Mr. Harris settled with the plaintiff by entering into a Mary Carter. Partial judgment was obtained pursuant to the Agreement for $1,378,000 which was circulated to the Region. While the amount of the settlement was disclosed, the terms of the Agreement (i.e. the reciprocal benefit to Mr. Harris) was not.
The Region brought a motion before Master Dash, who ordered disclosure of the Agreement. Mr. Harris and Mr. Stamatopoulos appealed to Justice Brown (as he then was), who dismissed the appeal. The matter was brought before the Divisional Court with leave.
Partial Settlement Agreements: Mary Carters and Pierrengers
To understand Stamatopoulos, we must first understand partial settlement agreements. Mary Carters and Pierrenger Agreements are types of agreements used in multi-defendant litigation. Both agreements involve settlement between the plaintiff, and some, but not all, of the defendants. In essence, they allow for actions to partially settle. While these agreements appear useful, the law concerning them (in particular, Mary Carters) is both complex and rapidly evolving.
Pierrengers are the easier of the two agreements, and are generally preferred by defendants.2 In short, a defendant settles with the plaintiff and leaves the action. The remaining defendants are left jointly responsible for only the losses that they caused.3 Defendants generally prefer Pierrengers due to their simplicity; in exchange for a one-time payment, the defendant can walk away from the litigation without any further expense or unpredictability.
Mary Carters are more complicated, but are preferred by plaintiffs.4 In these agreements, a defendant settles with the plaintiff for a fixed amount. The settling defendant agrees to stay in the litigation, and helps the plaintiff maximize its recovery against the remaining defendants. In exchange for helping the plaintiff recover as much as possible, the settling defendant will receive some kind of benefit. For example, a commonly structured Mary Carter allows for the settling defendant to deduct from its settlement a percentage of whatever the plaintiff is awarded against the non-settling defendants.
The Divisional Court was clear that any term in a partial settlement agreement that affects the 'litigation landscape' must be disclosed to the remaining parties and the court. |
The Supreme Court of Canada visits Pierrengers: Sable Offshore Energy
Whether the plaintiff and settling defendant have to disclose the existence of these partial agreements, including their details, has been the source of much judicial scrutiny. The issue, involving a Pierrenger, recently came before the Supreme Court of Canada in Sable Offshore Energy Inc. v. Ameron Interational Corp.5
The Supreme Court ruled that settlement negotiations are protected by class privilege, due to the public interest in seeing litigation resolved between the parties. However, this privilege is not absolute. The Court endorsed the British Columbia Court of Appeal’s holding in Dos Santos Estate v. Sun Life Assurance Co. of Canada, which stated that a party must show that "a competing public interest outweighs the public interest in encouraging settlement".6
The Court held that the due to the fact that the non-settling defendants had access to all of the non-financial terms of the Pierrenger, there was no need to have access to the actual dollar amount of the settlement.
The Changing of the "Litigation Landscape"
At issue in Stamatopoulos was not the dollar amount, which had already been disclosed, but the terms of the Mary Carter.
The Divisional Court was clear that any term in a partial settlement agreement that affects the "litigation landscape" must be disclosed to the remaining parties and the court. The litigation landscape, in essence, refers to the interests of the parties vis-à-vis each other. The Court defines the "litigation landscape" as follows:
When I refer to the litigation landscape, I mean to refer, in particular, to what would appear to an outside observer to be the position of the various parties to a proceeding.
By aligning the interest of the settling defendants with the plaintiffs against the non-settling defendants, the litigation landscape is altered. This alignment has been the source of much criticism in the United States, where Mary Carters have been in use far longer than in Canada.
For example, in the Supreme Court of Texas decision of Elbaor v. Smith,7 referred to by Justice Ferrier in Pettey et. al. v. Avis Car Inc. et. al.,8 the Court held that:
The chief problem associated with a Mary Carter agreement is that a hidden alteration of the relationship of some of the parties will give the jury a misleading and incomplete basis for evaluating the evidence. As is true in so many areas of jurisprudence, secrecy is the first enemy of justice. To address this concern, trial judges have appropriately implemented several procedural safeguards that remove the veil of secrecy from such settlements. Accordingly, we have emphasized the importance of complete disclosure of these arrangements.
The Divisional Court then referenced the decision of Justice Perell in Moore v. Bertuzzi,9 wherein His Honour stated:
The court needs to understand the precise nature of the adversarial orientation of the litigation in order to maintain the integrity of its process, which is based on a genuine not a sham adversarial system and which maintenance of integrity may require the court to have an issue-by-issue understanding of the positions of the parties.
Conversely, terms that do not affect the litigation landscape do not need to be disclosed. The Court rested heavily on the fact that in Sable, all of the non-financial terms had already been disclosed. As such, the disclosing party is entitled to edit the Agreement subject to an order of the court.
Conclusion
Partial settlement agreements enable parties to litigation to better manage their risk. However, they are complicated legal devices that must be well-understood in order to be used effectively. McCague Borlack has experienced litigation counsel who commonly use partial settlement agreements to achieve the best possible result for their clients.
1 2014 ONSC 6313.
2 Pierringer v. Hogan, 124 N.W.2d 106, 21 Wis.2d 182 (1963).
3 Typically, the plaintiff amends the statement of claim to pursue only several liability against the remaining defendants, see Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623.
4 The name originates from the Florida decision of Booth v. Mary Carter Paint Co., 202 So. 2d 8 (Fla. 1967). For more information on Mary Carter Agreements, refer to
article.
5 Supra note 1.
6 2005 BCCA 4 at para. 20, cited by Sable Offshore Energy, supra note 1 at para. 19.
7 845 S.W.2d 240, 1992 Tex. at p. 252.
8 [1993] O.J. No. 1454 (Gen. Div.) at para. 21.
9 [2012] O.J. No. 2485 (Sup. Ct.) at para. 76.
