Elbaor v. Smith
845 S.W.2d 240 (1992)
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Rule of Law:
In Texas, "Mary Carter" agreements, in which a settling defendant retains a financial interest in the plaintiff's recovery against a non-settling defendant and remains a party to the litigation, are void as contrary to public policy because they distort the adversarial process. Furthermore, a trial court commits reversible error by refusing to submit a question on contributory negligence to the jury if there is more than a scintilla of evidence to support it.
Facts:
- On May 8, 1985, Carole Smith was seriously injured in a single-vehicle accident, suffering a compound fracture of her left ankle.
- Dr. Abraham Syrquin performed emergency surgery on Smith's ankle at D/FW Medical Center.
- Smith was then transferred to Arlington Community Hospital (ACH) under the care of an orthopedic surgeon, Dr. James Elbaor, and a team of other physicians.
- While at ACH, Smith's medical records indicated that she frequently refused to take prescribed antibiotics and interfered with her treatment by directing family members to remove weights from her traction device.
- Smith's ankle condition deteriorated, ultimately requiring the removal of a section of bone and the fusion of her ankle joint, which left her permanently disabled.
- Before trial, Smith entered into settlement agreements, known as Mary Carter agreements, with Dr. Syrquin, Dr. Stephens, and ACH.
- These agreements guaranteed Smith a certain payment but required the settling defendants to participate in the trial, with Dr. Syrquin and ACH entitled to be reimbursed from any recovery Smith obtained from Dr. Elbaor.
Procedural Posture:
- Carole Smith filed a medical malpractice suit against D/FW Medical Center, ACH, Dr. Syrquin, Dr. Elbaor, Dr. Stephens, and Dr. Gatmaitan in a Texas trial court.
- Smith settled with D/FW Medical Center and nonsuited her claim against Dr. Gatmaitan.
- Dr. Elbaor filed a cross-claim for contribution against the remaining defendants.
- The trial court denied Dr. Elbaor's motion to declare the Mary Carter agreements between Smith and the other defendants void.
- The trial court refused Dr. Elbaor's request to submit a jury question regarding Smith's contributory negligence.
- The jury returned a verdict finding Dr. Elbaor 88% liable and Dr. Syrquin 12% liable for Smith's damages.
- The trial court entered judgment against Dr. Elbaor based on the jury's verdict.
- Dr. Elbaor appealed to the Court of Appeals, which affirmed the trial court's judgment.
- The Supreme Court of Texas granted review of the case.
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Issue:
Are "Mary Carter" settlement agreements, where a settling defendant retains a financial stake in the plaintiff's recovery against other defendants and remains a party at trial, void as against public policy?
Opinions:
Majority - Gonzalez, Justice.
Yes. A Mary Carter agreement is void as violative of sound public policy. Such agreements distort the trial process by creating a sham of adversity between a plaintiff and a settling co-defendant, who are actually allied to secure a large judgment against the non-settling defendant. They mislead the jury, promote unethical collusion among nominal adversaries, and create a likelihood that a less culpable defendant will be held fully liable. The court's public policy favoring fair trials outweighs the policy favoring partial settlements that tend to promote, rather than discourage, further litigation. Additionally, the trial court erred by refusing to submit an issue on Smith's contributory negligence, as there was some evidence her refusal to take antibiotics may have contributed to the infection, which is a question of causation for the jury, not merely an issue of mitigating damages.
Dissenting - Doggett, Justice.
No. Mary Carter agreements should not be declared void when procedural safeguards can preserve the integrity of the judicial process. The majority shows a profound distrust of the jury system, as juries are capable of assessing the facts and witness credibility when the nature of such agreements is fully disclosed. The trial court in this case took appropriate remedial measures, including informing the jury of the agreements' terms, which was sufficient to prevent a sham trial. The majority's outright ban is an overreaction that overrules precedent, creates uncertainty in pending litigation, and unprecedentedly denies a named defendant, Dr. Syrquin, the right to participate in a trial where his professional reputation is at stake.
Analysis:
This landmark decision fundamentally altered tort litigation in Texas by abolishing the use of Mary Carter agreements. The court prioritized the integrity of the adversarial system over the public policy of encouraging settlements, concluding that these specific agreements corrupt the trial process beyond repair. The ruling eliminates a strategic tool used by plaintiffs to fund litigation and pressure non-settling defendants, forcing parties into more straightforward settlement-or-trial scenarios. This precedent ensures that parties in a Texas courtroom are truly adverse, preventing the confusion and potential for injustice created when a defendant is secretly aligned with the plaintiff.
