On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Essex County, L-3356-97.
Before Judges Kestin, Eichen and Fall.
The opinion of the court was delivered by: Kestin, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
In this Law Division action involving a complaint for legal fees and costs and a counterclaim for malpractice, defendant appeals from the trial court's orders granting plaintiff's summary judgment motion for dismissal of the malpractice counterclaim and denying reconsideration. We reverse and remand.
This litigation grows out of a divorce proceeding between defendant and her former husband. Plaintiff was defendant's initial attorney in the matrimonial action, beginning in 1994.
In July 1996, plaintiff negotiated a settlement of the matrimonial matter despite only limited discovery of the husband's assets. Plaintiff recommended that defendant enter into the agreement. According to defendant, she evinced her acceptance of"some but not all of the terms," and plaintiff notified the court that the matter was settled. When the putative settlement was reduced to writing, defendant consulted with another lawyer, who advised her that the terms were unfavorable. Defendant then refused to participate in formalizing the settlement agreement. By September 1996, she had discharged plaintiff and had retained new counsel in the divorce litigation.
The husband moved to enforce the settlement, and a lengthy period followed while the parties prepared for a plenary hearing addressing the enforceability of the terms. During that period, plaintiff filed this action against defendant to collect unpaid legal fees, and defendant responded with her counterclaim for legal malpractice. The gravamen of the malpractice claim was that plaintiff had negligently advised defendant to enter into the settlement without first conducting adequate discovery regarding marital assets and"without properly informing [defendant] of the shortcomings of this proposed settlement and obtaining from [defendant] complete authority to enter into it." On defendant's motion, the fee dispute/legal malpractice action was stayed pending resolution of the divorce litigation. In making that motion, counsel had represented that his adversaries consented to the stay.
In 1998, during a plenary hearing in the Family Part on the settlement enforcement motion, defendant agreed to settle the divorce litigation for slightly more than she would have obtained under the earlier purported settlement. Defendant maintained that she did so because her new counsel informed her that the matrimonial judge had intimated to counsel that he was inclined to uphold the prior settlement as binding.
Thereafter, in this action, the Law Division granted plaintiff's motion for summary judgment on defendant's counterclaim, on the basis that defendant was precluded from pursuing her malpractice claim because she had entered into the second settlement in the divorce action. The Law Division judge also ruled that defendant was judicially estopped from maintaining her legal malpractice claim because, in seeking and obtaining the stay of trial on the fee dispute and malpractice claims pending resolution of the matrimonial matter, defendant's malpractice counsel had certified that the malpractice action"will be" rendered"moot" if defendant were to prevail on her husband's motion to enforce the first settlement. Defendant challenges these rulings on appeal after plaintiff's claim for fees and costs was settled and the matter concluded by a final order entered in the Law Division.
The 1998 Family Part hearing on the settlement enforcement application had progressed for six days when defendant was to begin the presentation of her proofs in opposition. At that juncture, the matrimonial parties, on the record, entered into the second settlement. Under the earlier terms, inter alia, defendant was to receive $100,000 annually in alimony for five years, equitable distribution of $1.5 million in cash, $100,000 from the husband's profit-sharing plan, and the marital home; she had waived any claim for amounts attributable to the husband's patents and business interests, as well as other property he owned, which, she contended, were worth many millions in the aggregate; and provision was made for support of the parties' children and their college expenses. The second settlement's new terms provided that defendant would receive an additional $100,000 IRA distribution and an additional $8,000 per year in alimony for the five-year term, with all of the alimony taxable to the former husband rather than to defendant.
Our review of the record discloses that the Law Division judge erred in dismissing defendant's counterclaim on the ground that defendant's legal malpractice claim was precluded because defendant had entered into the second settlement ending the divorce litigation. The flaws were in the judge's determination that defendant had an obligation to await the matrimonial judge's decision on the settlement enforcement application, as well as in the judge's reasoning that defendant's voluntary entry into the second settlement precluded a malpractice claim because to permit such a claim after the settlement would contravene"the spirit and the intent of what the professional malpractice [action] is all about."
The Law Division judge cited no authority in support of these rulings and we are unable to locate any that imposes on defendant the duties announced. To the contrary, such case law as exists suggests otherwise.
In Ziegelheim v. Apollo, 128 N.J. 250, 258 (1992), the client brought a legal malpractice action against her divorce attorney based upon the attorney's advice that she enter into a settlement agreement ending the divorce litigation. The attorney's motion for summary judgment was granted, the court noting that the client had stated on the record in the divorce action that she thought the settlement agreement was"fair." Id. at 257-60. We affirmed the dismissal of all but one of the five counts of the malpractice complaint. Id. at 260.
The Supreme Court reversed, and remanded the matter for trial on all counts of the complaint. Id. at 260-67. The Court noted New Jersey's judicial policy encouraging settlements, but held that the policy did not stand as a barrier to legal malpractice actions ...