Settle and Sue Is Here to Stay

Nearly 20 years ago, the New Jersey Supreme Court first decided whether and under what circumstances a client can settle a litigated matter and then sue her attorney for a purportedly inadequate settlement. After two seemingly contradictory opinions, Ziegelheim in 1992 and Puder in 2005, the Supreme Court clarified the issue further this year in Guido v. Duane Morris, LLP , 202 N.J. 79 (2010). Not only does the decision mark a return to the Court’s original position on the topic — settlement of an underlying claim is not necessarily a bar to a subsequent malpractice suit — it also holds that plaintiffs need not move to vacate the purportedly defective settlement before proceeding with a malpractice action.

The Court first ruled on a plaintiff’s ability to “settle and sue” in Ziegelheim v. Apollo, 128 N.J. 250 (1992). The decision appeared to protect clients even in instances where they made affirmative representations that they had entered into the underlying settlement knowingly and voluntarily. In Ziegelheim, the plaintiff settled her divorce action and then sued her former attorney for malpractice alleging that he failed to properly investigate her husband’s assets and, therefore, negotiated a deficient settlement on her behalf. Notably, however, when testifying before the Court immediately after the settlement was read into the record in open court, plaintiff stated that she understood the settlement, that she thought it was fair, and that she was entering into it voluntarily. Despite these representations, the Court allowed plaintiff to move forward with her malpractice claim, in large part, based on her assertion that she only believed the settlement to be fair in light of her attorney’s flawed representation that “wives could expect to receive no more than ten to twenty percent of the marital estate if they went to trial.”