In legal malpractice cases, one thing plaintiff must prove is that “but for” the negligence of defendants there would have been a better or more favorable outcome. A recent series of cases has defined a new battleground in the matrimonial legal malpractice field. Legal malpractice claims against matrimonial attorneys have been dismissed based upon the allocution taken of plaintiff at the matrimonial settlement. This is a novel defense.

In many matrimonial settlements taken in court, the parties are asked whether they understand the terms of the settlement and whether they are “satisfied” with the work of their attorney. When they answer “yes” to each, the settlement is then accepted by the court. Later, when a client sues the attorney in legal malpractice, the “satisfaction” becomes a bar to the case. Only the Appellate Division, First Department, has decided the “allocution cases.” No other departments have been presented with this novel defense.

Defendant’s Argument

Settlements are contracts, and should be enforced. It is well understood that settlements (especially in matrimonial cases) are difficult and fraught with emotional baggage. The attorney-client relationship is a difficult yet sacrosanct one, which both requires and deserves protection. As Justice Peter Skelos wrote in Koeth v. Koeth, 2002 NY Slip Op. 40046U (S.Ct. Nassau, 2002), “The attorney-client relationship by necessity is one of mutual trust and confidence. As such, it is ‘more easily disturbed than a less sensitive’ business relationship (see, Matter of Dunn, 205 NY 398 (1912)). Recognizing the fragile nature of this unique professional relationship, the Court of Appeals has observed, ‘Attorney-client relationships frequently end because of personality conflicts, misunderstandings or differences of opinion having nothing to do with any impropriety by either the client or the lawyer.’ Klein v. Eubank, 87 NY2d 459 (1995). In no area of the law are Judge Titone’s observations more applicable than the emotionally charged world of matrimonial litigation. It is not uncommon for a judge presiding in a matrimonial part to see multiple changes of counsel in a matrimonial case. Sometimes, as here, the attorney is substituted by the litigant pro se. In other cases, as litigation continues, clients second guess their own decisions as well as those of their counsel. Attorneys are hired and fired. Former attorneys are rehired, and counsel come and go. The substitution scenarios are limitless, giving rise to frequent litigation concerning the attorney’s fees and counsel’s entitlement to charging liens and/or retaining liens.” Because of this multiplicity of attorneys, and emotionally charged cases, attorneys are unnecessarily subject to meritless legal malpractice claims and must be protected.

All cases have to come to an end. This is the rationale of settlements, statutes of limitation, and releases. Plaintiffs have a fair opportunity to voice their concerns at the allocution and yet they consistently and routinely settle cases. In a settlement all parties compromise, and no party is completely happy with the outcome. Legal malpractice cases in general, and much more frequently in matrimonial actions, are an expression of unhappiness at the settlement or outcome, rather than a dispassionate investigation into whether the attorney made mistakes and effectively compelled the settlement. Legal malpractice cases must be closely scrutinized.

Clients are not advised to lie in the settlement process, and their unmediated response to questions put to them is the best evidence of the actual process. When a client says he is “satisfied” with the work of his attorney and that he understands the elements of the settlement, any legal malpractice case afterwards is simply a collateral attack on the settlement, and the legal system cannot withstand an avenue of attack in which all settlements are open to collateral attack.

Plaintiff’s Argument

It is settled law that where a claim for legal malpractice is viable, settlement of the underlying case will not bar a legal malpractice case where the settlement was effectively compelled by mistakes of counsel. N.A. Kerson Co. v. Shayne, Dachs, Weiss, Kolbrenner, Levy & Levine, 45 NY2d 730 (1978). This is a bold statement, as a typical reaction to legal malpractice after settlement is that the action was merely another means of attacking the stipulation of settlement and that plaintiffs could not base an action in malpractice upon alleged mistakes of counsel prior to the settlement, since their agreement to the settlement terminated the litigation. N.A. Kerson Co. v. Shayne, Dachs,Weiss, Kolbrenner, Levy & Levine, 59 AD2d 551 (2d Dept. 1977).

In the Second Department, Tortura v. Sullivan, Papain Block McGrath & Cannavo, 21 AD3d 1082 (2d Dept. 2005) reaffirmed that a legal malpractice case remains viable after settlement of the underlying matter, so long as the settlement was “effectively compelled” by mistakes of counsel. In the First Department, Bernstein v. Oppenheim, 160 AD2d 428 (1st Dept. 1990) reaches the same holding, as does Shapiro v. Butler, 273 AD2d 657 (3d Dept. 2000) in the Third Department.

The reasoning for this principle lies in mitigation of damage. “A settlement and release in an underlying action enables a plaintiff to obviate the full damage of that which would otherwise have flowed from his attorney’s negligence and do not preclude a subsequent claim for legal malpractice where the settlement was compelled because of the mistakes of former counsel.” Lattimore v. Bergman, 224 AD2d 497 (2d Dept. 1996).

This principle was considered to be bedrock until recently. An exception seems to be in the process of being carved out of the bedrock principle. In the relatively limited area of matrimonial legal malpractice cases after settlement of the underlying matrimonial action, a new principle has drifted from the “effectively compelled” principle. These cases take place after an allocution taken at the settlement of the matrimonial action in which the client is asked: “Are you satisfied with the representation by your counsel” and answers “yes.” A little background is called for.

Cases are settled in open court or by written agreement. Some are settled even less formally by an exchange of letters or the simple provision of a release and a stipulation of discontinuance. However, two strands of litigation seem to end with in-court resolution more than any others. One is a criminal plea, in which the defendant has to be in court and has to plead guilty “on the record.” Another seems to be a matrimonial settlement. The reason for the frequent in-court, in-person nature of matrimonial settlements seems to be the intractable nature of the negotiations, and the structural fact that they take place on the eve of a trial. It is the imminent threat of a trial that propels most settlements in the matrimonial field.

Regardless of the motivation of the matrimonial parties, a long-standing custom in resolution of the matrimonial matters is that an on-the-record settlement is taken, and for some reason, cloaked in history, it is customary to ask the client whether they are satisfied with the representation by counsel. Clients are asked/advised/directed/told/admonished to say “yes.”

Case Law

Whether this should mean anything at all, a series of legal malpractice cases have now held that whether the settlement was effectively compelled by mistakes of matrimonial counsel, a subsequent legal malpractice case is barred simply because the client has stated its naive satisfaction with the conduct of counsel.

The first case in this novel area was Katebi v. Fink, 51 AD3d 424 (1st Dept. 2008). There, plaintiff testified “that she was satisfied with the services provided by her attorney.” The court wrote: “While ‘a claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel,’ (Bernstein v. Oppenheim & Co., 160 AD2d 428, 430, 554 NYS2d 487 [1990]), here the complaint is contradicted by the evidentiary material…Plaintiff testified that she…was satisfied with the services provided by her counsel.”

Weissman v. Kessler, 78 AD3d 465 (1st Dept. 2010), came next. Plaintiff alleged that she lacked the mental capacity to understand and consent to a settlement based upon traumatic brain injury she alleged was caused by her husband. The Appellate Division found that the “evidence establishes that when entering into the settlement of the divorce action, plaintiff acknowledged in open court that she was satisfied with counsels’ representation…” (see Katebi).”

Harvey v. Greenberg, 82 AD3d 683 (1st Dept. 2011) soon followed. There the Appellate Division determined that “the trial judge in the underlying matrimonial action conducted a thorough allocution on the stipulation of settlement. Plaintiff acknowledged that she understood and agreed with the terms of the settlement” and “that she was satisfied with the services he provided. Under these circumstances, the motion court properly dismissed the complaint.”

The Supreme Court had earlier noted in that case that according to the First Department, “a claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel. However, the First Department also makes it clear that an allocution at settlement wherein the client states that she is satisfied with the attorney’s performance constitutes documentary evidence that contradicts an allegation of legal malpractice.”

The most recent Appellate Division case is Schloss v. Steinberg, 2012 NY Slip Op 7599 (1st Dept. 2012). The court rejected “plaintiff’s claim that she was not given a fair opportunity to voice objections or concerns during the allocution in the matrimonial action. During the allocution, plaintiff acknowledged on the record that she understood and agreed with the settlement terms, and understood that it was a final and binding agreement. Accordingly, the plaintiff should not be heard to disavow the allocution (see, e.g., Harvey v. Greenberg).”

In Chanos v. Sheresky, 2011 NY Slip Op 30856U, the Supreme Court dismissed plaintiff’s legal malpractice case. There, the court recognized the effectively compelled language and reiterated the Katebi language quoted above. “The waivers and releases in the Agreement provide a complete defense to plaintiff’s claims. Under the agreement plaintiff unequivocally stated that she was satisfied with the accounting and legal services she received…”

The Second Department has not ruled on the Katebi issue. One lower court has taken up the issue. In Castano v. Richman, 2011 NY Slip Op 32686U (S.Ct., Nassau, 2011), the court found that the allegation of effective compulsion was contradicted by the two allocutions of plaintiff in which she “indicated that she was satisfied with the terms of the settlement of the action [and] that she was satisfied with the services of her attorney.”

From plaintiff’s perspective, it seems wrong that a plaintiff is asked this question while still in the midst of being represented by the attorney. It seems unlikely that the client is capable of analyzing the work of her attorney, and that only if the client has an expert look at the case will she be able to determine if there is negligence and whether she should be “satisfied” or not. It seems counterintuitive that the client will not follow the attorney’s direction on how to answer, and that the “satisfaction” answer itself is forced from her by the specter of losing the settlement over a “couple of words.”

Unexamined Questions

Courts have so far taken up the issue of dismissal of the legal malpractice case based upon settlement and the “satisfaction question.” No examination of the ethical or procedural issues has yet taken place.

Is it a conflict of interest for the attorney to ask the client the satisfaction question? Is the attorney asking the client to immunize him from potential future litigation simply by asking (or having the court ask) this question? If so, may an attorney place the client knowingly or unknowingly in an adversarial position?

Is it a violation of 22 NYCRR 1200 1.8 for the attorney to elicit statements from the client which will immunize the attorney, especially when the client is not advised of the import of the words and not advised to have outside counsel?

Is it deceitful (within the meaning of Judiciary Law §487 to elicit these words without telling or advising the client, all the while knowing that they may serve to immunize the attorney?

These issues may be part of the next wave of litigation to crest over the “satisfaction” and settlement issues in matrimonial-legal malpractice cases.

Andrew Lavoott Bluestone is an attorney in Manhattan, specializing in legal malpractice litigation. He is board certified in legal malpractice by the American Board of Professional Liability Attorneys.