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Puder v. Buechel

June 7, 2005; as amended June 8, 2005

VIRGINIA B. PUDER, ESQ., PLAINTIFF-APPELLANT,
v.
KATHLEEN BUECHEL, DEFENDANT-RESPONDENT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 362 N.J. Super. 479 (2003).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In August 1994, Kathleen Buechel retained Virginia B. Puder, Esq., to represent her in a divorce action against Dr. Frederick Buechel, her husband of nine years. Puder filed a divorce complaint and the parties unsuccessfully attempted mediation. In April 1996, the parties and their counsel appeared before a court-appointed Early Settlement Panel (ESP). Dr. Buechel's attorney incorporated the panel's recommendation into a proposed settlement agreement, but Mrs. Buechel rejected the offer. By mid-July 1996, with an August trial date looming, Puder was able to negotiate an oral proposed settlement agreement that she deemed more favorable to Mrs. Buechel than the earlier ESP-generated proposal. Despite having conducted only limited discovery of Dr. Buechel's assets, Puder recommended that Mrs. Buechel accept the oral settlement and Mrs. Buechel subsequently authorized Puder to do so. After the trial court was advised of the settlement, and while the attorneys finalized the details, Mrs. Buechel, changed her mind about the settlement, finding it to be inadequate, discharged Puder, and retained new counsel, Neil S. Braun, Esq., to represent her in the divorce.

Dr. Buechel moved to enforce the settlement agreement. The trial court ordered that a plenary hearing be conducted to determine whether the parties had reached a binding agreement, and, if so, whether the agreement was enforceable. In March 1997, while the hearing was still pending, Puder sued Mrs. Buechel for unpaid legal fees and costs associated with her divorce representation. Mrs. Buechel filed an answer and counterclaim, alleging that Puder committed legal malpractice by negotiating an inadequate settlement based on insufficient income and asset information. In addition, Mrs. Buechel alleged that Puder failed to obtain her consent before accepting the settlement on her behalf.

In June 1998, the trial court held a plenary hearing to determine whether the parties had reached a binding settlement agreement, and, if so, whether the agreement was enforceable. After six days of testimony, Braun informed the court that Mrs. Buechel had agreed to settle the divorce. The new settlement was substantially similar to the disputed settlement, with the principal difference being that the new settlement provided Mrs. Buechel with an additional $100,000 IRA distribution and $8,000 more per year in alimony with all alimony payments now taxable to Dr. Buechel. On June 30, Mrs. Buechel testified before the trial court that the agreement was acceptable to her and that she entered into it voluntarily. Mrs. Buechel also testified that she was only agreeing to the settlement because she believed that the trial court would find the first settlement enforceable and because it was her understanding that the second settlement would not affect the status of her malpractice claim against Puder. The trial court ruled that Mrs. Buechel knowingly and voluntarily entered into the second settlement agreement with Dr. Buechel and granted a judgment of divorce to Mrs. Buechel. The trial judge did not comment on Mrs. Beuchel's testimony in respect of the effect of the second settlement agreement on the malpractice claim.

In January 2001, before a different judge, Puder moved for summary judgment on the legal malpractice counterclaim, arguing that Mrs. Buechel waived her right to sue Puder by entering into the second settlement before the validity of the first settlement was determined. The court agreed and granted the motion on that ground and on judicial estoppel principles. The court based its decision on the certification filed in support of Mrs. Buechel's motion to stay the malpractice claim, which stated that the claim would be "rendered moot" if Mrs. Buechel prevailed in the matrimonial action. Mrs. Buechel's motion for reconsideration was denied.

In a published opinion, the Appellate Division reversed and remanded, holding that the trial court erred in dismissing Mrs. Buechel's malpractice counterclaim. The Appellate Division concluded that clients clearly have a right to bring legal malpractice actions stemming from divorce litigation even where settlement has been reached. In addition, the Appellate Division rejected the trial court's application of the judicial estoppel doctrine.

We initially denied Puder's Petition for Certification, but granted certification upon reconsideration. The Court also granted amicus curiae status to the New Jersey Bar Association.

HELD: Mrs. Buechel is bound by her testimony before the trial court concerning the acceptability and fairness of the divorce settlement agreement. Those representations demonstrate that Mrs. Buechel resolved her divorce in a manner that was satisfactory to her, precluding her from bringing a malpractice claim against Puder.

1. Our courts have actively encouraged litigants to settle their disputes. Advancing that public policy is imperative in the family courts where matrimonial proceedings have increasingly overwhelmed the docket. Mrs. Buechel's responses to the trial court's inquiries as to her acceptance of the second agreement demonstrate that she bargained for, and received, what she believed was an equitable distribution of the marital estate. Thus, any alleged deficiency resulting from the first settlement was ameliorated by the second settlement that she deemed to be fair and equitable. It would contravene principles of fairness and our policy in favor of encouraging conclusive settlements in matrimonial cases to allow Mrs. Buechel to now pursue her attorney for greater monetary gain. She is bound by her calculated decision to resolve the dissolution of her marriage by accepting her former spouse's settlement offer, a settlement she approved in open court. (Pp. 13-15)

2. The Appellate Division agreed that Mrs. Buechel's professed understanding that the trial court would bind her to the first settlement justified her acceptance of the second settlement and her continued pursuit of the malpractice claim against Puder. Despite her self-serving assertions to the contrary, Mrs. Buechel has failed to present sufficient evidence that the trial court intended to bind her to the first settlement. Conclusory and self-serving assertions by one of the parties are insufficient to overcome a summary judgment motion. Neither the Court nor any of our lower courts are bound by what essentially amounts to a private agreement between Mrs. Buechel's matrimonial counsel and her malpractice counsel. Upon consideration of all of the circumstances of this appeal -- including Mrs. Buechel's sworn representation to the trial court that the settlement was "acceptable" and "fair," the public policy in favor of conclusive settlements, and the passage of almost nine years since Puder negotiated the first settlement -- we conclude that Mrs. Buechel is precluded from pursuing this malpractice action. The trial judge, however, should have informed Mrs. Buechel that her reservation would not necessarily preserve her ability to bring future related claims. (Pp. 15-19)

3. Contrary to the Appellate Division's reasoning, our conclusion here does not conflict with Ziegelheim v. Apollo, 128 N.J. 250 (1992). Our holding in Ziegelheim is inapplicable to this appeal because there are profound distinctions, both factual and legal, between the two cases. Here, unlike in Ziegelheim, Mrs. Buechel's claim against Puder was not her only remedy to the alleged malpractice. Mrs. Puder made a calculated decision to accept the second settlement -- one negotiated by a lawyer other than Puder -- before the trial court could decide whether the first agreement was enforceable. The burden of Mrs. Buechel's failed legal strategy rests with her, not Puder, in particular since she entered into the second settlement admittedly aware of the discovery deficiencies leading up to the settlement. Ziegelheim's reasoning discourages malpractice litigation when a court finds that a plaintiff, although well aware that the attorney was negligent, nevertheless testifies under oath that the settlement was both acceptable and fair. (Pp. 19-23)

4. Upon consideration of all of the circumstances of this appeal -- including the public policy that favors conclusive settlements, and the extensive delay in this matter -- we hold that Mrs. Buechel cannot sue Puder for malpractice. Given that Mrs. Buechel's litigation against Puder has lasted almost as long as her marriage to Dr. Buechel, it is time for closure, if not repose. After evaluating the potential unfairness to both parties if the malpractice action were allowed to continue, we find that the scales of equity weigh heavily against Mrs. Buechel's claim. (Pp. 23-24)

The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court for reinstatement of summary judgment in favor of Puder.

JUSTICE WALLACE filed a separate CONCURRING opinion stating that although Mrs. Buechel has a cause of action for legal malpractice against Puder, her complaint was properly dismissed because she essentially satisfied the damages portion of her cause of action when she accepted the second settlement as a fair and equitable distribution of the marital assets.

JUSTICE LONG filed a separate DISSENTING opinion, in which JUSTICE ALBIN joins, stating that to hold Mrs. Buechel to the settlement while denying her right against Puder at this late stage is not an outcome she would consider just.

CHIEF JUSTICE PORITZ and JUSTICES LaVECCHIA and RIVERA-SOTO join in JUSTICE ZAZZALI's opinion. JUSTICE WALLACE filed a separate concurring opinion. JUSTICE LONG filed a separate dissenting opinion, in which JUSTICE ALBIN joins.

The opinion of the court was delivered by: Justice Zazzali

Argued November 29, 2004

In this matter, a matrimonial attorney sued a former client to recover unpaid legal fees arising from her representation of the client in a divorce action. The client responded by filing a malpractice counterclaim against the attorney for negotiating an allegedly inadequate divorce settlement and for failing to obtain informed consent before accepting the settlement on the client's behalf. With the assistance of new counsel, the client then negotiated a second divorce settlement that she deemed "acceptable" and a "fair compromise of the issues." Subsequently, the matrimonial attorney moved for summary judgment on the malpractice counterclaim, arguing that by entering into the second settlement, the client waived her right to sue for malpractice arising from the first settlement. The Law Division granted the motion, but the Appellate Division reversed.

We hold that the client is bound by her representation to the trial court that the settlement was "acceptable" and "fair." Accordingly, we reverse the Appellate Division and remand for reinstatement of summary judgment in favor of the attorney.

I.

In August 1994, respondent Kathleen Buechel retained petitioner Virginia B. Puder, Esq., to represent her in a divorce action against Dr. Frederick Buechel, her husband of nine years. Puder filed a divorce complaint on behalf of defendant about one month later. The parties twice attempted mediation but failed to resolve the matter. In April 1996, the parties and their counsel appeared before a court-appointed Early Settlement Panel. Dr. Buechel's attorney incorporated the panel's recommendation into a proposed settlement agreement, but Mrs. Buechel rejected the offer. Consequently, from April through July 1996, there were numerous conferences and telephone discussions between counsel and the parties for the purpose of settlement.

The predominant dispute was over the accurate valuation and equitable distribution of several lucrative patents held by Dr. Buechel, an orthopedic surgeon. Mrs. Buechel argued that the patents were worth millions of dollars, evidenced by Dr. Buechel's income rising from $80,000 at the beginning of their marriage to about $4 million in 1994. Mrs. Buechel argued that she was entitled to a share of the royalties generated from these patents. However, Dr. Buechel contended that the patents were declining in value because his principal patent was about to expire and because lawsuits were pending against the patents. It was also Dr. Buechel's position that Mrs. Buechel waived any entitlement to royalty income from the patents by signing a pre-nuptial agreement.

By mid-July 1996, with an August trial date looming, Puder was able to negotiate an oral proposed settlement agreement that she deemed "clearly more favorable to [Mrs.] Buechel than the proposal recommended by the Early Settlement Panel." Indeed, Puder believed that the settlement was a "great deal" for Mrs. Buechel. Among other things, the settlement called for Mrs. Buechel to receive over $1.5 million in cash, a house valued at $400,000, a $100,000 IRA distribution, $100,000 annually in alimony for five years, and $50,000 annually in support for the couple's three children. Mrs. Buechel would also agree to waive all claims against Dr. Buechel's patents and other business interests. Despite having conducted only limited discovery of Dr. Buechel's assets, Puder recommended that Mrs. Buechel accept the oral settlement and Mrs. Buechel subsequently authorized Puder to do so.

In July 1996, Dr. Buechel's attorney sent Puder a letter memorializing the proposed settlement agreement. The following day, Puder advised the trial court that the parties had orally settled the matter and that the attorneys were in the process of finalizing the written agreement. Over the next few days, the parties worked out the remaining details of the settlement.

In August 1996, Mrs. Buechel consulted with attorney David Feinsilver who characterized the settlement as "ridiculously inadequate." Based on that statement, Mrs. Buechel informed Puder that she would not abide by the settlement's terms. Mrs. Buechel then discharged Puder and retained new counsel, Neil S. Braun, Esq., to represent her in the divorce.

Dr. Buechel moved to enforce the settlement agreement. The trial court ordered that a plenary hearing be conducted to determine whether the parties had reached a binding agreement, and, if so, whether the agreement was enforceable.

In March 1997, while the hearing was still pending, Puder sued Mrs. Buechel for unpaid legal fees and costs associated with her divorce representation. Mrs. Buechel filed an answer and counterclaim, alleging that Puder committed legal malpractice. According to Mrs. Buechel, Puder negotiated an "insufficient and inadequate" settlement agreement "without . . . adequate discovery and information concerning [Dr. Buechel's] income and assets." Mrs. Buechel further alleged that Puder accepted the agreement "without properly informing [Mrs. Buechel] of the shortcomings of th[e] proposed settlement and obtaining from her complete authority to enter into it." Mrs. Buechel also moved to stay the malpractice claim until the matrimonial hearing was resolved. The certification filed in support of the motion stated that a stay was necessary because the malpractice claim would be "rendered moot" if Mrs. Buechel prevailed at the matrimonial hearing. The motion to stay was granted in August 1997.

In June 1998, the trial court held a plenary hearing to determine whether the parties had reached a binding settlement agreement, and, if so, whether the agreement was enforceable. During the hearing, the judge stated several times that he had not, and would not, decide the existence or enforceability of the purported agreement until he heard all the proofs. After six days of testimony, Mrs. Buechel's counsel informed the court that Mrs. Buechel had agreed to settle the divorce.

The new settlement was substantially similar to the disputed settlement. The principal differences between them were that Mrs. Buechel received an additional $100,000 IRA distribution, and $8,000 more per year in alimony with all alimony payments now taxable to Dr. Buechel. On June 30, Mrs. Buechel testified before the trial court that the agreement was acceptable to her and that she entered into it voluntarily:

THE COURT: Okay. Have you read that agreement as --- as it's been modified, Mrs. Buechel? . . . .

KATHLEEN BUECHEL: Yes.

THE COURT: . . . . I don't want you to think that you're being forced or pressured into accept[ing] an agreement. You've been through an emotional experience, and I want to make sure that this agreement is acceptable to ...


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