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What Happens When A Plaintiff Sues Several Defendants In New York But Settles With Only One?

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the-ardennes-1284651-m.jpgIt is not unusual for a Plaintiff to sue more than one defendant. It happens all of the time in New York.

Think of when a homeowner hires a contractor and the contractor damages a neighbor’s property. The neighbor will most often sue both. In New York City it is not uncommon to have a lawsuit that involves two adjacent buildings. The first one is demolished but, because the shoring used to protect the remaining building is inadequate, the land under the second building shifts a little and the second building cracks. The owner of the second building wants to get paid to repair his damaged property. He sues the owner of the first building, the contractors that performed the work, and possibly even his own insurance carrier if he doesn’t like the way the carrier adjusts his first-party property claim.

What happens, though, when the plaintiff settles with only one defendant and goes to trial against the rest? How does a court decide how much the plaintiff can collect from the remaining defendants?

The rules in New York are fairly straightforward. New York General Obligations Law §15-108 permits a plaintiff to settle a claim with a defendant tortfeasor without risking the discharge of other tortfeasors who might be liable for the injury. When one tortfeasor settles with the injured party, the settlement relieves the settling tortfeasor of liability to any other person for contribution. It entitles the non-settling tortfeasor to assert the settlement as a defense to the injured party’s claim and to obtain an appropriate reduction in damages. In order to keep the rule clear, think of the “tortfeasor” as the party who allegedly did something wrong. In our examples it could be the contractor, the homeowner, or the owner of the first building.

New York General Obligations Law §15-108, provides in relevant part:

(a) Effect of release of or covenant not to sue tortfeasors. When a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms expressly so provide, but it reduces the claim of the releasor against the other tortfeasors to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor’s equitable share of the damages under article fourteen of the civil practice law and rules, whichever is the greatest.

(b) Release of tortfeasor. A release given in good faith by the injured person to one tortfeasor as provided in subdivision (a) relieves him from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules.

(c) Waiver of contribution. A tortfeasor who has obtained his own release from liability shall not be entitled to contribution from any other person.

The Court of Appeals, in Whalen v. Kawasaki Motors Corp., 92 N.Y.2d 288, 292, 703 N.E.2d 246, 248 (1998), succinctly set forth the rule for applying New York General Obligations Law §15-108:

In tort actions involving multiple defendants where a plaintiff settles with one or more defendants before trial, and proceeds to trial against the remaining defendants, General Obligations Law § 15-108(a) permits nonsettling defendants a monetary offset against the amount of a verdict. The permitted reduction is the greatest of three items: (a) the amount stipulated as consideration for the release; (b) the amount actually paid for the release; or (c) the settling tortfeasor’s equitable share of plaintiff’s damages (General Obligations Law § 15-108[a] ). The purpose of the statute is to encourage settlement, although the statute is also concerned with ensuring equity. Plaintiffs should be fairly compensated, but nonsettling defendants should not bear more than their fair share of a plaintiff’s loss. Moreover, the possibility of double recovery should be avoided (see, Williams v. Niske, supra, 81 N.Y.2d, at 442-444, 599 N.Y.S.2d 519, 615 N.E.2d 1003; accord, Dudick v. Keene Corp., 82 N.Y.2d 821, 605 N.Y.S.2d 3, 625 N.E.2d 588, affg. for reasons stated at 188 A.D.2d 214, 218, 593 N.Y.S.2d 43; Didner v. Keene Corp., 82 N.Y.2d 342, 351, 604 N.Y.S.2d 884, 624 N.E.2d 979; Pollicina v. Misericordia Hosp. Med. Ctr., 82 N.Y.2d 332, 604 N.Y.S.2d 879, 624 N.E.2d 974).

As most often happens, the rules at least try to be as fair as possible to all concerned:

  • If a defendant settles with the plaintiff, that defendant is done with the case; none of the other defendants can ask it to contribute any additional money to compensate for the plaintiff’s damages.
  • The non-settling defendants still can try to prove at trial that it was all the fault of the settling defendant, and they have every incentive to do so.
  • The non-settling defendants get a credit either for what the settling defendant actually paid, or what it should have paid, as determined at trial, to the plaintiff for its role in causing plaintiff’s injuries.
  • The plaintiff takes the risk that it accepts less money from the settling defendant than the settling defendant was actually liable for. The non-settling defendants are not penalized for any miscalculation plaintiff might make.
  • The plaintiff cannot recover twice for the same injuries.

It’s strange how little things can mean a lot, even in the most unexpected places. The next time you or your business are part of a lawsuit involving multiple parties in New York, it might be a good idea to keep these rules in mind. No matter whether you are a plaintiff or a defendant, a little knowledge can go a long way.

Of course, there’s more to this story than we’ve gone through here, but that can wait for another day.

Go raibh maith agat

Ray Grasing