Facts: Plaintiff alleged that her former attorney, Louis, wrote a letter to the adversary, without her authorization, that she was waiving her right to a one-half interest in a marina in the underlying matrimonial proceeding.
Plaintiff retained a new attorney, DeBartolo, to represent her in a post-judgment plenary hearing concerning the issue. After Plaintiff’s cross-motion seeking to maintain equal ownership of the marina was denied, she retained yet another attorney, Soranno. During the pendency of the post-judgment matrimonial litigation, Soranno negotiated a new settlement with Plaintiff’s ex-husband, prior to obtaining a ruling on whether Plaintiff had in fact waived her interest in the marina by way of her former attorney’s representations to the adversary.
The new settlement provided that Plaintiff would share equally with her former husband in the net proceeds of the sale of the marina’s real estate, and she would be entitled to 40% of all monies arising out of the marina’s business operations.
When questioned about the new settlement in open court, Plaintiff represented that given all the facts and circumstances, she thought the agreement was fair, reasonable, and the "best [she] could do." She further represented that by signing the agreement, she was waiving her right to later argue that the agreement was unfair. Plaintiff’s attorney did qualify the foregoing representations, however, by indicating that Plaintiff reserved her right to bring malpractice actions against Louis and DeBartolo.
Plaintiff did eventually bring malpractice actions against Louis and DeBartolo. The trial court held that, under Puder, Plaintiff could not settle and sue. Plaintiff appealed.
Issue: Can Plaintiff pursue malpractice actions against her former attorneys after entering into a purportedly "fair and reasonable" settlement in the underlying litigation?
Ruling: No. If a Plaintiff has a first agreement and is involved in litigation to enforce that first agreement, but decides to enter into a new settlement while the litigation is still pending, Plaintiff is bound by that new settlement, even where she only agrees to enter into the new settlement with a carve-out for a malpractice action.
The Appellate Division based its ruling on the fact that Plaintiff may have been successful in establishing that her former attorney acted without her permission at the plenary hearing, and might even have been able to recoup fees. As in Puder, however, she chose a different remedy — to negotiate and settle the matter before the conclusion of the plenary hearing. The Court distinguished the case from Ziegelheim and Guido:
[T]he Court in Ziegelheim…recognized that after denial by the Family Court of the plaintiff’s application to set aside the challenged settlement agreement, the plaintiff was left with only one remedy — the legal malpractice action…That is not the case here.
The Court recently decided Guido…and explained that Ziegelheim represented the standard to be applied in legal malpractice cases, while Puder represented a ‘limited exception’ to Ziegelheim, applying equitable principles…In Guido, unlike here, the plaintiffs did not represent that they were satisfied with the settlement. Here, Plaintiff made that affirmative representation.
We do not conclude that Plaintiff was required to await the motion judge’s decision [in the plenary hearing]; however, we do acknowledge the rule established by Ziegelheim recognizing the sole remedy of a malpractice action as a critical factor in that decision. That was not the case here.
Plaintiff, here, only had to decide whether she would accept a settlement or await the judge’s decision on the issue of her waiver. She was not in a situation where, choosing the latter, she would be left without a claim. This was not an ‘all-or-nothing’ decision for Plaintiff; it was a decision with options and she chose to accept the [new] settlement.
Litigated cases are settled everyday where plaintiffs and defendants have to weigh the costs and benefits of settling or allowing a judge or jury to decide their fate.
Lesson: If a plaintiff chooses to negotiate and voluntarily enter into a settlement of her claims before giving the court an opportunity to pass on the former allegedly inadequate settlement negotiated by a purportedly negligent attorney, she will waive her right to bring a malpractice action and will be bound by the terms of the new settlement.
Posted in: New Jersey