Legal Malpractice - Monterey County, California. October, 2005;
Confidential Settlement: $450,000.

The underlying case involved property rights between two neighbors in Santa Cruz County. Defendants were two law firms that represented one side of the dispute. One of the law firms was brought in under the property owner’s insurance policy, the other firm was private counsel. The underlying litigation involved disputed rights in a road easement, a well easement and an equestrian easement. It was a case that was hotly, even bitterly contested.

The case was eventually set for a Court ordered Mandatory Settlement Conference which took place over a two day period. At the end of the second day, the parties reached agreement on all issues resulting in a global settlement. Despite the fact that extensive notes were kept by all the attorneys, and despite an avowed concern by one of the client’s lawyers that the other side might renege on the agreement, the settlement was not reduced to writing for signature of the parties at the Conference, and was not recited on the record. Instead, what transpired was a stipulation that gave the mediator who presided over the settlement conference unprecedented authority to bind the parties to an agreement. The mediator’s authority was supposed to be limited to arbitrate any disputes between the parties relative to the settlement agreements. However, as recited on the record, the mediator was given complete authority to arbitrate “any disputes” that arose. It was the lawyers failure to memorialize the terms of the settlement on the record and their failure to limit the authority of the mediator that formed the basis of the claims of legal malpractice.

Following the settlement conference, the opposing side did, indeed, renege on the agreement (or claimed their recollection of the agreed upon terms was different) which resulted in the two sides having to go through a complicated and unusual mediation/arbitration process which eventually resulted in the former mediator (now arbitrator) rendering a binding award against the client; an award significantly less favorable that what had been agreed upon. The principal damage was in the loss of the full equestrian easement which reduced the value of the property for development purposes.

Defendants claimed that the decision not to put the settlement on the record was a tactical decision and therefore not actionable as negligence. They also claimed that the client understood the agreement needed to be drafted, and consented to the appointment of the mediator as a binding arbitrator. The lawyers also defended on the basis that the settlement imposed on the client was actually better than the settlement agreed upon, and that the loss of the easement didn’t damage the client because the easement he had originally claimed would have been unenforceable in any case.

The case settled approximately two weeks before trial by the payment by both law firms of a combined $375,000 and the forgiveness by one of the law firms of $80,000 in claimed legal fees.