New Jersey: Litigation Privilege Does Not Apply to Legal Malpractice Claims
The New Jersey Superior Court, Appellate Division determined that the litigation privilege does not protect an attorney from claims by a client based upon statements made during the course of litigation where it is alleged the attorney breached his duty to the client by failing to adhere to acceptable standards of legal practice. The issue initially arose from a botched bankruptcy and the legal malpractice action that followed. The attorney's professional liability insurer hired defense counsel to defend the claims. In the course of this litigation, the defense attorney submitted a memo to the insurer requesting authorization to settle which stated that letters between the clients and the attorney amounted to an admission of bankruptcy fraud. This action caused the insurer to deny coverage due to policy exclusions for fraudulent or criminal acts. Following, the insured attorney brought suit against the insurer and defense counsel alleging legal malpractice among other claims. The trial court dismissed the claims as falling under the litigation privilege because they were based on the settlement memo. The Appellate Division reversed this decision, holding that the litigation privilege does not protect an attorney from client's claims that the attorney's representation did not adhere to acceptable standards of legal practice.