Jurisdiction Over “High-Low” Agreements

Bryan v. Erie County Office of Children & Youth, 752 F.3d 316 (3d Cir. 2014).  A “high-low agreement” is one in which parties agree that, regardless of the outcome of (for example) a trial, the plaintiff will not recover more than $X and the defendant will not pay less than $Y.  In this case, the parties entered into a high-low agreement during trial.  Once the trial ended with a verdict that was far above the “high” figure, defendants sought to enforce the agreement.  Plaintiffs refused, asserting that defendants had breached a confidentiality provision of the agreement and that the agreement was therefore void.  The parties presented this dispute to the district court, with defendants moving for relief from the jury verdict under Rule 60(b)(5), but the judge believed that the district court lacked jurisdiction over the issue.  Defendants appealed, and the Third Circuit reversed in an opinion by Judge Fuentes.  Though the court normally reviews the denial of Rule 60 motions for abuse of discretion, the issue of subject matter jurisdiction called for de novo review.

The case presented a federal question, so the district court had subject matter jurisdiction over the matter as a whole.  “When a court has original jurisdiction over an entire action, it has limited authority to decide certain related claims or conduct incidental proceedings.”  Judge Fuentes cited a number of available post-trial motions as examples.   But a Rule 60 motion, he stated, “does not affect the judgment’s finality or suspend its operation … so it does not form part of the original action.”  Nonetheless, the district court had jurisdiction over the Rule 60 motion.  “The same ancillary jurisdiction that supports post-judgment enforcement proceedings supports proceedings to seek relief from the judgment.  The jurisdiction to enforce a judgment necessarily includes the jurisdiction to declare the judgment satisfied.”

In finding lack of jurisdiction, the district court had relied on Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994).  But Judge Fuentes rightly noted that that case dealt only with jurisdiction once a case had been dismissed.  But here, “[t]he case had not been dismissed, nor had the jury’s verdict been marked satisfied….  A district court’s jurisdiction does not terminate at the moment the jury’s deliberations do.”  The panel remanded the case to the district court to consider the parties’ post-trial arguments on their merits.