July 25, 2008
ARLENE BURKE, PLAINTIFF-APPELLANT,
SKOLOFF & WOLFE, P.C., AND EDWARD J. O'DONNELL, ESQ., DEFENDANTS-RESPONDENTS, AND BRIAN M. SCHWARTZ, ESQ., DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-2666-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 6, 2008
Before Judges Parker, R. B. Coleman and Lyons.
In this action asserting legal malpractice, plaintiff Arlene Burke appeals from the November 3, 2006 order of the Law Division, Union County, granting summary judgment in favor of defendants Skoloff & Wolfe, P.C. and Edward J. O'Donnell.*fn1 We affirm.
Plaintiff and her ex-husband, William M. Burke, were married in June 1960. After approximately thirty-six years of marriage, on August 1, 1996, plaintiff filed a complaint for divorce. During the marriage, the couple accumulated substantial assets and enjoyed an affluent lifestyle. They owned a residence in Short Hills as well as a home in Mantoloking. Dr. Burke, a cardiologist, was sixty-three years old at the time of the divorce. Expert valuations of his medical practice varied, ranging from $800,000 to $1.5 million. Dr. Burke was also a majority shareholder in an entity known as Allied Risk, to which he had loaned $288,000 from marital assets. The net value of Allied Risk was estimated to be about $58,000. To manage some of their properties as part of an estate plan, the couple had set up a limited partnership in which they were the general partners and their five children were the limited partners. Dr. Burke and Mrs. Burke each held a twenty-three percent interest in the limited partnership and the remaining fifty-four percent was held in equal shares by the five children. The assets of the partnership included (1) an office building for Dr. Burke's medical practice located in Berkeley Heights, (2) vacant land in Monmouth County, and (3) the residential property in Mantoloking.
Following a great deal of negotiation, the parties arrived at a property settlement agreement, the terms of which were acknowledged and agreed upon in open court on May 22, 1998. Before entering the judgment, the trial judge questioned plaintiff about her understanding of the agreement, and she indicated that she had ample time to review the terms of the settlement, that she had entered into the settlement voluntarily, and that she believed the terms of the settlement represented a fair, reasonable and equitable compromise of the issues between herself and her husband. She also testified that she was satisfied with the advice of her attorneys and accountant.
Pursuant to the settlement agreement, which was signed on May 21, 1998, plaintiff was to receive $350,000 for her share of the medical practice. She agreed to assume $135,000 of the debt associated with Allied Risk, and the parties agreed that the Burke Family Limited Partnership had a gross value of $2,910,000 and a net value of $2,860,000. Consequently, Dr. Burke was to be paid $1,430,000 for his interest in the partnership. Fifty-thousand dollars was subtracted from the gross value to pay a debt to John Burke, defendant's brother. Property in Ocean County and the former marital home in Short Hills were to be sold immediately and the net proceeds shared equally. The parties also agreed that Dr. Burke was to pay Mrs. Burke $150,000 per year in alimony. The trial court did not then evaluate the fairness of the agreement but determined that the parties understood the terms and were acting voluntarily and without coercion.*fn2
In time, however, plaintiff retained new counsel in order to attempt to vacate and/or modify the judgment of divorce and settlement agreement. The trial court denied that motion and plaintiff appealed. In an unpublished opinion, another panel of this court remanded the matter because of its concerns regarding the fairness of three aspects of the agreement: (1) the amount plaintiff was to pay to purchase defendant's interest in the partnership, (2) plaintiff's agreement to assume $135,000 of the debt of Allied Risk, and (3) the amount of the alimony. Burke v. Burke, No. A-6367-98T1 (App. Div. April 3, 2001) (slip op. at 25-28).
The panel recognized in its opinion that plaintiff's attorneys had advised her against taking the settlement because the Mantoloking property, which she was determined to retain, would represent a large portion of her equitable distribution share. As to Mrs. Burke's strategy in the agreement, the panel commented:
As we will note later, we question the logic of some of the decisions she ultimately made. We stress, however, that these were her decisions, not those of her attorneys or her husband. Indeed, the problems we will address in our consideration of the fairness of the agreement would appear to stem from plaintiff's stubbornness and intractability. [Id. at 21).]
The panel also agreed with the trial court that Mrs. Burke had not acted under duress when the property settlement agreement was reached or when negotiations were taking place. In fact, it noted "her conduct belied any claim that she was coerced. Plaintiff was fully engaged in the negotiations and strongly objected when her attorneys wavered on issues she deemed important." Id. at 21.
Plaintiff did, however, fare better on remand than she had under the settlement agreement. In accordance with a written opinion dated November 14, 2001, the remand court reconsidered its decision of May 12, 1999 and concluded that notwithstanding the conclusion in its initial decision "that the plaintiff received the agreement she wanted and bargained for," on reconsideration, the court found that the agreement was not fair and equitable. As a result of the reconsideration, instead of assuming a $135,000 debt of Allied Risk, plaintiff was to receive $29,000 for her share of that company. In addition, the trial court determined that the new payout figure to defendant for his twenty-three percent share of the limited partnership would be $800,000, rather than approximately $1.4 million based on a fifty percent share of an assumed value of $2.8 million. The remand court also adjusted the alimony payable to plaintiff from a base of $150,000 a year or twenty percent of defendant's adjusted gross income to a base of $252,000 a year or twenty percent of the adjusted gross income, but not to exceed $252,000 a year. The court also revisited the issue of counsel fees and awarded $75,000 to plaintiff to be paid from defendant's share of the proceeds of the sale of the Short Hills home.*fn3
On April 5, 2004, plaintiff filed a three-count complaint in this action alleging that her attorneys, the defendants herein, failed to properly and adequately advise her with respect to the matrimonial action, thereby committing (1) professional malpractice, (2) breach of contract and (3) breach of an implied covenant of good faith and fair dealing. On or about June 8, 2004, defendants Skoloff & Wolfe P.C. and Edward O'Donnell answered the complaint, and the firm asserted a counterclaim seeking to recover the value of services rendered. On or about September 23, 2006, defendants moved for summary judgment, which was granted by order dated November 3, 2006. Thereafter, on February 20, 2007, the parties entered into a stipulation of dismissal without prejudice that resolved the counterclaim and all matters between them pending before the Law Division. That stipulation was filed with the Clerk of the Superior Court on March 7, 2007, and plaintiff's notice of appeal from the order granting summary judgment was filed with the court that same date.
In the instant appeal, plaintiff contends the trial court erroneously dismissed her action to recover the legal fees she alleges she incurred as a result of the deficient settlement agreement that she entered into while she was represented by defendants. Plaintiff asserts the following arguments in this appeal.
POINT I: THE TRIAL COURT MISAPPLIED THE CONTROLLING LAW.
A. PUDER DOES NOT APPLY.
B. THE TRIAL COURT DID NOT PROPERLY APPLY ZEIGELHIEM.
C. THE TRIAL COURT DID NOT PROPERLY APPLY NEWELL.
POINT II: THIS COURT'S HOLDING IN PROSPECT MANDATES REMAND.
Defendants contend and the trial court held that plaintiff is judicially estopped from pursuing the malpractice action. Based upon our review of the arguments presented and the pertinent law, we affirm.
An appellate court employs the same standard of review that governs the trial court in its consideration of summary judgment motions. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Trinity Church v. Atkin Olshin Lawson-Bell, 394 N.J. Super. 159, 166 (App. Div. 2007); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608, 713 (1998). The court must consider whether there are any material factual disputes and, if not, whether the facts viewed in the light most favorable to the non-moving party would permit a decision in that party's favor on the underlying issue. Trinity Church, supra, 394 N.J. Super. at 166.
The judgment or order sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged . . . .
In making such a determination, this court must weigh "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill, supra, 142 N.J. at 536).
Plaintiff contends that the trial court erroneously granted the defendants' summary judgment motion on the basis of judicial estoppel. Judicial estoppel applies under the following circumstances:
"where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice to the party who has acquiesced in the position formerly taken . . . ."
[Newell v. Hudson, 376 N.J. Super. 29, 38 (App. Div. 2005) (quoting Davis v. Wakelee, 156 U.S. 680, 689, 15 S.Ct. 555, 558, 39 L.Ed. 578 (1895)).]
When, as here, parties agree to a settlement in open court, they are ordinarily bound by their agreement. As we have explained, "allowing plaintiffs to disavow a voluntary settlement . . . would 'wreak havoc' with the judicial system. Not only would defense counsel be more reluctant to settle, out of fear that those settlements would later be set aside simply because plaintiffs changed their minds, but the attorney client relationship would also be undermined. Plaintiffs' attorneys would also be more reluctant to settle, because even if their clients agreed to a voluntary settlement, plaintiffs' counsel would be concerned that plaintiffs would sue them for malpractice at a later time." [Newell, supra, 376 N.J. Super. at 39-40 (quoting Broad v. Conway, 675 F. Supp. 768, 772 (N.D.N.Y. 1987), aff'd, 849 F.2d 1467 (2d Cir. 1988), cert. denied, 488 U.S. 927, 109 S.Ct. 313, 102 L.Ed. 2d 331 (1989).]
It has been recognized, however, that there may be situations in which a settlement acknowledged by a party in open court to be fair and equitable may, nevertheless, be properly vacated or may become a basis for an action for professional negligence. See Ziegelheim v. Apollo, 128 N.J. 250, 266 (1992).
In Ziegelheim, the plaintiff sued her original divorce lawyer for malpractice. Id. at 257. When speaking with the lawyer about the upcoming divorce proceedings, the plaintiff had told him that her husband had $500,000 hidden in the form of cash savings and bonds, and she instructed the attorney to perform an exhaustive evaluation of her husband's finances. Id. at 254. Thereafter, the parties entered into a property settlement agreement, and each testified in court that the document was fair and entered into voluntarily. Id. at 257. In spite of her representation to the court, the plaintiff later filed a five-count complaint against her attorney, asserting among other things (1) negligent delay in securing a final agreement caused her to lose interest on the payments due under the settlement; (2) negligent handling of the case permitted defendant to settle for less than it should have been; (3) counsel had failed to use proper procedure in preparing and negotiating the case; (4) negligent advice convinced plaintiff to settle the case for less than a reasonably prudent attorney would have; and (5) the failure to reduce the oral negotiations into a comprehensive and accurate written instrument compromised plaintiff's ability to understand its terms. Id. at 258. The complaint was dismissed on summary judgment, and we affirmed.
The Supreme Court reinstated the complaint and remanded it for trial with the following observation:
The fact that a party received a settlement that was "fair and equitable" does not mean necessarily that the party's attorney was competent or that the party would not have received a more favorable settlement had the party's incompetent attorney been competent. [Id. at 265.]
In allowing the claim to proceed, the Court focused on the attorney's failure to discover hidden marital assets. Id. at 266. The Court indicated that its holding was limited, that it "[did] not open the door to malpractice suits by any and every dissatisfied party to a settlement." Id. at 267. Rather, the court emphasized that "plaintiffs must allege particular facts in support of their claims of attorney incompetence and may not litigate complaints containing mere generalized assertions of malpractice." Ibid. The Court observed that negotiations naturally breed compromise, and attorneys should not be deemed to have rendered unreasonable advice merely because a compromise yields a less than optimal outcome for the client. The Court stated:
[W]e acknowledge that attorneys who pursue reasonable strategies in handling their cases and who render reasonable advice to their clients cannot be held liable for the failure of their strategies or for any unprofitable outcomes that result because their clients took their advice. The law demands that attorneys handle their cases with knowledge, skill, and diligence, but it does not demand that they be perfect or infallible, and it does not demand that they always secure optimum outcomes for their clients. [Ibid.]
The Court revisited the issue in Puder v. Buechel, 183 N.J. 428 (2005). In that case, the plaintiff engaged a lawyer to represent her in her action for divorce and the parties eventually reached agreement on a proposed settlement. Before the agreement was finalized, plaintiff discharged the attorney and engaged new counsel. Id. at 432. Plaintiff thereafter acknowledged in court that the second agreement, which was substantially similar to the disputed first settlement, was acceptable to her, that it was a fair compromise of the issues, and that she accepted the agreement voluntarily. Id. at 438. Nevertheless, when the matrimonial attorney sued to recover unpaid legal fees, the client filed a counterclaim alleging malpractice and alleging that the attorney had negotiated an inadequate divorce settlement and had failed to obtain informed consent before accepting the settlement on the client's behalf. Id. at 430.
Under such circumstances, the Court ruled that fairness and the public policy favoring settlements dictated that the client be bound by her testimony before the trial court concerning the acceptability and fairness of the divorce settlement agreement. Id. at 439, 445. The Court remarked:
It would contravene principles of fairness and our policy in favor of encouraging conclusive settlements in matrimonial cases to allow [plaintiff] 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. [Id. at 438-39.]
Though the results differed, the Puder holding was not at odds with that of Ziegelheim. The Puder plaintiff never finalized any settlement agreement during the time she was represented by her first attorney, and she entered into the second settlement while "admittedly aware of the discovery deficiencies leading up to the first settlement." Id. at 443. Though the plaintiff purported to qualify her agreement to be bound to the second settlement on the assumptions (a) that the trial court would bind her to the first settlement and (b) that her malpractice claim would be preserved, the Supreme Court concluded that those assumptions were not binding on the courts considering the matter and that, upon consideration of all the circumstances by the appeal, the plaintiff was precluded from pursuing the malpractice action. The same considerations pertain in this action. Id. at 445.
Here, the plaintiff acknowledged that she understood the terms of the settlement and that she had voluntarily accepted the terms. Notwithstanding that acknowledgement and acceptance, we remanded the matter for reconsideration of the fairness of certain aspects of the settlement, which were modified in favor of plaintiff. In addition, though, the remand court rejected the sums requested by plaintiff. That court was permitted to and did award reasonable attorneys' fees for the additional legal services incurred. Fees were also awarded to plaintiff by this court and by the Supreme Court.
As we view the matter, the deficiencies of the settlement were remedied by the remand court but those deficiencies were not caused by professional negligence. We are still convinced, as we stated in our earlier opinion in the matrimonial action, that the problems with the original result would appear to have stemmed from plaintiff's own stubbornness and intractability, and that "these were her decisions, not those of her attorneys or her husband." Burke, supra, slip op. at 21. The trial judge, who was also the remand judge, found as a specific fact, to which we defer, that "[the attorney] was, in fact, ready to try the case and . . . he encouraged plaintiff to begin trial rather than accept defendant's (in [the attorney's] view) inappropriate proposals." It was not malpractice for the attorneys to accede to the will of the client. "In accepting a case, the lawyer agrees to pursue the goals of the client to the extent the law permits, even when the lawyer believes that the client's desires are unwise or illconsidered." Ziegelheim, supra, 128 N.J. at 261.
Plaintiff directs our attention to Newell, supra, which also arose in a divorce setting. Both parties in that case testified that they understood and voluntarily consented to the terms of the property settlement agreement. Newell, supra, 376 N.J. Super. at 32. The plaintiff later wrote a letter asserting that she had felt pressure from her husband's counsel, the judge and her counsel at the time of the hearing and that she had concern for the adequacy of her counsel. Ibid. She, therefore, filed a malpractice action against the attorney claiming that the settlement was woefully insufficient. Id. at 34. At her deposition, plaintiff admitted that her prior sworn testimony regarding the fairness of the settlement was knowingly false. Ibid.
The trial court ruled that plaintiff's claims were barred by the doctrine of judicial estoppel, and on appeal, we framed the issue and decided it as follows:
At issue in this appeal is whether a litigant who either lied, or later claimed she lied, about her understanding and voluntary acceptance of the terms of her property settlement agreement, in order to induce the court to accept and incorporate it into a judgment of divorce, is judicially estopped from asserting a claim for malpractice against her matrimonial attorney based on the settlement. The trial court found she was. We agree and affirm. [Id. at 30.]
The plaintiff in Newell, like the plaintiff in this case, was "not an unsophisticated individual or a vulnerable litigant." Id. at 46. She was an accountant, and she was fully familiar with the parties' financial circumstances. She could not point to any income or asset that had not been disclosed to her at the time of the divorce. Ibid. Indeed, the plaintiff in Newell concluded that, in order to pursue the malpractice action, she had testified falsely in the prior action. Her false testimony was designed to mislead the court and her counsel and to obtain the benefits of the settlement agreement. We agreed with the trial court that plaintiff was subject to judicial estoppel of her legal malpractice action. Our rationale was that "[I]t [was] immaterial whether [plaintiff] either deliberately lied in the matrimonial action or in the malpractice action; her statements [were] clearly inconsistent and uttered to obtain judicial advantage." Ibid.
After reviewing Newell and other cases cited by plaintiff, we conclude that plaintiff, Arlene Burke, acted knowingly and voluntarily in accepting the settlement agreement, as modified by the remand court. Moreover, plaintiff has not asserted particular facts that would warrant reinstatement of her claim of malpractice against her attorneys. Her complaint is premised on her claim that she was not properly advised about the values of the family limited partnership and her husband's medical practice. Those values were disputed, but there is no claim that material information was concealed or not discovered by the attorneys. She does not claim that she lied when she vouched for the validity and fairness of the agreement, and we do not imply as much; but, as we perceive it, plaintiff only claims that she should have received a more profitable settlement, which she did receive on remand. That this court remanded the case, and the remand resulted in upward adjustments of her total equitable distribution share is not enough to establish legal malpractice.
To prove legal malpractice, "a plaintiff must prove a deviation from the standard [of care], proximate causation, and damages." Garcia v. Kozlov, 179 N.J. 343, 357 (2004). Because the divorce case was settled prior to trial, we will not conduct the "suit within a suit" inquiry, typical of most legal malpractice actions. See, e.g., Gautum v. De Luca, 215 N.J. Super., 388, 398 (App. Div) certif. denied, 109 N.J. 39 (1987); Lierberman v. Employers Ins. of Wausau, 84 N.J. 325, 342 (1980). Instead, we must examine the facts to ensure that the defendants performed legal services with a reasonable degree of professionalism.
"[L]awyers owe a duty to their clients to provide their services with reasonable knowledge, skill, and diligence." Ziegelheim, supra, 128 N.J. at 260-61. "The lawyer must take 'any steps necessary in the proper handling of the case' [including], among other things, a careful investigation of the facts of the matter, the formulation of a legal strategy, the filing of appropriate papers, and the maintenance of communication with the client." Id. at 261 (quoting Passanante v. Yormark, 138 N.J. Super. 233, 239 (App. Div. 1975) (citations omitted)).
The panel specifically noted that the settlement agreement was not unconscionable, but it, nevertheless, questioned the fairness of certain provisions. The determination whether the spousal agreement was just and fair is distinct from the scrutiny of the attorney to determine whether that attorney deviated from the standard of care of the legal profession. Our unpublished opinion in Burke, supra, does not compel a finding of malpractice. Rather, we found that plaintiff was goal-oriented and not under duress. Burke, supra, slip op. at 16. Like the Newell plaintiff, Mrs. Burke was a sophisticated litigant who was intricately involved in the family business affairs and in the negotiations of the settlement agreement. See id. at 21-22. Mrs. Burke had more than a working knowledge of the family's assets. "'[T]he knowledge that the party possesses, or should have possessed, at the time the statement is made is determinative as to whether the person is playing "fast and loose" with the court.'" Newell, supra, 376 N.J. Super. at 44 (quoting McKay v. Owens, 937 P. 2d 1222, 1229 (Idaho 1997)). Plaintiff was not misinformed of the relevant criteria. See Puder, supra, 128 N.J. at 444. She had knowledge her husband owned only twenty-three percent share of the partnership; yet, she agreed to pay fifty percent of the value because of her belief that the children would do what she desired.
During negotiations, her desire to obtain the Mantoloking property was quite evident. Despite advice from defendants not to seek the property, she continued to pursue it in negotiations. As a consequence, she may have overpaid Dr. Burke for his interest in the partnership in order to obtain that property. There may have been several strategies behind the drafting of the original settlement agreement, and the agreement may have been drafted with certain imperfections, but this does not amount to malpractice. As we noted, the initial settlement agreement was not unconscionable, and we even remarked "[t]here is great difficulty establishing any precise figures because of the wide range of values appearing in the parties' appraisals and estimates." Burke, supra, slip op. at 28.
In Ziegelheim, summary judgment was vacated because of specific attorney errors, errors that are not evident in this case. Here, defendants had thoroughly investigated the assets at issue. They advised the client on avenues to obtain the goals she sought. With a full knowledge of the alternatives and knowledge of the contents of the proposed agreement, she agreed to its fairness. Upon consultation with another attorney, she believed she could receive a better bargain, and she did so. That does not amount to attorney malpractice on the part of the original attorney.
Plaintiff also argues that she should prevail because of the result of Prospect Rehab. Servs., Inc. v. Squitieri, 392 N.J. Super. 157 (App. Div. 2007). That case is distinguishable. First, "[p]laintiff's principal [in Prospect Rehab. Servs., Inc.] never represented to anyone, let alone a court, that its settlement with the nursing homes was a 'fair' and satisfactory resolution of its underlying claims." Id. at 167. One of the most important reasons for holding plaintiff judicially estopped was that she gave such testimony in open court without reservation. Second, the plaintiff in Prospect Rehab. Servs. was able to point to particular failures on the defendant's part. Plaintiff claimed that he had discussed possible Medicare claims with the lawyer early in the lawsuit, but the lawyer defendant certified that he first learned of these claims during the arbitration. Id. at 158-59. Arlene Burke did not assert any comparable omission.
Finally, defendants contend that, even if plaintiff could prove defendants were negligent, plaintiff suffered no damages. Because we rule on the basis of judicial estoppel, we need not reach that issue.