## Facts

- Joseph M. Guido, majority shareholder and board chairman of Allstates Worldcargo, Inc., sued Allstates and others in 2004 over corporate-governance disputes.
- Before settlement discussions in the first action, a Duane Morris partner advised Guido not to accept any agreement limiting his rights as majority shareholder and to protect stock value.
- After the first matter failed to settle in writing and litigation continued, Guido filed a second action in February 2005 seeking injunctive relief.
- The second action was mediated and settled; the settlement included restrictions on Guido’s majority-shareholder rights that he later alleged were contrary to competent legal advice.
- At an April 5, 2005 hearing, with Duane Morris attorneys present, the settlement terms were placed on the record and Guido acknowledged and accepted them.
- Guido and his wife sued Duane Morris LLP and two attorneys for legal malpractice, alleging negligent advice and representation caused Guido to enter an unfavorable settlement.
- Guido did not seek to vacate, rescind, or repudiate the settlement in the underlying corporate litigation.

## Issues

1. Whether a malpractice plaintiff who settled an underlying case must first move to vacate or repudiate that settlement before pursuing a legal malpractice action based on allegedly negligent settlement advice.
2. Whether on-the-record acceptance of a settlement’s terms and fairness categorically precludes a later malpractice claim arising from the settlement.

## Decision

- The Supreme Court of New Jersey affirmed the order permitting the malpractice action to proceed.
- The Court held that a legal malpractice plaintiff need not first seek to vacate the underlying settlement and may sue counsel directly for negligent advice that led to the settlement.
- The Court rejected reading prior precedent as creating a blanket settlement-vacatur prerequisite or an automatic bar based solely on settlement colloquy statements.
- The Court left the merits—breach of duty and causation—to later fact-finding, applying summary-judgment standards favoring the non-movant.

## Legal Principles

- A client may pursue a legal malpractice claim alleging negligent advice culminating in a settlement without first attempting to undo the settlement.
- A settlement and a client’s on-the-record assent do not, by themselves, categorically bar malpractice claims; any preclusion depends on the specific equities and the nature of the client’s representations.
- Prior case law barring some post-settlement malpractice claims is limited to circumstances involving an unconditional declaration that the settlement was fair and reasonable such that later litigation would be inequitable.

## Conclusion

The court allowed Guido’s malpractice claim to proceed, holding that settling an underlying case does not require a plaintiff to first vacate the settlement before suing counsel for negligent advice leading to that settlement, and that any bar based on settlement acceptance depends on the case-specific circumstances rather than a categorical rule.


Guido v. Duane Morris LLP, 202 N.J. 79, 995 A.2d 844 (2010)