Chateau Fiduciaire S.A. v. Argus International Life Bermuda Limited et al

Filing 99

Chateau Fiduciaire S.A. v. Argus International Life Bermuda Limited et al

Doc. 99

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -------------------------------- x - I-N RE TREMONT SECURITIES LAW, STATE LAW, and INSURANCE : LITIGATION : -------------------------------- x -- -his Document Relates to: Insurance Law T : Act ions, 09 Civ. 0557 (TPG) : -------------------------------- x Master File No.: 08 Civ. 11117 (TPG)

ECF Case Electronically Filed

THE TREMONT DEFENDANTS' MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS' MOTION FOR PRELIMINARY APPROVAL OF PARTIAL CLASS ACTION SETTLEMENT

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036 [phone] Attorneys for Defendants Tremont Group Holdings, Inc., Tremont Partners, Inc., and Tremont (Bermuda) Limited

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Defendants Tremont Group Holdings, Inc., Tremont Partners, Inc. and Tremont (Bermuda) Limited (co llect ively, "Tremont") respectfully submit this memorandum o f law in opposit ion to Plaint iffs' Motion for Preliminary Approval of Partial Class Act ion Settlement.1 INTRODUCTION Plaint iffs and the Argus Defendants (the "Settling Parties") have requested preliminary approval o f a stipulat ion of partial settlement (the "Settlement" or "Settlement Agreement") resolving claims asserted against the Argus Defendants in this case and in a related action capt ioned The Lugano Trust v. Tremont Capital Management, Inc., 09 cv- 6840 (TPG). Tremont objects to one provisio n of the Settlement that threatens to prejudice the rights of all non-settling defendants, including Tremont.2 The Settlement provision in quest ion is a bar order prohibit ing the non-settling defendants from pursuing claims for contribution against the Argus Defendants. The provision is prejudicial because it fails to provide for an adequate corresponding judgment reduction credit to compensate the non-settling defendants for the loss of their right to seek contribut ion. While the Settlement also purports to include a judgment reduction "credit" to offset the effect of the bar order, it fails to provide the credit mandated under Section 15-108 of New York's General Obligat ions Law ("GOL").3 The GOL unequivocally provides that any final judgment against

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Unless otherwise defined, capitalized terms used herein have the meanings ascribed to them in Plaint iffs' Motion for Preliminary Approval of Partial Class Act ion Settlement. In making this limited objection to the Settlement at this juncture, defendants do not concede that certificat ion of any plaint iff class in any of the related Tremont cases before this Court would be appropriate. Defendants reserve their right to oppose any motion for class certification addressed to any claims remaining in this lit igation. Alt hough Section 15-108 is phrased so lely in terms of "tortfeasors," it is applicable to all cases, such as this one, where non-settling defendants have a right to seek contribution fro m
(cont'd)

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non-settling defendants must be reduced by the greatest of: the amount stipulated in the release given to the settling defendant, the amount paid by the settling defendant for the release, or the amount of the settling defendant's equitable share of the damages (i.e., the statute entit les nonsettling defendants to the maximum credit available under either the pro tanto or the proportionate share methods of judgment reduction). See N.Y. GOL § 15-108 (McKinney 2007). Here, the Settlement departs from the clear words of the statute and offers a scheme that does nothing to protect the judgment reduction rights of Tremont and the other nonsettling defendants. Instead, under the Settlement, plaint iffs pro mise to seek a reduction in any judgment entered against the non-settling defendants, but only if the non-settling defendants prevail on cross-claims for contribution against the Argus Defendants. (See Proposed Judgment ¶ 13.)4 The Settlement's proposed bar order, however, would completely eliminate the Argus Defendants' liabilit y for contribution. Thus, the Settlement, by its terms, precludes any crossclaims for contribut ion, rendering the proposed judgment credit provisio n illusory. Consequent ly, as explained below, the Settling Parties' proposed bar order is inconsistent with GOL § 15-108 and would, if approved by the Court, prejudice Tremont and the other nonsettling defendants by depriving them of adequate compensat ion for the loss of their right to seek contribution fro m the Argus Defendants. Plaint iffs' motion for preliminary approval, therefore,

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settling defendants. See Minpeco, S.A. v. Conticommodit y Servs., Inc., 677 F. Supp. 151, 153 (S.D.N.Y. 1988); County of Westchester v. Welton Becket Assocs., 478 N.Y.S.2d 305, 313 (2d Dep't 1984).
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The Proposed Judgment is the Proposed Final Judgment attached as Exhibit F to the Settlement Agreement. 2

should be denied absent amendment of the Settlement to include the requisite judgment reduction credit for the benefit of the non-settling defendants.5 ARGUMENT THE PROPOSED SETTLEMENT IS PREJUDICIAL TO ALL NON-SETTLING DEFENDANTS, INCLUDING TREMONT Where, as here, a settlement agreement includes a provisio n barring the contribution claims o f non-settling defendants, the agreement may be approved by the court "only 'so long as there is a provisio n that gives the non-settling defendants an appropriate right of set-off fro m any judgment imposed on them. '" In re Parmalat Sec. Lit ig., No. 04 Civ. 9771, 2007 WL 541466, at *34-35 (S.D.N.Y. Feb. 22, 2007) (citations o mitted). In this case, the proposed bar order included in the Settlement is governed by GOL § 15-108. Accordingly, Tremont (and the other non-settling defendants) are entit led, at a minimum, to the judgment reduction credit specified in that statute, which provides in relevant part as fo llows: When a release . . . is given to one of two or more persons liable or claimed to be liable in tort for the same injury . . . it does not discharge any o f the other tortfeasors fro m liabilit y for the injury . . . unless it s terms expressly so provide, but it reduces the claim o f 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 pract ice law and rules, whichever is the greatest. N.Y. GOL § 15-108(a).6

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Non-settling defendants have standing to object to a proposed settlement where their "rights . . . are at stake." In re Parmalat Sec. Lit ig., No. 04 Civ. 9771, 2007 WL 541466, at *34-35 (S.D.N.Y. Feb. 22, 2007) (considering the rights of non-settling defendants as they relate to a proposed settlement bar order); see also Quad/Graphics, Inc. v. Fass, 724 F.2d 1230, 1232 (7 Cir. 1983) (recognizing right of non-settling defendants to object to terms of settlement that precludes indemnificat ion fro m settling defendants). 3

Here, in derogation of the statute, the Settlement purports to extinguish claims for contribution against the Argus Defendants, but fails to provide the non-settling defendants with an adequate judgment reduction credit. As for the proposed bar order, it is contained in a Proposed Final Judgment attached as Exhibit F to the Settlement, and purports to discharge the Released Parties (which include the Argus Defendants) "from all claims for contribution by any Person . . . based upon, arising out of, relat ing to, or in connect ion with the Released Claims o f the Settlement Class, any Settlement Class Member or the Individual Settling Parties." (Proposed Judgment ¶ 11.) In other words, the Settlement purports to extinguish all claims for contribution against the Argus Defendants, including those of Tremont and the other non-settling defendants. The Proposed Final Judgment annexed to the Settlement also includes a separate provisio n purporting to provide for a reduction in any judgment that may be entered against the non-settling defendants. In realit y, however, the provisio n as drafted could not possibly result in any judgment reduction under any circumstances. Indeed, the proposed judgment reduction clause is triggered only if the Settlement's bar order "is insufficient or inadequate to eliminate the Argus Defendants' liabilit y based on any [claim for contribut ion]." (Id. ¶ 13.) Given that the proposed bar order, by its terms, purports to eliminate all claims for contribution against the Argus Defendants, the purported judgment reduction clause could never beco me operative. This illusory judgment credit provisio n plainly flouts GOL § 15-108 and thus is improper. See Denney v. Deutsche Bank AG, 443 F.3d 253 (2d Cir. 2006); Local 875 I.B.T. Pension Fund v.
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GOL § 15-108 is intended both to encourage settlements and to ensure that the non-settling defendants will not be forced to bear more than their fair share o f any awarded damages. See, e.g., Whalen v. Kawasaki Motors Corp., 92 N.Y.2d 288, 292 (1998); Williams v. Niske, 81 N.Y.2d 437, 443-44 (1993). 4

Pollack, 49 F. Supp. 2d 130 (E.D.N.Y. 1999). See also In re Masters Mates & Pilots Pensio n Plan, 957 F.2d 1020, 1031 (2d Cir. 1992) (rejecting bar order provisio n because the settlement "provide[d] for a judgment reduction that may be less than the amount paid by the settling defendants"). To fairly co mpensate Tremont and the other non-settling defendants for the loss of their contribut ion claims against the Argus Defendants, the Settlement's judgment reduction provisio n should be amended to specifically provide that any judgment reduction credit shall equal the greater of the settlement considerat ion paid by the Settling Defendants, or the Settling Defendants' proportionate share of liabilit y. See Denney, 443 F.3d at 274-75 (settlement must specify how the full and sufficient judgment credit will be calculated); In re Parmalat, 2007 WL 541466, at *37 (rights of non-settling defendants are protected where judgment credit is at least an amount equal to settling defendant's proportionate share of liabilit y). CONCLUSION For the foregoing reasons, Tremont respectfully requests that the Court deny Plaint iffs' motion to preliminarily approve the Settlement absent amendment of the Settlement's proposed bar order to include the judgment reduction credit mandated under GOL § 15-108. Dated: September 18, 2009 Respect fully submitted, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP By: \s\ Seth M. Schwartz Seth M. Schwartz [e-mail] Michael H. Gruenglas Susan L. Saltzstein William F. Clarke, Jr. Four Times Square New York, New York 10036-6522 [phone] 5