Negotiating Resolution with Hi-Lo Agreements
Below, ADR Services colleague Ralph Williams' September 2009 ADR Tip.
High - Low Agreements, also known as "Mini - Maxi" agreements are used to limit or bracket arbitration awards and jury verdicts. They can be made at any time before the award/verdict is rendered. Below we discuss the mechanics of a high - low agreement as it usually occurs in an arbitration.
Prior to commencing the arbitration, the plaintiff agrees to limit its recovery ($500,000). In consideration the defendant agrees to pay a sum certain ($100,000). If the award ($700,000) is more than the high, it is reduced to the high number ($500,000). If the award ($20,000 or a defense verdict) is less than the low, the award is increased to the low number ($100,000). If the award falls between the two numbers ($350,000) that number is the award.
When implementing a high - low agreement, consider whether to tell the arbitrator its parameters. Generally, if the arbitrator knows the parameters of a high - low agreement, you will get a result between the numbers. Therefore, if you are the defendant with the chance at a defense verdict or the plaintiff with the chance of a homerun, you probably do not want to disclose the high - low agreement's numbers.
When using a high - low agreement in an arbitration, where the arbitrator does not know its parameters, request an interim award, because the arbitrator loses jurisdiction on signing the award, except for limited grounds to correct. After receiving the interim award, reveal the high - low agreement's parameters and have the arbitrator enter the final award in accordance with the agreement.
When using a high - low agreement in a bench or jury trial, it is best practice to let the trial judge know the existence of the agreement without revealing its parameters, so as to avoid the perception that you are manipulating the court and/or wasting judicial resources.
