A Plaintiff who obtained an Arbitration Award against two members of an LLC lost the right to recover under the Award from the LLC when it settled up with the two LLC members. The case, decided today by the Business Court, is Essa Commercial Real Estate, Inc. v. Five Trees, LLC.
The facts are complicated, but they boil down to this: Plaintiff got an arbitration award of $325,000 against two members of an LLC (Five Trees). Plaintiff then sued the LLC and its other members to collect on the Award. In the meantime, Plaintiff settled its claims against the two members against whom it had obtained the Award.
Under the settlement, the Plaintiff agreed to give up its claims against the two members in exchange for $150,000 and an assignment of the two members’ interest in the LLC. The Plaintiff attempted to preserve its right to pursue the LLC and the other members for the balance by including language in the settlement which said "nothing in this Agreement shall act to release, dispose of, compromise, or otherwise impair the right or ability of [Essa] to seek recovery from Five Trees, its members or members of its members under any theory of law or for recovery of the Arbitration Award."
That didn’t work. The Court held that Plaintiff’s claim was barred by the "one satisfaction rule," which says that a party is only entitled to a single recovery for any judgment. Since the Plaintiff had resolved the Arbitration Award, it no longer had any right to seek recovery under the Award.
That was so even though the LLC and the other members weren’t released by the settlement agreement. In this respect, the case is similar to a recent Court of Appeals decision, Santoni v. Sundown Cove, LLC, where the Court held that a plaintiff”s settlement with some defendants resulted in a settlement as to all plaintiff’s claims, even against non-parties to the settlement.
In an earlier opinion in the Five Trees case, the Business Court ruled that the Arbitration Award had collateral estoppel effect.