[220 NJSuper Page 519] The novel issue presented in this case is whether plaintiff's "high-low"*fn1 agreement with one defendant-tortfeasor, reached
prior to verdict, constitutes a settlement entitling the other defendant-tortfeasor to an offset from the verdict rendered against the settling defendant.
Plaintiff, a passenger in an automobile, sued defendant Cronk, his host driver, and defendant Smith, the operator of the other vehicle. Cronk and Smith were involved in a head-on collision. During trial plaintiff and defendant Smith entered into a "high-low" agreement on the record, in which defendant Smith agreed to pay plaintiff $40,000 but be limited to $100,000, regardless of the jury verdict above or below those amounts. They further agreed to accept any jury verdict rendered where the sum awarded against Smith was for a sum between those figures.
The jury returned a verdict of comparative negligence finding defendant Smith liable to the extent of 97% and defendant Cronk to the extent of 3%, and awarded plaintiff $500,000 for his injuries. On motion prior to the entry of judgment, plaintiff asserted that defendant Cronk is liable to him for the full extent of the $500,000 verdict citing N.J.S.A. 2A:15-5.3, which permits recovery of the full amount against any party against whom such recovering party is not barred from recovery.*fn2 Defendant Cronk disagreed and claimed his liability was limited to $15,000 -- his 3% liability for the negligence. Defendant Cronk further asserted that the effect of the "high-low" agreement was a settlement by plaintiff with defendant Smith which in effect barred any contribution defendant Cronk could seek
from defendant Smith. On the other hand, plaintiff asserted that the "high-low" agreement was not a settlement and did not constitute such a bar. At issue is the determination of the "high-low" arrangement, and whether it is a settlement so as to bar plaintiff from seeking recovery of the full amount from defendant Cronk.
A settlement is defined as
[A]ct or process of adjusting or determining; an adjusting; an adjustment between persons concerning their dealings or difficulties; an agreement by which parties having disputed matters between them reach or ascertain by which parties having disputed matters between them reach or ascertain what is coming from one to the other; arrangement of difficulties; composure of doubts or differences; determination by agreement; . . . . In legal parlance, implies meeting of minds of parties to transactions of controversy. [ Black's Law Dictionary (5 ed. 1979) 1231]
Settlement, therefore, is a contract between the parties resolving matters in dispute. The basic principles of contract law apply -- offer and acceptance based upon consideration. Defendant Smith offered, and plaintiff accepted specific terms and conditions, as previously recited. There was adequate consideration because plaintiff agreed to give up an expectation of a larger verdict for a guarantee of a sum certain. Defendant Smith agreed to pay a sum certain so as not to be exposed to a larger verdict. Such an arrangement constitutes a valid and enforceable contract.
Moreover, the purpose of the contract was to amicably settle the difference between them and may therefore be construed to be a compromise or settlement. These terms have been held in some respects to be synonymous and frequently are used interchangeably. 15A C.J.S., Compromise & Settlement, § 1 at 170. Because of its similarity to other kinds of arrangements known as settlement, it must and should be considered a settlement. If it has the appearance of a settlement, by the application of its terms acts like a settlement, and by its language talks in settlement terms, then it must be a settlement. The court, therefore, determines that a contract, entered into between the parties which is based upon adequate consideration,
and which intends to predetermine issues in dispute, is an arrangement which is contemplated ...