Settling Party Beware: A Claim for Legal Malpractice Cannot Survive When a Plaintiff Knowingly Settles the Underlying Case

By Nicole M. Ehrhart, Esq.*

It is well-established that Pennsylvania’s courts “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. An action should not lie against an attorney for malpractice based on negligence or contract principles when that client has agreed to a settlement. Rather, only cases of fraud should be actionable.” Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 587 A.2d 1346 (Pa. 1991). The Pennsylvania Supreme Court has decided to:

[d]isallow negligence or breach of contract suits against lawyers after a settlement has been negotiated by the attorneys and accepted by the clients in that to allow them will create chaos in our civil litigation system. Lawyers would 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.” We refuse to endorse a rule that will discourage settlements and increase substantially the number of legal malpractice cases. A long-standing principle of our courts has been to encourage settlements; we will not now act so as to discourage them.

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Numerous commentators have addressed the problem of overcrowded courts and the importance of settlements to the efficient flow of justice. A fundament of those articles is that settlement of civil litigation is critical to the courts’ management of caseloads. Without settlement of cases, litigants would have to wait years, if not decades, for their day in court. Nearly 90% of all matters in controversy end in settlement. Were we, as a court, to encourage litigation that would undermine the current rate of settlements, we would do a grave injustice and disservice to the citizens of the Commonwealth. “The settlement of cases before trial is one of the greatest potentials for assisting the courts to reduce their caseloads.” As courts are fond of repeating, “[j]ustice delayed is justice denied.”

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Mindful of these principles, 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 monies. To permit otherwise results in unfairness to the attorneys who relied on their clients’ assent and unfairness to the litigants whose cases have not yet been tried. Additionally, it places an unnecessarily arduous burden on an overly taxed court system.

Muhammad, 587 A.2d at 1349-1351.         

Litigants have tried to chisel away at the holding in Muhammad. However, the Pennsylvania Superior Court recently reinvigorated the policy concerns inherent in Muhammad and stated that Muhammad is still the law with regard to parties who settle their underlying dispute and then try to sue their counsel for malpractice. On March 27, 2015, in Silvagni v. Shorr, 113 A.3d 810 (Pa. Super. 2015), the Superior Court affirmed the trial court’s entry of summary judgment in favor of an attorney-defendant because a client was barred from maintaining the claim absent evidence that the attorney-defendant fraudulently induced the client into signing a compromise and release agreement without explaining the ramifications of the settlement. The plaintiff, having settled his workers’ compensation claim, was terminated from his medical coverage and any other benefits under the Workers’ Compensation Act.

The plaintiff argued that the attorney-defendant offered him incorrect legal advice and his reliance upon that advice led to a compromise and release. The Superior Court applied the policy concerns set forth in Muhammad and determined that the plaintiff had entered into the settlement voluntarily. The plaintiff acknowledged, under oath, that he understood that, in return for the settlement, he would no longer receive medical benefits or any other benefits under the Workers’ Compensation Act.

Silvagni reasserts that dissatisfaction is not a cause of action against one’s legal counsel. A litigant who merely wishes to second guess a decision based upon speculation of a better deal has no recourse in Pennsylvania. If a party knowingly and intelligently enters into a settlement agreement, absent competent evidence of fraud, he or she will not be able to sue his or her attorney for malpractice. Defense counsel should keep this principle in mind when defending claims based on late-arising regrets to the decision to settle.

* Nicole is an associate in our Harrisburg, Pennsylvania office who can be reached at 717.651.3512 or nmehrhart@mdwcg.com.

_{Defense Digest, Vol. 21, No. 3, September 2015}

_{Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2015 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}