§5.5 D. Effect Of Judgment Sharing/Indemnification Agreements On Advisability Of Settlement

• Jurisdiction: New York

D. Effect of Judgment Sharing/Indemnification
Agreements on Advisability of Settlement

In antitrust conspiracy cases, a plaintiff may sue a number of defendants and attempt to collect all or any portion of the settlement from any co-conspirator. Understandably, for the defendants, the possibility that one defendant may be held to answer for all defendants creates an incentive to settle early in a case, to avoid a large claim for liability. For plaintiffs, there is an incentive to settle early with some defendants to finance protracted litigation with others.

Settlements in multiparty cases can be complex. For example, while the plaintiff will be required to offset the amount it receives in a settlement from the treble damage award against the remaining defendants, there may be complex allocation problems if, in addition to the claims common to all defendants, there are additional claims against only certain members of the defendant group.⁴⁸⁰ As a result, it can be difficult to speak generally about settlements in such cases. To complicate matters, while settlement amounts received must be offset against subsequent treble damage awards, there is no obligation for contribution by settling defendants and no provision for indemnity.⁴⁸¹ Moreover, there is no requirement that the amount of a settlement with a defendant be proportionate to the share of damages attributable to that defendant. Thus, nonsettling defendants may find themselves liable for a disproportionate share of the damages. Moreover, the nonsettling defendants may not have standing to contest a settlement agreement to which they were not a party.⁴⁸²

To remedy potential inequities, and, more significant, to prevent a rush to settle on disadvantageous terms simply to avoid paying a disproportionate share of damages, the defendants will sometimes enter into claims-reduction agreements or judgment-sharing agreements. A claims-reduction agreement is an agreement among the defendants that no defendant will settle unless the plaintiff agrees to reduce the damages claim against the remaining (nonsettling) defendants by an amount proportionate to the settling defendant’s sales. A judgment-sharing agreement, by contrast, is a form of indemnity agreement in which the defendants agree to apportion the judgment cost according to an agreed-upon formula.⁴⁸³

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Notes:

^[480] . See Irving Scher, Antitrust Adviser § 10.60 (4th ed. 1995) (Scher).

^[481] . See Texas Indus., Inc. v. Radcliff Materials Inc., 451...