A New Jersey Appellate Division Court holds that the plaintiffs were precluded from utilizing a Social Security Administration disability determination in a personal injury action

November 6, 2013

On October 28, 2005, the plaintiff was involved in a rear-end motor vehicle accident.  The defendant Zimmer was stopped behind the plaintiff.  The defendant DeRosa, driving a van, struck the rear of the Zimmer, pushing Zimmer’s vehicle into the rear of the plaintiff’s vehicle.  The police responded and the plaintiff advised that she was OK and drove away from the scene.  Later, the plaintiff felt sore and went to the emergency room.

 About four months after the accident, the plaintiff began treatment with a chiropractor for back and neck pain.  The plaintiff was referred to Dr. Kaul, a specialist in interventional pain and minimally invasive spine surgery.  Dr. Kaul found the plaintiff had bilateral L5-S1 radiculopathy and tears in discs at L4-5 and L5-S1.  The plaintiff underwent lumbar steroid injections. Eventually, Dr. Kaul recommended spinal fusion therapy; however, the plaintiff declined.

  At trial, the plaintiff testified that she did not return to work as a seamstress because of pain and inability to perform her job functions.

 The defense produced an orthopedic surgeon who testified that the plaintiff was 5’5” and weighed over 300 lbs.  He found no objective evidence of injuries from the accident and that the plaintiff’s back problems were common in overweight individuals.  A radiologist testified that he had reviewed the MRI films and found they showed no evidence of herniated discs or annular tears, but did show age related disc degeneration.

 On June 24, 2007, the Social Security Administration (SSA) issued a four-page Notice of Award finding that the plaintiff became disabled on October 28, 2005.  Prior to trial, defense counsel filed an in limine motion seeking to preclude the plaintiff from introducing any evidence or testimony pertaining to the SSA disability determination.  The plaintiff argued that the determination creates a rebuttable presumption that the plaintiff was disabled and unable to work as a consequence of the accident.  The plaintiff also argued they should be able to cross-examine the defendant’s orthopedic expert with the SSA findings.  The trial court precluded the use of the SSA determination.

 It should be noted that during closing arguments, defense counsel stressed that there was no medical testimony that the plaintiff was unable to work.  Plaintiff’s counsel objected and the court found the defense counsel had “opened the door.”  The jury was then advised that the plaintiff was determined to be disabled by SSA.  The jury returned a unanimous verdict finding the plaintiff did not sustain an injury as a proximate result of the accident of October 28, 2005.

 On appeal, the court first observed that they were not faced with the concepts of res judicata or collateral estoppel since the defendant was neither a party nor in privity with a party to the proceedings before the SSA.

 The Appellate Court also noted that the SSA determination was hearsay.  The court found that the only hearsay exception that may apply to the case was the public records exception under NJRE 803(c)(8).  This evidentiary rule notes, “ (A) that a statement contained in a writing made by a public official of an act done by the official or an act, condition or event observed by the official if it was within the scope of the official’s duty either to perform the act reported or to observe the act, condition or event reported and to make the written statement.”

In rendering its decision, the court looked to Phillips v. Erie Lackawanna RR Co., 107 N.J. Super. 590 (App. Div. 1969), wherein the Appellate Division held the factual conclusions of the hearing examiner of the Public Utility Commission respecting the hazards posed by a particular grade crossing and the Board’s decision directing installation of protective lights and bells was hearsay and not admissible.  The Phillips’ court noted that it is “clearly the intent of the drafters not to allow in evidence conclusionary material resulting from official investigations embodied in statements or reports of the official or agency involved.”  The court also noted that under various Federal Districts and Circuits, the consensus is to favor the view that legal conclusions are not admissible as findings of fact under the Rule.

 The Appellate Court also noted that the cornerstone of the public records exception is trustworthiness.  In this case, a court must be cautious about the use of an administrative determination that may be predicated upon a different, more lenient standard.  Thus the court found that NJRE 803(c)(8) does not authorize the admission of an SSA Determination of Disability as a hearsay exception.

 Lastly, the court highlighted that the SSA Disability Determination is of dubious probative value in a personal injury action.  The lack of a meaningful adversarial process with respect to the cause, existence and extent of the plaintiff’s alleged disability renders the SSA conclusions on that issue unreliable.  Conversely, the court noted that the defendant may suffer real and significant prejudice from the admission of the SSA Disability Determination.  The jury may inappropriately give weight, based on the fact that SSA is a government agency, to its conclusions that the plaintiff suffered a disability.


Appellate Division Holds That Expert Is Not Permitted To Provide Opinion With Regard To Proximate Cause

November 1, 2013

            The Appellate Division has held that an expert witness cannot provide an opinion with regard to proximate cause.  In rendering its decision, the Court noted that “proximate cause is a factual issue, to be resolved by the jury after appropriate instruction by the trial court.”

            At issue in Wilkey v. Mayer was a motor vehicle accident involving the defendant striking the plaintiff as she was crossing a street with her car.  In order to prove her case, plaintiff retained the services of an accident reconstruction expert.  At the time of trial, plaintiff sought to offer this expert to explain to the jury how the accident happened.  In his report, and in his testimony, the expert opined that the defendant had an unobstructed view of the plaintiff for 300 feet before impact.  He further opined that if the defendant had seen the plaintiff at a distance of 300 feet, she would have had sufficient time to apply her brakes and avoid striking the plaintiff.

            Prior to offering this testimony to the jury, a Rule 104 hearing was held.  The defendant objected to the expert’s conclusions on the basis of them being net opinions.  Specifically, the defendant contended that the expert had not considered all evidence produced in discovery which would challenge his ultimate opinions.

            The trial court ruled that the expert could not testify that the defendant failed to use due caution.  However, over the defendant’s objection, the court ruled that the expert could give an opinion on proximate causation and the defendant could challenge the opinion on cross examination.  Accordingly, the expert was allowed to testify that “the defendant’s actions by failing to make observations of plaintiff crossing the roadway during clear daylight conditions, was the proximate cause of the accident.”  The expert then repeated on cross examination on two occasions that the defendant’s failure to observe the plaintiff was the proximate cause of the accident.  In an attempt to rebut this testimony, the defendant than attempted to question the expert on whether there could be more than one proximate cause of an accident.  Despite the trial court’s ruling that the defendant could challenge the expert’s ultimate opinions, the court would not allow that line of questioning, ruling “that’s a question of law for the Court.  I’ll define proximate cause to the jury at a later time.  The expert’s definition of proximate cause will not help this jury.”

            During jury deliberations a question regarding proximate cause arose.  The parties agreed to give the jury the Model Charge for proximate cause.  Subsequently, the jury returned a unanimous verdict that the defendant was negligent and awarded $600,000 in damages.  The defendant than appealed.

            In reviewing this case, the Court noted that “it is the court’s function, not that of an expert, to interpret the law” and the concept of proximate cause is of “legal significance.”  It is the responsibility of the trial judge, “where the question of ‘proximate cause’ is involved, to explain to the jury in simple terms what the law means by that expression and to illustrate the application of its legal principles to the facts to the particular case which he is trying.”

            The court found that in this case, plaintiff’s expert usurped the function of both the court and the jury when he repeatedly testified that the defendant’s conduct was the proximate cause of the accident.  While the expert was qualified to reconstruct things such as the defendant’s rate of speed, plaintiff pace and path of travel across the roadway and sight lines, “nothing in his background gave him any special ability to apply legal concepts of proximate cause and comparative negligence to the facts that he had reconstructed.”

            In vacating the liability finding, the court found that the trial court committed error by permitting the expert to express an opinion with regard to proximate cause.  This was further exacerbated by the court refusing to allow the defendant to cross examine the expert on whether the plaintiff’s actions could be a proximate cause of the accident.

            Due to this error, the Appellate Division reserved and remanded the matter for a new trial on liability.  The damage award was not disturbed as the defendant did not challenge same in its appeal.


NJ Court Holds that Mediator Cannot Also Serve As An Arbitrator

October 23, 2013

 

Minkowitz v. Israeli (A-2335-11T2)

 

The New Jersey Appellate Division has held that an individual retained to serve as an arbitrator cannot act as a mediator and then return to the role of arbitrator.

The Appellate Division has held that when parties to a dispute elect to submit a matter to binding arbitration, an arbitrator may not initially act as a mediator and then return to the role of an arbitrator unless the parties agree in writing to allow that individual to serve in that dual role.  In this case, the court held:

 mediation, although a form of Alternative Dispute Resolution, differs from binding arbitration…We conclude the differences in the roles of these two types of dispute resolution professionals necessitate that a mediator, who may become privy to party confidence in guiding disputants to a mediated resolution, cannot thereafter retain the appearance of a neutral fact finder necessary to conduct a binding arbitration proceeding.  Consequently, absent the parties’ agreement, an arbitrator appointed under the [Uniform Arbitration Act] may not assume the role of mediator and, thereafter, resume the role of arbitrator.

 In Minkowitz v. Israeli, the plaintiff filed for divorce from her husband of 14 years.  Following the filing of the divorce proceedings, the parties agreed to decide financial issues via binding arbitration and agreed that all custody and parenting plan issues would be reviewed in nonbinding arbitration.  The parties agreed to engage a single arbitrator and a jointly chosen forensic accountant.  To memorialize this understanding, the parties entered into a written arbitration agreement setting forth the issues to be presented to the arbitrator, which decisions of the arbitrator would be binding, which decisions would be non-binding and the scope of the arbitrator’s powers.  Further, the arbitration agreement noted that any person participating in the arbitration would “have the right to be provided copies of all documents presented to the arbitrator.”

 Initially, the arbitrator met with both parties prior to the commencement of arbitration hearings. The parties at that point decided to engage in settlement discussions and mediation in an attempt to narrow issues for final determination.  During the mediation process, the parties relied on the jointly chosen forensic accountant to offer recommendations regarding resolution of certain financial issues.  If the parties accepted the recommendation, a written agreement would be prepared regarding specific issues.

 Through this process, the parties were successful in resolving a number of issues.  The resolution of these issues resulted in four separate “settlement” agreements which were entered into during 2009 and memorialized in writing.  Once of these agreements noted that its contents had been reached “between the parties…after mediation with the assistance of the arbitrator and financial adviser.”  In these agreements, the parties agreed to such issues as waiving the rights to one another’s medical practice and respective claims for equitable distribution.  After the four agreements were reached by the parties, but before specific terms were formalized, plaintiff hired co-counsel to assist in finalizing a Property Settlement Agreement.  In doing so, co-counsel requested a meeting with the forensic accountant to review his findings which served as the underpinnings of the parties’ previous agreements relating to the property settlement.  The defendant objected, claiming that all of these matters were settled and disclosure was not necessary.  This in turn resulted in a flurry of letters to the accountant and arbitrator.

 The arbitrator denied plaintiff’s request to meet with the forensic accountant and/or review his records.  At this point, plaintiff’s original counsel filed an application with the Family Part to be relieved and substitute co-counsel as plaintiff’s attorney of record.  Plaintiff’s new counsel then moved before the family part for an Order requiring the forensic accountant to produce all evaluations of the parties’ finances.  The Family Part denied this motion stating that the parties had agreed that all financial aspects would be subject to binding arbitration.  Plaintiff then filed a motion with the arbitrator seeking his recusal or alternatively requesting the production of the forensic accountant’s financial documents.  In that motion, plaintiff’s counsel inferred bias by noting that the arbitrator had served both as a mediator and arbitrator throughout the proceeding.  Defendant opposed plaintiff’s request and sought attorney’s fees.  In rendering his decision, the arbitrator noted that “my role was to make recommendations, when requested, on the various financial issues…at no time did I assume the role of mediator.  I did not participate in the discussions of the financial information.”  The arbitrator subsequently rejected plaintiff’s request for releasing the financial documents she sought.  Plaintiff then returned to the Family Part seeking to reverse the arbitrator’s refusal to disclose the records sought.  This motion was denied by the trial court.

 The parties then returned to arbitration hearings.  During these proceedings, the defendant requested certain relief from child support which plaintiff objected to.  The arbitration hearing was conducted and was adjourned pending additional submissions by the parties.  The arbitrator rendered an award with regard to outstanding issues pertaining to the parties and on March 17, 2011, issued and order incorporating the parties’ 2009 settlement agreements, forensic accountant’s spreadsheets calculating debts and credits, the income schedules the forensic account prepared supporting the calculation of child support, and his decisions following the hearing.

 Plaintiff continued to seek to have the 2009 agreements vacated along with the other arbitration orders.  To do so, Plaintiff submitted to the arbitrator a certification of the defendant’s ex-fiancée which stated that the forensic accountant was biased against the plaintiff.  In the certification, the ex-fiancée claimed that she had been told by the defendant that the accountant “was going to make sure that everything was taken care of…a little birdie told me [the forensic accountant] got it covered.”  Additionally, the certification provided that the defendant had significantly underreported his income.  The defendant opposed the application and cross-moved for attorney’s fees.  The arbitrator found that the ex-fiancée was not “completely objective” and that the forensic accountant had acted in a neutral capacity throughout the proceedings.  The arbitrator rejected plaintiff’s request for vacating the 2009 orders and other arbitration decisions and reserved on defendant’s fee requests.  Ultimately, the arbitrator issued an award finding that the plaintiff was responsible for certain attorney fees incurred by the defendant following the last 2009 agreement.

 The defendant then moved in the Family Part to confirm the arbitration award.  Plaintiff cross-moved to vacate the award and all underlying agreements that were incorporated therein.  The plaintiff further sought to terminate the services of the arbitrator and forensic accountant, to reopen discovery and to select a new arbitrator and expert.  The trial court granted defendant’s motion to confirm the award and denied the plaintiff’s cross-motion.  The court did however deny defendant’s request for enforcing the arbitrator’s award allocating attorney’s fees.  Plaintiff then appealed the trial court’s decision.

 In rendering its decision, the Appellate Division noted that neither party to the action contested the consensual agreement to submit all financial disputes to binding arbitration.  In fact, the court found that as arbitration is a “creature of contract”, it is permissible for parties to an action to select which aspects of the action shall be arbitrated.  The court further noted that the Uniform Arbitration Act allows parties to define arbitration proceedings and the methods in which they are to be conducted.

 The court emphasized that,  “when binding arbitration is contracted for by litigants, the judiciary’s role to determine the substantive matter subject to the arbitration ends.  Arbitration should spell litigation’s conclusion, rather than it’s beginning.”  Once binding arbitration is selected, the court’s powers are generally limited to:  enforcing orders or subpoenas issued by the arbitrator, confirming an arbitration award, correcting or modifying an award  and in very limited circumstances, vacating an award.    Further, the court noted that an arbitration award can only be vacated upon proof that the award was procured through corruption, fraud or undue means, partiality of the arbitrator which results in prejudicing the rights of a party to the arbitration proceedings, the arbitrator refusing to postpone a hearing or refusing to consider evidence of material to the controversy which prejudices the rights of the party, and the arbitrator exceeding his powers.

 Importantly, the court recognized that while the scope of review of an arbitration award is limited by the Arbitration Act, the parties can contractually agree to expand judicial review.  The court noted that:  “for those who think the parties are entitled to a greater share of justice, and that such justice exists only in the care of the court…the parties are free to expand the scope of judicial review by providing for such expansion in their contract; that they may, for example, specifically provide that…awards may be reversed either for mere errors of New Jersey law, substantial errors, or gross errors of New Jersey law and define therein what they mean by that.”

 In this case, plaintiff alleged that due to the arbitrator acting as a mediator, all of the “settlement” agreements reached by the parties and subsequent arbitration decisions should be vacated.  With regard to the instant case, the court found that, “this case unraveled because the parties agreed to arbitration, then chose to do something else.”  While it is not improper to engage in settlement discussions when agreeing to arbitration, the potential problem arises when the arbitrator acts as a mediator.  In rendering its decision, the court focuses on the difference between a mediator and an arbitrator.  Specifically, the court notes that a mediator, in order to attempt to facilitate a resolution to a case, will seek confidential information from the parties and attempt to use that information to “push” the parties towards settlement.  Once a mediator undertakes this role, it is impossible for that individual to be a neutral fact finder which is essential to conducting a binding arbitration.  Accordingly, the court found that an individual serving in both capacities create inherent problems.  Regardless, the court held that parties may enter into an agreement whereby an arbitrator may assume the role of a mediator and thereafter resume the role of an arbitrator.  However, absent such agreement, “an arbitrator under the act may not assume the role of mediator and, thereafter, resume the role of arbitrator.”

 Ultimately, in this case, the court found that the arbitrator engaged in mediation in seeking to obtain settlement agreements reached in 2009.  Further, the court found that parties entered into subsequent agreements between arbitration hearings.  Ultimately, the court found those “settlement” agreements entered into by the parties enforceable.  However, those orders/decisions entered by the arbitrator after he engaged the parties as a mediator were not enforceable.

 The court reflected that arbitration, particularly binding arbitration, must be purposefully chosen, and the parameters must be designated in a contract between the parties.  “If binding arbitration is selected as the forum for resolution disputes, a litigant cannot jump back and forth between the court and the arbitral forum.  By its very nature, arbitration does not permit such a hybrid system…the parties held in mistaken belief that court intervention was permitted to check the decisions of the arbitrator.  This is untenable.”  The court continued “The Act’s provisions are unmistakable:  once binding arbitration is chosen and the arbitrator is named, the court is no longer involved in reviewing or determining the substantive issues.”

 Accordingly, the court found that the 2009 agreements and other agreements reached thereafter by the parties were enforceable.  However, the court found that decisions rendered by the arbitrator after he assumed the role of the mediator were not enforceable and were vacated.  Additionally, the court ordered the new arbitrator to request for documents in light of the agreement to arbitrate.  The court, in turn, vacated those orders of the arbitrator and remanded the case for new arbitration proceedings before a new arbitrator.


NJ Supreme Courts Rules — Put Your Settlement Agreements in Writing

October 18, 2013

 

  WILLINGBORO MALL, LTD. v. 240/242 FRANKLIN AVENUE LLC (A-62-11) (069082)

The New Jersey Supreme Court has held that “if the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close.”

This case involves Willingboro Mall, Ltd. (Willingboro), the owner of the Willingboro Mall, selling its property to 240/242 Franklin Avenue LLC (Franklin) in February 2005.  To secure part of Franklin’s obligations, the parties executed a promissory note and mortgage on the property.  Willingboro subsequently filed a mortgage foreclosure action.  Franklin denied that it defaulted on the note.  The court subsequently referred this matter to nonbinding mediation.

 On November 6, 2007, a retired Superior Court Judge conducted the mediation.  Willingboro’s manager and attorney appeared on behalf of the Willingboro.  The mediation was held at the offices of Franklin’s attorney.  The mediator met privately with each side.  At some point, Franklin offered $100,000 to Willingboro in exchange for settlement of all claims and for a discharge of the mortgage.  On behalf of Willingboro, the manager orally accepted the offer in the presence of the mediator who presented the terms of the proposed settlement.  The Manager also affirmed that he gave his attorney authority to enter into the settlement.  The terms of the settlement were not reduced to writing before the conclusion of the mediation.

 On November 9th, Franklin forwarded to the court and Willingboro a letter announcing that the case had been “successfully settled.”  The letter also set forth the terms of the settlement.  On November 20th, Franklin’s attorney sent a separate letter to Willingboro stating he held the $100,000 in his attorney trust account to fund the settlement.  On November 30th, Willingboro’s attorney told Franklin’s attorney that Willingboro rejected the settlement terms.

 In December, Franklin filed a motion to enforce the settlement agreement.  Franklin attached certifications from its attorney and the mediator that revealed communications made between the parties during the mediation.  The mediator averred in his Certification that the parties voluntarily entered into a binding settlement agreement and that the settlement terms were accurately memorialized in Franklin’s letter to the court.

 Willingboro did not give its consent to the filing of either Certification; however, Willingboro did not move to dismiss the motion based on violations of the mediation communication privilege.  Instead, in opposition to the motion, Willingboro requested an evidentiary hearing and the taking of discovery and filed a Certification of its manager who averred that he reluctantly agreed to take part in the mediation and that he was told it was “nonbinding.”

 During discovery taken in connection with the motion to enforce, five witnesses were deposed including the mediator, Willingboro’s manager and Willingboro’s attorney.  After the close of discovery, the Honorable Michael J. Hogan conducted a four day evidentiary hearing.  Judge Hogan found that a binding settlement agreement was reached as a result of the court directed mediation.  The Appellate Division affirmed the trial court’s enforcement of the settlement agreement.

 The New Jersey Supreme Court granted Willingboro’s petition for certification.  Willingboro raised two issues:  1)  Whether R.1:40-4 (i) requires a settlement agreement reached at mediation to be reduced to writing and signed at the time of mediation and 2) whether Willingboro waived the mediation communication privilege.

 R. 1:40-4(i) states “a settlement reached at mediation is not enforceable unless it is reduced to writing at the time of the mediation signed by the parties.”  In this case, the writing memorializing the terms of the settlement was forwarded by Franklin after the mediation and never signed by Willingboro.  Accordingly, Willingboro argued that the purported settlement should not be enforced.  Franklin countered by noting that nothing in R. 1:40-4(i) requires the written settlement agreement resulting from the mediation be created or tendered on the actual day of the mediation.  Willingboro also argued that it did not waive the mediation communication privilege by presenting evidence in opposition to the motion to enforce the oral agreement.  Willingboro noted that the mediation communication privilege had “already been destroyed by Franklin’s disclosures to the court through the mediator certification.”  Thus, Willingboro’s response was simply a defensive measure and should not have been taken as a waiver.

 The Supreme Court noted that R. 1:40-4(d) provides:  “Unless the participants in a mediation agree otherwise or to the extent disclosure is permitted by this rule, no party, mediator or other participant in the mediation may disclose any mediation communication to anyone who is not a participant in the mediation.”  The purpose of the rule is that without assurance of confidentiality, participants will be unwilling to enter into candid and unrestrained communication.  In addition, the New Jersey Mediation Act (N.J.S.A. 2A:23C-1 et. seq.) and the Rules of Evidence (N.J.R.E. 519) confer a privilege on mediation communications.

 The Court noted that there are limited exceptions to the privilege which include a signed writing exception which allows a settlement agreement reduced to writing and adopted by the parties to be admitted into evidence to prove the validity of the agreement.  R.1:40-4(i) provides that “if there is an agreement, it shall be reduced to writing and a copy thereof furnished to each party.”

 The Court noted that the second exception to the mediation communication privilege is waiver.  Pursuant to statute and case law, the waiver must be express.  The Court concluded that the Certifications filed by Franklin’s attorney and the mediator in support of Franklin’s motion to enforce the oral agreement disclosed privilege mediation communications.  Despite the fact that Franklin violated the mediation communication privilege, Willingboro did not timely move to strike or suppress the disclosure of the mediation communications.  Instead, Willingboro proceeded to litigate whether it had in fact entered into a binding oral settlement agreement.  Willingboro breached the mediation communication privilege by appending to its opposition papers the manager’s Certification.  Thus, Willingboro expressly waived the mediation communication privilege in responding to the motion.

 Ultimately, the Court held that settlement agreement was enforceable.  However, in order to avoid these issues in the future, the Court concluded:   “if the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close.”


Lack of contractual responsibility for maintenance of property does not relieve commercial unit owner from duty of care to plaintiff

February 20, 2013

Despite a developer’s contractual responsibility for maintenance and repair of an area outside a commercial condominium unit, the owner of that unit owes a duty of care to the employee of an independent contractor with regard to a hazardous condition in that same location, according to the Appellate Division’s published decision in Nielsen v. Wal-Mart Store #2171 (A-2790-11T1). The Court balanced  a number of factors in concluding that the lack of ownership or control of the area did not absolve Wal-Mart of liability, including the relationship of the parties, the attendant risks, the nature of the risks and ultimately, fairness to the innocent plaintiff.

The plaintiff, William Nielsen, was injured when he slipped and fell in a shopping plaza in Princeton while in the course of his employment with Ecolab, Inc., which had been hired by Wal-Mart to exterminate pests. He had been instructed by the store to access various entrances from the exterior of the unit owned by Wal-Mart. The perimeter of the store, where plaintiff fell, was owned by the developer, who, pursuant to the master deed, agreed to “supervise, administer, operate, manage, insure, repair, replace and maintain” the common elements. The plaintiff subsequently filed suit against Wal-Mart, and unsuccessfully attempted to amend the complaint to name the developer as a defendant more than two years after the action’s accrual, at which point the statute of limitations had run. At trial, a jury found Wal-Mart 80 percent negligent and awarded plaintiff damages of $400,000. Wal-Mart’s motion for a new trial was denied.

On appeal, Wal-Mart argued that the trial court erred in failing to distinguish between the duty owed by a business owner on and off its premises. The Appellate Division stated that case law supports the imposition of liability beyond the boundaries of a commercial land occupier’s property (i.e. to abutting sidewalks and adjacent public roadways). Likewise, while a lack of ownership or control of an area has relevance in determining the existence of a duty of care, the Court noted it is not dispositive. The Court also indicated that the private contractual arrangement of duties between a commercial unit owner and developer is simply another factor to be considered in the analysis.

 

Ultimately, the Court affirmed the trial judge’s decision based on foreseeability and fairness grounds. Wal-Mart directed the plaintiff to use the unit’s perimeter to perform extermination work, and as such, was aware that its invitees and passersby might foreseeably traverse the area outside the unit. The Court also suggested that, despite no contractual obligation to maintain an area, a business owner, such as Wal-Mart, would be encouraged to alert the responsible entity of a hazardous condition if a duty of care was imposed on that unit owner.


Failure By Auto Dealership To Disclose that Car Being Sold Had Been Used As A Loaner Violates The Consumer Fraud Act

February 13, 2013

A Law Division Judge has held that a New Jersey car dealer’s failure to advise a purchaser of a car that it had previously been used as a loaner constitutes a violation of the Consumer Fraud Act.  In this case, the purchaser bought a 2008 Mercedes Benz ML350 from the defendant for $42,815.  Soon after, the purchaser’s wife noticed sticker residue spelling “Courtesy Car” in the rear window.  The purchaser complained to the dealership and the dealership agreed to take back the car for $10,000 less than that which the purchaser had paid.  The purchaser did not accept the offer.  The purchaser then sued the dealership claiming that it “misrepresented, deceived and committed an unconscionable commercial practice through fraud and falsity by advising [the purchaser] that the automobile was a lease car traded in by its owner.”  The purchaser claimed that he would not have bought the car if he had known it was a loaner car.

The dealership argued that it was technically correct to say that the vehicle in question was a leased car traded in by its owner because the dealership had bought the car from the manufacturer and then sold it to its leasing subsidiary.  This in turn allowed the dealership to use it as a loaner.

The court permitted the purchaser to prosecute a Consumer Fraud Act claim against the dealership.  After a jury trial, the purchaser was awarded treble damages in the amount of $30,000 and attorney’s fees and expenses in the amount of $45,202.

As an aside, the court found plaintiff’s counsel’s hourly rate of $400 an hour to be reasonable.  Additionally, the judge enhanced the fees by 10% because plaintiff’s attorney did not require payment up front and agreed not to bill the client if he lost.

This is a case of first impression in New Jersey.  Montgomery v. Millennium Auto Group, MRS-L-2839-10.


Proposed Legislation Would Create Statutory Right For Insured To File A “Bad Faith” Claim Against Their Insurance Company And Recover Attorney Fees

February 6, 2013

The New Jersey Senate has reintroduced the “Consumer Protection Act,” which would establish a private cause of action which would allow insureds (or their assignees) to allege “bad faith” against their insurance company.  Currently, a cause of action for “bad faith” is not grounded in statute, but through the New Jersey Supreme Court’s ruling in Rova Farms Resorts Inc. v. Investors Insurance Company.

The proposed legislation provides that in addition to the enforcement authority provided to the Commissioner of Banking and Insurance (“Commissioner”), a claimant may, regardless of any action which has been filed by the Commissioner, file a civil action in court of competent jurisdiction against its insurer for any violation which could be deemed an unfair claims/settlement practice.  What constitutes an “unfair practice” is defined in the New Jersey statute, but may only be pursued by the Commissioner.  The unfair claims settlement practices are defined in N.J.S.A. 17:29B-4(9) as follows:

 Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue;

Failing to acknowledge and act reasonably and promptly upon communications with respect to claims arising under insurance policies;

Failing to adopt and implement reasonable standards for prompt investigation of claims arising under insurance policies;

Refusing to pay claims without conducting a reasonable investigation based upon all available information;

Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;

Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;

Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately covered in actions brought by such insureds;

Attempting to settle a claim for less than the amount of which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;

Attempting to settle claims on the basis of an application that was altered without notice to, or knowledge, or consent to the insured;

Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;

Making known to insureds or claimant the policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

Delaying the investigation or payment of claims by requiring the insured, claimant or physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

Failing to promptly settle claims where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;

Failing to promptly provide a reasonable explanation of the basis of the insurance policy in relation to the facts for applicable law for denial of claim or for the offer of a compromised settlement;

Requiring insureds or claimants to institute or prosecute complaints regarding motor vehicle violations in the municipal court as a condition of paying private passenger automobile insurance claims.

 

Under this bill, if an insured can establish that an insurance company engaged in an unfair practice, they would be entitled to: (1) their monetary damages; (2) attorney fees; and (3) punitive damages if malice or a wanton/willful disregard for the insured’s rights are proven by clear and convincing evidence.

A similar version of this bill has previously been introduced.  However, it did not clear a committee.  The current version is co-sponsored by Senator Nicholas Scutari (Democrat) and Senator Jennifer Beck (Republican).

In light of Super Storm Sandy, there is the possibility that this legislation will gain support by the legislature.  At this time, no hearing has been scheduled for this bill at the committee level.


Appellate Division Holds That Plaintiff’s Lack of Due Diligence Bars Replacing ‘John Doe’ Defendant With Actual Party

May 1, 2012

The Appellate Division has held in Andreoli v. State Insulation Corp. et. al. (2011 WL 4577646) that a plaintiff could not replace a “John Doe” defendant with an actual party due to a lack of due diligence in identifying that party.

In this matter, plaintiff filed an asbestos-related wrongful death and survivorship action.  By way of background, plaintiff died from mesothelioma on July 22, 2006.  His estate filed its first complaint on March 1, 2007.  In that complaint, plaintiff alleged that he was exposed to asbestos while working at a Hess-related facility.  At that time, Hess was not named as a defendant.  However, plaintiff did allege that the fictitiously named defendants “negligently mined, milled, manufactured, distributed and/or conspired to distribute the aforesaid fibers, dust, particles and products to the plaintiff’s employer without warning of the potential dangers.”

On November 26, 2008, plaintiff amended his complaint to reflect that he had been employed by a Hess-related entity for a brief period of time.  By motion filed on May 28, 2010, plaintiff’s counsel sought permission to file a third amended complaint to indentify Hess as one of the “John Doe” defendants.  A copy of this motion was not provided to Hess.  On July 19, 2010, the trial court granted plaintiff’s motion to name Hess as a defendant.

In lieu of an answer, Hess filed a motion to be dismissed in October 2010 on the basis that the statute of limitations had expired.  In opposition to this motion, plaintiff’s counsel argued that it was learned during a March 2009 deposition that Hess was a viable defendant.  Hess argued that as early as the filing of the initial complaint, plaintiff was aware that Hess was a viable defendant, but elected not to name the company as a defendant.  The trial court found that plaintiff had complied with the fictitious pleading rule and denied Hess’ motion.

The Appellate Division noted that to utilize the fictitious party rule, the plaintiff must: (1) not know the identity of the defendant said to be named fictitiously; (2) describe the fictitiously named defendant with appropriate detail sufficient to allow identification; (3) provide proof of how it learned the defendant’s identity; and (4) act diligently in identifying the defendant.  The court noted that “a showing of diligence is a threshold requirement for resort to fictitious-party practice.”  Additionally, the court noted that in limited circumstances, prejudice to a defendant may be considered in evaluating whether a plaintiff has acted diligently.

In reviewing this matter, the court first found that the plaintiff’s fictitious pleading could not be fairly construed to encompass a premises defendant (Hess) within a group of fictitiously named asbestos suppliers or installers.  Additionally, the court found that the plaintiff failed to provide an affidavit regarding how he obtained information about the identity of Hess.  Overall, according to the court, the record lacked evidence that plaintiff exercised due diligence in indentifying Hess. Accordingly, the trial court’s ruling was reversed and the matter remanded so that Hess could be dismissed from the matter with prejudice.


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