The Basics of Pierringer Agreements in Legal Settlements

What is a Pierringer Agreement?

A Pierringer Agreement, named after an actual case and decision of the Wisconsin Supreme Court, refers to a specific type of settlement agreement that is often utilized in lawsuits that involve multiple defendants. The utility of this type of agreement is specifically related to situations where the plaintiff makes a claim against multiple defendants as part of a single lawsuit, and that the lawsuit further relies on the factual and legal integrity of the claims against all remaining defendants. The purpose of the Pierringer Agreement is to allow plaintiffs to settle their claims against some, but not all, of the defendants (known as Pierringer defendants), so the plaintiff can focus remaining claims against the remaining defendants, while ensuring the financial reward of the settlement with Pierringer defendants.
In most situations without a Pierringer Agreement, if a plaintiff settles a case with one of multiple defendants, the other defendants are often able to pursue a defense of settlement out, or a set-off, to limit their liability or even eliminate it completely . This is in contrast to a Pierringer Agreement, which is able to specifically preserve remaining defendants rights to defend themselves, while not permitting them to set off claims associated with the claims being resolved by the settlement with the other Pierringer defendants. While the technicalities of these agreements may vary across jurisdictions, and judges may enforce the underlying settlement agreements inconsistently, in practice, most judges will generally set them up to allow the remaining defendants the opportunity to proceed forward with the presented lawsuit teed up as if the settlement agreement didn’t occur. While judges can and will occasionally impose additional terms of agreement that may not be required under law, they can only do so after providing a full explanation of the terms and conditions that may be imposed.

History and Evolution of Pierringer Agreements

The Pierringer Agreement (named after the case Pierringer v. Hopkins, 21 Wis.2d 182 (1964)), traces its origins to mid-20th century efforts to resolve complex personal injury claims where multiple parties are found liable.
Historically, if a plaintiff settled with several parties, they could not recover additional damages from a non-settling party, such as the defendant with the deepest pockets. As a result, plaintiffs would often forgo settlement in order to avoid jeopardizing a later verdict by settling with some but not all of the potentially liable defendants.
Pierringer agreements arose precisely for this reason. They allow a plaintiff suing multiple defendants to limit liability while preserving their right to seek compensation from a non-settling defendant. In essence, a plaintiff enters into a Pierringer agreement when they agree to settle with a single defendant while retaining the right to seek full compensation from all Other defendants.
Pierringer explains that the two theories that arise under Wisconsin Law are the independent tortfeasor theory and the indivisible harm theory. Independent tortfeasor theory recognizes each tortfeasor as a cause of the act complained of and allows plaintiff to sue them individually, with recovery against one tortfeasor having no effect on the liability of the other tortfeasors. Under the indivisible harm theory, "when plaintiff does not know which tortfeasor caused the damage, he cannot sue them separately because that would be subjecting him to the burden of double payment." The Pierringer court adopted the theory of indivisible harm but stipulated that, "the plaintiff must join all potential tortfeasors in the action."
In Pierringer, the court in Wisconsin applied the comparative fault doctrine to a joint tortfeasor setting which generally allows the jury to apportion liability between joint or several tortfeasors. The court held that "disclosure of the full extent of the injuries caused by each defendant is an appropriate function of the jury in apportioning damages." Since the purpose of settlement is to provide a plaintiff with funds necessary to cover injuries, the court reasoned that any defenses relating to the settlement amount are best left to the jury’s determination of the proportion of negligence attributable to each tortfeasor. As a result, the court stated "that joint tortfeasors should be permitted to admit … that they were jointly negligent but that there was a release to another tortfeasor pursuant to a Pierringer agreement."
Pierringer agreements, unfortunately for litigants, differ between jurisdictions, as not all courts’ approach is as welcoming as Wisconsin. The adoption of Pierringer agreements in a jurisdiction may depend on the wording of the relevant law.
In sum, the recorded history of Pierringer agreements is not uniform but based on a combination of various local and state laws. That historical inconsistency can create confusion for attorneys and plaintiffs who only discover differences in the breaths of the law the hard way.

Characteristics of Pierringer Agreements

The cornerstone of a Pierringer Agreement is the obligation on the remaining co-parties to the settlement agreement to indemnify and hold harmless the plaintiff/claimant in respect of their share of liability for damages and/or costs. There should also be an express release of the settling litigant by the plaintiff, which release would ordinarily extend to the settling party’s servants, agents, employees and/or co-directors and/or members where appropriate.
Any settling party would also seek an order that the Action against himself/herself be dismissed with prejudice. The plaintiffs will seek such an Order as a matter of course, since that effectively closes the issue of liability in favour of the settling party, including any claims for contribution and/or enactment of a provision of law relating to joint and several liability.
In terms of the obligations of the other parties to the Action and the procedure to be followed, a Pierringer Agreement will as a rule include a clause to the effect that (barring agreement to the contrary) the Action against the non-settling litigants will continue on the same basis as heretofore, and the plaintiff will be entitled to amend the particulars of claim as he deems fit. The other defendants will then have the option of failing to plead anew (in which event the plaintiff will be entitled to use the previous particulars of claim in evidence as they then stand) or of pleading anew, in which event the court will invariably order the allowance of amendments as may be necessary.
If the requisite co-operation has been secured from the plaintiff, non-pleading litigants will, if they wish to raise the defence of a stale claim, be expected to plead a new special defence to that effect, and if that is so admitted by the plaintiffs then the onus is upon the plaintiffs to lead evidence of every act and/or omission by the other litigants to the extent that it is alleged to have delayed the prosecution of the Action concerned. In the case of any dispute between the parties as to the applicability of the defence, the normal principle which applies is that it is the party seeking to rely thereon who has the onus of satisfying the court of its applicability (that being the party who has the onus of proof).
Not infrequently, it will happen that that the settlement Agreement relates to two or more co-accused persons, in which event they will be included as plaintiffs in the litigation at the suit of the plaintiffs who have not settled their claims.
It can be stated as a rule of thumb that non-settling defendants will be expected to seek out indemnities from the settling litigants who were their erstwhile employees and/or co-directors and/or members and/or agents or servants in the one form or another, in relation to their respective actions.
The settlement Agreement will also provide for the costs of the Action on the one hand and/or action or proceedings on appeal (if any) on the other hand, to be the subject of separate agreement.

Pros and Cons

There are certainly advantages to using Pierringer Agreements in legal settlements. Most importantly, it allows an injured person to make a claim against a negligent defendant whose actions contributed to the injuries but who may not be able to pay on the claim. This ultimately allows the claimant to recover more from a number of responsible parties than they could have by settling with a single negligent defendant for all of their damages.
Another benefit is that once an injured party enters into a Pierringer Agreement the issues with their case are settled. The injured party is not required to attend further discovery and their case is concluded more quickly. If the case settles without a Pierringer Agreement then it may take much longer to resolve the case.
On the other hand, the defendant who signs a Pierringer Agreement is not retrieving as much in damages as they would have if they had sued all responsible parties. The defendant may also be required to participate in a trial without receiving payment for their time, and the defendant may be subject to a cross-complaint in the lawsuit from the other liable party to recover the amount that was paid.
Pierringer Agreements are beneficial when the injuries are minor and the damages are correspondingly low. If the injuries are so severe that they are life-altering and far exceed the damage caps imposed by insurance, choosing to sign a Pierringer Agreement may not be the best choice.

Comparing Pierringer Agreements to Other Types of Settlement Agreements

In contrast to a Pierringer Agreement, in most other settlement agreements co-defendants will remain liable for the full amount of the damages awarded, or the amount of the settlement made with the plaintiff, if the plaintiff is unable to recover all of its damages from one or more of the co-defendants. In most provinces in Canada, joint tort-feasors who are sued together are joint and severally liable for the damages caused by the tort. This means that the plaintiff may collect the full amount of the damages award (or settlement) from either one of the alleged tort-feasors if the others are not collectible. As a result, co-defendants generally will have different settlement amounts, unless some portion of the joint tort-feasors has the means to fully indemnify the other, and are willing to pay that indemnity up front. Furthermore, in most settlement agreements, the parties undertake to deal with the rights of contribution after the fact. This means that they reserve the right to sue each other for some/all of what they have paid up front to the plaintiff should their rights of contribution later be triggered.
There are situations where a Pierringer Agreement is preferred: (1) Where the defendant is concerned about the potential for apportionment of liability and contribution between co-defendants; (2) Where the defendant’s liability is uncertain; (3) Where the defendant’s liability is capped and/or limited; or (4) Where the possibility of other defendants being subsequently added post settlement is an issue.
Where a defendant is concerned about the potential for apportionment of liability and contribution between co-defendants to the extent that they may not be able to recover 100% of their damages awarded , or paid on settlement, a Pierringer Agreement is preferred. A Pierringer Agreement is also preferred in situations where there are multiple defendants, and the potential for apportionment/liability between them is complex, as it will clearly delineate the roles and liabilities of each party.
A defendant facing uncertainty concerning its actual liability may wish to enter into a Pierringer Agreement so that they can settle based on their best estimate of their share of the liability without having to pay more than that estimated share up front.
A defendant facing a capped/limited damages award may wish to enter into a Pierringer Agreement so that it can ensure that it will only have to contribute its capped/limited share of the damages awarded by a judge/jury.
Where a plaintiff intends to add additional parties after settlement has been reached as defendants under the same cause of action, then it may be advantageous for the initial defendants to enter into a Pierringer Agreement to ensure that the additional defendants are equally liable for the damages awarded by the judge/jury.

How to Write a Pierringer Agreement

When a variety of defendants are liable to a plaintiff in a lawsuit, each defendant is likely to want to know that they will not be liable to pay if one of the other defendants pays. There are several ways that this can be accomplished, and a Pierringer Agreement is one of those.
Drafting a Pierringer Agreement is akin to drafting a release. The terms of the Pierringer Agreement should be negotiated and agreed upon by all parties before being written down. After the parties agree to the general terms of the Agreement, an attorney skilled at drafting contracts should reduce the agreement to writing that is legally conforming and enforceable.
In the Agreement, the plaintiff generally agrees to release the defendant from any liability for the plaintiff’s injuries, so long as the defendant pays the plaintiff a certain amount. The Agreement should include:

• the parties’ names and the date of the contract
• a release of the defendant from any liability for the plaintiff’s injuries
• the amount to be agreed to by the defendant
• a confidentiality clause
• a provision stating that the agreement is on equal bargaining terms
• a statement of having read the agreement and that the plaintiff understands it

Each case is different, so agree to only what will work for the case. A defendant may agree to pay a percentage of future liability, or a set amount after settlement with another defendant, or some other formula. The Pierringer Agreement will need to include the formula agreed to by the parties. It is essential that attorneys pay particular attention to any deadlines related to the settlement of the amount agreed to by the parties.

Examples of Pierringer Agreements in Practice

Case studies of various legal cases using Pierringer Agreements are invaluable in understanding the broader applications of such agreements. A frequent and notable case in Canadian legal jurisprudence is that of Holtby v. Abboud, 2014 BCSC 326 (CanLII), which demonstrates the clear advantage to the plaintiff of a global settlement negotiated with the joint defendants. The parties were able to negotiate a settlement of the total claim as tolled against all potential defendants, with no set-off or subsequent actions against other defendants; it was agreed that the plaintiff would release the second defendant (Abboud) as part of that global settlement, and that the independent rights of the plaintiff against the Abboud defendant were to be preserved. This was held to create the requisite uncertainties for the application of Pierringer, and as a consequence there was no right of contribution found between the Abboud defendant and the other defendants.
This supports the utility of the Pierringer Agreement in the cases where an unprotected defendant is potentially exposed as against the plaintiff, and suggests that where the settlement occurs as a result of advance agreement between all parties surviving litigation, that such agreement may prevent the need to resort to the Pierringer Agreement.
The case of Rahimi and Alnaimi v. Sutton Group and Harder & Associates, 2014 ONSC 1856 (CanLII) considered the Application of the Pierringer Agreement. The plaintiffs settled an Action under a Pierringer Agreement with five of seven defendants, to resolve all the claims arising out of a motor vehicle accident. It was further agreed between the parties that the two remaining defendants would have the right to make the motion before the trial judge or jury at trial on the merits of the cross-claims and claims for contribution and indemnity. The employment status of those parties was left undetermined, and was to be decided at trial. The two remaining defendants were limited in their ability to obtain contribution from the remaining defendants as against them in this matter. This case illustrates the complexities of the use of the Pierringer Agreement, and the various considerations for the parties to have in mind when contemplating use of this instrument.

Commonly Asked Questions about Pierringer Agreements

Q: What is a Pierringer Agreement?
A: A Pierringer Agreement is a type of settlement agreement that releases all parties in a lawsuit except one or more "non-settling defendants." This allows the plaintiff to proceed against the non-settling defendant(s) without fear of violating any settlement agreement with other parties in the case. This type of agreement is commonly used when an expert review of the circumstances indicates that the claim against one person/agency/person or company is more substantial than the others – and a jury should understand that .
Q: How does it affect my case if a Pierringer Agreement is used?
A: If a Pierringer Agreement is used, your case will be affected by why the underlying lawsuit was filed. For example, if the plaintiff tripped on a foreign item on the floor of a convenience store, and it is determined that the store should have known of the substance’s presence at least a few minutes prior to the incident, the store may be sued along with the person/party who dropped the substance. If the store then agrees to a Pierringer Agreement, the plaintiff can only move forward with the claim against the other party and cannot go back after the convenience store -unless he/she files a new, separate lawsuit against it.