In Cunha v Shapiro, (__ AD3d ___ [slip op. May 1, 2007]), the Second Department, answered two questions of first impression. The first question was whether high-low agreements -- when triggered -- are settlements or judgments. The second question, that necessarily followed was, if a high-low agreement is considered a settlement, do the provisions of CPLR 5003-a apply? The Court ultimately determined that high-low agreements, when triggered, are considered settlements and, as such, are regulated by the enforcement provisions of CPLR 5003-a.
Of relevance, the parties in this case entered into a high-low agreement prior to the damages phase of their trial. Specifically, the parties agreed that regardless of the jury's ultimate verdict, the damage award would not be lower than $75,000 and no more than $325,000. Naturally, if the jury rendered a verdict in between said amounts, its decision would be controlling. When the jury returned a verdict of $400,000, the high-low agreement was triggered, and plaintiff was entitled to $325,000. The dispute arose, when the plaintiff refused to execute a general release and stipulation of discontinuance and filed a judgment with interests, costs and disbursements.
Briefly digressing, CPLR 5003-a was enacted to promote prompt payment of damages arising out of a settlement. It provides that if a defendant fails to pay the agreed to amount of damages within 21 days of tender of settlement papers (including release and stipulation of discontinuance), then the plaintiff may file a judgment, which may include interest, statutory costs and disbursements. Caselaw interpreting the statute, has held that where a judgment is filed prematurely, where the release contains an inaccurate recitation of the damages or, where the plaintiff fails to tender a release and stipulation of discontinuance, the plaintiff's judgment may be vacated and he/she is not entitled to interest thereon.
The threshold question in this case was, therefore, whether the triggering of the high-low agreement was a settlement (5003-a potentially applies) or a verdict (5003-a does not apply, interest, costs and disbursements automatic). The Court, began its task by examining how the courts of the state have referred to high-low agreements. According to the Court, the cases referring to high-low agreements as settlements were legion. On the other hand, it could not find a single reference to a high-low agreement as a judgment. This line of reasoning is a little stretched, because passing references to high-low agreements by courts in other decisions may have been unintentional or inartful, especially in light of the fact that none of the cases cited examined the foundational question of whether a high-low agreement that has been triggered was in fact a settlement.
Next the Court pointed to the language used by the trial court, which -- according to the Court -- was analogous to a settlement. Namely, the trial court stated that "the case would be settled based on the jury verdict." Furthermore the trial court stated that there would be no appeals or post-trial motions on the issue of damages. Again, as with the initial rationale, it appears as though the Court were reaching for a result here. The Court's empasis on what the trial court -- in this case -- stated does not necessarily result in the conclusion that all triggered high-low agreements are settlements. While the Court could have used the trial court's language to make a decision tailored to the case before it, it is submitted that simply because the trial court stated that there would be no appeals and that the jury's verdict would settle the lawsuit (the outcome of all cases) should not lead to the conclusion that all triggered high-low agreements are settlements.
The final rationale offered by the Court in support of its holding was that high-low agreements were "consistent with our understanding of what settlements are designed to accomplish." After defining settlement, by quoting Black's Law Dictionary, the Court held that when a jury verdict is supplanted by the high-low agreement (i.e. the damage award is increased or reduced in keeping with the agreement), the parties, rather than the jury are determining the award. According to this rationale, since the parties are determining the award, it is a settlement, rather than a judgment.
Thus, due to the fact that high-low agreements have been referred to as settlements by the courts of the state in the past, in addition to the fact that the trial court here used language akin to normal terms of a settlement and because triggered high-low agreements behave like settlements, the Court concluded that triggered high-low agreements are settlements. All in all, the decision lies on pretty squishy legal ground, and one might argue that this was a results-based decision. Nevertheless, the Court has spoken and high-low agreements that are triggered will be considered settlements (at least within the Second Department). Taking this rationale to its next logical conclusion, the converse must also be true: a high-low agreement that is not triggered (as would have been the case here, if the jury returned a verdict between $75,000 and $325,000) is not a settlement, but rather a judgment.
Having decided the issue of whether triggered high-low agreements are settlements, it was largely a foregone conclusion that they would be subject to CPLR 5003-a. The Court did, however, include one final discussion which will likely have a great effect on all high-low agreements, for the Court held that parties to a high-low agreement can agree to exempt it from the dictates of CPLR 5003-a. Thus, one can be rest-assured that nearly all high-low agreements in the wake Cunha will exempt the CPLR 5003-a requirements, and counsel for the plaintiff would be best served by doing so.
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