Defense Digest

Suit Within A Suit:  Methodology Not Always Required to Prove Legal Malpractice in New Jersey

On April 12, 2004, the Supreme Court of New Jersey held in Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343 (2002), that it is not always necessary for plaintiffs in a legal malpractice case to follow the "suit within a suit" format in order to prove their case. The Court acknowledged that this format, in which the plaintiff presents the evidence that would have been submitted at trial had no malpractice occurred, is the one regularly employed in most jurisdictions, including New Jersey. Nonetheless, the Court found that it has shortcomings that have created a need for alternative approaches and that courts must show a "measure of willingness" to accept such alternatives when the situation demands.

On a rainy night in 1992, Karen Garcia was injured in a multi-vehicle pileup that began with a car accident between Carol Ertel and Emily Forman. On November 1, 1993, the law firm of Kozlov, Seaton, Romanini & Brooks filed a Complaint on behalf of Garcia that inexplicably omitted Ertel as a defendant. The law firm later withdrew after discovering a conflict of interest and referred the matter to attorney Michael Gentlesk, who was then retained by the plaintiff. Gentlesk then moved to amend the complaint to add Ertel as a defendant. The court granted the motion, but Ertel then successfully moved for summary judgment based on the applicable statute of limitations. Garcia later settled her claims against the remaining defendants for $87,000. She subsequently filed a complaint for malpractice against the Kozlov firm in which she alleged that the firm's negligence in failing to name Ertel as a defendant caused her to settle the matter for less than its worth.

After jury selection in the legal malpractice action, the trial court was presented with motions from both parties. Garcia argued that she should have to right to present expert testimony regarding the settlement reached, as well as direct evidence regarding her case. The Kozlov firm responded that the case should be tried solely as a "suit within a suit" and that such expert testimony should be barred. The court granted Garcia's motion and denied that of the Kozlov firm.

At trial, Garcia and three other witnesses testified regarding her medical condition as a result of the accident. Gentlesk also testified that he estimated the full value of Garcia's claim to be around $200,000. When Garcia received the settlement offer of $87,000, Gentlesk recommended accepting it. He testified that he did so because the absence of Ertel as a defendant gave the remaining defendants "leverage" at trial and because they had indicated to him that their defense would be to blame Ertel for causing the accident. Gentlesk further testified that he would probably not have recommended the $87,000 settlement had Ertel been a defendant in the case.

A malpractice expert also testified that the Kozlov firm had deviated from the standard of care when it failed to sue Ertel within the statute of limitations. He also testified that this negligence, along with New Jersey's comparative negligence statute, hampered Garcia's ability to fully recover for her injuries. According to his testimony, without Ertel, Garcia could not fairly argue that she was less negligent than the other defendants. This omission also hurt Garcia's case in that it allowed the remaining defendants to assert an "empty chair" defense.

The trial court put two questions to the jury for consideration. For one, the jury was to make a determination of whether the Kozlov firm was a proximate cause of Garcia's loss. The second asked for the reasonable value of her claim at the time of settlement in 1996. The jury answered the first question in the affirmative and then set the reasonable settlement value of Garcia's claim at $225,000. Based on these findings, the trial court molded the verdict and awarded Garcia $92,460 in actual damages plus pre-judgment interest.

The Kozlov firm appealed and argued, among other things, that the decision violated the conventional "suit within a suit" method of trying a legal malpractice matter. The Appellate Court ruled in favor of the Kozlov firm. The court did recognize that the mode of deciding a legal malpractice action is within the discretion of the trial court. In this matter, however, the court found that this discretion was abused because the complex nature of the case mandated the "suit within a suit" methodology.

Garcia appealed. The New Jersey Supreme Court recognized that the "suit within a suit" method is the most common way to prove a legal malpractice case. But the Court found that this method has shortcomings. Certain factors, such as the passage of time, should be considered when determining how to proceed. The Court also found that in this matter Garcia was entitled to present expert testimony to explain the reason for the settlement in the underlying matter.

This case is significant in that it brings to light circumstances in which courts are willing to evaluate a legal malpractice case outside of the traditional and accepted "suit within a suit" methodology. It is important for carriers to realize that plaintiffs in New Jersey now have more than one way of proving these claims. Courts have flexibility in these matters and, in certain circumstances, can have an expert testify about such things as the reasonableness of an underlying settlement.

*Kara is an associate in our Cherry Hill, New Jersey office. She can be reached at (856) 414-414-6305 or kpullman@mdwcg.com.