Can a Settlement Bar a Legal Malpractice Claim in New Jersey?

In a number of jurisdictions, there is a rule of law that will prevent a litigant from obtaining a recovery against an attorney for malpractice, where the litigant has accepted the terms of a settlement in the case subject of the attorney’s negligence, unless it can be shown that the attorney acted fraudulently. That rule does not apply in New Jersey. While the courts in New Jersey readily recognizes the importance of settlements in reducing the public and private costs of litigation, it has concluded that an attorney can be held professionally responsible for a settlement that has been negligently constructed because the client relies heavily on the advice of the attorney.

The rule is especially compelling if the attorney’s negligence prompted the settlement. For example, if an attorney fails to plead a responsible party in an automobile accident case and the client is required to accept a settlement that is less than the full value of the case, the client should have a claim against the attorney. Similarly, if an attorney fails to conduct a thorough investigation to the extent that a client agrees to settle a case ignorant of information that would have greatly influenced the worth of the case, the derelict attorney will be responsible for the client’s loss.