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By: Patrick Cosgrove and Kayla Panek
Pennsylvania has long been an outlier amongst jurisdictions in holding that clients cannot sue their attorney for legal malpractice after voluntarily agreeing to a settlement. A recent concurring opinion by a Pennsylvania Supreme Court Justice in Khalil v. Williams, et al. (July 20, 2022) suggests that it is only a matter of time before attorneys can no longer rely on this defense to a legal malpractice claim.
The Muhammad Decision
In 1991, the Supreme Court of Pennsylvania created what is known as the Muhammad doctrine, which prohibits an attorney’s clients from bringing non-fraud legal malpractice claims if the client voluntarily agreed to a settlement. Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 526 Pa. 541 (1991). In Muhammad, former clients of the defendant law firm sued their former attorneys for legal malpractice because the clients were dissatisfied with the settlement of a previous medical malpractice action. Id. The plaintiffs in Muhammad had lost an infant after a botched circumcision, brought suit against their newborn’s doctors, and subsequently settled the suit for just $26,500. The Muhammads later sued their counsel in the medical malpractice action, alleging that their former attorneys’ negligence caused the Muhammads to accept this low settlement offer.
The Court determined that dissatisfied plaintiffs may not sue their attorneys for malpractice “following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the action.” Id. at 547. This has remained the rule in Pennsylvania for three decades, in line with Pennsylvania’s longstanding public policy encouraging settlement.
The Khalil Decision
The recent Khalil decision upheld the Muhammad doctrine but issued a strong signal that this may be changed in the near future. In a Majority opinion written by Justice Debra Todd, the Pennsylvania Supreme Court held that Appellant Dr. Ahlam Khalil’s claims against her former attorneys are not barred by Muhammad. In allegations stemming from litigation over a flood in Khalil’s condo, Khalil claimed that her attorneys in that litigation were negligent in allowing her to enter into a settlement in one case that precluded her counterclaims in a second, separate case, and in explicitly advising her that settlement in the first case would not affect her counterclaims in the second. Reversing the Superior Court’s dismissal of Khalil’s claims against her attorneys, the Majority applied an exception to the to the Muhammad doctrine: Muhammad is inapplicable where a plaintiff’s claim is not based on the amount of a settlement, but on the attorney’s failure to advise the client of the consequences of entering the settlement. See McMahon v. Shea, 688 A.2d 1179 (Pa. 1997); Collas v. Garnick, 624 A.2d 117 (Pa. Super. 1993).
While the Pennsylvania Supreme Court did not explicitly overrule Muhammad, a concurring opinion penned by Justice David Wecht suggests a future change in course. Justice Wecht agreed with the majority that the trial court had erred in dismissing Khalil’s fraud and negligence claims against her attorneys, but minced no words in expressing his views on Muhammad: “Unlike the Majority, however, I would overturn this Court’s deeply flawed decision in [Muhammad v. Strassburger]. It is high time that we overrule that unfortunate precedent.”
Justice Wecht’s concurrence takes issue with the idea that Muhammad reflects good public policy. He argues that “the Muhammad rule does not encourage settlements in any meaningful way,” but “it does protect negligent attorneys from civil liability.” Justice Wecht bluntly refutes the Muhammad Court’s argument that allowing malpractice suits against settlement counsel would back up the courts, writing, “this Court reached the unbelievable conclusion that it had to kick some litigants out of court in order to ensure that no litigants are denied prompt access to the courts.” He even takes issue with the terminology used to describe these litigants, indicating that referring to them as “dissatisfied” or “disgruntled” indicates a bias against them. The concurrence is a scathing rebuke of what Justice Wecht refers to as “a true national outlier” of a precedent: “You can search from coast to coast, but you will not find another state where they kick legal malpractice plaintiffs out of court and call it ‘public policy.’”
The Wecht concurrence is a comprehensive counterargument to the application of the Muhammad doctrine and its original public policy justification. Although Muhammad remains the precedent, Justice Wecht’s position is ripe for future courts to take up when they are inevitably presented with a new iteration of these legal malpractice claims. It may only be a matter of time before Pennsylvania’s Muhammad doctrine is history.
Practically speaking, attorneys should no longer rely on the Muhammad doctrine as a defense to a legal malpractice claim when advising clients during the settlement process. Attorneys should take special care to advise the client throughout the settlement process and confirm in writing that the client understands the risks and benefits to the settlement so that the client cannot later claim ignorance if they second guess their settlement decision.
The case is Khalil v. Williams, et al., No. No. 24 EAP 2021, 2022 WL 2824672 (Pa. July 20, 2022).
For more information on this topic please contact Patrick Cosgrove or Kayla Panek. Stay up to date on our latest thought leadership by subscribing to our newsletter here.