Settlement Techniques: High-Low Agreements

July 26, 2017

The use of high-low agreements during the trial of tort cases is an often underutilized and misunderstood litigation technique that serves both parties well. From a plaintiff’s perspective, a high-low agreement guarantees that a minimum monetary amount will be received regardless of the verdict. In most cases, this will result in the payment of case expenses, an award to plaintiff and a fee for the attorney in the event of a defendant’s verdict.

For defendant, it will prevent a “run-away jury” verdict, protect both a defendant from personal or corporate exposure and an insurance carrier from bad faith claims if the jury verdict exceeds the policy.

A High-Low Is a Settlement

In Cunha v. Shapiro, 42 A.D.3d 95 (2d Dep’t 2007), the court found that a high-low agreement is a settlement for CPLR purposes, unless the provisions of the statute are expressly exempted. After a jury was selected, and prior to the presentation of the evidence, the parties placed a high-low agreement on the record in open court. The parties agreed that, regardless of the verdict, the plaintiff would receive damages not less than $75,000 and no more than $325,000. The court specifically stated that “there will be no appeals or post-trial motions” and that the case will be settled based upon the jury verdict.”

After a pre-apportionment verdict of $325,000, defendants’ counsel sought a general release from plaintiff’s counsel. Plaintiff’s counsel stated that no release was required. Without a release, defendants refuse to pay damages. Plaintiff filed judgment for #325,000 plus interest. Defendant responded by moving by order to show cause to vacate the judgment. They argued that the parties’ high-low was a settlement, displacing the jury verdict in its entirety. Without a general release, the time frame for payment pursuant to CPLR 5002 would not begin. The Second Department found that the strict enforcement of open-court stipulation of settlement served the interest of efficient dispute resolution, the management of court calendars, and the integrity of the litigation process. It ruled that the parties’ agreement was a settlement and warranted the application of the general release provision of the CPLR.

Interests and Costs

A high-low agreement limits recovery to the amount awarded by the jury and also prevents additional costs such as interest and disbursements. In Vargas v. Marquis, 65 A.D.3d 1332 (2d Dep’t 2009), the parties entered into a high-low agreement with parameters of $275,000/$25,000. The jury found for plaintiff in the sum of $135,000. Plaintiff entered that amount as a judgment with an additional $31,000 in pre-verdict interest and costs and disbursements. Defendant objected, arguing that the agreement waived the right to a judgment, and the plaintiff was obligated to provide a stipulation of discontinuance and general release. The clerk entered the plaintiff’s judgment and the Second Department granted defendant’s motion to vacate, finding that the agreement was straightforward and its terms must stand. Pre-verdict interest, costs and disbursements did not apply.

The Court’s Role

The court cannot alter a high-low agreement. In Esposito v. Podolsky, 104 A.D.3e 903 (2d Dep’t 2013), litigants in an auto accident case agreed to submit liability and damages to an arbitrator with high-low parameters of $50,000/0. Thereafter, they stipulated to proceed to arbitration regarding liability. The arbitrator found for plaintiff on the liability issue and plaintiff moved to restore the action to the trial calendar to resolve the issue of damages. The trial court directed that the parties return to arbitration, but modified the recovery amount to $250,000, the full amount of the insurance policy in excess of the agreed upon limits. The appellate court fund that the trial court erred in allowing recovery in an amount exceeding the limits provided in the high-low agreement. Because the parties had agreed to the $50,000 limit, it should have been binding.

Jury Sheet

A high-low agreement can be valid even where there is an error on the jury instruction sheet. In Crosby v. Montefiore Medical Center, 128 A.D.3d 523, 523 (1^st Dep’t 2015), the parties entered into a high-low settlement during jury deliberations. The agreement set a range of $1,485,000 and $250,000. Afterwards, defendants noted an error on the verdict sheet instructions which directed the jury to determine apportionment of fault and damages, even upon a finding of no liability. The parties agreed that if the jury found no liability but proceeded to award damages, the court would enter a defense verdict. The jury returned a verdict finding that defendants had departed from the standard of care but that the departure was not a substantial factor in causing the injuries. The jury nonetheless, allocated fault and awarded plaintiff $650,000.

The court found that the jury’s allocation of fault and award of damages pursuant to the defective verdict sheet was superfluous and did not render the verdict inconsistent and the high-low agreement was triggered. The court further held that the plaintiff’s post trial motions raising the issue of inconsistency in the verdict were not so substantial and fundamental as to breach the parties agreement and warrant rescission.

Client Approval. A client must consent to a high-low agreement for it to be effective. In Graham v. Hebert, 2009 N.Y. Misc. LEXIS 6702, 242 N.Y.L.J. 112 (N.Y. Sup. Ct.), plaintiff’s injuries stemmed from a motor vehicle accident. Plaintiff’s initial attorney agreed to limit recovery to $10,000. Plaintiff changed attorneys and the new counsel did not discover the agreement until an evidentiary hearing a month later. Plaintiff’s new attorney filed a motion to set aside the high-low stipulation entered into between plaintiff’s prior attorney and defendants. The court found that there was no evidence that the client had approved the high-low agreement and that the settlement amount agreed upon was unconscionable. As such, the court held that there was no basis to hold the plaintiff to an agreement that undervalued his claim and vacated the agreement.

Full Disclosure. Additionally, high-low agreement must be disclosed to all parties. In Eighth Judicial District Asbestos Litigation v. Amchem Products and Garlock Sealing Technologies, 8 N.Y. 3d 717 (2007), only two defendants remained at the time of the trial: Garlock and Niagara. Without informing Garlock, plaintiff and Niagara entered into a high-low agreement setting parameters of $155,000/$185,000. The Supreme Court knew an agreement was entered, but it did not know the terms and no one informed Garlock of the agreement. The jury awarded plaintiff $3.75 million apportioned between Garlock and Niagaa 60/40. The court found that the non-disclosure deprived Garlock of a right to a fair trial. Because the court found that the high-low agreements must be disclosed to all parties, the verdict was vacated and a new trial ordered.

Motions. Finally, high-low agreements must specifically prohibit motions on liability to prevent the court from considering them. Courts have been affirmed in considering motions where the high-low agreement in question did not specifically prohibit making post verdict motions. Doubrovinskaya v. Demitzer, 77 A.D. 3d 609 (2d Dep’t 2010). The courts have also held that the existence of a high-low agreement did not waive the issue of comparative negligence. Batista v. Elite Ambulette Services, 28 A.D.2d 196 (1^st Dep’t 2001).

Jury Question

There are hundreds of anecdotes about attorneys misinterpreting jury questions to their detriment. Holzmuller v. Spring Valley Housing Development Fund, 2005 WL 1566855, is a clear example of this and of usefulness of high-low agreements.

In Hollzmuller, the parties had discussed multiple high-low agreements. A $900,000/$450,000 high-low agreement had been proposed as the jury began deliberations. During deliberations the jurors contacted the judge and asked “If we do not feel like the plaintiff suffered any damage, do we still have to award him his medical expenses?” Upon hearing the question, defendants withdrew their high-low offer. The jurors ultimately found that plaintiff’s damages totaled $1.658 million dollars. Had the limits been in place, the defense would have saved nearly $750,000. This attorney gambled based on reading the jury’s tea leaves, which proved to be misleading when the verdict was finally announced.

Conclusion

A high-low agreement is a most effective way to prevent a runaway verdict with potential exposure of personal and corporate assets and at the same time guaranteeing plaintiff a recovery in the event of a defense verdict. The elements of the agreements must be carefully and specifically drawn to avoid either party from engaging in post-trial motion practice. All parties must be informed and the agreement must be placed on the record. Remember, a high-low can be put into effect during trial as long as the jury has not returned a verdict. It can be placed on the record even when the jury reached a verdict, but has not announced it. High low agreements should be utilized much more frequently.

Andrea M. Alonso and Kevin G. Faley are partners of Morris Duffy Alonso & Faley. Patrick Prager, an associate, assisted in the preparation of this article.

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