Torts II, Pages 404–407

Elbaor v. Smith

Supreme Court of Texas, 1992

Facts:

Plaintiff was injured in an automobile accident and multiple hospitals and doctors treated her. Her ankle joint fused afterwards, and sued the hospitals and doctors. She then settled, non-suited, and entered into Mary Carter agreements with all of these parties besides defendant Elbaor.

Note:

A Mary Carter agreement is where a defendant agrees to settle and be paid back out of the recovery from the remaining defendants. Often these defendants will still participate in the trial on plaintiff's behalf.

Procedural History:

  • The trial court denied defendant's request. At trial, Elbaor was found 88% responsible and Syrquin was found 12% responsible, and judgment was entered against Elbaor for $1,872,848.

  • The court of appeals affirmed.

Defendant's Argument:

The Mary Carter agreements should be voided as against public policy or the settling defendants should be dismissed from the case.

Issue:

Are Mary Carter agreements valid?

Reasoning:

Mary Carter agreements do not discourage litigation like normal settlements; they actually encourage it. Defendants are encourage to go to trial and to argue for the plaintiff. This misleads the jury as to the strength of plaintiff's case and promotes collusion among parties that are nominally adversaries. It actually makes it likely that the most culpable defendants will not have to pay for their wrong and instead leave the the least culpable to pay for the entirety of the harm.

Rule/Holding:

Mary Carter agreements are void as violative of sound public policy.

Judgment:

Reversed and remanded for a new trial.

Dissenting Opinion:

Doggett: The trial court took great care to safeguard the adversarial nature of its proceedings. The judge granted Elbaor the same number of peremptory challenges as plaintiff and all other defendants had combined. The jury was made aware of the agreement and the shift of interests it entailed. Plaintiff and Elbaor are still adversarial, so the goal of the truth emerging will still be sought. The majority also also allows Mary Carter agreements with such safeguards as are implemented here. Jurors are smart enough to handle such situations.

Note:

This is the minority position. Most jurisdictions allow Mary Carter agreements as long as there are procedural safeguards in place.