Malpractice Suit's Late Filing Spares Lawyer Liability for 'Dubious' Advice
A New Jersey lawyer who allegedly gave a client "dubious" advice about the tax implications of her divorce has dodged her malpractice suit — but only because it came too late.
The client's cause of action accrued when she realized a vital provision was missing from her divorce judgment — not 11 years later when the Internal Revenue Service came calling.
The "attorney's affirmative act of giving negligent advice has an immediate effect, even if the extent of the negative consequences remains uncertain," the Appellate Division said in Venturi v. O'Donnell, A-1198-12.
According to the opinion, Edward O'Donnell represented Marcia Venturi nearly 14 years ago in a divorce settlement with her husband, Giovambattista Venturi.
O'Donnell, then with Skoloff & Wolfe in Livingston, recited the settlement terms at a hearing, including a provision that the husband's alimony payments of $3,200 a month would not be deductible by him nor taxable to Venturi.
But when the judgment that O'Donnell drew up was issued four months later, in April 1997, it made no mention of the alimony payments' taxability.
Venturi realized the exclusion when she received her copy, and called O'Donnell the same day.
Venturi claimed O'Donnell told her "not to worry" unless her ex-husband claimed alimony as a tax deduction.
O'Donnell has disputed giving that advice, contending that he told Venturi he needed to revisit the file, according to Venturi's current attorney, Peter Ouda.
Venturi called her ex-husband to remind him that the alimony payments were not to be taxable, to which he allegedly responded: "What's the matter? Do you think you will get in trouble if I claim it?"
No changes were made, and for 11 years Venturi did not report her alimony income.
The IRS notified her in 2008 that she owed about $12,800 in federal back taxes.
After challenging the IRS audit and petitioning the Family Part to amend the judgment, both unsuccessfully, Venturi filed a complaint against O'Donnell and Skoloff & Wolfe in January 2012.
The defendants claimed Venturi's cause of action came about at the time she confronted O'Donnell about the omission. Essex County Superior Court Judge Michael Hubner agreed and granted summary judgment, finding the filing beyond the six-year statute of limitations.
"I do not believe that her attorney's response somehow placed her in a place  of perceived safety where the discovery rule would carry her forward," Hubner said.
Venturi appealed, arguing that she did not suffer actual damages until 2008.
On Friday, Appellate Division Judges Anthony Parrillo and Jonathan Harris disagreed and affirmed, deeming Venturi "aware in 1997 that she had a significant problem" with tax liability.
The discovery rule applies only to tardy litigants who are unaware of the injury or the party responsible. Venturi falls into neither category, the court said.
The panel called O'Donnell's alleged advice a "wholly unsatisfactory" solution that "left Venturi in the exact state of affairs that she did not want to be in, that is, subject to the whim" of her ex-husband.
Her concerns "prompted her immediate communication with O'Donnell, who provided her with the dubious guidance of not worrying about it unless her ex-husband was actually to claim the alimony as a deductible expense," the court said.
"Possessed of this disquieting advice, Venturi did nothing, waiting while the trigger to the taxation time bomb remained in the hands of Giovambattista Venturi," the panel continued, adding that Venturi's "repose was unwarranted."
Ouda, a Somerville solo, says Venturi "was just too trusting."
O'Donnell "should've been much more cogent in telling her that her interpretation" of the settlement did not conform with the written version, Ouda says.
"What she actually did — which was to do nothing — seemed to be based on his advice to sit tight," Ouda adds. "It just didn't make sense to me that she would do nothing."
O'Donnell, now with Newsome O'Donnell in Florham Park, did not return a call. Neither did his lawyer, Marshall Bilder of Eckert, Seamans, Cherin & Mellott in Trenton.
O'Donnell — a certified matrimonial attorney, ICLE instructor, State Bar Family Law Section executive committee member since 1995 and Essex County Bar president in 2008-09 — has avoided liability in at least two other malpractice actions.
In a 2008 decision, Burke v. Skoloff & Wolfe, an appeals court rejected claims by an ex-client who sought to recover attorney fees incurred when a divorce settlement O'Donnell crafted was challenged on appeal and had to be modified on remand. The difficulties the client encountered "would appear to stem from [her] stubbornness and intractability," the court said.
In January 2012, another appeals panel upheld dismissal of a malpractice case against O'Donnell in Goodwin v. Donahue, Hagan, Klein, Newsome & O'Donnell. The ex-client sued because O'Donnell, on the eve of trial, recommended arbitration, which wound up being more expensive and time-consuming. Lawyers can't be held liable for giving reasonable advice, the court said. The plaintiff in Goodwin, like Venturi, was represented by Ouda. •