On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The issue before the Court is whether the offer of judgment rule, Rule 4:58, covers counsel fees and costs incurred on appeal. The offer of judgment rule provides that, where, as in this case, a defendant does not accept a plaintiff's pre-trial settlement offer and the ultimate verdict in the plaintiff's favor exceeds 120% of the offer, counsel fees and other trial costs are recoverable by the plaintiff.
The facts underlying this appeal are these. On September 10, 1997, John and Elizabeth Wiese, husband and wife, were injured in an automobile accident (collectively "plaintiffs"). They sued James Dedhia, the driver of the vehicle; the car's owner; and the driver's insurer (collectively "defendants"). Plaintiffs sought to recover for their personal injuries and for Elizabeth's loss of services and consortium. Plaintiffs' claims were submitted to mandatory arbitration and the arbitrator awarded damages in the amount of $60,000 to John and $17,500 to Elizabeth. Defendants rejected the arbitration award and demanded a trial de novo.
Prior to trial, plaintiffs submitted a joint offer of settlement for $75,000. Defendants rejected that offer. At trial, the parties stipulated to 5% negligence against John and 95% negligence against Jamir Dedhia. Following a ten-day trial, the jury awarded $83,814 to John, reduced by 5% to $79,243.30, and $20,336 to Elizabeth. Plaintiffs thereafter moved for counsel fees, costs, and interest pursuant to Rule 4:58-2. The trial court denied the motion.
Plaintiffs appealed the decision of the trial court and the Appellate Division reversed, finding that the combined award of over $90,000 qualified as being in excess of 120% of the $75,000 joint offer. In reaching its conclusion, the appellate panel reasoned that the effectiveness of the offer of judgment rule would be undermined if it were construed to require spousal plaintiffs with interrelated claims to submit separate offers of judgment.
On remand, the trial judge awarded plaintiffs counsel fees, costs, and prejudgment interest for the trial and for the appeal. Defendants appealed, challenging, among other things, the amount of fees and costs awarded. The Appellate Division affirmed and neither party appealed that decision. Plaintiffs later moved for counsel fees and costs incurred on the second appeal. The Appellate Division denied plaintiffs' motion by order.
The Supreme Court granted certification.
HELD: All costs as a result of the rejection of an offer of settlement, including those incurred in Appellate Division and Supreme Court proceedings, fall within the scope of Rule 4:58-2.
1. The plain language of Rule 4:58-2 clearly provides that when a pre-trial offer is rejected and the money award exceeds 120% of the offer, the offeror is entitled to "all reasonable litigation expenses incurred following non-acceptance." The rule further entitles the offeror to attorney's fees "for such subsequent services as are compelled by the non-acceptance." The offer of judgment rule is mandatory and does not permit the judge discretion in determining whether or not to award attorney's fees and costs of suit in an offer of judgment case. (Pp. 4-7)
2. Rule 2:11-4 provides that counsel fees "may be allowed by the Appellate Court, in its discretion." Nonetheless, Rule 2:11-4 does not trump the language of Rule 4:58-2. The offer of judgment rule was intended as a procedural mechanism to facilitate the settlement of cases. It was intended to penalize, through the imposition of financial consequences, a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment. Thus, it would thwart Rule 4:58-2 to allow a party who has rejected a settlement to escape mandatory payment for any portion of the costs incurred as a result of that decision. Although the discretionary provision of Rule 2:11-4 ordinarily governs counsel fees on appeal, it was not meant to take the place of Rule 4:58-2, which serves a unique and specific purpose of imposing financial consequences on parties who unwisely reject an offer of settlement and insist on a trial. (Pp. 7-9)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED for calculation of fees and costs in accordance with this opinion.
The opinion of the court was delivered by: Justice Long
JUSTICES LaVECCHIA, ZAZZALI, ALBIN, WALLACE, and RIVERA-SOTO join in ...