Key Decisions

December 2012- Proving Settlement Value

(filed under: Key Decisions | December 19, 2012)

Proving Settlement Value Of An Underlying Case Can Be Difficult In A Legal Malpractice Case

Filbin v. Fitzgerald
(Cal. Ct. of App., 1st Dist.), filed November 20, 2012

Attorney Herman Fitzgerald represented James and Carolyn Filbin in a condemnation action in which the County sought to acquire land the Filbins owned.  As the trial date approached, Fitzgerald advised the Filbins that they were required to make a settlement offer that was below the amount to which their real estate appraiser would testify the property was worth.  This advice led to a breakdown in the attorney-client relationship and to the Filbins replacing Fitzgerald.

The Filbins, represented by new counsel, settled with the County.  They then sued Fitzgerald.  They alleged that Fitzgerald committed legal malpractice and that this resulted in their having to settle for less than their property was actually worth.

The trial court found that Fitzgerald gave the Filbins erroneous legal advice when he advised them that they were required to make a settlement offer and that, in doing so, he breached a duty of care to them.  However, it found that up until that time, Fitzgerald had performed in a competent manner.  Based on its finding that Fitzgerald had breached his duty of care, the trial court awarded the Filbins damages based on the difference between what they settled for and what they should have been able to settle for.

The Court of Appeal reversed.  It found that there was no substantial evidence connecting the alleged malpractice to the allegedly inadequate settlement.  In doing so, the court noted that in a “settle and sue” case, the manner in which the underlying lawsuit was concluded will often make proof of causation and damages challenging.  It also said:  “The requirement that a plaintiff need prove damages to ‘a legal certainty’ is difficult to meet in any case.  It is particularly so in “settle and sue” cases.”

Although the court noted the problem of establishing causation and damages, it declined to make a per se rule precluding “settle and sue” cases.  As such, it did leave open the possibility of such a case.

As to Fitzgerald, the trial court found that there was no malpractice before the erroneous advice about the Filbins being required to make a settlement demand. It said:  “[N]o part of Fitzgerald’s strategy or tactical decisions prior to his discussion with the Filbins on July 31, 2007 can figure in the determination of whether Fitzgerald committed malpractice.”

As to the erroneous advice, the court said:  “[W]hen replacement counsel took over the case on August 3, it was with no lingering impairment at Fitzgerald’s hands.  When it came time for the Filbins to consider whether to settle the case some two and a half months later, in mid-October, they were free agents.  No past decision by Fitzgerald hobbled them.  Nothing prevented their new counsel from giving them impartial advice.  No one would stop them from going to trial.  Their decision to settle was theirs and theirs alone, made with the assistance of new counsel, with no input from Fitzgerald.  The consequences of that decision are likewise theirs alone.”

In addition, the court held that “There is nothing in the record which proves either that the County would have paid a dollar more than it did, or why the Filbins’ new counsel did not secure the higher settlement the Filbins implicitly assume they would have pocketed had Fitzgerald remained as their counsel.  Thus, and dispositively, the Filbins introduced no evidence that a greater settlement could have been negotiated from the County.”