In a recent published decision, Serico v. Rothberg, Docket No. A‑1717‑15T1 (App. Div. February 16, 2017) the Appellate Division affirmed the Trial court’s denial of Plaintiff’s claim for sanctions under the Offer of Judgment Rule, R. 4:58-1 to 6, where the parties entered into a “high-low” settlement agreement and the jury returned a verdict in excess of the “high” agreement. Under the Rule, a successful plaintiff who obtains a verdict in excess of 120% of the offer to accept a judgment is entitled to seek the recovery of sanctions, including attorney’s fees and interest. The Appellate Court held that Plaintiff’s total recovery was limited by the “ceiling” imposed by the “high-low” agreement. Plaintiff gave no indication that she intended to preserve her claim under the Rule, and thus she was not entitled to any additional recovery for fees and interest in excess of the “high” agreement.
Prior to Trial, Plaintiff filed an Offer to Accept a Judgment against Defendant in the amount of $750,000.00. During Jury deliberations, the parties agreed to enter into a “high-low” agreement by which defendants agreed to a “low” settlement of $300,000.00 and Plaintiff’s agreed to a “high” of $1,000,000.00, irrespective of the Jury Award. The record was devoid of any discussions by any party during negotiations of the “high-low” regarding the ramifications of Plaintiff’s prior Offer of Judgment, particularly as it related Plaintiff’s entitlement to recover costs and prejudgment interest.
The Jury ultimately returned a verdict in favor of Plaintiff in the amount of $6,000,000.00. Nonetheless, given the Agreement, Plaintiff’s recovery was limited to $1,000,000.00. However, given that the $1,000,000.00 settlement was more than 120% of Plaintiff’s Offer of Judgment, Plaintiff moved to enforce remedies afforded under R. 4:58-1 to 6 which, and sought to recover attorney’s fees and costs. The record established that (a) there were no discussions regarding the waiver of Plaintiff’s rights under the Offer of Judgment Rule; and (b) there was no reference to same when the agreement was placed on the record before the Court.
In light of the factual record, the Court determined that it was Abound by custom and usage in the “industry” in deciding whether Plaintiff’s rights were preserved in light of the “high-low” agreement. Relying upon on the Court’s forty-plus year history as a civil litigator and as a trial court Judge, the Judge stated that he was unaware of any instance in which the prevailing party sought to pursue the claim following a “high-low” agreement. Similarly, the Judge “conferred” with several colleagues who shared a similar experience. Accordingly, the Trial court concluded that, in the absence of an express statement that the Offer of Judgment Rule will survive a “high-low” agreement; the sanctions could not be enforced following a judgment.
Although the Appellate Court disagreed with the Trial Court’s methodology, particularly its reliance upon its personal experience, the Appellate Court affirmed the Trial Court’s denial of Plaintiff=s remedies under the Offer of Judgment Rule finding that, as per the “high-low” agreement, plaintiff’s damages were “capped” at $1,000,000.00. Essentially, by entering into a “high-low” agreement, it is a basic assumption that a Plaintiff could not recover more than the “high” amount it bargained for and agreed upon. Since there was no evidence that Plaintiff preserved her rights under the Rule, or that the parties agreed to allow Plaintiff to seek an amount in excess of the “high,” Plaintiff was not entitled to recover any remedies under the Rule. The Court held that since Plaintiff did not express a clear intention to preserve any such claims, they were considered waived. Here, Plaintiff subsequently asserted that she never intended to waive any rights to recover sanctions under R. 4:58-1 to 6. However, the mere fact that this critical fact was not contemplated during negotiations or included in the final agreement, lead the Court to conclude that the remedy was not preserved.
The Court’s decision in Serico emphasizes the significance of parties to clearly and articulately express their intentions whenever entering into any agreement, particularly when a party is effectively waiving statutory rights. The omission and/or oversight of a critical issue, such as preserving one’s right to recover sanctions under a Rule of Court during negotiations, could lead to significant unintended consequences which cannot ultimately be remedied. Although the present matter involved Plaintiff’s efforts to enforce sanctions following a verdict in excess of the “high” agreement, the same reasoning could apply to a Defendant who seeks to recover sanctions following a verdict which is returned below the “low” agreement. Accordingly, it is incumbent on claims professionals and defense counsel to fully assess the ramification of negotiations, and ensure that all issues are fully addressed and vetted in order to avoid being faced with unanticipated results, which could be detrimental to their position, or lead to the accrual of additional fees and costs to defend.
 Russ M. Patane, Esq. is a Shareholder in GRSLB&G’s Litigation Department. He defends a wide variety of clients in various civil actions brought forth in New Jersey and New York State and Federal Courts. Russ can be reached at firstname.lastname@example.org.
 Hristo Zevilkaris, Esq. is an Associate in GRSLB&G’s Litigation Department. He defends a wide variety of clients in various civil actions brought forth in New Jersey State and Federal Courts. Chris can be reached at email@example.com.