## Facts

- Beverly J. Wood hired attorney Timothy J. Pugh of McGrath, North, Mullin & Kratz, P.C. to represent her in a divorce.
- The divorce ended in a negotiated settlement and decree dividing a marital estate that included Werner Enterprises stock and the husband’s unvested stock options.
- Wood later sued the firm for legal malpractice, alleging negligent settlement advice and disclosure failures regarding two legal issues:
  - whether unvested stock options could be included in the marital estate, and
  - whether the Werner stock should be valued without reducing it for potential capital gains taxes.
- Wood alleged the settlement excluded any share of the unvested stock options and reduced the marital estate by roughly $210,489 for potential capital gains taxes, even though legal authority indicated a court could treat both issues more favorably to her.
- Wood testified Pugh told her she would receive 40% of the marital estate and that a judge might award 35% to 50%, but he did not explain alternatives, recommend rejecting the settlement, or disclose that the governing law on the two issues was unsettled and resolved against her in the settlement.
- Wood presented expert testimony that the standard of care required informing a client about material unsettled legal issues affecting settlement choices.
- After Wood rested in the malpractice trial, the trial court directed a verdict for the firm on the stock-options and stock-valuation issues; the court of appeals affirmed on the ground of judgmental immunity.

## Issues

1. Whether judgmental immunity bars a legal-malpractice claim when the alleged negligence is failing to inform a client that legal issues material to a settlement are unsettled and that the settlement resolves those issues against the client.
2. Whether Wood presented sufficient evidence to submit to a jury the question of breach of the standard of care relating to advice and disclosure in settlement negotiations.

## Decision

- The Nebraska Supreme Court reversed the court of appeals and the directed verdict.
- The court held judgmental immunity does not apply to an attorney’s failure to inform a client of unsettled legal issues relevant to a settlement agreement.
- The court remanded for a new trial so a jury could decide whether the attorney’s omissions breached the professional standard of care.

## Legal Principles

- Judgmental immunity may protect reasonable, good-faith professional judgments made in areas of unsettled law, but it does not excuse nondisclosure of material legal uncertainty to the client.
- Attorneys owe a duty to use the same degree of care, skill, and diligence in advising about settlements as in other representation, including communicating material legal risks and options.
- Because the client controls the decision to settle or proceed to trial, the attorney must provide information necessary for an informed decision, including significant unsettled legal issues that could change the client’s evaluation of settlement versus litigation.
- When evidence supports that an attorney did not disclose material unsettled issues and experts testify that such nondisclosure falls below the standard of care, the question of negligence is generally for the jury rather than resolution by directed verdict.

## Conclusion

The Nebraska Supreme Court ruled that an attorney cannot invoke judgmental immunity to avoid malpractice liability for failing to disclose material unsettled law affecting a client’s settlement decision, and it ordered a new trial to allow a jury to determine whether the nondisclosure constituted negligence.


Wood v. McGrath, North, Mullin & Kratz, P.C., 589 N.W.2d 103 (Neb. 1999)