Limitations on Third-Party Actions in Breach of Contract Actions

Pursuant to CPLR § 1007, a defendant may seek indemnification and/or contribution from a third party who may be liable to the defendant for all or part of the plaintiff’s claim.  See Galasso, Langione & Botter, LLC v. Liotti, 81 A.D.3d 880, 883 [2d Dep’t 2011].  However, a defendant in a breach of contract action is limited in its ability to engage in such third-party practice.

The rule in New York is that “[t]he party seeking indemnification ‘must have delegated exclusive responsibility for the duties giving rise to the loss to the party from whom indemnification is sought,’ and must not have committed actual wrongdoing itself.”  Board of Managers of Olive Park Condominium v. Maspeth Properties, LLC, 170 A.D.3d 645, 647 [2d Dep’t 2019] (internal citations and quotation marks omitted).  “Common-law indemnification is warranted where a defendant’s role in causing the plaintiff’s injury is solely passive, and thus its liability is purely vicarious.  Since the predicate of common-law indemnity is vicarious liability without actual fault on the part of the proposed indemnitee, it follows that a party who has itself actually participated to some degree in the wrongdoing cannot receive the benefit of the doctrine.”  Id. (internal citations and quotation marks omitted).

Maspeth Properties, supra, was an action to recover damages arising from the allegedly deficient construction of a condominium building.  The condominium’s board of managers asserted breach of contract claims against the condominium’s sponsor (“Maspeth”) and general contractor (“Superior”) for their alleged failure to correct defects caused by Maspeth, Superior, and/or their subcontractors.  Id. at 646.  Maspeth and Superior commenced a third-party action for common-law indemnification against, inter alia, the engineering firm (“TSF”) and security company (“Security”) hired by Superior.  Id.   The Second Department affirmed the lower court’s dismissal of the third-party action as against TSF and Security, finding that:

[t]he allegations in the complaint are that Maspeth and Superior retained certain contractual responsibilities regarding the project and that any recovery against them would be based on their own failure to uphold those responsibilities.  This is not a case where a defendant’s liability sounded in tort, and the tortious conduct may have been solely the result of a third-party defendant’s negligence.

Id. at 647.

Further, a party cannot seek contribution for pure economic loss resulting from a breach of contract.  Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21, 26, 29 [1987] (finding no common-law right of contribution in contract actions); CPLR § 1401 (“two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them …”).

In Wecker v. Quaderer, 237 A.D.2d 512 [2d Dep’t 1997], the Second Department found that a third-party action for contribution should have been dismissed as against a third-party defendant architect where the underlying action was “for pecuniary loss resulting from a breach of a home improvement contract.”  Id. at 513.  “Even though the plaintiff couched the complaint in terms of negligent performance, it [was] essentially a breach of contract claim.”  Id. “Specifically, the underlying complaint sought the benefit of the bargain recovery for the cost of repairs and diminution in value.  The mere potential for physical injury or property damage did not suffice to create a duty independent of the contract warranting recovery in tort.”  Id.

Because simple breach of contract actions are neither predicated on the tort liability required for indemnification nor the physical injury or property damage required for contribution, defendants in such actions are limited in their ability to seek contribution or indemnification from third-parties.

Rebecca Sklar Bio

Rebecca Sklar is an Associate in the Litigation Group at Certilman Balin Adler & Hyman, LLP.  Based in the firm’s Hauppauge office, her practice includes a diverse range of commercial, real estate, and general litigation matters.  Rebecca is a member of the Suffolk County Bar Association Commercial Division Committee and an Officer of the Suffolk Academy of Law.  She earned her Juris Doctor, cum laude, from Hofstra University School of Law in 2013 and her Bachelor’s Degree from Binghamton University in 2009.