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Current Developments in the Commercial Divisions of the
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Posted: June 25, 2015

Settling Party Not Entitled to Contribution from Co-Defendants

On June 18, 2015, the First Department issued a decision in Diversified Group, Inc. v. Marcum & Kliegman LLP, 2015 NY Slip Op. 05265, holding that a settling party is not entitled to contribution under the General Obligations Law.

In Diversified Group, the plaintiffs settled claims against them and then asserted claims for contribution against their former co-defendants in a new action. The First Department affirmed the trial court’s entry of judgment for the defendants, explaining:

[P]laintiffs may not seek contribution from defendants pursuant to General Obligations Law §§ 15-108(c) and 15-108(d) because they settled their dispute with the investors for monetary consideration prior to the court entering judgment against them. To the extent the pre-2007 decisions cited by plaintiffs conflict with the plain language of General Obligations Law § 15-108(d), they are no longer good law.

Contrary to plaintiffs’ contention, whether defendants settled pre-judgment or post-judgment, General Obligations Law § 15-108(c) provides that a tortfeasor who has obtained his own release from liability shall not be entitled to contribution from any other person. The settlement agreement also effectively ended the underlying litigation, thereby triggering the waiver of contribution set forth in General Obligations Law § 15-108(c), even though, pursuant to the settlement agreement, the parties had ongoing obligations to fulfill their duties under the agreement.

(Internal quotations and citations omitted) (emphasis added).

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