A recent New Jersey Law Journal story by Michael Booth, “High-Low Agreement Sets ‘Hard Limit,’ Court Says in Barring Additional Fee Award,” reports that the New Jersey Supreme Court ruled that parties who enter into a high-low agreement may not later seek additional counsel fees and litigation costs if the agreement is silent on the issue.  In a unanimous decision, the court ruled that a high-low agreement should be considered a contract and that, unless expressly agreed to, the award of counsel fees and costs permitted under the offer of judgment rule cannot be considered.

“We determine that the high-low agreement is a settlement subject to the rules of contract interpretation,” Justice Faustino Fernandez-Vina said for the court.  A high-low agreement “is not the sort of settlement contemplated by Rule 4:58; rather, it serves a different purpose and provides distinct benefits,” he wrote.

“An offer of judgment pursuant to Rule 4:58 is designed to encourage parties to settle claims that ought to be settled, saving time, expense, and averting risk, while the specter of the continued prosecution of the lawsuit remains,” he said.  “A high-low agreement, in contrast, only mitigates the risk faced by the litigants—it saves no time or expense related to litigation and requires the full panoply of judicial process, up to and including a jury verdict.”  “The agreement is a settlement contract ”that” superseded and extinguished the offer of judgment,” the court held.

The issue reached the court on a question of whether the estate of a deceased medical malpractice plaintiff could be awarded fees over and above the $1 million “high” after a jury verdict of $6 million.  The Supreme Court affirmed lower courts, which said the answer was no.

In the suit, plaintiff Benjamin Serico of West Caldwell claimed he was administered a colonoscopy by physician Robert Rothberg in December 2007, but two years later he was diagnosed with colon cancer that had spread to his liver.  Serico died two years after his diagnosis, in December 2011, at age 62, after which his wife, Lucia Serico, continued to pursue claims that Rothberg negligently failed to treat the cancer.

Lucia Serico made a pretrial offer of judgment of $750,000, to which Rothberg’s carrier never responded, according to documents.  According to the court, settlement negotiations began in earnest during the trial, and the parties entered a high-low agreement providing for a minimum recovery of $300,000 and a maximum of $1 million.  During the negotiations, neither side raised a possible fee award, or a reservation or waiver of rights, or the offer of judgment, the court said.

A jury found for the plaintiff after a two-week trial before Essex County Superior Court Judge James Rothschild Jr., and awarded $6 million, thus triggering the $1 million “high.”  The jury attributed 20 percent of the fault to the decedent’s pre-existing cancer, which, absent the high-low, would have set the recovery at $4.8 million.  Because the $1 million judgment was more than 120 percent of the previous $750,000 offer, Serico, citing Rule 4:58, moved for an award of fees and costs.  Each side acknowledged that the issue hadn’t been raised at the negotiations during trial.

Rothschild denied the motion.  He found there was no evidence of intent to determine that Serico’s rights to a fee sanction under the rule had been preserved.  He said high-low settlements are rarely if ever followed by fee applications under Rule 4:58.  In a February 2017 ruling, the Appellate Division affirmed, saying: “Without evidence that the parties agreed to allow plaintiff to seek amounts in excess of the high, [the plaintiff] was not entitled to any other payments.”

Fernandez-Vina and the other justices agreed.  “The resulting agreement set a hard limit of $1,000,000,” Fernandez-Vina said.  “We conclude that the parties intended $1,000,000 to be the maximum recovery, including all expenses and fees.  “The agreement on the record reveals a meeting of minds on both the floor and the ceiling of Serico’s recovery, including fees and expenses,” Fernandez-Vina said.  “A crucial aspect of any high-low agreement is finality; both parties benefit from the strict and explicit limitations of financial exposure that such agreements provide,” he added.

Rothberg’s attorney, James Sharp of Schenck, Price, Smith & King in Florham Park, issued a statement through another attorney, Benjamin Hooper of the same firm.  “We were confident in the correctness of our position, that the plaintiff was ineligible to collect fees and costs under the offer of judgment rule,” Hooper said.  “The high-low contract superseded the offer-to-take judgment.  “As a matter of policy the decision benefits all litigants.  High-low agreements assist both plaintiff and defendant to mitigate the risk of an unfavorable jury verdict,” Hooper said.