Summary
declining to order mistrial due to secret settlement agreement between Wausau and Trident
Summary of this case from Wausau Business Insurance Co. v. Turner Construction Co.Opinion
99 Civ. 0682 (RWS)
June 4, 2001
MEMORANDUM OPINION
On Friday afternoon, June 1, 2001, Turner faxed in a letter motion alleging that the plaintiffs and Trident had entered into an unlawful "Mary Carter agreement," and seeking a full hearing. Plaintiffs responded by fax later the same afternoon and disclosed to Turner, Amis and Aris for the first time what they had notified the Court of during settlement discussions on or about May 25: Trident has settled with the plaintiffs for $1.25 million. In a reply letter sent on Saturday, Turner moved for a mistrial based upon this information. I have reviewed all of the relevant authorities, including those Turner provided, and find that a hearing is not necessary because the settlement agreement is not unlawful. I am also denying the motion for a mistrial because the settlement agreement did not violate Turner's due process rights.
A Mary Carter agreement is "an arrangement between a plaintiff and a defendant whereby the exposure of liability of the settling defendant is limited, `usually in some inverse ratio to the amount of recovery which the plaintiff is able to make against the non-settling defendant or defendants.'" American Medical Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 244 F.3d 715 n. 1 (quoting Black's Law Dictionary 974 (6th ed. 1990)). A Mary Carter agreement has several elements: (1) it is kept secret from the nonsettling defendants; (2) the settling defendant remains in the case and defends itself at trial; and, most importantly, (3) the settling parties structure the settlement in such a way as to give the settling defendant a financial incentive to assist the plaintiff in increasing the liability of the nonsettling defendant. See Hoops v. Watermelon City Trucking, Inc., 846 F.2d 637, 640 (10th Cir. 1988) ("It is the last element that is unique to the `Mary Carter' agreement and creates the most unfair prejudice to the non-agreeing defendant and his right to a fair trial."); Leon v. JM Peppe Realty Corp., 190 A.D.2d 400, 388, 596 N.Y.S.2d 380, 414 (N.Y.App.Div. 1993); Ward v. Ochoa, 284 So.2d 385 (Fla. 1973) (coining term and defining Mary Carter agreement as "a contract by which one co-defendant secretly agrees with the plaintiff that, if such defendant will proceed to defend himself in court, his own maximum liability will be diminished proportionately by increasing the liability of the other co-defendants."); Booth v. Mary Carter Paint Co., 202 So.2d 8 (Fla.App.Ct. 1967)).
Most jurisdictions, including New York, hold that such agreements are void as against public policy, because they secretly realign the parties, may confuse juries if not disclosed, and may affect the settling defendant's presentation of evidence in a way that prejudices the nonsettling defendants. See, e.g., Sierra Rutile Ltd v. Katz, No. 90 Civ. 4913 (JFK), 1994 WL 577888 (S.D.N.Y. Oct. 19. 1994) (citing Stiles v. Batavia Atomic Horseshoes, Inc., 579 N.Y.S.2d 790, 793 (N.Y.App.Div. 199 2)).
In this case, however, the settlement agreement, while secret from the nonsettling defendants, was disclosed to me, and was for a sum certain. The agreement gave Trident no new incentive to direct blame at Turner in order to minimize its own financial obligation, which, notably, was a central element of its already existing trial strategy. The agreement did not realign the parties or confuse the relationship of the parties in this case any more than they were already. In fact, it may in fact clarify for the jury that the plaintiffs filed suit against Turner, Amis and Aris, and then Turner sued Trident.
For all of these reasons, the plaintiffs' settlement with Trident is not an unlawful Mary Carter agreement. See Minpeco, S.A. v. Hunt, 127 F.R.D. 460 (S.D.N.Y. 1989) (finding settlement was not unlawful Mary Carter agreement because the defendant's "interest in the case ended" when it settled, and "it had no stake in the judgment recovered by [the plaintiff]."); Banovz v. Rantanen, 649 N.E.2d 977, 982 (Ill.App.Ct. 1995) (holding settlement was not unlawful Mary Carter agreement because "it] does not give the settling defendant any financial interest in the amount recovered from a nonsettling defendant, it does not give the settling defendant a financial incentive to bolster the plaintiff's case, and it does not effect a change in the relationship of the codefendants.").
As Wausau notes in its letter, Turner is the party that first joined Trident to this action. The fact that the plaintiffs adopted Turner's claims against third-party defendants does not relieve Turner of its burden of proof as a third-party plaintiff in its action against Trident, now that the plaintiffs have withdrawn their action against Trident.
The agreement was lawful and had no effect on Turner's right to due process and a fair trial. See Rogers v. City of Detroit, 579 N.W.2d 840, 842 (Mich. 1998) (no due process violation where defining element of Mary Carter Agreement — financial incentive for settling defendant to increase nonsettling defendant's liability — was absent), rev'd on other grounds, Robinson v. City of Detroit, 613 N.W.2d 307 (Mich. 2000); Garrett v. Mohammed, 686 So.2d 629, 630 (Fla.App.Ct. 1996) (affirming trial court's denial of mistrial after nonsettling defendant discovered during trial the existence of lawful secret settlement "high-low" agreement between another defendant and plaintiff, because agreement did not require settling defendant to remain in case, and settlement was subject to discovery by nonsettling defendant).
The settlement was made at the close of the plaintiffs' case. Although Turner did not have the opportunity to cross-examine any Trident witnesses about the agreement due to the timing of this revelation, Trident called only Keith Kloiber in its defense case after the agreement was made. New York courts have upheld secret agreements and declined to find a due process violation where the testimony of a settling defendant's witness is called for in the agreement. See Minpeco, 127 F.R.D. at 464 (no due process error where lawful secret agreement made prior to trial called for testimony of two settling defense witnesses and nonsettling defendant did not cross settling defense witnesses on the settlement). All Turner has lost is the plaintiffs' assistance in building its case against Trident, which does not implicate Turner's right to due process. See Ryals v. Hall-Lane Moving and Storage Co., Inc., 468 S.E.2d 69 (N.C.App.Ct. 1996) (finding no due process violation where nonsettling defendant argued it had relied on expectation that plaintiff would have presented evidence against defendant who entered into secret settlement agreement, where, as one defense attorney described the atypical alignment of parties, "This is sort of defendants scratching each others' [sic] eye's out.").
For the foregoing reasons, the motion for a mistrial is denied.
It is so ordered.