In two previous blogs, we have discussed both Mary Carter and Pierringer settlements. This blog provides an update on recent developments on the impact and effect of Pierringer settlements following Alberta’s Court of Appeal (ABCA) decision in Canadian Natural Resources Limited v. Wood Group Mustang. Although the decision is not binding in Ontario, it is at least persuasive and would be of interest to any Ontario litigants in situations where the settlement paid exceeds, or potentially exceeds, the apportionment of the fault of the settling defendant(s) at trial.
A plaintiff in a multi-party civil suit agrees with one or more of the defendants to accept a sum in settlement of all their claims against the paying defendant(s) in the action. The plaintiff would then also have to agree to discontinue their claims against those paying defendants. These defendants would no longer participate in the proceeding (as opposed to a Mary Carter Agreement, in which case the defendants would continue to participate in the proceeding).
The plaintiff assumes all of the financial risks in making such an arrangement. If they underestimate the eventual liability share of the settling defendants, they cannot make up any shortfall from any of the defendants, settling or non-settling. Equally, if the plaintiff eventually recovers a windfall from the settlement (settles for more than is found to be the actual share of liability of the non-settling defendants), they are not entitled to keep the surplus. That is accomplished by the court, reducing the amount the non-settling defendants have to pay to satisfy the judgment.
A 2010 decision of the ABCA called Bedard v. Amin established the rule that the plaintiff who made a Pierringer Settlement must account to the non-settling defendant(s) for any settlement monies paid to it which exceed the apportionment of fault found at trial. This rule was designed to avoid the plaintiff from being doubly compensated.
The Math in The Case at Hand
The plaintiff in Canadian Natural Resources settled with two of the defendants just before trial using two Pierringer Settlements. The plaintiff’s damages were assessed at $45,425,204 at trial. The plaintiff was also found to be 50% contributorily negligent.
They settled with defendant #1 for $14,500,000, which was inclusive of all damages, interest and costs. At trial, the assessment of this defendant’s fault was set at 25% which, with interest, totalled $11,569,551. The plaintiff argued that the apparent excess was absorbed by this defendant’s share of legal costs, which exceeded the settlement amount leaving no funds to account for. They argued they had under-settled with this defendant.
The settlement with defendant #2 was for $4,000,000 in full satisfaction of all claims. This defendant was found to have been 5% at fault. After adding the interest share, the total assessed liability of this defendant was $2,313,910. After again adding a share of the costs award, the plaintiff argued that it had only over-settled this claim by the difference of $1,991,280.
Issues on the Appeal
- In determining whether the settling plaintiff has been overcompensated, does one measure the plaintiff’s recovery against its total loss, or only against that portion of the loss that was not caused by its contributory negligence?;
- Is a plaintiff entitled to deduct solicitor and client costs in determining its net recovery under the Pierringer agreements?
The ABCA did not overturn its decision in Bedard.
Issue #1: The settling but contributorily negligent plaintiff does not have to give any credit for an over-settlement until it is fully indemnified for its actual loss. The finding of contributory negligence would not impact this modification of the rule as the plaintiff will still have suffered the loss even if it contributed to it.
Issue #2: The full amount of the plaintiff’s costs (solicitor and client)in pursuing the settling defendant(s) can be deducted from the settlement amount to determine if there is then any over-settlement.
Issues relating to settlement negotiations can be extremely complicated. It is always best to ensure that you have representation who can provide your business with experienced and knowledgable guidance through all aspects of commercial litigation.
Contact Milosevic & Associates in Toronto for unparalleled representation in even the most complex corporate and commercial disputes. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online for a consultation.