JHAVERI, et al. v. TEITELBAUM, et al.
(Cal. App. Ct. 2009)

In a written opinion issued August 12, 2009, the California Court of Appeal held that a statutory release or settlement between a plaintiff and one or more joint tortfeasors is only effective to offset the claims as to the non-settling co-tortfeasors before a verdict or judgment is entered. After entry of a verdict or judgment, a settlement with a co-tortfeasor does not reduce or offset claims against non-settling co-tortfeasors.

Factual Background

Plaintiffs Indra and Mary Jhaveri (“Jhaveri”) obtained a jury verdict for $5.2 million on their claims for breach of contract and fraud against Defendants Steven Teitelbaum, Los Angeles Coin Company LLC, and Brian Dubois. The trial court entered judgment in favor of Jhaveri for $5.2 million, which consisted of (1) compensatory damages of $1.2 against all defendants jointly and severally; (2) punitive damages of $1 million against Brian Dubois individually, $2 million against Steve Teitelbaum individually, and $1 million against Los Angeles Coin Company individually.

Jhaveri subsequently filed an enforcement action against Brian Dubois and his wife in an effort to secure payment on the original judgment. Prior to trial in the enforcement action, Jhaveri agreed to globally settle their claims against Brian Dubois and his wife for $1 million.

Upon learning of the Jhaveri-Dubois settlement agreement, Steven Teitelbaum and Los Angeles Coin Company (collectively “Defendants”) moved for an order acknowledging that the face amount of the Jhaveri-Dubois settlement agreement (i.e., $1 million) should offset their joint and several liability as established in the original trial.

In response to Defendants’ argument, Jhaveri argued that a portion of the settlement funds were in settlement of their claims against the Duboises in the enforcement action while the other portion was in settlement of Brian Dubois’ liability in the original action. Of the portion applied to Brian Dubois’s liability in the original action, Jhaveri argued that one-half of that amount should offset the joint and several compensatory damages while the other half satisfied Dubois’ punitive damages liability in the original action.

The Appellate Court’s Holding

On appeal, the Appellate Court examined whether Defendants were entitled to a credit, or offset, as to their joint and several liability as established in the first trial based upon the Jhaveri-Dubois settlement agreement. In resolving this issue, the Court looked to California Code of Civil Procedure section 877. Finding the language of Code of Civil Procedure section 877 “clear and unambiguous,” the Court ruled that the Section was inapplicable here because “it applies to a ‘release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment . . . given in good faith before verdict or judgment to one or more of a number of tortfeasors. . . .” (Emphasis original.) Thus, Section 877 only applies to a settlement entered into with a co-tortfeasor before a verdict or judgment is entered. Accordingly, and because it was undisputed that the Jhaveri-Dubois settlement agreement occurred after, and not before the judgment in the original lawsuit, Section 877 did not govern the Jhaveri-Dubois settlement. Thus, Code of Civil Procedure section 877 could not serve as a basis to reduce Defendants’ joint and several liability in the original action.

Summary of the Court’s Ruling

The Appellate Court affirmed the trial court’s ruling that a statutory release or settlement between a plaintiff and one or more joint tortfeasors is only effective before a verdict or judgment is entered. After entry of a verdict or judgment, a settlement with a co-tortfeasor does not reduce or offset claims against non-settling co-tortfeasors


Frank T. Sabaitis
Brad A. Byszewski


1 Shortly after entering into the settlement agreement, the Duboises filed for bankruptcy. At the time the Duboises filed for bankruptcy, they had paid Jhaveri $245,000 of the $1 million settlement agreement.

2 Jhaveri also argued that any credit given should only account for the settlement funds actually paid by Dubois before filing for bankruptcy, as opposed to the amounts agreed to be paid but in fact were not paid. The Trial Court agreed with Jhaveri and the Appellate Court affirmed.

3 Section 877 reads in pertinent part: “Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, it shall have the following effect: (a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the other in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater.”