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JOINT AND SEVERAL CONTRACTUAL LIABILITY AND SETTLEMENT

CREDITS: A LOOK AT THE “ONE SATISFACTION RULE” IN TEXAS

Benton T. Wheatley and Tracy McCreight

Munsch Hardt Kopf & Harr, PC

303 Colorado St., Suite 2600

Austin, TX, 78701

(512) 391-6100

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JOINT AND SEVERAL CONTRACTUAL LIABILITY AND SETTLEMENT

CREDITS: A LOOK AT THE “ONE SATISFACTION RULE” IN TEXAS

I. INTRODUCTION

Consider this scenario: You represent one of the parties to a lawsuit in which the owner

has sued the architect, the general contractor, and the geotechnical engineer because a

foundation is allegedly defective, causing the owner to expend significant sums of money in

repairs and maintenance. None of your experts can truthfully say what part of the damages

should be allocated to the wrongdoers, so the damages are “indivisible” because there are, so far

as you are aware, no scientific standards or agreed upon industry/association guidelines for such

an allocation. The owner has a separate contract with each party for different services, and the

owner alleges in its lawsuit that each defendant breached its contract, contributing to the

defective foundation. If one party settles with the plaintiff, are the other defendants

entitled to a settlement credit based on the “one satisfaction rule”? This question is the

subject of this article.

The one satisfaction rule1 seems simple enough. It is the principle that a plaintiff is only

entitled to one recovery for a particular harm. In other words, “a claimant in no event will be

entitled to recover more than the amount required for full satisfaction of his damages.”

McMillen v. Klingensmith, 467 S.W.2d 193, 196 (Tex. 1971). Expressed another way,

1 Texas cases have used the phrase “one satisfaction” for at least three distinct purposes: (1) limiting

recovery to the judgment amount in later enforcement suits, e.g., El Paso Nat. Gas v. Berryman, 858

S.W.2d 362, 364 (Tex. 1993) (alleged alter ego had no derivative liability if judgment against alleged

principle fully paid); (2) describing the election of remedies necessary for formulating the judgment

when damages for indivisible injury are awarded or recovered under multiple recovery theories,

Madison v. Williamson, 241 S.W.3d 145, 159 (Tex. App.—Houston [1st Dist.] 2007, no pet.); and (3)

describing the settlement credit created in response to article 2212 of the Civil Practice and Remedies

Code to limit the amount of damages recoverable when a potentially liable defendant settles its liability

before judgment. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 5 (Tex. 1991). This article

addresses only the third purpose – the “one satisfaction” settlement credit.

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The [one satisfaction] rule guards against a plaintiff receiving a windfall “by

recovering an amount in court that covers the plaintiff’s entire damages, but to

which a settling defendant has already partially contributed. The plaintiff would

otherwise be recovering an amount greater than the trier of fact has determined

would fully compensate for the injury.”

Osborne v. Jauregui, Inc., 252 S.W.3d 70, 75 (Tex. App.—Austin 2008, pet. denied) (quoting

First Title Co. v. Garrett, 860 S.W.2d 74, 78 (Tex. 1993)).

As litigators are generally aware, this rule is the foundation of a defendant’s right to

have a jury verdict reduced by the amount of any settlements the plaintiff has received from

other entities for the same injury. That all seems simple enough, but court decisions including

some as recent as January 2017 make the issue anything other than simple or clear, and result in

the following questions:

1. What is the “same injury”?

2. Does the one satisfaction apply equally in tort and contract?

3. How does joint and several liability play into analysis?

4. Does it matter if the injury is indivisible but there is no joint and several

liability?

5. Can a party that has settled a contract dispute assert a contribution claim

against a party that takes advantage of a settlement credit?

6. Can a defendant in a contract case ask for a jury instruction allocating

damages to a settled party?

7. Under the current state of the law, which requires a plaintiff in a multi-

party, multi-contract case to provide evidence of allocation of damages for

an indivisible injury, is there any expert in the design and construction

industry who will opine on such an allocation?

8. Can any verdict, without such expert testimony, withstand an evidentiary

sufficiency challenge?

These and other questions, which turn this seemingly simple principle into a legal

quagmire, are addressed in this article.

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II. HISTORY OF THE ONE SATISFACTION RULE IN TEXAS

Fully understanding when the one satisfaction rule should and should not apply requires

an appreciation of its history and why it was created in the first place. At common law, a tort

suit could not be asserted against multiple defendants for damages to which each defendant

contributed unless the defendants acted according to a common plan or scheme. Sun Oil Co. v.

Robicheaux, 23 S.W.2d 713, 715 (Tex. Comm’n. App. 1930, judgm’t adopted). Otherwise,

there could be no joint tort liability. Instead, the plaintiff had to sue each defendant separately

and establish that particular part of the injury that particular defendant caused. Id.

Also, defendants were not permitted a right of contribution generally under Texas

common law. Gattegno v. The Parisian, 53 S.W.2d 1005, 1007 (Tex. Comm’n App. 1932,

holding approved). It was “against the policy of the law to adjust equities between wrongdoers,

or to allow a [liable] person to found an action on his own wrong.” Austin Road Co. v. Pope,

216 S.W.2d 563, 564-65 (Tex. 1949).

The Texas Legislature passed article 2212 (now Texas Civil Practice & Remedies Code

chapter 32) to change these two perceived deficiencies in the law. First, article 2212 allowed a

tort defendant to be liable for all damages even if those damages were the common result of

multiple actors’ independent torts. A plaintiff no longer bore the “intolerable burden” of

proving particular damages attributable to a particular tort defendant in common injury cases.

Hodges, Contribution and Indemnity Among Tortfeasors, 26 Tex. L. Rev. 150, 151 n.11 (1947);

Wigmore, Joint Tortfeasors and Severance of Damages: Making the Innocent Party Suffer

Without Redress, 17 Ill. L. Rev. 458, 459 (1922). Instead, the plaintiff could recover all tort

damages from a single defendant. Deal v. Madison, 576 S.W.2d 409, 414 (Tex. Civ. App.—

Dallas 1978, writ ref’d n.r.e.), disapproved on other grounds by Cypress Creek Util. Serv. Co. v.

Muller, 640 S.W.2d 860, 866 (Tex. 1982).

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Article 2212 also created a right of action so that the defendant who was held liable for

the total common damages and, thereby, paid more than its per capita2 share of the total tort

liability could sue to collect the excess payment from the other jointly liable defendants. Id;

Hodges, 26 Tex. L. Rev. at 151 n.11. Article 2212, however, made no provision for cases in

which fewer than all tortfeasors settled. Deal, 576 S.W.2d at 414.

Therefore, to address a situation unique to tort claims involving defendants jointly and

severally liable for common injuries from independent torts,3 the courts created the one

satisfaction rule. Under it, a plaintiff who settled with less than all tortfeasors for more than the

settlors’ share of damages could not recover from the non-settling tortfeasors more than the

difference between total damages and the sum of all settlements. Hodges, 26 Texas L. Rev. at

171-72; see Gattegno, 53 S.W.2d at 1007; Bradshaw v. Baylor University, 84 S.W.2d 703, 705

(Tex. 1935).

After the one satisfaction rule was adopted, the Texas Supreme Court abolished the

common-law rule in Robicheaux that prevented joining multiple defendants in a single suit to

impose joint and several liability for independent torts. In Landers v. East Texas Salt Water

Disposal Co., the court stated,

[when] tortious acts of two or more wrongdoers join to produce an indivisible

injury, that is, an injury which from its nature cannot be apportioned with

2 At the time, liability was established by judgment and statutorily allocated equally among joint

tortfeasors so the amount of potential contribution liability was fixed. Accordingly, there was no need

to plead the one satisfaction rule. The rules concerning contribution today are vastly different, but

cases continue to incorrectly (in the authors’ opinions) recite that it is unnecessary to plead the one

satisfaction rule.

3 Some practitioners have inferred from pre-article 2212 cases containing the expression “one

satisfaction” that a common law settlement credit previously existed even if recovery was for a non-tort

liability. See, e.g., Lewis v. Taylor, 17 Tex. 57, 59 (1856); Alvord v. Waggoner, 32 S.W. 872, 873

(Tex. 1895); Andrews v. Harvey, 39 Tex. 123 (1873). While that is true for the “one satisfaction” of

judgment rule and election-of-remedies rule (see n. 1, supra), none of the cases found involve

settlement, a settling party, or reduction of a damage award. Thus, none of these cases show a “one

satisfaction” settlement credit existed before article 2212.

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reasonable certainty to the individual wrongdoers, all of the wrongdoers will be

held jointly and severally liable for the entire damages and the injured party may

proceed to judgment against any one separately or against all in one suit. If

fewer than the whole number of wrongdoers are joined as defendants to

plaintiff’s suit, those joined may by proper cross action under the governing rules

bring in those omitted.

248 S.W.2d 731, 734 (Tex. 1952). The Landers court also stated:

Thus at the time he filed his suit the plaintiff in this case was confronted with a

declared status of the law in this state which effectively relieved the two

defendants of the consequences of their wrongs and required the innocent

plaintiff to suffer his injuries without recompense. Whether he insisted on

standing on his joint and several suit against the defendants or bowed to the

ruling of the trial court and proceeded against the defendants separately, he could

not prevail. In other words, our courts seem to have embraced the philosophy,

inherent in this class of decisions, that it is better that the injured party lose all of

his damages than that any of several wrongdoers should pay more of the

damages than he individually and separately caused. If such has been the law,

from the standpoint of justice it should not have been; if it is the law now, it will

not be.

Id.4 Thus, Landers abolished Robicheaux’s concerted action requirement for establishing joint

and several tort liability. Under Landers, indivisible injury5 alone was enough in tort cases to

establish joint and several liability. A party had to be jointly and severally liable for the entire

damages, not just its share. Thus, when that party settled, they theoretically could have settled

for more than just their individual liability for just the damages they caused. Accordingly, in

that setting, the plaintiff had the opportunity to ultimately settle with multiple defendants for an

amount greater than the plaintiff’s overall injury, requiring application of the one satisfaction

rule.

4 In the authors’ opinions, if you knit together all of the court opinions applying the one satisfaction rule,

construction plaintiffs with indivisible injuries caused by multiple contracting parties find themselves

in the exact same position as tort claimants pre-Landers.

5 The one satisfaction rule also requires an indivisible injury common to the wrongdoing of the liable

and settling defendants. Sterling, 822 S.W.2d at 7; Landers, 248 S.W.2d at 734. An injury is

“indivisible” when, by its very nature, it cannot be apportioned with reasonable certainty to the

individual wrongdoers. Landers, 248 S.W.2d at 734.

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The one satisfaction rule’s historical development demonstrates it was intended to

address a problem unique to settlements with less than all jointly and severally liable defendants

in tort cases – the only cases to which article 2212 applied. A debate, which recently increased

in intensity, is about whether the one satisfaction rule applies in contract cases. Even assuming

for the sake of argument that the one satisfaction rule applies in a contract case—which will be

discussed in detail later in this article, the one satisfaction rule should not apply unless the

liability of the liable defendant and the settling defendant is joint and several. This has been

clearly stated by the Texas Supreme Court and the Fifth Circuit in interpreting Texas law. See

GE Capital Commercial Inc. v. Worthington Nat’l Bank, 754 F.3d 297, 306 (5th Cir. 2014);

Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000); First Title Co. of Waco v.

Garrett, 860 S.W.2d 74, 78 (Tex. 1993); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 8

(Tex. 1991); CTTI Priesmeyer, Inc. v. K&O Limited Partnership, 164 S.W.3d 675, 684 (Tex.

App.—Austin 2005, no pet.); LJ Charter, LLC v. Air America Jet Charter, Inc., No. 14-08-

00534-CV, 2009 WL 4794242 at *9 (Tex. App.—Houston [14th Dist.] Dec. 15, 2009, pet.

denied), all of which state that joint and several liability is a pre-condition to application of the

one satisfaction rule, versus Galle, Inv. v. Pool, 262 S.W.3d 564 (Tex. App.—Austin 2008, pet.

denied) and Elness Swanson Graham Architects, Inc. v. RLJ II-C Austin Air, LP; RLJ II-C

Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC, No. 03-14-00738-CV, 2017

WL 279598, at *1 (Tex. App.—Austin Jan. 20 2017, no pet. h.), which require only that

damages be indivisible in order for the rule to apply, even in a contract case.

The arguments against application of the rule when there is no joint and several liability

begin with the principle that joint and several liability is essential because the contribution right

is derivative of the plaintiff’s right to recover from the contribution defendant. Garrett, 860

S.W.2d at 79; Sterling, 822 S.W.2d at 8; Shoemake v. Fogel, 826 S.W.3d 933, 935 (Tex. 1992).

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As stated by the Texas Supreme Court, a non-settling defendant may successfully urge the one

satisfaction rule only to reduce damages for which all the defendants are jointly liable. Casteel,

22 S.W.3d at 391; Garrett, 860 S.W.2d at 78. In other words, if the plaintiff could not impose

joint and several liability, it would have no right to sue for damages other than those caused by

a particular defendant. Accordingly, a non-settling defendant would have no right to seek an

offset or credit from a settling defendant since the plaintiff had no right to do so against the

settling defendant or the non-settling defendant.

Thus, based on the history and the case law, discussed in detail in this article, opponents

of the rules’ application in contract assert that the one satisfaction rule applies in tort only. In

fact, the Texas Supreme Court has not applied it otherwise. See Casteel, 22 S.W.3d at 391-92

(“The non-settling defendant may only claim a credit based on the damages for which all

tortfeasors are jointly liable.”). (Emphasis added.) On the other hand, proponents of

application of the rule in contract argue “the absence of tort liability does not preclude the

application of the one satisfaction rule.” See, e.g., Hudspeth v. Enter. Life Ins. Co., 358 S.W.3d

373, 383 (Tex. App.—Houston [1st Dist. 2011, no pet.); AMX Enters., Inc. v. Bank One, N.A.,

196 S.W.3d 202, 206 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).

Insofar as research reveals, the proposition that the one satisfaction rule could be applied

in non-tort cases first appeared in Oyster Creek Fin. Corp. v. Richwood Investments II, Inc., 176

S.W.3d 307, 327 (Tex. App.—Houston [1st Dist.] 2004, pet. denied). The only support Oyster

Creek cited, however, was the per curiam opinion in El Paso Nat. Gas Co. v. Berryman, 858

S.W.2d 362, 364 (Tex. 1993). Berryman involved whether an alleged alter ego could be liable

for a judgment against a corporate entity after the corporation’s settlement extinguished the

judgment. Id. at 326. The alter ego doctrine applies when there is such unity between two

entities that they are, in law, one and the same. See Mancorp, Inc. v. Culpepper, 802 S.W.2d

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226, 228 (Tex. 1990); Hoffmann v. Dandurand, 180 S.W.3d 340, 347 (Tex. App.—Dallas 2005,

no pet.). Berryman did not involve any question of joint liability between two different parties,

but rather whether there was any liability remaining against what was, in legal effect, the same

party. Thus, Berryman did not involve an application of the one satisfaction rule at all and

cannot support its application in non-tort cases.

This view is further supported by the legislative history of section 33.012 of the Texas

Civil Practice and Remedies Code. Chapters 32 and 33 codify not only contribution rights, but

also the common-law one satisfaction doctrine. In doing so, the Legislature explicitly limited

the application of the one satisfaction rule generally to tort and DTPA cases. Tex. Civ. Prac. &

Rem. Code §§32.001 (“applies only to tort actions”) and 33.002 (applies to any cause of action

based on tort or any action under the DTPA).

It follows, goes the argument, that the plain language of the statute makes clear that

when the Legislature specifically limited contribution and settlement credits to tort cases, it

precluded other common-law contribution and settlement credits in other cases. When the

Legislature expressly provides for an exclusive remedy, it preempts the common law. Coleman

v. United Savings Ass’n of Texas, 846 S.W.2d 128, 132 (Tex. App.—Fort Worth 1993, no writ).

For example, when the Legislature abolished the common law equitable trust fund theory for

pre-dissolution claims to protect corporate directors, officers and shareholders, the Texas

Supreme Court ruled that the statute preclude further application of the previous common law

doctrine. Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex. 1981). Part of the

court’s reasoning was that application of the doctrine outside the restrictions imposed by the

statute would render the statute meaningless and impermissibly presume the Legislature

intended to do something that was effectively useless. Id.

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Opponents of the rule’s application in contract argue that the same is no less true when it

comes to the one satisfaction rule in Texas. Chapters 32 and 33 and their rules for settlement

credits are explicitly limited to tort and DTPA claims. If the Legislature had intended to include

other claims, it could have easily done so. By not including breach of contract actions, the

argument is that it must be presumed that the Legislature intended to limit application of the one

satisfaction rule to the cases and methods specified in the statute.

Legislative history confirms this intent. In 2005, the Legislature enacted Senate Bill 890

to amend section 33.0012 to restore the dollar-for-dollar credit. This credit was eliminated in

2003 when the Legislature enacted “tort reform” by adopting House Bill 4. Senate Bill 890 was

accompanied by a statement of intent from the author and sponsor stating,

Since the 1930s, Texas has recognized that an injured party is entitled to recover

only once for an injury. (Bradshaw v. Baylor, 126 Tex. 99, 101; 84 S.W.2d 703,

704 (1935)). The “one-satisfaction” rule was codified by the Legislature in

Chapter 33, Civil Practice and Remedies Code, in 1987…. The settlement credit

scheme created by H.B. 4 eliminates the one satisfaction rule that has been part

of Texas law for more than 70 years, except in medical liability cases.

Senate Committee on State Affairs, Bill Analysis, Tex. S.B. 890, 79th Leg. R.S. (2005) and

Senate Committee on State Affairs, Bill Analysis, Tex. C.S.S.B. 890, 79th Leg. R.S. (2005)

(emphasis added); available at Capitol Research Services, The Legislative History of Tex. S.B.

890, 79th Leg., R.S. (2005), Regarding Settlement Credit 20, 82, 89 (App. I).

The Legislature’s declaration that the 2003 tort reform bill “eliminate[d]” the common-

law one satisfaction rule confirms that, except as permitted by statute, the common-law one

satisfaction rule had otherwise been “eliminate[d]” when House Bill 4 was passed. Based on

this reasoning, a party can argue that its continued application by the courts outside the scope of

chapters 32 and 33 is legally erroneous. If applied in error by courts, it is understandable,

because courts were likely unaware of the not-readily-available declaration of Legislative intent

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in the legislative history of the statute. Thus, perhaps courts have naturally continued to resort

to case law antedating House Bill 4 without fully appreciating the historical reason why the one

satisfaction rule was developed or fully realizing that chapters 32 and 33 of the Civil Practice

and Remedies Code supplanted the common-law one satisfaction rule after September 1, 2003.

Nonetheless, the question remains about whether it is erroneous to apply the one satisfaction

rule outside the statutory parameters of chapters 32 and 33.

III. THE ONE SATISFACTION RULE IN CONTRACT CASES – SHOULD IT

APPLY?

As noted above, whether the one satisfaction rule applies in contract cases is a subject of

argument amongst practitioners. In undertaking this analysis, it is important to remember that

tort duties are universal and contractual duties are not. Landers implicitly recognized the joint

duty requirement would necessarily be satisfied in tort cases so that joint and several tort

liability need only focus on the existence of a common, indivisible injury. 248 S.W.2d at 734.

Specifically, for purposes of tort liability, “the law imposes on all persons a duty to act as a

reasonably prudent person would act under same or similar circumstances, considering any

reasonably foreseeable risks or probability of injury to others.” Zidell v. Bird, 692 S.W.2d 550,

553 (Tex. App.—Austin 1985, no writ).

Undertakings in a contract, however, are theoretically binding only on the contracting

parties and their privies. McClellan v. Scardello Ford, Inc., 619 S.W.2d 593, 597 (Tex. Civ.

App.—Amarillo 1981, no writ); Buckner Orphans Home v. Berry, 332 S.W.2d 771, 776 (Tex.

Civ. App.—Dallas 1960, writ ref’d n.r.e.). Thus, many commentators argue that joint and

several contractual liability requires more than indivisible injury, differentiating it from tort

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cases.6 Indeed, in order for the one satisfaction rule to apply, some courts have held that joint

and several contractual liability also requires that the parties separately promise the same

performance, whether under the same or separate contracts. Restatement (Second) of Contracts,

§ 13 (1981); 12 Richard A. Lord, Williston on Contracts, §§ 36:1; In re Sewell, 413 B.R. 562,

568 n.5 (Bankr. E.D. Tex. 2009); CTTI, 164 S.W.3d at 679, 684-85 (joint and several

contractual liability under separate contracts requires promise of the same performance); LJ

Charter, 2009 WL 4794242 at *9. But, not all undertakings for the same performance in

contract are necessarily joint:

Under the common law doctrine of joint, joint and several, and several

obligations in a contract, the question is whether multiple promisors of the same

performance have promised as a unit (jointly), or have promised the same

performance separately (severally), or both as a unit and separately (jointly and

severally).… The problem does not arise, however, unless the promises relate to

the same performance.

InvestIn.com v. Europa Int’l , Ltd., 293 S.W.3d 819, 828 (Tex. App.—Dallas 2009, pet. denied);

accord K-Bar Servs., Inc. v. English, No. 03-05-00076-CV, 2006 WL 903735 at *3 (Tex.

App.—Austin Apr. 7, 2006, no pet.). In all events, however, under this line of cases, to be

jointly and severally liable under contract the parties must effectively promise the same

performance. Export Worldwide, Ltd. v. Knight, No. SA 05 CA 647 XR, 2007 WL 628746

(W.D. Tex. Feb. 27, 2007) (joint promises); InvestIN.com Corp., 293 S.W.3d at 829; English,

2006 WL 903735 at *3.

6 There is also a group of Texas cases that say that joint and several liability is not required for the one

satisfaction rule to apply in contract cases. See, e.g., Elness, 2017 WL 279598 at *12; Matthews v.

Sohn, No. 13-12-00302-CV, 2013 WL 2949562, at *5 (Tex. App.—Corpus Christi June 13, 2013, no

pet.); Allan v. Nersesova, 307 S.W.3d 564, 574 (Tex. App.—Dallas 2010, no pet.); Galle, 262 S.W.3d

at 573-74; Osborne, 252 S.W.3d at 75, 78; Burke v. Union Pac. Res. Co., 138 S.W.3d 46, 70-71 (Tex.

App.—Texarkana 2004, pet. denied); Oyster Creek Fin., 176 S.W.3d at 326-29; Goose Creek Consol.

Indep. Sch. Dist. v. Jarrar’s Plumbing, Inc., 74 S.W.3d 486, 504 (Tex. App.—Texarkana 2002, pet.

denied).

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The Austin Court of Appeals agreed in 2008 in CTTI, stating that when a plaintiff goes

to trial on purely contract claims against a defendant, and no other party contracted with the

plaintiff promising the same thing, then the one satisfaction rule does not apply to any verdict

rendered against that defendant. 164 S.W.3d at 684. This is because the one satisfaction rule

should only apply to breach of contract claims where defendants are jointly and severally liable

for a plaintiff’s damages, and joint and several liability only arises in contract when the

defendants have made joint or overlapping promises to the plaintiff. Id. at 685; Bluestar

Energy, Inc. v. Murphy, 205 S.W.3d 96, 99 (Tex. App.—Eastland 2006, pet. denied); Moon Sun

Kang v. Derrick, 14-13-0086-CV, 2014 WL 2048424, at *12 (Tex. App.—Houston [14th

Dist.]

May 15, 2014, no pet.); LJ Charter, 2009 WL 4794242, at * 9; Karbach v. Markham, 03-06-

00636-CV, 2009 WL 3682604, at *3 (Tex. App.—Austin Nov. 6, 2009, no pet.).

The CTTI opinion analyzed the one satisfaction rule in a construction case, with facts

similar to the scenario presented in the introduction to this article. Specifically, CTTI involved

a contract suit by an owner against an architect and general contractor for a new building’s

foundation defects. 164 S.W.3d at 679. The architect’s contract required design and

“supervisory services.” Id. at 685. A separate contract required CTTI, the general contractor, to

build according to the architect’s plans and specifications. Id. at 678. Before trial, the owner

settled with several parties involved in the building’s construction and settled with the architect

during trial. Id.

After the jury returned its verdict, the general contractor sought to have its contractual

liability reduced by the other defendants’ settlement payments. Id. at 680. After carefully

reviewing Texas Supreme Court authorities, the court held the one satisfaction rule inapplicable

unless the liable and settling defendants breached the same contractual duty. Id. at 685. It

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concluded the architect’s and general contractor’s promised performances differed so that the

one satisfaction rule did not apply. Id. 7

In its analysis, the CTTI court discussed three Supreme Court of Texas cases, Stewart

Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991), First Title Co. of Waco v. Garrett, 860

S.W.2d 74 (Tex. 1993), and Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000). The

court observed that in each of those cases the liable and settling defendants were joint

tortfeasors. It pointed out that the Texas Supreme Court had observed in Casteel:

Under the one satisfaction rule, the nonsettling defendant may only claim a credit

based on the damages for which all tortfeasors are jointly liable.... [T]he

nonsettling defendant is entitled to offset any liability for joint and several

damages by the amount of common damages paid by the settling defendant, but

not for any amount of separate or punitive damages paid by the settling

defendant.

CTTI, 164 S.W.3d at 684 (quoting Casteel, 22 S.W.3d at 391-92; emphasis added).

CTTI is not an isolated example. CBI NA-CON, Inc. v. UOP, Inc., 961 S.W.2d 336, 339

(Tex. App.—Houston [1st Dist.] 1997, pet. denied), also categorically ruled “[c]ontribution is

allowed in Texas only among joint tortfeasors.” Id. at 339. CBI explained “the only way

[C]hapter 33 could apply is if [the plaintiff] had a negligence claim, breach of warranty claim …

or a strict products liability claim” because “[a] breach of contract claim is not a basis for

contribution under Chapter 33.” Id. at 339, 341. Bartley v. Guillot, 990 S.W.2d 481, 484 (Tex.

App.—Houston [1st Dist.] 1999, pet. denied), also disallowed a “one satisfaction” settlement

credit because “any set-off [the liable defendant] may be entitled to receive must come from

another tortfeasor, not … a party merely involved by contract.” Id. These decisions further the

7 The Austin Court of Appeals recently declined to follow its own opinion in CTTI, without a specific

explanation, and without overruling CTTI. See Elness, 2017 WL 279598, at *12, n. 7.

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argument that “one satisfaction” settlement credits should apply only to joint tort, not

contractual, liabilities.

However, these opinions have been no barrier to other courts applying the one

satisfaction rule to non-tort claims. One such case is Galle v. Pool, also a Third Court of

Appeals opinion like CTTI, which deals with a homeowner who brought suit against its

insurance company and a mold remediator. The homeowners’ claims against both parties arose

out of the defendants’ failures to properly deal with the proliferation of mold in the

homeowners’ residence (potentially overlapping promises). Galle, 262 S.W.3d at 571-72.

Specifically, the insurance company was obligated to provide coverage for damages arising out

of the mold issues in the home and for the homeowners’ inability to reside in the home while it

was impacted by the mold; the remediation company contracted to eradicate the mold and return

the house to a mold-free condition and its failure to do so caused damages arising out of the

mold issues in the home and the homeowners’ inability to reside in the home while impacted by

mold. Id.

Galle involved both tort and contract claims, both of which went to the jury, and the

plaintiff’s election of a tort remedy in a judgment. Id. at 569-70. Under the circumstances, the

Galle court applied Chapter 33 of the Texas Civil Practice & Remedies Code to the judgment

and reduced it dollar for dollar, because it was a judgment for a tort claim. Id. at 571-73.

In dicta,8 the Galle court also stated that the one satisfaction rule would have applied to

the homeowners’ contract claims because they had not provided evidence showing that the

settlement amount was for damages for which Galle was not jointly liable. (Allocation of

damages and settlement considerations are discussed later in this article.) Although not

8 The judgment in Galle was for negligent misrepresentation. Galle, 262 S.W.3d at 573. The plaintiffs

elected not to reduce the breach of contract verdict to judgment because the negligent

misrepresentation claim yielded greater damages. Id.

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expressly stated, this dicta can be reconciled with CTTI if the promises made by the different

defendants in Galle overlapped and created contractual joint and several liability, the exact

situation where the CTTI court agreed that the one satisfaction rule would apply. It is important

to note that the Galle did not overrule CTTI. In fact, it cites to CTTI for a definition of the one

satisfaction rule, showing that the Galle court knew of and approved of the CTTI holding. Id. at

573.

Osborne is another mold case where the plaintiff homeowner, after receiving a large

payment from its insurance company, proceeded to trial on multiple tort theories against the

subcontractors who constructed the house, settled with most of them on the eve of trial, then

obtained a tort verdict against the remaining defendant. Osborne, 252 S.W.3d at 73-74. The

authors address it here because it is has been cited by courts as a case supporting the application

of the one satisfaction rule in contract.

At trial, the Osborne jury returned a negligence finding against Jauregui, the remaining

defendant, determined the Osbornes’ total damages, and then reduced them proportionally to

48%. Id. at 75. Because of the previous settlements, the court reduced the tort verdict pursuant

to the statutory tort settlement credit scheme on a dollar-for-dollar basis before entering a take-

nothing judgment against the plaintiffs. Id.

The Osborne court discussed the one satisfaction rule in considering how reducing the

verdict affected attorneys’ fees and subrogation, but approved of the trial court’s application of

the tort settlement credit rule to reduce the verdict. Id. Moreover, the jury was asked to decide

the total amount of the Plaintiffs’ injuries and not, as in a typical contract case based on the

Texas pattern jury charges, the damages caused only by the remaining defendant – making the

tort settlement credit’s application logically and legally cogent. Id. Osborne, then, is another

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case involving a tort theory of recovery and perhaps should have no application where a breach

of contract finding is the only one in the verdict.

Four years after CTTI, the Fourteenth Court of Appeals in Houston also refused to apply

the one satisfaction rule absent a shared contractual duty. In LJ Charter, the plaintiff received a

judgment against the liable defendant for damages for breach of contract, breach of fiduciary

duty, and fraud. 2009 WL 4794242 at *6, n.12. The plaintiff previously settled claims for the

alleged breach of two contracts by two other parties. Id. at *7. The liable defendant was not a

party to either of the contracts that were the basis of the settled claims. Id. at *9. The court

refused the liable defendant’s request for credit under the one satisfaction rule because the liable

defendant was not a party to, and could not have been liable under, those contracts. Id. In

short, when there was no joint liability, the one satisfaction rule did not apply.

In 2014, the Fifth Circuit was persuaded by Garrett, Sterling, and CTTI that joint and

several liability was essential to the application of the one satisfaction rule. GE Capital, 754

F.3d at 306. The suit arose when a predecessor’s employee fraudulently induced wire transfers

to a bank that accepted them in bad faith in violation of a Texas statute. GE Capital sued the

predecessor for contractual remedies under the purchase and sale agreement and sued the bank

for statutory tort. Id. at 300. GE Capital settled its contractual claims with the predecessor, but

successfully tried the statutory tort claim against the bank. Id. at 301. The bank asserted the

one satisfaction rule applied and GE Capital should recover nothing because its contract

damages were for the same loss settled by the bank. Id. at 303.

Interpreting Texas law, the Fifth Circuit held there was no legal duty shared by the

settling and liable defendants and, therefore, the one satisfaction rule did not apply. Id. at 306-

07, 309. A common factual origin for the damages claimed against the settling and liable

defendants was not enough.

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[The settling defendant’s] alleged contractual breach and the TUFTA action

against [the liable defendant] may share common underlying facts – the three

fraudulent transfers …. But such factual commonality does not suffice … to

render [the settling defendant] a joint tortfeasor for one satisfaction rule

purposes.

Id. at 309 (emphasis added). Thus, the Fifth Circuit agreed with CTTI’s analysis that the one

satisfaction rule did not apply in any case where the duty allegedly breached by the liable and

settling defendants was not the same. Id. at 306-07.

IV. INDIVISIBLE INJURY WITHOUT JOINT AND SEVERAL LIABILITY -- ISN’T

IT ENOUGH?

Confusion around the one satisfaction rule appears to center around the concept that an

indivisible injury automatically warrants application of the one satisfaction rule, whether the

suit is in tort or contract. Adding to the confusion, some cases hold that application of a

settlement credit in a contract case based on indivisible damages, without a finding of joint and

several liability, is appropriate. The inconsistent application of the one satisfaction rule (even

within the same appellate court) leaves practitioners and parties wondering what will happen in

their case. Texas courts need to resolve this issue.

Another example of this confusion and inconsistency is that the contribution scheme in

section 33.003 of the Texas Civil Practice and Remedies Code allows the fact-finder to allocate

damages in a tort case with indivisible injury without expert testimony as to allocation of

indivisible damages, but courts apparently require expert testimony for allocation of damages in

a contract case with indivisible injury. See, e.g., Elness, 2017 WL 279598 at *11-12, 14.

Moreover, the Texas pattern jury charges do not address apportionment or allocation in multi-

party breach of contract cases. This issue likewise needs to be addressed.

“Indivisible injury” is defined as “an injury from which its nature cannot be apportioned

with reasonable certainty to the individual wrongdoers.” Landers, 248 S.W.2d at 734. Contrast

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the Landers statement with Texas Rule of Evidence 702, which governs admission of expert

testimony:

If scientific, technical, or other specialized knowledge will assist the trier of fact

to understand the evidence or to determine a fact in issue, a witness qualified as

an expert by knowledge, skill, experience, training, or education, may testify

thereto in the form of an opinion or otherwise.

Tex. R. Evid. 702.

When it articulated the statement of interpretation of Rule 702, the Texas Supreme

Court, quoting Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), stated:

In addition to being relevant, the underlying scientific technique or principle

must be reliable. Scientific evidence which is not grounded in the methods and

procedures of science is no more than subjective belief or unsupported

speculation. Unreliable evidence is of no assistance to the trier of fact and is

therefore inadmissible under Rule 702.

E.I. du Pont de NeMours & Co., Inc. v. Robinson, 923 S.W.2d 549, 557 (Tex. 1995) (internal

citations and quotations omitted). The Robinson court articulated the following non-exclusive

factors for an admissibility review of scientific expert opinion:

(1) the extent to which the theory has been or can be tested;

(2) the extent to which the technique relies upon the subjective interpretation of

the expert;

(3) whether the theory has been subjected to peer review and/or publication;

(4) the technique’s potential rate of error;

(5) whether the underlying theory or technique has been generally accepted as

valid by the relevant scientific community; and

(6) the non-judicial uses which have been made of the theory or technique.

Id. In terms of allocation of damages resulting from a defective foundation caused by multiple

parties, the authors are unaware of any articulated standards or guidelines which could serve as

a basis for an expert opinion, and therefore conclude that obtaining competent, admissible

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expert testimony allocating damages in the scenario above is simply not possible when viewed

in the context of Texas Rule of Evidence 702 and Robinson.

Adding to the confusion is the definition of legal injury for breach of contract versus for

a tort, and the fact that legal injury cannot be conflated with damages. They are separate and

distinct. A legal injury consists of the invasion to a claimant’s legally protected rights. Seureau

v. ExxonMobil Corp., 274 S.W.3d 206, 226-227 (Tex. App.—Houston [14th Dist.] 2008, no

pet.); Goggin v. Grimes, 969 S.W.2d 135, 137 (Tex. App.—Houston [14th Dist.] 1998, no pet.).

For contract breaches, the legal injury is failing or refusing to do something a party promised.

Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). For

tort, the legal injury occurs when the tort is committed and damage is suffered. Deloitte &

Touche v. Weller, 976 S.W.2de 212, 215 (Tex. App.—Amarillo 1998, pet. denied).

The CTTI court addressed the concept of “indivisible injury,” stating “(i)f we were to

hold that, due to the indivisible nature of the resulting injury, breach of contract defendants and

tort defendants are jointly and severally liable for all damages, we would be forced to hold a

person not a party to a contract liable for the breach of that contract.” 164 S.W. 3d at 685. As

noted above, courts would also have to apply differing standards for legal injury. The CTTI

court brushed aside the claim that settlement credits should apply because the plaintiff’s

damages resulted from a “single, indivisible injury” and “found that focus to be misplaced.” Id.

Allowing a settlement credit based on the one satisfaction rule in non-tort cases based on

the indivisible injury alone arguably ignores Texas joint and several tort liability law. It is true

that after Landers, joint and several tort liability is based solely on indivisible injury. 248

S.W.2d 731 at 734. Thus, some post-Landers tort cases, including the recent Elness opinion,9

9 Elness, 2017 WL 279598.

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discuss indivisible injury requirement without mentioning or requiring joint and several liability

because, post-Landers, in tort cases the former automatically satisfies the latter. However, as

noted earlier, there is Texas Supreme Court authority which appears to hold that joint and

several liability is essential to applying the one satisfaction rule. Casteel, 22 S.W.3d at 390;

Garrett, 860 S.W.2d at 78; Sterling, 822 S.W.2d at n. 8.

This is sound reasoning. In the RESTATEMENT (SECOND) OF CONTRACTS

Section 13 (1981) it states that joint and several liability arises in contract based upon the

relationship between the parties and the existence of what amounts to joint promises. CTTI, 164

S.W.3d at 684, citing Restatement (Second) of Contracts § 13 (1981). Numerous cases have

cited this proposition, many citing to CTTI.10

This is logical because a holding to the contrary

would lead to a result where a party found liable for breach of contract could get a settlement

credit that wipes out a judgment for a settlement entered into by another party who did not make

the same promise contractually. And under contract, the settling party has no contribution right

against the non-settling party, even though the parties were deemed to be joint and severally

liable for the plaintiff’s damages when the one satisfaction rule was applied.11

The result is that

the settling party is essentially liable on the non-settling party’s contract.

The CTTI court observed if an indivisible injury alone created a joint and several

liability between contract and tort defendants (or just contract defendants), applying the one

satisfaction rule would permit “hold[ing] a person not a party to a contract liable for the breach

of that contract.” Id. at 685. Such result is legally impermissible because contractual privity is

10

As noted earlier, the Houston and Dallas Courts of Appeals, and the Fifth Circuit all agree, post-Galle,

that joint and several contractual liability only exists where contractual promises overlap or are

identical. See Moon Sun Kang, 2014 WL 2048424 at *12; Karbach, 2009 WL 3682604 at *3;

InvestIN.com, 293 S.W.3d at 828-29; GE Capital, 754 F.3d at 306-07.

11 This is because, as noted above, the common law right of contribution was eliminated with the

adoption of Chapter 32 and 33 of the Civil Practice and Remedies Code.

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necessary for standing to sue. OAIC Commercial Assets, L.L.C. v. Stonegate Village, L.P., 234

S.W.3d 726, 738 (Tex. App.—Dallas 2007, pet. denied). Standing to sue is essential to subject-

matter jurisdiction. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 865 (Tex. 2010). No privity

of contract exists between persons not parties to the same contract without promises of the same

performance. See Amco Trust, Inc. v. Naylor, 317 S.W.2d 47, 50 (Tex. 1958). Now that the

Texas Supreme Court has made clear that contractual privity is an absolute condition precedent

to suit in the construction industry, clarity on this question is more important than ever. See

LAN/STV v. Martin K. Eby Const. Co., Inc., 435 S.W.3d 234 (Tex. 2014).

V. PRACTICAL CONSIDERATIONS

A. Pleading Considerations

In the event a party moves to apply the one satisfaction rule and seeks a credit for a

settlement by another party to a case, the best course of action is to put the opposing party and

the court on notice of that intent, at some point in the proceeding. Although it is not clear that it

impacted the decision, the Galle court specifically noted the party that sought application of a

settlement credit put the court on notice, “numerous times prior to, during and after the trial.”

Galle, 262 S.W.3d at 570.

A defendant’s best practice is to plead the one satisfaction rule as an affirmative defense

and state that it applies to contract claims. This is because the right of offset by settlement

credit is an affirmative defense and the burden of pleading and proving facts necessary to

support it are on the party making the assertion. Wise Elec. Coop., Inc. v. American Hat Co.,

476 S.W.3d 671, 716-17 (Tex. App.—Ft. Worth 2015, no. pet), citing Brown v. Am. Transfer &

Storage Co., 601 S.W.2d 931, 936 (Tex. 1980) and Hartnett v. Hampton Inns, Inc., 870 S.W.2d

162, 167 n. 6 (Tex. App.—San Antonio 1993, writ denied). See also Garrison Realty, L.P. v.

Fouse Architecture & Interiors, P.C., 546 Fed. Appx. 458, 465 (5th Cir. 2013) (an offset due to

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a settlement credit is an affirmative defense that must be pleaded and proved by the defendant);

Giles v. Gen. Elec. Co., 245 F.3d 474, 494 & n. 36 (5th Cir. 2001); Goose Creek Consol. Indep.

Sch. Dist. v. Jarrar's Plumbing, Inc., 74 S.W.3d 486, 501–02 (Tex. App.—Texarkana 2002, pet.

denied). The failure to plead an affirmative defense generally results in waiver of that defense.

Tex. R. Civ. P. 94; Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex. 1991). Similarly, a failure to

put the opposing party or the court on notice prior to the jury charge submission may result in

waiver. Tex. R. Civ. P. 90; Bullock v. Regular Veteran’s Ass’n of U.S., 806 S.W.2d 311, 314

(Tex. App.—Austin 1991, no writ).12

The Austin Court of Appeals has specifically acknowledged that the one satisfaction rule

is in the nature of an affirmative defense. RenewData Corp. v. eMag Solutions, LLC, No. 03–

05–00509–CV, 2009 WL 1255583, at *1 n. 1 (Tex. App.—Austin May 6, 2009, pet. denied)

(unasserted one satisfaction rule could not be considered as alternative summary judgment

ground); accord Pagosa Oil & Gas, L.L.C. v. Marrs & Smith P’ship, 323 S.W.3d 203, 217

(Tex. App.—El Paso 2010, pet. denied); Brewer & Pritchard, P.C. v. AMKO Res. Int’l, LLC,

No. 14-13-00113-CV, 2014 WL 3512836, at *1 (Tex. App.—Houston [14th Dist.] July 15,

2014, no pet.). Moreover, cases holding otherwise seem to be irreconcilable with Texas Rule of

Civil Procedure 94 because the opponent must be notified of the need to prove damages

allocation, if possible, plus defend against the elements of the affirmative defense, as the burden

to plead facts necessary to support application of the rule is on the party seeking to apply it. See

Wise, 476 S.W.3d at 716-17; Garrison, 546 Fed. Appx. at 465-66.

12

But, compare Elness, which implies that pleading Chapter 33 as an affirmative defense puts a party on

notice of its intent to seek a settlement credit under contract, with Garrison, where a party pled that

damages were barred in whole by a settlement was not sufficient to put a party on notice that damages

may be barred in part by a settlement. Elness, 2017 WL 279598 at *15; Garrison, 546 Fed. Appx. at

465.

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The cases cited above seem to provide some clarity on the affirmative defense question,

but the Ft. Worth Court of Appeals has held that because Chapter 33 of the Civil Practice and

Remedies Code is “silent” concerning whether a pleading was required, and that so long as the

court is aware of the request for application of the credit, it must do so if all of the other

elements are met. Dalworth Restoration, Inc. v. Rife-Marshall, 433 S.W.3d 773, 783 (Tex.

App.-Ft. Worth 2014, pet. dism’d w.o.j.).13

Interestingly, both the Galle and Dalworth opinions

make clear that the party seeking application of the settlement credit had put the court on notice

of the intent to seek a settlement credit, before, during and after trial. Id. at n.16; Galle, 262

S.W.3d at 570. Based on these varying opinions, a party that intends to ask a court to apply a

settlement credit should plead such as an affirmative defense, or at the very least make a record

before the court of that intent, making it explicitly clear the request applies to all causes of

action, including breach of contract.

Waiting until after a jury verdict to assert the application of the one satisfaction rule or

give notice of the same may result in the argument being barred by the doctrine of laches.

Laches is an equitable remedy that prevents a plaintiff from asserting a claim due to lapse of

time. Green v. Parrack, 974 S.W.2d 200, 203-04 (Tex. App.—San Antonio 1998, no pet.);

Bluebonnet Sav. Bank, F.S.B. v. Grayridge Apartment Homes, Inc., 907 S.W.2d 904, 912 (Tex.

App.—Houston [1st Dist.] 1995, writ denied). The one satisfaction rule developed as an

equitable principle, subject to equitable defenses. Sterling, 822 S.W.2d at 6; see also Brewer v.

Nationsbank of Texas, N.A., 28 S.W.3d 801 (Tex. App.—Corpus Christi 2000, no pet.). To

prevail, the party asserting laches must show two elements: (1) there was an unreasonable delay

13

Chapter 33, on its face, only relates to tort claims. Dalworth, 433 S.W.3d at 780. Given this strict

construction, courts should not be able to apply Chapter 33, even by analogy, to contract claims

because Chapter 33 is “silent” about its applicability to contract and, as noted above, there is no

common law “one satisfaction” rule. However, both Galle and Dalworth apply Chapter 33 to establish

entitlement to the settlement credit. Id. Galle, 262 S.W.3d at 579.

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by the other party in asserting legal or equitable rights, and (2) the party asserting laches made a

good faith change in position to his detriment because of the delay. Caldwell v. Barnes, 975

S.W.2d 535, 538 (Tex. 1998); Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 80 (Tex. 1989);

see City of Fort Worth v. Johnson, 388 S.W.2d 400, 403 (Tex. 1964).

With respect to whether parties are joint and severally liable, this determination is a

legal conclusion, not a factual assertion. See Bentley v. Bunton, 94 S.W.3d 561, 619 (Tex.

2002) (conspiracy finding “requires the legal conclusion to impose joint and several liability”);

Ilami v. Rowinska, 2008 WL 3522242, at *2 (Tex. App.—Dallas Aug. 14, 2008, no pet.)

(“defendants are jointly and severally liable” is a “legal conclusion”). As such, it is probably

not worthwhile to argue that a party made a judicial or pleading admission, because “[t]he mere

fact that plaintiffs incidentally inserted in their petition the legal conclusion that ‘[the

defendant], under the facts alleged, is further liable to plaintiffs, jointly and severally, in his

individual capacity’ did not in any respect change or alter the nature and character of the cause

of action otherwise asserted ….” Whitley v. King, 227 S.W.2d 241, 244 (Tex. Civ. App.—

Waco 1950, no writ).

Thus, even if a party “admitted” potential joint contractual liability, its should not be

binding because the purported admission concerned a question of law, not fact. Boulet v. State,

189 S.W.3d 833, 838 (Tex. App.—Houston [1st Dist.] 2006, no pet.). Admission of a legal

conclusion has no legal effect. Elliott v. Newsom, No. 01-07-00692-CV, 2009 WL 214551, at

*2 (Tex. App.—Houston [1st Dist.] Jan. 29, 2009, no pet.). Nonetheless, due to conflicting

court opinions, a party who has pled multiple theories of liability, including ones that involve

joint and several liability, must be clear in its pleading regarding which causes of action the

party wishes to result in joint and several liability and which do not.

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B. Allocation of Damages, Settlements, and Potential Ethical Issues

How does a plaintiff avoid application of the one satisfaction rule? Recall that in Galle,

the court said that a party needs to provide evidence showing that the settlement amount was for

damages for which the non-settling defendant was not jointly liable. Galle, 262 S.W.3d at 573.

The Galle court further stated that a party seeking to apply a settlement credit has the burden of

proving the settlement amount, which it could meet by placing the settlement agreement or

“some evidence” of the settlement amount in the record. Galle, 262 S.W.3d at 572, citing

Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 927 (Tex. 1998.)

Additionally, in the Galle dicta, the court states that if an indivisible injury is alleged

then it is the Plaintiffs’ burden to prove that a settlement with one defendant was for damages

for which that defendant was independently liable and not for damages that both defendants

were jointly liable, to prevent the application of the one satisfaction rule. Id. The court’s

analysis of this issue is treated like its analysis of the Chapter 33 settlement credit issue, because

the court had decided that joint and several liability existed. The Galle court looked at the terms

of the settlement agreement to determine whether the Plaintiffs met their burden to prove that

the settlement amount was for separate damages for applying the tort settlement credits, and

referenced that the same evidence would have been required for the contract claims. Id. at 572-

73. This reasoning, however, simply does not work outside the confines of joint and several

liability.

As noted, courts have stated that a settlement agreement is itself evidence of allocation.

Id. at 572.14

A defendant should be entitled to a settlement credit for any amount representing

14

The Galle court did so without stating how or why the agreement was admissible evidence, or the

method for proving up the agreement.

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joint damages, but not for separate or punitive damages.15

Id., citing Casteel, 22 S.W.3d at 391-

92. The plaintiff bears the burden to offer evidence of why and how any such allocation was

made. Id. These statements seem simple enough but are indicative of the lack of clarity courts

have provided in contract cases, and the risks facing lawyers representing breach of contract

plaintiffs with indivisible damages.

Indeed, based on Galle and the recent Elness opinion, it is quite possible that the current

state of the law prevents a plaintiff from ever getting a jury verdict in a multi-party construction

case with indivisible damages which can survive appeal.16

This is because these cases hold that,

unlike tort cases, a plaintiff obtaining a verdict against multiple defendants for breach of

contract on different contracts must have presented evidence of allocation of damages at trial.

Elness, 2017 WL 279598, at **11, 12; Galle, 262 S.W.3d at 573. Of course, in a construction

case, this can only be done through expert testimony. However, in the defective slab services

scenario described in the introduction to this article, the authors are unaware of any expert who

could or would testify regarding allocation of damages which are already given the moniker

“indivisible.” Furthermore, if courts are going to require that a party allocate damages, there is

still an issue with evidentiary sufficiency. As noted above, such an opinion would be based

only on the expert’s subjective opinion, and not on any of the reliability factors articulated in

Robinson.

15

This makes sense in a tort case, where the jury is asked the total amount of damages, and settlement

credits are given according to the statutory scheme.

16 It appears that plaintiffs in a multi-party contract case with indivisible damages now find themselves

exactly where tort plaintiffs with indivisible damages caused by multiple tortfeasors were prior to the

Texas Supreme Court’s decision in Landers. Because of the proof issues inherent in allocating

indivisible damages, the defendants are relieved of the consequences of their wrongs and the innocent

plaintiff is forced to suffer his injuries without compensation. Landers, 248 S.W.2d at 735.

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According to Galle and Elness, the only safe harbor from which to protect your client

from the application of the one satisfaction rule is to be found in the actual language of a

settlement agreement. See Galle, 262 S.W.3d at 572-74; Elness, 2017 WL 279598, at *12. In

these opinions, the courts state that allocation of damages in the settlement agreement is the

only way to prevent the application of the one satisfaction rule. Galle, 262 S.W.3d at 572-74.

However, the courts have articulated no standards or guidelines identifying what language

might be sufficient. So, while the Supreme Court of Texas encourages settlement, the

conflicting message from the courts seems to be, “Draft the agreement and hope we find it

sufficient, and if we don’t, hope you don’t get sued for malpractice.” For these reasons,

plaintiff’s counsel needs to strongly consider the wisdom of entering into anything less than a

global settlement in a multi-party construction case with indivisible damages.

The proposition of settlement language allocating damages presents at least two

significant issues for the practitioner, which are (1) precisely what are the standards for

language in a settlement agreement to be found sufficient to prevent application of the one

satisfaction rule and (2) what ethical issues are the drafters exposed to as a result of the

language they drafted.

For example, lawyers are required to be truthful to courts. Preamble Two to the Texas

State Bar Rules requires that “[a]s Negotiator, a lawyer seeks a result advantageous to the client

but consistent with honest dealings with others.” By placing the entire burden of solving the

one satisfaction rule dilemma on a lawyer drafting a settlement agreement, not based on facts or

any clear articulation of principles, it is not a stretch to imagine a non-settling defendant allege

that a plaintiff’s lawyer violated Preamble 2 while drafting a settlement that fabricates allocation

of damages out of whole cloth, which are otherwise deemed “indivisible,” when no witness or

expert could so allocate.

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Courts need to weigh the potential chilling effect that application of the one satisfaction

rule might have on settlements in breach of contract cases versus the harm that would occur if a

plaintiff was able to keep excess funds from a good settlement. Courts also need to wrestle with

the idea that not every dollar paid in exchange for settlement represents an economic trade for

damages.

The Texas Supreme Court has recognized that settlement consideration includes benefits

other than relief from paying damages. See Duncan v. Cessna, 665 S.W.2d 414, 431 (Tex.

1984); Landers, 248 S.W.2d at 734. “There is no conceptual inconsistency in allowing a

plaintiff to recover more from a settlement or partial settlement than he could receive as

damages.” Duncan, 665 S.W.2d at 431. “Plaintiffs will benefit from good settlements and bear

the risk of bad ones, just as they do in single-tortfeasor cases. Id. Allowing plaintiffs to keep

the excess from a good settlements may violate the one recovery rule, but no one is harmed.”

665 S.W.3d at 431-32. In this regard, the Texas Supreme Court has refused to accept that

preventing recovery of more than the jury’s damage assessment is a more important than

preventing a wrongdoer from escaping its full liability. Id., see also Landers, 248 S.W.2d at

734. It has justified overruling the application of the one satisfaction rule to the extent it

conflicted with its creation of a purely comparative negligence system because the one

satisfaction rule allowed the non-settling defendant to unfairly “benefit from a generous

settlement in which they refused to participate.” 665 S.W.2d at 431-32.

In addition, Texas Disciplinary Rule 3.03 requires candor to the tribunal. At some point

during argument over application of the one satisfaction rule, the drafting lawyer may have to

defend the allocation of damages in the settlement agreement, despite the knowledge that she

has no expertise in the matter, and that those with the expertise have told her the damages are

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indivisible. A lawyer could easily be accused of submitting evidence he knows is false, in

violation of Disciplinary Rule 3.02(a)(5).

Similarly, Disciplinary Rule 3.04(c)(2) prohibits a lawyer from

(2) stat[ing] or allud[ing] to any matter that the lawyer does not reasonably

believe is relevant to such proceeding or that will not be supported by

admissible evidence, or assert personal knowledge of facts in issue except when

testifying as a witness. (Emphasis added)

As noted above, it is virtually impossible (if not impossible) to find evidence supporting

allocation of indivisible damages in the construction context that can meet the Robinson factors,

so a lawyer who drafts a settlement agreement that does allocate indivisible damages is

probably running afoul of these rules.

While the permutations here seems endless, the last rule to discuss is Disciplinary Rule

3.08, “Lawyer as a Witness.” At some point, for a settlement agreement to be anything other

than inadmissible hearsay, the party resisting the use of a settlement agreement to get around

application of the one satisfaction rule should call the drafting lawyer as a witness to determine

the expertise and basis for allocation in the settlement agreement. Not only would this action

implicate Rule 3.08, which prohibits a lawyer from continuing to represent the client in the

action if the lawyer becomes a witness, but would implicate the other rules cited above.

The Galle court provides some instruction for drafting, including that settlement

agreement language should be narrowly crafted to only address damages for which only the

settling defendant is liable, and not for damages for which both defendants are jointly and

severally liable. Id.17

The Galle court then criticizes the settlement language at issue, noting that:

17

Note also that Galle dispenses with the collateral source rule without explanation. Galle, 262 S.W.3d

at 571-73.

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“[T]he settlement agreement is much broader, extending to claims “in any way

arising from, growing out of or in any way connected with any and all injuries,

losses and/or damages of any nature and kind whatsoever, or claims now known,

or that may hereafter develop as a consequence of any and all plumbing leaks

which occurred on or about June 30, 2002 at [the Pools’ house].”

Id. at 573.18

So, along with drafting an agreement that cannot be supported by evidence, the courts

provide an additional prescription for resolving the issue of a settlement credit, by making the

incredibly naïve suggestion that a defendant agree to exchange money in return for something

other than a global and complete release, which no competent defense counsel would allow.

Prior to the Texas Supreme Court’s decision in Eby Const. Co., 435 S.W.3d 234,

construction practitioners could plead something other than breach of contract in a construction

case, but now making such a claim is speculative, to say the least. That said, the temptation will

be to add negligence claims, fraud or the like to a petition simply to be able to attempt to

“allocate” settlement proceeds to allegedly separate duties, acts and damages. Again, however,

at some point a lawyer could be cross-examined on the language and belief behind the language,

and may well be subject to disciplinary action for the reasons described above, or for filing

frivolous causes of action.

Last, despite the fact the Galle opinion implies that a settlement agreement is evidence,

the party seeking application of the one satisfaction rule should object to the agreement as

18

The opinion in Galle makes clear just how unworkable contractual joint and several liability is, when

it states “although it is theoretically possible that some of the damages [Plaintiff] sought to recover

from [insurance company defendant] and for which they were compensated in the settlement

agreement may have been separate rather than joint, it was the [Plaintiff’s] burden to offer evidence

allocating the damages for which only [insurance company defendant] was liable, and those for which

[co-defendants] were jointly liable….” Galle, 262 S.W.3d at 573. The inference here is that one can

never prove allocation of indivisible damages. That actually may be true in a sense (see discussion of

Landers, supra), which is why the fact-finder should make the allocation based on the factual evidence

presented at trial. See, e.g. Tex. Prac. & Rem. Code § 33.003 (allowing fact-finder to apportion fault

and therefore, damages).

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inadmissible hearsay, and demand that the drafters or the parties be required to testify regarding

the agreement.

C. Constitutional Implications

A party seeking to apply the one satisfaction rule in a contract case may face significant

constitutional challenges. Texas strongly favors parties’ freedom of contract. Gym-N-I

Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 912 (Tex. 2007). Generally, parties are entitled to

consensually allocate risks and rewards by contract as they wish so long as there is no public

policy violation. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 & n. 11 (Tex. 2004).

Based on these principles, parties typically contract so that a breaching party will be

responsible for all damages that flow from that contract breach, irrespective of other contractual

relationships. This is especially true in Texas, where courts have done a poor job providing

clarity on the subject of joint and several contractual liability and where some cases lead to the

result that a construction plaintiff with indivisible damages caused by multiple parties’ breach

of contract cannot possibly get a jury verdict that can be upheld on appeal.

Thus, it is difficult to square the notion of the application of the one satisfaction rule to

these constitutional principles, when the net result would be to benefit a wrongdoer that was not

a party to the contract between the settling parties. See Landers, 248 S.W.2d at 734. In the

context of the one satisfaction rule, one argument is that it results on an involuntary transfer of a

party’s contract rights to benefit a wrongdoer who was not a party to that agreement. Id.

One possible argument to the contrary is that Texas’s constitutionally guaranteed

contractual freedom only applies to statutory restrictions. However, the Texas Supreme Court

perceived no such limitation when it considered this right paramount to a court-recognized

public policy against insuring exemplary damages. Fairfield Ins. Co. v. Stephens Martin

Paving LP, 246 S.W.3d 653, 664 (Tex. 2004). This argument is that court opinions are not

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“laws” as contemplated by § 16 of the Texas Constitution. See Howell v. Texas Workers’

Comp. Comm’n, 143 S.W.3d 416, 444 (Tex. App.—Austin 2004 pet. denied), citing

Amalgumated Transit Union, Local Div. 1338 v. Dallas Public Transit Board, 430 S.W.2d 107,

119 (Tex. App.—Dallas 1968, writ ref’d n.r.e.), citing Storrie v. Cortes, 38 SW 154, 156 (Tex.

1896) (with regard to the U.S. Constitution, “[a] decision of a court is not a law, within the

provisions of the Constitution relating to impairment of contracts”).19

Restricting the guarantee

to statutes is based on a federal parallel, because, being located in Article I of the U.S.

Constitution, it only limited legislative power. Storrie v. Cortes, 38 S.W. 154, 156 (1896). The

Texas freedom-of-contract provision is contained in the Bill of Rights and limits the power of

state government generally. “No … law impairing the obligations of contract shall be made.”

Tex. Const. art. I, §16. This restriction is not limited to the legislature, or encumbered by any

relationship to legislation, as opposed to the facts in Storrie on which Howell and Amalgumated

rely.

An additional argument could be that art. I, §16 does not apply because a “one

satisfaction” settlement credit is not a retroactive law. It reasons “the rule was in existence long

before any contract at issue.” However, based on the current body of law, it seems a stretch to

argue that the application of the one satisfaction rule in these circumstances is an “undisputed”

rule whose existence was certain. Unless the rule’s application to contract can be deemed

“undisputed,” its application would most likely be retroactive and unconstitutional.

Given the plain language of the Texas Constitution, and the case law interpreting it, the

argument is that the one satisfaction rule, if applied to contracts, would operate to violate the

constitution. The Texas Supreme Court has “long recognized Texas’ strong public policy in

19

This entire line of cases is reliant on Storrie, which interprets the U.S. Constitution which relates its

prohibition against law limiting contract to legislation. The Texas Constitution has no such limitation.

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favor of preserving the freedom of contract.” Fairfield Insurance Co. v. Stephens Martin

Paving, LP, 246 S.W.3d 653, 664 (Tex. 2004). This constitutionally guaranteed contractual

freedom strongly favors the parties’ right to “bargain for mutually agreeable terms and [to]

allocate risks as they see fit.” Snider, 220 S.W.3d at 912. It outweighs court-created general

policies, such as that prohibiting insuring punitive damages. Fairfield Insurance Co., 246

S.W.3d at 664.

[I]f there is one thing which more than another public policy requires it is that

[persons] of full age and competent understanding shall have the utmost liberty

of contracting, and that their contracts when entered into freely and voluntarily

shall be held sacred and shall be enforced by Courts of justice. Therefore, you

have this paramount public policy to consider – that you are not lightly to

interfere with this freedom of contract.

Wood Motor Co. v. Nebel, 238 S.W.2d 181, 185 (1951) (quoting Printing & Numerical

Registering Co. v. Sampson, 1874 WL 16322 (1875)). This freedom will most likely outweigh

application in contract cases of a judicial doctrine to remedy a conundrum unique to tort actions.

The analysis of whether the application of the one satisfaction rule would violate

constitutional principles is subject to a three part test, which are (1) it must not substantially

impair a contractual relationship; (2) it “must have a significant and legitimate purpose behind

the regulation, such as the remedying of a broad and general social or economic problem”; and

(3) it must be reasonable and appropriate for its intended purpose. Energy Reserves Group v.

Kansas Power & Light, 459 U.S. 400, 410, 411-13 (1983). Where the Texas Supreme Court

has stated that no defendants are harmed if the rule were not applied, it seems unlikely

application of the one satisfaction rule could meet this test.

The argument against application of the one satisfaction rule is that it cannot satisfy the

first test because it substantially impairs a contractual relationship. It effectively takes from the

injured party the benefit of its settlement with another defendant to reduce the wrongdoer’s

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liability, and puts contract claimants in the same position, with no viable cause of action, as

found pre-Landers for tort claimants. See, e.g., Langever v. Miller, 76 S.W.2d 1025, 1028 (Tex.

1934) (law reducing collectible amount of deficiency judgments to difference between actual

property value and foreclosure price void as a substantial contractual impairment). See also

Landers, 248 S.W.2d at 734. At the same time, application of the one satisfaction rule to

contracts, essentially will act to relieve a potential wrongdoer from all responsibility because,

unlike in tort cases, there is no statute or authority allowing for any sort of contributions claim

by a settling party in the breach of contract context.

In contract cases, arguably, the one satisfaction rule’s reduction of damages by credit for

another’s settlement substantially and unconstitutionally impairs contractual freedom. Last, and

perhaps most important, is the ambiguity of the entire subject of the one satisfaction rule as

applied to contracts and the resulting chilling effect on settlement of disputes, despite the strong

Texas public policy in favor of settlements. Simply put, if, at best, the sole protection a

potential settling plaintiff in a multi-party construction case with indivisible damages may have

from application of the one satisfaction rule is the language created in a settlement agreement

out of whole cloth by a lawyer, which itself is subject to challenge, parties will be loathe to

settle with any single party until such time as all parties settle.

D. Jury Charge

A standard jury charge based on the Texas pattern jury charges in a construction breach

of contract case will have two parts – a liability question and a damages question. The typical

liability question is as follows:

Did Architect fail to comply with the Design Contract regarding

the architectural services required by the Design Contract?

The damages question will be phrased as follows:

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What sum of money, if any, paid now in case, would fairly and

reasonably compensate Plaintiff for its damages, if any, that

resulted from Architect’s failure to comply with the Design

Contract that you found in answer to [the question above]?

At first glance, the questions above seem to allocate damages arising solely and

distinctively from a single party’s breach of contract. However, the Elness court gave this

notion no credence. Elness, 2017 WL 279598 at *12.

The Nevada Supreme Court proposed a solution to the jury instruction dilemma, in a

construction case where an owner accused a contractor, architect, and engineer of breach of

contract. Western Technologies, Ins. v. All-America Golf Center, Inc., 139 P.3d 858, 859 (Nev.

2006). In Western Technologies, in addition to a jury question that asked the jury to award total

damages (which is not part of the Texas pattern jury charges for breach of contract in a multi-

party case), the court suggested a jury question which directs the jury to “award the total

amount of damages caused solely by [defendant].” Western Technologies, 139 P.3d at 862.

The Western Technologies opinion goes further to suggest that the jury should be requested to

apportion damages caused by parties other than those remaining in the case. Id.

The suggestion is not novel, and is essentially what is used in Texas tort cases. See Tex.

Civ. Prac. & Rem. Code § 33.003. The fly in this ointment for Texas contract case, however, is

evidentiary sufficiency. As noted above, Galle suggests that expert testimony dividing the

indivisible is a mandatory proof element in a breach of contract case. Galle, 262 S.W.3d at 574.

Thus, unless plaintiff’s counsel can find an expert willing to provide an expert basis for

“dividing” indivisible damages, any award, even one using the Nevada model referenced above,

would be void in Texas due to a lack of expert testimony on allocation.

Failure to object to the charge’s failure to segregate, or failure to request an instruction

requiring allocation, may result in waiver. Tex. R. Civ. P. 278 (failure to request properly

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worded question); see Dick’s Last Resort of West End, Inc. v. Market/Ross, Ltd., 273 S.W.3d

905, 919 (Tex. App.—Dallas 2008, pet. denied); McCarty v. Wani Venture, A.S., 251 S.W.3d

573, 585 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (failure to request instruction).

Requesting a jury question or instruction on the total amount of damages, and another

allocating those damages to particular defendants, should now be the standard practice if the

Elness opinion is in fact the law in Texas. However, the Texas pattern jury charges do not

provide for the “total damages” question in a breach of contract case.20

A party seeking to apply the one satisfaction rule will also want to obtain a finding (or in

the alternative preserve for the record if it cannot obtain a finding) about whether promises

overlapped. Under CTTI, such a finding is necessary to trigger any alleged duty to allocate.

CTTI, 164 S.W.3d at 675, n.3. Through such a finding, a party can demonstrate that that any

settlement proceeds were for the injury or the same damages as those assessed against the

asserting the credit.

In summary, the best practice suggestion under the current jurisprudence is to use the

Nevada model for your jury questions: (1) request the jury determine a total amount of

damages; and (2) request the jury specifically allocate some or all of the damages to the various

defendants, including perhaps, non-parties and/or settled parties.

E. Attorneys’ Fees

Another issue to consider is the segregation and award of attorney’s fees. In a breach of

contract case, the plaintiff will seek its reasonable and necessary attorney’s fees under chapter

20

As practitioners know, in a tort context, a jury is asked to find a plaintiff’s damages from an

occurrence, then to reduce them by proportional fault, then settlement credits may be applied. In a

breach of contract, the damages questions specifically asks for damages flowing from the breach

party’s conduct – it does not ask for the total damages.

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38 of the Texas Civil Practice and Remedies Code and/or the contract provision. If the damages

are indivisible, then it can be argued that the plaintiff should not have to segregate its fees

between its breach of contract claims against multiple parties. Generally, reasonable and

necessary attorney’s fees requires proof of the fees incurred for suit on a claim for which such

fees are recoverable. Sterling, 822 S.W.2d at 10. If the causes of action depend upon the same

facts or circumstances, they may be “intertwined to the point of being inseparable.” Id.

Attorney’s fees should be allowed for inseparable claims even if some issues also relate to

matters for which attorney’s fees are not recoverable, Stewart Title Guar. Co. v. Aiello, 941

S.W.2d 68, 73 (Tex. 1997); Sterling, 822 S.W.2d at 11, provided the underlying services

advance both. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 314 (Tex. 2006).

Whether fees can be segregated is a mixed question of law and fact. Id. at 303. For

example, when an attorney testified that the issue common to all claims was the right of control

over a corporation, this Austin Court of Appeals deemed the recoverable and unrecoverable

claims so interrelated that it was unnecessary to segregate fees. Fortenberry v.Cavanaugh, No.

03-07-00310-CV, 2008 WL 4997568, at *12 (Tex. App.—Austin Nov. 26, 2008, pet. denied).

Thus, if the one satisfaction rule applies – and it should apply only if contractual joint

and several liability exists (requiring a promise of the same performance by the settling and

liable defendants and an indivisible injury) – then the activities of an attorney to prove the

settling defendants’ lability would necessarily also serve as proof of the non-settling defendant’s

liability. Thus, if the one satisfaction rule applies at all, no segregation should be required.

F. Standard of Review

Consistent with the lack of clarity on this topic from Texas courts, there is not even an

agreement on the standard of review for application of a settlement credit. The Austin Court of

Appeals has stated that applicability of the settlement credit is a legal question reviewed de

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novo. Galle, 262 S.W.3d at 570 n.3. At the same time, the First Court of Appeals in Houston

has stated that “[w]e review a trial court’s determination of the existence or amount of a

settlement credit for an abuse of discretion. Alanis v. US Bank National Assoc., 489 S.W.3d

485, 509-510 (Tex. App.—Houston [1st Dist.] – 2016, pet. denied.). In addition to other issues

addressed in this article, the courts need to resolve this issue as well.

VI. CONCLUSION

This article presents significant issues for practitioners on both sides of a multi-party

construction defect case in which damages are indivisible. While it seems likely that a case will

make its way to the Texas Supreme Court for it to resolve the issues identified in this paper,

until that happens, caution and precision must be the order of the day, both in terms of advising

your clients of the hurdles or opportunities presented by these issues, or in the actual

prosecution of your case.

By Benton T. Wheatley and Tracy McCreight

Munsch Hardt Kopf & Harr, PC

303 Colorado St., Suite 2600

Austin, TX, 78701

(512) 391-6100

The authors wish to thank their colleague, Stephen Gibson, for his invaluable contribution to

this article.