diff --git a/llm-proxy/backend/src/controllers/ProxyController.js b/llm-proxy/backend/src/controllers/ProxyController.js
index c5850e1..38aeed9 100644
--- a/llm-proxy/backend/src/controllers/ProxyController.js
+++ b/llm-proxy/backend/src/controllers/ProxyController.js
@@ -146,6 +146,47 @@ async function proxyToOllama(req, res) {
 
     } catch (e) {
         logger.error(`❌ Internal Server Error [${shortHash}]: ${e.message || e}`);
+
+        // If the payload expects JSON, return a valid fallback JSON response instead of a raw 500/502 error object
+        // to prevent the App Script pipeline from crashing when trying to parse the error text.
+        let expectsJson = false;
+        if (payload.response_format && payload.response_format.type === "json_object") {
+            expectsJson = true;
+        } else if (messages) {
+            for (const msg of messages) {
+                if (msg.content && msg.content.toLowerCase().includes("json")) {
+                    expectsJson = true;
+                    break;
+                }
+            }
+        }
+
+        if (expectsJson) {
+            const fallbackJson = JSON.stringify({
+                final_evaluation: {
+                    decision: "Error",
+                    exclusion_code: "N/A",
+                    reasoning: `Server Error: ${e.message || String(e)}`
+                },
+                logic_trace: {}
+            });
+
+            return res.status(500).json({
+                id: `error-${Date.now()}`,
+                object: 'chat.completion',
+                created: Math.floor(Date.now() / 1000),
+                model: payload.model || "unknown",
+                choices: [{
+                    index: 0,
+                    message: {
+                        role: "assistant",
+                        content: fallbackJson
+                    },
+                    finish_reason: "stop"
+                }]
+            });
+        }
+
         if (e.message && e.message.includes('fetch')) {
             return res.status(502).json({ error: `Ollama connection error: ${e.message}` });
         }
diff --git a/llm-proxy/backend/src/services/RoutingService.js b/llm-proxy/backend/src/services/RoutingService.js
index 5743348..58c76a6 100644
--- a/llm-proxy/backend/src/services/RoutingService.js
+++ b/llm-proxy/backend/src/services/RoutingService.js
@@ -68,7 +68,23 @@ class RoutingService {
                 } else {
                     logger.warn(`⚠️ Invalid JSON detected for [${reqHash.substring(0, 8)}] on attempt ${attempt + 1}/${maxRetries}. Retrying...`);
                     if (attempt === maxRetries - 1) {
-                        throw new Error("LLM failed to produce valid JSON after retries.");
+                        logger.warn(`⚠️ Exhausted retries for [${reqHash.substring(0, 8)}]. Returning fallback error JSON.`);
+                        const fallbackJson = JSON.stringify({
+                            final_evaluation: {
+                                decision: "Error",
+                                exclusion_code: "N/A",
+                                reasoning: "LLM failed to produce valid JSON after retries."
+                            },
+                            logic_trace: {}
+                        });
+
+                        // Overwrite the content with our fallback
+                        if (responseData && responseData.choices && responseData.choices.length > 0) {
+                            if (!responseData.choices[0].message) {
+                                responseData.choices[0].message = { role: "assistant" };
+                            }
+                            responseData.choices[0].message.content = fallbackJson;
+                        }
                     }
                 }
             } else {
diff --git a/llm-proxy/backend/src/utils/parsers.js b/llm-proxy/backend/src/utils/parsers.js
index 4182df8..be43f29 100644
--- a/llm-proxy/backend/src/utils/parsers.js
+++ b/llm-proxy/backend/src/utils/parsers.js
@@ -1,14 +1,59 @@
 function optimisticRepairJson(text) {
-    // A robust regex to find JSON string values and escape unescaped double quotes and newlines
-    const pattern = /("\w+"\s*:\s*")([\s\S]*?)("\s*(?:,|}|]))/g;
+    // 1. Repair quotes in flat string values
+    const pattern = /("\w+"\s*:\s*")([\s\S]*?)("\s*(?:,|}|\]))/g;
+
+    let repaired = text.replace(pattern, (match, start, content, end) => {
+        // If content contains standard object/array syntax or looks like nested JSON mapping, skip quote repair
+        if (/\{\s*\\?"\w+\\?"\s*:/.test(content)) {
+            return match;
+        }
 
-    return text.replace(pattern, (match, start, content, end) => {
-        // Escape double quotes by unescaping first to avoid double-escaping, then escape all
         let repairedContent = content.replace(/\\"/g, '"').replace(/"/g, '\\"');
-        // Escape newlines
-        repairedContent = repairedContent.replace(/\n/g, '\\n').replace(/\r/g, '');
         return start + repairedContent + end;
     });
+
+    // 2. Safely encode newlines and control characters everywhere inside strings
+    let inString = false;
+    let escapeNext = false;
+    let result = '';
+
+    for (let i = 0; i < repaired.length; i++) {
+        const char = repaired[i];
+
+        if (escapeNext) {
+            result += char;
+            escapeNext = false;
+            continue;
+        }
+
+        if (char === '\\') {
+            result += char;
+            escapeNext = true;
+            continue;
+        }
+
+        if (char === '"') {
+            inString = !inString;
+            result += char;
+            continue;
+        }
+
+        if (inString) {
+            if (char === '\n') {
+                result += '\\n';
+            } else if (char === '\r') {
+                // skip
+            } else if (char === '\t') {
+                result += '\\t';
+            } else {
+                result += char;
+            }
+        } else {
+            result += char;
+        }
+    }
+
+    return result;
 }
 
 function extractJsonFromMixedText(text) {