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Legal Updates for Lawyers' Professional Liability

Jack Slimm and Jeremy Zacharias Successfully Defend Appeal of Equitable Distribution Legal Malpractice Action in New Jersey

Legal Update for Lawyers' Professional Liability - June 17, 2025

June 17, 2025

by John L. Slimm and Jeremy J. Zacharias RPLU

Jack Slimm and Jeremy Zacharias successfully defended the appeal of an equitable distribution legal malpractice action in New Jersey where they had also prevailed at the trial court level. In Pennetti v. Zeigler, A-1680-23 (App. Div. May 15, 2025), after a Rule 104 hearing, the judge barred the plaintiff’s expert’s opinions as being net and inadmissible. In addition, the court found that the rulings of the trial court in the underlying matrimonial case barred the alimony malpractice claims under the doctrine of collateral estoppel. 

In Pennetti, the plaintiff, the owner of a multi-million-dollar ultrasound company, filed a legal malpractice action against the attorneys who represented her in her divorce settlement. She claimed that she received bad advice by agreeing to an anti-Lepis clause, which put her in a position where she could not move to modify her equitable distribution and alimony obligations to her ex-husband if the company performed badly. The trial court dismissed the alimony claims in the legal malpractice action based upon the doctrine of collateral estoppel. 

In a significant ruling, the Appellate Division upheld the trial court’s decision, reinforcing an important principle in legal malpractice defense: the doctrine of collateral estoppel can be used to prevent re-litigation of issues that were already decided in the underlying case. Therefore, the malpractice claims arising out of the anti-Lepis clause were barred under the doctrine of collateral estoppel, leaving only the claims in connection with the settlement of the major equitable distribution claims. Here, the plaintiff’s expert opined that the attorneys were negligent by not obtaining an up-to-date valuation of the ultrasound company prior to settlement. The trial court rejected that opinion and granted Jack’s and Jeremy’s motion for involuntary dismissal, dismissing the entire legal malpractice action. 

On appeal, the Appellate Division held that the plaintiff was required to establish she would have paid her ex-husband less than she agreed to, had the attorneys obtained a lower valuation of the business. It also ruled that the plaintiff must prove these damages with certainty under which the jury can make a fair and reasonable estimate. The court reiterated in this case that damage awards may not be based on mere speculation. 

Jack’s and Jeremy’s defense focused on the fact that the plaintiff’s expert failed to conduct a comparison of similar property settlement agreements in the venue in question, or in surrounding counties. The expert could not rationalize how the parties reached the settlement figures in the first place, and his testimony failed to address how the correct valuation would have affected the settlement or the plaintiff’s payment obligations. He acknowledged that the settlement agreement itself lacked any indication as to how the parties arrived at the settlement numbers. He also failed to testify and give a professional standard in similar matters. As a result of that and other factors, the Appellate Division affirmed the trial court’s order which barred the expert’s testimony of causation and damages regarding the legal malpractice claims arising out of the settlement of the equitable distribution claim. 

Jack and Jeremy were also able to submit into evidence the amount the divorce case settled for which was important because the plaintiff alleged the purportedly heightened value of her company led to a settlement that required her to pay more than she would, or should have, but for the attorneys’ negligence. In doing so, the Appellate Division confirmed that the trial court correctly applied the framework for expert opinions when the case was dismissed at trial.

Should you have any questions regarding this key Appellate Division decision in connection with the defense of legal malpractice actions, please do not hesitate to contact Jack (JLSlimm@mdwcg.com) or Jeremy (JJZacharias@mdwcg.com). 

 

Legal Update for Lawyers' Professional Liability - June 17, 2025, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved.

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Ray Freudiger and Michael A. Roberts (both of Cincinnati) successfully obtained summary judgment on behalf of their client in a coverage dispute arising from a May 19, 2022, motor vehicle accident. A permissive driver operated a box truck for an interstate trucking company and caused severe injuries to two tort victims. Prior to the accident, the insured had procured a commercial auto policy for the trucking company with stated limits of $1,000,000. Following the accident, the insurer initiated a declaratory judgment action asserting that only reduced bodily injury limits of $25,000/$50,000 applied and later counterclaimed, alleging it would not have insured the driver had he been properly submitted for approval under the policy. After extensive discovery, briefing, and oral argument, the court rejected the insurer’s attempt to shift responsibility for the $750,000 in coverage it was legally required to provide for permissive drivers under Ohio law, granting summary judgment in favor of the insured and preserving $750,000 in liability exposure.

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SIU Gets a Boost: NJ Supreme Court Affirms Insurers' Right to Litigate, Not Arbitrate, Fraud Claims

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Thought Leadership

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On June 25, 2026, the House passed the Financial Exploitation Prevention Act of 2025 (“the Act”) by a vote of 414 to 2. The Act allows financial advisors and firms to delay suspicious transactions regarding the accounts of clients who are 65 or older, if they believe financial exploitation has occurred or is about to take place. With the advancement of technology and AI, the House’s overwhelming bipartisan passage of the Financial Exploitation Prevention Act represents an important step in strengthening the financial industry’s ability to combat the growing threat of elder financial exploitation. The Act recognizes what advisors have long known that financial professionals are often the first to detect suspicious behavior but have historically lacked clear legal authority to intervene before irreversible financial harm occurs. From the industry’s perspective, the bill accomplishes several important objectives, including the following: (1) Provides a practical “pause button” by allowing financial professionals to temporarily delay certain transaction requests when there is a reasonable belief that a senior or vulnerable adult is being financially exploited; (2) Empowers financial professionals to act by providing greater certainty that firms can act in good faith to protect clients without unnecessary legal risk; and (3) Strengthens investor protection without sacrificing client rights by allowing temporary delays based on a reasonable suspicion of exploitation, which is intended only to allow additional review and not to deny clients access to their money indefinitely. In sum, the Financial Exploitation Prevention Act will equip financial professionals with practical, carefully tailored tools to stop suspected financial exploitation before client assets are lost. By allowing firms to temporarily delay suspicious transactions under defined circumstances, Congress is recognizing the critical role advisors play as the first line of defense against increasingly sophisticated fraud schemes. The Act strikes an appropriate balance between protecting vulnerable investors and preserving individual financial autonomy, while reinforcing collaboration among advisors, families, and law enforcement to combat financial exploitation. The bill now awaits Senate action.

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Thought Leadership

New Jersey Expands Family Leave Protections Effective July 17, 2026

On January 17, 2026, Governor Murphy signed into law legislation expanding the New Jersey Family Leave Act (NJFLA). Beginning July 17, 2026, significant amendments to the NJFLA will expand job-protected family leave to smaller businesses and more employees across the state. The new law broadens coverage by lowering the threshold for private employers from 30 employees to 15 employees, meaning many smaller businesses will now be subject to the NJFLA. Employees of state and local government agencies will continue to be covered regardless of the size of the employer. The amendments also make it easier for employees to qualify for leave. Under the revised law, an employee will be eligible after three months of employment and at least 250 hours worked during the preceding 12 months, replacing the previous requirement of 12 months of employment and 1,000 hours worked. Currently, New Jersey's Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI) programs provide eligible employees with wage replacement while they are on leave but do not independently guarantee job protection. The recent amendments to the New Jersey Family Leave Act (NJFLA) expand these protections by extending job-protected leave to additional employees. Under the amended law, employees receiving TDI or FLI benefits may be entitled to return to the same position they held before taking leave, or to an equivalent position with the same seniority, status, pay, and benefits. Although the legislation also states that it does not expand or modify an employee's reinstatement rights under the NJFLA, the amendments appear to provide job protection to eligible employees receiving TDI or FLI benefits without requiring them to separately satisfy the eligibility requirements of the NJFLA or the federal Family and Medical Leave Act (FMLA). As a result, some employees may be entitled to longer periods of job-protected leave than were previously available under existing law. With these amendments, New Jersey continues to strengthen workplace protections by expanding access to job-protected family leave for eligible employees. These changes significantly expand access to job-protected family leave and may require employers to update their leave policies, employee handbooks, and HR practices. Notably, employers who were previously not required to administer NJFLA may need to amend their policies and/or create new protocols to come into compliance with the NJFLA. Failure to do so would prove costly, as the penalties for non-compliance are significant.

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

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