Pierringer Agreements have been around in Canada for some time now. They were originally developed in the United States to deal with some of the obstacles to settlement that were commonly seen in multi-party litigation. Pierringer Agreements were designed to allow one or more defendants in a multi-party action to settle with the plaintiff and withdraw from the litigation leaving the remaining non-settling defendants responsible only for the loss they actually caused.
The Supreme Court of Canada in Sable Offshore Energy Inc. vs. Ameron International Corp., 2013 SCC 37 (Released June 21, 2013) settled a longstanding issue as to whether a settling defendant is required to disclose the quantum of the settlement to a non-settling defendant.
In Sable, the plaintiff sued a number of defendants who supplied and applied an anti-corrosive paint which was used on both its off shore and on shore facilities alleging that the paint failed to prevent corrosion. Sable entered into Pierringer Agreements with some of the defendants and sought to proceed with its action against the non-settling defendants. The terms of these agreements were disclosed with the exception of the quantum of the settlement. The non-settling defendants sought disclosure of the settlement amounts. The trial judge found that the quantum of settlement was covered by settlement privileged and refused to order disclosure. The Nova Scotia Court of Appeal disagreed and ordered the amounts disclosed. The jurisprudence was conflicting as to whether disclosure was required and fortunately the Supreme Court of Canada agreed to settle the issue.
The Supreme Court of Canada allowed the appeal and held that the non-settling defendants were not entitled to disclosure of the amount of the settlements. The Court undertook a careful analysis of settlement privilege and reaffirmed its importance noting that settlement privilege is a class privilege and there is a prima facie presumption of inadmissibility.
In order to come within an exception to the privilege, “a defendant must show that, on balance, “a competing public interest outweighs the public interest in encouraging settlement”.”
The Court emphasized that the non-settling defendants received all the non-financial terms of the Pierringer Agreement. They were provided with access to all the relevant documents and other evidence that was in the possession of the settling defendants. Under the agreement, they are clearly protected and they will not be found liable for any more than their share of the damages.
Justice Abella, writing for the Court observed:
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 importance to displace the public interest in promoting settlements.1
The Court accepted the settling defendant’s argument that the likelihood of an initial settlement may decrease if disclosure of the quantum of settlement is required. As the Court noted:
Someone has to go first, and encouraging that first settlement in multi-party litigation is palpably worthy of more protection than the speculative assumption that others will only follow if they know the amount. The settling defendants, after all, were able to come to a negotiated amount without the benefit of a guiding settlement precedent. The non-settling defendants; position is no worse.2
The decision of the Supreme Court of Canada provides welcome clarification of the obligation to disclose the quantum of settlements contained in Pierringer Agreements. Pierringer Agreements are a very important and useful tool used to enable partial settlements in multi-party actions. The law is now clear. The non-settling defendants are entitled to timely disclosure of the terms of the Pierringer Agreement with the exception of the quantum of the settlement. Settlement privilege is alive and well in Canada.
1 Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, Paragraph 27
2 Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, Paragraph 29