Mary Carter Agreement

Where some defendants settle with a plaintiff a term of which is a loan by the settling defendant to the plaintiff, to be repaid by any monies recovered from the remaining defendant(s).

In Mateo v United States, a 2006 decision of the US District Court for Middle Florida, Tampa Division, justice Kovachevich wrote:

"Mary Carter agreement is one in which a co-defendant secretly agrees with the plaintiff that, if that defendant will defend himself in court, his own maximum liability will be proportionately lessened by increasing the other co- defendants' liability.

"Secrecy is the key to this type of arrangement, as the trier of facts, if so informed, would likely vary the credence given to the testimony and conduct of the signing defendant as it relates to the non-signing defendants. Id.

"Additionally, by portraying a grim picture of the other defendants' misconduct or, sometimes, by admissions against himself and the other defendants, the cooperating co-defendant could lessen or dispose of his own liability via use of the secret Mary Carter agreement.

"Finally, it is the public policy of the State of Florida to promote settlement and early termination of litigation."

These types of agreements are problematic as on the one hand, they promote the settlement of litigation by eliminating a cause of action as against the settling defendant, but on the other hand they promote litigation by subsidizing it as against those defendants who are not part of the Mary Carter Agreement.

The term comes from the first case in which it was raised by a defendant: Booth v. Mary Carter Paint Co., (Florida Distrist Court of Appeal, 1967, cited at 202 So.2d 8).

As the Supreme Court if Illinois said in Reese v. Chicago, Burlington & Quincy Railroad Company, 1973, published at 55 Ill.2d 356, on point:

"(W)e contemplate those situations in which a concurrent tortfeasor, perhaps otherwise unable to obtain indemnity from his joint tortfeasor, may escape liability and judgment by loaning funds to a plaintiff.  Thus framed, the question becomes whether our policy of denying contribution between joint tortfeasors outweighs the considerations favoring private settlement of lawsuits.  We think it does not."

In Canada, in specific reference to a Mary Carter Agreement, the Ontario judge said in Bodnar v Home Insurance Co., 1987, published at 25 CPC 2d 152, and contrary to ther Florida court's comments in regards to secrecy above:

"Any secret agreement between two or more parties which may affect the outcome of the litigation should be revealed to the other counsel and the Court."