Defendant and Third-Party Plaintiff, Ford Motor Credit Company seeks an order granting it summary judgment in the amount of $1,750,000 as against Enid Motelson, Michael Motelson, as Administrator of the Estate of Steven Motelson and Dome Property Management, Inc.

Background

This case arises out of an accident which occurred on July 1, 2000 involving a 1998 Ford Explorer operated by the decedent, Steven Motelson. Four passengers were riding in the vehicle: Steven Motelson's son, Gary Motelson, was in the front passenger seat while the three rear seat passengers were Steven Motelson's two grandsons and Gary's sons, Brian and Evan Motelson, [*2]along with Mitchell Slepian, the plaintiff herein. As a result of the accident, the driver Steven Motelson and his grandson, Brian Motelson, both died, and the other three passengers suffered serious physical injuries and serious emotional distress requiring psychiatric treatment.^[FN1]

Steven Motelson, as the President of Dome Property Management, Inc. ("Dome") and individually, leased the vehicle at Bell Motor Inc., a Ford dealership, which assigned the title and the lease to Ford Motor Credit Company ("Ford Credit"). The Ford Explorer Lease Agreement contained an indemnity clause which states, in part

"INDEMNITY: You will indemnify and hold harmless Lessor, Ford Credit and Holder and their assigns from any loss or damage or damage to the Vehicle and its contents and from all claims, losses, injuries, expenses and costs related to the use, maintenance, or condition of the Vehicle..."

On September 15, 2000, Ford Credit made a cross-claim seeking contribution and indemnification against the Estate of Steven Motelson. Thereafter, Ford Credit commenced a third-party action for contribution and indemnification against Dome and the Estate of Steven Motelson, as the lessee.

Mitchell Slepian commenced a negligence action against Steven Motelson, the driver, and Ford Credit as the owner of the Ford Explorer. As part of his action, he also sued Ford Motor Company and others in products liability.^[FN2] Ultimately, the Firestone Tire Co. and the Quickie Lube were dismissed.^[FN3] Both of the remaining actions were eventually consolidated for trial and transferred to the Supreme Court of Richmond County to join the two other products liability actions arising out of the same accident,^[FN4] wherein the other three passengers, Gary Motelson, Evan Motelson and the Estate of Brian Motelson, sued Ford Motor Company as the manufacturer of the vehicle for various counts of products liability and negligent design. The Estate of Steven Motelson also sued Ford Motor Company for products liability and negligent design. Only Mitchell Slepian sued Steven Motelson for negligence.

On June 19, 2007, prior to the trial, Slepian and Ford Credit entered into a private settlement agreement, in which the other plaintiffs were not present. The terms of the agreement [*3]provided that Slepian settle all claims against Ford Credit for the amount of $1,750,000, and an agreement to discontinue Slepian's product liability claims against Ford Motor Company, which he agreed.

Following the settlement, Ford Credit filed a motion with this court seeking summary judgment on the issues of indemnification, liability and the reasonableness of the settlement. In an order dated, February 25, 2008, this court denied Ford Credit's motion on the basis that it was made more than sixty (60) days after the Note of Issue was filed and was thereby tardy under the law.^[FN5] Moreover, this court would not rule on the issue of liability or reasonableness of the settlement where the facts were so unclear and contested vigorously in the pleadings and documents as to whether Steven Motelson, as the driver of the 1998 Ford Explorer, was liable, in whole or in part, for the accident as compared to the co-defendants, Ford Motor Co. and Ford Credit, before the case was presented to both the jury and this court at trial. Therefore, Ford Credit's motion was denied without prejudice and allowed to be renewed at the conclusion of the trial, wherein this court has taken the jury verdict as an advisory opinion as to the liability of Steven Motelson.

Indeed, at the conclusion of the trial of Motelson v. Ford Motor Co., et al., after three weeks of testimony and evidence, the jury found Steven Motelson not liable for any negligence in driving the vehicle, in which Slepian and the others were passengers. Moreover, the jury awarded Steven Motelson's widow, Enid Motelson, $5,000,000 in compensatory damages and the Estate of Steven Motelson the sum of $1,500,000 in lost wages. While this sum has been reduced by $1,327,000, this Court has upheld the jury finding that Steven Motelson was not negligent.^[FN6]

Ford Credit now asks this court for an order granting summary judgment in the full amount of $1,750,000 plus counsel fees and expenses against Dome Property Management for the lease of the vehicle and against Michael Motelson, as Administrator of the Estate of Steven Motelson ("Estate"), because Steven Motelson, who signed the vehicle lease as President of Dome, also signed the lease as a co-lessee. In essence, Ford Credit wants the widow, Enid Motelson, to indemnify it for the settlement it made with Mitchell Slepian.

Courts generally favor settlements over judgments for the sake of judicial economy. Such favorable attitude towards settlements applies in the cases where an indemnity clause is at issue. However, as Philip L. Bruner and Patrick O'Connor, Jr. point out, a disincentive and troublesome situation is created in the cases when an indemnitee can be absolutely assured of transferring its [*4]liability under a settlement to an indemnitor "it undermines the establishment of the vigorous defense and reasonable resolution of the dispute."^[FN7]

Therefore, in order to alleviate this dilemma, under New York law, there is a hurdle to overcome. As the Appellate Division Second Department has held, the indemnitee has the burden of establishing that the settlement was "reasonable" and made in "good faith."^[FN8] Although these legal terms of art establish the burden standard, past cases have not given a clear guideline or set of factors as to what constitutes a "reasonable" and "good faith" settlement. Consequently, the courts must evaluate each case based on its unique set of facts and decide whether the indemnitee has met the standard.

In Feuer v Menkes Feuer, Inc.,^[FN9] plaintiff indemnitee refused the defendant indemnitor's offer to defend and insisted upon his own legal representation. Under the settlement, the defendants paid approximately $20,000 and the plaintiff paid $3,300. Despite the indemnitee's significantly lower amount in liability as compared to the defendants, the Appellate Division, First Department denied the indemnitee's motion for summary judgment, reversing the Special Term's granting of partial summary judgment, reasoning that if all of the individual defendants had different levels of criminal culpability, the amount paid in settlement may not be determined to be reasonable merely because plaintiff's contribution was a fraction of the amount paid by the others.^[FN10]

Furthermore, the Feuer court held that the indemnitee has a higher requirement of explanation in a situation where the indemnitee has not given notice, or has rejected the defense by the indemnitor. Ford Credit argues that this higher standard does not apply here because the indemnitor, Steven Motelson's widow and Estate, did not offer to provide a defense to Ford Credit. However, when reading the case closely, the rationale in Feuer for a hightened requirement of the indemnitee "stems from the fact that his [indemnitee's] action with regard to the claim is completely free of control by the indemnitor."^[FN11] The court continues, "[s]ince, under such circumstances, the indemnitee knows or believes that any financial responsibility he undertakes is likely to fall ultimately on the indemnitor, he is not inhibited, except by the barest [*5]self-restraint."^[FN12]

Here, this court is presented with that very issue of whether Ford Credit's settlement with Mitchell Slepian for the amount of $1,750,000 was indeed a reasonable good faith settlement in order for this court to grant Ford Credit's summary judgment. In reviewing the voluminous papers submitted, this court answers in the negative.

Ford Credit claims that the Slepian settlement amount was reasonable based on the following four reasons: (1) the jury could have found Steven Motelson liable for negligent driving, and thus place Ford Credit financially liable; (2) Peter Scalia, the investigator of the New York State police department testified that when Steven Motelson drifted to the side of the road, he overcorrected when he turned the wheel to the right and to the left in order to stay on the road, and thus, caused the vehicle to rollover nearly four times; (3) plaintiff's original speed control system expert, Samuel Sero, was barred from testifying thereby defeating plaintiff's theory that the electromagnetic interference with the vehicle's cruise control system could cause the vehicle to suddenly accelerate, thus weakening plaintiffs' theory that Steven Motelson was not at fault; and (4) Mitchell Slepian sustained serious injuries.

In evaluating Ford Credit's argument as well as the defendants claims, this court finds the settlement problematic for many reasons. First, Ford Credit only attempted to settle with Mitchell Slepian and not the other plaintiffs, two of whom were also passengers in the Ford vehicle and sustained serious psychiatric injuries. Second, Mitchell Slepian was given this large settlement with the condition that the product liability claims against Ford Motor Company be discontinued. Therefore, this settlement provided that the claims against Ford Motor Company be dismissed so that the product would not be challenged in a products liability trial. This raises the specter of why the co-defendant, Ford Motor Credit Company, would pay the entire sum to Slepian, while Ford Motor Company does not contribute a single penny, yet benefits from having the product liability claims dropped against it. The logical conclusion is that while Ford Motor Credit Company is a separate entity from Ford Motor Company, both companies acted in concert in settling this litigation even though Ford Motor Company did not pay one cent to have Slepian dismiss his product liability claim against it.

During the settlement discussions with the other plaintiffs, Ford merely offered approximately $1,000,000 to settle with all of the four remaining plaintiffs who presented proof of two deaths and two surviving passengers who have extreme emotional distress requiring permanent psychiatric treatment, which was never contested by the defendants. These significant discrepancies raise the issue of whether Ford Credit's reasons for settling the case with Slepian, a single plaintiff, for $1,750,000 was made in good faith or was it a settlement tactic to establish that Steven Motelson, the driver, was responsible for the accident and no defects existed in the Ford Explorer. Moreover, the jury found that the rear seat passengers were not seat belted in the vehicle and consequently, those persons should have the monetary value of their injuries reduced [*6]by 100%. Hence, if the jury similarly found that Mitchell Slepian was not wearing his seat belt based on the fact that he also was ejected from the rear window as were the Motelson children, then he would have been awarded no money by the jury. And unlike Evan Motelson, he would not have been entitled to recover for his mental injuries by virtue of being in the "zone of danger" because he was not a member of the Motelson family. Consequently, the payments made by Ford Credit was not a reasonable decision.

This court finds that Steven Motelson's widow, Enid Motelson, the Estate, and Dome have put forth evidentiary proof showing the existence of material issues of fact regarding Ford Credit's good faith and the reasonableness of its settlement with Slepian. While the settlement with Slepian may have been a business decision on the part of Ford Credit, the findings of the jury were that Steven Motelson was not negligent and therefore, was found not to be responsible for any "loss, injuries, expenses and costs" in accordance with the indemnity clause.

Accordingly, it is hereby:

ORDERED, that the Defendant and Third-Party Plaintiff, Ford Motor Credit Company's motion for summary judgment in the amount of $1,750,000 as against Enid Motelson, Michael Motelson, as Administrator of the Estate of Steven Motelson and Dome Property Management, Inc., is denied and the action is dismissed with prejudice, with costs and disbursements awarded to the plaintiffs.

ENTER,

DATED: August 29, 2008

Joseph J. Maltese

Justice of the Supreme Court