As any business owner knows, litigation is a reality that may one day be visited upon you.  If your business is named as a co-defendant, you will find yourself in a common situation as many files these days have multiple parties and, more specifically, multiple defendants.  In cases such as these most of those co-defendants will cross claim against each other seeking to deflect liability.

The litigation can become very risky as the degree of fault is left to the Judge or Jury as each defendant seeks to push liability onto the other.  As the case progresses it may become clear that some defendants have contributed to the plaintiff’s losses in differing ways or in differing magnitudes.  It may be then, that an individual defendant, who acknowledges some liability, seeks to negotiate a cap or limit on its particular liability to the plaintiff.

However in the scenario where the other defendants have cross claimed, and the case is moving forward, it is not possible for that defendant to simply just exit the proceedings even if they reach a settlement with the plaintiff.  Accordingly there are two kinds of settlement agreements that may arise in such situations.  They are referred to as Mary Carter Agreements and Pierringer Agreements.  Each are unique and have implication as to how the litigation proceeds.  Each may also have different disclosure requirements.

The features of these agreements were recently set out in in the leading case of Moore v. Bertuzzi at para’s 67 and 82 respectively;

Mary Carter Agreements

67 The settlement in Pettey had the features of a Mary Carter agreement, which originated in the Florida case of Booth v. Mary Carter Paint Co., 202 So. 2d 8 (U.S. Fla. Ct. App. 2 Dist. 1967). The features are: (1) the settling defendant settles with the plaintiff but remains in the lawsuit and may pursue crossclaims against the non-settling defendant(s); (2) the settling defendant guarantees the plaintiff a specified monetary recovery; (3) the exposure of the settling defendant is “capped” at the specified amount; (4) the settling defendant’s liability is decreased in direct proportion to any monetary recovery above the specified amount; and (5) the non-settling defendant is exposed only to several liability and is no longer exposed to joint and several liability.[1]

Pierrenger Agreements

84 The features of a Pierringer agreement are: (1) the settling defendant settles with the plaintiff; (2) the plaintiff discontinues its claim action the settling defendant; (3) the plaintiff continues its action against the non-settling but limits its claim to the nonsettling defendant’s several liability (a “bar order”); (4) the settling defendant agrees to co-operate with the plaintiff by making documents and witnesses available for the action against the non-settling defendant; (5) the settling defendant agrees not to seek contribution and indemnity from the non-settling defendant; and (6) the plaintiff agrees to indemnify the settling defendant against any claims over by the non-settling defendants.[2]

If a settlement is reached, the others will want to know the details of that settlement, as it will affect the quantum of damages still in play, and likely has  implications to the damages claimed by way of the cross claims.  Certainly all defendants would seek to avoid a situation in which the plaintiff has ‘double recovery’.  So inevitably there is pressure to disclosee the terms of any settlement with all the named defendants. Interestingly, the timing of that disclosure can be different depending on the nature of the settlement agreement reached between the plaintiff and the settling defendant.  However, as a rule the quantum of the settlement will be disclosed at some point so as to ensure the plaintiff does not benefit from double recovery.  If there is any debate as to the scope and/or timing of the disclosure to the co-defendants, the Court can determine.

On the topic of Mary Carter Agreements, the Courts have recently held that the disclosure of a MCA or “like” agreement must be disclosed as soon as they are made, with any exception to this rule only arising as the result of an Order of the Court in the particular case.  Pierringer agreements grant a degree of procedural fairness to the non-settling defendant. All the settlement documents are provided, liability becomes several, and, importantly, there is an obligation to disclose the settlement amount at the end of the trial to avoid overcompensation of the plaintiff.

So if your organization is named as a co-defendant, and it appears has some liability on the particular facts, it may be that canvassing one of these settlement techniques to limit liability is advisable.  It doesn’t mean an “out” of the litigation altogether, but it can provide greater certainty.  Make sure to discuss the viability of these options with your counsel as either one could provide better risk management.

[1] Moore v. Bertuzzi, 2012 ONSC 3248 at para 67, 2012 CarswellOnt 6962 [Bertuzzi].