Plaintiffs Are Entitled To Prompt Payment Of A Settlement, But Non-Parties Are Not

Following a settlement, the defendant must promptly pay all sums owed to the plaintiff within twenty-one (21) days of the plaintiff delivering the executed release and a stipulation discontinuing the action to that defendant. See CPLR § 5003-a. On July 27, 2017, the New York State Appellate Division, Third Department, issued a decision in Ronkese v. Tilcon N.Y., Inc. addressing whether that provision also applies to money payable by a defendant to a third-party lienholder pursuant to a settlement agreement between a plaintiff and that defendant. See 2017 NY Slip Op 05905 (3d Dep't 2017). The Third Department held that CPLR § 5003-a's requirement for prompt payment to a plaintiff does not apply to settlement payments owed to a non-party lienholder.

In Ronkese, the plaintiff sued his employer to recover damages for injuries he sustained during the course of his employment. The plaintiff and his employer entered into a stipulation of settlement. The terms of the settlement were: the plaintiff agreed to settle his claims against his employer for $3.25 million, and his employer agreed to satisfy an outstanding workers' compensation lien against the plaintiff's recovery. The employer promptly paid the plaintiff, but ignored the plaintiff's requests concerning the status of the satisfaction of the lien. Thereafter, the plaintiff moved to enforce the terms of the settlement. The Court addressed whether money payable by a settling defendant to a lienholder, pursuant to a settlement agreement between a plaintiff and that defendant, constituted a sum due to the plaintiff within the meaning of CPLR § 5003-a.

The Third Department's analysis focused on the definition of a "sum." It decided that CPLR § 5003-a applied only to the nonpayment of settlement money owed directly to a settling plaintiff. The Court concluded that the plaintiff was paid and that CPLR § 5003-a was fulfilled because all money required to be paid to him was paid within twenty-one (21) days. The Court reasoned that the intent behind CPLR § 5003-a was: to protect settling plaintiffs from having to chase defendants for money that may be essential to their well-being; to stop defendants from making delayed payments, which often results in plaintiffs losing interest on the settlement proceeds; and to enforce plaintiffs' rights similar to if they had won a money judgment at trial. The Third Department further concluded that nothing in the legislative history of the statute suggested it was meant to give plaintiffs those benefits if the defendant failed to promptly pay a lienholder pursuant to the parties' settlement agreement, and, as such, there is no requirement for prompt payment to a non-party.

This decision will impact how settlements are constructed going forward. Practically, time periods for payment to lienholders should be specifically addressed in the language of the settlement agreement.