Plaintiff Lucia Serico entered into a high-low agreement with defendant Robert M. Rothberg, M.D. to resolve her claim against the defendant. However, in reaching this settlement, plaintiff did not expressly reserve her rights to recover fees under the Offer of Judgment rule. Based upon the jury award, the plaintiff would have been entitled to these fees under the rule. In the published decision of Serico v. Robert M. Rothberg, M.D., 2017 N.J. Super. LEXIS 19 (App. Div. February 16, 2017), the Appellate Division was asked to decide whether the failure to preserve the right to pursue fees, in entering into the high-low agreement, barred the plaintiff from pursuing such fees.
This case was a medical malpractice action filed against the defendant due to the failure to diagnose Benjamin Serico’s colon cancer. Before trial, plaintiff made an offer to accept judgment against defendant in the amount of $750,000. Defendant did not respond to the offer. During the trial, while the jury was deliberating, the parties entered into a high-low agreement, in which the agreed upon low was $300,000 and the high was $1 million.
During the negotiations for this high-low agreement, there was no mention of the offer of judgment rule or plaintiff’s possible entitlement to any award based upon the defendant’s rejection of her offer of judgment. Plaintiff never expressed any intention to waive or pursue the offer of judgment remedies, nor did the defendant ask for a release or waiver of plaintiff’s rights under the rule.
The jury returned a verdict of $6 million. Because the judgment exceeded 120% of the offer, that would have entitled the plaintiff to an award of attorney’s fees and costs. After the verdict, plaintiff filed a motion for these fees, claiming that she never intended to waive or release the provisions of the offer of judgment. The defendant opposed the application on the basis that the plaintiff never mentioned, nor expressed any intention of preserving her right to attorney’s fees during the negotiations for the high-low settlement.
The trial court judge relying on the “custom and usage” in the industry denied the plaintiff’s application. He found that there was nothing in the agreement reached between the parties to indicate the intent to preserve this claim and that successful parties rarely made fee applications following a high-low agreement. If they did make such an application, it was denied.
The Appellate Division confirmed the trial court judge’s ruling but utilized basic contract principles in reaching the same conclusion. The Court noted that a high-low agreement is a device used in negligence cases whereby a defendant agrees to pay plaintiff a minimum recovery in exchange for the plaintiff’s agreement to accept a maximum sum, regardless of the jury verdict.
In this case, the parties’ high-low agreement did not mention the defendant’s rejection of plaintiff’s offer of judgment. The Court noted that a basic assumption of a high-low agreement is that a plaintiff cannot recover more than the maximum agreed upon amount. Awarding a plaintiff any sum more than the “high” would be contrary to the purpose of encouraging defendants to settle.
The Court stated that the parties are always free to preserve a claim that they might have pursuant to a court rule or otherwise in settling a case. Here, the plaintiff did not produce any evidence that she preserved her rights to pursue fees under the offer of judgment rule, despite the high-low agreement. A claim for additional amounts beyond the “high,” including attorney’s fees, is considered to be encompassed within a negotiated settlement unless expressly preserved. Accordingly, because the jury’s verdict was in excess of the high, the Appellate Division found that the trial court correctly ruled that plaintiff’s claim was limited to the $1 million high number and that number included all fees and costs to which she might have been entitled under the offer of judgment rule.
