What Is a Pierringer Agreement?
A Pierringer Agreement refers to a type of settlement agreement that is often used in cases involving numerous defendants. It is a deliberate attempt to separate responsibilities amongst individual defendants, while also allowing the plaintiff to recover the loss suffered in full. The reasoning for its use is to limit the liabilities of everyone but one defendant (the pierringer). One of the biggest benefits of a Pierringer Agreement is the limitation of the liability of each defendant, because the plaintiff decides where the fault lies, and only the at-fault defendant is liable for that amount. This may be used where a plaintiff has been involved in an accident with multiple defendants, and the defendant believes that one of the other defendants is solely responsible for the accident. The worry with this is that not every defendant has the same financial means, leaving a greater financial risk should the case go to trial.
For example, let’s say that the Plaintiff decides that the Defendant A is 50% at fault, Defendant B is 30% at fault, and Defendant C is 20% at fault. When deciding to settle, the Plaintiff looks at the financial means of each defendant. If the Plaintiff settles both with Defendant B and Defendant C for 20% of their liability (which is 12% and 10% respectively), they risk that Defendant A is unable to pay the 50% owed at trial and are left with no way to recover the full 50% . As such, when the plaintiff looks to settle and has differing financial means in mind, it makes sense for a plaintiff to look to one defendant to recover to fullest extent of the ruling. In the above example, Plaintiffs set up Pierringer Agreements with Defendants B & C for 12% and 10% respectively, making them 50% liable for their respective parties and allowing Plaintiff to sue Defendant A for the full amount. This protects the Plaintiff and ensures they recover to fullest extent.
Pierringer Agreements originated from the case of Pierringer v. H.M. Hobbs, [1968], 20 D.L.R. (3d) 1, 65 W.W.R. 241 (B.C. S.C.). Pierringer and his wife observed a car being blocked and begun to enter the intersection. The Hobbs’ car was struck by the Phillips’ vehicle. The Pierringer’s sued both the Phillips’ and Hobbs’ in an effort to recover for the injuries and damages caused. Since the Plaintiff Pierringer was the only one to sue the defendant(s), each Defendant was entitled to sue the other Defendant for contribution to damages paid. The Court found that the Plaintiff was able to sue the Defendants for the full extent of damages, even though the Plaintiff had already entered into a Pierringer Agreement with one of the Defendants. The result was that the Defendant sued in the Pierringer Agreement could sue both the other Defendant and the Plaintiff for contribution to the damages paid. This case speaks to foresight, as you can imagine that numerous agreements were put in place after the decision in Pierringer v. H.M. Hobbs.
Legal Framework for Pierringer Agreements in Alberta
In deciding whether a Pierringer agreement should be implemented, parties in Alberta must first consider the legal framework that presides over their use. As of October 1, 2010, the Alberta Rules of Court contain a presumptive Rule 4.16 regarding Pierringer agreements. That Rule states that a trial judge can order that the claim against the Pierringer defendant is stayed as of the date of the order and the plaintiff shall have 45 days to amend the statement of claim to omit the stayed defendant. A cost consequence for failure to comply with the Rule can be awarded against the non-compliant party.
The intent of this Rule is to strike a balance that assures timely trial dates while at the same time avoiding lengthy delay when potentially severe injuries are sustained. The rule requires defence counsel to disclose the substance of their defence or proposed defence within 90 days of being retained. The purpose of this provision is to facilitate timely decisions about the appropriateness of a Pierringer agreement and will give an idea as to whether the defence can be met and would put up a strong case. The Rule also allows plaintiffs 90 days to gather medical/rehabilitative evidence from the time of providing a copy of the defence’s Form 53. That provision recognizes that in serious tort actions the plaintiffs may take longer in gathering this evidence and is meant to ensure their opportunity to do so is not jeopardized through the strict application of deadlines.
Alberta in fact was one of the first provinces to have a decision regarding Pierringer issues. In Purdy v. Evans, the Court of Appeal was called upon to consider the appropriate test when proceeding with a Pierringer agreement. The court stated that the essential question that had to be asked was "whether justice could be done and whether the plaintiff could obtain the relief she claimed on the present record if she decided to pursue her action only against Evans who, it was argued, was solely responsible for her loss."
The most recent Alberta case regarding the dismissal of the action against a Pierringer defendant was in Grieg v. Graham. There the Court of Appeal held "the judge erred in concluding that although the appellant emulated the conduct of the other two defendants during discovery, the circumstances did not compel a Pierringer agreement". The Court overturned the judge’s decision and dismissed the action against the Pierringer defendant.
Pursuant to Rule 4.16(3), the parties can agree to exceptions whereby this Rule does not apply, or to modify its provisions with the leave of the Court. There are certain instances where the wording of the Rule is inconsistent with the wording of a Pierringer Agreement. For instance, Alberta Rule 4.16(3)(a) provides that a trial judge can stay the claim against the Pierringer defendant and suspend the use of the defence as an additional form of relief for the other party. However, it remains the law in Alberta that disclaiming an action against a defendant and reserving the right to use the defence against them is not considered a Pierringer Agreement. This is because a cause of action is not stayed and no party is truly released under that arrangement.
It is important to understand that at any time, in the appropriate circumstance, the courts in Alberta remain open to reviewing a Pierringer Agreement that is drafted between litigating parties. Otherwise, a judge can also, of course, after assessing the motion to be relieved of the action against a Pierringer defendant, make a determination regarding the appropriateness of granting such an order to do so.
Pros and Cons of Using a Pierringer Agreement
Pierringer Agreements, like any other tool, can have both benefits and limitations for plaintiffs and defendants. For plaintiffs, the ability to settle and release some or all of the parties in an action can have positive implications for the conduct of litigation and the strategy parties adopt. Businesses and insurers, as well as plaintiffs, can benefit from knowing that they will not be part of a trial or hearing.
In many instances, particularly in more complex cases with multiple defendants or respondents, a defendant may wish to settle without going through the expense and uncertainties of a trial or hearing. Unfortunately, there is a risk that this defendant may be found liable in judgment. In such cases, the defendant may insist on a Pierringer Agreement, i.e. "I will settle but I will only settle with the plaintiff if I can essentially contract out of the risk that I will be judged liable." The defendant may spin it any way it wants – "I am settling but I do not want to take the risk that I lose my money and I have to pick up the tab" or "it is the only we can bring down the legal costs in this case/bring cost certainty to this case."
The defendant is most concerned with limiting its potential liability – it does not want to pay more than its fair share of the damages. However, it must also balance its own exposure to other defendants or respondents and the overarching business objective of settling its part in the dispute.
For plaintiffs, the ability to reach agreement with some, but not all, of the parties can have significant benefits for themselves and for the resolution of the dispute. A plaintiff should be aware that the amount of the settlement with one party will offset the damages award against that party.
There are some limitations to the use of Pierringer Agreements, most of which turn on the specific words used in the agreement. For example, if a pure Pierringer Agreement is drafted such that the non-settling defendants are held solely responsible for the remaining damages, no indemnity claim can be brought by the plaintiff in respect of the amount the plaintiff would otherwise have recovered from the settling defendant.
The names of the settling defendants may appear in some decisions which may result in more aggressive subsequent settlement demands or litigation strategies by addressees of those decisions.
Perhaps the most challenging limitation of the Pierringer Agreement is that a plaintiff must embrace a settlement with some or all of the adjudicative silence that is being adopted in the proceeding. Adjudicative silence is the term used to describe the impact on the court of the failure of a party to make submissions, call evidence or do other things at trial or a hearing. If a party is silent at trial, the court will consider what that party’s evidence or submissions would have been – and likely adverse inference will be used.
For many insiders in settlement discussions or negotiations, the decision to go to trial not having heard from one party, is a difficult decision.
However, if the case does go to trial, the advantage of having the case settled or decided based on that party’s reports from credible witnesses, may be significant.
How to Implement a Pierringer Agreement
Typically parties, along with their lawyers, will draft a Pierringer Agreement as part of their negotiation and mediation of the settlement process. The process is usually the following:
1. Drafting the Agreement
During the drafting process, the parties will meet in order to discuss the terms of the Pierringer Agreement. Typically this process will take place informally amongst the lawyers and their clients, or it can be done through a court mandated and supervised mediation process.
2. Filing of the Agreement
Once finalized, the Pierringer Agreement should be presented to the court through a motion to be included within the record of evidence for the action. A copy of the Pierringer Agreement will be placed on the record and submitted to the court through the Alberta Courts civil process. The parties to the Agreement would jointly file the Agreement with the Court Registry, regardless of whether the action has been commenced or is settled by way of Consent Order. Parties are required under the Rules of Court to file their documents similar to the other civil actions.
3. Obtaining an Order to Approve the Agreement
The parties subsequently will be before a judge in order to have the Agreement approved. This is typically done at a Case Management Conference within the Alberta Courts , meaning that the parties are before a judge even if the action is settled by a Consent Order.
4. Pursuing Individual Cases Against the Remaining Parties
At this time, if the parties so wish, individual actions can be initiated against the remaining parties. Under the provisions of a Pierringer Agreement, the plaintiff can pursue separate settlement offers with both the named defendants responsible for damages, where you may agree to less than what was originally requested for damages. In most cases, defendants are named according to their relative percentages of liability for the action.
5. Distribution of Settlement Funds
Parties can seek a Court Order if one of the previous Defendants does not release settlement funds related to the overall settlement agreement (if applicable), which will prevent the plaintiff from recovering on his remaining claims.
6. Parties Not Released Under the Agreement
Parties that are not released under the Pierringer Agreement are then precluded from seeking recovery or contribution from the released defendant as to the proportionate share of liability agreed to by the parties to the Pierringer Agreement.
Impact on Case Strategy and Outcomes
The application and approval of Pierringer Agreements fundamentally alters the legal strategy of personal injury claims in Alberta. First, if a defendant is quick to settle with a plaintiff who has sustained very serious injuries, that sends an obvious message about the defendant’s concerns over liability. Moreover, depending on the amount paid under the Pierringer Agreement, it may significantly reduce the value of any pending litigation by virtue of the defendant’s settlement. Whether to settle large claims with a small plaintiff is thus an extremely important tactical decision.
Second, and perhaps one of the most useful aspects for personal injury lawyers to consider, is the ability for a defendant to continue to defend the action after approving the Pierringer Agreement. The defendant will likely only be required to pay the shortfall if the matter is eventually tried. The defendant who pays a full and fair amount in this instance can be assured that they will incur no additional fees as a result of continuing to defend the action, whereas the plaintiff may be required to relinquish a portion of the amount paid in the Pierringer Agreement in order to pay their own lawyer’s fees.
This structural advantage permits a defendant to wait and hold out in hopes of litigating the claim at trial. If a plaintiff is anxious to proceed to trial, he may be strong-armed into relinquishing a portion of the amount received in the Pierringer Agreement in order to have his own lawyer paid. This scenario is unlike common settlements where the defendant has no role to play in what portion of a plaintiff’s settlement amount goes to its lawyers.
Recent Developments and Trends in Alberta
There are a number of recent cases in which Alberta courts have endorsed Pierringer agreements. In Koziuk v Ricci 2017 ABQB 44 the plaintiffs were motor vehicle drivers who were injured when their vehicle was rear-ended in a motor vehicle accident. The defendant who rear-ended them brought a third party claim for contribution and indemnity against a second defendant who was a motor vehicle collision repairer. The parties settling with the plaintiff, the Koziuks, subsequently entered into a Pierringer agreement with the second defendant. As part of the agreement, the second defendant coached and assisted the Koziuks in bringing their action against the repairer. Subsequently, the repairer issued third party notices against the Koziuks and the second defendant. The Koziuks issued an application to have the third party notices enjoined on the grounds a Pierringer agreement is a bar to third party proceedings . Justice McCarthy conducted a thorough review of the authorities in Canada on Pierringer agreements and relied on a majority of them to conclude that "Pierringer agreements serve the useful purpose of settlement and limit litigation involving claims for contribution or contribution and indemnity in the context of a motor vehicle accident". He set out an effective template for lawyers seeking to draft Pierringer agreements. A further recent decision of the Alberta Courts has also supported the usefulness of Pierringer agreements. In Taylor v Royal Alexandra Hospital, 2017 ABQB 347, the plaintiff brought a claim for damages arising from medical negligence. He settled his claim against various defendants for $800,000 under a Pierringer agreement. His lawyers failed to settle his bill of costs and the hospital’s lawyers took the position they were entitled to half of their costs as a result. Justice P.B. Cunningham decided (in obiter) that Pierringer agreements were beneficial and should be further utilized by litigants to facilitate expedient resolution of litigation and dismissal of parties.