If the parties agree to enter into a tolling agreement, the most important provisions in the agreement will govern its scope, including types of claims you might consider filing against the co-defendant. In product liability cases, you might have a contribution claim against co-defendants to ensure that your client does not pay more than its pro rata share of liability assessed in jurisdictions that have joint and several liability. You may also have an implied indemnity claim against a manufacturer if you are a distributor or downstream seller, or you may have a claim for contractual indemnity if your client has a contract with defense and indemnity provisions in it. Warranty claims may also exist. Clear language will help avoid litigation over the scope of the agreement down the road. See e.g., Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989 (7th Cir. 2007).
Depending on the needs of the parties, most defendants include the following clauses tolling agreements:
- No admission of liability by co-defendants;
- The effective date of the agreement, particularly when executed in close proximity to the running of a statute of limitation;
- Types of claims to which the agreement applies;
- Specific time period in which the agreement will toll the limitations period;
- Effect of dismissal of any defendant on the tolling agreement; and
- Time in which the parties should meet and confer prior to the expiration of the agreement to address whether to extend the agreement.
Although tolling agreements are useful tools, they do have potential drawbacks. First, consider whether the court entered a scheduling order with a deadline for counterclaims and that deadline's potential conflict with your tolling agreement. Further, if your client has a contractual or implied indemnity claim and the co-defendant has not agreed to indemnify your client, your client may want clarity on the issue of indemnity prior to trial.
Additionally, if you agree to toll counterclaims until after trial on the underlying the plaintiff's case, it could result in inefficiencies and more protracted litigation. Make sure your client understands this prior to agreeing to the tolling agreement. This particular issue may be dealt with by 1) allowing counterclaims to be filed during the tolling period if a party chooses or 2) ending the tolling period in advance of trial and with sufficient time to allow the filing of counterclaims, if necessary.
- Consider scope and duration of tolling agreements.
- Business considerations among co-defendants may impact decisions on tolling agreements.
- Ensure that tolling agreements do not conflict with scheduling orders in a way that prejudices your client.