Moore v Bertuzzi - Settlement Privilege

This case involed an appeal from the decision of Master Dash of the Ontario Superior Court of Justice. Master Dash ordered the defendant, Todd Bertuzzi and the defendants Orca Bay Hockey Limited Partnership, Orca Bay Hockey Inc., Vancouver Canucks Limited Partnership and Vancouver Hockey General Partners Inc. (collectively "Orca Bay") to disclose their settlement agreement to the plaintiffs, Steve Moore and his parents.
In February 16, 2004, when Moore was playing with Colorado Avalanche, in a game between the Avalanche and the Vancouver Canucks, Moore checked Markus Nasland, the Canucks' team captain and the league's leading scorer. Nasland was injured but there was no penalty on the play and after the NHL's review Moore was not disciplined. NHL officials warned Canucks' management against any retaliation against Moore.
However, unfortunately for the Vancouver Canucks their General Manager was Brian Burke. Marc Crawford, the Vancouver coach, called the hit by Moore a "cheap shot". Three weeks later on March 8, 2004, in a game in Vancouver between the two teams Bertuzzi jumped on Moore from behind, drove him into the ice. Moore broke his neck and suffered a brain injury. Bertuzzi was suspended by the NHL.
Bertuzzi subsequently pleaded guilty to a criminal charge of assault causing bodily harm. On February 14, 2006, Moore and his parents commenced a civil action against Bertuzzi and Orca Bay. Initially Moore sued Bertuzzi directly and sued Orca Bay for being vicariously liable for Bertuzzi's conduct. Moore sued Bertuzzi for assault and punitive damages claiming $41.5 million. Bertuzzi and Orca Bay delivered statements of defence and cross-claimed against the other for contribution and indemnity.
At discovery, Bertuzzi testified that Crawford told the Canucks players that Moore had to "pay the price". As a result, in February of 2008, the Moores were granted leave to amend the statement of claim to sue Orca Bay directly and not just vicariously. After the amendments, Bertuzzi issued a third party claim against Crawford. Crawford defended the third party claim but did not defend the main action.
On November 17, 2007, Master Dash was assigned as Case Management Master.
On January 26, 2010, the main action was set down for trial and on September 29, 2010, the third party action was set down for trial.
Between July 13 and July 18, 2011, Bertuzzi, Orca Bay and Crawford, signed a settlement agreement to settle the cross-claims and third party claim. They did not advise the Moores that they had settled the claims against each other.
On July 21, 2011, a case conference was held to set trial dates. The defendants did not bring their settlement to the Moores' attention or to the attention of the case conference judge.
Moore and his parents did not find out about the settlement until the defendants obtained an order dismissing the third party action without costs. On September 22, 2011, Moore's lawyer wrote to the lawyers for the other parties and asked them to produce the details of the settlement. The lawyers for Orca Bay and Bertuzzi ignored the letter.
At the motion before Master Dash, Master Dash ordered that the settlement agreement be produced. He concluded that the defendants were disqualified from asserting settlement privilege because their settlement agreement was akin to a Mary Carter agreement. He also concluded that settlement agreements were subject to a case by case privilege with the onus being on the party claiming privilege to show that the "Wigmore" criteria were satisfied.
Justice Perell of the Ontario Superior Court heard the appeal. Justice Perell found that the Master had erred in treating settlement privilege as a case by case privilege rather than as a categorical or class privilege. However, he agreed with the Moores that it was not necessary to decide this point because in either event the defendants were disqualified from asserting privilege for their settlement agreement. He found that there are exceptions to settlement privilege. Mary Carter agreements are just one example of an exception to settlement privilege. In Justice Perell's opinion, Master Dash was correct in ordering that the settlement agreement be disclosed.
Justice Perell's reasons were as follows:
There are certain types of agreements, such as Mary Carter Agreements and Pierrenger Agreements, that the courts have held must be disclosed to the court and to the other parties to avoid an abuse of process.
Mary Carter Agreements
Mary Carter agreements originated in the Florida case of Booth v. Mary Carter Paint Co. (1967). The features of such an agreement are:
1. the settling defendant settles with the plaintiff but remains in the lawsuit and may pursue cross-claims against the non-settling defendants;
2. the settling defendant guarantees the plaintiff a specified monetary recovery;
3. the exposure of the settling defendant is capped at the specified amount;
4. the settling defendant's liability can be decreased in direct proportion to any monetary recovery above the amount that it is offering to pay to the plaintiff; and
5. the non-settling defendants are exposed only to several liability and no longer to joint and several liability.
The structure of a Mary Carter agreement provides an incentive for the plaintiff and the settling defendant to cooperate to maximize the quantum of the plaintiff's recovery because the defendant's liability is capped and the amount it pays to the plaintiff may be reduced in direct proportion to the amount above the capped amount determined at trial to be owed to the plaintiff. The practical effect of this is that the settling defendant shares in the plaintiff's recovery. As a result, Mary Carter agreements must be disclosed because, if undisclosed, these types of agreements distort the "adversarial orientation of the litigation". The abuse is that if the agreement is not disclosed, the judge or jury will have a misleading basis for understanding the evidence since parties that appear to be adversaries are really allies.
In the Canadian case of Pettey v. Avis Car Inc., Justice Ferrier of the Superior Court of Justice held that Mary Carter Agreements were legal in Ontario but they had to be disclosed to the parties and to the court as soon as the agreement was made. The non-settling defendants must be advised immediately because the agreement may well have an impact on the strategy and line of cross-examination to be pursued and evidence to be led by them. The non-settling parties must also be aware of the agreements so that they can properly assess the steps being taken from that point forward by the plaintiff and the settling defendants. Justice Ferrier held that procedural fairness requires immediate disclosure. Most importantly, the court must be informed immediately so that it can properly fulfil its role in controlling its process in the interest of fairness and justice to all parties.
Pierrenger Agreements
Pierrenger Agreements are named after the Wisconsin case of Pierrenger v. Hoger (1963). The features of a Pierrenger Agreement are:
1. the settling defendant settles with the plaintiff;
2. the plaintiff discontinues its claim or action against the settling defendant;
3. the plaintiff continues it action against the non-settling defendants but limits its claim to the non-settling defendants several liability (also called a bar order);
4. the settling defendant agrees to cooperate with the plaintiff by making documents and witnesses available for the action against the non-settling defendants;
5. the settling defendant agrees not to seek contribution and indemnity from the non-settling defendants; and
6. the plaintiff agrees to indemnify the settling defendant against any claims over by the non-settling defendants.
A Pierrenger agreement allows the settling defendant to extract itself from participating in litigation in whole or in part. The practical effect is that there is little reason for the settling defendant to participate. Usually he has settled with the plaintiff and obtained a release and since the plaintiff agrees to sue the non-settling defendants only for their several liability, the settling defendant does not have to be worried about a claim for contribution and indemnity because he is protected by the plaintiff's undertaking to indemnify him from that sort of thing.
In the Canadian case of Noonan v. Alpha-Vico, Master McLeod held that these types of agreements in Canada were legal but that there were several reasons for disclosing them.
First, the amounts received by the plaintiff were relevant to the quantification of the plaintiff's damages and whether the plaintiff had mitigated its loss or received double recovery.
Secondly, non-settling defendants needed to be told about the settlement in order to update their litigation planning and strategy including whether to make their own offer to settle.
Thirdly, the court immediately needed to know the extent to which, if at all, the settlement agreement influenced the adversary system. The court must be able to properly fulfil its role in controlling the adversary process in the interests of fairness and justice to all parties.
Justice Perell held that a case called Aecon Building was an example of the vigour and rigour of the court's insistence on disclosure. The necessity of disclosing the reality of the adversarial orientation of the parties is not confined to the circumstances of Mary Carter agreements or Pierrenger agreements. Other cases have held that non-settling defendants have a right to review the settlement agreements to the extent that the agreements have an impact on litigation strategy, the design of cross-examinations and the evidence to be led at trial.
Caselaw from across Canada suggested there is an over-arching general principle that establishes an exception to the privilege and confidentiality of settlement agreements and is not confined to circumstances of Mary Carter agreements and Pierrenger agreements.
Justice Perell held that the court needs to understand the precise nature of the adversarial orientation of the litigation in order to maintain the integrity of its process, which is based on a genuine not a sham adversarial system in which maintenance of integrity may require the court to have an issue–by –issue understanding of the positions of the parties.
The caselaw establishes that settlement privilege is not absolute and that it admits exceptions where settlement agreements must be disclosed to non-settling parties. Disclosure must be made immediately when the agreement changes the adversarial orientation of the lawsuit or the court needs to know about the settlement in order to maintain the fairness and integrity of the process.
In this case he saw no reason not to disclose the complete details of the settlement agreement between Bertuzzi, Orca Bay and Crawford.

Regards,

Blair