Following the lead of Higginbotham (1985), Andrew Barss (1986) notes that examples like (1) are ambiguous.
(1a) They told each other they had better leave
(1b) John and Bill told each other they had better leave
Let's focus on (1b) for simplicity. Specifically, what is being claimed is that (1b) may convey both the distributive reading in (2a) and the collective reading in (2b).
(2a) [J told B that B should leave] & [B told J that J should leave]
(2b) [J told B that J&B should leave] & [B told J that J&B should leave]
I am not a native English speaker, but I wonder whether the availability of the distributive reading hinges on the fact that the embedded clause subject they is number-neutral, i.e. it may denote both an individual and a plurality of individuals. (Note also that each other is formally singular.)
My impression is that (3) lends itself less to such construal.
(3) We told each other we had better leave
What do you guys think?