By Eric E. Ludin
If the first goal of mediation is to settle your case, the second goal should be to manage your client’s risk. When the mediation seems to be reaching an impasse, a good mediator will encourage the parties to consider the high/low agreement.
In a high/low agreement, the defendant agrees to pay a minimum amount of money regardless of the outcome at trial. The money is usually paid when the settlement agreement is entered into. In exchange, the parties agree that regardless of the verdict, the maximum that will be paid will be an agreed amount. Any verdict between the high and the low will be paid without adjustment.
You understand from your experience the enormous perils associated with going to trial. However, your clients may not fully appreciate the danger of losing a case that should have been won and vice versa.
If you want to be a good advocate and a good risk manager, you should not give up attempting to limit risk even if you cannot settle your case at the mediation conference. You can consider a high/low agreement at any time during the course of litigation. For example, after all the evidence is presented, neither party may have a good sense about the potential outcome. After closing arguments are completed, the parties can enter into a high/low agreement that guarantees a substantial amount of money to the plaintiff and limits the upside to protect the defendant in the event of an exorbitant verdict.
Such a settlement can be structured to make certain that no matter the outcome, neither party will be saddled with a judgment for attorney fees because of prior offers and demands for judgment. The settlement can assure that there will be no appeal and that the monies owed will be paid within a specific period of time. The defendants know that under the worst-case scenario, they will not need to file bankruptcy. The plaintiffs know that under the worst-case scenario, they will receive significant compensation for their losses.
High/low agreements can be even more beneficial to the parties if agreed to before trial. Normally, the low amount is paid upon execution of the agreement. These monies can fund the costs needed to go to trial. Therefore, a high/low agreement can level the playing field for plaintiffs and limit the risk to the defendant.
A high/low agreement has some risk. The defense can overpay if the verdict is lower than the low, or the plaintiff can be underpaid if the verdict is higher than the high. Be very careful to cover all contingencies in the agreement. Remember that by encouraging your clients to limit their risk exposure, you are being both their best possible advocate and counselor.
