In Diamond v. Reshko, (filed 8/20/2015, No. A139251) the California Court of Appeal, First District, held that a defendant was entitled to introduce evidence at trial reflecting amounts paid by co-defendants in settlement of a plaintiff’s claim.

Plaintiff, Christine Diamond, was injured during an automobile accident that occurred while she was a passenger in a taxi driven by Amir Mansouri. Christine, and her husband Andrew, filed suit against Mr. Mansouri, the Yellow Cab Collective (“Yellow Cab”), and the driver of the vehicle that collided with the taxi, Serge Reshko. Before trial, Mansouri and the Yellow Cab Collective settled with Plaintiffs, but agreed to appear and participate as defendants at the jury trial of the action. Mansouri and Yellow Cab paid a total of $400,000 to Plaintiffs in settlement.

Reshko filed a pre-trial motion seeking an order permitting Reshko to admit evidence of the settlement between Plaintiffs and the other defendants. The trial court refused to rule on the motion before trial. Ultimately, evidence of the settlement between Plaintiffs, Mansouri and Yellow Cab was excluded during trial. The jury returned a verdict in favor of Plaintiffs in the total amount of $745,778, finding Mansouri 40 percent at fault, and Reshko 60 percent at fault. The Trial Court entered judgment against Reshko in the sum of $406,698.

Reshko appealed the judgment. The First District Court of Appeal reversed, holding that evidence of the settlement should have been admitted at trial because the settling defendant’s position should be revealed to the court and jury to avoid committing a fraud on the court, and in order to permit the trier of fact to properly weigh the settling defendant’s testimony.

In its analysis, the Court noted that the evidentiary bar identified in California Evidence Code §1152 was not applicable in the present action because the evidence was not being introduced to show Mansouri’s liability, but rather to show witness bias and prevent collusion between Plaintiffs and Mansouri/Yellow Cab.

Notably, the Court held that the decision of whether to admit the evidence should be reviewed under an abuse of discretion standard. Here, the trial court abused its discretion in excluding the evidence, and that exclusion was prejudicial error.

The case is favorable to defendants in multi-defendant litigation because it operates as a deterrent against plaintiffs who seek to enter collusive settlement agreements wherein one defendant pays a nominal settlement amount and then becomes an advocate for the plaintiffs against non-settling defendants. The decision properly protects against party collusion in litigation.