No. 89 Matter of Eighth Judicial District Asbestos Litigation
(Reynolds v Amchem Prodcuts, Inc.)

Donald Reynolds, who worked at the Ashland Oil refinery in Tonawanda for more than 35 years,
was diagnosed with malignant mesothelioma, an incurable lung disease, in 2003. Reynolds and his wife filed this personal injury action against 20 defendants, including Garlock Sealing Technologies LLC and Niagara Insulations, Inc., alleging that his disease was the result of workplace exposure to asbestos. By the time the trial was held in 2004, the only remaining defendants were Garlock, which provided the refinery with asbestos-containing pump gaskets and packing, and Niagara, which provided asbestoscontaining pipe insulation.

Shortly before the trial began, Reynolds and Niagara entered into a confidential "high-low agreement" in which Niagara agreed to pay Reynolds a minimum of $155,000 in return for Reynolds'
agreement to accept a maximum of $185,000 from Niagara regardless of the outcome of the trial.

The trial court was informed of the agreement, but neither the court, Reynolds, nor Niagara informed Garlock or the jury. The jury awarded $3.75 million to the plaintiffs, apportioning liability 60 percent to Garlock and 40 percent to Niagara. Supreme Court reduced the judgment to $2.7 million, but denied Garlock's motion to set aside the verdict and grant a new trial based on the court's failure to disclose the high-low agreement, which capped Niagara's liability at $185,000.

The Appellate Division, Fourth Department affirmed in a 3-1 decision. The majority said,
"Absent evidence of collusion between Niagara and plaintiffs to the detriment of Garlock, the failure to disclose the high-low agreement does not mandate reversal.... Here, Niagara retained the incentive to minimize its own culpability and to magnify the culpability of Garlock and [Reynolds], and thus Garlock has failed to show how the [high-low] agreement realigned loyalties so as to prejudice [it]'...."

The dissenter argued the trial court failed to notify Garlock of ex parte communications regarding
the agreement, as required by Code of Judicial Conduct Canon 3, and that Reynolds and Niagara "thus actually or potentially gained a 'procedural or tactical advantage' over Garlock." He said, "[I]t was unfair to Garlock and prejudicial to its substantive rights and interest to be compelled to participate in the trial without knowledge of the critical procedural and substantive fact" that a high-low agreement limited Niagara's liability to a specified range.