Creative Settlement Possibilities in Multi-Party Disputes

June 3rd, 2014 by

Michelle Stephenson, Summer Law Student

Creative Settlement Possibilities in Multi-Party Disputes

Parties to complex, multi-party legal disputes should be aware of the option of forming settlement agreements with some parties within ongoing litigation. In many cases, these agreements can reduce risk to the settling parties, and/or reduce costs to all parties in the dispute.

A recent Ontario Court of Appeal case illustrates how parties in a legal dispute, where there are three or more parties involved, might come to an agreement between themselves to partially settle or simplify the proceedings.

In Miller Group Inc. v. James, appeals arose after two parties to the dispute created a “Pierringer” agreement or proportionate share settlement agreement. In a Pierringer agreement, the plaintiff settles with one of the defendants, who then withdraws from the litigation. The agreement below has all the typical components of a Pierringer agreement.

In Miller Group, two companies (the owner and the operator of a blasting quarry) were being sued by a couple (the “Jameses”) for damages a stray rock had done to their property. An agreement was made between the couple and the operator of the quarry; it had 4 main components:

1) They agreed that the operator of the quarry would pay the Jameses $30,000 for damages, and $5000 for legal costs;

2) In exchange the Jameses’ action against them would be dismissed;

3) The Jameses’ ongoing action against the owner of the quarry would be restricted only to the amount that the owner would be severally liable for (for example, if the owner was found to be only 5% liable of $100,000 of damage, the Jameses could only claim $5,000 from them); and

4) The Jameses agreed to indemnify the operator for any cross-claims or claims for indemnity that might be raised by the owner.

There are many reasons why agreements like these can be an appealing option to litigants. They have the benefit of allowing one cooperative defendant to settle with the plaintiff, while reducing the complexity, and by extension the costs, of the proceedings for the remaining parties. This also saves the settling defendant money as they do not have the added cost of prolonged litigation.

In M.J. v. Bradley, the court notes that in Pierringer agreements, the contracting parties “prefer the certainty of settlement to the uncertainty and expense of trial”; these agreements allow them to withdraw, while the remaining defendants are “responsible only for the loss they actually caused, with no joint liability.”

Pierringer agreements are not the only kind of agreement that parties in a multi-party dispute might consider. Another option is the Mary Carter agreement, which is similarly between the plaintiff and a defendant, but in this case the settling defendant remains a party to the litigation.

Typical terms of a Mary Carter Agreement, which are laid out in Moore v. Bertuzzi, include:

1) a guarantee by the contracting/settling defendant that the plaintiff will recover a certain amount;

2) the exposure of the settling defendant is capped at that amount;

3) the settling defendant remains a party to the lawsuit;

4) the settling defendant’s liability is decreased in direct proportion to the increase in the remaining defendants’ liability (for example, if the settling defendant guarantees $10,000 and the plaintiff receives that much or more from the remaining defendant, then the settling defendant will not have to pay anything); and

5) the remaining defendants are exposed only to several liability.

A big incentive to the settling defendant in a Mary Carter Agreement is the cap put on their liability. While they do have to guarantee a level of recovery to the plaintiff, they are assured that they will not be forced by the court to pay more than this amount. For the plaintiff, this sort of agreement has the obvious benefit of guaranteeing that they will at least recovery some agreed upon amount.

As with Pierringer Agreements, this is a situation where parties in a complex dispute might opt for the certainty of a contracted settlement, over the risk of the ongoing litigation.

Pierringer and Mary Carter Agreements are just two options open to parties in a multi-party dispute. Parties should be aware that, as with other kinds of contracts, the possibilities are endless. They can contract into mid-proceeding settlement agreements that are suited to their specific needs. In Moore v. Bertuzzi, for example, multiple defendants reached an agreement that was “akin to a Mary Carter”, though not involving the plaintiff, and included settling their cross-claims.

Agreements like these can be valuable options to parties wishing to extract themselves from a complicated legal dispute and, in the right circumstances, they can be beneficial to everyone involved.

One thing litigants should be aware of is that if such an agreement occurs, the agreement, and potentially the terms, will need to be disclosed to the court (see Pettey v. Avis Car). The actual dollar amount agreed upon however, may not need to be disclosed, at least until after a decision has been reached (see Sable Offshore v. Ameron).

Examples of Pierringer Agreements:
Miller Group
Sable Offshore v. Ameron
J.M. v. Bradley

Examples of Mary Carter Agreements:
Pettey v. Avis Car
Laudon v. Roberts

Other mid-proceedings Agreements:
Moore v. Bertuzzi

For more information regarding this topic or any other litigation related topics, please feel free to contact our Commercial Litigation law group.

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