A court of appeals in New Jersey reinstated a legal malpractice lawsuit, finding that the defendant law firm owed a duty of care to explain the terms of an agreement to a client even though they were unambiguous and the client was a sophisticated businessman who personally negotiated the agreement without assistance from defendant. Cottone v. Fox Rothschild, Docket No. A-0420-12T4 (App. Div., September 2, 2014)

Plaintiff, Robert Cottone, was the owner of a commercial insurance brokerage company. In 2000, plaintiff sold his company to the NIA Group, LLC. At the same time, plaintiff entered into a five-year employment contract with NIA. Thereafter, the arrangement between plaintiff and NIA soured and plaintiff filed a lawsuit against NIA for breach of contract.

In an effort to settle the lawsuit, plaintiff negotiated a complicated settlement agreement over many months with NIA. The terms of the agreement with NIA wee negotiated by plaintiff himself. No attorney from defendant law firm took part in the negotiations.

After a draft agreement was prepared by counsel for NIA, plaintiff retained a partner from defendant law firm to review the agreement on his behalf. Several more drafts and revisions of the settlement agreement were sent back-and-forth between the lawyers. A nonbinding draft of the agreement was forwarded to plaintiff for his signature. The draft contained unambiguous language added by NIA’s counsel which had the effect of reducing the amount plaintiff would receive in the settlement. Plaintiff claimed that he signed the draft agreement only after obtaining approval to sign via the telephone from his lawyer, who was then in Europe.

The final agreement, signed later, contained the same language reducing the amount plaintiff would receive in the settlement. According to plaintiff, his lawyer admitted “missing” the language when he reviewed the agreement; the lawyer denied making the statement.

Plaintiff filed a legal malpractice lawsuit against defendant law firm and the partner who represented him. After discovery, defendants filed a motion for summary judgment which was granted by the court. The trial judge found that an attorney owes no duty, as a matter of law, to explain unambiguous business terms in a written agreement when the client is a sophisticated businessperson who negotiated the terms of the agreement himself. Plaintiff appealed.

The appellate division reversed and reinstated plaintiff’s lawsuit. The appeals court held that “there is no question that defendants owed plaintiff a duty of care arising from the attorney-client relationship.”

Although agreeing with the trial judge by finding that the contract language in question was unambiguous, the appeals court held that “the question before the trial court was whether defendants breached their duty of care when they allegedly failed to explain the terms of the agreement to plaintiff,” and that issues of fact precluded summary judgment:

We hold that, viewing the evidential materials presented by plaintiff in the light most favorable to him as the non-moving party, genuine factual disputes existed that were material to determining whether defendants breached their duty of care. These material issues of fact precluded the trial court from resolving the malpractice claim at the summary judgment stage of these proceedings. We also hold that there are genuine issues of material fact concerning proximate cause and damages

The decision is annexed hereto – Cottone v. Fox Rothschild

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