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Third Circuit Certifies to N.J. Supreme Court Questions Regarding Applicability of Affidavit of Merit Statute

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In an opinion issued on August 16, 2012, the United States Court of Appeals for the Third Circuit certified two questions to the Supreme Court of New Jersey pertaining to the state's Affidavit of Merit Statute. Specifically, the court requested clarification on 1) whether the law applies to "property damages" claims, and 2) whether the law applies to intentional torts, specifically, fraud.

The underlying case of Nuveen Municipal Trust v. WithumSmith+Brown, et al. involved a loan transaction between Nuveen and Bayonne Medical Center. In connection with the transaction, Bayonne provided Nuveen with an audit report authored by Withum, its accounting firm, as well as an opinion letter authored by its counsel, Lindabury McCormick Estabrook & Cooper. While both documents attested to the financial solvency of Bayonne, six months after the loan was executed, Bayonne filed for Chapter 11 bankruptcy. According to Nuveen, both the audit report and the opinion letter concealed problematic issues with regard to Bayonne's financial condition, and as such, it would not have entered into the loan had it known otherwise.

Nuveen filed suit against Withum alleging fraud and against Lindabury alleging malpractice. Ultimately, the District Court of New Jersey dismissed Nuveen's action with prejudice, holding that it had failed to timely file affidavits of merit attesting to the viability of its claims directed against each of the "professional" defendants. Under New Jersey law, such an affidavit must be filed in any action "for damages for personal injury, wrongful death, or property damage resulting from an alleged act of malpractice of negligence by a licensed professional."

On appeal, Nuveen offered several choice-of-law arguments, claiming that the New Jersey statute which required the affidavit of merit was a procedural pleading requirement, which notably conflicted with the pleading provisions contained with Federal Rule 8. The Third Circuit rejected this argument, holding that the affidavit was neither a pleading nor a pleading requirement, and thus was inapplicable to Rule 8. Moreover, it stated that the purpose of the affidavit is not to apprise the defendant of the claims against it (as encompassed by the scope of Federal Rule 8), but rather to give some modicum of validation to professional malpractice claims.

The Third Circuit also rejected Nuveen's arguments that it was denied various protections under New Jersey law which were intended to protect claimants from the harshness of the affidavit of merit requirement. Specifically, these protections included the New Jersey civil Case Information Sheet and the accelerated case management conference, both of which served as operative "reminders" with regard to the affidavit of merit requirement. As stated by the Third Circuit, the absence of these reminders would not preclude dismissal, as "plaintiffs (and their attorneys) are required to know the law."

New Jersey law allows the affidavit of merit requirement to be extended or even forgiven if the plaintiff can show, among other things, "substantial compliance" with the requirement, or alternatively, some "extraordinary circumstances" warranting equitable relief. While the Third Circuit found neither of these with regard to Nuveen's case, it was ultimately unable to determine whether the affidavit of merit requirement could be applied at all. In this regard, the Third Circuit sought to determine whether Nuveen's action was for "damages for personal injuries, wrongful death, or property damage," thereby requiring an analysis of the "nature of the injuries" under New Jersey law. In addition, the Third Circuit also sought to determine whether Nuveen's claims for fraud could be regarded as those sounding in "malpractice or negligence." Here, the Third Circuit noted that proof of malpractice was not an element of fraud, and as a result, Nuveen's claim required a similar analysis of the operative "cause of action" under New Jersey law.

As the Third Circuit was reluctant to decide how the New Jersey Supreme Court would rule on either issue, both were certified to the Court for review.


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