Rachel Kranz v. Steven Schuss, M.D.
146 A.3d 647
N.J. Super. Ct. App. Div.2016Background
- Rachel Kranz, born in NY, received pediatric care in New Jersey from Dr. Steven Schuss; later diagnosed with left hip dysplasia requiring surgery.
- Plaintiffs settled a prior New York malpractice suit (against New York providers) for $2 million before filing a separate New Jersey suit against Dr. Schuss alleging delayed diagnosis while in his care.
- Defendants moved for an order granting a pro tanto credit of $2 million against any New Jersey judgment, arguing the New York settlement compensated the same injuries.
- The motion judge granted the $2 million credit, reasoning it would be a windfall to plaintiffs otherwise; plaintiffs then voluntarily dismissed the New Jersey complaint but appealed the interlocutory order.
- The Appellate Division reviewed de novo whether defendants were entitled to a pro tanto credit where the settling out-of-state tortfeasors were never parties and New Jersey lacked personal jurisdiction over them.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants are entitled to a pro tanto credit equal to the out-of-state settlement amount | No; under NJ statutory scheme a credit must reflect the settling parties’ adjudicated share of fault, not the settlement amount | Yes; equitable/public-policy and collateral-source considerations justify a full pro tanto credit to avoid double recovery and discourage forum shopping | Reversed: pro tanto credit equal to settlement amount is not permitted; credit must be based on jury allocation of fault to the out-of-state settling defendants when appropriate |
| Whether apportionment of fault to nonparties (out-of-state settling defendants) is permissible when they could not be joined in NJ suit | Permissible; the jury should apportion fault to the out-of-state defendants so defendants’ liability is reduced accordingly | Not permissible because the NY defendants were never and could not have been parties in NJ; CNA applies only to parties | Permissible: courts should allow apportionment to nonparty settling tortfeasors (when fair and supported by evidence); defendants are entitled to reduction based on fault attributed to them, not the raw settlement amount |
| Whether collateral source or NY law principles authorize a full settlement-offset credit | No; collateral source rule and NJ policy disfavor double recovery and require apportionment among responsible parties, not automatic offsets | Yes; NY law would allow a pro tanto credit, and public policy favors preventing windfalls and discouraging forum shopping | Collateral-source and NY law arguments rejected; NJ statutory framework (JTCL and CNA) controls and disallows an automatic pro tanto credit here |
| Whether plaintiffs’ motion to bar discovery and evidence of NY settlement should have been granted | Plaintiffs: bar further expert reports and any mention of the NY settlement, arguing defendants produced no proof of NY defendants’ liability | Defendants: need to present evidence and have jury apportion fault among all responsible parties; discovery should be reopened | Court declined plaintiffs’ request: reversed and remanded to reopen discovery and allow defendants reasonable opportunity to obtain evidence and expert reports to support apportionment |
Key Cases Cited
- Young v. Latta, 123 N.J. 584 (discusses non-settling tortfeasor credit and Judson principles)
- Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67 (historical analysis of JTCL and limits on settlor liability)
- Town of Kearny v. Brandt, 214 N.J. 76 (interplay of JTCL and Comparative Negligence Act; favoring apportionment)
- Theobald v. Angelos, 44 N.J. 228 (settler paying more than pro rata does not increase non-settlor credit)
- Johnson v. Am. Homestead Mortg. Corp., 306 N.J. Super. 429 (need for adjudicated percentage to reduce non-settling defendant’s liability)
- Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102 (apportionment to dismissed defendants, e.g., bankruptcy discharge)
- Cockerline v. Menendez, 411 N.J. Super. 596 (apportionment and credits when codefendants settle or are fictitious)
- Boryszewski v. Burke, 380 N.J. Super. 361 (allowing rough apportionment by the trier of fact)
- Carter v. Univ. of Med. & Dentistry of N.J., 854 F. Supp. 310 (D.N.J.) (permitting jury to consider fault of settling out-of-state defendants where claims are inextricably interwoven)
- Yousef v. General Dynamics Corp., 205 N.J. 543 (forum non conveniens discussion endorsing equitable consideration of apportionment to nonparties)