Underlying PA Divorce Action.
Facts: Plaintiff retained the defendant to represent him in renegotiating a property settlement agreement with his former wife. The new agreement was made part of a stipulation that settled personal property and child custody issues. The stipulation became a court order and a court appointed master decided the remaining issues. Both the plaintiff and his ex wife filed exceptions to modify the master’s recommendations, resulting in the plaintiff owing $250,000.00 to his ex-wife. The plaintiff then filed a legal malpractice and breach of contract action against the defendant claiming that the defendant was not competent in advising him that the plaintiff’s initial settlement agreement with his ex-wife should be opened by stipulation that allowed for the renegotiation of items that were already settled.
Issue: Whether an action for legal malpractice covers claims made by the client against their attorney for fraud in the inducement?
Citing the Pennsylvania Supreme Court in Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 587 A.2d 1346 (Pa., 1991), the court stated, “…in light of our longstanding public policy which encourages settlements…we will not permit a suit to be filed by a dissatisfied plaintiff against his attorney following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the original action. An action should not lie against an attorney for malpractice cased on negligence and/or contract principles when that client has agreed to a settlement. Rather, only cases of fraud should be actionable.”
Lesson: Where a client is unhappy with the outcome of a settlement agreement their only redress against their attorney is fraud by inducement, not legal malpractice. An attorney should make sure that his or her client explicitly agrees to any modifications to a stipulation in order to protect him or herself from a legal malpractice claim where their client was dissatisfied with the outcome