Entry into Mary Carter and Pierringer agreements are driven by the desire of some parties in litigation to promptly resolve disputes as well as to minimize risk and exposure involved in litigating potentially complex and lengthy trials. These agreements grow out of an arrangement between some but not all parties over the apportionment of liability and damages. Courts increasingly look favourably upon the use of Mary Carter and Pierringer agreements as they serve to uphold the principle that settlements must be encouraged and facilitated.

Both Mary Carter and Pierringer agreements enable contracting defendants, or “settling defendants”, to individually settle with the plaintiff without a need to reach a largescale settlement inclusive of all parties. As a result, the plaintiff is secure in knowing that a minimum recovery amount is guaranteed, all while reserving the right to pursue for the remaining balance of damages put forth against the non-settling defendant.

Pierringer Agreements

In Pierringer agreements, the settling defendant does not have to actively or at all participate at trial, leaving the burden of defending the claim on the non-settling defendant exclusively. The plaintiff is entitled to the agreed upon amount from the settling defendant regardless of the outcome at trial. Even if the plaintiff loses at trial, the settling defendant will pay the plaintiff the agreed upon amount.

These agreements may contain the following elements:

• plaintiff receives some consideration from the settling defendant, in full satisfaction of the claim against the settling defendant;
• plaintiff agrees to discontinue the action against the settling defendant;
• pleadings are amended to remove the settling defendant from the action;

(4) plaintiff continues the action against the non-settling defendants, who are only responsible for their several liability.^[1]

Mary Carter Agreements

In Mary Carter agreements, the settling defendant will generally want to participate at trial. This is due to a provision in the agreement decreasing the settling defendant’s obligation to pay the plaintiff in direct proportion to any increase in the non-settling defendant’s liability as determined at trial. The settling defendant will want to participate at trial in order to decrease its payout to the plaintiff by attributing greater liability to the non-settling defendant.

The plaintiff is entitled to the agreed upon amount from the settling defendant. However, this agreed-upon amount may decrease due to the aforementioned provision.

Mary Carter agreements may contain the following elements:

(1) a minimum recovery for the plaintiff;

(2) a cap on the exposure of the settling defendant;

(3) a provision enabling the settling defendant to remain and participate in the lawsuit in the hope of recovering some of the damages or costs from the non-settling defendants; and

(4) a provision decreasing the settling defendant’s obligation in direct proportion to any increase in the non-settling defendants’ liability as determined at trial.^[2]

When should the agreements be disclosed?

In Pettey, the court found that the settlement agreement had to be disclosed both (1) to the parties and (2) to the court as soon as the agreement was made.^[3] The non-settling parties had to be advised immediately because the agreement could impact the “litigation landscape”.^[4]

What must be disclosed?

In Stamatopoulos v. Regional Municipality of Durham, the Divisional Court found that once a Mary Carter or like agreement was entered into, both the existence of the agreement and its terms had to be disclosed to the other parties and the court.^[5] However, not every term of such agreements had to be disclosed. Only the terms that affected the litigation landscape had to be disclosed. If either the plaintiff or the settling defendant had an issue with disclosing a certain term because the term might not have affected the litigation landscape, the disclosing party was entitled to edit the agreement for disclosure purposed subject to any order of the court. In general practice, the entirety of settlement agreements is provided.

[1] Canadian Natural Resources Ltd. v. Wood Group Mustang, [2018] A.J. No. 1123, at para 120 [Canadian Natural Resources Ltd.].

[2] Ibid, at para 120.

[3] Pettey, supra note 6, at 19.

[4] Ibid.

[5] Stamatopoulos v. Regional Municipality of Durham, 2014 ONSC 6313, at para 20.

[6] Ibid, at para 19.

[7] Ibid, at para 20.