LEGAL MALPRACTICE-RELEASE-FRAUDULENT INDUCEMENT

Khalil v. Williams, 2022 Pa. LEXIS 1033 (S. Ct. July 20, 2022) (Todd, J.)  This case follows the Muhammad rule in that once a party settles a case, they cannot challenge their lawyer as being negligent in a subsequent action.  However, the court says there should be redress where a party is fraudulently induced to settle a case, which was the Muhammad Rule.  Only cases of fraud should be actionable, according to the court.  Here, the Commonwealth Court concluded that by signing a release with Travelers, appellant had also released her counterclaims against Pier 3 and Wentworth in a case involving fees.  A malpractice case followed.  Allegedly, the lawyer repeatedly and erroneously advised appellant that the Travelers release would not affect her counterclaim in the other case, the Fees Case.  It was also alleged that the lawyers fraudulently induced appellant into settling her lawsuit by discounting the rate.  “We do believe, however, there must be redress for the plaintiff who has been fraudulently induced into agreeing to settle.  It is not enough that the lawyer who negotiated the original settlement may have been negligent; rather, the party seeking to pursue a case against his lawyer after a settlement must plead, with specificity, fraud in the inducement.”  The court went on to say, “Today, the majority holds that when counsel fails to advise a client as to the controlling law applicable to a settlement contract, he may be subject to a malpractice claim based on a theory of negligence.  In doing so, the court properly draws the legally relevant distinction between a challenge to an attorney’s professional judgment regarding an amount to be accepted or paid in settlement of a claim, and a challenge to an attorney’s failure to correctly advise his client about well-established principles of law in settling a case.  This is a reasonable and justifiable distinction.”  This is a quote from Muhammad.  In the case at bar, appellant is not alleging that it is her attorney’s negligence that caused her damages; instead, she is alleging that her damages, dismissal of her claims in a separate case, were caused by fraud.  Appellee’s lawyers breached her duty to appellant in negotiating the Travelers release and advising her that it would not impact her subsequent claims in the Fees Case.  The court concluded that the Superior Court erred in holding that appellant’s negligence and breach of contract claims were barred under Muhammad.  The plaintiff/appellant claimed that a different version of the release, she claims, was switched with the Travelers release.  That is obviously an outright fraud.  The Superior Court was reversed to the degree that it affirmed the trial court’s grant of summary judgment in favor of appellees.  The case will be remanded to the trial court for further proceedings.  Justice Wecht and Justice Mundy filed a concurring opinion that Muhammad should be overruled.