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Overcoming the Puder Hurdle.

Gere v. Louis, 209 N.J. 486 (2012) is a New Jersey case which discusses when a client may sue their attorney after a settlement. It is an important case because it takes into consideration many facts of settlements that up ... 

Gere v. Louis, 209 N.J. 486 (2012) is a New Jersey case which discusses when a client may sue their attorney after a settlement. It is an important case because it takes into consideration many facts of settlements that up to this point had not been considered by courts. Furthermore, it builds on the Puder doctrine which is an essential line of jurisprudence in the malpractice arena.

Julia Gere is the plaintiff in this case which originates from a divorce action involving her ex-husband Peter Ricker. After a long marriage, during which the couple attained a large amount of assets, the couple underwent an acrimonious divorce in 1997. In 2000, the couple prepared a property settlement agreement, where each side was represented by counsel.

Under the terms of the agreement, Gere was to receive a fixed amount of alimony over 7 years. The settlement also provided an equitable distribution of assets, including both real estate investments and businesses. As part of the distribution scheme, there were deadlines placed regarding notice of option executions. Louis was the attorney who represented Gere throughout these proceedings and settlements.

Louis testified under deposition concerning one of the 6-month options. He had not yet heard from Gere, so he called her to ostensibly ask her opinion. When he called, he instead reached a good friend of Gere's. Trusting this friend to communicate Gere's wishes, Louis asked, and received an answer which he believed satisfied his obligations. Based on a flawed interpretation of Gere's friend, Louis prepared a letter for Ricker's attorney which expressed Gere's interest in part of the assets. A draft of this letter was not provided to Gere.

About a year after the first letter, Louis followed up with a letter intending to acquire equitable interests in certain assets or as an alternative to sell some assets. Louis believed he was reflecting the intentions of Gere to maintain a partial interest still. This was however contentious, and Ricker believed that all deadlines had passed, resulting in relinquishment of Gere's rights to property.

This disagreement led to post-judgment proceedings concerning the extent of interest Gere had waived. Since much of this litigation concerned the letter sent, but never approved by Gere, Louis withdrew as the attorney of record. The hearing on these property issues did not actually commence until 2006, at which time out of concern for the statute of limitations inNew Jersey, Louis agreed to extend it to whenever the action finished. Another extension was signed, and the original post-judgment proceeding was settled in July, 2007. This later agreement was intended to supplement the original agreement as opposed to completely replacing it. When the settlement was recorded, it included a reservation clause concerning actions for Gere against former attorneys. In a hearing on this reservation clause, it was clear that Gere settled for the best she could, and did not wish the settlement to act as a defense in a malpractice action.

The importance of Puder in this case, is that the doctrine normally prevents a matrimonial litigant who resolves a dispute and testifies that an agreement is an acceptable, fair, and voluntary compromise may not thereafter sue the attorney for the balance not received in that settlement. In this case the issue is whether Puder applies to divorce agreements like Gere's.

The main public policy of Puder is settlement which courts have a strong incentive to promote. Normally, the doctrine acts to prevent a person from taking a contradictory position between settlement and post-settlement whenever they are unhappy with an outcome.

The Court then stated they believed this case was factually distinguishable from Puder. In the original Puder case, a woman divorced her husband and considered a settlement agreement recommended by her first attorney; Puder. However, she later consulted a second attorney who believed the settlement inadequate. As a result, she did not intend to comply, discharged Puder and hired a new attorney. Her ex-husband then tried to enforce the settlement, but before the enforcement hearing, there was a second settlement where the ex-wife received more than in the original agreement, and testified she was voluntarily agreeing to a fair agreement. After several months, the ex-wife sued Puder for malpractice, and the Supreme Court eventually ruled that because the ex-wife had been happy with the second agreement, the malpractice claim would be barred by public policy. Thus any deficiency from the first settlement which was affected by malpractice was cured by the second settlement according to the court. Pursuing her first attorney now would lead to monetary gain as opposed to making the ex-wife whole, thus the Puder doctrine was created.

Puder is an equity based exception according to the court. It does not erect an absolute bar to malpractice actions if a former client enters into a settlement with regard to the underlying action before obtaining a decision with respect to the complained-of conduct by the attorney. This case provided no basis for believing that equity requires a bar against the malpractice action for many reasons.

In this case, Gere claimed it was post-settlement actions of the attorney as opposed to actions which affected the settlement. The actions of Louis following settlement jeopardized the rights of Gere relating to the initial settlement. Another big difference in the second settlement is that afterwards, Gere did not have what she believed she would at the outset. Puder provided a bar because the plaintiff was in the same position after renegotiation as she would have been had there been no malpractice. In this case, Gere was still missing out on some property, and would not be able to be placed in a similar position because of the requirement to get the best deal she felt she could.

This case is obviously most important in divorce settlement actions. A settlement does not necessarily bar a client from a malpractice suit. In New Jersey, a client is best served by analyzing the interests at settlement, and whether malpractice affected these interests. If the malpractice affected the interests, and the client was unable to be placed back into the position originally intended by their actions, then Puder will not be a bar. It does however remain a strong defense tool for legal malpractice actions with divorce settlements, since the court must engage in fact intensive analysis to overcome the bar, and meet an exception.

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