Reynolds v. Amchem Products, Inc., 10 N.Y.3d 713 (2008)

In multi-defendant litigation, when a plaintiff and one defendant enter into a high-low agreement that requires the agreeing defendant to remain in the litigation, the existence and terms of the agreement must be disclosed to the court and the non-agreeing defendant(s).

Summary

Reynolds sued multiple defendants, including Garlock and Niagara, alleging asbestos exposure. Unbeknownst to Garlock, Reynolds and Niagara entered into a high-low agreement two weeks before trial, limiting Niagara’s liability exposure. The trial court was aware of the agreement but did not disclose it to Garlock. The jury apportioned liability, and Garlock appealed, arguing that the non-disclosure prejudiced its right to a fair trial. The New York Court of Appeals held that the failure to disclose the high-low agreement warranted a new trial because Garlock was deprived of a fair determination of its rights and liabilities.

Facts

Donald Reynolds contracted mesothelioma, allegedly from asbestos exposure at the Ashland Oil Refinery. He and his wife sued multiple manufacturers and distributors, including Garlock (gaskets) and Niagara (insulation). Two weeks before trial, Reynolds and Niagara entered into a high-low agreement: Niagara would pay Reynolds a minimum of $155,000 even if found without fault, and its liability was capped at $185,000. Garlock was unaware of this agreement.

Procedural History

The trial court, aware of the agreement but not its specific terms, did not disclose it to Garlock. The jury found Garlock 60% liable and Niagara 40% liable, awarding damages. Garlock moved for a new trial, arguing prejudice due to the undisclosed agreement. The trial court denied the motion. The Appellate Division affirmed, finding no evidence of collusion detrimental to Garlock. The New York Court of Appeals reversed.

Issue(s)

Whether, in a multi-defendant action, the failure to disclose a high-low agreement between the plaintiff and one defendant to the non-agreeing defendant constitutes reversible error.

Holding

Yes, because the non-disclosure of the high-low agreement deprived the non-agreeing defendant of its right to a fair trial and a fair determination of its rights and liabilities.

Court’s Reasoning

The Court of Appeals emphasized that high-low agreements, while useful tools, can prejudice non-agreeing defendants in multi-defendant cases if kept secret. The court noted that “secretive agreements may result in prejudice to the nonagreeing defendant at trial, distort the true adversarial nature of the litigation process, and cast a cloud over the judicial system.” The court reasoned that the undisclosed agreement gave Reynolds an incentive to maximize Garlock’s liability while minimizing Niagara’s. This deprived Garlock of the opportunity to adjust its trial strategy, seek appropriate procedural and evidentiary rulings, and argue the agreement’s significance to the jury. The court held that disclosure is necessary to ensure fairness and allow non-agreeing defendants to meaningfully defend themselves. The court balanced the state’s interest in settlement with the need to ensure a fair trial. The determination of what effect, if any, the agreement will have at trial, including whether the jury should be informed, remains within the trial court’s discretion. As the court stated, “To ensure that all parties to a litigation are treated fairly, we hold that whenever a plaintiff and a defendant enter into a high-low agreement in a multi-defendant action which requires the agreeing defendant to remain a party to the litigation, the parties must disclose the existence of that agreement and its terms to the court and the nonagreeing defendant(s).”