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Plaintiffs Who Trusted Attorney's Explanation of Stipulation Sue for Malpractice

Issue: Whether a client has a cause of action for legal malpractice where that client signed a revised settlement stipulation without reading it, relying on its attorney’s misstatement that the stipulation was changed to correct only one typographical error.

Article by David Drescher on February 4, 2013

Underlying Loan Payback Case

Facts: The plaintiffs in the underlying and case at bar were Arnav Industries Retirement Trust and Rochel Properties. The defendant in the underlying case was David Schick. Plaintiffs settled a claim against Schick for unpaid loans whereby Schick would make payments for $2,500,000 until the full loan amount of $6,023,702.95 would be paid. If Schick defaulted on any of these payments, then plaintiffs would obtain an immediate judgment for the full loan amount. Schick’s initial payment of $420,000 breached this settlement agreement. Plaintiffs retained a law firm, the defendant in the case at bar, to prepare the stipulation of settlement. Joseph Wassner, a trustee of Arnav and officer of Rochel, allegedly read the stipulation of settlement once it was sent to him by defendant and then executed the agreement. After defendant sent the stipulation to Wassner once more, noting that there was a typographical error in the first paragraph of the document, as the original document stated that the amount of the settlement would be $2,800,000 rather than the correct amount ($2,080,000), Wassner relied on defendant’s statement that this figure was the only difference between the first and second versions of the document and executed the settlement once more. The second version of the settlement, however, erroneously stated in paragraph 13 that the amount of judgment upon Schick’s default would be $2,080,000 rather than $6,023,702.95. Schick later made one payment of $100,000 and then defaulted. Defendant had the judgment entered in the proper courts in accordance with the erroneous amount in the settlement, plus interest, totaling $2,021,986.85. After Schick then involuntarily entered bankruptcy, plaintiffs settled with Schick and filed a malpractice claim against defendant law firm for malpractice.

Issue: Whether a client has a cause of action for legal malpractice where that client signed a revised settlement stipulation without reading it, relying on its attorney’s misstatement that the stipulation was changed to correct only one typographical error.

Ruling: The client stated a cause of action for legal malpractice sufficient to survive a motion to dismiss.

Lesson: When an attorney makes statements regarding his work and his client relies upon those statements without verifying them, a client may still have a malpractice case against said attorney if an issue later arises on the basis of those statements.

 

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