Get Me Out of This Mess! Partial Settlement in Multi-Party Litigation
April 2023 - 3 min read
The cost and delay in litigation has, in many cases, become undefendable. The involvement of multiple parties, each with their own counsel and interests, can further delay and increase litigation costs for all parties. Partial settlement may simplify litigation and decrease the number of involved parties, making litigation more streamlined and cost-effective. But the procedure is not without its risks, primarily borne by the Plaintiff. So, what are the benefits and risks of partial settlement of your litigation?
Types of Partial Settlements
There are two major types of partial settlements used in Canada:
- Pierringer agreement
- Mary Carter agreement
Both agreements allow one or more Defendants to settle with the Plaintiff while allowing the Plaintiff to continue litigating against the remaining “non-settling” Defendants. However, in a Mary Carter agreement, the settling defendants are not released from the litigation. Rather, a Mary Carter agreement is simply an agreed cap on the damages that the settling Defendants will pay at the end of the litigation.
A Pierringer agreement is different because it results in the settling Defendants being removed from the litigation. The settling Defendants pay the Plaintiff an amount that the settling parties believe approximates the proportionate liability of the settling parties. A Pierringer agreement contains wording that severs the joint liability of the settling Defendants from the non-settling Defendants. As a result, the non-settling Defendants are only liable for the proportionate share of the Plaintiff’s claim that a trial court ultimately determines they are liable.
For example, if they are only found to be 50% liable, they can only be forced to pay 50% of the claim. Therefore, they do not need any third party or notice to co-defendant claim against the other negligent settling defendants.
Benefits of a Pierringer
The benefits of a Pierringer generally include all the benefits of settlement, including:
- Decreasing the stress associated with litigation
- Achieving a finality and certainty that a party can then move on from
- Protecting a relationship from the deleterious effects of litigation and avoiding publicity
There are other benefits of a Pierringer as well – by decreasing the number of parties (and issues), the litigation may be simplified, allowing it to proceed more quickly and at a lesser cost. Moreover, a Pierringer ensures some guaranteed minimum recovery for the Plaintiff, and the infusion of cash from a partial settlement can sometimes make the difference between whether a party can continue litigation or not.
Drawbacks of a Pierringer
A Pierringer, like all settlements, is essentially a bet on the outcome of litigation. In a Pierringer agreement, almost all of the upside of that risk goes to the non-settling Defendants. Any settlement carries the risk of under or over-compensation, but in the circumstances of a Pierringer, the risk of overcompensation is borne by the settling Defendant, with the non-settling Defendant reaping the benefit. Any amount the Plaintiff has recovered from the settling Defendant in the Pierringer will be offset against any amount for which the non-settling Defendant is ultimately liable. Meanwhile, the risk of under-compensation is borne by the Plaintiff alone. If they have misjudged the proportionate share of the liability of the settling Defendant, they are prevented from recovering the balance from any of the remaining Defendants due to terms of the Pierringer.
Using a Pierringer can be a valuable tool to move a complicated multi-party action toward completion. However, its use is not appropriate in all circumstances, and with the assistance of your counsel, the benefits must be carefully weighed against the drawbacks.