Wood v. McGrath, North, Mullin & Kratz, P.C.

Timothy Pugh, an attorney with McGrath, North, Mullin & Kratz, P.C. (McGrath) (defendant), represented Beverly Wood (plaintiff) in her divorce settlement. When Pugh presented the proposed settlement terms, he did not inform Wood the law was unsettled about (1) whether unvested stock options could be included in the marital estate, and (2) whether unvested stock options were valued with or without first deducting possible capital-gains taxes. The proposed settlement terms excluded Wood’s husband’s unvested stock options from the marital estate. Pugh did not discuss alternative settlement terms and did not discuss the potential outcomes at trial. Wood signed the settlement agreement. Subsequently, Wood brought a legal-malpractice suit against McGrath, claiming Pugh negligently represented her because Pugh failed to inform her about the unsettled law regarding unvested stock options. Wood testified she would not have signed the settlement agreement had she known about the unsettled law and her associated range of potential outcomes at trial. At trial in the malpractice action, the trial court granted McGrath’s motion for a directed verdict. Wood appealed, and the court of appeals affirmed, holding the judgmental-immunity doctrine applied to shield Pugh from liability for his omissions related to the unsettled areas of law, and that Pugh was not required to advise Wood about unsettled law related to the settlement. Wood appealed, arguing the doctrine of judgmental immunity should not apply and that Pugh had a duty to inform her there was unsettled law relevant to the terms of the settlement proposal, especially because the settlement terms as written resolved the unsettled law against her and a trial judge could have ruled to the contrary in her favor.