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SKYLON CORP. v. GUILFORD MILLS

October 12, 1995

SKYLON CORPORATION, Plaintiff, against GUILFORD MILLS, INC. and GEORGE GREENBERG, Defendants.


The opinion of the court was delivered by: PRESKA

 LORETTA A. PRESKA, District Judge:

 By an Opinion and Order dated September 29, 1994 *fn1" (the "Opinion and Order"), I granted defendants' motion for summary judgment with respect to Guilford Mills, Inc. ("Guilford") and denied the motion with respect to Guilford's former president, George Greenberg ("Greenberg"). I determined there was a factual question as to whether the general release of Guilford executed by Skylon Corporation ("Skylon") also extended to Greenberg. Defendants have moved for reargument concerning the denial of summary judgment with respect to Greenberg and, in the alternative, for certification for interlocutory appeal. For the following reasons, defendants' motion for reargument is denied and defendants' motion for certification is granted.

 BACKGROUND

 The factual background of this action is fully set forth in the Opinion and Order and, in general, will not be repeated.

 In the Opinion and Order, I determined that there was an issue as to whether defendant Greenberg was covered by the September 1990 release. The release, by its express terms, covers Skylon, Guilford, Chuck Hayes (Guilford's CEO), Irving Schuyler (Skylon's Chairman) and Harvey Schuyler (Skylon's president). Although Greenberg is not mentioned, he nevertheless contended that he is included in the release which, he says, was intended to be plenary. Skylon, on the other hand, maintained that only those individuals to whom the release expressly refers were intended to be protected. I determined that defendants' arguments were not persuasive enough to overcome the facts that (i) the release names specific individuals and (ii) Greenberg is not among them. *fn2" In view of these circumstances, which raised the substantial possibility that Greenberg's omission from the release was not merely an oversight, I could not -- and cannot -- hold as a matter of law that the parties intended Greenberg to be released.

 Defendants also argued that the issue of intent was not material because, they contended, Skylon's release of Guilford operated to release all of Guilford's agents, including Greenberg, Guilford's president. Defendants relied upon International Halliwell Mines, Ltd. v. Continental Copper & Steel Industries, Inc., 544 F.2d 105, 109 (2d Cir. 1979) ("International Halliwell "), wherein the Court of Appeals stated that "New York law is well settled that the release of one wrongdoer releases all those who acted as its agents, absent an express reservation to the contrary." The Court went on, however, to state that the rationale underlying this rule was "the prevention of double recovery where the alleged wrongful acts of several individuals cause a single injury." Id. The fear was that an injured party would settle his or her claims with the principal and then sue the agent, enabling the injured to reap a total recovery in excess of the amount of his or her damages. See Gavin v. Malherbe, 146 Misc. 51, 261 N.Y.S. 373, 375-76 (N.Y. Sup. Ct. 1932), aff'd, 240 A.D. 779, 266 N.Y.S. 897 (2d Dep't 1933), aff'd, 264 N.Y. 403, 191 N.E. 486 (N.Y. Ct. of App. 1934). However, as reflected in § 15-108 of its General Obligations law, New York no longer prevents double recoveries by construing releases to extend beyond their stated scope. See N.Y. Gen. Oblig. Law § 15-108 (McKinney 1989) ("GOL § 15-108"). Releases are interpreted to cover only those stated to be covered, and double recoveries are avoided by reducing an injured party's claims against non-released liable parties by the amount received in settlement from released liable parties. E.g., Tufail v. Hionas, 156 A.D.2d 670, 549 N.Y.S.2d 436 (2d Dep't 1989) (applying GOL § 15-108 and holding that release given to automobile owner did not release driver from liability for injuries sustained by passenger). Taking the above into account, I held that Skylon's release of Guilford does not extend to Greenberg as a matter of law and that the factual issue concerning the parties' intent with respect to Greenberg's status under the release is material thereby preventing summary judgment for Greenberg.

 DISCUSSION

 I. Motion for Reargument

 After having read the parties' papers on the motion for reargument and conducted oral argument, I see no reason to change my earlier ruling. As I previously stated, under New York law, a release, like any other contractual provision, must be construed in accordance with the intent of the parties who executed it. Stone v. National Bank and Trust Co., 188 A.D.2d 865, 591 N.Y.S.2d 609, 611 (3d Dep't 1992). See also Wells v. Shearson Lehman/Am. Express, 72 N.Y.2d 11, 530 N.Y.S.2d 517, 521, 526 N.E.2d 8 (N.Y. Ct. of App. 1988) (stating that courts generally "must look to the language of a release -- the words used by the parties -- to determine their intent, resorting to -- extrinsic evidence only when the court concludes as a matter of law that the contract is ambiguous").

 As I stated in the Opinion and Order, none of defendants' arguments is persuasive enough to overcome the facts that the release names specific individuals who were officers of the corporate parties, but Greenberg, former president of Guilford, is not among them. Defendants' main contention on reargument is that the absence of Greenberg from the release is not material because the release of a principal also releases the agent; *fn3" as explained infra, I do not believe that is the law of New York. In addition, even assuming that to be the law of New York, the following question arises: if it was unnecessary to include Greenberg, an agent of Guilford, why did the parties see fit to name, expressly, Chuck Hayes (Guilford's CEO), Irving Schuyler (Skylon's Chairman) and Harvey Schuyler (Skylon's President)? Skylon caused the two Schuylers to be included, and Guilford, on one hand caused Hayes to be included, but, on the other hand, did not cause Greenberg to be included. Obviously, the parties did not simply include various specified corporations and individuals unrelated to those corporations in the release; rather, the parties released specific "agents" of the released "principals". If the parties had believed that the release applied to agents simply as a matter of law, they likely would not have named any agents in the release. In light of these circumstances, which, as I held previously, raise the possibility that Greenberg's omission was not merely an oversight, I once again find that summary judgment is inappropriate because questions of fact remain about the parties' intent.

  Defendants, relying on International Halliwell, contend that Greenberg is covered by the release as a matter of law and that although GOL § 15-108 applies to "joint tort-feasors", it does not apply to "principal" and "agent." They argue that the Court of Appeals was aware of the change in GOL § 15-108, which occurred prior to the decision in International Halliwell, as indicated by its decision in Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, 540 F.2d 27, 39 (2d Cir. 1976) (decided July 15, 1976). Herzfeld indicates that the Court of Appeals was aware that GOL § 15-108 changed the law with respect to joint tort-feasors; however, Herzfeld does not address the application of GOL § 15-108 in the context facing me now, i.e., principal-agent. 540 F.2d at 38-39. In addition, International Halliwell did not address GOL § 15-108 in any context. 544 F.2d at 109-10. In short, one cannot assume from Herzfeld and International Halliwell that the Court of Appeals focused on the precise issue before me now.

 In addition, I note that in International Halliwell, the Court of Appeals cited to two New York cases, Metropolitan Dry Cleaning Machinery Co. v. Hirsch, 38 A.D.2d 558, 328 N.Y.S.2d 349 (2d Dep't 1971) and Gavin v. Malherbe, 146 Misc. 51, 261 N.Y.S. 373 (N.Y. Sup. Ct. 1932), aff'd, 240 A.D. 779, 266 N.Y.S. 897 (2d Dep't 1933), aff'd, 264 N.Y. 403, 191 N.E. 486 (N.Y. Ct. of App. 1934), both of which pre-date the statutory change embodied in GOL § 15-108. In Metropolitan Dry Cleaning Machinery Co., plaintiff alleged that defendant Hirsch had breached his fiduciary duty as plaintiff's sales manager and had conspired with officers of Washex Machinery Corporation ("Washex") to terminate an exclusive franchise plaintiff held to distribute equipment manufactured by Washex. Plaintiff also alleged that defendant conspired with Washex officers to destroy plaintiff's business. 328 N.Y.S.2d at 350. Plaintiff later reached a settlement with Washex and executed a release in its favor. Id. at 351. Defendant contended that the release of Washex was also a release as to him because he and Washex were alleged co-conspirators/joint tort-feasors. Id. The court agreed and explained that the release of Washex barred plaintiff's entire action:

 
The principle . . . [that] a release of one joint tortfeasor releases all, absent a reservation to the contrary, is founded on the equitable notion that the law will not permit a double recovery. The law presumes that a settlement with one of the joint tortfeasors represents a full satisfaction of the entire claim.

 Id. In short, Metropolitan Dry Cleaning Machinery Co. does not do more than restate the old common law principle that GOL § 15-108 explicitly rejected. In addition, Metropolitan Cleaning Machinery Co. is silent as to the principal-agent issue.

 In Gavin, plaintiff sustained injuries in an automobile accident and brought an action against the owner of the automobile and the driver, who allegedly was employed by the owner. Plaintiff subsequently settled with and executed releases in favor of the owner/employer. The driver/employee sought to invoke the then-prevailing common law rule that a release as to one or more joint tort-feasors, without reservation, is a release as to all tort-feasors. Plaintiff contended the release did not extend to the driver/employee because, under the theory of respondeat superior, the driver/employee and the owner/employer were not joint tort-feasors. 261 N.Y.S. at 374-75. The Gavin court rejected plaintiff's argument:

 
Although not joint tort-feasors . . . in the sense that the master was an active participant in the negligent or wrongful act, it is likewise true that the doctrine of respondeat superior puts the master and servant in such close legal relationship as to intimately affect each other in dealings with third parties. The tort committed by the servant is the same tort for which the master is liable under the doctrine of imputed negligence. Damages recovered for such a tort are entire and not severable. The servant is liable to his master for damages which the master has been compelled to pay to third persons because of the negligent or other wrongful act of the servant, where the master is not himself at fault. For the above reasons it has been held that, despite the fact the master and servant are not joint tortfeasors, a release to one discharges the other. If that were not the case, we ...

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