Should you use a Pierringer Agreement?

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• The Pierringer or proportionate share agreement[1] continues to be recognized by the courts as a valuable tool for encouraging settlement in multi-party litigation.  Fundamentally, a Pierringer agreement is a private contract between a plaintiff and one or more (but not all) of the defendants in an action.  The agreement is designed to allow the defendants that are party to the Pierringer agreement (the "Settling Defendants") to settle the plaintiff's claims against them and withdraw from the litigation.

• For a defendant in particular, a Pierringer agreement can allow for a quick resolution of the action and avoid the obstacles typically encountered in attempting to reach a global resolution.  For example, where it appears there is some liability on the facts, a Pierringer agreement can fix your client's exposure to liability at an early stage in the litigation, thereby avoiding the uncertainty and cost of proceeding to trial.

• The following provides a brief refresher on the top four things to remember about Pierringer agreements:

• Disclosure of the Agreement

• Several Liability for the Non-Settling Defendants

• Amendment of the Claim or Indemnification of the Settling Defendants Against Cross-Claims

• The Settling Defendants No Longer Participate in the Action

• Plaintiff's Perspective

• Defendant's Perspective

• Pitfall: By entering into a Pierringer agreement, the plaintiff agrees to seek only several liability among the non-settling defendants.  Accordingly, it will be important to assess whether there is an ability to delineate the liability attributable to the Settling Defendants and non-settling defendants.

• Benefit: The plaintiff is able to achieve monies upfront without incurring the cost of proving its claim at trial or bearing the risk of exposure to an adverse costs award.  Further, obtaining funds from the Settling Defendants may help the plaintiff "finance" its lawsuit against the non-settling defendants.

• [2] Moore v. Bertuzzi, 2012 ONSC 3248 at para 99 (Ont Sup Ct J). [3] Ibid.

• [4] Sable Offshore Energy Inc. v. Ameron International Corp, 2013 SCC 37 (SCC). [5] Ibid at para 23.

• Although usually the subject of settlement privilege, settling parties are obliged to disclose the existence of a settlement agreement where the agreement changes the adversarial orientation of the lawsuit or the court needs knowledge of the settlement in order to maintain the fairness and integrity of its process.[2]  A Pierringer agreement falls within this exception to settlement privilege.  Consequently, at a minimum, the existence of a Pierringer agreement must be disclosed to the court and any non-settling parties.[3]

• However, the settlement amount may be kept confidential until the end of trial unless there is a competing public interest that outweighs the public interest in encouraging settlement.[4]  Disclosure of the settlement amount at the end of trial is required in order to prevent the plaintiff from receiving double recovery.

• In the Pierringer agreement, the plaintiff agrees to limit their claims against the non-settling defendant to several (as opposed to joint and several) liability.  Put another way, as a result of the Pierringer agreement, the non-settling defendants would only be held accountable for their own share of liability at trial.[5]

• [11] Amello v. Bluewave Energy Limited Partnership, 2014 ONSC 4040 (Ont Sup Ct J). [12] Ibid at paras 95-96.

• [9] Laidler v. Public Guardian & Trustee, 2015 ONSC 943 (Ont Sup Ct J). [10] Ibid at para 11.

• Because the plaintiff agrees to pursue the non-settling defendants only for their several liability, the Settling Defendants typically need not be concerned about a claim for contribution and indemnity from the non-settling defendants.[6]  In practice, this is accomplished by incorporating terms into the Pierringer agreement that the plaintiff must: (i) amend its claim to clearly and unambiguously limit the relief sought against the non-settling defendant to the non-settling defendant's proportionate degree of fault and/or (ii) indemnify the Settling Defendants against any claims for contribution and indemnity by the non-settling defendants.

• Following the Pierringer agreement, the Settling Defendants have very little reason to continue to participate in the action.[7]  The lack of participation by the Settling Defendants may result in a procedural disadvantage for the non-settling defendants.  To minimize this, protections for non-settling defendants can be incorporated into the agreement itself or imposed by way of a court order.  For example, in Sable Offshore Energy Inc. v. Ameron International Corp., the Supreme Court of Canada highlighted that "the court order approving the settlement required that the plaintiffs get production of all relevant evidence from the settling defendants and make this evidence available to the non-settling defendants on discovery."[8]