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11/14/88 Tu Hou Lam, v. Lynch Machinery Division

November 14, 1988

TU HOU LAM, PLAINTIFF-APPELLANT

v.

LYNCH MACHINERY DIVISION OF LYNCH CORPORATION, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

533 N.E.2d 37, 178 Ill. App. 3d 229, 127 Ill. Dec. 419 1988.IL.1644

Appeal from the Circuit Court of Cook County; the Hon. John J. Crown, Judge, presiding.

APPELLATE Judges:

JUSTICE MURRAY delivered the opinion of the court. LORENZ, P.J., and PINCHAM, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MURRAY

Plaintiff, Tu Hou Lam, appeals from a judgment for defendant, Lynch Machinery Division of Lynch Corporation (Lynch), in a personal injury action. She contends that the trial court erred in not allowing her to examine the potential biases of witnesses. Plaintiff also appeals from an order of the trial court denying her post-trial motion for judgment notwithstanding the verdict or, alternatively, a new trial on the ground that the verdict was against the manifest weight of the evidence.

The record discloses that plaintiff, while working as an employee for Tootsie Roll Industries , was injured when her right arm was caught in a candy-wrapping machine in 1980. The machine had been manufactured by Lynch and sold to a TRI factory in New Jersey in 1966. In 1981, plaintiff sued Lynch on negligence and strict liability grounds, the latter action being dismissed because the appropriate statute of limitations had expired. That dismissal is not appealed.

Lynch answered plaintiff's negligence complaint, denying any negligence, and asserted the defense of contributory negligence on the part of plaintiff. Lynch later filed a third-party claim for contribution and indemnity against TRI, asserting that plaintiff's injuries were caused by TRI's removal of a guard from the rotating shaft in which plaintiff's arm had been caught. On February 6, 1987, Lynch and TRI's attorneys offered to settle with plaintiff for $200,000 plus a waiver of TRI's worker's compensation lien. Plaintiff had earlier recovered approximately $96,000 on her worker's compensation claim. Plaintiff rejected that offer and also a subsequent offer by Lynch of $300,000 on February 9. The next day, February 10, TRI and Lynch had the third-party claim dismissed after entering into a contribution and settlement agreement. Before trial on the morning of February 11, plaintiff advised the court that she would accept Lynch's settlement offer of $300,000 and was informed that it had been withdrawn. The trial commenced with plaintiff taking the stand. After the end of the first day of trial, it was learned that the agreement between Lynch and TRI provided that TRI would pay 70% of any settlement with plaintiff or 70% of the amount in any verdict rendered against Lynch.

There were many in limine sessions during which plaintiff argued that the jury should be informed of the verdict-sharing agreement. Plaintiff contended that the agreement gave TRI a substantial financial interest in the outcome of the case, thus raising the issue of possible bias of witnesses who were TRI employees. Several times the court, with Lynch's approval, offered to voir dire the witnesses outside the presence of the jury, an-offer initially rejected by plaintiff because she contended it was insufficient protection. Subsequently, the court decided no voir dire was necessary. Plaintiff made a written motion in limine to inform the jurors of the agreement, moved for a mistrial, repeatedly sought permission to cross-examine the witnesses on the issue, made an offer of proof at the end of trial, and proferred two jury instructions regarding the agreement, all of which were rejected by the trial court.

At trial, the witnesses testifying were plaintiff, her treating physician, three TRI employees, one retired TRI employee, one Lynch employee, and one expert witness for each party. After a five-day trial on the negligence complaint, the jury returned a verdict for Lynch and against plaintiff. After denial of her post-trial motions, plaintiff filed this appeal.

The crux of this appeal is whether plaintiff was prejudiced and, thus, denied a fair trial, by the trial court's refusal to permit the jury to be informed of the verdict-sharing agreement between TRI, plaintiff's employer, and defendant Lynch. The trial court's decision appears to be based on several grounds: the policy of encouraging good-faith settlements pursuant to the Contribution Among Joint Tortfeasors Act (Ill. Rev. Stat. 1985, ch. 70, par. 301 et seq.); the prejudice to Lynch by revealing its insurance coverage and settlement negotiations; a failure to show how the agreement was relevant to any jury issue between Lynch and plaintiff, thus creating a possibility that the case would be decided on an improper basis; and prejudice to plaintiff arising from the jury's awareness of her worker's compensation payment.

We have found no Illinois case law directly addressing the precise issue in this case, i.e., whether a contribution settlement between a defendant and a third-party defendant, which is also plaintiff's employer, should be disclosed to a jury for the limited purpose of showing potential biases of witnesses who are employees of the third-party defendant. However, there is a line of cases wherein loan receipt agreements and covenants not to sue between a plaintiff and one of several defendants have been held relevant and admissible to show bias or prejudice of a witness. We find the rationale underlying the determination of the issue in these cases to be applicable to the present case because of a fundamental similarity between the issues.

Even before contribution among joint tortfeasors was permitted in Illinois, our supreme court in Reese v. Chicago, Burlington & Quincy R.R. Co. (1973), 55 Ill. 2d 356, 303 N.E.2d 382, approved the use of pretrial loan receipt agreements between a plaintiff and one of several defendants, the settling defendant then usually being dismissed from the case. In so ruling, the Reese court held that when the dismissed defendant thereafter testifies for the plaintiff, the remaining defendant(s) should be protected by being given an opportunity to expose to the jury the witness' possible bias or prejudice resulting from the agreement. However, such evidence should be considered only as to the motive and credibility of the witness, and not as to liability or damages. The court also noted that the potential for this kind of bias is likely to be present, to some degree, in many third-party actions.

The rationale underlying the Reese decision was explained by the court in Casson v. Nash (1978), 74 Ill. 2d 164, 384 N.E.2d 365, when it held that evidence of a loan receipt agreement was inadmissible to show bias of a testifying plaintiff because a plaintiff's interest in the outcome of the case is always evident. The Casson court stated that "[the] relevant principle that emerges from Reese is that when a witness whose interest in the outcome of the case is not apparent to the jury may be influenced by the existence of a loan-receipt agreement, ...


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