What is a Pierringer Agreement?

By: David Heffernan, Claims Counsel

Throughout Canada, the legal system has consistently emphasized the importance of encouraging settlements to resolve disputes. The reasoning behind the courts’ settlement focused approach is that it serves the broader interests of parties by sparing them the financial burden of long, contentious trials, and it alleviates the strain on an already heavily burdened court system.

A Pierringer Agreement — or a proportionate share settlement agreement — is one of the ways whereby parties can resolve litigation. In some cases, all parties involved in a lawsuit may agree to settle the entire matter at once. However, in complex multi-party lawsuits, achieving such a neat resolution may not be feasible.

In such situations, a Pierringer Agreement, named after the 1963 Wisconsin case of Pierringer v. Hoger, 124 N.W.2d 106 (Wis. 1963), is one option available to the litigants.

A Pierringer Agreement pursues a more targeted objective than a global or total settlement: the primary aim is to proactively manage the risks associated with litigation. The goal of this type of risk management is to simplify and speed up legal proceedings, achieved by reaching agreements on liability issues with some, but not all, parties. As a result, the number of disputes are minimized, saving time and money.

In Amoco Canada Petroleum Co. v. Propak Systems Ltd., the Alberta Court of Appeal described a Pierringer settlement agreement as an agreement that lets one or more defendants in a multi-party lawsuit settle with the plaintiff and leave the case. The remaining defendants will only be responsible for the specific part of the loss they directly caused. They don’t share responsibility with the settling defendants, but those defendants who didn’t settle might share responsibility with each other.

The Court identified that Pierringer Agreements typically include the following elements:

The plaintiff gets a payment from the defendants who settled, and this payment completely settles the claim against those defendants;
In exchange, the defendants who settled receive from the plaintiff a promise to discontinue the claim, effectively removing the settling defendants from the litigation;
Later changes to the litigation will formally remove the settling defendants from the claim; and
The plaintiff then continues its claim against the defendants who did not settle.

Before Pierringer Agreements were used, a defendant who settled might face claims for more money from the defendants who didn’t settle. A Pierringer Agreement addresses this by having a clause that protects the settling defendants.

The plaintiff will agree to either cover any damages the court assigns to them, which would otherwise be the non-settling defendants’ responsibility, or not to pursue non-settling defendants for the settling defendants’ share of the blame. In both cases, the agreement aims to limit the non-settling party’s responsibility to just what they were responsible for.

Now that we have a general grasp of what a Pierringer Agreement is and its goals, let’s explore some other important aspects of this agreement:

As we have discussed, when a Plaintiff enters a Pierringer Agreement, they can’t ask for compensation from the remaining defendants that are attributable to the defendants who settled. However, unless the written agreement says otherwise, the Plaintiff isn’t limited to seeking damages only from the non-settling defendants. This means a non-settling defendant can still make a claim against someone who wasn’t a party to the Pierringer Agreement. (Maio v. Kapp Contracting Inc., 2022 ONCA 196 (CanLII) )

To prevent any possible procedural issues for those who haven’t settled, protections for those defendants can be added to the Pierringer Agreement or mandated through a Court order. The Court may order that the Plaintiffs obtain all relevant evidence from the defendants who settled and ensure this evidence is accessible to those who did not settle (Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (CanLII), [2013] 2 SCR 623);

If the Plaintiff goes to trial against those who haven’t settled, the court will decide if the actions or neglect of the ones who settled had any role in the damages the person is claiming. Even though those who settled won’t be part of the trial, the court will still consider their involvement in causing the harm ( M. v. Bradley, 2004 CanLII 8541 (ON CA)). If those who haven’t settled argue at trial that a settling defendant was negligent, the courts have decided that the responsibility to prove this negligence shifts from the plaintiff to the non-settling defendant (MacNeil v Kajetanowicz, 2019 NSCA 35 (CanLII));

Recognizing that settlements can significantly impact legal proceedings, the Courts have consistently emphasized the importance of promptly disclosing the settlement to those who haven’t settled. Immediate disclosure is necessary if the settlement significantly alters the course of the legal action. If there’s a failure to disclose the settlement appropriately and in a timely manner, the judge might intervene and order a stay/halt to the litigation. (CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467 (CanLII)).

The Supreme Court of Canada addressed whether a Plaintiff must reveal to those who haven’t settled the amount paid by those who settled using a Pierringer Agreement. In this situation, the Plaintiff had made a claim against several parties and settled with some of them. The remaining parties wanted to know the settlement amounts. The Court had to decide whether these negotiated amounts should be disclosed or if they are protected by settlement privilege. In ruling against disclosure, the Court mentioned that those who hadn’t settled had received all the non-financial terms of the Pierringer Agreements. The Court determined that withholding the settlement amounts didn’t cause any significant harm that outweighed the public interest in encouraging settlements. (Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (CanLII), [2013] 2 SCR 623).

The financial details of the settlement will be revealed to the judge and those who haven’t settled once the trial ends. This is done to ensure fair compensation and prevent overcompensating the plaintiff. If the plaintiff receives more money than his or her assessed damages, the judge will adjust the award accordingly. The Courts have debated whether to measure the plaintiff’s compensation against the total loss or only the part not caused by their own negligence. The Courts have preferred the first approach. This decision encourages the plaintiff, even if partly at fault, to consider settling (Gendron v. Doug C. Thompson Ltd. (Thompson Fuels), 2019 ONCA 293 (CanLII)).

While Pierringer Agreements provide numerous advantages, they also come with complexities and potential challenges, particularly in safeguarding the rights of non-settling defendants. Therefore, the implementation of these agreements should be conducted with a thorough understanding of the legal intricacies involved, and guidance from legal advisors.

As the legal world continues to evolve, the utility of Pierringer Agreements remains undeniably relevant. Their ability to encourage settlements, streamline litigation, and ensure that parties bear responsibility in proportion to their faults make these agreements a compelling mechanism for resolving complex multi-party disputes. This way, Pierringer Agreements contribute to achieving justice in civil litigation in an efficient and fair manner.

About David:

David is a senior barrister and solicitor with nearly 15 years' experience involving a broad litigation practice that includes civil litigation, corporate-commercial litigation, and insurance defence work. He was called to the Bar of Ireland in 2007 and then to the Bar of Ontario in 2014.
David joined Axxima in August 2023, and manages E&O claims and litigation as part the Claims Management group.