Opinion
DOCKET NO. A-5017-14T1
06-15-2016
BAYWAY LUMBER, INC., Plaintiff-Appellant, v. KREVSKY SILBER & BERGEN and PHILIP M. KREVSKY, Defendants-Respondents.
Laura Valenti Studwell argued the cause for appellant (The Killian Firm, P.C., attorneys; Ms. Studwell, on the brief). Meredith Kaplan Stoma argued the cause for respondents (Morgan Melhuish Abrutyn, attorneys; Ms. Stoma, of counsel and on the brief; Christopher P. Ward, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer and Manahan. On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-3819-14. Laura Valenti Studwell argued the cause for appellant (The Killian Firm, P.C., attorneys; Ms. Studwell, on the brief). Meredith Kaplan Stoma argued the cause for respondents (Morgan Melhuish Abrutyn, attorneys; Ms. Stoma, of counsel and on the brief; Christopher P. Ward, on the brief). PER CURIAM
Plaintiff, Bayway Lumber, Inc., appeals from a May 29, 2015 order entered by the Law Division judge dismissing its complaint with prejudice for failing to submit an affidavit of merit (AOM) in support of its legal malpractice action. Bayway also appeals the judge's finding that no "extraordinary circumstances" existed warranting a dismissal without prejudice. We affirm in part and reverse in part.
Bayway filed a complaint against defendants Krevsky Silber & Bergen (KSB) and Philip M. Krevsky (Krevsky) (collectively defendants) alleging negligence (count one) and breach of a fiduciary duty (count two). Bayway filed a request for production of documents shortly thereafter. Defendants filed an answer and responded to Bayway's document request. Defendants filed a motion to dismiss Bayway's complaint with prejudice for failure to serve an AOM. Bayway opposed the motion. Following oral argument, the Law Division judge granted defendants' motion and dismissed Bayway's complaint with prejudice. This appeal followed.
We derive the following facts from the record. In 2009, defendants represented Bayway in the purchase of property located on South Park Avenue in Linden for $1.85 million. Bayway instructed Krevsky to name as the purchaser Park Ave. Realty Group, LLC — a newly-formed limited liability company created "for the purpose of acquiring the [p]roperty." Contrary to those instructions, Krevsky listed Bayway as the purchaser. Defendants allegedly assured Bayway that "there would be no problems associated with naming [it] as the purchaser" rather than the LLC because Bayway could cancel the contract "for any reason." Bayway claimed it also "made clear to [defendants] that [it] wanted to be able to cancel the [c]ontract in the event [its] environmental investigation disclosed any contamination associated with the [p]roperty."
In April 2009, Bayway signed the contract to purchase the property from the sellers, Park Avenue Linden Properties, LLC (Linden Properties). The property was sold "[a]s [i]s" according to the contract, but Bayway was permitted to inspect the property. The contract further provided that "[i]f the inspections reveal any serious defects and the parties do not agree on what corrective actions or repairs are to be made by the [s]eller, either party may cancel this contract." (emphasis omitted).
Linden Properties provided Bayway a "No Further Action" letter (NFA) issued by the New Jersey Department of Environmental Protection (NJDEP) in 1994. The NFA was issued when Linden Properties acquired the property, and "protected [Linden Properties] and any subsequent owner from any liability for any contamination found at the site based upon activities prior to 1994." Despite the NFA, Bayway hired Geographic Services, Inc., (GSI) to conduct an inspection of the property. GSI generated two site investigation reports concluding there was groundwater contamination "due to the historical uses of the site." GSI recommended reporting the matter to NJDEP, and issued a remediation estimate in the amount of $281,000. Premised upon the reports, Bayway instructed defendants to cancel the contract.
Although not relevant to our determination, the record is devoid of any communication between defendants and Linden Properties relating to the contract cancellation issue. --------
"Following receipt of the [GSI] reports and estimate for remediation" Linden Properties engaged a different environmental consulting company to conduct a site investigation and seek NJDEP clearance. No contamination was found by Linden Properties' environmental consultant, and NJDEP again cleared the site. Linden Properties attempted to contact defendants to schedule a closing, and issued a "[t]ime of the [e]ssence letter, demanding that Bayway close by a date certain." Bayway alleges defendants never responded and failed to inform Bayway of Linden Properties' position. Bayway contends that defendants failed to inform them that Linden "rejected [their] attempt to cancel" the contract and wished to set a closing date.
On May 27, 2010, Linden Properties filed a verified complaint alleging that Bayway breached their contract. Defendants "represented Bayway in the litigation up until the time of trial[,]" at which time Bayway obtained new trial counsel. Finding no serious defect with the property, the court ruled in favor of Linden Properties and awarded damages in excess of $1 million. The matter settled for $450,000 during the pendency of Bayway's appeal of the judgment. Bayway then instituted its malpractice action against defendants.
Count one of Bayway's complaint alleged defendants breached their duty "to perform their legal services in accordance with the customs and standards of attorneys possessing similar expertise and qualifications in the legal industry." Specifically, Bayway alleged that defendants breached their duty by:
a) failing to comply with the instructions of [Bayway] to name the newly-formed LLC as the purchaser instead of Bayway; b) failing to include language in the [contract] which would allow Bayway to cancel the [c]ontract after conducting its environmental investigation; c) failing to advise Bayway of the communications they had received from counsel for [Linden Properties] rejecting Bayway's attempt to cancel the [c]ontract and demanding that Bayway proceed to closing; d) failing to recommend that Bayway utilize new counsel in the litigation; and e) failing to properly advise Bayway that, due to the "serious defect" language contained in the [c]ontract prepared by them, Bayway would be facing a difficult battle in [c]ourt, and thus that Bayway should explore settlement options early in the matter.
Count two of the complaint alleged that defendants breached their fiduciary duties by "failing to act in the best interests of Bayway, failing to follow [Bayway's instructions] in order to adequately protect [its] interests with respect to the [p]roperty . . . , failing to keep Bayway apprised of the status of its attempt to cancel the [c]ontract, and failing to properly advise Bayway after litigation was commenced against it."
In their answer, defendants demanded plaintiff serve an AOM by an expert establishing "some objective threshold merit to the allegations." See Hubbard v. Reed, 168 N.J. 387, 394 (2001) (citation and internal quotations omitted). Both case information statements filed in connection with the matter acknowledged that the matter was a professional malpractice case subject to the requirements under the AOM statute, N.J.S.A. 2A:53A-27.
Defendants' motion to dismiss argued that an AOM was required because the matter was a "complex attorney malpractice case with lots of different allegations, lots of customs and standards, lots of [Rules of Professional Conduct] that [Bayway] allege[d] were breached with conflicts of interests." In opposition, Bayway argued that the common knowledge exception applied and, therefore, an AOM was not required. Bayway further asserted that the documents obtained during discovery supported its claim and, therefore, the claims were meritorious. In the alternative, Bayway argued that "extraordinary circumstances" existed allowing it to file a late affidavit.
In an oral opinion granting defendants' motion, the judge relied on Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone, P.C., v. Ezekwo, 345 N.J. Super. 1 (App. Div. 2001), abrogated in part, Segal v. Lynch, 211 N.J. 230 (2012), and Estate of Chin v. Saint Barnabas Med. Ctr., 160 N.J. 454 (1999), in holding that Bayway's complaint was not a common knowledge case. The judge reasoned that the issue presented in the complaint "is something that is well beyond the ken of the average juror. It goes to how the contracts are constructed, the language attorneys choose to put into contracts. There are very nuanced issues that would have to be proven to show that [Krevsky] committed malpractice." The judge further held that there were no "extraordinary circumstances" to warrant a dismissal without prejudice.
Bayway presents two arguments on appeal:
POINT I
THE COURT SHOULD REVERSE THE ORDER OF THE TRIAL COURT, GIVEN THAT NO EXPERT TESTIMONY IS REQUIRED WHEN A PROFESSIONAL'S NEGLIGENCE IS PLAINLY OBVIOUS, AS IN THE PRESENT CASE, AND THUS WHERE THE "COMMON KNOWLEDGE" EXCEPTION IS APPLICABLE.
A. The applicable standard of review of the trial court's order is de novo.
B. The objective of the affidavit of merit statute is to eliminate frivolous lawsuits and allow meritorious claims to proceed, and the present case has already been shown to be meritorious through defendants' own documents obtained through discovery.
C. When a professional's negligence would be readily apparent to the average juror, no affidavit of merit is required.
POINT II
ALTERNATIVELY, IF THE COURT IS INCLINED TO FIND THAT THE COMMON KNOWLEDGE EXCEPTION DOES NOT APPLY, IT SHOULD ALLOW BAYWAY TO FILE AN AFFIDAVIT OF MERIT PRESENTLY, IN THE INTERESTS OF JUSTICE.
We apply a plenary standard of review to a trial judge's decision to grant a motion to dismiss. Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 114 (App. Div.), certifs. denied, 208 N.J. 366 and 208 N.J. 368 (2011). It is a "well-established principle that our review of a trial judge's conclusions of law is de novo." Triarsi v. BSC Grp. Servs., LLC, 422 N.J. Super 104, 113 (App. Div. 2011). Thus we accord no deference to the trial judge's legal conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).
Bayway contends that an AOM was not required in this case as defendants' negligence was "plainly obvious[,]" and, therefore, the common knowledge exception applied. For the reasons stated herein, we are in agreement as to some of Bayway's claims.
To establish a claim for legal malpractice, a plaintiff must prove "(1) the existence of an attorney-client relationship creating a duty of care upon the attorney; (2) the breach of that duty; and (3) proximate causation." Stoeckel v. Twp. of Knowlton, 387 N.J. Super. 1, 14 (App. Div.) (quoting Conklin v. Hannoch Weisman, 145 N.J. 395, 416 (1996)), certif. denied, 188 N.J. 489 (2006). Pursuant to N.J.S.A. 2A:53A-27, "a plaintiff who brings a malpractice action against a licensed professional must provide the defendant with the affidavit of an appropriate expert stating that the action has merit." Hubbard, supra, 168 N.J. at 390. The AOM statute provides:
In any action for damages for personal injuries, wrongful death or property damage resulting from an alleged act of malpractice or negligence by a licensed person in his profession or occupation, the plaintiff shall, within [sixty] days following the date of filing of the answer to the complaint by the defendant, provide each defendant with an affidavit of an appropriate licensed person that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint, fell
outside acceptable professional or occupational standards or treatment practices. The court may grant no more than one additional period, not to exceed [sixty] days, to file the affidavit pursuant to this section, upon a finding of good cause.
[N.J.S.A. 2A:53A-27.]
The purpose of the AOM statute "is to weed out frivolous lawsuits early in the litigation while, at the same time, ensuring that plaintiffs with meritorious claims will have their day in court." Triarsi, supra, 422 N.J. Super. at 114 (quoting Hubbard, supra, 168 N.J. at 395). Failure to serve the AOM within the statutory time period "requires a dismissal of the complaint with prejudice." Ibid. (quoting Ferreira v. Rancocas Orthopedic Assocs., 178 N.J. 144, 146-47 (2003)).
To determine whether an AOM is required, "courts must look to the underlying factual allegations, and not how the claim is captioned in the complaint." Ibid. (quoting Syndicate 1245 at Lloyd's v. Walnut Advisory Corp., 721 F. Supp. 2d 307, 315 (D.N.J. 2010)). Thus, the nature of the proof controls. Ibid. An AOM is generally required where expert testimony is necessary to establish defendant's negligence. Hubbard, supra, 168 N.J. at 397. "Because the duties a lawyer owes to his [or her] client are not known by the average juror, a plaintiff will usually have to present expert testimony defining the duty and explaining the breach." Stoeckel, supra, 387 N.J. Super. at 14; see also Shamrock Lacrosse, Inc. v. Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, 416 N.J. Super. 1, 12-13, 24-26 (App. Div. 2010) (law firm's failure to advise plaintiff of patent renewal fees required AOM where relevant standard of care not "within the ken of the average lay person"); Stoecker v. Echevarria, 408 N.J. Super. 597, 607-10, 616 (App. Div.) (AOM required where attorney allegedly gave misinformation regarding sale of property and sent "time is of the essence" letter without plaintiff's approval), certif. denied, 200 N.J. 549 (2009). An expert opinion is also required where "the adequacy of an investigation or the soundness of an opinion is the issue[.]" Sommers v. McKinny, 287 N.J. Super. 1, 11 (App. Div. 1996).
Where expert testimony is not required, an AOM need not be provided. Hubbard, supra, 168 N.J. at 390, 394. Cases that "do not require proof of a deviation from a professional standard of care" are "referred to as 'common knowledge' cases." Triarsi, supra, 422 N.J. Super. at 114 (quoting Syndicate 1245 at Lloyd's, supra, 721 F. Supp. 2d at 315). The common knowledge exception is "appropriately invoked when the 'carelessness of the defendant is readily apparent to anyone of average intelligence and ordinary experience'" and "in circumstances involving obvious errors[.]" Bender v. Walgreen E. Co., Inc., 399 N.J. Super. 584, 590 (2008) (quoting Chin, supra, 160 N.J. at 469-70). However, the exception must be construed "narrowly in order to avoid non-compliance with the statute[,]" and, therefore, "the wise course of action in all malpractice cases would be for plaintiffs to provide affidavits even when they do not intend to rely on expert testimony at trial." Hubbard, supra, 168 N.J. at 397.
In Bender we held that a pharmacist's error in filling a prescription with a drug other than the one prescribed was "sufficiently careless to be 'readily apparent to anyone of average intelligence and ordinary experience.'" Bender, supra, 399 N.J. Super. at 590-91 (quoting Chin, supra, 160 N.J. at 469-70). Therefore, the common knowledge exception applied. Ibid.; see also Hubbard, supra, 168 N.J. at 394-97 (expert testimony not required where dentist pulled the wrong tooth); Chin, supra, 160 N.J. at 460-61, 470-71 (expert testimony not required where improperly attached equipment pumped gas into patient's uterus rather than fluid); Becker v. Eisenstodt, 60 N.J. Super. 240, 242-46 (App. Div. 1960) (expert testimony not required where caustic solution accidently used to treat nose after rhinoplasty).
The common knowledge exception has been applied to legal malpractice claims, including where attorneys have failed to timely and properly communicate with experts to ensure their attendance at trial. See, e.g., Kranz v. Tiger, 390 N.J. Super. 135, 147-49 (App. Div.), certif. denied, 192 N.J. 294 (2007). The exception has also applied where attorneys failed to adequately prepare their case, submit legal arguments in support of the claim, and accurately represent the state of the case, Sommers, supra, 287 N.J. Super. at 11-12; and where attorneys failed to investigate a claim or commence an action within the statute of limitations, Brizak v. Needle, 239 N.J. Super. 415, 431-32 (App. Div.), certif. denied, 122 N.J. 164 (1990). In such cases, the trier of fact is not required "to evaluate an attorney's legal judgment concerning a complex legal issue." Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone, P.C., supra, 345 N.J. Super. at 13.
Here, while Bayway asserts both negligence and breach of fiduciary duty in its complaint, both claims rest on defendants' failure to act in a certain manner in their capacity as professionals. Therefore, both counts assert the same claim for legal malpractice. See, e.g., Triarsi, supra, 422 N.J. Super. at 115 ("Both legal theories are premised upon defendants having a duty to [advise plaintiff], although the duty is referred to as a fiduciary one in count one and a professional one in count two. However, as a matter of law, there is actually a single duty and it is essentially one sounding in negligence.").
Most of Bayway's claims are based on defendants' duty to perform legal services in accordance with the relevant standard of care exercised by similarly situated attorneys. On these discrete claims we agree with the motion judge that their resolution, in the absence of expert testimony, is beyond the ken of the average juror. Specifically, the claims of failure to utilize new counsel in the litigation with Linden Properties and failure to explain the consequences of the "serious defect" language in the contract clearly require expert testimony as to the relevant standard of care and the deviation therefrom by defendants. The failure to name the single-purpose limited liability company as the purchaser would also implicate expert testimony as to whether, for example, it is standard practice in commercial real estate transactions to substitute purchasers at a later date. Expert testimony would also be required to establish proximate causation, which would involve complex issues, such as whether the seller would have been willing to contract with a single-purpose limited liability company, absent guaranties of payment by Bayway or its principals.
In contrast, we conclude Bayway's claim that defendants' purported failure to respond to Linden Properties' requests to confirm a closing date, or to communicate those requests to Bayway, would involve alleged errors that jurors of "average intelligence and ordinary experience" could understand without the need for an expert's specialized knowledge. In its verified complaint against Bayway, Linden Properties averred that an email and two letters were sent to defendants on different dates, and defendants failed to respond to either. Linden Properties alerted defendants that the "failure to respond . . . would constitute a breach of contract . . . ." As noted, defendants allegedly failed to advise Bayway of these communications which, if so, would constitute a violation of the Rules of Professional Conduct. See R.P.C. 1.4(b) ("A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.").
Predicated upon our review of the record and in light of our recognition that the common knowledge exception should be narrowly construed, Hubbard, supra, 168 N.J. at 397, we conclude that the common knowledge exception applies solely to defendants' failure to advise Bayway of Linden's communications "rejecting Bayway's attempt to cancel the [c]ontract and demanding that Bayway proceed to closing." As such, Bayway's failure to provide an AOM did not warrant dismissal of those claims.
Bayway also contends that, if required to file an AOM, the trial court's failure to hold a Ferreira conference constituted an "extraordinary circumstance" allowing for a dismissal without prejudice. We disagree.
"Where extraordinary circumstances are present, a late [AOM] will result in dismissal without prejudice." Paragon Contractors, Inc. v. Peachtree Condo. Ass'n, 202 N.J. 415, 422-423 (2010); see also Tischler v. Watts, 177 N.J. 243, 246-47 (2003) (finding extraordinary circumstances where affidavit was deficient and plaintiff's counsel failed to notice deficiency due to terminal illness). Attorney inadvertence, however, "is not such a circumstance entitling plaintiff to a remedy of dismissal of a complaint without prejudice." Paragon, supra, 202 N.J. at 423 (emphasis omitted) (quoting Ferreira, supra, 178 N.J. at 152). Due to the fact that an attorney's inadvertence would generally result in a dismissal with prejudice, Ferreira "developed a prophylactic measure" in the form of "an accelerated case management conference" to "encourage the timely filing of affidavits." Ibid. (citing Ferreira, supra, 178 N.J. at 154-55)).
Whether the failure to hold a Ferreira conference is an "extraordinary circumstance" permitting leniency depends on whether the failure to file an AOM was due to the attorney's inadvertence or whether it was a conscious decision not to do so. In the former scenario, the failure to hold a Ferreira conference may permit leniency. See Paragon, supra, 202 N.J. at 426 (reversing dismissal of complaint with prejudice where conference would have addressed confusion regarding whether AOM needed to be filed before or after conference); Ferreira, supra, 178 N.J. at 148-55 (reversing dismissal of complaint with prejudice where conference would have reminded plaintiff to serve an AOM plaintiff had previously obtained during the statutory period); Saunders v. Capital Health Sys., 398 N.J. Super. 500, 503-04, 10 (App. Div. 2008) (permitting plaintiff's lawsuit to proceed where conference would have reminded plaintiff to serve AOM obtained prior to filing the complaint), abrogated on other grounds, Paragon, supra, 202 N.J. 415; Buck v. Henry, 207 N.J. 377, 382-83 (2011) (reversing a dismissal with prejudice where Ferreira conference would have alerted plaintiff that his filed affidavits were non-conforming).
Where there is a conscious decision not to file an AOM, the failure to hold a Ferreira conference will not permit leniency. See Triarsi, supra, 422 N.J. Super. at 117-122 (affirming dismissal of complaint with prejudice where counsel consciously decided that AOM was not required, and obtained AOM only after complaint was dismissed). Bayway argues on appeal that it did not file an AOM because it believed that the common knowledge exception applied. Similar to the plaintiff in Triarsi, as Bayway consciously decided not to file the AOM, the failure to hold a Ferreira conference does not constitute a basis for a dismissal without prejudice.
Affirmed in part, reversed in part. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION