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The phrase “jointly and severally” is used in the U.S. legal system to indicate a shared liability or responsibility. The phrase has three primary applications: personal injury lawsuits, corporate partnerships and business arrangements, and securities offerings and bond underwritings. In each instance, the phrase indicates that all of the involved parties share so closely in the central action that they can each be treated as having sole responsibility. In other words, the parties are jointly responsible for the actions any other party takes individually, or severally.
Joint and several liability can apply in a personal injury case when more than one defendant contributed to the injuries. Each U.S. state has its own set of tort, or personal injury, laws, and not all permit joint and several liability. If allowed by state statute, joint and several liability means that any defendant who caused any portion of an injury can be sued for the full amount of damages.
Whether defendants in personal injury cases should be held jointly and severally liable is a controversial issue, even in states that permit it. Supporters argue that shared liability makes it easier for injured parties to recover. Defendants, they say, are in a better position to apportion liability amongst themselves without involving the injured party in extended court proceedings. On the other hand, critics point to the inequality of pinning full liability on a party who caused but a small fraction of the harm. Critics say that joint and several liability encourages lawyers to strategically sue those parties who are the wealthiest, regardless their proportion of fault.
When “jointly and severally” is used in partnership agreements or incorporation documents, the meaning is similar—all partners will be treated as any one. Parties usually use the “jointly and severally” language as a way of enabling one partner to make decisions for the entire partnership. The actions of any partner who shares in a partnership jointly and severally can be attributed to any other partner.
In some cases, a court will declare that joint and several liability applies to a partnership, even if it has not been expressly chosen by the partners. For example, most laws of incorporation require that all partners be jointly and severally liable when a company makes an initial public offering (IPO) of its stock options. IPO documents must make certain important declarations about the company’s profits, revenue, and other facts. Falsification in IPO documents is enough to sustain a lawsuit against either the corporation as a whole, or any partner individually.
The phrase also appears in certain financial situations. Investment banks will often structure loans to multiple borrowers with a clause designating joint and several liability, which enables the bank to recover the entire amount of the loan from any one of the borrowers. In bond underwriting scenarios, underwriters are often jointly and severally liable for some percentage of bonds owned by a shared group, or syndicate. Under the rules of joint and several liability, an underwriter can be compelled to absorb the failure of other syndicate members to sell shares, even if the underwriter has already met his agreed-to percentage.
Whether joint and several liability applies to any given fact pattern is largely a matter of local law. If a jurisdiction requires joint and several liability, that liability will often apply, even if not expressly agreed to by the parties. Conversely, if a jurisdiction does not permit shared liability, writing it into an agreement will not guarantee its application. The best thing to do when wondering whether joint and several liability can be pursued or when considering putting a joint and several liability clause into a contract is to contact an attorney familiar with local laws.
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