PENNSYLVANIA ATTORNEYS TAKE NOTE ' A Voluntary Settlement Agreement May No Longer Bar A Legal Malpractice Action

• Published date: 01 August 2022
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Freeman Mathis & Gary
• Author: Mr Patrick Cosgrove and Kayla Panek

Pennsylvania has long been an outlier amongst jurisdictions in holding that clients cannot sue their attorney for legal malpractice after voluntarily agreeing to a settlement. A recent concurring opinion by a Pennsylvania Supreme Court Justice in Khalil v. Williams, et al. (July 20, 2022) suggests that it is only a matter of time before attorneys can no longer rely on this defense to a legal malpractice claim.

The Muhammad Decision

In 1991, the Supreme Court of Pennsylvania created what is known as the Muhammad doctrine, which prohibits an attorney's clients from bringing non-fraud legal malpractice claims if the client voluntarily agreed to a settlement. Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 526 Pa. 541 (1991). In Muhammad, former clients of the defendant law firm sued their former attorneys for legal malpractice because the clients were dissatisfied with the settlement of a previous medical malpractice action. Id. The plaintiffs in Muhammad had lost an infant after a botched circumcision, brought suit against their newborn's doctors, and subsequently settled the suit for just $26,500. The Muhammads later sued their counsel in the medical malpractice action, alleging that their former attorneys' negligence caused the Muhammads to accept this low settlement offer.

The Court determined that dissatisfied plaintiffs may not sue their attorneys for malpractice "following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the action." Id. at547. This has remained the rule in Pennsylvania for three decades, in line with Pennsylvania's longstanding public policy encouraging settlement.

The Khalil Decision

The recent Khalil decision upheld the Muhammad doctrine but issued a strong signal that this may be changed in the near future. In a Majority opinion written by Justice Debra Todd, the Pennsylvania Supreme Court held that Appellant Dr. Ahlam Khalil's claims against her former attorneys are not barred by Muhammad. In allegations stemming from litigation over a flood in Khalil's condo, Khalil claimed that her attorneys in that litigation were negligent in allowing her to enter into a settlement in one case that precluded her counterclaims in a second, separate case, and in explicitly advising her that settlement in the first case would not affect her counterclaims in the second. Reversing the Superior Court's dismissal of Khalil's claims against her attorneys, the Majority...