Saturday, January 30, 2010
NJ Supreme Court to decide (again) whether attorney can be sued for malpractice in negotiating a settlement that the client agreed to
Law.com is reporting (here) that the New Jersey Supreme Court has before it a case which raises the issue of whether a client can sue his or her lawyer for malpractice over a settlement that the client originally said was acceptable. This is an interesting question that the court has addressed before, reaching seemingly incompatible results. In Ziegelheim v. Apollo, 128 N.J. 250 (1992), the Court said the "fact that a party received a settlement [in an underlying action] that was 'fair and reasonable' [did] not mean necessarily that the party's attorney was competent or that the party would not have received a more favorable settlement had the party's incompetent attorney been competent…" For this reason, the Court refused to adopt a per se rule barring malpractice actions by clients who later become dissatisfied with their settlements, unless the clients were trying to commit fraud. However, more recently, in Puder v. Buechel, 183 N.J. 428 (2005), the Court held that a litigant who accepted a settlement in an underlying action and who clearly stated on the record that she was satisfied with the outcome was precluded from suing for malpractice. The current case before the court is Guido v. Duane Morris, and it can have very important consequences for all attorneys in the state. The statement quoted above from Ziegeineim v. Apollo makes perfect sense to me. The fact that a client accepts a settlement does not preclude the possibility that an attorney was negligent. However, openning the door to possible liability any time a client changes his or her mind after he or she agreed to a settlement proposed by the attorney can make the attorney's practice more difficult and can, ultimately result in fewer settlements. Attorneys could become reluctant to recommend settlements. At the very least, it would affect the dynamics of the attorney-client relationship. Attempting to reach a compromise between the two precedent cases, the court of appeals in Guido concluded that a malpractice claim could be pursued if "particular facts" support a claim of attorney incompetence. It will be very interesting to see what approach the Supreme Court decides to take. Stay tuned. For more on the story go here. UPDATE - June 11 Last week, the New Jersey Supreme Court issued its decision in Guido v. Duane Morris allowing the legal malpractice suit to go forward holding that "the existence of a prior settlement is not a bar to the prosecution of a legal malpractice claim" arising from the settlement. For more on this story go to Law.com.