Litigation Strategy - High / Low Agreement

A high / low agreement is a quite fascinating negotiating strategy that can render assurances to both the plaintiff and defense of which I myself was unaware of until I was introduced to the phenomenon. Below is an explanation as to how and when it is employed.

A high-low agreement (or "high-low option") is a private agreement negotiated between the plaintiff and the defendant during litigation, often used just before a trial or arbitration, that limits the minimum and maximum financial recovery a plaintiff can receive. A high-low agreement can be negotiated and agreed to even up to and during jury deliberations at trial as long as it is executed before the jury renders a verdict.

It is a mechanism designed to reduce the financial risk for both sides, guaranteeing a floor for the plaintiff and a ceiling for the defendant, regardless of what the jury or arbitrator decides.

The agreement is defined by two figures set by the parties:

1. The "High" (The Cap): This is the maximum amount the defendant will have to pay the plaintiff, even if the jury awards a verdict higher than this number.3 This figure serves as the defendant's safety net against a catastrophic verdict.4
   
2. The "Low" (The Floor): This is the minimum amount the defendant must pay the plaintiff, even if the jury awards a verdict of zero, or a verdict lower than this number. This figure serves as the plaintiff's safety net against a total loss.

In a tort, personal injury case, if both sides agree to a high-low option:

Jury Verdict High-Low Agreement ($300k Low / $2M High) Resulting Payout $5,000,000

Verdict is higher than the High ($2M cap). The defendant pays the plaintiff the $2,000,000 High amount.$1,000,000 Verdict is between the Low ($300k) and the High ($2M). The defendant pays the plaintiff the $1,000,000 jury award.$0 Verdict is lower than the Low ($300k floor). The defendant pays the plaintiff the $300,000 Low amount.

High-low agreements are popular because they offer predictability and manage risk:

• For the Plaintiff (You): It guarantees you a definite recovery (the "Low"), ensuring you cover litigation costs and get some compensation, even if the jury completely rejects your claim.
• For the Defendant: It removes the catastrophic risk of a runaway jury awarding multi-million dollar damages, especially in a case with potential punitive damages. The "High" provides a firm budget cap.