A PSA On PSSAs: Ramifications Of A Pierringer Agreement In The Face Of A Crossclaim For Contribution And Indemnity

What is a Pierringer Agreement?

A Pierringer agreement, named after Pierringer v. Hoger et al., 124 N.W. (2d) 106 (Wis. S.C. 1963), the Wisconsin case in which this type of agreement was first considered. Such agreements permit some parties to withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused, with no joint liability. As the non-settling defendants are responsible only for their proportionate share of the loss, a Pierringer agreement can properly be characterized as a "proportionate share settlement agreement" (PSSAs).

Pierringer Agreements in Canada, in contrast to the United States, included additional protections for non-settling defendant(s), such as requiring that non-settling defendant(s) be given access to the settling defendant's evidence.

Characteristics of a Proportionate Share Settlement Agreement (PSSAs)

To the extent that a PSSA completely removes the settling defendant(s) from the legal action, it operates similarly to a conventional settlement agreement that resolves all outstanding issues between the parties involved.

PSSAs typically consist of the following elements:

1. The plaintiff receives a payment from the settling defendant(s) in full satisfaction of the plaintiff's claim against them.
2. In return, the settling defendant(s) receive from the plaintiff a promise to discontinue proceedings, effectively removing them from the suit.
3. Subsequent amendments to the pleadings formally remove the settling defendant(s) from the suit.
4. The plaintiff then continues its suit against the non-settling defendants.

Potential Complications with PSSAs

There is, however, an added complication that a PSSA must address. As a result of third-party proceedings, settling defendant(s) are almost always subject to claims for contribution and indemnity from non-settling defendant(s) for the amount of the plaintiff's loss alleged to be attributable to the fault of the settling defendant(s).

Before the settling defendant(s) can be released from the suit, some provision must be made to satisfy these claims.

What is "Contribution"?

When one defendant settles with the plaintiff through a Pierringer agreement, the non-settling defendant(s) may still seek contribution from the settling defendant for any amounts they are required to pay to the plaintiff. Contribution allows defendant(s) who have paid more than their fair share of damages to recover a proportionate amount from other defendant(s) who are also liable.

Therefore, even though the settling defendant(s) has resolved their liability with the plaintiff, they may still be responsible for contributing to the payment of damages if the other defendant(s) are found liable.

What is "Indemnity"?

Similarly, a non-settling defendant(s) may also seek indemnity from the settling defendant(s). Indemnity is a legal obligation to compensate for any losses or damages incurred. In this context, if the non-settling defendant(s) is required to pay damages to the plaintiff, they may seek full indemnification from the settling defendant(s) if there was an agreement or legal basis for such indemnification.

This obstacle is overcome by including an indemnity clause in which the plaintiff covenants to indemnify the settling defendant(s) for any portion of the damages that a court may determine to be attributable to their fault and for which the non-settling defendant(s) would otherwise be liable due to the principle of joint and several liability.

Alternatively, the plaintiff may covenant not to pursue the non-settling defendant(s) for that portion of the liability that a court may determine to be attributable to the fault of the settling defendant(s).

As for any concern that the non-settling defendant(s) will be required to pay more than their share of damages, it is inherent in Pierringer agreements that non-settling defendant(s) can only be held liable for their share of the damages and are severally, and not jointly, liable with the settling defendant(s).

Crossclaims That Go "Beyond Contribution And Indemnity"

In instances where a defendant's crossclaim expands beyond merely seeking contribution and indemnity for the plaintiff's allegations of negligence, particularly when grounded in contractual agreements between defendants, the plaintiff's restriction of its claim to the defendant's individual liability does not invalidate the crossclaim. This means that even if the plaintiff narrows its focus to the defendant's individual responsibility, the crossclaim remains relevant and must be addressed with the participation of all relevant parties during trial.

Consequently, Courts have consistently opted not to dismiss crossclaims that exceed the scope of negligence-based contribution and indemnity, as outlined in Pierringer agreements, recognizing the necessity of comprehensive participation in resolving such complex legal matters.¹

This was the case in Laidler v. The Office of the Public Guardian and Trustee, 2015 ONSC 943, where a legal action was initiated to seek damages related to the purchase of land allegedly contaminated. The lawsuit targeted the property vendors, the involved real estate agents, and their respective brokerages. Subsequently, the real estate agents and their brokerages entered a Pierringer agreement with the plaintiffs. However, one of the non-settling defendants chose to uphold their crossclaim against a settling defendant (the vendor's former agent and listing broker), alleging negligence and breach of contract.

Although the Court acknowledged that the vendors could not sustain crossclaims against the settling defendants solely based on contributory negligence, it determined that it remained within the trial judge's purview to decide whether the vendors were eligible for indemnification for all or part of the damages they might be required to pay to the plaintiffs. Consequently, the Court opted not to dismiss the crossclaim.

Conclusion

Pierringer or proportionate share agreements remain widely recognized by the courts as valuable tools for fostering settlement in multi-party litigation. While these agreements afford a means for a settling defendant to withdraw from the litigation, non-settling defendants may still retain the right to pursue avenues for recovery, such as contribution or indemnification. However, the viability of such claims depends on various factors, including the specific circumstances of the case and any existing contractual arrangements.

In essence, while Pierringer agreements streamline dispute resolution, they do not offer blanket immunity against further legal action.

Footnote

1 1511233 Ontario Inc v. Spallino, 2024 ONSC 2045 (CanLII), at para 17.

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