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In a case that previously ascended to the state Supreme Court and empowered clients to go after their lawyers despite having entered settlements, a New Jersey appeals court signed off on the dismissal of a legal malpractice suit against Duane Morris.
The Appellate Division on Aug. 4 affirmed a decision from more than two years ago in the suit, lodged by Joseph Guido, co-founder of Allstates WorldCargo Inc.
Though Guido has maintained that the ramifications of a 2005 settlement in a dispute with other company shareholders were never properly explained by counsel, Duane Morris presented evidence “that on at least 13 occasions they explained…or advised against the settlement proposals.”
Guido had majority ownership of Bayville, N.J.-based Allstates—a publicly held shipping company—but lost his status as president and CEO after a 1999 merger. He sought to add three seats to the company’s four-member board. Guido’s principal adversary was a succeeding president, Sam DiGiralomo, according to court documents.
Guido retained Philadelphia-based Duane Morris and was represented by James Ferrelli and Patricia Kane Williams, both of Cherry Hill, N.J. He sued the company, DiGiralomo and the other board members.
The documents said that during a recess from an October 2004 court hearing, Guido began talking settlement with DiGiralomo in the hallway without counsel. They held a special board meeting at the courthouse to review the agreement, which restricted stock transfers by any board member without the others’ written consent. Lawyers were left out of the negotiations, according to documents.
Ferrelli nonetheless expressed his concerns on the record—that Guido, as an elderly man with health problems—might have been under “duress and overreaching” by DiGiralomo.
After the settlement wasn’t finalized, the parties entered mediation with retired Superior Court Judge James Havey in April 2005 and struck a new deal, though the new version still included the stock restriction.
Ocean County Superior Court Judge James Clyne read the terms into the record and asked the Guidos whether they understood and agreed to them, to which they replied in the affirmative, documents said.
Over the course of the dispute, Guido fired Duane Morris three times—for good, in November 2005—but twice rehired the firm, documents said.
Though the firm’s role in the case was effectively reduced to drawing up the needed documents, Duane Morris has maintained that it repeatedly advised the Guidos—in writing and in person—to reject the agreement because it would adversely affect the stock holdings, according to the documents.
In February 2007, Guido sued Duane Morris, Williams and Frank Luchak, who took the case after Guido demanded Ferrelli’s removal. Guido claimed the settlement rendered his stock holdings worthless and the lawyers never advised him of that consequence.
Ocean County Superior Court Judge Edward Oles threw the case out on summary judgment based on Puder v. Buechel, 183 N.J. 428 (2005), which precluded legal malpractice actions as a matter of law by litigants who had settled in the underlying action and clearly stated on the record their satisfaction with the result.
But Oles reinstated the case days later, when the Appellate Division decided Hernandez v. Baugh, 401 N.J. Super. 539 (2008). That case allowed a malpractice suit by a plaintiff who alleged he was compelled to settle a case on unfavorable terms because his lawyer’s negligence deprived him of needed proofs.
On Duane Morris’ appeal, the case reached the state Supreme Court, which in June 2010 held that “the existence of a prior settlement is not a bar to the prosecution of a legal malpractice claim” arising from the settlement. The court made it clear that Puder was an exception to the overarching rule allowing malpractice claims by clients stricken with settler’s remorse.
The ruling allowed Guido to proceed with his malpractice case, but Duane Morris prevailed on remand in March 2012, when Ocean County Superior Court Judge Rochelle Gizinski held that Guido presented only “uncorroborated, self-serving assertions that he was not adequately warned about the settlement.”
In finding no proof of negligence, Gizinski contrasted Guido’s “conclusory and self-serving assertions” and his repeated failure to recall what was said with Duane Morris’ “voluminous” objective evidence concerning the advice it gave.
Gizinski refused to apply the law of the case doctrine because discovery had not been completed when the appellate courts observed that a genuine issue of material fact existed about whether Duane Morris adequately explained the implications of the settlement.
Gizinski also spurned Guido’s “best practices” argument: that the settlement documents should have been signed and introduced as exhibits and carefully explained to him on the record.
Guido appealed Gizinski’s ruling, but Appellate Division Judges Jane Grall, Alexander Waugh Jr. and Allison Accurso on Aug. 4 affirmed, largely relying on Gizinski’s reasoning.
The law of the case doctrine is inapplicable because the Supreme Court’s decision “was about the applicability of Puder and not whether there were genuine issues of material fact,” and additional discovery took place after it, the panel said.
Any factual discrepancy “was the result of the additional discovery taken following the remand and the difficulty of unraveling what the Supreme Court referred to as the ‘rather tortured factual history’ and ‘the needlessly complicated procedural background,’” the panel said.
The panel, like Gizinski, found that Guido didn’t successfully plead all the elements of a malpractice claim, and tossed his claims that he couldn’t recall the specifics of the various meetings with Duane Morris during which the settlement’s terms were discussed.
Joseph LaSala of Morristown, N.J.’s McElroy, Deutsch, Mulvaney & Carpenter, counsel to Duane Morris, said the Appellate Division’s ruling was the “right result.”
Duane Morris spokesman Joshua Peck referred to a previous comment by firm general counsel Michael Silverman, who said the firm “represented Mr. Guido effectively and appropriately, notwithstanding the very difficult nature of the matter.”
Succasunna, N.J. solo Donald Fedderly, Guido’s counsel, declined comment.
The parties reached a settlement on Duane Morris’ counterclaim for more than $400,000 in allegedly unpaid fees amassed in the underlying case, though the amount ultimately paid is not included in the opinion.
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