Defeating “Settle and Sue” and “Lost Settlement Opportunity” Legal Malpractice Claims as a Matter ofLaw By Steven S. Fleischman Horvitz &LevyLLP INTRODUCTION malpractice action than the plaintiff could should be liable for the difference between have achieved in the underlying action. what was received and what should have A common claim in legal malpractice been received, taking into account the I.actions is the assertion that the The starting place is Viner v. Sweet (2003) expense of going forward with a trial. underlying matter, if settled through the 30 Cal.4th 1232, 1241 (Vinerl), in which auspices of the attorney, should have been the California Supreme Court held that The California case with the most thorough settled on better terms, or if litigated to a a legal malpractice plaintiff must always analysis of these issues is Barnard v. Langer disappointing conclusion, that it should prove “but for” causation, regardless of (2003) 109 Cal.App.4th 1453 (Barnard). have been settled instead. By definition, the type of claim asserted. In other words, During the underlying action, there were these claims involve 20/20 hindsight and liability exists only if the plaintiffs shows numerous offers and counteroffers between often rank speculation. One court has that, but for the lawyer’s malpractice, a the parties and eventually a settlement summarized the hindsight nature of these different and better outcome would have was reached at a settlement conference. claims, noting that courts are “loathe to been achieved. The “but for” causation During the settlement conference, the allow settling plaintiffs to later second- requirement “is to safeguard against client asked the law firm to reduce its fees guess themselves by suing their attorneys.” speculative and conjectural claims.” (Ibid.) by $100,000; the firm declined. The parties (Blecher & Collins, P.C. v. Northwest After the Supreme Court remanded the then negotiated and signed a settlement Airlines, Inc. (C.D.Cal. 1994) 858 F.Supp. Viner case to the Court of Appeal to agreement. “Before the ink was dry,” the 1442, 1458 (Blecher & Collins).) Recent evaluate the facts in light of the clarified client wrote the firm contesting the firm’s case law confirms the importance of legal standard, the Court of Appeal held fee due to its alleged negligence; the fee was understanding the rules of causation in this that the plaintiffs had failed to come placed in a trust account pending resolution area, and the strategies defense counsel can forward with any evidence at trial proving of the dispute and the remaining sums were use to defeat these claims as a matter of law. that the other side would have agreed to a disbursed to the client. The client sued, The purpose of this article is to explain the more favorable transaction than the one claiming that the firm’s malpractice caused legal basis for these claims and how defense the parties eventually entered (a “better him to settle for “ ‘substantially less than counsel can defeat these claims as a matter deal” scenario) or that the legal malpractice [he was] legally entitled to.’” (Id. at pp. of law on summary judgment. plaintiff would have been better offwithout 1457-1458.) entering into any transaction at all (a “no II. RELEVANT CASE LAW deal” scenario). (Viner v. Sweet (2004) 117 The trial court granted a nonsuit, which was A. “Settle and sue” claims Cal.App.4th 1218, 1227-1229 ( Viner II).) affirmed. The court held that plaintiff had The first (and more common) type of failed to come forward with evidence that “buyers’ remorse” claims discussed here arise The “better deal” scenario in Viner II is the “but for the [defendant’s] negligence,” the when the underlying action was settled and proper analysis in any “settle and sue” claim. underlying action would have “had a better the client then claims that the settlement Legal malpractice plaintiffs must prove that outcome, either by a higher settlement or at would have been better absent the lawyer’s “but for” the alleged malpractice leading up trial.” (Barnard, supra, 109 Cal.App.4th at malpractice. The law in California for to settlement or malpractice in advising p. 1461.) these claims is clear: the legal malpractice the client to agree to settlement, they plaintiff should not be able to obtain a could have obtained a “better deal” in the better result from the attorney in the underlying action and that their attorney continued on page 24 Volume 3 • 2012 verdict 23 Legal Malpractice — continued from page 23 “It is not enough for [plaintiff] to simply happened, upon which a claim for damages to recommended settlements often are claim, as he did at the trial of this is predicated, will not support the claim protected as judgment calls.’” (Ibid.) malpractice action, that it was possible to or furnish the foundation of an action for obtain a better settlement or a better result such damages.”’” (Ibid.) Plaintiff’s offer “‘The standard should be whether the at trial. The mere probability that a certain ofproof at trial was “little more than a wish settlement is within the realm ofreasonable event would have happened will not furnish list of damages, unsupported by evidence conclusions, not whether the client could have the foundation for malpractice damages. that the [defendant] would have settled received more orpaid less. No lawyer has ‘Damages to be subject to a proper award for more, or by expert testimony to show the ability to obtain for each client the best must be such as follows the act complained that [plaintflc] amounts could have been possible compromise but only a reasonable of as a legal certainty.’” (Ibid.) recovered had the case been tried.” (Id. at p. one.’” (Ibid., emphasis added.) 1463, emphasis added.) Accordingly, under The plaintiff’s evidence in Barnard Barnard, a legal malpractice plaintiffmust Barnard provides the correct analysis and showed nothing more than “speculative prove either evidence that the case could shows that these claims can be resolved harm” because it did not demonstrate have settled for more than it did or must by motion short of trial. “‘“The law that but for the attorney’s negligence, the submit expert testimony that the outcome favors settlements.”’” (Village Northridge underlying action would have “settled would have been better had the matter gone Homeowners Assn. v. State Farm Fire for more or gone to trial and resulted in a to trial. & Casualty Co. (2010) 50 Cal.4th 913, larger recovery.” (Barnard, supra, 109 Cal. 930.) Every client who settles a claim App.4th at p. 1461.) The plaintiff failed Barnard further noted the “hindsight could sue their attorney for malpractice, to introduce evidence that the defendant vulnerability of lawyers is particularly acute asserting that the matter should have in the underlying action would have paid when the challenge is to the attorney’s settled on better terms, even $1 better. If more than the settlement amount, leaving competence in settling the underlying the possibility of an additional dollar the alleged harm as” ‘only a subject of case.” (Barnard, supra, 109 Cal.App. 4th at could create a triable issue of material fact, surmise, given the myriad ofvariables’” p. 1462, fn. 13.) The court stated that “the requiring a trial, then the legal malpractice that affect trials. (Ibid.)”’” [T]he mere speculative nature of hindsight challenges probability that a certain event would have continued on page 25 DRM Consider It Resolved! SERVICES, INC Hon. Robert Hon. Patricia Hon. Jacqueline Hon. Alan Hon. Joe Hon. Michael Hon. Robert Hon. Michael Altman, (Ret.> Collins, (Ret.) Connor, (Ret.> Haber, (Ret.> Hilberman, (Ret.) Latin, (Ret.) Letteau, (Ret.> Marcus, (Ret.> Denise Hon. Gregory Hon. Enrique Hon. Thomas Hon. Robert W. Hon. Alexander Ralph Hon. John Madigan, Esq. O’Brien, (Ret.) Romero, (Ret.) Schneider, (Ret.) Thomas, (Ret.) Williams III, (Ret.) Williams, Esq. Zebrowski, (Ret.> www ADRSERVICES org I CenturyCity 310 201 0010 Downtown LA 213 683 1600 I OrangeCounty 949 863 9800 San Diego 619 233 1323 24 verdict Volume 3 • 2012 Legal Malpractice — continued from page 24 plaintiffwould always be able to survive p. 1528.) The court noted that “settle and Plaintiff did not claim that she would have summary judgment. That is why the issue sue” claims are “likely to be speculative” received a better result at trial than she is not whether the settlement could have and followed Barnard in holding that did in the settlement. Instead, she argued been higher or lower, but instead, whether attorneys are only subject to the “standard that had the negligent tax advice not been the settlement was within the range of ofwhether the settlement was within given, she would not have settled the case reasonableness. (Barnard, supra, 109 Cal. the realm of reasonableness.” (Ibid.) and would have insisted on going to trial App.4th at p. 1462, fn. 13.) Undisputed facts showed that the plaintiff’s even if it meant a lesser result. (Id. at p. underlying claim was time barred, and “to 1774.) The Court of Appeal reversed a Barnard was followed in Slovensky v. recover damages at trial, she would have jury verdict rendered in plaintiff’s favor. Friedman (2006) 142 Cal.App.4th 1518 had to defeat the statute of limitations The court rejected plaintiff’s contention (Slovensky). Slovensky involved a “settle defense. The undisputed facts reveal she that her claim was for the right to put the and sue” claim brought by the underlying could not have done so.” (Ibid.) That is, underlying defendant through a trial. The plaintiff The client consulted the the attorney defendants were entitled to court held that implicit in that theory was defendant attorneys after the statute of summary judgment because they disproved that the underlying defendant would have limitations had run on the client’s claim.