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Arbitration Eligible

Goodwin v. Donahue Hagan Klein Newsome & O'Donnell (A-3476-10T2, 2011 WL 6845888 (N.J. Super. App. Div. 2011)) is a super settlement case. It is a New Jersey case which aims to set the boundaries of what sort of actions rise to the level of legal malpractice. The attorney relationship revolves around a divorce action filed by the plaintiff Matthew Goodwin against the defendant Edward O'Donnell, a member of the firm named in the case.

On October 31, 2006, Goodwin filed a divorce complaint. On July 31, 2007, the plaintiff executed a retainer agreement with O'Donnell, the named attorney. The retainer agreement outlined the scope of representation in Goodwin's divorce proceedings. The case was scheduled for trial on April 24, 2008.

When the day of trial arrived, O'Donnell, the attorney, recommended the plaintiff used arbitration. He recommended this route of settlement because it would be quicker and cheaper than carrying on a full-scale trial. After the recommendation by O'Donnell, the parties agreed to the terms of arbitration, and costs of arbitration. The Family Court judge signed an order on that day, and the case was diverted for arbitration.

The plaintiff retained new counsel prior to the arbitration, on October 9, 2008. At this point, O'Donnell no longer represented Goodwin in the arbitration matter. The arbitration concluded on July 21, 2009. On September 1, 2009, following dissatisfaction with the result of arbitration, Goodwin filed a malpractice issue against O'Donnell, his original attorney. Goodwin alleged that arbitration was neither cheaper nor quicker, and in fact had cost him an additional $200,000.

The trial court ruled in favor of the defendant O'Donnell at the initial hearing. Their decision was based on various factors. They considered the length of time the case took to proceed through arbitration as a matter outside of the control of the defendant. When the issue of the representations made concerning length and cost were broached, the court noted that arbitration is generally favored by public policy, and is generally cheaper, and quicker. Finally the trial court made a statement which every practitioner should take to heart.

"When all is said and done, the advice was appropriate. Whether or not the advice worked out as intended does not create an issue of legal malpractice. The question is whether or not under the circumstances the lawyer gave the client reasonable advice. "

The advice was not unreasonable because of some client tax issues, and the defendant firm was also fired. Based on these factors the trial court ruled in favor of the attorneys.

The Superior Court, upon review, also found in favor of the law firm, based primarily on the same reasoning. They did expand somewhat on the language used by the trial court. As many other courts have noted legal malpractice requires 3 elements; the existing of an attorney-client relationship creating a duty of care upon the attorney, the breach of that duty, and proximate causation of harm due to that breach. The court focused then on the fact that attorneys sometimes make strategic decision which do not positively affect the outcome for their clients, and in fact may fail. However, the question remains whether the strategy was reasonable. In this case especially, the Court felt, there was no legal duty for the attorneys to refrain from recommending arbitration, because the State strongly promotes use of arbitration in matrimonial matters. The Court felt that no reasonable jury could believe there was a breach of duty by the attorney in recommending arbitration as speedier and less expensive. There was also the lack of a connection between recommending arbitration and actual harm suffered by the client. Finally, the attorney who recommended arbitration had been released 9 months prior to the actual hearing, and thus had no control over the final results.

This case is important given the growing emphasis placed on arbitration. It is often speedier, and cheaper to use arbitration, and thus a reasonable strategy. If a client is unhappy with the representation provided during arbitration, that case may still be viable. However, if an attorney is hired and fired long before arbitration begins, it seems that courts will be hesitant to impose any liability for legal malpractice on the attorneys who recommend arbitration in the first place. Whether this case will apply outside of matrimonial matters is unclear, but given the number of divorce proceedings a year, it is still important in that context.

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