In its opinion filed on July 19, 2018, the Supreme Court of New Jersey (“New Jersey Supreme Court”) affirmed that the New Jersey medical malpractice plaintiff was not entitled to an award of attorney fees in a successful medical malpractice lawsuit where the parties entered into a high-low agreement during jury deliberations that superseded and extinguished the qualifying offer of judgment under Rule 4:58.
Rule 4:58 prescribes the process and consequences of making a pre-trial offer of judgment. The fundamental purpose of the rule is to induce settlement.
Rule 4:58-1 provides, in relevant part, that “any party may, at any time more than [twenty] days before the actual trial date, serve on any adverse party . . . an offer to take a monetary judgment in the offeror’s favor, or as the case may be, to allow judgment to be taken against the offeror, for a sum stated therein (including costs).” R. 4:58-1(a). The Rule continues: “The making of a further offer shall constitute a withdrawal of all previous offers made by that party. An offer shall not, however, be deemed withdrawn upon the making of a counter-offer by an adverse party but shall remain open until accepted or withdrawn as is herein provided.” R. 4:58-1(b). Finally, the Rule describes the consequences of a party’s failure to accept the offer and proceeding to trial. R. 4:58-2(a); -3(a).
In essence, the rule imposes financial consequences on a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment. It is designed so that a party who has rejected a settlement may not escape mandatory payment for any portion of the costs incurred as a result of his decision. All costs that result from the rejection of an offer of judgment, including those incurred in Appellate Division and Supreme Court proceedings, fall within the scope of Rule 4:58-2.
In the case the New Jersey Supreme Court was deciding, the parties entered into a high-low agreement on the record during trial. The “low” was $300,000 and the “high” was $1,000,000. A high-low agreement is a settlement in which a defendant agrees to pay the plaintiff a minimum recovery in return for the plaintiff’s agreement to accept a maximum amount regardless of the outcome at trial. Neither party in the present case mentioned Rule 4:58, nor did they explicitly waive or preserve rights pursuant to the Rule.
The New Jersey medical malpractice jury awarded the plaintiff a total amount of $6,000,000. The trial court entered judgment in the amount of $1,000,000 as specified in the high-low agreement. The plaintiff moved for litigation expenses, including attorney’s fees, pursuant to Rule 4:58-2. The trial court denied the motion. The plaintiff appealed.
New Jersey Supreme Court Opinion
The New Jersey Supreme Court stated that the agreement on the record reveals a meeting of the minds on both the floor and ceiling of the plaintiff’s recovery, including fees and expenses, and the high-low agreement is a settlement subject to the rules of contract interpretation.
The New Jersey Supreme Court held that because the contract superseded the qualifying offer of judgment, if the plaintiff desired Rule 4:58 expenses, she would have been required to explicitly preserve the right to pursue them when entering into the high-low agreement in this case. Neither party mentioned Rule 4:58, nor did they explicitly waive or preserve rights pursuant to the Rule. A crucial aspect of any high-low agreement is finality; both parties benefit from the strict and explicit limitation of financial exposure that such agreements provide.
The New Jersey Supreme Court held: “We conclude that the parties intended $1,000,000 to be the maximum recovery, including all expenses and fees, and that they anticipated that it would replace any prior agreements … [the plaintiff] may not now seek Rule 4:58 expenses based on her previous offer of judgment.”
Source Lucia Serico v. Robert M. Rothberg, M.D. (A-69-16) (079041).
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