Here is a case from New Jersey which gives a full explanation of "judicial estoppel" and its application to legal malpractice. Generally, the issue comes up when a client agrees to a settlement, which it later finds to be inadequate. The legal malpractice case which follows is defended, in part, by the assertion that the client settled the case, said they were satisfied, and now change their mind.
"Judicial estoppel is an equitable doctrine that protects the integrity of the judicial process. Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996). It "preclud[es] a party from asserting a position in a case that contradicts or is inconsistent with a position previously asserted by the party in the case or a related legal proceeding." Tamburelli Prop. Ass’n v. Borough of Cresskill, 308 N.J. Super. 326, 335 (App. Div. 1998) (citation omitted).
Judicial estoppel does not prevent litigants from pleading alternative positions; rather, it "is designed to prevent litigants from playing fast and loose with the courts." Newell v. Hudson, 376 N.J. Super. 29, 38 (App. Div. 2005) (citation omitted). "[A] party must successfully assert a position in order to be estopped from asserting a contrary position in future proceedings." Cummings, supra, 295 N.J. Super. at 386. Prior success does not necessarily mean that the party benefited from the position taken, but only that a court allowed them to maintain that position and relied on it to make a judicial determination. Id. at 387.
New Jersey "has a longstanding policy that encourages settlements." Ziegelheim v. Apollo, 128 N.J. 250, 263 (1992). However, our policy favoring settlements and the doctrine of judicial estoppel only bar a litigant from subsequently disputing the fairness and reasonableness of a settlement where the litigant was fully aware of all of the facts and was reasonably advised as to the legal remedies available based on those facts. Newell, supra, 376 N.J. Super. at 33; Puder v. Buechel, 183 N.J. 428, 437-39 (2005).
The motion judge relied on Newell to apply the doctrine of judicial estoppel in this case. The issue in Newell, was "whether a litigant who either lied, or later claimed she lied, about her understanding and voluntary acceptance of the terms of her property settlement agreement, in order to induce the court to accept and incorporate it into a judgment of divorce, is judicially estopped from asserting a [counter]claim for malpractice against her matrimonial attorney based on the settlement." Newell, supra, 376 N.J. Super. at 30. At the time of the divorce hearing, Hudson represented in court that she understood and voluntarily consented to the terms of the property settlement agreement. Id. at 32. Based upon this testimony, the judge approved the settlement and incorporated the agreement into the judgment of divorce. Ibid.
Thereafter, the wife sought a modification of the alimony amount, claiming that her former husband’s salary was misstated in the agreement as a result of her attorney’s negligence and, as a consequence, she received an insufficient alimony award. Id. at 32-33. That motion was denied by the Family Part judge. Id. at 33.
Hudson failed to pay the divorce attorney’s fee and a collection suit was instituted against Hudson. Ibid. Hudson counterclaimed alleging malpractice. Id. at 33-34. In responding to questions posed at her deposition, Hudson essentially testified that her sworn testimony to the judge hearing the divorce proceeding was false. Id. at 34. The attorneys then filed a motion for summary judgment. Ibid. In dismissing the malpractice action on the basis of judicial estoppel, the motion judge found that the wife was not misled by her attorney because she testified under oath that she knew what she was doing. Id. at 36. The judge also stressed that the wife, who was an accountant, although not tutored in the law, was nevertheless a sophisticated individual who had received sufficient factual information to inform her decision regarding the settlement. Id. at 35-36.
In reviewing the grant of summary judgment, we noted that the Ziegelheim and Puder
courts recognized legal malpractice as a viable cause of action where a matrimonial attorney’s negligent pretrial preparation and advice led to the recommendation of an improper settlement. By declining to apply a per se bar, these cases preserve a malpractice claim of a vulnerable litigant who unknowingly enters into an inadequate settlement, believing it is fair, as a result of the arguable negligence of her matrimonial attorney.
We agreed that a legal malpractice action was reserved for "vulnerable litigant[s] who unknowingly enter into an inadequate settlement, believing it is fair, as a result of the arguable negligence of [their] . . . attorney." Ibid. Further, we adopted the position of the Idaho Supreme Court, stating that judicial estoppel
should only be applied when the party maintaining the inconsistent position did have, or was chargeable with, full knowledge of the attendant facts prior to adopting the initial position. . . . [T]he concept of judicial estoppel takes into account not only what a party states under oath in open court, but also what that party knew, or should have known, at the time the original position was adopted. [Ibid. (quoting McKay v. Owens, 937 P.2d 1222 (1997)).]