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Using Pierringer agreements in class proceedings

4 minute read

Pierringer settlement agreements have been increasingly utilized in Canada.

The Supreme Court of Canada in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, at paragraph 6 of its decision, described Pierringer agreements as an agreement that “allows one or more defendants in a multi-party proceeding to settle with the plaintiff and withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused.”

Pierringer agreements (the name stems from the U.S. case, Pierringer v. Hoger, 21 Wis. 2d 182 (1963)) tend to be well-suited to the class proceedings context. Often class actions involve claims against multiple defendants. A Pierringer agreement is one way a defendant may settle with the plaintiffs while the class action continues against the non-settling defendants.

In the seminal case approving a Pierringer agreement in a class proceeding, Justice Warren Winkler, as he then was, in Ontario New Home Warranty Program v. Chevron Chemical Co., [1999] O.J. No 2245, determined that the court had authority to approve a settlement involving a Pierringer agreement. At paragraph 40 of the decision, the court noted that the authority to do so came from s. 12 and 13 of the Class Proceedings Act, 1992 (the CPA):

“I do, however, find that the underlying principles on which ‘bar orders’ are granted in the American cases have some application to these proceedings. Moreover, the Class Proceedings Act provides a specific mechanism through which these objectives can be achieved in class proceedings in Ontario. Under s. 13 a court may ‘stay any proceeding related to the class proceeding before it, on such terms as it considers appropriate’. This broad discretion is buttressed by s. 12 which permits the court, on a motion by a party or class member, to make such orders as are necessary to ensure the fair and expeditious determination of the class proceeding.”

Recently, the Ontario Court of Appeal in Endean v. St. Joseph's General Hospital, 2019 ONCA 181, reiterated the essential provisions of a Pierringer agreement at paragraph 52 of the decision noting:

“(1) The settling defendant settles with the plaintiff;

(2) The plaintiff discontinues its claim [against] the settling defendant;

(3) The plaintiff continues its action against the non-settling [defendant] but limits its claim to the non-settling defendant's several liability (a ‘bar order’);

(4) The settling defendant agrees to co-operate with the plaintiff by making documents and witnesses available for the action against the non-settling defendant;

(5) The settling defendant agrees not to seek contribution and indemnity from the non-settling defendant; and

(6) The plaintiff agrees to indemnify the settling defendant against any claims over by the non-settling defendants.”

 

In Allianz v. Canada (Attorney General), 2017 ONSC 4484, a class action arising out of incidents involving an aircraft, the court reiterated the public policy in favour of supporting settlements, noting at paragraph 11 of the decision that “Pierringer agreements should be approved and supported if possible because there are benefits to the parties involved in the litigation but also systemic benefits to the justice system as a whole.”

Pursuant to the CPA, the statute governing class proceedings in Ontario, a settlement of a class proceeding is not binding unless approved by the courts. The court cannot modify the terms of a proposed settlement. The court can only approve or reject the settlement.

The court has commented on the role comity plays in multi-jurisdictional class proceedings. In Ali Holdco Inc. v. Archer Daniels Midland Co., 2010 ONSC 3075, at paragraph 27 of the decision, the court noted, “…judicial comity and the goal of certainty in litigation outcomes makes it essential that the courts in the class action jurisdictions in Canada afford considerable weight to the decision in other Canadian jurisdictions in identical class action claims.”

Pierringer agreements can be a useful tool to both plaintiffs and defendants involved in a class proceeding. It can be especially helpful in cases where a parallel proceeding has been started in another jurisdiction. A parallel proceeding is one where the proposed class and subject matter overlaps or potentially overlaps with a proposed or certified class action in another province or territory.

In Shah v. LG Chem Ltd., 2018 ONSC 6101, the Ontario Superior Court of Justice considered a settlement agreement involving defendants in parallel proceedings in Ontario and Quebec. The settlement agreement was conditional upon the approval of the Ontario and Quebec courts. An essential term in many Pierringer agreements involves a condition that the settlement agreement is conditional upon the approval of the court in all jurisdictions of any parallel proceedings.

The courts have long recognized an overriding public interest in favour of settlement noting that a settlement achieves access to justice, behaviour modification, and judicial economy, the three goals of class proceedings legislation. As more and more class proceedings continue to appear across Canada, the class actions bar should anticipate the more wide-spread use of Pierringer agreements as a means of resolving these types of actions.

 


This article originally appeared on The Lawyer's Daily website published by LexisNexis Canada Inc.

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