Despite Settlement, N.J. Plaintiffs Can Sue Law Firms for Malpractice
Considerably expanding what some understood to be the scope of permissible malpractice claim against a law firm after the underlying case at issue has settled, a New Jersey appeals court has revived a claim against two law partnerships.
Distinguishing the current case from a 2005 state supreme court holding in Puder v. Buechel, an Appellate Division panel yesterday said that former clients can still sue Nixon Peabody and Wolff & Samson for malpractice, reports the New Jersey Law Journal.
Although the plaintiffs in Schulman v. Wolff & Samson previously settled with fellow shareholders the underlying dispute, over the break-up of a family-owned company, here the settlement was not as directly related to the alleged malpractice and breach of fiduciary duty by the law firms, the panel explained in a written opinion (PDF).
Hence, it overruled a trial court that had dismissed the malpractice action and distinguished Puder, saying that it was a different case, in which “the damages caused by the alleged inequities of the actual settlement were the crux” of the client’s malpractice case against its former counsel, the legal publication writes. In Puder, the supreme court said an ex-client can’t settle a claim for less than it is worth and then sue counsel for the difference.
The Schulman plaintiffs–who sued derivatively, on behalf of the company’s shareholders, as well as individually–based their claim on the law firms’ claimed forwarding of individual shareholders’ interests, rather than the best interest of the company as a whole.
Attorney R. James Kravitz of Fox Rothschild represents the two plaintiffs. He calls the appellate court ruling “the most significant case interpreting Puder,” saying that it limits the supreme court ruling to a very narrow set of facts and clarifies that Puder “simply isn’t going to be applicable when the attorney is functioning as a joint tortfeasor.”
The plaintiffs are seeking $8 million in compensatory damages.
Related coverage:
New Jersey Law Journal (2007): “N.J. Court Widens Standard for Legal Malpractice Claims”
