Pierringer Agreements ' An Overview

• Published date: 07 October 2022
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Taylor McCaffrey
• Author: Mr Simon Garfinkel

Introduction

A Pierringer agreement allows one or more defendants in a multiparty legal proceeding to settle with the plaintiff and withdraw from the litigation. This then leaves the remaining defendants responsible only for the losses they actually caused.

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.

There is no joint liability with the settling defendants, but non-settling defendants may be jointly liable with each other.¹ The remaining defendants are left with their "proportionate share" of the damages. Hence Pierringer agreements can properly be characterized as a "proportionate share settlement agreement." ²

The Requirements of Pierringer Agreements as set out in Case Law

In Paragraph 14 of Amoco Canada Petroleum Co. v. Propak Systems Ltd., the Alberta Court of Appeal describes the elements of a Pierringer agreement:

[14] To the extent that a proportionate share settlement agreement completely removes the settling defendants from the suit, it is like a conventional settlement agreement that brings all outstanding issues between the settling parties to a conclusion. Proportionate share settlement agreements, therefore, typically include the following elements:

1. The plaintiff receives a payment from the settling defendants in full satisfaction of the plaintiff's claim against them;

2. In return, the settling defendants receive from the plaintiff a promise to discontinue proceedings, effectively removing the settling defendants from the suit;

3. Subsequent amendments to the pleadings formally remove the settling defendants from the suit; and

4. The plaintiff then continues its suit against the non-settling defendants.³

Overcompensation Principle/Double Recovery

An important aspect to keep in mind is that a plaintiff who participates in an action where a Pierringer agreement is involved will not be able to be overcompensated by the settling and non-settling parties.

The Ontario Court of Appeal decision of Louden v. Roberts brought this practice to a halt. The Ontario Court of Appeal found that the amount of a settlement is deducted after trial from the verdict. The Court of Appeal found that the principles of double recovery prevent the claimant from recovering twice.⁴ The decision quoted from the UK decision of Bryanston Finance Ltd. v. de Vries, where Lord Denning stated:

The right solution nowadays is for any sum paid by one wrongdoer under the settlement to be taken into account when assessing damages against the other wrongdoer.⁵

Privilege/Disclosure

In Sable Offshore Energy Inc. v Ameron International, The Supreme Court of Canada was asked to consider whether the dollar amounts paid by the settling defendants under a Pierringer agreement must be disclosed.

The Court held that it need not be disclosed.⁶ The overriding policy consideration that persuaded the Supreme Court appears to have been the desire to promote settlement.

The Supreme Court of Canada determined that the settling defendant need not disclose the quantum of settlement to the non-settling defendant. Justice Abella of The Supreme Court of Canada wrote:

[27] It is, therefore, not clear to me how knowledge of the settlement amounts materially affects the ability of the non-settling defendants to know and present their case. The defendants remain fully aware of the claims they must defend themselves against and of the overall amount that Sable is seeking. It is true that knowing the settlement amounts might allow the defendants to revise their estimate of how much they want to invest in the case, but this, it seems to me, does not rise to a sufficient level of...