September 18, 2014

Client Alert: Minnesota Supreme Court Confirms Reallocation of Damages

A Minnesota Supreme Court ruling today prohibiting reallocation of uncollectable damages will affect the allocation of fault on defendants at trial in asbestos cases.

The Minnesota Supreme Court issued an opinion today that will affect asbestos-related cases in the State of Minnesota. In Staab v. Diocese of St. Cloud,  the Minnesota Supreme Court held that a party who is severally liable under Minnesota’s apportionment-of-fault statute, Minn. Stat. § 604.02, subd. 1, “cannot be required to contribute more than that party’s equitable share of the total damages award through the reallocation-of-damages provision in Minn. Stat. § 604.02, subd. 2.” 

In an opinion authored by Justice Wilhelmina M. Wright, the supreme court found that there was more than one reasonable interpretation of the statute in concluding that under Minn. Stat. § 604.02, subd. 2, an uncollectible portion of a party’s equitable share of damages cannot be reallocated to a party that is only severally liable under Minn. Stat. § 604.02, subd. 1. Justice David L. Lillehaug penned a dissent that was joined by Justice Alan C. Page. 

The apportionment-of-fault statute directly affects asbestos cases when a party or tortfeasor (who is not sued) is found liable but is insolvent or for which a judgment is not collectable. Often bankrupt entities are assigned an apportionment of fault by the jury in asbestos litigation. When this happened prior to today’s opinion, uncollectable damages from other entities assigned liability were reallocated among the remaining defendants that the jury found liable for the plaintiff’s injury. The court’s ruling today prohibits reallocation of uncollectable damages, ensuring that severally liable defendants are responsible only for the amount originally allocated to them by the jury. 

It must be noted, however, that the opinion rendered today does not alter Minn. Stat. § 604.02, subd. 3, which applies to product liability claims. Subdivision 3 provides that an amount uncollectable from any person in the chain of manufacture and distribution can be reallocated among all other persons in the chain of manufacture and distribution of the product. (See Minn. Stat. § 604.02, subd. 3.) For instance, uncollectable damages from a bankrupt insulation manufacturer may still be reallocated to defendants that distributed or sold the bankrupt insulation manufacturer’s products.  

Today’s opinion is a step forward for defendants in Minnesota asbestos litigation. The decision balances the scale in Minnesota by requiring people and companies to pay for the harm they cause, but not for harm caused by others. “Allowing uncollectible damages attributable to the fault of one party to be reallocated to a severally liable party would be contrary to the clear purpose of the 2003 amendment—requiring severally liable parties in the Minnesota tort system to pay only for the harm caused by their own conduct and not for the harm caused by others.”

Summary of Staab v. Diocese of St. Cloud 

Alice Staab was injured when her husband Richard Staab pushed her wheelchair through an open doorway and over an unmarked five-inch drop-off at Holy Cross Parish School. Staab v. Diocese of St. Cloud (Staab I), 813 N.W.2d 68, 71 (Minn. 2012). Staab sued the owner and operator of the school, the Diocese of St. Cloud, alleging the Diocese failed to protect her from an unreasonable risk of harm created by the unmarked five-inch drop-off. Id. Richard Staab was not named as a party in the lawsuit. Id. The jury awarded Staab compensatory damages, attributing 50 percent of the negligence that caused Staab’s injuries to the Diocese and 50 percent to Richard Staab. Id. In Staab I, the supreme court held that Minn. Stat. § 604.02, subd. 1, “applies when a jury apportions fault between a sole defendant and a nonparty tortfeasor, and limits the amount collectible from the defendant to its percentage share of the fault assigned to it by the jury.” 813 N.W.2d at 80.

On remand, Staab sought reallocation of Richard Staab’s equitable share of the damages award to the Diocese. The district court determined that Richard Staab’s equitable share was uncollectible and entered judgment against the Diocese for the entire damages award after finding that the uncollectible share of damages attributable to a nonparty tortfeasor can be reallocated under Minn. Stat. § 604.02, subd. 2. 

The court of appeals affirmed the reallocation. Staab v. Diocese of St. Cloud (Staab II), 830 N.W.2d 40, 47 (Minn. App. 2013). The supreme court granted the Diocese’s petition for review, the result of which, is today’s opinion. The Court has clarified that Under Minn. Stat. § 604.02, subd. 2, an uncollectible portion of a party’s equitable share of damages cannot be reallocated to a party that is only severally liable under Minn. Stat. § 604.02, subd. 1.