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Admissibility of high-low agreements in multi-defendant litigation.

This article explores courts' evolving attitudes toward admitting high-low agreements at trial and suggests factors for predicting whether agreements will be admissible in future cases. A high-low agreement insures against litigation risk. (1) It sets a minimum floor the defendant must pay, even in the event of a defense verdict. Conversely, it sets a maximum ceiling for which the defendant could be responsible. If the judgment against the signing defendant falls between the floor and ceiling, the defendant pays the judgment.

In lawsuits with multiple defendants, complications arise when only one defendant signs an agreement and the other defendant(s) does not. The nonsigning defendant will want to tell the jury about the agreement, as a way to suggest the jury cannot trust evidence proffered by the plaintiff or the signing defendant because those parties have an artificial incentive to place maximum blame on the nonsigner. That is, the plaintiff is motivated to shift blame to the nonsigner so as to maximize damages against the noncapped defendant, and the signing defendant is motivated to support this effort to increase the likelihood of a judgment against the signer equal to or less than the agreement's floor.

Conversely, the plaintiff and signing defendant likely will object to the agreement's disclosure. They will argue the agreement has not unfairly manipulated the trial process. The plaintiff will argue the nonsigner always was the main target. And the signing defendant will argue it always intended to shift blame to the nonsigning defendant, even before the high-low agreement. The signer also will argue that disclosure of the agreement will suggest to the jury the signer believes it is at least partly to blame for the plaintiff's damages, and that this result is unfairly prejudicial.

The earliest appellate decision analyzing admissibility appears to have employed a mechanical approach. In 27th Avenue Gulf Service Center v. Smellie, 510 So. 2d 996 (Fla. 3d DCA 1987), a car accident plaintiff sued three defendants. The plaintiff and one of the defendants entered into a high-low agreement with a floor of $100,000 and ceiling of $300,000. Counsel for the nonsigning defendant referenced the agreement multiple times in his opening statement and closing argument, and received a defense verdict. On appeal, the plaintiff argued the high-low agreement should not have been disclosed to the jury. The appellate court agreed and remanded the case for a new trial on liability.

At the outset, the appellate court acknowledged that Mary Carter agreements are admissible. (2) Such agreements require the signing defendant to continue defending himself or herself in the case, and also provide that the signing defendant's liability will be reduced in proportion to an increase in the nonsigner's liability. (3) In other words, the signing defendant is kept in the lawsuit to assist the plaintiff in increasing the nonsigner's damages. The court went on to explain the agreement at issue was not a Mary Carter agreement because it did not contain a liability shifting provision, (4) and, therefore, was not admissible.

Later, the Florida Supreme Court articulated a more nuanced approach. In Dosdorian v. Carsten, 624 So. 2d 241 (Fla. 1993), the Court prospectively abolished Mary Carter agreements, and also "any [other] agreement which requires the settling defendant to remain in the litigation, regardless of whether there is a specified financial incentive to do so." (5) A high-low agreement falls into neither of these two categories. It is not a Mary Carter agreement because it does not reduce the signing defendant's liability in proportion to the increased liability of the nonsigning defendant. Nor does a high-low agreement require the signing defendant to remain in the litigation. In fact, the signing defendant could choose not to attend the trial at all and still take advantage of the judgment cap in the high-low.

Still, subsequent court opinions have used Dosdorian as a touchstone because the analysis speaks to the heart of the controversy over admitting high-low agreements. In essence, the Dosdorian court was concerned with the artificial, unfair manipulation of our adversarial legal system. In that system, the jury is tasked with finding the truth. (6) To find the truth, the jury weighs the evidence. (7) To weigh the evidence, the jury considers the litigants' opposing viewpoins. (8) The attorneys express these viewpoints throughout the trial by presenting opening statements, proffering evidence, examining witnesses, and making closing arguments. (9) The jury assumes each party is proffering the best evidence it has and lodging the best arguments possible against the opponent's evidence. (10) At the end of the trial, the evidence that emerges unscathed (or the least scathed) from this process is considered to reflect the truth. (11) The Florida Supreme Court has noted that "[i]n our system[,] the courts are almost wholly dependent on members of the bar to marshal and present the true facts of each cause in such manner as it enable the judge or jury to cook the adversary contentions in a crucible and draw off the material, decisive facts to which the law may be applied." (12) The end result hopefully is an informed and correct decision.

This truth-finding process it undermined by Mary Carter and other settlement agreements that require a settlings defendant to remain in the lawsuit. At trial, the signatories to these agreements no longer operate solely in the roles assigned to them by our adversarial system. Instead, for example, a signing defendant may agree to "go easy" on the cross examination of the plaintiff's expert in exchange for the plaintiff agreeing to a favorable settlement amount. The result is the jury receiving testimony that is not fully vetted. When the testimony goes unrebutted, the jury assumes no rebuttal exists. (13)

Arguably, the nonsigning defendant could remedy any substantive deficiencies in the signing defendant's cress exam. Still, the jury seeing one defendant; "throwing softballs" to the witness could minimize the effectiveness of the nonsigner's cross. Instead of seeing all the defendants aggressively undermining the witness' testimony, the jury sees only the nonsigner being critical of that testimony. The jury might think the testimony cannot be too far off base if only some of the defendants seem to dispute it and others seem to support it.

The jury then assigns weight to the testimony that is not necessarily justified by the truth, and in this sense the truth-finding process breaks down. As the Dosdorian court explained:

By virtue of a Mary Carter agreement, settling defendants often acquire a substantial financial interest in a trial's outcome should the jury rule favorably for the plaintiff. For example, a settling defendant may agree to settle at some ceiling figure upon the condition that if the jury awards the plaintiff a judgment against the nonsettling defendant in excess of a certain amount, the settling defendant's settlement money is returned proportionately or perhaps entirely. In these instances, Mary Carter defendants desire to remain parties to the suit so that their counsel may influence the jury's verdict in favor of the plaintiff and against the nonsettling defendant. (14)

As it turns out, the agreement at issue in Dosdorian was not a Mary Carter agreement, but rather a settlement for policy limits on the condition that the settling defendant continue to defend itself through trial. But the court ruled this type of agreement also should be abolished for similar reasons:

[O]nce that defendant has agreed to settle[,] there simply is no longer any incentive to actively defend the case. In fact, it is no longer even in the settling defendant's interest to put forth further effort or incur additional expense in the litigation. Simple inaction on the part of one defendant can adversely affect the codefendant. (15)

Because the court's abolishment of such agreements was prospective only, it ruled the agreement at issue could remain intact but must be disclosed to the jury at the second trial. In other words, because the agreement already existed, the next best thing was to inform the jury of that existence. By way of this disclosure, the jury could better account for the parties' biases in the presentation of evidence.

The first post-Dosdorian opinion to discuss the admissibility issue did so tangentially. In Garrett v. Mohammed, 686 So. 2d F29 (Fla. 5th DCA 1997), a nonsigning defendant moved for a mistrial upon learning of a high-low agreement that established a floor of $5,000 and ceiling of $15,000. (16) The trial court denied the motion, but announced its intent so disclose the agreements to the jury. Before the disclosure, the plaintiff and signing defendant settled outright. The nonsigning defendant appealed, arguing his motion for mistrial should have been granted.

The appellate court affirmed the denial. It ruled the agreement did not present the dangers of a Mary Carter because it did not require the signing defendant to remain in the litigation, and drew support from the absence of disapproval of 27th Avenue Gulf Service Center in Dosdorian. (17) It went on to note "[t]he agreement was at all times subject to discovery by the appellant and could have been admitted into evidence." (18) The court did not explain its reasoning behind this statement.

Then in Gulf Industries, Inc. v. Nair, 953 So. 2d 590 (Fla. 4th DCA 2007), a plaintiff sued two defendants for separate car accidents. The plaintiff and one of the defendants entered into a high-low agreement with a floor of $1 million and ceiling of $2 million. The trial court denied the nonsigning defendant's request so disclose the agreement to the jury.

The appellate court observed the answer to this question "it not perfecting clear, and a study of the admissibility of high-low agreements in other states demonstrates there is no consensus on the issue." (19) But it went on to affirm the trial court's ruling. It reasoned the agreement did not manipulate the parties' conduct, and, therefore, disclosure was unnecessary. It noted that although the signing defendant did attempt to blame the nonsigner, the signer likely would have done so even without a high-low agreement in place. That is, a high percentage of fault for the nonsigner necessarily would increase the likelihood of a low percentage of fault for the signer. In addition, the nonsigning defendant had higher policy limits, which suggests the plaintiff would have targeted the nonsigner even without a high-low agreement. As such, "the danger of a 'sham of adversity' between plaintiff and settling defendant was not present in this case." (20)

The recent case of State Farm Automobile Insurance Co. v. Thorne, 110 So. 3d 66 (2013), involved a fact pattern similar to Gulf Industries, Inc., but yielded an opposite result. In State Farm, a plaintiff sued four defendants for separate car accidents. The plaintiff and one of the defendants entered into a high-low agreement with a floor of $100,000 and ceiling of $350,000. (21) The trial court denied multiple requests of the nonsigning defendants to disclose the agreement to the jury.

The appellate court reversed and remanded for a new trial. It reasoned "[t]he agreement in Dosdorian was very similar to the high-low agreement between [the plaintiff] and the [signing] defendant[]. It is sufficiently similar that Dosdorian demands that it be disclosed to the jury." (22) The court went on to quote two passages from Dosdorian, but did not further explain the basis for its opinion.

High-low agreements are intended to minimize the uncertainties of trial. But that purpose is undermined when courts determine admissibility on an ad hoc basis because parties cannot always accurately predict whether the jury will learn of the high-low. Still, a case-by-case assessment is better than a rigid approach because some high-low agreements will implicate the policy concerns discussed in Dosdorian, while others will not. Trial judges are in the better position to assess whether the Dosdorian concerns are implicated, and they should be left free to examine the unique dynamics at work in an individual case. (23)

Currently, the sparse case law on this subject offers at least two factors trial attorneys can employ to help predict admissibility. First, the Garrett opinion prompts examining the range between the agreement's floor and ceiling. "The greater the window between the 'high' and the 'low' limits of the agreement, the more incentive a co-defendant has in genuinely and aggressively litigating the dispute." (24) But this factor should not be over-appreciated. One would have expected the $250,000 spread in State Farm--which amounted to 250 percent of the agreement's floor--to have sufficiently motivated the signing defendant to "genuinely and aggressively litigate the dispute." Still, the State Farm court ruled the agreement admissible.

Second, the Gulf Industries opinion suggests examining the proceedings from the jury's point of view. "If the true alignment of the co-defendants is apparent to the parties, the court and the jury, introduction of the agreement to the jury is unnecessary because there is no prejudice to be avoided." (25) That is, if the parties' post-agreement conduct is such that it would be expected even absent an agreement, that conduct does not serve to artificially manipulate the fact-finding process. This necessarily is a subjective call to be made by the trial judge outside the presence of the jury. Counsel should honestly evaluate their clients' motivations both with and without an agreement in place, and be able to explain those motivations to the judge.

When a trial judge rules on the admissibility of a high-low agreement, the parties should request a written order of factual findings or a recitation of those findings on the stenographic record. The appellate court then will be able to review the trial judge's interpretation of those facts in light of the Dosdorian concerns and the guideposts espoused by Garrett and Gulf Industries.

(1) E.g., Thurman v. Mistovich, 735 So. 2d 605, 606 (Fla. 1st DCA 1999) ("The very nature of a 'high-low' agreement is to guarantee that a plaintiff will recover a judgment in some amount, while reducing a defendant's risk that the trier of fact will return an unexpectedly high verdict.").

(2) 27th Avenue Gulf Service Center v. Smellie, 510 So. 2d 996, 998 (Fla. 3d DCA 1987).

(3) Id. The term "Mary Carter" agreement drives from Booth v. Mary Carter Paint Co., 202 So. 2d 8 (Fla. 2d DCA 1967). "The hallmark of a Mary Carter [a]greement is the pitting of one defendant against the remaining defendants at trial." Cardona v. Metro Dade Transit Agency, 680 So. 2d 1098, 1099 (Fla. 3d DCA 1996).

(4) 27th Avenue Gulf Service Center, 510 So. 2d at 998.

(5) Dosdorian, 624 So. 2d at 247.

(6) Id. at 243-44; Fla. Standard Jury Instruction No. 201.2 ("The jury's job will be to decide what the facts are and what the facts mean."); Fla. Standard Jury Instruction No. 601.1 ("Your job is to determine what the facts are.").

(7) Dosdorian, 624 So. 2d at 243-44; Fla. Standard Jury Instruction No. 202.2 (jury instructed to "correctly sort through the evidence to reach your decision").

(8) See id.

(9) Dosdorian, 624 So. 2d at 243-44.

(10) Id.

(11) Id.

(12) Dodd v. Florida Bar, 118 So. 2d 17, 18 (Fla. 1960).

(13) See, e.g., Fla. Standard Jury Instruction No. 601.1 ("In reaching your verdict, you must think about and weigh the testimony and any documents, photographs, or other material that has been received in evidence."); Fla. Standard Jury Instruction No. 201.2 ("A basic rule is that jurors must decide the case only on the evidence presented in the courtroom.").

(14) Dosdorian, 624 So. 2d at 244.

(15) Id. at 247.

(16) The Garrett case was disapproved on grounds unrelated to high-low agreements in Allstate Ins. Co. v. Sarkis, 809 So. 2d 6 (Fla. 5th DCA 2001).

(17) Garrett v. Mohammed, 686 So. 2d 629, 630, n. 2 (Fla. 5th DCA 1997).

(18) Id. at 630.

(19) Gulf Indus., Inc., 953 So. 2d at 593-94.

(20) Id. at 595.

(21) The author was co-counsel for the signing defendant. Pursuant to the terms of the high-low agreement, the plaintiff dismissed the signing defendant with prejudice after the first trial's conclusion.

(22) State Farm Automobile Insurance Co., 110 So. 3d at 72-73.

(23) See Garrett, 686 So. 2d at 630, n. 2 ("Perhaps the question of whether high-low agreements are covered by Dosdorian should turn on a case by case analysis of whether such agreements are in fact true settlements.").

(24) Id.

(25) Gulf Indus., Inc., 953 So. 2d at 594.

Michael L. Forte is a partner at the Tampa office of Rumberger, Kirk & Caldwell, P.A. He practices in the areas of retail and hospitality, law enforcement defense, product liability, and construction. He graduated from Stetson University College of Law in 2002.
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Title Annotation:Florida
Author:Forte, Michael L.
Publication:Florida Bar Journal
Date:Dec 1, 2013
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