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October 09, 2006



This is a really interesting case--thanks for posting about it.

I think you raise a great point re: the ex parte issue. I'm still on the fence as to whether the failure to advise the co-defendant or the jury of the agreement was inherently unfair. Would the co-defendant have handled its case differently? Maybe, perhaps by referring the the agreement during cross or closing and asking the jury to think about why it was in effect. But, that might actually backfire and cause the jury to attribute even more fault to co-d Garlock.

But, you rasie a good point. I'd love to hear from others on this one...

Ryan Gellman

I represented Niagara with regard to the high/low agreement and the trial. Niagara was not a party to the appeal, so our position was not represented. There was no impermissible ex parte communication.

The facts of this case have been mischaracterized and were not sufficiently outlined in the appellate decision to let people fairly discuss this issue. In its published opinion, the majority did not consider Garlock’s argument about the ex parte communication to be worth addressing. Presumably, it is one of the “remaining contentions” that it found to be “without merit.” The dissent discusses it at length and would hold that the trial judge was required to notify Garlock’s counsel. It did not mention that Garlock’s counsel was present at the conference where the alleged ex parte communication occurred or that Garlock’s counsel also met with the judge. From the decision, the reader is left to infer that some type of secret back-door discussion took place. This is simply not what happened.

Close to the time of trial, plaintiff’s counsel requested that the trial judge hold a settlement conference with all remaining parties. (I assume that some parties had already settled and others had been dismissed one way or another.) No party objected. Plaintiffs’ counsel and counsel for about one dozen defendants were present. Garlock was represented at the settlement conference. The judge met with plaintiffs’ counsel, then with each defense attorney (including Garlock’s), then again with plaintiffs’ counsel, etc. I believe that a number of parties settled that day, plaintiffs and Niagara entered into a high/low agreement and plaintiffs and Garlock were presumably unable to reach any type of agreement.

Garlock’s counsel met with the judge outside the presence of other counsel at the conference that day, as did counsel for all other parties. Why would Niagara’s communication be an impermissible ex parte communication but not Garlock’s? In nearly every one of my cases that has proceeded to trial, the trial judge has met with the attorneys immediately before trial to make a last-ditch attempt to reach a settlement and to avoid a trial. Often, it works. Often judges do this long before trial. Judges always ask defense counsel their settlement authority and plaintiffs counsel their bottom line number. Sometimes, judges have conversations directly with a plaintiff or defendant (or a defendant’s adjuster) to try to push a settlement. If no agreement is reached, the trial judge does not disclose a party’s settlement position to an opponent. I think that all litigators accept this procedure. We all know the drill. Unless we are to institute a rule barring judges from acting as mediators to attempt to broker settlements – and I think such a rule would be counterproductive when considering this issue from a broader perspective – this communication was not impermissible. I find it interesting that on appeal Garlock argues that Niagara’s communication with the judge was ex parte and impermissible but never mentions that this argument necessarily and inevitably means that Garlock and the judge had impermissible ex parte communications.

Whether the communications were productive is not relevant to whether they were impermissible. Both Garlock’s counsel and I met with the judge under identical circumstances, as did various other counsel. Niagara reached an agreement; Garlock did not. Garlock does not challenge all of the other ex parte communications with other parties in this very case. It did not object when plaintiffs’ counsel requested the settlement conference (I believe the request was made in open court before all of the parties), when it received notice of the conference before it took place (even though all parties knew exactly what would take place), and it did not object at the time of conference. To my knowledge, no other case has held a communication like this one to be illegal.

Garlock’s counsel knew when I met with the judge and I knew when its counsel met with the judge. Garlock and Niagara are often co-defendants in the same cases, usually in front of the same judge, and both parties have been involved in a number of settlement conferences with this judge over the years. I have never heard Garlock, or for that matter any other party, object in advance to a settlement conference with a judge because they know that there would be some ex parte communications regarding settlement numbers. Garlock never objected to this conference until after trial.

I do not even believe that Garlock’s counsel believes that the ex parte communication aspect of this case is relevant. I believe that they mistakenly believe that the agreement was illegal, and the fact that the judge knew about it and did not object to it simply riles them further. They think that the judge should have made sure that such an agreement did not exist, but this argument presupposes that the agreement was illegal. So far, the trial court and the Fourth Department disagree with them. I also think they bring up this issue because he dissent emphasized it.

While the nature of the communication may be relevant to an ethics discussion, I do not think it is particularly relevant to the appeal or the outcome of the case. My recollection is that plaintiffs and Niagara were in settlement negotiations before the conference and had discussed the possibility of a high/low agreement. I suspect that they would have entered into substantially the same agreement even if the judge had not been involved. In such an instance, all of Garlocks’s other objections to the agreement would remain valid appellate issues, but the issue of ex parte communications would not have been relevant. Had we reached the agreement outside the settlement conference, we probably would not have told the judge about it before trial. As in high/low arbitration, my feeling is that the fairness of the proceeding is best preserved if arbitrators or judges do not know and thus the agreements do not affect any decisions made at trial/arbitration. Here, the judge knew because some of the settlement negotiations took place in his presence. In high/low arbitration, I believe that the rule that the arbitrators do not know the amounts of or even the existence of highs and lows is usually expressly agreed upon. Even though here the judge knew, I have not heard anyone allege that the trial judge made any trial decisions differently because of the agreement. To me, the larger, meatier and more universally relevant issue is the legality of the agreement, not whether there were ex parte communications before it was reached.

Let me go a bit beyond the issue of the ex parte communication. Keep in mind that under current New York law, the nature of settlements with other parties is not disclosed until after trial. What Garlock argues here is that they should be made aware of the terms of a high/low agreement even though they would not know the terms of other parties’ settlements. I entered into that trial not knowing whether Garlock had a high/low agreement and I did not know the amounts of the settlements with the former co-defendants. In other words, I did not know the amount of the setoffs, so capping liability was a priority. As a result of issues related to Garlock, plaintiffs refused to settle with Niagara unless Garlock settled first, and Garlock knew this. Garlock was in the same position of not knowing definitively whether Niagara had a high/low and I assume it did not know the amounts of the other settlements. Garlock and Niagara were adverse parties with or without the agreement, given plaintiffs’ allegations and the facts of the case. There is no dispute that this was not a Mary Carter agreement and Niagara and plaintiffs did not collude to Garlock’s detriment. No New York court has ever held that high/low agreements are per se impermissible or that they must be disclosed to all parties. I have no statistics, but my feeling is that they are quite common. I believe that Garlock’s counsel at least strongly suspected the existence of the agreement during trial and that they were not the slightest bit surprised when they learned of it. Counsel called me cell to cell minutes after the verdict while I was still driving home from the courthouse and asked whether there was a high/low agreement.

To me, the issue of whether all parties must be informed of high/low agreements is the most interesting issue. No New York case has ever held that such agreements must be disclosed to other parties. No New York case has held that juries must be informed, and there is no PJI for informing juries. If Garlock had been told, there would have been no way to stop them from telling the jury, and this would have affected the verdict.

I do not have time here to discuss various related issues, including issues relating to the applicable legal standard, the issue of prejudice, how the agreement really affected the parties’ actions at trial, why this agreement was not unfair to Garlock and why they were not at a disadvantage, whether the verdict was fair, the effect of other parties’ settlements, how settlement negotiations effected the outcome of the case, some of the surprising issues Garlock raised at the trial court in post-trial motions but did not argue on appeal, what I think was likely to happen if the case were tried again and various strong opinions I have about the majority and dissenting opinions. I remain willing to discuss any of these issues with interested parties.

I am interested in your opinions because I think this case touches on at least two issues that are important to all litigators. First, there is the issue of whether judges should be allowed to be part of settlement discussions. I think that regardless of where you stand, this is an issue that should be addressed by statute or regulation rather than by common law. To my knowledge, no one has ever challenged the practice on this basis. Second, there is the issue of the legality of high/low agreements as a tool for limiting defendants’ liability and guaranteeing a minimum payment to plaintiffs, and related issues regarding whether those agreements must be disclosed to other parties involved.

Michael Hutter

I am appellate counsel to Garlock. I respond to one of Ryan's comments. Contrary to what Ryan states, Garlock never argued that a high-low between a plaintiff and one of a defendant in a multi-defendant case is unlawful. In fact, in our Brief we said it is permissible. We just argued that such an agreement must be disclosed. To date, no reason why it has not been disclosed has ever been given other than no one says we have to.


I want to thank everyone who has thus far commented on this incredibly interesting issue. Also, thank you to Ryan and Mike for taking the time to present both sides of the issue. I continue to welcome constructive comments on the issue.

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