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No Attorney’s Fees Permitted Under Offer of Judgment Rule When not Preserved Under High-Low Agreement

By on August 24, 2018 in Awards with 0 Comments

Plaintiff Lucia Serico filed a motion for attorney’s fees following a jury trial in a medical malpractice case based upon an offer of judgment she had made before the trial. While the jury was deliberating, she entered into a high-low agreement with the defendant. When the jury returned a verdict of $6 million, which was in excess of the $1 million high number in her high-low agreement, she requested that she be awarded attorney’s fees based upon the pre-trial offer of judgment she had made of $750,000. The issue before the New Jersey Supreme Court in Serico v. Rothberg, 2018 N.J. LEXIS 928 (July 19, 2018), was whether she may collect attorney’s fees when the verdict exceeded the high number in her high-low agreement.

This claim involved a medical malpractice action for the failure to diagnose the colon cancer of Benjamin Serico, who passed away before the trial. Before the trial, plaintiff made an offer of judgment in the amount of $750,000, which defendant Rothberg declined to accept. During the trial, the parties entered into a high-low agreement with the “low” of $300,000 and the “high” of $1 million. The agreement was placed on the record.

Neither party mentioned the offer of judgment made under Rule 4:58, nor did they explicitly waive or preserve any rights under the rule. However, the parties did explicitly include interest in the   $1 million high number. Further, it was confirmed on the record that the defendant’s insurance coverage was limited to a $1 million policy.

After the verdict, the plaintiff filed a motion for attorney’s fees based upon the offer of judgment rule. (Under this rule, if the award is 120% or more than the offer of judgment, the plaintiff is entitled to an award of litigation expenses, including attorney’s fees.) This motion was denied by the trial court and that decision was affirmed by the Appellate Division. The plaintiff then petitioned the Supreme Court for certification, which appeal was accepted by the Court. However, the Supreme Court agreed with the two lower courts and affirmed.

The Court reviewed the purpose of the offer of judgment rule. It was designed to encourage and promote early out-of-court settlements. However, a high-low agreement has a different purpose. Based upon this type of agreement, the parties would let the matter proceed to trial with any outcome limited to the agreed upon limits by the parties.

The Supreme Court noted that this agreement was entered into during jury deliberations. Thus, it “was not intended to avoid litigation expenses or save time; it was entered to mitigate the inherent risk to the parties of a jury verdict and to limit subsequent appeals.” However, the agreement was silent as to the Rule 4:58 offer of judgment expenses.

The Court found that this issue was governed by the laws of contracts. It held that it must “look to the expressed intent of the parties and the context of the agreement.” The Court examined the trial transcript when the high-low agreement was placed on the record. The parties explained their positions as to the agreement and expressed that $1 million would be a hard limit with no interest or medical expenses added on. Further, the Supreme Court found compelling that the plaintiff requested that the defendant’s counsel place on the record that the insurance policy limit was $1 million with no secondary insurance.

The Court held that the settlement through the high-low agreement superseded and extinguished the offer of judgment. It found that the parties intended $1 million to be the maximum recovery, including all expenses and fees, and that they anticipated that it would replace any prior agreements. Because the high-low agreement superseded the offer of judgment, if plaintiff intended to pursue an award of fees under Rule 4:58, she would have been required to explicitly preserve the right to pursue them when entering into the high-low agreement. The Court noted that a “critical” aspect of any high-low agreement is finality and that both parties “benefit from the strict and explicit limitation of financial exposure that such agreements provide.” Accordingly, the Supreme Court affirmed the decisions of the trial court and Appellate Division, denying the plaintiff’s application for attorneys fees and costs.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

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