Offers of Judgment and High-Low Agreements

Serico v. Rothberg, 448 N.J. Super. 604 (App. Div. 2017).  In this medical malpractice case, plaintiff and defendant entered into a “high-low” agreement while awaiting a jury verdict.  As Judge Rothstadt noted in his opinion in this case today, such an agreement “guarantees a plaintiff a minimum recovery and limits a defendant’s exposure to an agreed upon amount, regardless of the jury’s award, if any.”  The low was $300,000 and the high was $1 million.  Before trial, plaintiff had offered to accept judgment for $750,000, inclusive of costs and prejudgment interest.  Defendant did not respond that offer.

The high-low agreement did not mention any possible award that plaintiff might get by virtue of the unaccepted offer of judgment (such an unaccepted offer can result in an award of litigation expenses from and after the date of non-acceptance, on top of whatever the jury awards, if a plaintiff recovers more than 120% of the amount of the offer).  The jury returned a $6 million verdict.  Under the high-low agreement, plaintiff was entitled to a $1 million judgment.

Plaintiff sought recovery of fees and costs under the offer of judgment rule, since $6 million far exceeded the $750,000 offer of judgment.  The Law Division denied plaintiff’s application.  There was no indication that the parties had agreed that plaintiff could recover fees and costs relating to the offer of judgment in addition to the high-low amount.  The judge cited that fact, his own lengthy experience as a litigator and judge, and the experience of other judges whom he consulted, in determining that absent an agreement that rights under an offer of judgment would survive after a high-low agreement, there is no such right.

Plaintiff appealed, and today the Appellate Division affirmed.  Judge Rothstadt applied the de novo standard of review and found error in the Law Division’s reliance on its own experience and that of other judges.  Still, the result below was correct, for different reasons.

The high-low agreement was a contract, to be interpreted just as any other contract.  Absent some expression to the contrary, the “basic assumption of high-low agreements” is that a plaintiff cannot recover more than the high.  Judge Rothstadt cited cases where a plaintiff was denied prejudgment interest in circumstances where allowing it would have resulted in a recovery that was more than the high end.

In short, “if there was any intention to preserve a claim for amounts beyond the high,” it was plaintiff’s obligation to state that expressly.  Since that did not happen, the high was a cap on recovery, and the Law Division’s decision to deny recovery under the offer of judgment rule was affirmed.  Trial lawyers in particular can derive an important lesson from today’s decision.