## Facts

- April Garcez, a minor, by her guardian Chicago Title and Trust Company, sued Mercy Hospital and Medical Center and several physicians for injuries allegedly caused by negligent care connected to April’s birth.
- The defendants originally included Keith Knapp, M.D., Fritz Michel, M.D., Stewart Kernes, M.D., Harshavadan Vyas, M.D., and Erlinda Azcona, M.D., along with related medical entities.
- Before trial, Garcez settled with Mercy Hospital and, as part of that settlement, released Kernes, Vyas, and Azcona (the dismissed defendants) from the lawsuit.
- The settlement agreement did not require the dismissed defendants to testify and did not tie any payment obligation to the outcome of the remaining case.
- The case went to trial only against Knapp and Michel.
- Garcez filed a motion in limine seeking to bar any mention of the settlement at trial.
- After a hearing, the trial court denied the motion and permitted Knapp and Michel to disclose the settlement agreement to the jury.
- The trial court allowed disclosure without first determining whether the settlement’s terms had a realistic ability to affect the dismissed defendants’ testimony.
- Two dismissed defendants, Vyas and Azcona, testified at trial.
- In closing argument, counsel for Knapp and Michel referred to the settlement in a way that suggested (1) Garcez had already been paid enough money and (2) the dismissed defendants settled because they were “guilty.”
- The jury returned a verdict for Knapp and Michel, and judgment was entered on that verdict.
- Garcez appealed, arguing that allowing the settlement to be disclosed and argued was error and denied a fair trial.

## Issues

1. Whether the trial court erred by allowing the remaining defendants to disclose the plaintiff’s settlement with dismissed defendants without first making a threshold finding that the settlement had the potential to bias the dismissed defendants’ testimony.
2. Whether it was improper and prejudicial to use the settlement in closing argument to suggest the settling parties’ fault and that the plaintiff had already received sufficient compensation.

## Decision

- The Appellate Court of Illinois, First District, reversed the judgment for Knapp and Michel and remanded for a new trial.
- The trial court erred by permitting disclosure of the settlement agreement without making a preliminary determination that the agreement’s terms created a genuine possibility of bias in the testimony of the dismissed defendants.
- The court also found that the manner in which the settlement was used—especially in closing argument to imply guilt and to suggest prior full payment—invited the jury to treat settlement as proof of liability and as a reason to deny damages.
- Given the repeated emphasis on the settlement and the risk that it affected how the jury assessed fault and damages, the error was not harmless.
- The opinion was authored by Justice Theis, with a dissent by Justice Cahill.

## Legal Principles

- Evidence that parties settled is generally not admissible to prove negligence, fault, or liability, or to suggest the proper amount of damages.
- A settlement may be admissible for the limited purpose of showing a witness’s bias, interest, or motive, but only if the settlement’s terms realistically could influence that witness’s testimony.
- Before allowing settlement evidence for bias, a trial judge must make a threshold determination that the agreement has the potential to bias the witness and must weigh probative value against the risk of unfair prejudice.
- When settlement evidence is admitted for a limited reason, it must not be argued as proof that the settling parties were wrongdoers or that the plaintiff has already been fully paid.
- Allowing settlement evidence without a proper gatekeeping decision, and then permitting it to be used as a liability-and-damages argument, can require a new trial.

## Conclusion

Because the trial court allowed the jury to hear about Garcez’s settlement without first deciding that the settlement created a real risk of biased testimony, and because the defense used the settlement to imply both fault by the dismissed defendants and adequate prior compensation, the appellate court reversed and remanded for a new trial.


Garcez v. Michel, 668 N.E.2d 194 (1996)