First Fed. Sav. & Loan Ass'n v. Oppenheim, Appel, Dixon & Co.

• Decision Date: 19 March 1986
• Docket Number: No. 85 Civ. 4163 (MEL).,85 Civ. 4163 (MEL).
• Citation: 631 F. Supp. 1029
• Parties: FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH; Wichita Federal Savings & Loan Association; City of Farmington, New Mexico; and Federal Savings and Loan Insurance Corporation, Plaintiffs, v. OPPENHEIM, APPEL, DIXON & CO., a partnership, Defendant. OPPENHEIM, APPEL, DIXON & CO., a partnership, Third-Party Plaintiff, v. MARINE MIDLAND BANK, N.A., a National Banking Association, Third-Party Defendant. OPPENHEIM, APPEL, DIXON & CO., a partnership, Third-Party Plaintiff, v. E. Keith OWENS; Robert Bell; S. Muir Atherton; Daniel Harkens; Richard Tisdale; John J. Giovannone; and Memel, Jacobs, Pierno, Gersh & Ellsworth, a partnership, Supplemental Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

631 F. Supp. 1029

FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH; Wichita Federal Savings & Loan Association; City of Farmington, New Mexico; and Federal Savings and Loan Insurance Corporation, Plaintiffs, v. OPPENHEIM, APPEL, DIXON & CO., a partnership, Defendant.

OPPENHEIM, APPEL, DIXON & CO., a partnership, Third-Party Plaintiff, v. MARINE MIDLAND BANK, N.A., a National Banking Association, Third-Party Defendant.

OPPENHEIM, APPEL, DIXON & CO., a partnership, Third-Party Plaintiff, v. E. Keith OWENS; Robert Bell; S. Muir Atherton; Daniel Harkens; Richard Tisdale; John J. Giovannone; and Memel, Jacobs, Pierno, Gersh & Ellsworth, a partnership, Supplemental Third-Party Defendants.

No. 85 Civ. 4163 (MEL).

United States District Court, S.D. New York.

March 19, 1986.

Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for plaintiffs; Harvey Kurzweil, Jonathan W. Miller, Neil Tublin, of counsel.

Sullivan & Cromwell, New York City, for third-party defendant; Philip L. Graham, Jr., James W. Dabney, Merle M. Martin, of counsel.

Patterson, Belknap, Webb & Tyler, New York City; Harold R. Tyler, Jr., Eugene L. Girden, Frederick T. Davis, of counsel.

Rosenfeld, Parnell & Shames, Inc., Los Angeles, Cal. (Edward M. Rosenfeld, of counsel), for defendant and third-party plaintiff.

LASKER, District Judge.

Marine Midland Bank, N.A. ("Marine") moves pursuant to Rules 12(b)(6) and 56(b) of the Federal Rules of Civil Procedure to dismiss the third-party complaint filed by Oppenheim, Appel, Dixon & Co. ("OAD") against Marine. The motion is granted.

In an earlier, related litigation, Wichita Federal Savings and Loan Association v. Comark, No. 82 Civ. 4703(MEL) (S.D.N.Y.), five savings and loan associations and a municipality sued Comark, a dealer in government securities, and Marine, Comark's clearing bank, for losses of $17 million in government securities. The Wichita action was tried to a jury in the spring of 1985, with the jury returning a verdict for fraud and the court directing a verdict for conversion against Comark. The plaintiffs settled their claims against Marine in mid-trial.

In the present action five of the six Wichita plaintiffs or their successors-in-interest (hereafter "plaintiffs") are suing OAD, Comark's accountants, on a variety of legal theories for the losses they sustained. OAD, in turn, has impleaded Marine as a third-party defendant¹ for recovery from Marine by way of contribution² in the event that plaintiffs recover damages from OAD in this action.

By the present motion Marine seeks to dismiss the third-party complaint against it on the ground that as a released tortfeasor it is immune from contribution on the state law claims under N.Y.Gen.Oblig.L. § 15-108(b) (McKinney 1978) and on the federal securities law claims³ because either (1) New York's contribution statute provides the appropriate rule of decision; (2) contribution is barred as a matter of federal common law; or (3) contribution on federal securities claims is available only as between joint tortfeasors, and Marine and OAD are not joint tortfeasors.

I.

The settlement agreement between the plaintiffs and Marine provides for the dismissal with prejudice of plaintiffs' claims against Marine, the exchange of releases between the parties of all claims arising out of the Comark situation, the payment by Marine to plaintiffs of a "base settlement amount" of $3 million, and the payment of an "additional settlement amount" of up to $2 million which is contingent upon the amount of money subsequently recovered by plaintiffs from Comark, Comark's estate, Comark's partners, and OAD.⁴ October 23, 1985 Settlement Agreement (Exhibit A to Affidavit of Philip L. Graham, Jr.).

New York's release statute, the focus of the parties' arguments on this motion, provides in pertinent part:

(a) Effect of release of or covenant not to sue tortfeasors. When a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms expressly so provide, but it reduces the claim of the releasor against the other tortfeasors to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor's equitable share of the damages under article fourteen of the civil practice law and rules, whichever is the greatest.

(b) Release of tortfeasor. A release given in good faith by the injured person to one tortfeasor as provided in subdivision (a) relieves him from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules.

N.Y.Gen.Oblig.L. § 15-108 (McKinney 1978).

Before analyzing the legal issues raised by Marine's motion to dismiss, it is helpful to identify the positions of the parties. Marine maintains that the third-party complaint against it should be dismissed on the ground that plaintiffs' release in Marine's favor bars all contribution claims against it. Marine takes no position on the question of what law governs the reduction of OAD's liability to the plaintiffs as the result of Marine's settlement or on the issue of the application of Section 15-108 to the settlement in this regard.

OAD concedes that the New York release statute bars contribution claims against Marine on the state law causes of action in the case (although OAD argues that Section 15-108 guarantees it a reduction in its potential liability of at least $5 million, based on the Marine settlement) but contends that contribution from Marine is not precluded on the federal securities law claims.

Plaintiffs, for their part, agree that contribution from Marine is barred on the state law claims but argue that the applicable rule of decision is provided not by New York's contribution statute but rather by the laws of other states — all of which do not entitle a joint tortfeasor such as OAD to a setoff based upon a settling tortfeasor's relative fault. See N.Y.Gen. Oblig.L. § 15-108(a). Plaintiffs appear to support OAD's position that contribution from Marine is not barred on the federal securities claims but admit that the law on the question is unclear.

II.

Are OAD's contribution claims against Marine as to the state law claims⁵ barred by Marine's settlement with the plaintiffs? Under the rule of Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed.2d 1477 (1941), the forum state's choice of law rules apply to determine which state's law governs the contribution question with respect to the state law claims.⁶ In deciding choice of law questions, the New York courts employ an "interest analysis" approach. Schultz v. Boy Scouts of America, Inc., 65 N.Y.2d 189, 197, 491 N.Y.S.2d 90, 95, 480 N.E.2d 679, 684 (1985). "The law of the jurisdiction having the greatest interest in the litigation will be applied and ... the only facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict." Id. (quoting Miller v. Miller, 22 N.Y.2d 12, 15-16, 290 N.Y.S.2d 734, 737, 237 N.E.2d 877, 879 (1968)) (changes in original).

Application of this New York choice of law analysis favors the selection of Gen. Oblig.L. § 15-108 as the rule of decision governing the issue of Marine's contribution on the state law claims. The major purposes of the New York statute are:

(1) to rekindle the incentive for settlement between plaintiffs and defendants, while at the same time (2) ensuring that the nonsettling tortfeasor not be burdened with more than his equitable share of liability because of the fact that another tortfeasor has chosen to settle (Mielcarek v. Knights, 50 A.D.2d 122, 126, 375 N.Y.S.2d 922, 925 4th Dept.1975). (see, Report of the Law Revision Commission, Leg.Doc. 1972, No. 65k).

Purcell v. Doherty, 102 Misc.2d 1049, 1053, 424 N.Y.S.2d 991, 994 (Sup.Ct.Sp.T.Bronx Co.1980), aff'd mem., 80 A.D.2d 755, 437 N.Y.S.2d 993 (1st Dept.1981), aff'd, 55 N.Y.2d 985, 449 N.Y.S.2d 186, 434 N.E.2d 255 (1982). At the outset it may be noted that it is not obvious that the New York statute is in true conflict with the laws of other jurisdictions which plaintiffs contend should apply to the issue of contribution from Marine. Plaintiffs suggest that the laws of Pennsylvania, New Mexico, Iowa, Missouri, and Kansas (domiciles of plaintiffs or their predecessors-in-interest) or California (locus of OAD's alleged tortious conduct) should provide the rule of decision; however, the only point on which the laws of these jurisdictions, as a group, differ from the New York statute is that they fail to provide a non-settling tortfeasor with a setoff against his or its liability based on the settling tortfeasor's share of fault. The laws of those jurisdictions do, however, appear to bar contribution from a settling tortfeasor and provide a non-settling tortfeasor with a setoff at least equal to the amount paid by the settling tortfeasor for the settlement. To this extent the law of the other jurisdictions is quite consistent with N.Y.Gen.Oblig.L. § 15-108. The only "conflict" is that New York has gone further in assuring an equitable apportionment of liability as between settling and non-settling tortfeasors.

However, even assuming a true conflict between Section 15-108 and the laws of other jurisdictions which might apply to the contribution claims in this case, an interest analysis favors application of the New York release statute. The question here is which jurisdiction "has the greatest concern with the specific issue raised in the litigation," Babcock v. Jackson, 12 N.Y.2d 473, 481, 240 N.Y.S.2d 743, 749, 191 N.E.2d 279, 283 (1963). The issue presented here is the effect of a release on claims for contribution asserted...