Introduction:
A Settlement Agreement was concluded between Plaintiffs and several Defendants who were parties to the claim, which included an allocation of liability, as well as of the amount of the damages. As a result, the Claim against the settling defendants was dismissed.
The State, which was also a Co-Defendant in the Claim (hereinafter: “the State”), decided not to participate in the Settlement, as it wished to proceed the litigation in Court with Plaintiff. Since the remaining Defendants were eliminated from the Claim as a result of the Settlement, the State filed a Motion, requesting to allow it to send a Third Party Notice against the Settling Defendants. The State’s Motion was declined by the District Court, and it appealed to the Supreme Court.
The Supreme Court determined that a Defendant who chose not to participate in a Settlement Agreement, is not entitled to file a Third Party Notice against Defendants who settled the claim due to a lack of a cause of action as it was agreed in the settlement agreement that Plaintiff will only claim the damages relative to the remaining Defendants’ liability.
The Facts:
Plaintiff filed a claim against 5 Defendants, for compensation for the damage she suffered as a result of a Jet Ski accident. Plaintiff and 4 out of the 5 Defendants (hereinafter: “the Settling Defendants”) had reached a settlement agreement with Plaintiff. The fifth Defendant, the State, did not agree to settle.
The parties to the Settlement filed a Motion to the Court, requesting to dismiss the claim against the settling Defendants, after which Plaintiff will proceed with the claim against the State, only for the damage caused due to the State’s liability.
Following the submission of the Motion, the State requested the Court’s leave to send a Third Party Notice against the settling Defendants, despite the fact that the deadline to send the Notice had elapsed.
The District Court declined the State’s Motion, and the State therefore filed a Motion for leave to appeal with the Supreme Court.
The State argued that since the Compromising Defendants were struck out from the claim, it is entitled to file a Notice against them. It further argued that under the circumstances, the Notice against them is justified.
On the other hand, Plaintiff and the settling Defendants argued that the State’s Motion should be declined, as its sole purpose is to drag back to the proceeding parties that had already been taken out from the claim. It was further argued that the implication of re-joining the settling Defendants may deter parties from reaching a Settlement, as they will still face the risk to be brought again to the proceedings, by means of a Third Party Notice.
The Supreme Court’s Decision:
The Supreme Court declined the State’s appeal, stating that Plaintiff clarified that the proceedings against the State will only relate to the portion of the State’s liability, and any liability attributed to the settling Defendants will be deducted, hence, any judgement that is handed down will take into account only the State’s share in the damage. Therefore – the State will not bear any liability that exceeds its relative share, and as such – it will not have any cause of action against the settling Defendants.
Therefore, in a partial settlement between the two parties, while reserving the right of a claim against additional parties – Plaintiff will be entitled to sue additional parties, as long as the share of any compromising party is deducted from its claim. Subsequently, the compromising Defendant will not only be protected against Plaintiff’s claim, but also against Claims from the additional parties who had not settled.
The Court further stated that by not recognizing the option of partial settlements, parties will be deferred from reaching a Settlement, as they will still be at risk to continue litigating the claim, despite the settlement.
The Court therefore concluded, that given that the Settlement Agreement guarantees that the Party who did not settle will not have a right to claim from the compromising defendants – there is no justification to allow it to send a Third Party Notice against them.
Comment: This judgement solves a problem so far faced by parties to a tort claim: where one co-defendant objected to a settlement offer, the negotiations were halted, as the agreeing defendants feared being exposed to be third partied by the objector. The Courts, which consider settlements of claims as being a desirable object for the parties and for the Courts, have now the guidance of the Supreme Court, which is a binding instance, not to allow the objector, to frustrate settlement of claims, even partially.
August 4, 2019
Categories: Tort & Subrogation
Tags: Articles
