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Many settlements are placed are the record before a trial court. Invariably, the parties to the settlement will be asked by the court as to whether they believe that the terms of the settlement are fair, reasonable, and voluntary. Indeed, unless the trial court receives a positive response to questions of this nature the settlement will be rejected.

Eighteen years ago, in the case entitled Ziegelheim v. Apollo, New Jersey’s Supreme Court concluded that despite a client’s testimony under oath that the settlement agreement was understood and fair, the client could sue the attorney for legal malpractice. In rendering its decision, the court noted that lawyers have a responsibility to a client to provide services with reasonable knowledge, skill, and diligent that is consistent with generally accepted standards in the legal profession and that the goals of the client must be achieved even when the lawyer believes that the client desires are unwise to the extent those goals are consistent with the law. The court also noted that a client’s decisions are significant influenced by a lawyers advice. As a result the lawyer should provide the client with insight into the various legal and strategic issues that develop during the course of litigation and since the negotiations attending settlements are some of the most basic tasks that a lawyer may be required to perform, negligent advice on the propriety of a settlement can produce liability for a lawyer, even where the client believed the settlement was fair and reasonable.

Thirteen years later, the Supreme Court revisited the issue in a case titled Puder v. Buechel. In that case the client alleged, among other things, that the lawyer provided faulty advice in accepting the terms of a settlement. Procedurally, the client filed a motion to vacate the settlement and at about the same time a legal malpractice claim was filed against the former attorney. The legal malpractice claim was stayed pending a plenary hearing required by the trial court to determine whether the settlement should be set aside. After six days of testimony in the plenary hearing, the client decided to settle the case with the original defendant under terms that were slightly more favorable to the client. When the client sought to reactivate the lawsuit against the former attorney, the attorney filed a Motion for Summary Judgement contending that the second settlement barred further prosecution of the legal malpractice case. The core of the argument that any damages suffered in the first settlement was “irrevocably” severed by the terms of the second settlement agreement. In short, the former attorney contended that the second settlement broke the causal connection that existed between the original negligent act and the client’s loss. The Court refused to decide the issue on causation. It concluded, instead, that the public policy that favors settlements and other principles of fairness required the case to be dismissed. Specifically, the Court looked to two special features of the case. The first was that in the proceeding associated with the second settlement the client testified that the arrangement was acceptable and fair. The other practical issue noted by the Court was that if the client had litigated the enforceability of the first settlement to conclusion, the need to file a malpractice claim against the former attorney may not have been necessary.
More importantly, however, the Court took the opportunity to further clarify the principles in the Apollo case and observed that the conclusions in that case should discourage legal malpractice litigation when a court finds that a litigant, although aware that the attorney was negligent, nonetheless testifies under oath that the settlement was both acceptable and fair.

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