NJ Supreme Court: Settle and Sue Round 2.
The New Jersey Supreme Court is about to take another look at the "settle and sue" syndrome: When a client settles a case and then sues his or her lawyer over it. The case is Guido v. Duane Morris.
The Appellate Division had decided to permit the Guidos' malpractice lawsuit against their former attorneys who had represented them in an underlying shareholder dispute that was settled.
Duane Morris has filed an interlocutory appeal and brief (PDF) arguing that the suit should not be permitted.
Plaintiffs oppose (PDF) and say that their malpractice claim should be allowed.
Trial Attorneys of New Jersey, representing the interests of the trial bar, wants permission to file an amicus brief.(PDF).
Pennsylvania had faced the same problem and has resolved it in a way that seems to have pleased all the contending parties. How should New Jersey’s High Court proceed? For one suggestion, see, "Holding Lawyers Accountable for Bad Settlements" in the New Jersey Law Journal. (PDF) Should New Jersey follow Pennsylvania's lead or should it chart a different course to calm the unrest in the Appellate Divisions resulting from its 2005 decision in Puder v. Buechel?
Stay tuned. More to come on this hot topic.
Illinois has allowed such suits for some time. What the result would have been in the underlying case, absent settlement, is a question of fact in the malpractice action.
Plaintiff bears the burden of proof on that question and the traditional causation issue-- what would the result have been in the absence of the (alleged) malpractice. Plaintiffs may also proceed on the theory that a "better settlement" would have resulted absent the malpractice.
I litigated an "unfavorable settlement" case, representing the defendant attorneys (defense counsel in the underlying suit) several years ago. Even the judge had difficulty with the many proximate cause, burden of proof and admissibilty issues that were presented. Should an expert be allowed to opine on whether the settling party would have won, had it not settled? Or how much better the settlement would have been, absent the alleged malpractice?
Neither party wanted to risk that a jury would not be able to navigate these troubled waters-- even if instructed perfectly-- and , as a result, would "vote" for the party it "liked better." The case settled soon after it was assigned to the trail call.
If NJ allows such malpractice claims to proceed, it will produce more work for the professional liability bar and require more stringent "documentation" of the advice regarding, and reasons for, the settlement. Allowing a "new" claim will produce more work for everyone. Is it worth it?
The Puder holding should meet a fiery end and the Pennsylvania solution should be invoked by the Supreme Court in New Jersey. The Court should resolve the issue now even though the case is being presented on an interlocutory basis. Puder is one dimensional and overly broad. As a result, it can preclude valid claims that fall within its holding. Our trial and intermediate appellate courts have labored to distinguish the meritorious cases that have followed and have confused the underlying controlling principle in the process. The Pennsylvania approach appears to deal with the multiple considerations, and is fair and rational, while Puder in most instances is neither. The problems raised in the previous comment constitute trial difficulties that may or may not be present in given cases. Potential trial difficulties, in my view, should never bar the formation of the correct underlying legal principle.
More work for the liability bar?
Is that bad?
More stringent "documentation" of the advice and reasons for the settlement?
As in, making sure the settling party actually understands what he/she is settling for?
Is that bad?
As in, no more hasty pushing through settlements just so that the Court's crowded dockets get reduced?
Is that bad?
In NJ, suing for a bad settlement is not a "new claim". It's been around for many years. Remember the Ziegelheim case? In any event, it seems the number of such claims that are successfully brought are few.
So what's the big deal if it encourages lawyers to carefully explain the terms of a settlement to a client in such a way that the client actually understands what they're settling for and so that the client can make an informed judgment about taking the settlement or going to trial.
Is all this work worth it?
I think so, because it's our job as lawyers to fully and carefully counsel our clients so that they can make an informed choice. Doing it this way will discourage such claims from being brought and may even increase the likelihood that more settling defendants will actually understand the terms they're settling for.
To me, this is a tempest in a tea pot!
My two cents.