The Court of Appeals of Georgia held that a release and settlement agreement between two parties that contained a covenant not to sue barred a party from obtaining rights to bring a claim via assignment and asserting such third-parties rights. Likewise, no claim for contribution of indemnification can lie where a defendant does not breach a duty directly to a plaintiff(s). Finally, the apportionment statute, O.C.G.A. § 51-12-33, no longer offers indemnification in such a situation. ALR Oglethorpe, LLC et al., v. Fidelity National Title Insurance Company, A21A0989, 2021 WL 4398520 (Ga. Ct. App. Sept. 27, 2021).
First, the Court reviewed whether a covenant not to sue in a release and settlement agreement covered claims that were assigned to Plaintiffs by a third party.
A release or settlement agreement is a contract subject to construction by the court. It is governed by state law applicable to contracts in general. The cardinal rule of construction is to determine the intention of the parties. Where the terms of a written contract are clear and unambiguous, the court will look to the contract alone to find the intention of the parties. Such a contract is the only evidence of what the parties intended and understood by it. UniFund Financial Corp. v. Donaghue, 288 Ga. App. 81, 82 (653 SE2d 513) (2007). A covenant not to sue is a contract that “bars the holder of the cause of action from asserting it against the party or parties with whom he has covenanted. Brantley Co. v. Briscoe, 246 Ga. 310, 312 (1) (271 SE2d 356) (1980). “In order to ascertain what claims the parties sought to address in the [covenant not to sue], we must read that provision in light of the contract as a whole and in the legal context in which it was created.” Langley v. MP Spring Lake, 307 Ga. 321, 325 (834 SE2d 800) (2019).
The Court reviewed the express language of the the release, which stated that ALR released "any and all liability for any and and all claims . . . arising out of or relating in any way to the released agreement . . ." ALR Oglethorpe, 2021 WL 4398520 at *4. The agreement defined “released claims” as “any claims or other matters. . . arising out of or in connection with the [p]olicy [c]laims,” which it defined as “any claims or matters arising out of the [e]asement. . .” Id. This included the agreement not to participate or institute any suit as a party against Fidelity by reason of the released claims. Id. This broad language covered "a clear intent to resolve any claim ALR might ever have against Fidelity relating to the easement." Id. The Court as such stated they would not obtain via assignment a third-party's claims against Fidelity related to the easement.
Second, the Court reviewed whether the Plaintiffs could make a claim for contribution.
The contribution statute, O.C.G.A. § 51-12-31, states, "the right to contribution relates only to joint tortfeasors, and where the proposed defendant cannot be made liable as a joint tortfeasor, the contribution action does not state a claim." Hines v. Holland, 334 Ga. App. 292, 295 (1) (a) (779 SE2d 63) (2015). In order to make the showing that Fidelity was a joint tortfeasor, ALR had to present evidence that Fidelity can be directly liable to them. Weller v. Brown, 266 Ga. 130-131 (464 SE2d 805) (1996).
The only claims asserted were negligent misrepresentation and legal malpractice, however, none of these duties by Fidelity were owed to the Plaintiffs.
The essential elements of a cause of action for negligent misrepresentation against one with whom the plaintiff is not in privity are: “(1) the defendant’s negligent supply of false information to foreseeable persons, known or unknown; (2) such persons’ reasonable reliance upon that false information; and (3) economic injury proximately resulting from such reliance.” Hardaway Co. v. Parsons, Brinckerhoff, Quade & Douglas, 267 Ga. 424, 426 (1) (479 SE2d 727) (1997). Plaintiffs failed to present any evidence that they relied on any information supplied by Fidelity. ALR Oglethorpe, 2021 WL 4398520 at *6-7. Likewise, as for legal malpractice, the Plaintiffs did not present any evidence that there was an attorney client relationship with Fidelity or its attorney. Id. at *7. Therefore, the negligent misrepresentation and legal malpractice claims were not grounds for joint tortfeasor contribution.
Lastly, the Court reviewed whether Plaintiffs were entitled to indemnification.
Plaintiffs made a claim under common-law indemnity under O.C.G.A. § 51-12-32(c) states, "the right of indemnity, express or implied, from another or others shall continue unabated and shall not be lost or prejudiced by compromise and settlement of a claim or claims for injury to person or property or for wrongful death and release therefrom." Id. at *7.
The Court noted that there is no claim for a right to indemnify under a contract or under vicarious liability, which are the only forms of indemnification viable after the enactment of the apportionment statute, therefore the claim failed. Id. at *7.
The apportionment statute, O.C.G.A. § 51-12-33, changed the law of indemnity. Following its enactment, “Georgia law continues to recognize two broad categories of indemnity: as created by contract, as between a surety and a debtor; and under the common law of vicarious liability, as between principals and agents.” Dist. Owners Assn. v. AMEC Environmental & Infrastructure, 322 Ga. App. 713, 715 (1) (747 SE2d 10) (2013) (citations and punctuation omitted); accord Hines, 334 Ga. App. at 296 (1) (b). The Plaintiffs rely on cases that found that passive tortfeasors have a right to indemnity against active tortfeasors. This theory of indemnity concerns liability among joint tortfeasors. See Reid v. Morris, 309 Ga. 230, 238 (845 SE2d 590) (2020) (noting that in 1997, Georgia law “distinguished between active and passive tort-feasors in the context of contribution and indemnity among joint tort-feasors”). As held in the contribution ruling, Fidelity was not a joint tortfeasor.
The Court went on to state, "even if Fidelity were a joint tortfeasor, following the enactment of the apportionment statute, common-law indemnity based on the distinction between active and passive negligence no longer exists in Georgia." Id. at *8. The enactment of the apportionment statute, OCGA § 51-12-33, changed the Georgia law of joint tortfeasor liability (whether in the context of claims for contribution or in the context of claims for indemnity) by limiting joint and several liability of tortfeasors to instances when fault is legally or factually indivisible. See Alston & Bird v. Hatcher Mgmt. Holdings, __ Ga. at __ (3). In light of this changed legal landscape, the Curt stated "after the enactment of the apportionment statute, a defendant may not seek indemnification from another defendant as a joint tortfeasor simply based on allegations that the other defendant’s negligence actually caused the harm." Id. at *8. Therefore, "after the enactment of the apportionment statute, Georgia law recognizes 'two broad categories of indemnity: as created by contract, as between a surety and a debtor; and under the common law of vicarious liability, as between principals and agents.'" ALR Oglethorpe, 2021 WL 4398520 at *8 quoting Dist. Owners Assn., 322 Ga. App. at 715 (1). Since neither form was alleged on the facts of the matter before the Court there could be no claim for indemnification against Fidelity. Id. at *9.
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