New opinion examines the bar on legal malpractice actions after settlements

/ 03.Apr, 2015
On March 31, 2015, Judge Slomsky of the United States District Court for the Eastern District of Pennsylvania issued a memorandum opinion in consolidated cases involving Spector Gadon & Rosen, P.C. and its former client Robert M. Fishman.  The consolidated cases involve an action by Spector Gadon to collect fees, and an action in return by Mr. Fishman for legal malpractice. Spector Gadon, and attorney Alan Epstein, represented Mr. Fishman in an arbitration against his former employer.  During the arbitration, Mr. Fishman contended his employer breached his employment agreement by depriving him of certain benefits after terminating his employment.  Mr. Fishman believed he achieved a favorable settlement while represented by Spector Gadon, but the favorable settlement was never finalized.  In the legal malpractice action, Mr. Fishman asserted Spector Gadon was negligent in not finalizing the settlement, and caused him to have to retain subsequent counsel and settle his claim for less than the original settlement offer. Judge Slomsky granted Spector Gadon’s motion for judgment on the pleadings.  The court found “Fishman’s overarching grievance is that Epstein breached his professional duty to Fishman because he ‘failed to take steps to ensure that the settlement was documented and/or confirmed in a form which would be binding and enforceable.’”  Judge Slomsky noted the “favorable settlement” was not finalized because Mr. Fishman did not agree to the terms of the written agreement.  Judge Slomsky found that accepting all of plaintiff’s averments as true, Mr. Epstein did not breach a duty to Mr. Fishman, because even if Mr. Epstein took all the steps plaintiff asserted he should have taken, it still would not have created a binding settlement. Judge Slomsky also found Mr. Fishman’s theory of recovery is based upon “impermissible speculation.”  Judge Slomsky entered into an extended discussion of Pennsylvania courts’ history of refusing to allow speculation regarding settlement negotiations to form the basis of legal malpractice action.  However, the court refused to accept the defendants’ contention the claim was barred under the Muhammed decision precluding legal malpractice claims arising out of settlements, noting that subsequent cases do not bar cases following settlement if the action is settled by a third party rather than the allegedly negligent attorney. For purposes of students of professional liability cases, this action is most interesting for its discussion of speculation regarding settlements.  For other practitioners looking for lessons on legal malpractice avoidance, it serves as a reminder that the best way to get sued for legal malpractice is to sue your clients for fees. –Josh J.T. Byrne, Esquire