Opinion ID: 728787
Heading Depth: 3
Heading Rank: 2

Heading: When Does the Cause of Action for Contribution Accrue?

Text: 35 In the context of contribution actions under 10b-5 (or §§ 9 or 18 of the 1934 Act), the fact that the statute of limitations ordinarily begins to run when an act occurs that creates liability under that section leads to the question of when liability for contribution arises. The language of the contribution provisions of §§ 9 and 18 (as well as of § 11 of the 1933 Act) provides evidence of how Congress intended this question to be answered. Those sections allow recovery of contribution to [e]very person who becomes liable  under their provisions. 15 U.S.C. §§ 77k(f), 78i(e), 78r(b) (emphasis added). At least one court has held that this language strongly impl[ies] that the right accrues after a judgment is rendered, Nelson v. Quimby Island Reclamation District Facilities Corp., Fed. Sec. L. Rep. p 97,388, 1980 WL 1405 (N.D.Cal.1980). 36 Indeed, as a rule, the right to contribution becomes complete and enforceable only upon a payment or its equivalent by the claimant discharging, satisfying, or extinguishing the whole or more than his just and equitable share of the common obligation. 18 Am.Jur.2d, Contribution § 11. See also Restatement (Second) of Torts 8 § 886A(2) (The right of contribution exists only in favor of a tortfeasor who has discharged the entire claim for the harm by paying more than his equitable share of the common liability, and is limited to the amount paid by him in excess of his share.); id. § 886A comment f (In order to be entitled to contribution, the tortfeasor seeking it must have discharged the entire claim of the injured person by paying more than his equitable share of the common liability ... [T]here can be no contribution so long as the claim of the original plaintiff is still outstanding.). That this was the rule in the era in which the 1933 and 1934 Acts were adopted can be seen from the Restatement of Restitution, which was drafted between 1933 and 1936. Restatement of Restitution xi-xii (1937). The Restatement provides that [a] person who, with another, is subject to a duty as to which between the two neither has a prior duty of performance, is entitled to contribution from the other when, and only when, he has discharged more than his proportionate share, if the time for performance has arrived. Restatement of Restitution § 82(1) (1937); see also § 86 (providing that contribution among tortfeasors is generally allowed in accordance with the provisions of §§ 76-85 of the Restatement and noting in comment b that the rules as to the time when the right of indemnity or contribution arises, as stated in §§ 77 and 82 are applicable). We therefore hold that a defendant's right to contribution in a 10b-5 action does not arise until a defendant has paid more than her share of the judgment. 37 Given the timing of the accrual of the right to contribution, the general rule for limitation of contribution claims is that the statute of limitations governing claims for contribution runs from the discharge of the obligation ... so that a third-party claim may be prosecuted notwithstanding the fact that the original plaintiff may not proceed against a third-party defendant directly because his claim has been barred by the statute of limitations. 18 Am.Jur.2d, Contribution § 102. See also Calvin W. Corman, 1 Limitation of Actions § 7.2.2 (1991) (The right to contribution rests on an implied in law contract.... This right does not arise until the party seeking such relief suffers loss by payment of a judgment or settles the claim involving a greater share of the total debt than the party's proportionate liability. At that time the applicable statute of limitations begins to run.). Again, this appears to have been the rule in the era in which § 10(b) was drafted, as comment b to § 82 of the Restatement of Restitution notes that [t]he time when the cause of action arises is important ... in fixing the time from which the Statute of Limitations begins to run. See also Restatement of Restitution § 77, comment b (The Statute of Limitations runs in favor of the principal obligor from the time when payment is made if performance is then due, or from the time for performance if payment is made before such time.). 38 Both the Leslie Fay and the Ades courts applied these long-standing, Leslie Fay, 918 F.Supp. at 755, and fundamental, Ades, 1993 WL 362364 at  16, Fed. Sec. L. Rep. at 97,707, rules to 10b-5 contribution actions and held that the statute begins to run when  'judgment is entered against the direct defendant and is paid by him' . 918 F.Supp. at 754-55 (quoting Ades, 1993 WL 362364 at  16). See also Wassel v. Eglowsky, 542 F.2d 1235 (4th Cir.1976) (defendants in action under § 12(1) of 1933 Act had claim for contribution against parties not sued by original plaintiff, but [n]o right of contribution accrues ... until [the defendants in the original § 12(1) action] have paid to [the plaintiff] the entire amount to which [plaintiff] is entitled), overruled on other grounds, Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101 (4th Cir.1989) (en banc) (holding that no right to contribution existed under § 12 of the 1933 Act). We agree that the statute of limitation on a defendant's action for contribution under § 10(b) does not begin to run until the defendant satisfies the judgment.