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2nd Dept Allows Judgment Entry Where Settlement Not Timely Paid Because Of Delayed W-9

September 16, 2010

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Pursuant to CPLR 5003(a), defendants have 21 days from the plaintiff's tender of a release and stipulation of discontinuance to pay the proceeds of a settlement. If the defendant fails to timely pay the settlement the plaintiff can enter judgment entitling him or her to recover interest, costs and disbursements. In <i>Klee v. America's Best Bottling Co</i>., a pedestrian knock down case, the plaintiff settled his claims for $400,000 and promptly mailed a release and stipulation of discontinuance to the defendant. The closing papers were accompanied by a cover letter disclosing the plaintiff's tax identification number, but not a completed W-9 form. The defendant requested the form, but the plaintiff failed to provide it.
Because the plaintiff did not comply with defense counsel's request, the settlement proceeds were not paid within 21 days. Once the 21 days lapsed, the plaintiff entered judgment and the defendant subsequently moved to vacate the judgment, arguing that the Internal Revenue Code requires that the plaintiff provide a W-9. The lower court vacated the judgment. On appeal, however, the Appellate Division, Second Department reversed, holding that the plaintiff fulfilled his obligations under CPLR 5003(a) by tendering a release and stipulation of discontinuance and further held that there is no statutory authority that makes submission of a completed W-9 a condition precedent for payment of the sum due in settlement of a personal injury claim.
I note that the Appellate Division, First Department, reached a different conclusion in <i>Cely v O'Brien &amp; Kreitzberg </i>, 45 AD3d 368.
Thanks to Ed Lomena for his contribution to this submission.
<a href="http://www.courts.state.ny.us/reporter/3dseries/2010/2010_06361.htm">http://www.courts.state.ny.us/reporter/3dseries/2010/2010_06361.htm</a>

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