Sable Offshore Energy Inc. v. Ameron International Corporation et al. – 2013 SCC 37

Sable sued a number of defendants for supplying it with corrosion-resisting paint which allegedly failed to prevent corrosion. Sable settled and signed Pierringer Agreements with some of them. The non-settling defendants sought disclosure of the amounts the parties settled for. 

“[A] Pierringer Agreement 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. There is no joint liability with the settling defendants, but non-settling defendants may be jointly liable with each other.” [6]

In this case, all the terms of the Pierringer Agreements were disclosed to remaining defendants, except the amounts agreed to. Furthermore, in accordance with the Agreements, all the relevant evidence in the possession of the settling defendants would be given to the plaintiff and be discoverable by the non-settling defendants. [7]

The Court held that the amounts are protected by settlement privilege, and refused to order their disclosure.

The Court stated that settlement privilege is “a class privilege.  As with other class privileges, while there is a prima facie presumption of inadmissibility, exceptions will be found ‘when the justice of the case requires it’.” [12]

“[T]he protection is for settlement negotiations, whether or not a settlement is reached.  That means that successful negotiations are entitled to no less protection than ones that yield no settlement.” [17]

“Since the negotiated amount is a key component of the ‘content of successful negotiations’, reflecting the admissions, offers, and compromises made in the course of negotiations, it too is protected by the privilege.” [18]

There can be exceptions to privilege if the if the party arguing against privilege can show, on balance, that “a competing public interest outweighs the public interest in encouraging settlement.” [19] In this case, there is no “tangible prejudice created by withholding the amounts of the settlements which can be said to outweigh the public interest in promoting settlements.” [20]

Commentary

This decision is particularly relevant to patent litigation, which is prone to ensnaring multiple defendants. First, s. 42 of the Patent Act grants the patentee an exclusive right to make, use, and sell his or her invention. As such, multiple links in the distribution chain, provided they all have notice of the patent, may be liable for patent infringement. In addition, importers of infringing goods as well as those who induce others to infringe may also be liable. Given the multiplicity of potential defendants in patent infringement cases, the Supreme Court’s setting out of a robust doctrine of settlement privilege and endorsement of Pierringer-like agreements is likely to facilitate speedier resolution of these complex proceedings.