Should you use a Pierringer Agreement?

The Pierringer or proportionate share agreement[1] continues to be recognized by the courts as a valuable tool for encouraging settlement in multi-party litigation.  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.

The use of Pierringer agreements in the context of contaminated sites litigation has received limited commentary.  However, given that contaminated sites cases often involve multiple defendants, the use of a Pierringer agreement is worth considering.  For a defendant in particular, a Pierringer agreement can allow for a quick resolution of the action and avoid the obstacles typically encountered in attempting to reach a global resolution.  For example, where it appears there is some liability on the facts, a Pierringer agreement can fix your client's exposure to liability at an early stage in the litigation, thereby avoiding the uncertainty and cost of proceeding to trial.

The following provides a brief refresher on the top four things to remember about Pierringer agreements:

1. Disclosure of the Agreement:  Although usually the subject of settlement privilege, settling parties are obliged to disclose the existence of a settlement agreement where the agreement changes the adversarial orientation of the lawsuit or the court needs knowledge of the settlement in order to maintain the fairness and integrity of its process.[2]  A Pierringer agreement falls within this exception to settlement privilege.  Consequently, at a minimum, the existence of a Pierringer agreement must be disclosed to the court and any non-settling parties.[3]  However, the settlement amount may be kept confidential until the end of trial unless there is a competing public interest that outweighs the public interest in encouraging settlement.[4]  Disclosure of the settlement amount at the end of trial is required in order to prevent the plaintiff from receiving double recovery.
2. Several Liability for the Non-Settling Defendants:  In the Pierringer agreement, the plaintiff agrees to limit their claims against the non-settling defendant to several (as opposed to joint and several) liability.  Put another way, as a result of the Pierringer agreement, the non-settling defendants would only be held accountable for their own share of liability at trial.[5]
3. Amendment of the Claim or Indemnification of the Settling Defendants Against Cross-Claims:  Because the plaintiff agrees to pursue the non-settling defendants only for their several liability, the Settling Defendants typically need not be concerned about a claim for contribution and indemnity from the non-settling defendants.[6]  In practice, this is accomplished by incorporating terms into the Pierringer agreement that the plaintiff must: (i) amend its claim to clearly and unambiguously limit the relief sought against the non-settling defendant to the non-settling defendant's proportionate degree of fault and/or (ii) indemnify the Settling Defendants against any claims for contribution and indemnity by the non-settling defendants.
4. The Settling Defendants No Longer Participate in the Action:  Following the Pierringer agreement, the Settling Defendants have very little reason to continue to participate in the action.[7]  The lack of participation by the Settling Defendants may result in a procedural disadvantage for the non-settling defendants.  To minimize this, protections for non-settling defendants can be incorporated into the agreement itself or imposed by way of a court order.  For example, in Sable Offshore Energy Inc. v. Ameron International Corp., the Supreme Court of Canada highlighted that "the court order approving the settlement required that the plaintiffs get production of all relevant evidence from the settling defendants and make this evidence available to the non-settling defendants on discovery."[8]

As mentioned above, in the context of contaminated sites claims, where a number of parties have been sued, a Pierringer agreement can be an effective tool to extract your client from the litigation early on.  However, before negotiating a Pierringer agreement, you should consider both its benefits and pitfalls.  A few of these have been identified from the perspective of both the plaintiff and a defendant:

Plaintiff's Perspective

• Benefit: The plaintiff is able to achieve monies upfront without incurring the cost of proving its claim at trial or bearing the risk of exposure to an adverse costs award.  Further, obtaining funds from the Settling Defendants may help the plaintiff "finance" its lawsuit against the non-settling defendants. 
• Pitfall: By entering into a Pierringer agreement, the plaintiff agrees to seek only several liability among the non-settling defendants.  Accordingly, it will be important to assess whether there is an ability to delineate the liability attributable to the Settling Defendants and non-settling defendants.  In contaminated sites cases, this can often be a challenge in the early stages of the litigation.  If it is difficult to delineate the proportion of liability as between the defendants, then it may be more advantageous to maintain all parties in the action or seek a global resolution.

Defendant's Perspective

• Benefit: If you are able to identify your contribution to the plaintiff's loss and are willing to acknowledge some liability, a Pierringer agreement allows you to negotiate a fixed cap or limit on the particular liability to the plaintiff.  In doing so, you can avoid the significant expense of proceeding to trial and avoid the risk that the trier of fact may attribute greater liability to you over other defendants.  Further, the risk of being subject to a costs award in favour of the plaintiff is removed.
• Pitfall:  The Pierringer agreement will not prevent a non-settling defendant from pursuing an independent claim against a Settling Defendant to indemnify the non-settling defendant for its several liability.  For example, in Laidler v. Public Guardian & Trustee,[9] an action was brought for damages arising from the purchase of allegedly contaminated land.  The action was brought against the vendors of the property, the real estate agents involved in the transaction, and their brokerages.  The real estate agents and their brokerages entered into a Pierringer agreement with the plaintiffs.  One of the non-settling defendants refused to abandon their crossclaim against one of the settling defendants (the vendor's former agent and listing broker).  The crossclaim was based on negligence and breach of contract.  While the Court acknowledged that the vendors would not be able to maintain crossclaims against the settling defendants based on contributory negligence only, it found it would be open to the trial judge to find that the vendors were entitled to indemnification for all or part of the damages they may be called upon to pay to the plaintiffs.[10]  As a result, the Court declined to strike the crossclaim. 

Similarly, in Amello v. Bluewave Energy Limited Partnership,[11] the Amellos suffered an oil spill in the basement of their home.  The oil seeped into their home from a tank maintained by the defendant, Bluewave Energy Limited Partnership ("Bluewave").  The oil that seeped into the basement was transported by another defendant, Daniel Charles Transport Ltd.  The defendants asserted crossclaims against each other in the action.  A Pierringer agreement was entered into between the plaintiff and Daniel Charles Transport Ltd.  A motion was subsequently brought by Daniel Charles Transport Ltd. for judgment dismissing Bluewave's crossclaim on the basis of the Pierringer agreement.  However, the Court refused to dismiss the crossclaim as it was premised on Daniel Charles Transport Ltd. being liable to indemnify Bluewave for Bluewave's several liability under a services agreement.[12]

In sum, a Pierringer agreement can be a useful tool in a litigator's tool box to achieve a partial resolution of an action.  However, great care should be taken to ensure that it is the right tool for the job.