New Jersey Appellate Division Disallows Attorney's Fees Pursuant to the Offer of Judgment Rule, as Part of a High-Low Agreement

04.06.17

In a recently published decision, Serico v. Rothberg, 2017 N.J. Super. LEXIS 19 (Feb.16, 2017), the New Jersey Appellate Division affirmed the Trial Court's denial of attorney's fees and costs pursuant to the Offer of Judgment rule, where the parties had entered into a High-Low agreement capping the plaintiff's recovery to $1 million dollars, and where the plaintiff did not preserve her right to counsel fees as part of the High-Low agreement.

In this case, the plaintiff brought a medical malpractice action based upon an alleged failure to diagnose the plaintiff's colon cancer. While the case was awaiting a trial date, the plaintiff made an offer to accept a judgment in the amount of $750,000, in accordance with R.4:58-1 et seq. The offer-of judgment rule permits a party to offer to take a monetary judgment or to allow judgment to be taken against it for a sum certain. If the offer is not accepted, and the claimant obtains a monetary judgment that is 120 percent of the offer or more, the claimant is permitted costs of suit and "all reasonable litigation expenses incurred following non-acceptance." R. 4-58-2(a).

The defendant did not respond to the plaintiff's offer. During the ensuing trial, while the jury was deliberating, the parties entered into a High-Low agreement, which is a settlement that guarantees a plaintiff a minimum recovery and limits a defendant's exposure to an agreed upon amount, regardless of the jury's award. The agreement, as placed on the record by counsel, provided for a "low" of $300,000 and a "high" of $1 million. When counsel placed the terms of the settlement on the record, no one mentioned the plaintiff's potential entitlement to recover fees. It was agreed, however, that the plaintiff's medical expenses would be subsumed within the amount of the High-Low agreement.

The jury ultimately returned a verdict in the amount of $6 million dollars. As a result, the plaintiff was entitled to entry of a judgment pursuant to the High-Low agreement in the amount of $1 million dollars, which was more than the 120 percent of the amount of the initial offer of judgment. Because the judgment exceeded the Rule's 120 percent threshold, the plaintiff filed a motion for an award of attorney's fees and costs. The Trial Court denied the motion and this appeal followed.

In affirming the Trial Court's decision, the Appellate Division recognized that High-Low agreements, like any contract "are to be enforced as written," and that the parties' High-Low agreement made no mention of the effect of the defendant's rejection of the offer of judgment, or the plaintiff's entitlement to counsel fees or other remedies based upon the amount of the judgment entered after the jury's verdict. Inasmuch as the plaintiff did not come forward with any evidence that she preserved her rights under the Rule, the Court determined that the plaintiff was not entitled to any other payments. 

Comment: Counsel should ensure that issues such as pre-judgment interest, costs and counsel fees are fully addressed and placed on the record, as part of any High-Low settlement. The take-away from this case is that any claims beyond the "High" in a High- Low agreement are considered encompassed within a negotiated settlement and therefore must be specifically contained in the High-Low agreement or expressly preserved on the record.

For more information, please contact Jane Kelsey at jkelsey@wglaw.com or 973.854.1078.

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