Opinion ID: 1952749
Heading Depth: 3
Heading Rank: 2

Heading: The 1997 Settlement Between DEPCO and the Accountants Bars the Indemnity Claim

Text: Section 42-116-40 of the Rhode Island Depositors Economic Protection Act, provides in pertinent part as follows: Notwithstanding any provisions of law to the contrary, a person, corporation, or other entity who has resolved its liability to the Rhode Island Depositors' Economic Protection Corporation, the receiver of Rhode Island Share and Deposit Indemnity Corporation or the receiver of any state-chartered financial institution in ajudicially approved good faith settlement is not liable for claims for contribution or equitable indemnity regarding matters addressed in the settlement. Pursuant to § 42-116-40, once any parties have consummated a good-faith settlement with DEPCO and that settlement is judicially approved, the settling parties are immunized from any contribution or equitable-indemnity claims regarding matters addressed in the settlement. Here, in 1997, the accountants settled claims brought by DEPCO and others charging them with professional negligence in connection with their accounting work for the credit union and others. The matters addressed in the 1997 settlement between DEPCO and the accountants included all claims which were asserted or could have been asserted by DEPCO against the accountants in the lawsuit that DEPCO had filed against them in Superior Court. Among the claims that DEPCO asserted against the accountants in that lawsuit were claims for alleged negligence in providing accounting services to certain financial institutions, including their preparation of audits and financial reports for the credit union and the Rhode Island Share and Deposit Indemnity Corp. (RISDIC). Thus, the same conduct that constituted the basis for plaintiffs' equitable-indemnification claim against the accountants in this lawsuit was part and parcel of the alleged misconduct that formed the basis for the 1997 settlement between DEPCO and the accountants. Also, the mere fact that the 1997 settlement agreement included a provision requiring DEPCO to indemnify the accountants if any third party sued them in connection with matters addressed in the settlement did not prove, as plaintiffs suggest, that the parties to that settlement must have believed that such claims would not be subject to the statutory immunity provided for in § 42-116-40. The accountants were entitled to negotiate for and obtain as part of their settlement with DEPCO whatever supplemental protection that they believed might be prudent oradvisable to insulate themselves from the threat of incurring double liability or additional defense costs in connection with having to relitigate the malpractice claims that they had settled with DEPCO. Moreover, it would make little sense as a matter of legislative interpretation to construe § 42-116-40 as requiring DEPCO to indemnify the accountants for their liability to repay plaintiffs' outstanding loan balance to DEPCO. Such a result would mean that DEPCO would have to absorb the losses created when plaintiffs defaulted on the credit union loan and the accompanying loan guarantees. Such an absurd result would confound the very purpose of DEPCO's existence  namely, to purchase and recover the assets of failed financial institutions forced into receivership, thereby allowing DEPCO to make payment to the depositors of the institutions certain amounts in respect of their deposit liabilities   . Section 42-116-2 (c); see also In re Advisory Opinion to the Governor (DEPCO), 593 A.2d 943, 946 (R.I.1991) (describing DEPCO as created to remedy the economic disaster arising from the failure of the Rhode Island Share and Deposit Indemnity Corporation (RISDIC) and the subsequent banking crisis). In sum, the subject matter of this complaint was substantially identical to the professional negligence and negligent misrepresentation claims that DEPCO asserted against the accountants in the litigation that led to the 1997 settlement between DEPCO and the accountants. In both cases, the claims in question included ones that arose out of the accountants' providing professional services to the credit union and RISDIC from 1982 to 1990. Thus, the Superior Court properly ruled that § 42-116-40 barred the plaintiffs' attempt to obtain indemnification from the accountants.