Settlements and Legal Malpractice

Can a settlement of litigation result in a legal malpractice case? Can a client sue his or her lawyer after entering into a settlement by claiming that the case should have settled for more money?

The answer unfortunately is: each case will depend on the facts of the case. In some settlement cases the answer is “yes”, but in others the answer is “no”. You need to obtain a professional evaluation by a certified legal malpractice lawyer in every case in which you believe “but for” the conduct of your lawyer a better settlement should have been obtained. The facts of each case will control the analysis.

First, remember the statute of limitations for a legal malpractice lawsuit is relatively short, usually one year. So, if you switched lawyers over a year ago because your lawyer made serious mistakes that hurt your case, and your second lawyer managed to obtain a reduced settlement for you, your claims against your first lawyer may be barred by the statute of limitations. That is, unless you have a tolling agreement, which we recommend anytime you switch lawyers. We have obtained dozens and dozens of tolling agreements for clients.

Second, these so-called “settle and sue” cases are generally disfavored by the courts and often times difficult to prove. The analysis by the courts most often focuses on the issue of “causation”, and they often rule in favor of the lawyers finding that the client cannot establish that, “but for” the conduct of the lawyer, the result (i.e. the settlement) would have been different.

It is not enough in a legal malpractice case to prove that your lawyer made many, many errors. Those errors must have actually caused you damages. And, in virtually every case a client must prove this causation element with proof that, but for the lawyers conduct, the result would have been different.

Several cases illustrate the difficulty of proving this causation element:

In a 1999 California case (Marshak), the defendant lawyer represented the client in a divorce case. After a mandatory settlement conference, the client and his ex-wife stipulated to a settlement of their dissolution action in which, among other things, the husband was relieved of any continuing support obligations, and an agreement was reached about distribution of the parties’ property.

However, the doctor client almost immediately repudiated the settlement and, acting in propia persona, attempted to have it set aside. When he failed, the client sued his former attorney, claiming the settlement she recommended overvalued the accounts receivable from the doctor’s medical practice (which was charged to him), and undervalued the couple’s home (which was awarded to the ex-wife). In other words, “the gravamen of plaintiff’s complaint is that defendant advised him to settle the marital dissolution action for ‘less than the case was worth'”. The defendant won summary judgment. While the client proffered some evidence that the lawyer has acted negligently by ignoring information about the value of the marital residence and failing to submit evidence about the value of the plaintiff’s medical practice, the doctor did not provide any competent evidence of the actual worth of those assets. Nor did the doctor submit evidence to show that, had the attorney done everything she supposedly should have, a more favorable result would have been obtained. Finding that the client’s case was based on nothing but speculation, the court affirmed the summary judgment in favor of the lawyer.

An earlier malpractice case, in 1995 (Thompson), that arose out of a settlement of the original medical malpractice case also proves the point.

The attorney defendants in Thompson were accused of mishandling the prosecution of a medical malpractice case. Although the plaintiff ultimately obtained a settlement of over $1.7 million, he nonetheless asserted that had his attorneys not delayed in the prosecution of the case, evidence would not have been destroyed and the value of his claim would have been higher. The court found that even if this were true, the plaintiff still had not shown that the underlying defendant would have settled the claim any differently. Therefore, it is not enough to prove negligence if the client can only show a probability of damages.

The seminal case in this area arose in 2012 (Filbin). The clients were involved in a contentious land dispute with San Luis Obispo County which ultimately resulted in an eminent domain proceeding being brought by the County. The lawyer hired by the landowners clearly misadvised his clients about the need to make a certain settlement offer, and the clients also contended the lawyer failed to properly work up the case, failed to properly prepare his experts, and then 17 days before trial was set to start abandoned them. The clients agreed to a settlement with the County, but alleged in the subsequent legal malpractice case that they could have settled for more. So, they sued their attorney for more than $2.7 million.

Both the trial court and the Court of Appeal rejected the legal malpractice claim and ruled in favor of the lawyers. The courts found, despite the errors of the lawyer, there was too much speculation about the possibility of a better settlement or result.

Stanford, Ryan &¬†Associates, APC has, however, handled several legal malpractice cases after a client has settled the underlying or original case. We have successfully argued that the client’s efforts at settling the original case, particularly when represented by a second, successor lawyer, was actually a good faith attempt to mitigate his or her damages. And, in many cases we have also been able to obtain evidence that the other party to the original lawsuit would have agreed to pay more to settle, “but for” the negligence of the lawyers. Finally, we have also handled several legal malpractice cases in which the lawyer failed to properly advise the client to settle, and we have found clear proof of the other side’s willingness to settle.