The highest court of New York has ruled that a "high-low" agreement must be disclosed to the judge and to non-settling defendants.
This is what the Court said:
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 non-agreeing defendant(s). This result strikes a proper balance between this State’s public policy of encouraging the expeditious settlement of claims, and the need to ensure that all parties to a litigation are apprised of the true posture of the litigation so they may tailor their strategy accordingly. Disclosure provides a non-agreeing defendant a meaningful opportunity to place on the record how it intends to use the agreement at trial, if at all, and affords the trial court an opportunity to weigh the interests of all the parties in considering the extent to which an agreement may be utilized in that forum. Of course, the determinations as to what effect, if any, the existence of the agreement will have at trial, including whether such an agreement should be disclosed to the jury, are matters that lie within the sound discretion of the trial court.
The case is Reynolds v. Amchem, Inc., No. 89 (N.Y. Ct. of App. June 27, 2007). Read the opinion here.