The Connecticut Grievance Committee rejected a settlement that would have found a lawyer guilty of failing to document legal transactions Friday — the most recent development in a 2003 medical malpractice lawsuit that led to the winning party suing their lawyers for malpractice.

The committee held a public hearing in the Hartford Superior Court Feb. 4 between the state of Connecticut, Howard Altschuler — the legal malpractice lawyer now representing Dominic and Cathy D’Attilo, who won $25 million after their son was injured in childbirth — and Kathleen Nastri, one of the D’Attilos’ attorneys at the firm Koskoff Koskoff & Bieder. Although Altschuler originally charged two different law firms with 16 different violations, a Fairfield judicial grievance panel, which first heard the case, only escalated one of the violations to the Grievance Committee. But following Thursday’s hearing, the settlement proposed by state disciplinary officer Karyl Carrasquilla was rejected. The Grievance Committee decided to neither absolve nor condemn Nastri of improper documentation. Instead, the case will go to another public hearing, this time involving the submission of evidence, testifying witnesses and cross-examination.

The committee did not list reasons for rejecting the settlement, as is procedure in such decisions.

Altschuler, a legal defender of clients who believe their lawyers have exploited them, said in a press release that Koskoff Koskoff & Bieder failed to account for $600,000 in legal expenses. However, Koskoff’s lawyers said the legal expenses were fully documented, though paper receipts were not kept. The law firm has presented around $635,000 in cancelled checks as evidence — proving money had changed hands -— and is expected to present them again in the next hearing.

“We thought the proposed resolution was fair and we look forward to a full hearing,” said the defendants’ attorney Anthony Nuzzo, a managing partner at Nuzzo & Roberts.

A statement released earlier this month by Koskoff Koskoff & Bieder Managing Partner James Horwitz said the firm was proud of the work done by their attorneys on the D’Attilo case, including Nastri’s.

“Over the course of the two trials and nine years that we helped the D’Attilo family win their case, our office laid out $635,000 in expenditures, which an independent audit of our cancelled checks confirms and which no one disputes,” Horwitz said. “Unfortunately, after the case was settled, the paper receipts for that money were not retained as required for businesses in Connecticut. We regret and take responsibility for this clerical error.”

A press release from Altschuler stated that Nastri could now face suspension or disbarment on charges of professional misconduct. This is because the violation of the American Bar Association Professional Rule 8.4 previously filed against Nastri can be punished with disbarment.

But the professional misconduct charge against Nastri was formerly discarded by a lower committee and was not in question at last week’s hearing.

“It’s unclear what will be on the line,” Altschuler said, adding that the Hartford ethics committee has the ultimate power to decide punishment.

This is not simply a question of legal malpractice in the D’Attilo case, Altschuler said, but has implications for Connecticut’s entire legal justice system. Altschuler said he filed a writ of mandamus — a court order to an inferior court that seeks to correct past government action — against the Office of Chief Disciplinary Counsel in order to highlight problems with the grievance committee procedure. He hopes the system will be changed to create safeguards for complainants.

Altschuler called the proposed settlement “an unfortunate and unjustified sweetheart deal that was made by the Office of Chief Disciplinary Counsel,” adding that he still has significant concerns about the state’s grievance process.

According to an 1997 article in The Daily Pennsylvanian, Altschuler sued his alma mater, the University of Pennsylvania Law School, after his professor gave him a failing grade in her class after he refused to defend an issue to which he found himself morally opposed.

Correction, Feb. 15: A previous version of this article misidentified the Fairfield judicial grievance panel as the New Haven Superior Court. The headline also inaccurately referred to the settlement as relating to malpractice, when in fact it was an ethical grievance. The article also inaccurately explained why Altschuler received a failing grade in a University of Pennsylvania course.