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March 11, 1996

HENRY F. WHITE, et al., Defendants.

The opinion of the court was delivered by: SHADUR

 Long Beach Mortgage Company ("Long Beach") has reached settlement agreements with a number of defendants--Edwin Cabey, Elveria Ferguson, Jean Val Jean F. Hillman, James Koechle ("Koechle") and Frederick Moore (collectively "Settling Defendants")--in this multidefendant fraud case, and Long Beach's counsel has represented that settlements are also essentially concluded with all other defendants except for J.F. Caputo ("Caputo"). Among the conditions precedent to the effectiveness of the several settlement agreements between Long Beach and Settling Defendants is a provision that this Court must enter a settlement bar order that (1) will preclude any nonsettling defendant who may later be held liable to Long Beach from seeking contribution against any Settling Defendant and (2) will allow Long Beach to apply the proceeds received from Settling Defendants against the obligations as set forth in the respective settlement agreements.

 Caputo has objected to the second aspect of that condition but not the first, on the ground that Long Beach's proposed application of proceeds would expose him to more than his fair share of the total liability for Long Beach's losses from the fraudulent transactions at issue in the case. That dispute has been fully briefed by Caputo and Long Beach and is therefore ripe for decision by this Court. *fn1"

 It is quite true, as Caputo claims, that he was not originally in on the ground floor of the fraudulent scheme hatched by other codefendants in this action. Instead Caputo's only participation in the overall scheme consisted of a bogus appraisal review on one of the two properties on which Long Beach was induced to make inflated mortgage loans--almost identical in amount--that were predicated on bogus "sales" of the properties at enormously inflated prices.

 Because federal jurisdiction over this action is predicated on diversity of citizenship (and because the entire set of events at issue was Illinois-based), Caputo correctly urges that the Illinois Joint Tortfeasor Contribution Act ("Act," 740 ILCS 100/0.01 to 100/5 *fn2" ) applies to define the respective rights and obligations of the joint tortfeasors and, of course, of victim Long Beach as well. But for more reasons than one, Caputo's attempted invocation of the Act to support his position rests on false premises.

 Before those premises are examined, it should however be made clear that Long Beach's own effort to take the Act effectively out of play are unwarranted. Long Beach begins with the unarguable proposition (based on the plain language of Act § 2) that the right of contribution is available only against parties liable in tort (correctly citing for that proposition Hahn v. Norfolk & W. Ry., 241 Ill. App. 3d 97, 101, 608 N.E.2d 683, 687, 181 Ill. Dec. 610 (5th Dist. 1993)). But Long Beach then proceeds impermissibly to point to the decision in Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d 179, 201-06, 538 N.E.2d 530, 540-42, 131 Ill. Dec. 155 as standing for the proposition that "under Illinois law, intentional torts are not covered by the contribution Act" (Long Beach Mem. 3). What Gerill actually held was that an intentional tortfeasor (a category that embraces all of the Settling Defendants) are not entitled to seek or to obtain contribution under the Act. What it did not address was the obverse side of that coin: whether a negligent tortfeasor (that is the only level of culpability charged to Caputo) may obtain contribution from fellow tortfeasors whose torts were intentional.

 In the course of its discussion Gerill, 128 Ill. 2d at 204-05, 538 N.E.2d at 542 referred to and quoted from the legislative statements that were made during the course of the Act's passage through the General Assembly and that "demonstrated that the statute was meant to create a right of contribution for negligent tortfeasors." That statutory purpose would be served rather than disserved by giving Caputo access to the provisions of the Act, and it is certainly not negated by the decision in Gerill. Nor has either party identified a case (and this Court has found none) that suggests that the Act's benefits are unavailable to a negligent tortfeasor who wants to elicit contribution from an intentional (and presumably more culpable) joint tortfeasor. *fn3" Accordingly this opinion will proceed on the premise that Caputo could, if he qualified, call upon the Act's provisions for assistance.

 But as indicated earlier, that does not help Caputo here. Under the Act a good faith settlement between a plaintiff and one or more of a group of tortfeasors extinguishes any otherwise applicable right of contribution of nonsettling defendants (Act §§ 2(a) and (d)) and also reduces plaintiff's potential recovery on claims against those nonsettling defendants to the extent of the greater of two amounts: the amount stated in the releases given to the settling tortfeasors or the amount of the consideration actually paid for those releases (Act § 2(c)). Caputo Mem. 5, citing Rice v. McDonald's Corp., 268 Ill. App. 3d 201, 644 N.E.2d 482, 205 Ill. Dec. 926 (5th Dist. 1994), urges that the purpose of the Act is to protect him against the possibility of paying more than his "fair share" of Long Beach's damages. But that case dealt with the right of contribution under Act §§ 2(a) and (b), and not with the effect (as prescribed by other Act provisions) of a settlement on nonsettling defendants. Caputo's position glosses over entirely the even more basic proposition that in any joint and several liability situation the intended operation of the Act, and its expressly-stated purpose (Act § 4), is to preserve the right of the injured party to full recovery if a nonsettling defendant has a sufficiently deep pocket ( Henry v. St. John's Hosp., 138 Ill. 2d 533, 563 N.E.2d 410, 150 Ill. Dec. 523 (1990)).

 To focus on the matter in a simpler context that highlights the problem, suppose for example a $ 1 million injury caused by two equally responsible joint tortfeasors A and B. Assume that A settles with plaintiff for say $ 250,000 (it will be assumed that nonsettling defendant B did not commit an intentional tort, which under Gerill would totally disqualify B from seeking contribution). If A's settlement is found to have been entered into in good faith, taking into account all of the relevant factors (including risks of litigation) involved in such a determination, nonsettling defendant B cannot complain--either in the later trial of the action with plaintiff that results in a $ 1 million verdict in plaintiff's favor *fn4" or by a consequent effort to obtain contribution from A--that B's being stuck with a net $ 750,000 liability means that B has been required to bear more than a "fair share" of the victim's damages. Indeed, the appropriateness of such a result under the Act is precisely the thrust of the thoughtful and extended discussion in Henry.

 One of the natural and intended consequences of early settlements is to substitute certainty for risk as between the settling parties. Caputo himself recognizes that the goal of the Act is to encourage settlements in multilitigant cases (both parties cite Higginbottom v. Pillsbury Co., 232 Ill. App. 3d 240, 246, 596 N.E.2d 843, 847, 173 Ill. Dec. 219 (5th Dist. 1992)). Any defendant such as Caputo who chooses to roll the dice instead of settling--thus risking total liability (which is after all the meaning of the joint and several liability concept)--cannot complain if that gamble turns out to be a bad one. After all, Caputo has been just as free as his codefendants to reach a settlement with Long Beach.

 As Long Beach correctly points out (citing Pyskaty v. Oyama, 266 Ill. App. 3d 801, 812, 641 N.E.2d 552, 561-62, 204 Ill. Dec. 328 (1st Dist. 1994)), parties must be deemed joint tortfeasors where there concurrent actions injure a plaintiff, even though they may "share no common purpose or duty and fail to act in concert." That concept certainly applies (perhaps even a fortiori) in the circumstances here, and hence Long Beach remains free to pursue any or all of the tortfeasors that caused its injuries and with whom it has not settled--in this instance Caputo.

 It is also conventional wisdom that a party to whom obligations run from a number of other parties may apply any realized proceeds to the best advantage of the injured party (see, e.g., Herget Nat'l Bank v. USLife Title Ins. Co., 809 F.2d 413, 417-18 (7th Cir. 1987), applying Illinois law), with the obvious exception being a situation in which that type of application would work an injustice ( id. at 418, quoting Village of Winfield v. Reliance Ins. Co., 64 Ill. App. 2d 253, 258, 212 N.E.2d 10, 12 (2d Dist. 1965)). Here there is no question of the bona fides of Long Beach's settlements with Settling Defendants--even Caputo does not challenge that (Caputo Mem. 6), and it is of course his burden to establish the absence of good faith by clear and convincing evidence ( Higginbottom, 232 Ill. App. 3d at 249, 596 N.E.2d at 849). What Caputo complains about instead is that if Long Beach is permitted to allocate what it collects from Settling Defendants toward the partial (but not total) satisfaction of the damages that Long Beach has sustained from the fraudulent transaction in which those Settling Defendants participated but Caputo did not, Caputo would suffer unjust treatment.

 That however differs neither in degree nor in kind from the natural consequences of joint and several liability, as exemplified by the earlier-discussed hypothetical example of settling tortfeasor A and nonsettling tortfeasor B. Even if Long Beach were hereafter to collect 100 cents on the dollar of its claim against Caputo, it would still not be rendered whole by the overall recovery that it has received from Settling Defendants, plus what it expects to receive from the other defendants whose settlements are in the works and plus the hoped-for recovery from Caputo as judgment debtor. If conversely Caputo were to succeed with his present objection, thus further reducing Long Beach's ability to approach (let alone to attain) a full recovery of its losses, Caputo would receive an undeserved windfall by getting credit against his liability for some portion of the amounts that have ...

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