## Facts

- Smith suffered a compound ankle fracture in an automobile accident and received treatment at multiple facilities, including by Dr. Elbaor (an orthopedic surgeon).
- Smith’s ankle ultimately fused, causing permanent injury, and she sued several medical providers for malpractice.
- Smith settled with some defendants and entered “Mary Carter” agreements with others (including Dr. Syrquin, Dr. Stephens, and Arlington Community Hospital).
- Under the agreements, the settling defendants paid Smith about $425,010, remained as parties at trial, and could be reimbursed (in whole or part) from any recovery Smith obtained from the remaining defendant, Dr. Elbaor.
- Dr. Elbaor moved to declare the agreements void as against public policy and to dismiss the settling defendants; the trial court denied the motion.
- The jury found $2,253,237 in damages and apportioned 88% negligence to Dr. Elbaor and 12% to Dr. Syrquin; after settlement credits, judgment was entered against Dr. Elbaor for $1,872,848.
- The court of appeals affirmed.

## Issues

1. Whether “Mary Carter” agreements—settlements in which a settling defendant stays in the case and has a financial incentive tied to the plaintiff’s recovery against non-settling defendants—are void as contrary to public policy.
2. Whether the trial court erred by refusing to submit a contributory negligence issue as to Smith.

## Decision

- The Supreme Court of Texas held Mary Carter agreements void as contrary to public policy.
- The Court reversed the judgment and remanded for a new trial because the case was tried under invalid agreements.
- Given the remand, the contributory negligence submission issue was not the central basis for disposition and could be reconsidered in the new trial.

## Legal Principles

- Settlement agreements that keep settling defendants in the case while aligning their financial interests with the plaintiff against a non-settling defendant are void when they distort the adversarial process.
- Agreements that create incentives for collusion, mislead the jury about the true alignment of parties, and skew allocation of responsibility away from actual fault violate public policy.
- Traditional settlement policy favors ending disputes; arrangements that encourage continued trial participation by settling defendants to shift liability to a remaining defendant run counter to that policy.

## Conclusion

The Texas Supreme Court invalidated Mary Carter agreements as against public policy and ordered a new trial, reasoning that these arrangements realign parties’ incentives in a way that compromises fair fact-finding and proportionate responsibility.


Elbaor v. Smith, 845 S.W.2d 240 (Tex. 1992)