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Clark v. Associates Commercial Corp

Law Dictionary
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Law Dictionary

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Civil Procedure Keyed to Marcus

Citation. 149 F.R.D. 629, 1993 U.S. Dist. 27 Fed. R. Serv. 3d (Callaghan) 811; 26 U.C.C. Rep. Serv. 2d (Callaghan) 596

Brief Fact Summary. Clark (Plaintiff) sued Associates Commercial Corporation (Defendant) for damages to his person and property due to Defendant’s repossession by force of a tractor that was collateral for a loan made to the Plaintiff. Defendants filed a third party complaint seeking indemnity from its employees and two parties that assisted in the repossession. Third party defendants moved to dismiss the third party complaint and Plaintiff moved to strike the third party complaint or for a separate trial to determine those issues.
Synopsis of Rule of Law. A third party complaint for indemnity based on the agency theory, which does not demonstrate that the third party defendant has a duty to the original plaintiff is proper.

Facts. Plaintiff’s complaint against Defendant for damages to his person and property alleges causes of action in tort and contract. Defendants filed a third party complaint seeking indemnity from its employees and two parties that aided in the repossession of the tractor from the Plaintiff. Third party defendants moved to dismiss the third party complaint and Plaintiff moved to strike the third party complaint or in the alternative for a separate trial to determine those issues. Defendant alleges in its third party complaint that it hired Bob Howard (Third party defendant), who, unbeknownst to the Defendant, had subcontracted with Clark Investigation & Recovery (Third party defendant) to repossess Plaintiff’s tractor. Defendant also alleges that other employees, including Lett, (Third party defendant) of the company conducted the actual repossession of the collateral. Plaintiff’s complaint alleges that Howard and Clark were agents of Defendant, and thus Defendant was liable for their actions. Defendant brought an indemnity claim against third party defendants Howard, Clark and Lett for the amount that Defendant may be held liable to Plaintiff.

Issue. Whether a third party claim for indemnity based on the agency theory is proper? Whether it is necessary for a third party defendant to have a duty to the Plaintiff in order to have a third party complaint.

Held. Yes and no. Both the Motion to Dismiss and Motion to Strike the Third-Party Complaint or For a Separate Trial are denied. An employer has the right to seek indemnity against its employee for liability resulting from the employee’s tortious acts under the agency theory. In other words, an employer can hold its agents liable for the amounts the employer is found to be liable to the plaintiffs. Here, Defendant brought indemnity actions against each third party defendants as a person who may be liable to the third party Plaintiff for all or part of the plaintiff’s claim. Therefore, Defendants properly impleaded third party defendants. A third party complaint does not require the existence of a duty on the part of the third party defendant to the Plaintiff. Impleader is only proper if the third party defendant may be liable for some or all of the Plaintiff’s claim against the third party plaintiff. The third party claim need not be on the same basis as the main claim and impleader is proper despite the fact that third party’s liability is not established when the third party plaintiff’s liability to the plaintiff is established. Therefore, in the instant case, the Defendants have stated a valid claim for indemnity against third party defendants. Inclusion of third party indemnity claims will not complicate the suit. This decision is typically within the discretion of the court. Here, the court finds that many of the issues are so closely related that resolution of Plaintiff’s claims may collaterally estop defendants from relitigating these issues in separate proceedings and thus will not confuse the issues.

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Discussion. Impleader is the procedure by which a third party is brought into a lawsuit, through a defendant’s third party action. This is also called third party practice. In this case, Defendant brought its employees, third party defendants into this lawsuit in order to be indemnified for any award that Plaintiff would obtain against Defendant. Since, employees and certain third parties were directly responsible for the damage done to the tractor during repossession they should bear the cost of any award of damages.

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