Pennsylvania courts have long held that a cause of action for legal malpractice cannot be brought against an attorney when a case has settled absent proof of fraud or attorney error in providing advice on the legal implications of the settlement. See, Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 526 Pa. 541, 587 A.2d 1346 (Pa. 1991), rehearing denied, 528 Pa. 345, 598 A.2d 27 (Pa. 1991), cert denied    U.S.   , 112 S.Ct. 196, (1991) ("Simply stated, we will not permit a suit to be filed by a dissatisfied plaintiff against his attorney following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the original action.").

Muhammad foreclosed claims based on dissatisfaction with the terms of a settlement: "We foreclose the ability of dissatisfied litigants to agree to a settlement and then file suit against their attorneys in the hope that they will recover additional moneys." In Muhammad the Pennsylvania Supreme Court considered a legal malpractice claim stemming from dissatisfaction with the settlement of prior litigation. The Supreme Court decided not to allow lawsuits against lawyers that are premised upon the client's determination a settlement was inadequate.

The Supreme Court reasoned a cause of action for dissatisfaction with a settlement threatened the long-standing principle in favor of encouraging settlements since recognizing such a cause of action would cause lawyers to be "reluctant to settle a case for fear some enterprising attorney representing a disgruntled client will find a way to sue them for something that 'could have been done, but was not.'"

Quite naturally, plaintiffs have attacked Muhammad since it was decided, and the continued viability of Muhammad and questions regarding the scope of the exceptions to Muhammad are perennial issues for our appellate courts. The fundamental principles of Muhammad have repeatedly been upheld by other decisions. See Piluso v. Cohen, 2000 Pa. Super. 335, 764 A.2d 549 (Pa. Super. 2000) appeal denied 568 Pa. 663, 793 A2d 909; Spirer v. Freeland & Kronz,    Pa. Super.   , 643 A.2d 673, 676 (Pa. Super. 1994) (Former client could not maintain legal malpractice action against his lawyer based on dissatisfaction with marital property settlement absent fraud by the lawyer to induce client to accept settlement even though settlement was achieved based on incomplete information due to failure of attorney to adequately investigate and perform discovery); Banks v. Jerome Taylor & Associates, 700 A.2d 1329, 1332 (Pa. Super. 1997); Martos v. Concilio, 427 Pa. Super. 612, 629 A.2d 1037 (Pa. Super. 1993) (in the absence of fraud, client who was displeased with results of settlement agreement could not sue his attorney for malpractice); Silvagni v. Shorr, 2015 PA Super 62, 113 A.3d 810, 816 (Pa. Super. 2015) ("Unless Silvagni had specifically pleaded, and could prove, the defendants fraudulently induced him into signing the compromise and release agreement, or he could prove that the defendants failed to explain the effect of that settlement, or that the settlement was somehow legally deficient, Silvagni is barred from maintaining an action in negligence against the defendants."); McGuire v. Russo, 2016 Pa. Super. Unpub. LEXIS 4281 * (Pa. Super. 2016). Likewise, in Banks v. Jerome Taylor & Associates, 700 A.2d 1329, 1332 (Pa. Super. 1997) the court noted:

In cases wherein a dissatisfied litigant merely wishes to second guess his decision to settle due to speculation that he may have been able to secure a larger amount of money, i.e. "get a better deal" the Muhammad rule applies so as to bar that litigant from suing his counsel for negligence. If, however, a settlement agreement is legally deficient or if an attorney fails to explain the effect of a legal document, the client may seek redress from counsel by filing a malpractice action sounding in negligence.

Most recently, the Superior Court upheld the fundamental tenants of Muhammad in Greenawalt v. Stanley Law Offices, LLP, No. 1018 WDA 2019, (Pa. Super. June 22, 2020). In a nonprecedential decision, writing for a unanimous panel, Judge Mary Jane Bowes relied on Muhammad in affirming the order of the trial court sustaining the preliminary objections of the Stanley Law Offices, LLP ("Stanley") to a legal malpractice claim arising out of a settled personal injury action.

The Greenawalt decision actually involved appeals of two separate claims of professional negligence arising out of Stanley's representation of Greenawalt.  Greenawalt went to Stanley, a law firm located in Rochester, New York, for representation regarding an injury which took place on December 14, 2009, in the parking lot of company provided housing when he was working as a union laborer in New York.  Stanley agreed to represent Greenawalt in a personal injury action against the owner of the apartment complex, but referred Greenawalt to Pennsylvania attorney Justin Lewis for a potential workers' compensation claim because Stanley believed jurisdiction for that claim did not lie in New York.

Stanley settled the personal injury action in July of 2011, and Greenawalt signed a release.  Lewis commenced a workers' compensation action in Pennsylvania. On Dec. 29, 2011, the Pennsylvania workers' compensation judge found there was no jurisdiction for the workers' compensation claim in Pennsylvania. Lewis appealed and contacted Stanley about bringing a workers' compensation claim in New York. Stanley agreed to do so, and filed a New York workers' compensation claim on Jan. 12, 2012.

Lewis, on behalf of Greenawalt, then sued Stanley alleging negligence in handling both the personal injury claim and the New York workers' compensation claim. Stanley acknowledged that the New York workers' compensation claim, which was still pending, may have been filed after the applicable statute of limitations. Stanley filed preliminary objections asserting: the settlement barred a claim based on the personal injury action; that no duty was owed by Stanley to Greenawalt regarding the New York workers' compensation claim until Stanley agreed to represent Greenawalt in the New York workers' compensation claim which was after the statute of limitations had already run; and Greenawalt had not sustained a loss with respect to the New York workers' compensation claim as it was still pending.

The trial court sustained the preliminary objections with respect to the personal injury claim and overruled the other preliminary objections. The trial court subsequently granted summary judgment finding that no duty was owed by Stanley with respect to the New York workers' compensation claim until after the statute of limitations on the New York workers' compensation claim had already expired.

On appeal, Greenawalt challenged both the order sustaining preliminary objections and the order granting the motion for summary judgment. Greenawalt both challenged the continued viability of Muhammad and asserted he had adequately pleaded a claim of fraud regarding the settlement so as to overcome the Muhammad bar.

In attacking the continued viability of Muhammad, Greenawalt relied on the subsequent plurality decision of our Supreme Court, in McMahon v. Shea, 547 Pa. 124, 688 A.2d 1179 (1997), and the fact that the Supreme Court accepted allocatur in McGuire v. Russo, which Greenawalt asserted signaled a willingness to overturn Muhammed. The Superior Court rejected both these contentions. The Superior Court noted that McMahon was only a plurality decision, and that it involved a question of alleged negligence in failing to advise a client as to controlling law regarding a contract.

In McMahon, the plaintiff entered into a counseled agreement with his estranged wife to pay her alimony and child support. Upon counsel's recommendation, McMahon entered into a stipulation to incorporate, but not merge, the agreement into the final divorce decree. When his ex-wife remarried two months later, McMahon filed a motion to terminate alimony. The trial court denied the request because the agreement survived the divorce since it was not merged into the final decree. Alleging negligence, McMahon initiated a legal malpractice claim alleging negligence against counsel representing him in the divorce. The trial court, relying on Muhammad, granted McMahon's attorney's preliminary objections and dismissed the complaint. The Superior Court, sitting en banc, reversed the trial court, finding that the policy set forth in Muhammad was not applicable where an attorney's alleged negligence does not lie in the judgment regarding the amount to be accepted or paid in settlement, but rather lies in the failure to advise a client of well established principles of law and the impact of a written agreement.

The Supreme Court affirmed the decision of the Superior Court, but did not issue a majority opinion. Two Justices joined the opinion written by Justice Stephen Zappala that found the reasoning of Muhammad had no application to the facts of McMahon's legal malpractice claim:

"… there is no element of speculation as to whether a jury would return a verdict greater than the amount recovered by a settlement. Also, Mr. McMahon is not attempting to gain additional monies by attacking the value that his attorneys placed on his case. Instead, Mr. McMahon is contending that his counsel failed to advise him as to the possible consequences of entering into a legal agreement. The fact that a legal document at issue had the effect of settling a case should not exempt his attorneys from liability …"

Zappala then, unnecessarily, concluded "that the analysis of Muhammad is limited to the facts of that case." Justice Ralph Cappy, joined by Justice Ronald Castille and Justice Sandra Newman concurred in Zappala's opinion except to the extent that it limited Muhammad to its facts.  Cappy wrote "to emphasize the continuing need for, and validity of, [the Supreme Court's] decision in Muhammad." The concurring opinion agreed with the distinction between a legal malpractice claim based on a challenge to an attorney's professional judgment regarding an amount to be accepted in settlement of a claim (Muhammad) and a challenge to an attorney's failure to correctly advise his client about well established principles of law in settling a case (McMahon).

Our Superior Court has since repeatedly addressed the limited applicability of McMahon. See,  Moon v. Ignelzi, 2009 Pa. Super. LEXIS 7016 (Pa. Super. 2009) ("With the stroke of the pen that prevented the Supreme Court in McMahon from rendering a majority opinion, Zappala then went on to conclude 'that the analysis of Muhammad is limited to the facts of that case.'"); See Silvagni v. Shorr, 2015 PA Super 62, 113 A.3d 810, 816 (Pa. Super. 2015). In Abeln v. Eidelman, 118 A.3d 452 (Pa. Super. 2015), the court stated:

Appellant has greatly exaggerated the effect of the McMahon decision. While the McMahon majority purported to restrict Muhammad to its facts, we note that the McMahon "majority" was not even a plurality decision. Rather, McMahon was the product of an equally divided, six-member supreme court. In point of fact, the three-member "minority" concurred in the result, but specifically objected to limiting Muhammad to its facts. Consequently, McMahon did not serve to limit Muhammad to its facts, and Muhammad remains as controlling precedent until a true majority of the supreme court rules otherwise.

The Superior Court decision in Greenawalt conforms with these decisions, noting that "to the extent McMahon carves out an exception to Muhammad," Greenawalt had not asserted facts that fell within the exception.  The Superior Court found:

In contrast to the situation in McMahon, there are no allegations that the law firm misstated the law or the facts regarding the effect of the settlement. Nor are there any allegations that the law firm fraudulently misrepresented facts or the law in order to induce Mr. Greenawalt to settle the case. Rather, Mr. Greenawalt is attacking the adequacy of the financial settlement after the fact, the very situation Muhammad was intended to preclude. Accordingly, the trial court properly sustained the demurrer with regard to Mr. Greenawalt's negligence claims involving the personal injury settlement.

The Superior Court in Greenawalt agreed with the trial court on the order sustaining preliminary objections to the claim arising out of the personal injury claim and reaffirmed the continued viability of Muhammad. However, the Superior Court did not agree that the claim arising out of the New York workers' compensation claim was barred due to a lack of duty. Despite this, the Superior Court did affirm the grant of summary judgment as Greenawalt had not established the existence of actual loss as the New York workers' compensation claim remained pending. For our purposes, the take-away from the Greenawalt case is that Muhammad continues to be the controlling seminal case barring legal malpractice cases arising from dissatisfaction with settlements.

Josh J.T. Byrne, a partner in Swartz Campbell's professional liability group in the firm's Philadelphia office, is the chair of the Pennsylvania Bar Association's professional liability committee former co-chair of the Philadelphia Bar Association's professional guidance committee.