Friedman v. Hartmann

Brief Fact Summary.

Plaintiffs brought suit against Defendants to reclaim their investment alleging fraud and various other legal theories. Defendants impleaded third party defendants alleging the third party defendants should be liable to Defendant’s for contribution or indemnification.

Synopsis of Rule of Law.

A defendant cannot implead a third party claim to seek indemnification or contribution when there is not a right to indemnification or contribution under the main claim.

Facts.

Friedman and other investors (collectively known as “Plaintiff’s) made an agreement with Hartmann, Defendant, to invest in the expansion of commercial properties in Connecticut. One of the properties was supposed to be a shopping center. Plaintiffs invested $600,000 to buy the property. Upon purchase, the agreement stated that there was not a broker involved in the deal.  Nonetheless, Plaintiffs’ allege that Defendant and various developers were actually involved in the transaction. However, it was kept a secret to Plaintiffs that a broker was involved because, had it be disclosed, Plaintiff would be required to pay $1 million commission at closing. Plaintiffs brought suit against Defendant to reclaim their $600,000 investment alleging fraud and misrepresentation, breach of contract, and violations of the Racketeer Influenced and Corrupt Organizations Act. Defendants impleaded their attorney, Kathy Priest, Priest’s law firm, and James O’Connor (collectively known as “third party defendants”). Defendant’s alleged that third-party defendants committed malpractice by advising Defendants they did not need to disclose the broker’s commission to Plaintiff. Further, Defendant alleged they have a right to contribution and indemnification from the third party defendants. The third-party defendants motioned to dismiss the case alleging Defendants failed to state a claim on which relief can be granted.

Issue.

Whether a defendant may implead a third party claim to seek indemnification or contribution when there is not a right to indemnification or contribution under the main claim. 

Held.

No, a defendant cannot implead a third party claim to seek indemnification or contribution when there is not a right to indemnification or contribution under the main claim.

Discussion.

A defendant cannot implead a third party claim to seek indemnification or contribution when there is not a right to indemnification or contribution under the main claim.

Here, Defendants allege that they are entitled to contribution or indemnification because the third-party defendants’ malpractice was the result of Plaintiff’s harm. Nonetheless, the Racketeer Influenced and Corrupt Organizations Act does not provide Defendants the right of contribution or indemnification. Further, common law precedent confirms this. Thus, Congress wanted to penalize individuals who violate Racketeer Influenced and Corrupt Organizations Act. Also, even if Congress did not expressly state its intention to penalize these individuals, neither contribution nor indemnification is not an available remedy for an intentional wrongdoing. Therefore, Defendants may not implead the third-party defendants to seek neither contribution or indemnification, and the third party defendants motion to dismiss is granted.