Court Finds No Admissible Evidence of Collusive “Mary Carter Agreement,” Suggests Parties Stop “Flogging” Each Other

March 11, 2020

Ordinarily, a defendant will not actively try to help the plaintiff prove her case. But even this fundamental principle of the adversarial litigation process has limits. For example, in the criminal context, a defendant may cooperate with the prosecution in exchange for immunity or preferential sentencing. Thus, the internet’s recent fascination with the overeager Tekashi 6ix9ine.

Civil litigants also “snitch.” In an eponymous 1967 decision from the Florida District Court of Appeals (Booth v. Mary Carter Paint Company, 202 So. 2d 8), two co-defendants entered into a written agreement with the plaintiff whereby the plaintiff agreed to limit the co-defendants’ liability to $12,500. The plaintiff further agreed that in the event any of the co-defendants were found jointly liable with a third co-defendant, the Mary Carter Paint Company, then the plaintiff would satisfy the judgment solely from Mary Carter so long as the judgment was for an amount exceeding $37,500. The parties agreed to keep this arrangement secret. The court held that this agreement was not a release and upheld the lower court’s refusal to offset any judgment against Mary Carter Paint Company by the $12,500 figure. (The Florida Supreme Court subsequently rejected this holding and required that any such agreements be produced in discovery. See Ward v Ochoa (284 So 2d 385, 387 [Fla Sup Ct 1973].)

New York courts have taken a disfavorable view of these so-called “Mary Carter Agreements,” which the courts describe as:

“a contract by which one or more of the defendants in a multiparty case secretly conspires with the plaintiff to feign an active role in the litigation in exchange for assurances that its own liability will be diminished proportionately by increasing the liability of the nonagreeing defendant(s)” (Reutzel v. Hunter Yes, Inc., 135 AD 3d 1123 [1st Dept 2016]).

In Stiles v. Batavia Horseshoes, 174 AD 2d 287 (4th Dept 1992), the Fourth Department, citing an Oklahoma decision, noted that such agreements, if established, “may be void per se.”

The New York Supreme Court, Commercial Division (Cohen, J.), recently addressed the burden of proof associated with a motion to disqualify counsel for allegedly entering a “Mary Carter Agreement.” In Gerzog v. Goldfarb (Index No. 653432), a defendant sought to disqualify plaintiff’s counsel based on allegations that counsel had “effectively suggested to [co-defendant] that in return for false testimony favorable to [plaintiff], [plaintiff] would not continue to pursue his claims against [co-defendant].” In support of this motion, the movant’s counsel submitted an affirmation describing a conversation with the co-defendant’s counsel, in which co-defendant’s counsel in turn described a conversation he had had with plaintiff’s counsel.

The court denied the motion, holding that the proffered affirmation was inadmissible hearsay. Moreover, because the conversation between co-defendant’s counsel and plaintiff’s counsel had been disclosed to the movant, the court found that the essential element of “secrecy” was missing and thus defeated any claim of an impermissible “Mary Carter Agreement.” The court concluded by suggesting that “the parties focus more on litigating the merits of the case and less on flogging each other with tangential issues and ad hominem attacks.”