APPELLATE DIVISION HOLDS THAT LIABILITY POLICY OF TENANT DOES NOT PROVIDE COVERAGE FOR LANDLORD AND ITS REAL ESTATE MANAGER

April 25, 2012

The Appellate Division in Cambria v. Two JFK Blvd., LLC, et. al. (423 N.J. Super 499) was called upon to determine whether the trial court properly found that the landlord and its real estate manager were additional insured under a liability policy of insurance issued to a tenant.  In this matter, plaintiff slipped and fell in the icy parking lot of a strip mall owned by Two JFK Blvd., LLC (“JFK”).  JFK in turn utilized the services of David Rubin (“Rubin”) as its real estate manager.  JFK Food & Deli was a tenant in the strip mall and was insured under a policy of insurance issued by Harleysville Insurance Company of New Jersey (“Harleysville”).

Under the lease with JFK Food & Deli, the landlord was to be named as an additional insured.  Further, the lease provided that the landlord was responsible for addressing snow and ice issues in the parking lot.  While the landlord coordinated snow and ice removal, JFK Food & Deli was to pay a pro rata share of the cost associated with providing those services.  The Harleysville policy defined insured as JFK Food & Deli and “any person (other than your employee), or any organization while acting as your real estate manager.”

In the underlying matter, JFK Food & Deli failed to name the landlord as an additional insured under its policy.  Regardless of this omission, JFK and Rubin argued that they should be deemed a “real estate manger” under the Harleysville policy and afforded coverage.  The trial court found that Rubin was JFK Food & Deli’s “real estate manager” and was therefore entitled coverage under the Harleysville policy.  Additionally, the trial court found that JFK was entitled to coverage under the Harleysville policy.

On appeal, the landlord and Rubin argued that they were acting as the “real estate manager” for JFK Food & Deli as they coordinated snow removal on site.  Further, they argued that the fact that the tenant paid for the snow removal services was evidence that their actions were taken on behalf of JFK Food & Deli.  Harleysville argued that Rubin was not JFK Food & Deli’s “real estate manager” and as such, the clause referencing such managers was not triggered.

The Appellate Division noted that “the question is whether – with regard to the portion of the premises where the slip and fall occurred – Rubin was acting as the landlord’s or the tenant’s real estate manager.”  To answer this question, the Court found that the “question turns on an understanding of whether the incident occurred on the lease premises or some other area of the property for which the tenant was responsible.”

In reviewing the lease, the Court found that the parking lot was not a portion of the leased premises.  Instead, the parking lot was found to be a common area.  Further, in rejecting the argument that paying a pro-rata share of the snow removal imposed a greater obligation on the tenant, the Court noted:

That a portion of the rent was devoted by the landlord to hire someone to care for the common areas, which were the landlord’s responsibility, does not alter the parties rights and    obligations regarding the common areas or render that hired person the real estate manager for the tenant.  In short, the fact that the lease explains the manner in which the owner disburses a portion of the rent does not render the tenant liable for area outside the leased premises or convert the landlord’s real estate manager into the tenant’s real estate manager.  The obligation to care for the common areas remained with the owner absent a clear and unambiguous declaration to the contrary that cannot be found in the parties’ lease.

The Court also questioned the trial court’s finding that the landlord was also considered a “real estate manager” under the Harleysville policy.

Ultimately, the trial court’s decision finding coverage under the Harleysville policy was reversed and the matter remanded to the trial court to allow the landlord and Rubin to proceed with their breach of contract claim against the tenant for failing to name them as additional insureds.


New Law Changes Rule Governing Removal of Matter From State Court to Federal Court

April 17, 2012

On January 6, 2012, the Federal Courts Jurisdiction and Venue Clarification Act (“Act”) of 2011[i], came into effect.  The Act as a whole brought changes to Federal statutes affecting venue, removal and jurisdiction.  The purpose of this article is to discuss the important changes under the Act that impact the timing requirements associated with removing an action from a State Court to Federal Court.  Under the Act, in multi-defendant litigation, each defendant now has thirty days from the date on which they were served to file a Notice of Removal to the Federal District Court.

Prior to the Act becoming effective, there was a split between Circuit Courts and within the Circuits themselves, regarding when the timing requirements for seeking removal from State Court to Federal Court began to run.  The two legal doctrines applied in addressing this issue were known as the “later-served” rule and the “first-served” rule.  Prior to the passing of the Act, the Fourth and Fifth Circuit Courts had adopted the “first-served” rule while the Third, Sixth, Eighth, Ninth and Eleventh Circuit had adopted the “later-served” rule.

Before the Act’s enactment, courts disagreed on whether the language in 28 U.S.C . § 1446 provided that the thirty-day window for filing a Notice of Removal began to run when the first defendant was served or was triggered upon the service of each defendant who was a party to the litigation.  As was noted by the Ninth Circuit Court of Appeals, the question presented to the courts was “does the first-served defendant’s thirty day clock run for all subsequently served defendants (the first-served rule), or does each defendant gets its own thirty days to remove after being served (the later-served rule)?”[ii]    Prior to the passing of the Act, 28 USC §1446 (a) provided that:   “[any] defendant or defendants desiring to remove any civil action… from a state shall file in the District Court of the United States for the district and division within which such action is pending a Notice of Removal…containing a short plain statement of the grounds for removal together with a copy of all process, pleadings, and orders served on such defendant or defendants to such action.”  Further, 28 USC § 1446(b) provided that “the Notice of Removal of the civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after service of summons upon the defendant if such initial pleading has been filed in court and is not required to be served on the defendant, whichever period is shorter.”  In interpreting this statutory language, courts found ambiguity permitting the development of the “first-served” and “later-served” rules.

The reasoning utilized to support the first-served rule was enunciated in Mcanally Enterprises, Inc. v. Mcanally, et al., 107 F. Supp.  2d 1223 (2000).  In that matter, plaintiff had originally filed a complaint in the Superior Court of the State of California.  During the course of the litigation, pleadings were amended to include defendants.  The new defendants filed a Notice of Removal within thirty days of being served with the amended complaint.  Plaintiff then filed a motion to remand the matter to state court claiming that the procedural requirements of 28 USC §1446 had not been met.  Specifically, plaintiff argued that the thirty day period for removal began to run when the first defendant was served.  Accordingly, plaintiff asserted that as the initial defendant did not seek removal within the thirty day period, removal was not appropriate.

In ordering that the matter be remanded to state court, the federal court initially noted that in multi-defendant litigation all defendants must consent to the removal  (known as the Unanimity Rule).[iii]    The court reasoned that as the initial defendant in this action did not seek removal within the thirty day timing requirement, allowing that defendant to later consent to removal sought by a newly added party would defeat the timing requirement set in the statute.    Further, the court held that applying the “first-served” rule would support the proposition that forum selection should be resolved as early as possible in litigation and that removal statutes must be narrowly construed .[iv]  Accordingly, based on this reasoning, the court determined that the thirty day time period for removal ran upon service on the first defendant.  This reasoning largely served as the basis for the “first-served” rule which was exercised by a minority of jurisdictions at the time the Act was passed.

The rationale behind the “later-served” rule was enunciated by the Third Circuit Court of Appeals in the Delalla v. Hanover Insurance et al.[v]  In that matter, plaintiff had initially been sued in connection with a trademark dispute over a line of nutritional supplements.  Plaintiff’s liability insurance carrier retained defense counsel to represent the plaintiff in connection with that action.  Defense counsel negotiated a settlement in that matter on behalf of the clients.  Subsequently, plaintiff felt the terms of the settlement were improper and filed suit against its liability carrier and its attorneys in the State Court of New Jersey.

The liability carrier was initially served and did not seek to remove the matter to Federal Court.  Former defense counsel was subsequently served and then filed a Notice of Removal.  At that time, the thirty day period to seek removal had expired for the liability carrier.  The liability carrier consented to the request to remove the matter to District Court.  The matter was subsequently removed to the District Court.  Plaintiff then filed a Motion to Remand the matter back to State Court.  Ultimately, the request to remand was denied.

On appeal, the Third Circuit addressed the issue as to when the thirty day time period for removal began to run under 28 USC §1 446.  Ultimately, the Third Circuit found that the “later-served” rule should be applied in addressing removal matters under 28 USC § 1446.  The court noted “the first-served rule not only unfairly prejudices later-served defendants, but it creates a perverse incentive system that encourages further inequity.  Under the first-served rule,  a plaintiff who wishes to remain in State Court benefits by serving a defendant who is indifferent to removal, and then waiting to serve other defendants who are more likely to wish to remove.  The rule thus incentivizes plaintiffs to take advantage of the inequities inherent under the first-served rule.  By protecting each defendant’s right to removal  without regard to whether other defendants were served earlier, the later-served rule thus removes the incentive for unfair manipulation by delaying service on defendants most likely to remove.”[vi]

The Act has now resolved the differences between the Circuit Courts in applying the timing requirements for removal.  Under the Act, 1446(b) now provides “each defendant shall have thirty days after receipt by or service on that defendant of the initial pleading or summons described in paragraph one to file the  notice of removal.”  Further, “if defendants are served at different times, and a later-served defendant files a Notice of Removal, any earlier-served defendant may consent to the removal even though that earlier-served defendant did not previously initiate or consent to removal.”  The Act also codifies the unanimity rule by providing “when a civil action is removed solely under Section 1441(a), all defendants who have been properly joined and served must join in or consent to the removal of the action.”


[i] P.L. 112-63

[ii] Destfino v. Reiswig, 630 F. 3rd 952, 955 (9th Cir. 2011)

[iii] See Chicago, Rock Island & Pacific Railroad v. Martin,  178 US 245, 248 (1900)

[iv] The decision in Mcanally was handed down prior to the Supreme Court’s decision in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 US 344 (1999), which allowed a lenient interpretation of 28 USC 1446.

[v] 660 F. 3d 180 (2011)

[vi] Id. at 187, citing Destfino, 630 F.3d at 955


APPELLATE DIVISION HOLDS THAT CHURCH MAY BE EXPOSED TO LIABILITY FOR FALL ON SIDEWALK

April 10, 2012

In Mohamed v. Iglesia Evangelica Oasis de Salvacion (2012 WL 931981), the Appellate Division held that the trial court had prematurely granted summary judgment on behalf of Iglesia Evangelica in connection with an accident arising on a sidewalk adjacent to their property.  In this matter, plaintiff was walking on the sidewalk adjacent to the church when she stepped in a depression and fell.  Plaintiff sued the church for personal injuries arising out of her fall.  Prior to the expiration of the discovery end date, the church moved for summary judgment on the basis that as a nonprofit organization, it could not be held liable for the accident.  The trial court held that under applicable law, the church was a nonprofit organization and as such summary judgment was appropriate as it owed not duty to the plaintiff.  On appeal, the court ruled that the granting of summary judgment should not have occurred and remanded the case to the trial court.

Generally New Jersey law provides that “absent negligent construction or repair, a landowner does not owe a duty of care to a pedestrian injured as a result of the condition of the sidewalk abutting the landowner’s property.”  However, an exception to the no-liability rule applies to commercial landowners.  Specifically, commercial landowners owe a duty to reasonably maintain the sidewalk abutting their property.  If they fail to do so, the property owner can be held liable for injuries that occur on the sidewalk.  The New Jersey Supreme Court has held that when a property owner is truly nonprofit, this standard of care does not apply.  However, in determining if the property owner is nonprofit, the court must look to the nature of the use of the property, not the nature of the ownership.  Specifically, the Court has established that “the status of a nonprofit organization as religious or charitable is not crucial to a determination of whether the property is commercial or residential.”  Instead, “it is the use of the property that determines its classification for the purposes of abutting sidewalk liability.”

Discovery in the Mohamed case revealed that the church would allow members and non-members to utilize its parking lot for commuting purposes.  The church would receive donations for such usage.  Additionally, the Church kept two ledgers for those donations, one for members of the church and the other for nonmembers.  It was estimated that the church received approximately $1,000 in donations from the use of the parking lot.  Further, the church allowed its members to use its basement hall for parties.  Again, individuals utilizing the hall would give a donation of approximately $300 to the church.

In reversing the trial court’s decision, the Appellate Division cited cases in which nonprofit organizations owned property, but utilized a portion of their property for commercial activities.  For example, the Appellate Division noted the case in which a religious institution operated a private school on its property.  In such a circumstance, the Court ruled that the church was a “commercial landowner” and could be held responsible for a slip and fall on ice on the sidewalk abutting their property.  In another case, the court held that a church was a “commercial landowner” when it provided rental apartments for needy families.  Despite charging rent under fair market value and no rent at all, the court ruled that the church could be held liable for an accident which occurred on a sidewalk which abutted their property.

The ruling in Mohamed reaffirms precedent that despite holding a nonprofit or charitable designation, a property owner can still be held liable for accidents which occur on an abutting sidewalk.  In determining whether such a landowner is exposed to liability does not rest on its designation.  Instead, an evaluation must be undertaken to determine if the property owner engages in conduct on the property which made be deemed a commercial exercise.  If the property owner does engage in commercial conduct, case law establishes that liability may attach for accidents on adjacent sidewalks.


Lawyer’s Suit Against Avvo Dismissed, Ordered to Pay Avvo’s Attorney Fees

April 2, 2012

A lawsuit filed by a Florida attorney against Avvo (a website that profiles attorneys and provides ratings) alleging defamation, false advertising and misrepresentation was dismissed by a Federal Court in Washington State.  Additionally, under Washington’s anti-SLAPP (Strategic Lawsuit Against Publication Participation) statute, the plaintiff was ordered to pay Avvo its attorney fees and a $10,000 penalty.

In the underlying case, plaintiff was approached by a prospective client to represent her in an employment matter.  The prospective client allegedly indicated to the attorney that as he had a “low rank” on Avvo, he should be eager to take her case.  Upon learning of the “low rank”, the plaintiff attempted to correct errors in his profile and have his name removed from Avvo’s database.  These activities were unsuccessful.  Plaintiff subsequently filed a lawsuit against Avvo in Florida.  Avvo then moved to transfer venue to Washington based on a choice of law provision in their user agreement.  The motion to transfer was granted and the case was heard in Washington.

Relying on applicable law and Washington’s anti-SLAPP statute, the Federal District Court dismissed plaintiff’s claim and ordered that Avvo’s attorney fees be reimbursed as well as pay a $10,000 statutory penalty.

The Court’s decision can be found here..http://media.avvo.com/avvo-press/Avvo_AntiSlappMotion_Ruling.pdf