Bob helped plaintiff Rose take full advantage of a high-low agreement in a
two-defendant case. Rose and defendant “1” agreed that Rose’s recovery
against defendant “1” would be no less than $300,000 and no more than
$700,000. The jury found against defendant “1” for $200,000 and against
defendant “2” for $800,000. The high-low agreement worked like a
charm. As a result of the jury verdict, defendant “1” must pay the “low”
of $300,000 (even though the jury awarded only $200,000); and, at least by Bob’s
calculation, defendant “2” must pay $800,000. Rose will recover $1.1
million, even though the verdict was for only $1 million.
However, defendant “2” in its post-trial motion now contends that the court
should set aside the entire verdict because Bob’s failure to disclose the
high-low agreement tainted the trial. Defendant “2” argues that it was
prejudiced because concealing the high-low agreement took away its right to
cross examine witnesses to establish bias or prejudice resulting from the
high-low agreement.
The New York Supreme Court, Appellate Division recently considered whether to
set aside a jury verdict in similar circumstances. The court held that the
failure to disclose the high-low agreement did not mandate reversal “[a]bsent
evidence of collusion between [the settling defendant] and plaintiffs to the
detriment of [the nonsettling defendant].”
That is good news for Bob and Rose – assuming that they are in a jurisdiction
that follows the Appellate Division’s holding and assuming that the New York
Court of Appeals, which granted the nonsettling defendant’s leave to appeal,
does not reverse the Appellate Division’s decision.
Before Bob begins calculating his legal fee and Rose considers what to do
with her recovery, however, they should consider the bad news. The New
York Appellate Division expressly recognized that “evidence of collusion” would
mandate reversal of the verdict. That surely means that the case is not
over. To the contrary, all parties must return to the trial court to allow
defendant “2” to take the post-verdict discovery necessary to determine whether
there was collusion and whether the collusion prejudiced defendant “2” at
trial. For instance, defendant “2” no doubt will seek to learn about all
written or oral post-settlement agreement communications between Rose (or her
attorney) and defendant “1” (or its attorney). Imagine the deposition
questions regarding the substance of those communications!
There is even more bad news for Rose and Bob: a stinging dissent in the New
York case asserted that “it was unfair to [the nonsettling defendant] and
prejudicial to its substantive rights and interests to be compelled to
participate in the trial without knowledge of the critical procedural and
substantive fact that plaintiff had reached a high-low agreement with [the
settling defendant].” A Michigan appellate court likewise observed, in
criticizing the failure of the settling parties to disclose a high-low agreement
to the nonsettling defendant, that “the integrity of the judicial system is
placed into question when a jury charged with the responsibility to determine
the liability and damages of the parties is denied the knowledge that there is,
in fact, an agreement regarding damages between a number of the parties.
Consequently, wise judicial policy must favor disclosure of such agreements to
the jury.”
Rose and Bob are not off the hook, even if they in a jurisdiction such as
New York– at least pending the New
York Court of Appeals review. Indeed, they are in an unenviable position;
they must try to justify why Rose and defendant “1” pulled the wool over the
eyes of defendant “2,” the judge, and the jurors. And that is only after
Bob and Rose each has been deposed.
The bottom line: Bob and Rose may salvage the jury verdict, but only after
responding to discovery and participating in a post-trial hearing where
defendant “2” will seek to prove the collusion necessary to set aside the jury
verdict. This satellite litigation could drag on for months and even
years. If defendant “2” demonstrates any collusion, the Court –
recognizing the threat to the very integrity of our fact-finding system – likely
will conclude that defendant “2” was prejudiced, even if there is scant evidence
of prejudice. That would force Bob and Rose back for a brand new trial –
where, I bet, they will disclose any high-low agreement.
