June 19, 2009
Question. The Builder is a residential home builder in New York. In the course of its business, the Builder engages licensed architects to provide services related to home designs and approval of proposed home plans.
The Architects are New York-licensed architects specializing in home designs and home plans. Specifically, the Architects are in the business of designing, drafting and modifying home plans, as well as marketing, advertising, and selling home plan designs through traditional print and Internet media. The Builder engaged the Architects for architectural services and the Architects provided services to the Builder. During that time period, prospective clients approached the Builder with proposed plans for home designs. Some of these proposed plans bore no indication of their original source. Others indicated that they were created by Generic Plans, a popular national licensor of home designs. As a matter of course, the Builder passed along all of the proposed home plans that it received to the Architects for them to review, modify for compliance with local regulations, and approve.
The Builder provides the following representative example of its dealings with the Architects. The Builder received a photocopy of a proposed home design from a prospective client, through a broker. The photocopy was of a home design by Generic Plans known as "Basic McMansion." The design drawings included markings indicating that the design was the property of Generic Plans. The Builder contracted with the Architects to produce construction drawings from the photocopy. The Builder raised with the Architects the possible need to obtain a license from Generic Plans to use the Basic McMansion design. The Builder made inquiries as to whether the Architects' software was compatible with that of Generic Plans. The Architects assured the Builder that there was no need to purchase a license from Generic Plans, because the finished plans would be significantly different from any version given to the Builder by the prospective client. The Architects modified the design drawings, and Architect filed his own copyright applications for the modified designs. Architect advised the Builder to use the modified plans, and officially approved the plans. The Builder proceeded to construct multiple homes using the drawings.
Generic Plans filed a copyright infringement action against the Builder. Generic Plans did not file suit against the Architects, but did accuse them of copyright infringement, and reached a settlement with them prior to commencing the action against the Builder. The Builder incurred legal fees and other business expenses as a result of defending the action. The Builder ultimately chose to settle the action.
Generic Plans brought a second action against the Builder for copyright infringement, based on additional homes that the Builder had built that were not covered by the settlement in the first action. The home designs at issue in this second action had been approved by the Architects in the same manner that the home designs in the first action had been approved. In the second action, Generic Plans sued the Architects for infringement as well as the Builder. Once again, the Builder incurred legal fees and other business expenses in defending the suit. Once again, it chose to settle the suit, agreeing to make a payment to Generic Plans through its insurance carrier. Following this settlement, Generic Plans voluntarily dismissed the action, with the result that the Architects did not pay a judgment or a settlement in the second action.
Is the Builder entitled to contribution from the Architects under New York State common law for its expenses in connection with the Generic Plans litigations?
Is the Builder entitled to indemnification from the Architects under New York State common law for its expenses in defending the two Generic Plans actions?
Answer. No.
Contribution
There is no right to contribution under the Federal Copyright Act. The Builder's effort to find a right to contribution in New York State law is unavailing. Whether contribution is available in connection with a federal statutory scheme is a question governed solely by federal law.
Even if the Court allowed the Builder to invoke New York State law to support its claim for contribution in this case, the Builder would still fail to state a claim. The right to contribution under New York State law is governed by N.Y. C.P.L.R. § 1401. Section 1401 of the C.P.L.R. provides: "Except as provided in section [ ] 15-108 [of the GOL]... 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 whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.". GOL § 15-108 provides, in relevant part: "A tortfeasor who has obtained his own release from liability shall not be entitled to contribution from any other person. "GOL § 15-108(c).
In this case, the Builder settled both of the litigations brought by Generic Plans for which it now seeks contribution from the Architects. Therefore, the Builder's claim is barred by GOL § 15-108(c). There is an exception to GOL § 15-108(c) for parties who reached a settlement post-judgment. See GOL § 15-108(d) ("A release or covenant not to sue between a plaintiff or claimant and a person who is liable or claimed to be liable in tort shall be deemed a release or covenant for the purposes of this section only if ... (3) such release or covenant is provided prior to entry of judgment."). However, the Builder settled both Generic Plans litigations before any judgment or any apportionment of liability by a finder of fact. Indeed, there was never any judgment or apportionment of liability by a finder of fact in either Generic Plans litigation, for the very reason that the Builder chose to settle rather than defend the actions. Thus, the exception to GOL § 15-108(c) does not apply in this case.
For all of the foregoing reasons, the Builder cannot state a claim for contribution in this case.
Indemnification
The Builder's claim for indemnification is unaffected by the success or failure of its claim for contribution.
Indemnification is a claim by which the party held legally liable shifts the entire loss to another. It arises out of a contract which may be express or may be implied law to prevent a result which is regarded as unjust or unsatisfactory. The Builder does not claim that it had a contractual right to indemnity. In order for indemnification to be implied under common law, a party must establish that it cannot be held responsible for the underlying injuries to any degree.
In this case, the Builder cannot establish that it was without fault with respect to the underlying injuries to Generic Plans. The Builder knew that the plans at issue in both Generic Plans lawsuits originated from designs that belonged to Generic Plans, even before it gave the plans to the Architects for modification and approval. Indeed, the Builder alleges that it raised copyright concerns with the Architects, suggesting to the Architects that it might be necessary to obtain a license from Generic Plans to use the designs.
It is plain that the Builder in this case was aware of potential copyright issues but chose to ignore them, provided the copyrighted designs to the Architects, and proceeded with the construction of the homes upon receiving the Architects' approval. Therefore, it is clear that the Builder bore at least some fault for any infringement of Generic Plans' copyrights.
For all of the foregoing reasons, the Builder cannot state a claim for indemnification in this case.
About the Author
Thomas S. Tripodianos received a Bachelor of Arts degree from St. John's University with a major in Government and Politics and dual minors in Philosophy and Psychology. He went on to obtain a Juris Doctor from Hofstra University School of Law. He is admitted to practice law in the State of New York, as well as the U.S. District Court for the Northern, Southern and Eastern Districts with admission pending in the State of Pennsylvania, and the State of Massachusetts.