Divided Connecticut Appellate Court Expands Successor Liability
Michael F. Bahler | Bloomberg Law
In a case of first impression, the Appellate Court of Connecticut ruled in a 2-1 vote that a medical malpractice settlement that contained a covenant not to sue discharging the liability of the settling defendant did not prevent the plaintiff from continuing to pursue claims against the corporate successors of one of the settling parties.
In October 2005, plaintiff Lisa Robbins gave birth to a son at Lawrence and Memorial Hospital. Her obstetrician and certified nurse midwife were employed by Shoreline Obstetrics and Gynecology, P.C. After the delivery, the child was immediately transferred to Yale-New Haven Hospital, where he subsequently died. In July 2006, approximately nine months after the child’s death, Shoreline entered into a purchase of assets and sale agreement with Physicians for Women’s Health, LLC, and Women’s Health USA, Inc., (collectively, Physicians).
Robbins sued Shoreline, Physicians, and her health care professionals in Connecticut state court, asserting claims for medical malpractice. Even though Physicians did not have any ownership interest in Shoreline at the time of the injury, Robbins contended that they were vicariously liable. Robbins later reached a multi-million dollar settlement with Shoreline and the individual defendants. The settlement expressly provided that Robbins’s claims of liability against the settling parties were extinguished but that her claims against Physicians were unaffected by the agreement.
Physicians later moved for summary judgment, arguing that Robbins’s covenant not to sue discharging the settling parties also discharged their liability since her claims against them were based on successor liability. The trial court agreed and granted the motion for summary judgment. See Robbins v. Physicians for Women’s Health, Inc., 49 Conn. L. Rptr. 5 (Super. Ct. 2009).
On review, a split panel of the Appellate Court noted that a covenant not to sue traditionally differed from a release in that a covenant not to sue with one joint tortfeasor did not discharge the other tortfeasors, while a release discharged the underlying cause of action. While the present case did not involve joint tortfeasors, the Court wrote that the distinction was applicable since the settlement agreement included an explicit reservation preserving Robbins’s right to pursue her claims against Physicians. “Although such an agreement may be novel in the context of successor liability,” the Court stated, “principles of contract interpretation require that we construe the agreement as a [traditional] covenant not to sue.” Since the covenant did not discharge Shoreline’s liability for the underlying causes of action, the Court concluded that it did not foreclose Robbins’s successor liability claims against Physicians.
The Court noted that Physicians would have been entitled to summary judgment if there were undisputed evidence that the value of the settlement agreement covered all of the damages. Since the record lacked such evidence, the Court ruled that summary judgment was inappropriate and Robbins could pursue her vicarious liability claims against Physicians.
In dissent, Judge Stuart Bear blasted the majority’s opinion for creating a path for Robbins to obtain a windfall recovery, noting that “after receiving at least $2 million from a predecessor and its employees . . . [Robbins] should not be able to claim, ‘not enough,’ and then pursue successor entities that had no relationship to the predecessor on the date of the alleged negligence.” He added that the decision “may result in an increase in insurance premiums for many businesses and professional entities to protect against the unjustified, unforeseeable, random and fortuitous claims of other parties against successors acting in good faith to purchase assets.”
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