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Current Developments in the Commercial Divisions of the
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Posted: June 4, 2017

Release Did Not Bar Derivative Claims, But Bringing Claims Might Violate Covenant Not to Sue

On May 23, 2017, the First Department issued a decision in Ridinger v. West Chelsea Development Partners LLC, 2017 NY Slip Op. 04067, holding that while a release did not bar derivative claims, bringing such claims might constitute a violation of the covenant not to sue, explaining:

Plaintiff’s individual claims were barred by a prior release. However, plaintiff could not and did not release the derivative claims on behalf of the unit owners. Plaintiff was nevertheless bound by a covenant not to sue, in which she promised not to bring any claim regarding the unit, the building or the condominium, including in a derivative capacity. This did not bar the instant suit on derivative claims, but it does expose plaintiff to a possible claim for damages for breach of the covenant.

(Internal citations omitted).

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