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Legislative Memo

Ken Pokalsky
Vice President
T 518.465.7511, ext. 205
www.bcnys.org

BILL:

S.412 (DeFrancisco) / A.1500 (Weinstein)

Support

SUBJECT:

Indirect Recovery from Third Party Defendant

 

DATE:

May 15, 2017

 

The Business Council opposes S.412 (DeFrancisco) / A.1500 (Weinstein) which amends the CPLR to allow a plaintiff to obtain an indirect recovery from a third-party-defendant when that plaintiff's judgment against an original defendant was not satisfied within thirty days of the judgment being served.

This legislation represents a dramatic shift in state law, allowing a plaintiff to recover against a third party against which it did not litigate, and with which it has no privity. We are aware of no other jurisdiction in the U.S. that has adopted this significant new legal standard.

This legislation also allows for the recovery by a plaintiff from a third-party-defendant even in cases when the Statute of Limitations has expired for any claim the plaintiff could traditionally bring against the third-party, exposing the third-party-defendant to open-ended liabilities and turning long standing legal restraints on their head.

The bill creates a perverse disincentive against a defendant satisfying a costly judgment. Under this proposal, non-paying defendants may end up “off the hook” by fraudulently filing for bankruptcy, knowing that a plaintiff will have an easier time pursuing the satisfaction of a judgment on a solvent third-party-defendant rather than opposing a bankruptcy filing. This problem is exacerbated when the third-party-defendant is perceived as a “deep pocket,” such as a corporation, insurer, health plan or a municipality.

Under common law, the concepts of legal duty and privity of contract are necessary to legally obligate a defendant to a plaintiff in tort and contract law respectively. This bill removes the necessity of that relationship and would make the third-party defendant and its insurer liable under circumstances where no duty is ordinarily owed.

For these reasons The Business Council respectfully opposes enactment of this proposal.