How does a settlement affect the later legal malpractice claim against the attorney who represented plaintiff in the settlement?  We have seen an erosion of the standard that a legal malpractice claim after settlement is permitted if plaintiff was ‘effectively compelled" to settle because of the departures of the attorney.  In some divorce cases in the 1st Department, an allocution upon settlement that the client was "satisfied" with the attorney’s work has vitiated the later legal malpractice.

May 18, 2012, we see a discussion the "effectively compelled" principle.

"In order to sustain a malpractice claim, [*18] the client must allege and prove: "(1) that the attorney ‘failed to exercise ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’; and (2) that the attorney’s breach of the duty proximately caused the [client] actual and ascertainable damages." Dempster v. Liotti, 86 A.D.3d 169, 176, 924 N.Y.S.2d 484, 489 (N.Y. App. Div. 2011) (quoting Leder v. Spiegel, 9 N.Y.3d 836, 837, 840 N.Y.S.2d 888, 872 N.E.2d 1194, (N.Y. 2007), cert. denied sub nom. Spiegel v. Rowland, 552 U.S. 1257, 128 S.Ct. 1696, 170 L.Ed.2d 354 (2008)). Causation, which is an element of a malpractice claim, requires a showing by the party alleging malpractice "that he or she would have prevailed in the underlying action. . . . but for the lawyer’s negligence." Pistilli Constr. & Dev. Corp. v. Epstein, Rayhill & Frankini, 84 A.D.3d 913, 921 N.Y.S.2d 887 (N.Y. App. Div. 2011) (quoting Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y. 3d 438, 442, 835 N.Y.S.2d 534, 867 N.E.2d 385 (N.Y. 2007)).

Dr. Haywoode alleges, and the Debtor admits, that the Debtor’s failure to file a summons and complaint on behalf of Dr. Haywoode prior to expiration of the applicable statute of limitations [*19] constituted malpractice. HN3An attorney’s admitted failure to commence an action within the applicable time frame provided by statute constitutes negligence as a matter of law. Bergin v. Grace, 39 A.D.3d 1017, 1018, 833 N.Y.S.2d 729, 730 (N.Y. App. Div. 2007) (citing A.H. Harris & Sons, Inc. v. Burke, Cavalier, Lindy and Engel P.C., 202 A.D.2d 929, 930, 610 N.Y.S.2d 888, 889 (N.Y. App. Div. 1994) (other citations omitted)). This is not a case where the client decided to accept a settlement in lieu of facing the risks of trial. Because of the Debtor’s malpractice, Dr. Haywoode was left with no choice but to accept the settlement, having lost the right to maintain any action for damages against the City of New York.

Because the underlying action was settled, and the settlement was upheld, the effect of the settlement on the malpractice claim must be examined. HN4Under New York law, where the underlying action has been terminated by settlement rather than by dismissal or adverse judgment, a claim for legal malpractice survives only if the court finds that the settlement was compelled because of the mistakes of counsel. Cohen v. Lipsig, 92 A.D.2d 536, 459 N.Y.S.2d 98, 99 (N.Y. App. Div. 1983) [*20] (citing Kerson Co. v. Shayne, Dachs, Weiss, Kolbrenner, Levy & Levine, 45 N.Y.2d 730, 732, 408 N.Y.S.2d 475, 380 N.E.2d 302 (N.Y. 1978), and Becker v. Julien, Blitz & Schlesinger, 95 Misc.2d 64, 66-67, 406 N.Y.S.2d 412 (N.Y. Sup. Ct.1977), modified on other grounds, 66 A.D.2d 674, 411 N.Y.S.2d 17 (N.Y. App. Div. 1978)).

As stated in Becker v. Julien, Blitz & Schlesinger, P.C.:
HN5Where the termination (of the underlying action) is by settlement rather than by a dismissal or adverse judgment, malpractice by the attorney is more difficult to establish, but a cause of action can be made out if it is shown that assent by the client to the settlement was compelled because prior misfeasance or nonfeasance by the attorneys left no other recourse. Thus, the court finds itself in agreement with the concurring opinion by Mr. Justice Suozzi in the Kerson case, supra, that the cause of action for legal malpractice must stand or fall on its own merits, with no automatic waiver of a plaintiff’s right to sue for malpractice merely because plaintiff had voluntarily agreed to enter into a stipulation of settlement.
95 Misc.2d at 66, 406 N.Y.S.2d at 414 (citing Kerson Co. v. Shayne, Dachs, Weiss, Kolbrenner, Levy & Levine, 45 N.Y.2d at 732, 408 N.Y.S.2d 475, 380 N.E.2d 302). [*21]

The Debtor and the Trustee urge the Court to find that the settlement and release bar Dr. Haywoode from maintaining a malpractice action against the Debtor. According to the Debtor and the Trustee, Dr. Haywoode accepted the settlement and found it to be reasonable, signed the general release, and made subsequent efforts to enforce the settlement. Based on Dr. Haywoode’s actions, including her ratification of the settlement when she executed the settlement and release, she forfeited her right to maintain the malpractice action. In contrast, Dr. Haywoode argues that she was compelled to accept the settlement due to the Debtor’s malpractice. Because Dr. Haywoode had no other choice but to accept the settlement, she did not waive her right to bring a malpractice action against the Debtor, and the settlement of the personal injury action does not restrict her right to assert a claim for malpractice.

In this case, neither party has accurately characterized the effect the settlement has on Dr. Haywoode’s malpractice claim. The City of New York offered to settle Dr. Haywoode’s claim for $7,750.00. This offer appears to have been made solely based on the City of New York’s view [*22] of the value of the claim, in that it was made before the City became aware that a complaint was not filed prior to expiration of the statute of limitations. Once the Debtor failed to file a timely complaint, the personal injury "claim" was effectively worthless and the City of New York revoked the settlement. The Debtor’s failure to file a timely complaint precluded Dr. Haywoode from having her day in court. As a result of the Debtor’s negligence, the most that Dr. Haywoode could ever collect from the City of New York was $7,750.00. Only an intervening order of a State Court judge preserved the deal. The $7,750.00 settlement, while providing some evidence of the value of the claim, only mitigated the damages caused by the Debtor’s negligence. The Debtor recognized that the settlement served to mitigate any damages he caused because he agreed to be responsible for up to $7,750.00 in the event the City of New York reneged. It was in the best interests of Dr. Haywoode as well as the Debtor to seek enforcement of the City’s agreement."