High-Low Agreements in Wrongful Death Cases
by Morry S. Cole1
Prudent Missouri practitioners should obtain judicial approval of high-low agreements in wrongful death cases."Once [litigants] place their fate in the hands of a jury, then they should be prepared for the result. . ."
2 (emphasis added).
Frequently litigants seek to reduce the risk of a trial by entering into a high-low agreement. Typically, in Missouri, under a high-low agreement a defendant agrees to pay a certain minimum amount (the "low") of money damages regardless of the size of the verdict in return for a plaintiff's agreement not to collect any amount in excess of a certain amount (the"high").3
High-low agreements in wrongful death cases seem as though they should be a simple contract governing the parties' rights and responsibilities - until you ask some important questions. Who has authority to enter into the agreement? Is it enforceable? Does a high-low require court approval? What if persons entitled to participate in the suit are not named plaintiffs? What if persons entitled to participate are not active participants in the case? What if persons entitled to participate are legally incompetent? What notice must be given? There can be many complicating factors.
Under statute, only a judge can approve a high-low agreement in a wrongful death case. Judicial approval of a proposed high-low is recommended to protect named and participating plaintiffs, settling defendants, appointed next friends, or guardians ad litem and counsel, and to ensure the integrity of the agreement.
I. Statutory Authority
The Missouri remedy for wrongful death is a creature of statute and must be technically construed.4 In pursuing a case, and in attempting to obtain approval of a high-low, several statutes govern.
Survivors of a decedent are authorized to bring an action for wrongful death by the Missouri wrongful death act, §§ 537.080, et seq. RSMo. Under § 537.080, RSMo:
Whenever the death of a person results from any act, conduct, occurrence, transaction or circumstance which, if death had not ensued, would have entitled such person to recover damages in respect thereof, the person or party who, or the corporation which, would have been liable if death had not ensued shall be liable in an action for damages, notwithstanding the death of the person injured.
Section 537.080 also defines those persons entitled to sue.5 If a decedent has a surviving spouse, child or parent - also known as "Class 1" persons because they are within one degree of consanguinity of the decedent - one or more of those individuals must bring suit.6 If there is no surviving spouse, child or parent, then suit may be brought by a sibling to the decedent or a sibling's descendants - known as "Class 2" persons.7 If any individual brings a wrongful death suit, he or she brings it on behalf of all those entitled to participate. There can only be one action against any one defendant for the death of any one person.8
Any person entitled to sue under § 537.080 may, with approval of any circuit court, seek to compromise or settle the claim for damages. Authority to request approval of a settlement from a court is found in §537.095, RSMo. Under § 537.095, if two or more persons are entitled to sue for and recover damages arising out of a wrongful death, then any one or more of them may settle the claim if they obtain court approval.9
Frequently, a wrongful death case will be brought on behalf of a minor through a next friend. Pursuant to §§ 507.184.1- 507.184.3, RSMo, the next friend of a minor is authorized to settle wrongful death claims on behalf of the minor, again with court approval.
A high-low agreement is a partial settlement or compromise of a claim.10 The first steps in seeking approval are to file an application for approval, provide notice and schedule a hearing.
II. Application For Approval
Missouri case law is silent on the technical requirements to establish a binding partial settlement pursuant to a high-low agreement in a wrongful death case. However, under a plain and conservative reading of §537.095, judicial approval is required.11
Plaintiffs, or the parties jointly, must apply to the court for approval of a partial wrongful death settlement. An on-the-record hearing is recommended rather than having the court rule on affidavits - especially when persons entitled to participate are not actively participating in a case. The application should be made pursuant to §§ 537.080-537.095. As with any wrongful death settlement, certain facts should be set forth. The application should identify the parties and their degree of consanguinity or class under the wrongful death act. If a minor or incompetent is involved, the authority relied upon to serve as next friend should be cited. The applying party's statutory authority to settle should be set forth for the court, and counsel should detail the steps taken to provide notice to other persons entitled to participate. A brief summary of the claim - as well as noting that the facts and circumstances have been fully investigated - should follow. Lastly, counsel should include that the parties have negotiated an agreement subject to court approval, that the parties understand their right to try the case without a high-low agreement, and that they move for the court's approval.
An exemplar application is attached hereto as Appendix A.
III. Notice of Hearing
Under § 537.095, RSMo, each person entitled to sue for and recover damages must be given notice of hearing.12 If actual notice is not possible, then the court must have evidence that a diligent attempt has been made to notify all class members.13
Notice is considered "actual" when a person "knows of the existence of the particular fact in question or is conscious of having the means of knowing it, even though such means may not be employed by him." Whatever fairly is sufficient to put an ordinarily prudent person on inquiry constitutes notice to him of such facts as would be disclosed by reasonable pursuit and proper inquiry."14 Generally, a "certified letter from an attorney" is sufficient.15 Anecdotally, evidence of FedEx or other parcel service receipt has proven satisfactory notice in some instances; however, there is no specific Missouri law addressing the adequacy of such notice.
If the address, phone number and whereabouts of a person entitled to participate are unknown, the efforts taken to locate them and provide them notice must be presented to the court. For example, counsel should have an investigator testify as to steps taken to locate the person; provide evidence of mailing notice to the person's last known address; have a paralegal testify as to efforts to locate the person, etc. Such evidence will, in most circumstances, satisfy the court.16
IV. The Hearing
A special hearing date before trial is preferable to hold a hearing on the application. However, many times discussion of a high-low arises close to trial. In such cases, the first day of trial is a good time for the hearing. On the first day of trial, in most circumstances, all necessary witnesses will be present and the judge and opposing counsel will certainly have time set aside for the proceedings.
The hearing should be methodical and well-planned. Ground rules for the examination of the witnesses should be established prior to the hearing to keep direct and cross-examination relevant to the partial settlement. Counsel should elicit testimony showing each witness's understanding that the jury verdict may be greater than, less than or within the range of the high-low. Entering into a high-low is a waiver, by the parties, of the right to a trier of fact's determination of damages as to the settling defendants. Such a waiver must be made only with a full understanding of the consequences. Providing the court evidence of verdicts in similar cases can help demonstrate the reasonableness of your high-low. If possible, the hearing should take place in a cleared courtroom, especially in high-profile cases, to avoid publicity of the high-low. It is recommended to hold a hearing on the record and secure a copy of the transcript for your file - especially when minors are involved. This is important to protect all concerned in the event of a verdict substantially above or below the range of the high-low. In addition, it is helpful if there is ever a question about the propriety of the agreement. Additionally, you should establish on the record each witness's understanding that the court will have the final word on the ultimate allocation of proceeds.
V. Trial Considerations
After high-low approval, the trial goes on. However, additional practical issues should be addressed before jury selection begins.
Court files are open to the public. It is a good idea to have the application for approval and order of approval sealed to prevent the press or jurors from discovering the existence of the high-low prior to the conclusion of the case. The proposed high-low should be discussed with the court prior to filing the application in the clerk's office. The parties and the court should address in limine that the existence of the agreement is not to be admitted into evidence. All parties should avoid all reference to the high-low in the presence of the jury.
The proposed order approving the high-low should track the application and should be provided to the court in advance of the hearing. The parties should also provide the court a copy of the proposed high-low agreement.
When negotiating the terms of a high-low, the right to appeal is often a stumbling block. It is suggested that the right to appeal remain unaffected by the high-low except as to damages. One way the agreement can address appeals follows: Upon completion of the trial, any party retains the right to appeal any judgment or verdict based upon any errors committed at trial; however, neither party may simply appeal the judgment as being too excessive or too small except to the extent necessary to appeal any other trial error. Neither party shall seek remittitur or additur.
By handling the issue of appeal in this manner, each side will remain on its best behavior for trial. Post-trial motion practice should remain unchanged, with the exception that there will be no remittitur or additur motions.
VI. Form Of Agreement
There are many options when it comes to drafting a high-low agreement. As with most agreements, straightforward, concise language is possible and preferable.
The agreement should identify the parties to the agreement and the case style. It should state the parties' desire to enter into an agreement to limit liability, the high and the low. It should include a covenant not to collect an excess verdict. And it should address the right to appeal, interest on the judgment in case of appeal, timing of satisfaction of judgment, how joint and several liability is implicated, indemnification, that the partial settlement is not an admission of liability, that court approval is required, that it is entered into with understanding and advice of counsel, and whether it applies to punitive damages. Additionally, you will want to include choice of laws and forum selection clauses.
The high-low agreement should be incorporated into the court's order approving the partial settlement and made a part of the court file.
VII. Pitfalls
Without court approval, what you think is a binding high-low contract may be an unenforceable document that neither your client nor your carrier will appreciate. The potential challenges that can arise to a high-low are daunting. A co-defendant that is not a party to the high-low can move for a mistrial.17 A family member can challenge the high if the jury awards more than the high.18 Dissatisfaction may arise when the court ultimately enters its allocation order.19 If terms and conditions of the high-low are not timely met, it may be argued that they are waived.20 A plaintiff may face a defendant that refuses to pay any amount greater than a jury's low verdict entered as judgment. A plaintiff may attempt to challenge the high-low if the jury finds liability but assesses zero damages.21 An "oral high-low" can fall through after the trial is concluded.22 A plaintiff may assert that the high-low did not limit punitive damages.23 A person entitled to participate and who never participated in any phase of the pre-trial or trial may challenge the agreement if a large verdict is returned.
When an unanticipated issue arises, the parties may face more litigation and more of the uncertainty that they sought to avoid in the first instance. In the subsequent contractual litigation, they may find they lacked authority to enter into the agreement without court approval or may find that their agreement is interpreted to their disfavor.
VIII. Conclusion
High-low agreements can be beneficial to relieve all parties from uncertainty. However, in Missouri only a judge has the ability to approve a wrongful death settlement. Because a high-low is a partial settlement of a wrongful death claim, prudent practitioners should obtain judicial approval prior to trial.
APPENDIX A
- EXEMPLAR APPLICATION -
JANE DOE, et al., Plaintiffs v. BAD ACTOR TRANSPORTATION,
et al., Defendants.
Case No. ____________________
APPLICATION FOR APPROVAL OF PARTIAL WRONGFUL DEATH SETTLEMENT PERTAINING TO DAMAGES
COME NOW Plaintiffs Jane Doe, Carl Doe and Sam Doe, by counsel and request approval of partial settlement of their wrongful death cause of action against Defendants Bad Actor Transportation and Bad Driver (hereinafter "Defendants"), and as grounds therefore, state to the Court as follows:
1. Plaintiff Jane Doe is the surviving spouse of John Doe, deceased (hereinafter "decedent").
2. Plaintiffs Carl Doe and Sam Doe are surviving natural children of Jane Doe and the decedent.
3. Plaintiffs are entitled to bring this wrongful death action under the provisions of Mo. Rev. Stat. § 537.080. Plaintiffs have filed this lawsuit under the provisions of Mo. Rev. Stat. § 537.080 against the above named Defendants for the wrongful death of decedent within three years of the death of decedent.
4. Pursuant to § 507.184, RSMo, Jane Doe, as next friend of Sam Doe, a minor, is authorized to partially settle this claim on behalf of Sam Doe.
5. Plaintiff is entitled to compromise or settle this wrongful death cause of action under the provisions of Mo. Rev. Stat. § 537.095, and states that this Application for Approval of Settlement is being brought in accordance with the provisions of Mo. Rev. Stat. § 537.095.
6. Bill Doe and Sara Doe are also surviving natural children of the decedent, falling within the class designated under Mo. Rev. Stat. § 537.080(1) as being entitled to bring a cause of action for the wrongful death of decedent, but they are not named parties to this case.
7. Jim Doe and Mary Doe are surviving natural parents of the decedent, falling within the class designated under Mo. Rev. Stat. §537.080(1) as being entitled to bring a cause of action for the wrongful death of decedent, but they are not named parties to this case.
8. Plaintiffs state that they have notified Bill Doe, Sara Doe, Jim Doe and Mary Doe, by mailing to their present address via Federal Express, certified mail return receipt requested and regular U.S. Mail of the filing of this application for approval of proposed partial wrongful death settlement pertaining to damages of the above cause of action under the provisions of Mo. Rev. Stat. § 537.095 and have provided notice of hearing requesting approval of such settlement for 9:00 a.m. on [first day of trial].
9. Plaintiffs state that they have attempted to notify Bill Doe at his last two known addresses, both of which were undeliverable.
10. A wrongful death action is filed in this Court by Plaintiffs against Defendants and alleges, inter alia, that on or about June 1, 200X, the negligence of the Defendants caused or contributed to cause the death of the decedent.
11. The Plaintiffs herein have fully investigated the facts and circumstances with reference to the wrongful death claim arising out of the death of decedent and considering all the facts and circumstances of the case, Plaintiffs believe it would be in their best interests to enter into a proposed partial settlement ("high-low agreement") prior to the trial of this matter to partially settle their claims against the Defendants, arising out of the June 1, 200X death of decedent.
12. Subject to the approval of this Court, the parties have negotiated a proposed high-low agreement in which said Defendants have agreed, regardless of the outcome of this case, to pay to Plaintiffs at least XXXX Hundred Thousand Dollars ($X00,000.00) for a low and up to XXXX Million XXXX Hundred Thousand Dollars ($X,X00,000.00) as a high should any verdict fall within that range. In return, Plaintiffs have agreed, subject to Court approval, not to collect any verdict in excess of $X,X00,000.00. Plaintiffs believe the partial settlement is fair, reasonable, and acceptable to them, and they ask this Court to approve the partial settlement.
13. Plaintiffs fully understand that they have a legal right to try this lawsuit before a judge or jury without any high-low partial settlement agreement, and that, in such event, they might recover an amount greater than $X,X00,000.00, or an amount less than $X00,000.00 or any amount in between.
14. Plaintiffs proposed Order is attached hereto as Exhibit 1.
WHEREFORE the Plaintiffs respectfully request the Order of this Court approving the partial settlement described herein, and for any such further relief as this Court deems appropriate under the circumstances.
Dated this _______ day of December, 200X.
Footnotes
1 Morry S. Cole is an associate with the firm of Gray, Ritter & Graham in St. Louis. He is chair-elect of The Missouri Bar Young Lawyers' Section Council.
2 Morrissey v. Welch Co., 821 F.2d 1294, 1301 (8th Cir. 1987).
3 Fiegener v. Freeman-Oak Hill Health Sys., 996 S.W.2d 767 (Mo. App. S.D. 1999); Hewlett v. Lattinville, 932 S.W.2d 910 (Mo. App. E.D. 1996); Kress v. Lederle Laboratories, 901 S.W 2d 206 (Mo. App. E.D. 1995).
4 Ivey v. Williams, 760 S.W.2d 485, 487 (Mo. App. W.D. 1988).
5 Section 537.080.1(1)-(3), RSMo 2000.
6 Section 537.080.1(1), RSMo 2000.
7 Section 537.080.1(2), RSMo 2000.
8 Section 537.080.2, RSMo 2000.
9 Section 537.095.1(1), RSMo 2000.
10 Case law throughout the country is replete with references to high-lows as "settlements" or "compromises" of claims. See, e.g., Cortez v. HCCI-San Antonio, 131 S.W.3d 113 (Tex. Ct. App. 2004) (settlement); Rodriguez v. Maxson, 2002 WL 31833553 (Tex. App. Austin December 19, 2002) (settlement); Ferrell Lavergne Eagle Pac. Ins. Co. v. Quality Fabricators of Eunice, 832 So.2d 1176, 1178 (La. Ct. App. 2002) (compromise); Carter v. Southeastern Pa. Transp. Auth., 809 A.2d 464 (Pa. Cmwlth. Ct. 2002) (settlement); Wilson v. Greyhound Bus Lines, 830 So.2d 1151 (Miss. 2002) (settlement); Benz v. Pires, 636 A.2d 101, 104 (N.J. Super Ct. App. Div. 1994) (New Jersey Superior Court appellate division found that prejudgment interest was not appropriate where a high-low agreement existed because it was the same as a settlement); Birth Center v. St. Paul Cos., 787 A.2d 376 (Pa. 2001); New York City Hous. Auth. v. Hous. Auth. Risk Retention Group, Inc., 203 F.3d 145 (2d Cir. 2000); Fiegener v. Freeman-Oak Hill Health Sys., 996 S.W.2d 767 (Mo. App. S.D. 1999); California Union Ins. Co. v. Liberty Mut. Ins. Co., 930 F. Supp. 317 (N.D. Ill. 2000); Stewart v. M.D.F., Inc., 83 F.3d 247 (8th Cir. 1996); Wisconsin Patients Compensation Fund v. CNA Ins. Co., No. 95-0943 (Wis. App. December 19, 1995); Ryll v. Columbus Fireworks Display Co., Inc., 769 N.E.2d 372 (Ohio 2002); Stout v. State Compensation Fund, 44 P.3d 178 (Ariz. Ct. App. 2002); Richard v. Wilde, Civil Action No. 99-00891 (Mass. Super. 2001); Norman Enterprises Interior Design, Inc. v. Dekalb County, 538 S.E.2d 130 (Ga. Ct. App. 2000); Wingo v. Rockford Memorial Hospital, 686 N.E.2d 722 (Ill. App. Ct. 1997); Smith v. Settle, 492 S.E.2d 427 (Va. 1997) (compromise and settlement); Garrett v. Mohammed, 686 So.2d 629 (Fla. Dist. Ct. App. 1996) (compromise and settlement); Medical Mut. Liability Ins. Soc. of Md. v. Evans, 622 A.2d 103 (Md. 1993); Boyd v. L.G. DeWitt Trucking Co., 405 S.E.2d 914 (N.C. Ct. App. 1991). However, it is also noted that a high-low is not a final settlement. Accord Camarda v. Barman's Inc. 1997 WL 33344418 *1 (Mich. App. 1997).
11 Some would argue that a high-low is simply a covenant not to execute or a contract separate and apart from the wrongful death proceedings. However, such a stance can, in the extreme, lead to unintended problems. See, e.g., In the Matter of Alcorn, 41 P.3d 600, No. SB-01-0075-0 (Az. 2002) (evasive statements or misleading statements regarding settlement to court created sham trial for illegitimate purpose, leading to attorney discipline).
12 Section 537.045.1, RSMo 2000.
13 Id.
14 Lamke v. Lynn, 680 S.W.2d 285, 288 (Mo. App. E.D. 1984).
15 See Walkenhorst-Newman v. Montgomery Elevator, 37 S.W.3d 283, 286-287 (Mo. App. E.D. 2000).
16 Id.
17 Accord Garrett v. Mohammed, 686 So.2d 629 (Fla. Dist. Ct. App 1996) (claim that high-low invoked same dangers as prohibited "Mary Carter Agreement").
18 Accord Rodriguez v. Maxson, 2002 WL 31833553 (Tx. App. 2002) (medical malpractice case where approval of a minor child's high-low was sought by guardian ad litem. High-low was approved. Jury verdict exceeded the high-low and the parents challenged the agreement. Though not a wrongful death case, there is an overlap of issues).
19 Accord Carter v. Southeastern Pennsylvania Transp. Auth., 809 A.2d 464 (Pa. Commwlth. Ct. 2002).
20 See In re Sensitive Care, 28 S.W.3d 35 (Tex. App. 2000).
21 See Stevens v. Allen, 520 S.E.2d 625 (S.C. Ct. App. 1999).
22 See CSX Transportation v. Whittler, 645 So.2d 2 (Fla. Dist. Ct. App. 1994).
23 See Boyd v. L.G. DeWitt Trucking Co., 405 S.E.2d 914 (N.C. Ct. App. 1991).
JOURNAL OF THE MISSOURI BAR
Volume 61 - No. 1 - January-February 2005