Sklodowsky v. Lushis, N.J. App. Div., February 2, 2011.
Facts: After a real estate deal went sour, plaintiff filed suit against the prospective buyer and sought a judgment permitting him to retain the deposit as liquidated damages. Allegedly, plaintiff instituted that lawsuit on the advise of Defendants, his counsel in the real estate transaction.
Eventually, one of the Defendants sued plaintiff for legal fees and plaintiff counterclaimed for professional negligence. More specifically, Plaintiff alleged that Defendants were engaged in the practice of law in New Jersey without a license; erroneously advised him to commence a lawsuit against the prospective buyer; did not adequately represent him in the sale of his real property; and billed him for unnecessary legal fees.
Defendants filed for summary judgment and argued that plaintiffs’ claim was barred by New Jersey’s entire controversy doctrine.
Issue: Was plaintiff required to bring their legal malpractice claim against Defendants in the suit against the prospective buyer?
The Appellate Division cited Olds v. Donnelly, 150 N.J. 424 (1997):
[The] risk of the disclosure of privileged information and the generally adverse effects on attorney-client relationships outweigh any benefit from requiring a client to assert a malpractice claim in the pending lawsuit…[the entire controversy] doctrine no longer compels the assertion of a legal malpractice claim in an underlying action that gives rise to the claim.
[The application of the entire controversy doctrine in this context] can chill attorney-client relations. The attorney, formerly the client’s advocate, is made the adversary. The client is forced to expend time and money to engage a second attorney to pursue the attorney-malpractice claim. Because the first attorney is now a potential witness, that attorney’s own interests are no longer aligned with those of the client…Thus, clients are put in the untenable position of either pursuing a claim against their attorney, whose negligence may never result in an unfavorable outcome, or forever forgoing a legal malpractice action…That result does not provide the fairness that the entire controversy doctrine is designed to encourage.
Lesson: In New Jersey, legal malpractice claims are exempted from the requirement of the entire controversy doctrine that a party litigate all claims arising from the same occurrence in one suit.