Pierringer agreements a useful tool in litigation: Pearn
By Rob Lamberti, AdvocateDaily.com contributor
Pierringer agreements may be an underutilized legal tactic, but they are gaining wider acceptance as a way for lawsuit litigants to reach a separate settlement within a multiparty action, says Fredericton litigator Matthew Pearn.
As part of a litigation toolkit, it offers a strategic advantage for a smaller party to settle while the lawsuit carries on for others in the case, says Pearn, an associate with Foster & Company.
"If I were a smaller litigant, I think it would be worth my while to approach the plaintiff about it," he tells AdvocateDaily.com.
"If I were the plaintiff and trying to resolve the claim, anyone would be a good target. If you're able to resolve the main part of the claim, then everyone else is looking at themselves as a floating piece in this litigation because they were planning on riding the coat-tails of the potentially larger player."
It often pushes remaining litigants into seeking a resolution without relying on a trial or settlement conference, Pearn says.
Pierringer agreements, developed through American jurisprudence, allow for one or more involved in a multiparty action to settle and withdraw. In Canada, a Supreme Court ruling affirmed the remaining defendants were not party to the settlement reached with those who settled and withdrew.
The agreements "caught the attention of many people" in Canada in that 2013 ruling from Nova Scotia, Pearn says. Despite that, it's a tactic that often remains on the shelf, he says.
"At the moment, it's not as common as it should be," Pearn says. "In the Atlantic provinces, its use has started to take off but it's an item that is not yet in everyone's toolkit. It does help to resolve matters."
Pearn says Pierringer agreements generally offer an opportunity for his clients to position themselves early in the suit as a party looking to be proactive and settle.
"I think the biggest strategic advantage for plaintiffs, who are self-funding, is to get enough money in the war chest to continue," he says.
A plaintiff could identify parties who have a smaller role in the suit and attempt to settle before the others involved, "and take those dollars and run with it," Pearn says.
“Getting the experts in place to assess your risk early is very wise, being able to cost out what you see as your highest risk in the lawsuit at an early stage is also sensible and then approaching the plaintiff separately and saying, 'I see my involvement as somewhat discrete and I'm not tied to anyone else’s liability here,’” he says.
The client would be able to offer the plaintiff a dollar amount they could accept and they would get money right away rather than waiting months, if not years, for a settlement conference or trial, he says.
"The risk for the plaintiff is that you may accept too few dollars and you're not able to collect the full value of the claim," Pearn says. "So the question is: do you want to resolve a large portion of the claim against one of the major defendants at an early stage?
"For the most part, the answer would be ‘no,’ but if there are people you see as connected — whom you brought in as a defendant, but that you can parse off a part of the claim — try to figure out what their portion of the claim is worth. It can be a very helpful tool to fund the litigation and demonstrate that you're earnestly trying to resolve the claim," he says.
Pearn says using it also launches a conversation among the other parties about whether they want to resolve their claims as well. If a larger litigant settles, then it passes the costs of pursuing the suit on to smaller parties who may not be able to afford it. In that case, they may be tempted to settle, he says.
"It becomes more expensive for those who remain," Pearn says. "The labour doesn't go away. Someone needs to do the work to answer the questions that are necessary, to determine each party's individual or shared liability."
Lawyers aren't necessarily seeking 100 cents on the dollar, but they are looking for a resolution that makes economic sense for the client — and where they get more than they've invested in the case, he says.
"For people who are pushing for a settlement, they may be looking for a way to resolve the case early and don't have the money to carry on the litigation indefinitely. They may be motivated to take that first deal at a discount, but then they don't have to find the money to pay for the remainder of the claim," Pearn explains.
In New Brunswick's first case where Pierringer agreements required a written judgment, Justice Lucie LaVigne said they appear to provide a significant option in resolving litigation.
"There is an overriding public interest in settlement, and the promotion of settlement through the use of Pierringer agreements to promote settlement of complex multi-party litigation is sound judicial policy that contributes to the effective administration of justice, which overrides any prejudice that could be caused by the fact that the settling defendants will no longer be parties to the action," LaVigne ruled.
Pearn says it's a way to get the parties thinking of a settlement within a few months of launching a suit rather than 18 to 24 months later.
There would be no mystery among the litigants if one of them decided to seek an agreement, he says, as court approval is required where the parties consent to the terms or ask a judge to write a decision on it.
"More people are asking for court approval of these Pierringer agreements," Pearn says. "It looks to me, at least so far, that people are becoming sufficiently comfortable with these kinds of agreements that they're able to get court approval without written decisions following."