While evidence of a settlement is not admissible to prove liability of a settling tortfeasor, it is admissible to prove witness bias and to prevent collusion. This issue arises when a settlement agreement requires a settling joint tortfeasor to participate in trial even though it has already reached a settlement with the plaintiff. The justification for such a requirement is to prevent the non-settling joint tortfeasor from making an “empty chair” argument by ascribing fault to an actor who is not present to defend himself.
A recent decision by California’s First District Court of Appeal provides an example of a situation in which evidence of a settlement agreement was admissible to prove bias and prevent collusion. In Diamond v. Reshko, Christine Diamond sustained injuries while riding in a taxi owned by Yellow Cab. The taxi collided with a vehicle driven by Serge Reshko. Reshko and the taxi driver were each partially responsible for the accident. Diamond and her husband (Plaintiffs) sued Reshko and his mother (Reshkos) as well as Yellow Cab.
Prior to trial, Yellow Cab executed a settlement agreement with Plaintiffs. The agreement included the following terms: (1) the attorney who represented Yellow Cab “agreed to remain an active participant” at Plaintiffs’ jury trial and (2) Plaintiffs agreed to provide a covenant not to execute and a release of all claims against Yellow Cab. The trial court determined the settlement was made in good faith.
In a motion in limine, the Reshkos argued the settlement was admissible at trial to show bias or prejudice arising out of the fact that Yellow Cab and Plaintiffs now were allied against the Reshkos. The trial court reserved ruling on the Reshkos’ motion because it wanted to “see how things [would] actually unfold.” The trial court then did not admit evidence of the settlement at trial.
During trial, the taxi driver testified that he saw Ms. Diamond wearing her seatbelt prior to the accident. This contradicted his deposition testimony that did not remember whether she wore a seat belt. The testimonial discrepancy itself was revealed to the jury, but the jury was deprived of evidence of the prior settlement, which could have supported a conclusion that the taxi driver was now biased in favor of Plaintiffs.
Additionally, Yellow Cab helped Plaintiffs make their case against the Reshkos by characterizing Serge Reshko as “the bad guy.” Yellow Cab went further by allying its own liability expert witness with Plaintiffs’ experts during Plaintiffs’ case-in-chief. Then, during closing argument, Yellow Cab’s counsel conceded virtually all of Plaintiffs’ claimed damages, and proposed an evaluation of those damages that Plaintiffs subsequently approved while vouching for the credibility of Yellow Cab’s attorney.
Based on the foregoing, the Court of Appeal concluded “by the time Yellow Cab presented closing argument on the damages issue, its bias in favor of [Plaintiffs] and against the Reshkos was indisputable.” Because the settlement agreement was kept secret, the Court felt the jury was deprived of its right to determine whether Yellow Cab’s evidence, arguments, and concessions were substantively genuine, or whether Yellow Cab had tactically joined forces with Plaintiffs for reasons unrelated to the merits of Plaintiffs’ case. The Court therefore concluded it was an abuse of discretion for the trial court to exclude evidence of the settlement.