JOINT AND SEVERAL LIABILITY-THE BASICS
When two or more persons or entities are alleged to be liable to another either due to breach of contract or a tortious wrong such as negligence or assault, the doctrine of joint and several liability can come into play. In its most basic form, it means each defendant is liable to the plaintiff for the entire claim. Which means that if I am owed fifty thousand from two people, each of them faces liability to me for the full fifty thousand and I can collect that amount from either. (I cannot collect more than what is owed to me, but I can collect the full amount from both or either.)
This article shall discuss some of the ramifications of that doctrine.
The Basic Law:
In cases of joint and several liability, a person who was harmed or wronged by several parties could be awarded damages and collect from any one, several, or all of the liable parties.
Does that mean that one of them gets out of the liability because the plaintiff chose to sue only one? No, for the paying defendant has a right to seek contribution from all the other defendants and usually does.
In most instances, the plaintiff will sue each and every defendant but note that obtaining a judgment does not mean getting paid. Often, the plaintiff will seek to enforce the judgment against the defendant most easily located or with the most assets, which is the right that joint and several liability gives the plaintiff. In that case, the defendant forced to pay the judgment will demand contribution of proportionate shares from the other defendant and sue them for it if necessary.
But note that if the other defendants have no resources or file bankruptcy, that paying defendant may find no way to practically enforce the right for contribution. It is vital if one is executing a lease or contract which provides for joint and several liability to understand that even if it seems you are only liable for a portion, you are liable for the full and complete amount unless the other defendants contribute their share.
Defendants in a tort matter are only held jointly and severally liable if their concurrent (but not necessarily simultaneous) acts caused the damage to the plaintiff. Each wrongful act must contribute to the damage for this type of liability to be imposed.
As an example, if I drive my car negligently and strike you but my brakes failed due to negligent installation by my mechanic so I hit you at twice the speed I would have if I could have braked then both myself and my mechanic can be sued and joint and several liability can be imposed.
Note in those jurisdictions in which comparative negligence is the doctrine, which now includes California, tort liability for negligence is normally divided up by percentages of responsibility and joint and several liability would not apply.
However, in torts not based on negligence (intentional torts and violations of certain statutes) the doctrine would still apply.
Contracts and Leases:
Joint and several liability can also arise if a contract or lease so imposes it upon more than one party who executes a contract or lease. Thus, if my company, myself personally, and you executed a lease which provides we are jointly and severally liable under the lease, we each face the same liability as if we were joint tortfeasors with joint and several liability. The other party can sue any or all of us and collect the full amount from any or all. Note this can also apply to husband and wives, joint guarantors, and partners in a general partnership. As one client put it when he faced a judgment that was caused by the error of his partner in a general partnership, “I guaranteed all contracts despite the errors he made. And now he’s left the country…” Yes.
Taxes are often imposed with joint and several liability, including husband and wives as well as for such entities as general partnerships.
Some states have limited the application of joint and several liability, especially when speaking of tort liability. Thus, California limits it to apply only to economic damages, not punitive damages. Illinois has abolished joint and several liability in negligence cases in which a defendant is less than twenty five percent at fault. New York and Iowa have abolished joint and several liability in tort actions for negligence for parties less than fifty percent at fault. Louisiana and Mississippi limit the joint liability to fifty percent of the total damages.
The error we see many people make is to assume that because there are other people in your partnership or who were at fault in some accident that the liability is limited to “your share.” That can be the case where joint and several liability is not at issue. But it often is not. A wise plaintiff will understand that and seek recovery against the defendant with the most assets. A wise landlord will insist upon every tenant signing a lease imposing joint and several liability.
Another client going into business commented that in every business startup he had to consider the assets of his joint venturers as carefully as the project itself since his risk was not necessarily limited to his portion of the company and if his partners did not have funds, he would be the target of all creditors…including taxing authorities.
“Joint and several liability changes the game,” he said simply.