A recent decision of the Supreme Court of Canada has ruled that
in a multi-party lawsuit, a plaintiff that settles with only some
defendants can keep the settlement amounts confidential from the
non-settling defendants, at least until the liability of
non-settling defendants is determined. The Court's underlying
rationale is that this advances the public interest in promoting
settlement of lawsuits.
In Sable Offshore Energy Inc. v. Ameron International
Corp., 2013 SCC 37, a decision released on June 21, 2013, the
plaintiff sued suppliers of paint, and contractors that had applied
the paint to the plaintiff's structures. The plaintiff entered
into Pierringer Agreements with only some of defendants. Pierringer
Agreements allow certain defendants to settle with the plaintiff,
while leaving the non-settling defendants potentially liable only
for the loss they actually caused. All the terms of the settlement
agreements were disclosed to the non-settling defendants except for
the settlement amounts. Also, to avoid the possibility of being
overcompensated, the plaintiff agreed to disclose the settlement
amounts to the trial judge once the liability of the non-settling
defendants had been determined.
The non-settling defendants applied to the Nova Scotia Supreme
Court to compel the plaintiff to disclose the settlement amounts,
arguing that non-disclosure impaired their ability to defend the
case and impeded their own settlement initiatives.
The Nova Scotia Supreme Court dismissed the application, but the
Nova Scotia Court of Appeal overturned that decision and ordered
disclosure of the settlement of amounts. The plaintiff appealed to
the SCC, which allowed the appeal and refused to order disclosure
of the settlement amounts.
The SCC began by noting the public interest in promoting the
settlement of lawsuits, in that settlement saves litigants the
expense of a trial and conserves judicial resources. The SCC then
recognized that settlement privilege promotes this public interest
because settlement negotiations will more be more open, and
therefore more fruitful if the parties know that the content of
settlement negotiations cannot ultimately be disclosed.
Prior to the SCC decision, some lower court decisions had
indicated that settlement privilege protected only settlement
negotiations, but not concluded settlement agreements. In contrast,
the SCC adopted "an approach that more robustly promotes
settlement" by indicating that settlement privilege extends to
the settlement agreement, as well as the settlement negotiations.
The settlement privilege will be lifted only in exceptional cases
where the non-settling defendants can show that a competing public
interest outweighs the public interest of encouraging settlement,
and not merely that disclosure is tactically advantageous to the
As the SCC noted, "someone has to go first" when
settling multi-party litigation. A plaintiff can now enter into
settlement agreements with greater assurance that the non-settling
defendants will not be able use the settlement amounts to measure
the plaintiff's negotiation position. Defendants now have less
incentive to take a wait-and-see approach to assess how settling
defendants fared in their settlement negotiations with the
plaintiff. While the dynamics that drive settlement are unique to
each case, the SCC's decision has, on balance, arguably made
the law more conducive to settlement of multi-party litigation.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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