The Rule, Not the Exception

Smith v. Grayson, A-1072-10T4, October 17, 2011, (N.J. Super. Ct. App. Div. 2011) is a case which details 3 main points. The first point demonstrates the limits of the Puder doctrine, outlining when a settlement may be ripe for a malpractice suit. The second point concerns the basis of attorney opinions in malpractice suits. Finally, the case deals with 3rdparty malpractice liability, such as when a defendant attorney retains consultant counsel to help with a case.

The case began as a simple divorce. Leslie Smith retained Bette Grayson in 2000 for the purpose of gaining a divorce from her husband. As a result of this relationship, Grayson hired the law-firm of Wilentz, Goldman, and Spitzer as consultants in the divorce proceeding. On May 10, 2000 when the divorce was filed, Smith was earning $42,000 per year while her husband was earning $246,000. At the time of divorce, the marital residence was worth around $750,000. Both parties were 48 years old which would affect the advice given.

Part of the way through the divorce, Smith became frustrated at the slow pace of settlement discussions. Therefore, she hired Epstein to be a consultant and propose negotiation solutions, while Grayson was retained to handle the pre-trial and litigation. Settlement negotiations began in June, 2001, when the husband offered $28,600 per year for ten years and child support of $300 per week. Smith countered by demanding $100,000 per year of permanent alimony and $850 support. Grayson and Smith had private conversations, where Grayson advised that Smith was probably entitled to 1/3 the difference between the respective incomes of the parties. The strategy was to use the permanent alimony demand as a bargaining chip to get Smith equitable assets she may not have been entitled to.

On April 3, 2002, an agreement was reached. At this point, Epstein had made only one proposal which was not accepted. The final agreement required Smith to leave the marital residence in exchange for $240,000 as her half-share equity, a $90,000 lump-sum payment representing interest in ex-husbands law practice, limited alimony of $50,000 per year for 5 years, and $35,000 thereafter for 4, and a $50,000 lump-sum payment in exchange for waiving any permanent alimony claims. The plaintiff then agreed on the record that the settlement was fair. It was not until 2006, when Smith consulted Epstein about a post-judgment matter that legal malpractice was hinted at by Epstein.

On March 20, 2008, plaintiff filed a legal malpractice action. The core complaint concerning Grayson's representation was that Smith was not advised to reject the settlement because it was well below the range usually awarded. Regarding alimony, the expert opined that the 1/3 benchmark should have applied, giving Smith an award of between $60,000 and $72,000 per year. The expert used a calculation formula to arrive at damages which approached $250,000 because of Grayson's professional negligence.

The court first decided whether or not Puder's equitable bar applied. The court decided there was no tension between Puder, and Ziegelheim, the case which came right before Puder. 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, according to the court, and Ziegelheim. Contrast that idea with Puder, where the unconditional declaration of satisfaction on the record precludes a malpractice lawsuit, when the client has already fired one set of attorneys. In other words, Puder, prevents people who already suspect incompetence from malpractice suits, whereas this case and Ziegelheim allow malpractice suits if a competent lawyer would have received a more favorable suit. Thus, in this case, because Smith had no reason to know of professional negligence the legal malpractice claim could proceed to trial.

The next issue the court decided was the charge that Smith's expert rendered a net opinion, meaning it was not based on facts or data. An expert is required to give the why and wherefore of his opinion, not just a conclusion. When an opinion is based on a speculative conclusion, it is net, and inadmissible. Experts must identify the factual basis for their opinions, including methodology, and reliability. The expert must be able to point generally accepted, objective standards of practice, not those merely personal to them.

This case did not involve a net opinion for several reasons. Primarily, the expert stated the legal duty an attorney owes a client, using supporting case law, thus providing an objective standard. Then, using specific facts and circumstances of the plaintiff, the expert measured the attorney's performance against the established objective standards. The expert laid a factual foundation, using step-by-step methodology, in a case which was rightly determined to be one of permanent alimony. The expert then discussed deviations of professional standards of care, and provided a table of calculations. This was much more than a net opinion in the court's opinion because of the level of detail.

Finally, the court dealt with the suit by Grayson against Epstein for not providing the proper duty. The court's opinion shows how important expert reports are, because they dismissed this case for that reason primarily. Epstein was not a co-counsel, and thus had a limited duty. If Grayson wanted to show professional negligence due to breach of this duty, then she had to provide an expert outlining what legal duty Epstein actually had.

This case is very interesting mainly because it provides that Puder is an exception. Generally speaking, if you are not aware of negligence in a matrimonial case, after acquired evidence may provide enough to challenge a settlement. It is interesting also, that this court overturned a lower court's decision concerning net opinion. That alone shows how 2 courts sitting in the same area may have a divergent view of the existing law. Mainly however, the lesson is Puder is the exception, not the rule.

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