Boulder LLC Lawyer | LaszloLaw

Can You Make A Secret Settlement–A “Mary Carter Agreement”?

The Boulder Business Lawyers of LaszloLaw On Whether You Can Ever Make A “Mary Carter Agreement”

ABoulder Business Lawyer | LaszloLaw recent Louisiana court of appeal opinion involved a question of whether there existed a “Mary Carter” agreement–the “backroom deal” that isn’t disclosed.

In Hutto v. McNeil-PPC, Inc., McNeil was one of three defendants in a tragic case involving the death of an infant who was given multiple doses of Infant Tylenol at the direction of a nurse and who assumed the parents had Children’s Tylenol, and parents who asumed the nurse’s instructions called for infant Tylenol, a weaker version of the drug. The infant died from liver failure secondary to acetaminophen toxicity.

Prior to trial, the hospital admitted liability and paid the Plaintiffs $100,000. Due to the hospital’s admission of liability, the Patients Compensation Fund entered the case to defend on the issue of causation and damages. Plaintiffs and PCF entered into an agreement whereby the Plaintiffs and Defendant PCF would jointly cooperate during trial with the goal being to minimize the percentage of fault allocated to the PCF to less than 10%, if any at all and PCF would support the Plaintiff’s damages arguments. The agreement was secret from McNeil and McNeil argued that the secret agreement was a “Mary Carter” agreement which was prejudicial to McNeil.

Briefly, a Mary Carter agreement is an agreement between a plaintiff and one or more, but not all, co-tortfeasor defendants which places a limit on the maximum liability of the settling defendant, and further provides that such sum will be reduced or extinguished (based on the amount recovered) in the event of a recovery against the non-agreeing co-tortfeasor. The plaintiff also agrees to not execute on any judgment against the settling defendant, seeking recourse against only the non-agreeing defendants, and the defendant agrees to continue as a party defendant in the trial of the action.

In finding that the agreement was not a Mary Carter agreement, the Court relied primarily on two things: 1) The fact that the agreement was “not a true compromise because the Plaintiff did not receive any money –  they did not settle their claims against the PCF; and the PCF remained potentially liable to them, albeit for a significantly reduced amount,” and, 2) the fact that the defendant PCF was a “nominal defendant” who’s position was not the same a McNeil’s on account of the fact that PCF entered the litigation with its liability already established. Therefore, the court stated, PCF had no defense to liability and was not, in reality, McNeil’s co-defendant.

Mary Carter agreements are viewed differently in different jurisdictions. In Louisiana, Mary Carter agreements that are not made known to the trier of fact are said to violate public policy as they distort the litigation process. Other jurisdictions will apply off-sets where such a settlement is reached. As a Colorado business lawyer, Mary Carter agreements are not very practical in Colorado as such an agreement would be discoverable. Because the finder of fact is to determine the degree of negligence of the agreeing defendant, any secret agreement’s purpose is eliminated and there is no reason to use one. So, it is very important to know what effect a settlement with one party may have on the outcome of your case against another defendant – especially if the agreement is kept secret from a non-settling party.

Boulder Business Lawyers

The Boulder Business Lawyers of LaszloLaw provide legal counsel for businesses on a variety of business needs, including products liability, risk management, corporate protection, and legal compliance. Contact our Boulder business lawyers today to discuss your business’s legal needs.

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