New York, N.Y. (June 26, 2019) - The New York legislature recently passed several important measures that will alter civil jurisprudence in New York State and are expected to be signed by Governor Cuomo. Our New York office is committed to keeping all our clients advised of these important changes to New York law, and our attorneys will be ready to litigate the new rules as soon as they take effect.
First, the legislature has substantially overhauled New York
General Obligations Law (GOL) 15-108, which governs the financial
impact of settlements. The new changes will take effect January 31,
2020, and will apply to any action commenced on or after that date.
Probably the most important change concerns "equitable
share" versus "total amount paid" setoffs for
non-settling defendants. The statute currently provides that, if a
defendant settles with a plaintiff in multi-defendant litigation,
the non-settling defendant(s) can reduce their share owed to the
plaintiff by either: (1) the amount paid by the settling defendant;
or (2) the settling defendant's percentage share of liability
as determined at trial on the verdict sheet, whichever amount is
greater.
Under the new version of GOL 15-108, this rule is modified
significantly. Although non-settling defendants can still choose
between options (1) and (2), they are now obligated to make their
choice in writing before trial, rather than after trial, as in the
current system. The current rule allows non-settling defendants to
take a "wait and see" approach until after trial. The
legislature believes that the current rule discouraged settlements
and unfairly penalized settling defendants. By requiring
non-settling defendants to make their choice before trial, they can
no longer sit back and wait for the trial results to play out,
rather, they must choose their option in advance and make difficult
decisions before the verdict is rendered. The legislature believes
this will result in more settlements. We believe it will certainly
result in more robust settlement discussions before trial, with all
parties. Also note, under the new rule, if a defendant does not
affirmatively make a choice in writing before trial, it will be
presumed to have chosen an "equitable share"
credit.
Another important aspect of the new statute will be its impact on
contribution and indemnity claims by settling defendants against
non-settling defendants. The courts have construed the current
version of GOL 15-108 to render a settling defendant immune from
contribution claims, but not indemnity claims. The legislature felt
this caused uncertainty among settling defendants as to whether
they would be pursued after trial by non-settling defendants for
indemnification, and that this discouraged settlement. Indeed, in
many cases this rule did not allow defendants in certain cases to
"buy their peace." In order to reduce this uncertainty
and encourage settlement, the legislature added language to the
statute stating that common-law indemnification claims will be
barred against any settling defendant, but not contractual
indemnification claims.
Second, the legislature has created a new statute, CPLR 1405, which
will take effect immediately and will permit, for the first time,
plaintiffs to recover and collect an unsatisfied judgment (or
partial judgment) against a third-party defendant or co-defendant,
if the direct defendant-judgment debtor has a claim for
contribution or indemnification against the co-defendant or
third-party defendant. The statute permits plaintiffs to
essentially assume the insolvent judgment debtor's claim
against the co-defendant or third-party defendant. Direct recovery,
however, is not authorized in this manner if the claim would have
been barred by the Worker's Compensation defense. The new
statute also intends to protect the ability of an injured plaintiff
to collect a judgement in the event a defendant-judgement
debtor's cause of action or judgement against a third party
wrongdoer is extinguished in bankruptcy, leaving the plaintiff with
no remedy to collect their judgment. We expect that the
plaintiff's bar will fully take advantage of this new provision
whenever it applies, and that it will generate more motion practice
whenever a direct defendant is insolvent or partially
insolvent.
In view of these changes, our firm will be prepared to deliver updated advice as to the most cost-effective resolution strategies before trial in any cases affected by the new statutory regime, which will eventually encompass all civil litigation in New York. Please contact us if you have any questions about these or any other matters.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.