury.”

In accordance with the doctrine, then, the trial court ruled that the plaintiff had been made whole, so would collect nothing more from the tax consultant, however negligent.

That was an error on the merits, the Appeals Court ruled.  “Settlements are motivated by a wide range of factors, some non-monetary, and may involve significant payments or no payment at all,” the court wrote.

Justice Desmond

[T]here are many reasons [the husband] could have agreed on behalf of [the company] to dismiss the complaint against [the wife].  To name just one, having in-depth knowledge of [her] financial status, [he] may well have concluded that [she] would be unable to pay any judgment against her.  In any event, it was clearly erroneous to conclude that the plaintiff had been made whole based on no more than (i) the mere existence of a settlement [on] multiple legal claims and (ii) hearsay assertions that a discount had been given.

The court remanded for the trial court to reassess the actual measure of credit against liability represented by the share allocation, thus the remaining liability owed to the plaintiff by the tax-consultant defendant.

The case is Custom Kits Co. v. Tessier, No. 19-P-503 (Mass. App. Ct. May 1, 2020).  Associate Justice Kenneth V. Desmond Jr. wrote for a unanimous panel with Justices Wendlandt and McDonough.