A New Jersey appeals court has ordered further proceedings for one plaintiff who claimed in a legal malpractice suit that the firm of Leeds, Morelli & Brown accepted bonuses for steering its clients into arbitration of an employment dispute with the Prudential Insurance Co.

But the appeals court also affirmed the dismissal of malpractice claims against Leeds Morelli by two former clients, Benedict Fejoku and Linda Guyden. Each retained the firm to bring employment discrimination claims against Prudential but cut ties with the law firm after learning the details of its fee agreement.

But the panel said Guyden’s suit should proceed if she had never been offered the opportunity to set aside the arbitration award and allowed to litigate discrimination claims in court.

Malpractice claims by Fejoku and Guyden were dismissed on summary judgment at the trial court level. A trial court ruled that their decision to dismiss Leeds Morelli long before their cases ended precluded them from demonstrating proximate causation of compensable injury.

Fejoku and Guyden appealed, and Appellate Division Judges Jack Sabatino, Mitchel Ostrer and Lisa Rose affirmed the dismissals. But the panel also remanded Guyden’s case to the trial court, in order to develop the record definitively as to whether Prudential, before settling, offered her the opportunity to set aside the arbitration award and litigate her discrimination claims in court.

Leeds Morelli, of Carle Place, New York, now known as Leeds Brown Law, represented more than 300 Prudential employees in a discrimination suit against the company.

Guyden is an African-American certified public accountant who was hired by Prudential in September 1997. She resigned in March 2001. She claims she was paid a lower salary, given a lower bonus, and denied promotions three times because of her race.

Fejoku, a native of Nigeria, was hired as a staff accountant by Prudential in 1992. He claims he was denied promotions, harassed, and had to work in a hostile work environment due to his race.

Both agreed in May 1999 to pursue their claims exclusively through arbitration, but later discharged Leeds Morelli.

Guyden retained new counsel and sued Prudential in federal court. The case was referred to arbitration pursuant to an arbitration agreement. But the arbitrator found Guyden had not proved discrimination. When she moved to set aside the arbitration claim, Guyden was granted discovery on her claim that she was fraudulently induced to sign the alternate dispute resolution agreement. Thereafter, she reached a confidential settlement with Prudential.

Fejoku and Guyden sued Leeds Morelli for legal malpractice. The trial judge granted summary judgment, finding both plaintiffs “had extricated themselves from the Leeds firm’s initial representation and thereafter proceeded with their discrimination claims on their own.”

The appeals court said that, because the arbitrator found Guyden’s claims lacked merit, it is speculative to think her claims were worth more than the sum her successor attorneys negotiated with Prudential. But the panel said the trial judge’s reasoning is subject to a caveat: whether Prudential offered Guyden the opportunity to set aside the arbitration award and to litigate her claims in court. The defense maintains that such an offer was made to Guyden, but she claimed she never heard such an offer, and no record of any such exchange exists.

“If, in fact, Prudential made such an offer to Guyden to, in effect, wipe out the arbitration and the ADR agreement and litigate her discrimination claims instead in court, and she or her then-counsel rejected that offer, then she cannot establish proximate causation. That scenario would signify that Guyden was not ultimately, as she alleges, ‘trapped’ in arbitration, having declined an offer to exit that process,” the appeals court said.

“Conversely, if Prudential never made such a definitive proposal, then Guyden’s claims were prematurely dismissed on summary judgment,” the panel said.

Fejoku demanded $4 million from Prudential in early 2001, then reduced his demand to $500,000. Prudential counteroffered $10,000 if he stayed at the company or $60,000 if he left. He declined that offer and another for $75,000. In September 2001, when Prudential made a global settlement offer of $10.5 million to resolve all remaining claims, Fejoku opted for arbitration.

Fejoku was scheduled for arbitration in January 2002, but he refused to attend, calling the process unfair. He was given a second date for arbitration, but he said he would not appear, and the arbitrator dismissed his case. He received no settlement, and in 2008 he was terminated by Prudential.

“In essence, Fejoku’s losses, if any, are substantially self-inflicted. We discern no basis to reinstate his claims in the present case, even viewing the record in a light most favorable to him,” the appeals court said.

Kenneth Thyne of Roper & Thyne in Totowa, New Jersey, who represented Fejoku, and Angela Roper of the same firm, representing Guyden, did not return calls.

Evan Krinick and Janice DiGennaro of Rivkin Radler in Uniondale, New York, who represented Leeds Morelli, also did not return calls.