What Is A Mary Carter Agreement
A Mary Carter Agreement is a contractual intervention in litigation wherein one party, usually the plaintiff, settles with one or more defendants, prior to trial. The remaining defendant (or defendants) then asserts the joint tortfeasor statute in defense of its fault, usually while seeking apportionment under the statute. That fault, of course, should have been alleged against the settling party (or parties) but for which only the settlements (or payments) are public in the end, and so the lawsuit is tested against a lesser measure of fault in the jury room so that a verdict need only be reached upon knowledge of the defendant’s (or defendants’) fault.
The first such agreements and their formal name, the "Mary Carter" agreement , arose in 1963 when the Florida supreme court decided Mary Carter Paint Co. v. 2400 North Atlantic Condominium Ass’n 5-6, 247 So.2d 338 (Fla. 1963), allowing the plaintiff to share in the liability verdict entered on the other defendant’s claim of active and/or primary fault while retaining its right to collect the entirety of the verdict from the remaining defendant. Id. The terms of the agreement were not disclosed to the jury.
Mary Carter agreements launched what became known as the "Mary Carter" rules, governing whether and under what circumstances such agreements would be binding on the courts and admissible to the jury. Viewed otherwise, the rules, in effect, define the Mary Carter agreement for litigation purposes.
Major Characteristics of Mary Carter Agreements
Mary Carter agreements have a deceptively simple structure. They typically consist of a release and covenant not to sue between a plaintiff and a settling defendant, coupled with a further agreement between the same parties that provides for shared liability among all defendants, even non-settling defendants. Yet they pose serious problems for courts and practitioners. The in terrorem effect of a Mary Carter agreement – the potential to cause non-settling defendants to capitulate, lest they be burdened with excess liability – accounts for much of their infamy. Even so, those who deploy them can run afoul of procedural and substantive law. The most provocative feature of a Mary Carter agreement is the dual nature of the settlement. On one hand, it is a release dealing with the settling defendant. On the other, it is a division of liability among the settling and non-settling defendants. Recognizing that consonant yet conflicting nature is key to understanding the continuing propriety of these settlements. The typical Mary Carter agreement requires the settled defendant to make both a payment to the plaintiff, as well as set the settling defendants’ comparative fault at no more than some agreed upon level; this is usually 0% or 25%. The non-settling defendants are then responsible for any remaining fault. In this sense the Mary Carter agreement resembles a "dismissal with a covenant not to sue." But the ongoing purpose of the Mary Carter agreement redeeming its name is its tendency toward overstatement. Not only does the settling defendant settle, but it must also put a thumb on the scale to show that any fault that could fairly be laid against it must be subject to some modest amount of liability, and then do so in such a way that the settling defendant remains taking some blame for the accident.
Legal Consequences and Problems
The legal implications surrounding Mary Carter Agreements are twofold. As shown in Rogers, these agreements can provide resolution earlier in litigation. In fact, when the agreement was executed in Rogers, it allowed the parties to settle the initial case between the plaintiff and defendants in an "expeditious fashion." On the other hand, Mary Carter Agreements can come with complications. This is because the Agreements deviate from the purpose of the comparative fault statute itself, which is apportioning fault among all parties. In Roger v. Quester, 40 S.W.3d 24 (Tenn. Ct. App. 2000), the Tennessee Court of Appeals explained that: The comparative fault statute serves the purposes of fairness and equity, as the comparative fault statute requires proportionality or relative contributions to the injury by each tortfeasor. One among overreaching, abusive and deceptive use of Mary Carter Agreements is when a tortfeasor makes the settlement for less than the amount of his or her equitable share of the liability for the injury. The receipt of this amount, if not disclosed to the Court and jury, is to the disadvantage of the defendant who fails to enter into an undisclosed Mary Carter Agreement and who receives a verdict against him or her, and the plaintiff who agrees to the "no settlement" position of such defendant, who may be seeking a set-off for the tortfeasor’s equitable share of the amount apportioned to him, who has saved "the windfall" to the disadvantage of society and public. Other courts are similarly skeptical in their applications and interpretations of the Mary Carter Agreements. In Martin v. Nicholson, 662 A.2d 726 (Pa. 1995), the Supreme Court of Pennsylvania expressed its disapproval of Mary Carter Agreements, stating that "[i]n our view, the common law rule should not be abrogated to permit such non-monetary contributions from a settling defendant." Martin v. Nicholson, 662 A.2d 726, 731 (Pa. 1995). Similarly, in Hoppes v. Water Works, Inc., 823 N.E.2d 1, 7 (Ohio Ct. App. 2004), the court held that Mary Carter Agreements are enforceable, but are not an exception to the "time-honored rules of equity." That is, they do not supplant the well-established principle of equity that a party may not settle its claims against one or more of several joint tort-feasors while letting another joint tort-feasor pay the entire price. As can be observed from above, Mary Carter Agreements generally have a negative connotation; however, they can be an effective instrument to reach settlements before trial.
Pros and Cons
The Mary Carter "settlement" agreement does have its benefits. If a sole defendant in a multi-defendant case and plaintiff’s counsel are in cahootz, and the sole defendant is the only defendant who could really pay a judgment, the plaintiff, by entering into a Mary Carter agreement, gets some money to use to prosecute his or her case, and it obtains the power to dismiss the settlements – essentially buying the cooperation of the settling defendant as an ally against any hold-out co-defendants.
On the other hand, Mary Carter Agreements are not without disadvantages to the plaintiff. A plaintiff who has entered into a Mary Carter agreement remains the nominal plaintiff in the case, and so must bear the responsibility (both to co-defendants and to the court) for all of the plaintiff’s actions or inaction, unless the trial court relieves the plaintiff of that responsibility. But most importantly , once the settling defendant becomes a collaborative co-plaintiff in the action, that defendant cannot be relied upon to represent the plaintiff’s interests. By virtue of the manufactured alliance, the settling defendant and its insurer cannot be relied upon to present an aggressive case against a hold-out defendant. Placing reliance on the financial strength of a settling defendant, which is not the real party in interest, a plaintiff runs the risk of losing by summary judgment against it any claim for liability contribution by the co-defendants against the "settler."
That loss can become even more pernicious because the settling defendant, while still nominally a party, is now a party in the action that is actually aligned with the plaintiff, and therefore "disinterested" for rules of evidence purposes, such that the same statements by the settling defendant can bind the plaintiff against whom they were made.
Notable Case Examples of Mary Carter Agreements
The use of Mary Carter Agreements has been the subject of many significant legal cases. One of the earliest was that of the Missouri Supreme Court in West Point-Pepperell, Inc. v. Jefferson, 486 S.W.2d 432 (Mo. 1972). In this case, the court struck down a secret settlement agreement between the plaintiff and one of the defendants after determining that it facilitated the remaining defendant’s liability. The trial court had held that the agreement did not violate the state’s law against non-disclosure or non-assertion agreements but the Supreme Court overturned this distinction, stating that the ultimate effect of the agreement was to conceal its full benefits of the plaintiff, which violated the statute. This was one of the first times that a court invalidated a Mary Carter Agreement on the basis of concealment of its terms.
Another important case involving Mary Carter Agreements came before the Illinois Supreme Court in Potter v. Plumbers’ Local Union 200, 89 Ill. 2d 1 (1982). Like West Point-Pepperell, Inc., the court found the agreement in Potter violated the Illinois public policy against covenants not to sue. In a 4-2 decision, the court held that the general enforcement of secret settlements was against the public interest because it allowed financially advantaged litigants to pay off potential liability and kept it private. Although the court did not strike down the participant’s agreement, it ruled that it could not be used at trial.
Courts in other states dispute the Illinois Supreme Court decision. The Wisconsin Supreme Court rejected the Potter analysis in her case of Alsteen v. Capital Cities Communications, Inc., 139 Wis. 2d 428, 407 N.W.2d 548 (1987). The court in Alsteen noted that if a Mary Carter agreement between a plaintiff and a defendant was general enforceable at the trial court level, actual cases showing the agreement’s inconsistency with the law would need to be cited. In other words, the court deferred to the trial court’s ruling against the Illinois view.
Up-to-Date Legal Developments and Future Implications
The current legal landscape demonstrates that Mary Carter Agreements remain a point of contention, with courts cautiously weighing the potential for abuse with the need to promote early settlement. Courts regularly provide directions and instruction on how to craft these agreements in order to respect the doctrine, most notably to avoid predictability regarding the settlor’s eventual payout and to avoid circumvention of the limitations established in Moeller and similar cases. Courts will also tightly curtail scenarios where the plaintiff has potential means to recover from the settlor that would defeat settlement leverage to the extent it is available. Recent trials have shown that instance where settlement leverage is available to a defendant remain the most likely to survive to verdict. The future should see an increase in judicial scrutiny regarding the interplay between the settlement and the settlement amount and the persuasiveness of the indicia of ongoing finality of settlements that Courts have emphasized , including alleging continuing negligence against the settling defendant, barring involvement by the settling defendant at trial, and the extent to which the settling defendant will participate in damages allocation.
Mary Carter Agreements will continue to be permitted as valid components of a global settlement with careful drafting. A trial court judge will be instrumental in obtaining adequate information about the settlement to make an educated determination about the appropriate limits of the agreement.
Future trends will likely include further innovations to address the repeated concerns of justice systems. For example, a meaningful leveling of the playing field for individual defendants as part of a larger settlement negotiation between the plaintiff(s) and a corporate or institutional defendant may be included within the agreement itself. This could come in the form of not using the joint or comparative fault rules, prejudice against later non-settling defendants (e.g., through special jury instructions), or indemnity by the plaintiff.