By: Rey O. Villanueva, Esq.[1] and Christopher Scott, Esq.[2]
In a recent unpublished, unanimous decision, reversed the Appellate Division’s ruling in Rowe v. Bell & Gossett Company, et al., holding that the discovery responses and deposition testimony of a settling defendant are admissible at trial as an exception to the hearsay rule under the statements against interest exception. This ruling provides a framework for a non-settling defendant in New Jersey to rely on this hearsay exception for seeking an apportionment of liability against settling parties at the time of trial.
In Rowe, Plaintiff Donna Rowe, individually and as Executrix of the Estate of Ronald Rowe, filed an asbestos product liability action alleging that her husband, Ronald, had contracted mesothelioma due to his exposure to asbestos-containing automobile parts. Of the nine manufacturers named in the Complaint, eight settled with Plaintiffs prior to trial, leaving only Hilco, Inc., an alleged successor in interest to an asbestos-containing dry cement manufacturer, Universal Engineering Co., Inc. Hilco/Universal disputed Plaintiff’s allegation that it was a successor in interest to Universal and denied liability for Ronald Rowe’s alleged exposure.
At trial, Plaintiffs moved to preclude Hilco/Universal from presenting proofs of the settling Defendants’ liability in an effort to seek an apportionment of fault as to those Defendants. The trial court denied the motion, and Hilco/Universal offered into evidence excerpts from the settling Defendants’ interrogatory answers as well as the deposition testimony of their corporate representatives. In seeking to admit the proffered evidence, Hilco/Universal contended the statements satisfied three exceptions to the rule against hearsay namely, (1) N.J.R.E. 804(b)(1), testimony in prior proceedings; (2) N.J.R.E. 803(b)(1), statements by a party-opponent; and (3) N.J.R.E. 803(c)(25), statements against interest. Plaintiffs objected, contending that the evidence was inadmissible under N.J.R.E. 803(b)(1) and N.J.R.E. 804(b)(1) because the evidence was being offered against Plaintiffs, and not the parties who made the statements (i.e. the settling defendants.). Additionally, Hilco/Universal had not demonstrated that the corporate representatives were unavailable to testify at trial which is typically required in order to admit an “out of court statement.” Ultimately, the proffered evidence was admitted into evidence as an exception to the hearsay rule as they were deemed to be contrary to settling defendants’ interests in the immediate case, as well as pending asbestos product liability matters. Accordingly, the trial court admitted into evidence excerpts from the interrogatory answers of the eight settling Defendants, and portions of the deposition testimony of six settling Defendants’ representatives.
After hearing all of the evidence, the jury returned a verdict for Plaintiffs, but only allocated 20% of fault against Hilco/Universal. The remaining 80% of fault was allocated amongst the eight settling Defendants but unrecoverable in light of the prior settlement agreement. The trial court then molded the verdict and entered judgment in Plaintiff’s favor for damages and prejudgment interest.
By way of background, under the New Jersey Comparative Negligence Act (N.J.S.A. 2A:15-5.1) and the Joint Tortfeasors Contribution Law (N.J.S.A. 2A:53A-1, et seq.), a defendant may seek the allocation of a percentage of fault to a co-defendant who has previously settled with the plaintiff. Once a factfinder assigns a percentage of fault to a settling defendant, the court will mold the judgment resulting in the allocation operating as a credit against the recovery of damages.
Plaintiffs appealed, and the Appellate Division reversed the trial court decision, holding that the admission of the settling Defendants’ discovery responses was improper. The Appellate Court found that the disputed evidence was inadmissible as a statement of a party-opponent under N.J.R.E. 803(b)(1) because Hilco/Universal was offering the evidence against the Plaintiffs, and not the settling Defendants who made the statements. They further held that the interrogatory answers and deposition testimony were similarly inadmissible under N.J.R.E. 804(b)(1) because the declarants were not “unavailable” within the meaning of N.J.R.E. 804(a)(4).
Additionally, the Appellate Division held that the disputed evidence did not constitute statements against interest for purposes of N.J.R.E. 803(c)(25). It acknowledged that a nonparty declarant’s statement can qualify as a statement against interest in a civil case if it “so far tend[s] to subject declarant to civil … liability … that a reasonable person in declarant’s position would not have made the statement unless the person believed it to be true.” They reasoned, however, that the statements at issue in this case fell short of this standard as they comprised only one piece of the broader picture required to establish liability. The court also deemed the evidence to be inadmissible under N.J.R.E. 803(c)(25) because “the existence of asbestos-containing products and the absence of warnings are objective, well-known historical facts that the settling defendants could not avoid acknowledging in the face of incontrovertible proof.” The matter was remanded to the trial court for a new trial with respect to the allocation of fault. Hilco/Universal then petitioned for certification, which was granted.
In support of Hilco/Universal, amici curiae briefs were filed by the New Jersey Defense Association, Honeywell International, Inc., and Ace Plumbing & Electrical. The briefs contended that the evidence was admissible and that the Appellate Division’s decision precludes fair apportionment under the Comparative Negligence Act and Joint Tortfeasors Contribution Law. The New Jersey Association for Justice also filed a brief in support of Plaintiffs contending that the statements did not constitute prior testimony of an unavailable declarant.
In writing the opinion for the Court, Judge Anne M. Patterson held that the interrogatory answer excerpts and deposition testimony were admissible as statements against interest under N.J.R.E. 803(c)(25). Judge Patterson agreed that, at the time the statements were made, they were adverse to the Defendants’ interests which would subject the Defendants to civil liability. Accordingly, Judge Patterson concluded that such statements had a strong propensity for truthfulness and thus should have been admissible as “statements against interest.”
Judge Patterson noted that the Court has long viewed the comparative fault statutory scheme as authorizing an allocation of fault to a settling defendant, without regard to the amount of the settlement. The applicable rules provide that a non-settling defendant does not have to assert a crossclaim in order to seek allocation against a settling defendant, provided the non-settling defendant gives fair and timely notice of such intentions. A Judge may instruct a jury to consider allocating a percentage of liability to a settling defendant, so long as the non-settling defendant presented to the trial court prima facie evidence supporting any claims against the settling defendant.
The Appellate Division had determined that the statements at issue were inadmissible under N.J.R.E. 803(c)(25) because the fact that “a particular defendant manufactured or sold a product containing asbestos but did not warn about its hazards in only one piece of the much larger picture required to establish liability.” The Court disagreed, finding that nothing in N.J.R.E. 803(c)(25) requires a declarant’s statement to establish all elements of a cause of action in order to be admissible as a statement against interest.
Additionally, the Court disagreed with the Appellate Division’s view that the statements were inadmissible because they constituted “well-known historical facts that the settling defendants could not avoid acknowledging in the face on incontrovertible proof.” The Court found that the statements went beyond merely acknowledging the existence of asbestos-containing products and thus constituted admissions as the Defendants acknowledged selling the products without adequate warnings.
Accordingly, the Court concluded that all of the proffered evidence satisfied the standard of N.J.R.E. 803(c)(25), statement against interests exception, and were admissible pursuant to that rule. The Court did not address whether the evidence was permissible under N.J.R.E. 804(b)(1), N.J.R.E. 803(b)(1), or Rule 4:16-1(b).
The Court’s decision further confirms the ability of non-settling defendants to rely on the statutory support of N.J.R.E. 803(c)(25) to essentially allocate liability against an “empty chair.” Despite the fact that common law cross-claims for contribution are extinguished upon a co-defendant’s settlement with plaintiff, the Court’s ruling provides a non-settling defendant an opportunity to include a settling defendant on a verdict sheet for purposes of allocation of fault only. This potentially may have a chilling effect on piecemeal settlements in a multi-party action as Plaintiff will have to contend with potential apportionment of fault against a settling defendant at the time of trial. In considering whether to settle with an individual defendant, a Plaintiff, involved in a multi-party action, must thoroughly assess the potential apportionment against a settling defendant. Additionally, despite a settlement, a party may now contend with the possibility that a corporate representative may still be called at trial if Plaintiff attempts to rebut the proffered evidence. However, this is something that the parties could potentially negotiate in reaching a settlement agreement.
[1] Rey O. Villanueva, Esq. is a Shareholder in GRSLB&G’s Litigation Department. He defends a wide variety of clients in various civil actions brought forth in New Jersey and New York State and Federal Courts. Rey can be reached at rvillanueva@grsl.com.
[2] Christopher Scott, Esq. is an Associate in GRSLB&G’s Litigation Department. He defends a wide variety of clients in various civil actions brought forth in New Jersey State and Federal Courts. Christopher can be reached at cscott@grsl.com.
