Font Size: 
N.J. High Court to Weigh Client's Right to Sue Lawyer After Approving a Settlement
New Jersey Law Journal
October 21, 2009
The New Jersey Supreme Court will take another look at when a client can sue his or her lawyer over a settlement the client originally found to be acceptable.
On Oct. 8, it granted a motion for leave to appeal filed by Duane Morris in Guido v. Duane Morris, No. M-191-09.
The Appellate Division held on July 15 that Joseph and Teresa Guido could proceed with their malpractice suit against the firm and two partners at its Princeton, N.J., office, Frank Luchak and Patricia Kane Williams, over their representation of the Guidos in a shareholder dispute.
The firm asked the Court for an interlocutory appeal to answer the question: Under what circumstances should a client be allowed to sue his or her attorney after having knowingly and voluntarily accepted a settlement placed on the record by the trial court while two motions to enforce a similar prior settlement were pending?
Inconsistent lower court interpretations of Puder v. Buechel, 183 N.J. 428 (2005), and Ziegelheim v. Apollo, 128 N.J. 250 (1992) had created "persistent uncertainty," wrote Joseph LaSala of McElroy, Deutsch, Mulvaney & Carpenter of Morristown, N.J., in the brief he filed for the defendants.
Leaving the Appellate Division decision in place would encourage clients to sue their lawyers whenever they second-guess settlements, undermine the policy favoring finality of settlement and damage the trust underlying the attorney-client relationship, argued LaSala.
Appellate Division Judge Ariel Rodriguez and Alexander Waugh Jr. read Puder and Ziegelheim together as allowing a malpractice suit when "particular facts" support the claim of attorney incompetence and "negate the element of prior acceptance of the underlying settlement."
Flanders, N.J., solo Donald Fedderly, the Guidos' lawyer, says he is glad the Court will clarify the issue for future litigants, though the delay is bad news for his 75-year-old client.
"There is a litany of questions counsel almost always asks their own client in settling claims in open court to make sure the client understands the terms of the settlement," but the only one to ask questions was the judge, says Fedderly. The Guidos were asked whether they understood the settlement, whether they had any questions, whether they agreed to be bound and whether any health issues would impact their ability to understand and accept responsibility for the terms but not whether they found the settlement to be fair and reasonable, he says.
The result was that Joseph Guido, who started Allstates World Cargo and owned most of the stock and was trying to strengthen his control over the company, ended up with a settlement that stripped him of all power by prohibiting him from voting or selling his shares without the unanimous consent of the board, says Fedderly.
Duane Morris' general counsel, Michael Silverman of the Chicago office, says "we are pleased that the New Jersey Supreme Court has agreed to review the case and that the Trial Attorneys of New Jersey filed an amicus brief in support of our position."
TANJ asked for leave to appear as amicus in support of Duane Morris on Oct. 13. The brief, filed by Diana Manning of Bressler Amery & Ross in Florham Park, N.J., urges the Court to adopt a rule that would require plaintiffs with claims like the Guidos' to first seek enforcement, modification or vacation of the settlement in the original court.
