Teresa Giudice, one of the stars of Bravo’s hit reality show The Real Housewives of New Jersey, is suing her former bankruptcy lawyer, James A. Kridel, alleging legal malpractice, breach of contract, and breach of fiduciary duty. Kridel represented Teresa and her husband, Joe, when they filed for bankruptcy back in 2009. Teresa is now blaming Kridel for the fifteen-month federal prison sentence she must serve beginning on January 5 as a result of pleading guilty to four out of thirty-nine charges of fraud.
Even after filing for bankruptcy, the RHONJ stars continued to rack up enormous bills.
On October 29, 2009, Teresa and Joe Giudice filed for bankruptcy, claiming they were in over $10 million in debt, owing money to credit card companies, mortgages on multiple properties, construction services, and more. The couple blamed their debt on the downturn in the economy, which caused their annual income to quickly decrease.
Even after filing for bankruptcy, the RHONJ stars continued to rack up enormous bills. Television cameras documented their spending sprees, including paying $120,360 in cash to furnish a single room in their new $1.7 million dream house. The couple’s actions caught the attention of the IRS, and they were subsequently audited.
Teresa and Joe pled guilty in March 2014 to submitting phony loan applications to get $5 million in mortgages and construction loans, and to hiding assets from the bankruptcy court.
In July 2013, the Giudices were indicted on thirty-nine counts including conspiracy to commit mail and wire fraud, bank fraud, making false statements on loan applications and bankruptcy fraud. Teresa and Joe pled guilty in March 2014 to submitting phony loan applications to get $5 million in mortgages and construction loans, and to hiding assets from the bankruptcy court. Teresa must report January 5 to federal prison to serve a fifteen-month sentence. Joe’s forty-one-month sentence will begin after Teresa is released. The couple will also owe over $400,000 in restitution and Joe must pay $224,211 in back taxes.
During sentencing, Judge Esther Salas of the U.S. District Court for the District of New Jersey criticized and reprimanded Teresa and Joe for continued omissions in their financial disclosure statements to the court. Salas even told Teresa that she was considering giving her probation instead of prison time, but changed her mind because of all of the discrepancies (totaling more than $75,000) between what the prosecutors had listed as the couple’s assets and what the couple had reported to the court. Salas scolded Teresa, stating that she was unsure that if “[Teresa] respect[s] the court, [our] laws, nor understand[s] what [she] has done.”
After sentencing, Teresa’s former bankruptcy attorney, Kridel, told the media “it [was] possible that [Teresa] may have committed the crimes unknowingly.” He explained that the spouse not in charge of finances signs forms all of the time not knowing any information just because the accountant tells them to do so. Kridel added that being in the “spotlight” ultimately hurt the couple when it came to their legal case.
Ultimately, Teresa blames Kridel for her and Joe’s fraud convictions and prison sentences.
On December 2, 2014, Teresa filed a lawsuit in the New York County branch of Supreme Court of the State of New York. The lawsuit seeks $5 million in damages from Kridel for legal malpractice, breach of contract, and breach of fiduciary duty.
In the filing (pdf) Teresa claims it was Kridel who “failed to report the family’s earnings in full on the bankruptcy petition and that Kridel never met or spoke with Teresa before he filed their claim.” Therefore, Teresa claims Kridel mishandled their entire bankruptcy case back in 2009, even though it was dropped in 2011. Ultimately, Teresa blames Kridel for her and Joe’s fraud convictions and prison sentences.
Teresa also alleges that Kridel “failed to perform a reasonable investigation concerning the petition, schedules, and statement of financial affairs.” Giudice’s current attorneys add that there were numerous problems with the bankruptcy petition, including failure to list the plaintiff’s employment, the failure to list the plaintiff’s income from her employment, the failure to identify any automobiles which were owned or leased at the time, the failure to identify certain business interests, the failure to list income from rental property, and the failure to list certain bank accounts. Further, Kridel failed to “exercise the degree of reasonable knowledge and skill that lawyers of ordinary ability and skill possess” and, therefore, caused Teresa “loss of income, legal fees, botched business deals, and public ridicule.”
The first cause of action in the lawsuit is for legal malpractice or negligence. In order to sue for legal malpractice, the plaintiff must prove an attorney-client relationship existed, there was a breach of the duty to provide skillful and competent representation (negligence), causation, and a financial loss (damages). Teresa states in the complaint that an attorney-client relationship existed when Kridel was hired by Teresa and her husband to file a joint Chapter 7 bankruptcy case on their behalf; Kridel breached his duty when he failed to exercise the degree of reasonable knowledge, skill, and care that an ordinary lawyer in the same position would possess; Kridel’s negligence proximately caused, and was a substantial factor in causing, Teresa’s damages, and but for his negligence, Teresa would not have suffered those damages; and Teresa suffered and continues to suffer from damages in the monetary amount of at least $5 million.
The second cause of action in the lawsuit is for breach of contract. The complaint states that a contract was formed when an agreement was made for Kridel to perform legal services for the Giudice family and in return be compensated for it; Kridel breached this contract when he did not perform obligations under the contractual agreement; and as a result of this breach of contract, Teresa has suffered damages in the monetary amount of at least $5 million.
Finally, the third cause of action is for breach of fiduciary duty. The complaint claims Kridel breached his fiduciary relationship with Teresa when he knew, or reasonably should have known, that he was incompetent to represent her; Kridel covered up his legal malpractice throughout the bankruptcy case; and he failed to properly advise Teresa in connection with her deposition. Therefore, Teresa has suffered damages in the monetary amount of at least $5 million.
“These are not innocent people who got caught in circumstances beyond their control. They filed for bankruptcy so they don’t have to pay.”
There has been no shortage of critics coming forward to say that the Giudices have no one but themselves to blame for their predicament.
Architect Jon Fellgraff said Teresa wanted unrealistic features in their million dollar mansion and that she had “no concept of finances.” Fellgraff is still owed $7,000 for designing the couple’s Montville Township home. Teresa’s former crisis manager, Wendy Feldman, told reporters that she believed Teresa’s problems were her own, despite the fact Teresa is blaming Kridel. Bob Kaslander, owner of Excelsior Lumber, is owed over $90,000. Kaslander says, “These are not innocent people who got caught in circumstances beyond their control. They filed for bankruptcy so they don’t have to pay.”
Joe’s former business partner, Joe Mastropole, has filed a lawsuit of his own against the Giudices. He is owed $586,000 and claims any money he gave to Joe for apartment buildings they co-owned simply went toward paying the Guidices’ personal bills. Ruby Persha, a former tenant in one of the arpatment buildings, sued Joe for failing to fix a staircase that ultimately injured her. She won the lawsuit by default because Joe never answered the complaint, and he still owes her $129,000. Persha said Joe “did everyone dirty.” Whether Kridel or the Giudices are to blame for their own legal troubles will ultimately be up to the court to decide.