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Chancery Finds that Non-Settling Defendants Waived their Right to Seek a Settlement Credit Under DUCATA

In re Mindbody Inc. S’holder Litig., Consol. C.A. 2019-0442-KSJM (Del. Ch. Nov 15, 2023)
The Delaware Uniform Contribution Among Tortfeasors Act (“DUCATA”) establishes the legal framework applicable when plaintiffs release only some joint tortfeasors through settlement. DUCATA creates a right of contribution among joint tortfeasors and specifies that an ultimate damages award against non-settling defendants can be reduced by amounts received in settlement from other joint tortfeasors. In this fiduciary duty action challenging the fairness of a merger, the Court ruled that, despite a settlement of claims against certain defendants, the non-settling defendants waived their right to seek a damages reduction.

Under DUCATA, a partial release does not discharge the non-settling joint tortfeasors, but instead reduces the claim against them “in the amount of the consideration paid for the release, or in any amount or proportion by which the release provides that the total claim shall be reduced, if greater than the consideration paid.” The non-settling defendants in this case asked for the reduction of damages award in the amount of the $27 million paid by the settling defendants. The plaintiff, however, argued that the reduction was inappropriate because the non-settling defendants waived their right to request a credit by failing to raise the argument before their post-trial answering brief, among other reasons. The Court agreed.

The Court explained that waiver was an issue of fairness that focused on “competing desires of avoiding trial by ambush and promoting fair and orderly proceedings.” In non-jury trials, Delaware courts have allowed defendants to pursue contribution claims post-trial, because forcing them to present evidence of their joint tortfeasor status while also arguing that they should not be liable puts them in an “awkward position[.]” Because the non-settling defendants in this case first raised the issue in their post-trial answering brief, however, and did not otherwise preserve the issue before trial, the Court found that they waived their right to seek a settlement credit. The Court reasoned that the minimum necessary to place the other side on notice may include pleading a cross-claim for contribution, or by raising the issue in pre-trial submissions or during the pre-trial conference. Because the non-settling defendants here did not do so, they did not put the plaintiff on notice of the potential contribution claim and, therefore, waived their right to seek a settlement credit.

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