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The Need For Precision In High-Low Agreements

High-low agreements are intended to manage the risks of civil trials. The defendant agrees to pay a minimum amount, and the plaintiff agrees to accept a maximum recovery, no matter the outcome of a trial. Thus, the plaintiff eliminates the risk of recovering nothing, and the defendant eliminates the risk of a run-away jury. While a high-low agreement can be a sensible means of resolving a lawsuit, it is important that it be properly drafted so as to conclusively terminate any further litigation. The case of David v. Kelly, 2021 WL 4944478 (Mass. App. Ct. 2021) demonstrates the need to include specific language waiving appellate rights in a high-low agreement.

David is a textbook dog bites mailman case. Liability was admitted, but damages were vigorously contested. The parties entered into a high-low agreement on the last day of trial, and memorialized it in a handwritten document drafted in the courtroom. The hastily-written terms set a floor of $150,000 and a ceiling of the available $1 million liability policy limit, but made no mention of appellate rights. After the jury awarded $375,000, the defendants unsuccessfully moved for a new trial, and then appealed. Plaintiff argued that the high-low agreement constituted a waiver of the defendants’ appellate rights, but the Massachusetts Appeals Court disagreed. It held that a high-low agreement is a contract like any other, and ordinary rules of contract construction apply. As such, the Court observed that waiver must be shown “clearly” and “unequivocably.” The handwritten high-low agreement made no reference to post-verdict or appellate rights. In the absence of explicit language, the Court ruled that the agreement was not susceptible of a reading that included a waiver of appellate rights.

A courtroom in the middle of a trial is a busy place. Trial counsel are often juggling several things at once. The burdens on trial counsel are immense. A lesson that might be learned from the David case is that these burdens can be lessened by anticipating potential settlement discussions and keeping draft settlement agreements handy in the trial bag.