Elbaor v. Smith

Brief Fact Summary.

The Plaintiff, Ms. Smith (Plaintiff), brought claims against multiple defendants for medical malpractice. Plaintiff entered into Mary Carter agreements with several defendants, in which the defendants effectively settled before trial, then participated in the trial as defendants assisting the plaintiff in her suit against the remaining defendant. The remaining defendant challenged the validity of the Mary Carter agreements.

Synopsis of Rule of Law.

The Texas Supreme Court has voided the validity of Mary Carter agreements based on public policy considerations.

Facts.

The Plaintiff suffered serious injuries as a result of an automobile accident and required significant medical attention. She was treated at various times by Dr. Syrquin, Dr. Elbaor, Dr. Stephens and Dr. Gatmaitan. Plaintiff filed medical malpractice claims against the Defendants, all four above doctors, D/FW Medical Center, and Arlington Community Hospital (ACH), (Defendants) due to a fused ankle that resulted from treatment. Prior to trial, Plaintiff settled and dismissed her claim against D/FW Medical Center and non-suited her claim against Dr. Gatmaitan. She also entered into “Mary Carter” settlement agreements with Dr. Syrquin, Dr. Stephens and ACH. The agreements provided that they would pay plaintiff a total of $425,010, remain as defendants, participate in the trial, and be paid back all or a portion of the settlement money out of the recovery against Dr. Elbaor. Dr. Elbaor requested the agreements be voided, or the settling Defendants be dismissed from trial. The tria
l court denied the requests and proceeded with trial. The jury awarded Plaintiff damages in the amount of $2,253,237, allocating responsibility between Dr. Elbaor (88%) and Dr. Syrquin (12%). The trial court entered judgment against Dr. Elbaor for $1,872,848. The Court of Appeals affirmed.

Issue.

Are Mary Carter agreements void as against public policy?

Held.

Yes. Judgment reversed and remanded for new trial.
* Mary Carter agreements are agreements where a plaintiff enters into a settlement agreement with one defendant and goes to trial against the remaining defendants. The settling defendant remains a party and guarantees the plaintiff a minimum payment, which may later be offset by an excess judgment recovered at trial. These agreements create an incentive for the settling defendant to assist the plaintiff in receiving a sizably recovery.
* The trial court recognized this incentive and took remedial measures to mitigate the effects of the agreement. These measures included reapportioning preemptory challenges, changing the order of proceedings to favor the adverse Defendant, allowing counsel to explain the agreements to the jury and instructing the jury regarding the agreements.
* Throughout the trial the settling Defendant’s attorneys sat with Dr. Elbaor’s attorneys, but vigorously assisted the plaintiff in placing the majority of the blame on Dr. Elbaor.
* This Court believes that Mary Carter agreements do not accomplish what most court approved agreements do, help to promote settlement. Although allowing for partial settlement, Mary Carter agreements nearly always ensure a trial will occur. Many jurisdictions have chosen to tolerate these agreements, some with protective measures such as those taken by the trial court.
* This Court believes that the negative effects of Mary Carter agreements outweigh any potential benefits. They create a false sense of adversity between plaintiff and one co-defendant, with the parties actually being allied. They also pressure the settling defendant to contribute discovery material, peremptory challenges, trial tactics and supportive witness examination. Remedial measures cannot overcome these effects. Because the public policy favoring fair trials outweighs that of favoring partial settlements, the Court declared Mary Carter agreements void as violative of sound public policy.

Dissent.

The trial court went to great lengths to ensure that the agreements were not hidden from the jury and did not unduly favor the Plaintiff. As long as two parties to the trial remain antagonistic, the adversarial process should still effectively result in discovery of the truth.

Discussion.

The dissent’s opinion represents the majority view in the United States, with most jurisdictions allowing for Mary Carter agreements.