Winstock v. Galasso, A-2715-10T2; Appellate Division; opinion by Fuentes, P.J.A.D.; decided and approved for publication May 6, 2013. Before Judges Fuentes, Graves and Harris. On appeal from the Law Division, Morris County, L-1213-07. [Sat below: Judge Dumont.] DDS No. 04-2-9850 [42 pp.]

In this legal-malpractice case, plaintiff Richard Winstock sued defendant attorney Amato Galasso, claiming that his incorrect legal advice resulted in him having to plead guilty to third-degree promotion of gambling. Plaintiff’s wife, Jennifer Winstock, was indicted for the same offense based on her role as the owner and registered agent of the limited liability corporation, Fifth Street Club, L.L.C., that operated and promoted the gambling enterprise. Despite the state consenting to her admission into pretrial intervention, co-plaintiff sued defendant based on the same theory of liability.

On a motion for summary judgment, relying on Alampi v. Russo, the trial judge dismissed the malpractice action as a matter of law, holding that plaintiffs were precluded from suing defendant by the doctrine of judicial estoppel, and dismissed plaintiffs’ claim for emotional distress damages.

Plaintiffs argue on appeal that the trial judge erred in relying on Alampi to dismiss their complaint. Plaintiffs argue that, unlike the facts in Alampi, in which the plaintiff retained the defendant attorney after the plaintiff had already engaged in criminal conduct, plaintiffs here retained defendant to ensure that their business model was proper and lawful. Thus, according to plaintiffs, but for defendant’s incorrect legal advice, they would not have engaged in the conduct that gave rise to the criminal charges. Plaintiffs also argue that the trial court should not have dismissed their claim for emotional distress damages.

Held: The dismissal of the malpractice action is reversed because a rational jury could find that defendant’s incorrect legal advice was a substantial factor in causing plaintiffs to engage in criminal conduct. The trial court’s denial of emotional distress damages is affirmed where, absent egregious circumstances, such claims are not cognizable in a legal-malpractice action.

The issue on appeal is whether an unimpeached guilty plea in a criminal proceeding bars recovery in a legal malpractice action."

The panel in Alampi held that plaintiff was precluded from taking a position in the legal-malpractice action that was inconsistent with the factual basis he gave to induce the criminal court to accept his guilty plea. The panel viewed the plaintiff’s malpractice action as a collateral attack on his criminal conviction. The Alampi court also concluded that the plaintiff’s "thesis for recovery undermine[d] the public policy expressed by the doctrine of judicial estoppel."

Here, the appellate panel finds the trial court misapplied Alampi by treating plaintiff’s guilty plea as an impenetrable wall, shielding defendant from civil liability based on professional malpractice. In cases involving tort or contract claims, the doctrine of issue preclusion does not automatically prevent a plaintiff in a civil trial from contesting the admitted facts that formed the basis of his or her guilty plea.

Co-plaintiff’s admission into PTI renders the concerns of issue preclusion irrelevant. Jennifer Winstock did not plead guilty to any crime. She was not required and did not provide any self-incriminating statement as a condition of her admittance into the PTI program. Admission into PTI is not predicated on an accused acknowledging his or her culpability to a particular criminal charge. Furthermore, once admitted into supervisory treatment, any "statement or disclosure" made by a participant in a PTI program is not admissible evidence against her "in any civil or criminal proceeding." The trial court’s decision to apply a theory of estoppel against Jennifer Winstock based on her admission into PTI is untenable as a matter of law and undermines the expressed public policy embodied in the PTI program.

As to Richard Winstock, in Alampi the plaintiff was already involved in criminal activity before he retained the defendant lawyer and the colloquy between the plaintiff and the federal judge in Alampi illustrated that the plaintiff knew he was violating the law before he retained the defendant. By contrast, in his allocution, all of the activity Richard Winstock admitted he engaged in occurred after he had retained defendant as his legal adviser. Defendant reviewed and approved plaintiffs’ business model in a legal memorandum. Although defendant’s legal opinion may not have absolved Richard Winstock of criminal responsibility for his actions, Winstock’s admission of criminal culpability did not relieve defendant of his duty to provide plaintiffs with legally correct advice. Even if Richard Winstock’s statements before the criminal court were construed as an unequivocal admission that, at the time of his arrest, he was operating a "gambling resort" in violation of N.J.S.A. 2C:37-2a(2), such an admission is not dispositive of defendant’s potential civil liability to plaintiffs for his alleged incorrect legal advice.

Richard Winstock’s admissions at the plea hearing may be evidential in his civil claims of professional malpractice against defendant. His plea alone, however, does not preclude him or Jennifer Winstock from arguing that defendant’s alleged professional negligence was a proximate cause of the damages they incurred by operating the Fifth Street Club. Defendant represented plaintiffs in filing the necessary documents to create the limited liability corporation and represented plaintiffs before the Dover Zoning Board of Adjustment to obtain approval to operate the club. However, whether defendant was the mastermind and chief choreographer of a plan to mislead the board and conceal the club’s true purpose as a gambling resort, as plaintiffs claim, or, as defendant alleges, he was simply following the directions given to him by plaintiffs, are material issues of fact that cannot be resolved by way of summary judgment.

The appellate panel affirms the trial court’s dismissal of plaintiffs’ claims for emotional distress damages, where there is nothing in the record that substantiates a finding of "egregious or extraordinary circumstances."

The order granting defendant’s motion for summary judgment and dismissing plaintiffs’ legal-malpractice action is reversed. The court’s decision to dismiss plaintiffs’ claims for emotional distress damages is affirmed.

For appellants — Gabriel H. Halpern (Pinilis & Halpern; Halpern and Jeffrey S. Mandel on the briefs). For respondent — Robert B. Hille (McElroy, Deutsch, Mulvaney & Carpenter; Hille and John W. Kaveney, on the brief).