Tags: Property, Easement by necessity
Beverly J. Wood sued McGrath, North, Mullin & Kratz, P.C. for legal malpractice, claiming that her attorney, Timothy J. Pugh, negligently represented her in a dissolution action by allowing her to accept less than her share of the marital estate. Wood alleged that Pugh failed to inform her of several important issues related to the settlement. The Nebraska Court of Appeals initially ruled in favor of Pugh, but the decision was later reversed by the majority opinion, which concluded that judgmental immunity does not apply to an attorney's failure to inform a client of unsettled legal issues. During the trial, two expert witnesses testified for Wood, stating that Pugh breached the standard of care by not providing Wood with sufficient information on the unvested stock options and capital gains tax issues. The court sustained a directed verdict on the issues of stock valuation and exclusion of unvested stock options at the close of Wood's evidence. Wood appealed the trial court's decision to grant a directed verdict, arguing that Pugh breached the standard of care by not properly advising her on the settlement agreement. The Court of Appeals applied the judgmental immunity rule, concluding that Pugh's acts and omissions were not negligent as a matter of law. Wood argues that judgmental immunity does not apply to Pugh's failure to inform her about the law on unvested stock options and capital gains tax deductions, and that a trial judge might have resolved those issues in her favor. McGrath argues that judgmental immunity applies to an attorney's decision regarding unsettled law.
Attorneys are not liable for errors in judgment on unsettled points of law, but they must advise clients on settlements with the same skill and diligence as other legal tasks. Lawyers must make their best efforts to ensure clients are informed of relevant considerations before making a decision to settle. Negligence in failing to inform a client of unsettled legal issues does not provide immunity from suit. In the current case, Pugh had no case law from the relevant jurisdiction to support the settlement agreement's determinations on unvested employee stock options or capital gains tax issues.
The Davis court's judgmental immunity rule for an attorney's failure to inform a client of unsettled legal issues relevant to a settlement is flawed because it places the burden of assessing risk on the attorney rather than the client. Negligence is determined by whether the attorney exercised the same skill, knowledge, and diligence as attorneys of ordinary skill and capacity commonly possess and exercise in the performance of all other legal tasks. The Court of Appeals erred in deciding that Pugh was not negligent in failing to inform Wood about the uncertain legal status of unvested stock options in a marital estate. The decision is overturned, and the case is sent back to the Court of Appeals with instructions to return it to the district court for a new trial.
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