Pierringer Agreement: Encouraging Parties To Settle In Multi-Party Litigations

A Pierringer Agreement is a great tool for encouraging parties to settle in multi-party litigations. This form of agreement was first introduced in the 1963 decision of the Wisconsin Supreme Court in Pierringer v. Hoger, 124 N.W. 2d 106. A Pierringer Agreement is a form of proportionate share agreement that severs the liability of one (or more) defendant parties (the “Settling Defendant”) from that of its co-defendants. The key distinction for a Pierringer Agreement is that, upon settling with the plaintiff, the Settling Defendant is able to withdraw entirely from the litigation. The plaintiff, in consideration for the settlement funds, agrees not to pursue the remaining defendant parties for more than their proportionate share of the damage. While not an express requirement of Pierringer Agreements, it is a practical requirement that the plaintiff agrees to indemnify the Settling Defendant for any contribution to the non-settling defendants. This removes the risk to the Settling Defendant of the non-settling defendants pursuing a claim against them for contribution.[1] This aspect has practical importance, as it resolves any third-party claims or claims for contribution or indemnity by non-settling defendants.[2]

The proportionate share aspect of a Pierringer Agreement is vital to its validity. If a plaintiff under settles with a Settling Defendant for its portion of liability, it cannot seek to recover the deficit from the remaining defendants. Similarly, if a plaintiff settles for a surplus, or a windfall, it must account for that windfall to the non-settling defendants, and cannot receive double compensation.[3]

There are strong public policy reasons to encourage settlement, especially in complex or multi-party litigation. A Pierringer Agreement provides certainty to the plaintiff of recovery from the Settling Defendant and provides certainty to the Settling Defendant that it can exit the litigation without further contribution. It also does not prejudice the non-settling defendants as they cannot be held liable for damages properly attributed to the Settling Defendant. It is important to note that the terms of a Pierringer Agreement, with the exception of the settlement amount, are subject to court approval. It is important to note that even if a party is released from an action by way of a Pierringer Agreement, it is possible that they must take a limited role in additional steps in the litigation.

[1] Canadian Natural Resources Ltd. v. Wood Group Mustang (Canada) Inc., 2018 ABCA 305. See also Hudson Bay Mining and Smelting Co. v. Fluor Daniel Wright, [1997] 120 Man.R. (2d) 214.  

[2] Amoco Canada Petroleum Co v. Propak Systems Ltd. 2001 ABCA 110.

[3] Bedard v. Amin., 2010 ABCA 3.