MARY BETH KELLY, J.
In this joint and several liability medical malpractice case, defendant, Dr. Martin Tuma, seeks a reduction of the final judgment rendered against him by the amount of his codefendants' settlement. This case therefore concerns the interplay between the common-law setoff rule, whereby a jointly and severally liable tortfeasor is entitled to a setoff from any adverse verdict in the amount of the cotortfeasor's settlement, and the noneconomic damages cap of MCL 600.1483, which limits a medical malpractice plaintiff's recovery of noneconomic damages. Specifically, we must decide whether the Legislature intended to abrogate the common-law setoff rule and, if not, the order in which the setoff rule and the noneconomic damages cap of MCL 600.1483 apply to a jury's verdict. Both the circuit court and Court of Appeals held, pursuant to Markley v. Oak Health Care Investors of Coldwater, Inc.,
We agree that Markley was correctly decided and thus hold that the Legislature did not abolish the common-law setoff rule in the context of joint and several liability medical malpractice cases. We affirm the Court of Appeals in this regard and further clarify that where the Legislature has retained principles of joint and several liability, the common-law setoff rule applies. The lower courts' sequencing of the setoff and the noneconomic damages cap, however, results in an outcome contrary to the Legislature's requirement that medical malpractice plaintiffs "shall not" recover more noneconomic losses than the amount determined by MCL 600.1483. Rather, the Legislature has exercised its authority to limit a medical malpractice plaintiff's recovery by capping noneconomic losses and requiring the reduction of economic losses by the amounts paid by collateral sources. Because application of the setoff to the jury's verdict can result in a recovery beyond those statutorily mandated damages limitations, we further hold that a joint tortfeasor's settlement must be set off from the final judgment after application of the noneconomic damages cap of MCL 600.1483, as well as the collateral source rule. We therefore reverse that portion of the Court of Appeals' judgment affirming the circuit court's application of the common-law setoff rule.
In September 2001, plaintiff, Myriam Velez, filed suit against Detroit Receiving Hospital, Harper Hospital, and Drs. Lawrence Schwartz and Martin Tuma, alleging that their failure to timely operate on her leg necessitated its amputation below the knee. After plaintiff filed her notice of intent to sue, the hospitals entered into a settlement agreement with plaintiff in which those defendants paid plaintiff a total of $195,000. After the settlement, plaintiff's lawsuit was dismissed by stipulation but without prejudice with respect to Tuma, who was not a part of the settlement agreement.
Plaintiff then filed a new complaint against defendant Tuma in January 2004, raising the same allegations against defendant.
Before the circuit court entered a final judgment in plaintiff's favor, defendant requested that the circuit court apply the noneconomic damages cap to the jury's verdict and then subtract codefendants' $195,000 settlement from the final judgment. Plaintiff objected, relying on Markley, and argued that the circuit court was required to subtract codefendants' settlement from the jury's unadjusted "verdict."
Thereafter, the circuit court entered a judgment awarding plaintiff $394,200, which is the amount of the noneconomic damages cap in this case.
In the Court of Appeals, defendant argued that the circuit court had erred by applying the setoff to the jury's unadjusted verdict rather than to the amount of the final judgment after applying the noneconomic damages cap. The Court of Appeals, however, affirmed the circuit court's decision to apply the setoff to the unadjusted verdict.
Defendant applied for leave to appeal in this Court, and plaintiff filed a cross-appeal. Initially, we denied both applications,
The questions presented in these appeals are questions of law that we review de novo.
Plaintiff argues that the Legislature abrogated the common-law setoff rule and thus any setoff of codefendants' settlement award is not warranted. In support, plaintiff posits that in 1995 PA 161, the Legislature clearly intended to abrogate the common-law rule when it repealed former MCL 600.2925d(b), as added by 1974 PA 318, which had codified the setoff rule and provided that a settlement "reduces the claim against the other tort-feasors to the extent of any amount stipulated by the release...."
The common law remains in force until "changed, amended or repealed."
We cannot conclude that the Legislature intended to abolish the common-law setoff rule in the context of joint and several liability medical malpractice cases. While the pertinent statutes are silent with respect to the application of the common-law setoff rule, we cannot agree with plaintiff that the repeal of the statutory setoff, former MCL 600.2925d(b), by 1995 PA 161 demonstrates a clear intent to abrogate the common-law rule. Plaintiff's argument ignores the fact that the repeal of former MCL 600.2925d(b) was but one part of comprehensive tort-reform legislation and that there is no conflict between the common-law rule and the current legislation that would prevent the setoff's application. Those 1995 reforms abolished joint and several liability in most contexts and created an allocation-of-fault system in which each tortfeasor is liable only for the portion of the total damages that reflects that tortfeasor's percentage of fault.
The same comprehensive tort-reform legislation, however, also specifically retained "joint and several liability" in medical malpractice cases under MCL 600.6304(6)(a) where, as in the present case, the plaintiff is determined to be without fault.
The term "joint and several" liability, as used in MCL 600.6304(6)(a), is a technical legal term. It has a long-acquired meaning that is well established in our jurisprudence: "[]Where multiple tortfeasors caused a single or indivisible injury, the injured party [may] either sue all tortfeasors jointly or he [may] sue any individual tortfeasor severally, and each individual tortfeasor [is] liable for the entire judgment...."
Inherent in the meaning of joint and several liability is the concept that a plaintiff's recovery is limited to one compensation for the single injury.
The Court of Appeals' decision in Markley is consistent with this reasoning. There, the defendant sought a setoff against a jury verdict in the amount of the joint codefendant's settlement. The Court of Appeals rejected the circuit court's reasoning that the Legislature's repeal of former MCL 600.2925d(b) was intended to abrogate any common-law right to a setoff. Instead, the appeals court reasoned:
Thus, the Court of Appeals held that "the principle of one recovery and the common-law rule of setoff, in the context of joint and several liability cases, continue to be the law in Michigan."
While the present case is factually dissimilar from Kaiser, the principles espoused in Kaiser nonetheless support our interpretation of the tort-reform statutes; mainly, that where the Legislature has retained joint and several liability, the common-law setoff rule remains intact. Indeed, as the Court of Appeals acknowledged in Markley, we are aware of no conflicting provision that would prevent the setoff's application, and plaintiff has identified none. Given our reasoning and our decision in Kaiser, we cannot hold that Markley was wrongly decided, as plaintiff urges. Accordingly, we hold that the common-law setoff rule remains the law in joint and several liability medical malpractice cases. We further clarify, consistent with our decision in Kaiser, that where the Legislature has specifically retained the technical common-law term "joint and several liability," the common-law setoff rule remains applicable.
Our conclusion that the common-law setoff rule remains applicable in joint and several liability cases does not end our analysis. Rather, we must address the issue of the sequence in which to apply the common-law setoff rule and the statutory cap on noneconomic damages to the jury's verdict. We therefore examine the interplay between the common-law rule and MCL 600.1483. We are cognizant that we are the stewards of the common law and that the Legislature is presumed to be aware of the common law when enacting legislation.
We agree with defendant that the lower courts erred by applying the setoff before applying the noneconomic damages cap, thereby allowing plaintiff to recover a total judgment beyond what Michigan law permits. While the Court of Appeals properly recognized that the common-law setoff rule applies in this case and is necessary to
As noted, MCL 600.1483(1) limits a plaintiff's damages for "noneconomic losses recoverable" and provides, in part:
This language mandates an absolute cap on all available noneconomic losses: a medical malpractice plaintiff's "total amount" of noneconomic damages "recoverable" "shall not exceed" the statutory cap. Use of the term "recoverable," giving it its plain meaning, denotes noneconomic losses that are capable of being recovered, which necessarily includes recovery through settlements, jury verdicts, or arbitration.
Despite the unequivocal language of MCL 600.1483 limiting noneconomic damages, the statute is silent with respect to when the cap is to be applied both generally and in relation to the common-law setoff.
Yet this is exactly what the lower courts did in this case. Neither the circuit court nor the Court of Appeals recognized that the Legislature has statutorily limited a medical malpractice plaintiff's recovery and that a setoff must be applied to ensure that the plaintiff does not recover an amount more than that which the Legislature has fixed by statute. Instead, the lower courts ignored the mandate of MCL 600.1483 and measured plaintiff's "actual loss," or full compensation, as the jury's verdict. This erroneous reasoning led to the legally incorrect conclusion that plaintiff's recovery for her single injury could not exceed the amount of the verdict, thereby justifying a setoff from the jury's verdict, rather than the judgment, after application of the noneconomic cap and collateral source rule. By applying the setoff directly to the unadjusted verdict, the lower courts thus subverted both the clear directive of MCL 600.1483 — that medical malpractice plaintiffs not recover noneconomic losses beyond the legislatively
Plaintiff would have us affirm the lower courts' erroneous application of the cap and rule, but her argument fails due to similar shortcomings. Like the Court of Appeals, plaintiff and Justice HATHAWAY's dissent assert that the measure of her actual losses for purposes of the setoff is the jury's verdict and that she can only be overcompensated for purposes of the common-law setoff rule if she receives more than the jury's verdict. Plaintiff cites both Kaiser and Markley for the proposition that the unadjusted jury verdict is the measure of the one full recovery to which plaintiff is entitled, but these cases are simply inapposite. Kaiser involved a vehicle owner's vicarious liability for those who drive the owner's vehicle, and there is no similar damages cap in the context of vehicle-owner vicarious-liability cases. It was not necessary for Kaiser to address the interaction between a statutory limitation on damages and the common-law setoff and, thus, distinguish between "judgments" and "jury verdicts" as the measure of the one full recovery to which a plaintiff is entitled. Markley also does not support plaintiff's position. Indeed, Markley itself acknowledged that "there [was] no reason to address the damage cap" when applying the setoff rule.
Plaintiff criticizes this position and claims that it requires the itemization of settlements. Plaintiff's position actually causes this perceived harm, however. When a judgment contains both economic and noneconomic damages, a circuit court applying the setoff to the jury's verdict before application of the collateral source rule would have to determine how to allocate the settlement between economic and noneconomic damages. This is a result we cannot condone, not only because it can result in an outcome contrary to the mandate of MCL 600.1483, but also because it could discourage settlements in instances in which there are multiple related defendants.
To the extent the Legislature has not abolished principles of joint and several liability, those principles and the common-law setoff rule remain the law in Michigan. Markley reached this same conclusion, and we decline plaintiff's invitation to conclude that Markley was wrongly decided. Further, when joint and several liability principles apply in medical malpractice cases, any settlement must be set off from the final judgment after application of the noneconomic damages cap and the collateral source rule. The lower courts erroneously set off codefendants' settlement against the jury's verdict, which resulted in plaintiff receiving $195,000 more for her injury than permitted by law. Accordingly, we reverse the portion of the Court of Appeals' judgment upholding the circuit court's application of the common-law setoff rule and remand to the circuit court for entry of an order reducing the final judgment by $195,000.
YOUNG, C.J., and MARKMAN (except for the fourth sentence of the third paragraph on page 11) and ZAHRA, JJ., concurred with MARY BETH KELLY, J.
MARKMAN, J. (concurring).
I concur in the majority opinion with the exception of the majority's statement that "we will [not] extend a statute by implication to abrogate established rules of common law." Ante at 437. I do believe that a statute may by implication abrogate established rules of common law. That is, the Legislature does not have to explicitly state that it is abrogating a common-law right in order for it to abrogate a common-law right. The Legislature's intent to abrogate the common law may be sufficiently clear without its having to explicitly state that this is its intent. A legislative body need not provide a running commentary of the effect of its actions on the common law when its actions will admit of only the most obvious interpretation. The statement is unnecessary to the opinion, and no injury would be done to the opinion were it not there. I join the majority because I believe the Legislature has not, either expressly or implicitly, abrogated the common-law setoff rule in the context of joint and several liability medical malpractice cases.
MICHAEL F. CAVANAGH, J. (concurring in part and dissenting in part).
I agree with both the majority and dissenting opinions that the common-law setoff rule applies in the context of joint and several liability medical malpractice cases. There is no indication that the Legislature intended to abrogate the common-law setoff rule when it eliminated the statutory setoff rule in MCL 600.2925d(b).
I would, however, affirm the judgment of the Court of Appeals with respect to how the common-law setoff rule should be applied because, in my view, the panel did
MARILYN J. KELLY, J., concurred with MICHAEL F. CAVANAGH, J.
HATHAWAY, J. (dissenting).
I generally agree with the majority that when a trier of fact determines that a plaintiff in a medical malpractice case is not comparatively negligent, the common-law setoff rule applies. However, I disagree with the manner in which the majority applies this rule because it does so in a fashion that is contrary to the rule's purpose. Because today's decision departs from the common-law setoff rule, I respectfully dissent.
For many years, the rule in this state was that concurrent tortfeasors were held to be jointly and severally liable. Joint and several liability operated to place the full burden of the injustice on a tortfeasor, rather than on the injured party.
A corollary of joint and several liability is the common-law setoff rule.
The common-law setoff rule was codified in former MCL 600.2925d by 1974 PA 318 and this statutory version of the setoff rule was applied in the same manner as it was at common law in instances in which the defendants were jointly and severally liable. However, statutory setoff was subsequently eliminated by 1995 PA 161,
Kaiser addressed the issue of whether the common-law setoff rule applies to claims against owners and operators of motor vehicles when vicarious liability is statutorily imposed. In holding that the common-law setoff rule applies to such cases, this Court explained:
Thus, Kaiser recognized that when a party suffers a single, indivisible injury as the result of the conduct of multiple tortfeasors, the injured party is entitled to be made whole. This means that the injured party is entitled to be fully compensated, but not overcompensated. I see no reason why the principles set forth in Kaiser should not be extended to the category of medical malpractice claims that also retain joint and several liability.
Moreover, I believe that in Markley v. Oak Health Care Investors of Coldwater, Inc., 255 Mich.App. 245, 256-257, 660 N.W.2d 344 (2003), the Court of Appeals correctly reasoned that
Thus, Markley correctly held that in medical malpractice cases that retain joint and several liability, the common-law setoff rule applies. However, with that said, if the common-law setoff rule is to be imposed in the absence of statutory authority, it must be applied in the same manner and for the same purpose as it was at common law. Otherwise, the common-law setoff rule is not being applied; instead, an entirely new rule is created.
The undisputed historical purpose of the common-law setoff rule was to preclude a plaintiff from being overcompensated for a single, indivisible injury.
In analyzing whether a medical malpractice plaintiff has been overcompensated, we must be mindful of the so-called "tort reform" liability statutes that contain measures to preclude a plaintiff from receiving overcompensation in many regards. For example, the fact-finder is required to separate all economic damages from noneconomic ones,
To determine whether a medical malpractice plaintiff has actually been overcompensated, a multistep analysis is required that considers all the principles discussed above. The first step is to consider whether the plaintiff was comparatively negligent. If the plaintiff was comparatively negligent, a defendant's liability is several and, as such, the defendant is only responsible for his or her pro rata share of the plaintiff's damages.
The majority opines that the verdict must first be reduced by the applicable limitation on noneconomic damages;
The majority applies setoff in a manner that is at odds with the common-law rule, which was used to prevent a plaintiff from receiving a double recovery or overcompensation for a single, indivisible injury. The majority seemingly disregards the obvious — the trier of fact determines the total amount of a plaintiff's damages, and only when a plaintiff receives more than that amount as compensation is the plaintiff overcompensated. A plaintiff is not overcompensated when he or she receives less than the trier of fact's determination of the amount that is required to make him or her whole. The goal of the common-law setoff rule is merely to prevent overcompensation; it is not to further undercompensate the plaintiff. Unfortunately, the majority's method of applying this rule fails to achieve the goal of common-law setoff. While the majority asserts that it is applying "common-law setoff," it instead creates a new rule that bears little resemblance to the common-law setoff rule or its underlying purpose. It is axiomatic that if a common-law rule is to be used, it should be applied in the manner and for the purposes that it was intended at common law. To do otherwise defies logic and does nothing more than judicially create a new rule in order to fill what the creator of the new rule perceives to be a statutory void.
The majority counters that its manner of applying the common-law setoff rule is mandated by the language of MCL 600.1483(1), which sets forth the limitations on damages.
The majority's analysis ignores the full language of MCL 600.1483(2), which requires the "trier of fact" to segregate the economic and noneconomic elements of damages. This language logically means that only awards by a trier of fact are within the scope of the subsection, not settlements, which do not involve a trier of fact. More importantly, MCL 600.6304(5) mandates that only following an "award of damages" is the court to reduce that "award" of noneconomic damages to the appropriate limitation found in MCL 600.1483. MCL 600.6304(5) provides:
However, no comparable language can be found allowing a court to reduce awards by the amount of a settlement. Thus, two logical conclusions can be drawn from the actual text of this provision. First, the Legislature did not intend to preclude a trier of fact from determining the full amount of recovery that is necessary to make the plaintiff whole and, second, the Legislature only intended awards by a trier of fact to be reduced to the noneconomic-damages limitation. If the Legislature had intended the interpretation adopted by the majority, it would be logical to assume that it would have made some reference to settlement somewhere in the statutory scheme. Instead, the statutory scheme is silent with respect to settlements. While the absence of such language does not preclude common-law setoff, the common-law setoff rule is only applicable when overcompensation is involved. When there is no overcompensation, the common-law setoff rule does not apply. In the absence of statutory authority, and in situations
In this case, a jury determined that as a result of defendant Dr. Tuma's negligence, plaintiff Ms. Velez's left leg had to be amputated. The jury found that defendant was both professionally negligent and the proximate cause of plaintiff's injuries. The jury returned a verdict in plaintiff's favor that included $124,831.86 in economic damages and $1.4 million in noneconomic damages for a total verdict of $1,524,831. It is the total verdict that constitutes full recovery and makes plaintiff whole. Only if she receives more than this total amount would she be receiving a double recovery or overcompensation. Plaintiff is clearly not receiving a double recovery or overcompensation because the trial court reduced the amount the jury determined would make her whole to $394,200.
My final concern regarding the majority's decision is that it concludes that the entire amount of plaintiff's prior settlement with Tuma's codefendants must be set off or subtracted from plaintiff's noneconomic-damages award. I find this action considerably troubling because it ignores the actual agreement of the settling parties. The settlement agreement between plaintiff and the settling codefendants is contained in a document entitled "Covenant Not to Sue Agreement." The total settlement amount was $195,000, and the agreement specifically states the settlement is for all the damages including economic, noneconomic, costs, attorney fees, and interest. This settlement was intended to resolve all of plaintiff's claims with the settling codefendants. Pursuant to the unambiguous terms of the agreement, the amount of $195,000 was not allocated into any specific category of damages. As such, there is no logical way to conclude that all the settlement proceeds were for noneconomic damages. Despite this, the majority ignores the terms of the agreement and instead assumes that the entire settlement was for noneconomic damages that are limited by the noneconomic-damages limitation contained in MCL 600.1483. Because an agreement between the parties is a contract, the majority is not free to alter its unambiguous terms by making such an assumption.
Total Jury Verdict $1,524,831.86
Settlement Setoff -$195,000
Post Setoff Verdict $1,329,831.86
Economic Damages $0 due to reduction for collateral sources
Noneconomic Damages $394,200 due to statutory cap on noneconomic
damages
Final Judgment $394,200
Total Jury Verdict $1,524,831.86
Economic Damages $124,831.86, reduced to $0 by collateral sources
Noneconomic Damages $1,400,000, reduced to $394,200 due to cap on
noneconomic damages
Settlement Setoff -$195,000
Final Judgment $199,200
