Significant New Jersey Liability Litigation Cases | May 2013 – November 2013

By: Betsy G. Ramos, Esq. and Gina M. Zippilli, Esq.

Arbitration (compelling non-signatory to arbitrate). Hirsch v. Amper Financial Services, 215 N.J. 174 (2013). Hirsch dealt with whether the trial court erred when it compelled arbitration between a non-signatory and a signatory to a contract containing an arbitration clause on grounds that the claims involving the two were similar and sufficiently intertwined to warrant the doctrine of equitable estoppel. The Appellate Division reversed the lower court. While the appeals court recognized that in some cases equitable estoppel may be used to compel arbitration against a non-signator, its use has limited applicability and cannot be applied when the sole basis is that the parties and claims are intertwined.

Arbitration (waiver). Cole v. Jersey City Medical Center, 215 N.J. 265 (2013).  A party to an arbitration agreement will be deemed to have waived its right to arbitrate the dispute if the party engages in prolonged litigation. In this wrongful termination case, defendant employer engaged in active litigation for 21 months before invoking the arbitration provision of its employment agreement with plaintiff. The court held that the employer had waived its right to arbitrate, reasoning that its acquiescence in litigation was inconsistent with its right under the agreement. The court set forth a seven-factor test for assessing when a party’s litigation conduct is consistent with arbitration rights and whether those rights have been waived:  (1) the delay in making the request; (2) filing any motions, particularly dispositive; (3) whether delay in seeking arbitration was litigation strategy; (4) extent of discovery conducted; (5) whether the party raised arbitration in its pleadings; (6) proximity of the date which arbitration is sought with trial; and (7) resulting prejudice.

Attorney-Client Privilege. Hedden v. Kean University, 2013 N.J. Super. LEXIS 156 (App. Div. October 24, 2013). In the organizational context, the corporation, not each and every corporate employee, is the holder of the attorney-client privilege and, thus, the authority to waive that privilege belongs to the officers and directors of the organization, or those individuals who manage/control its activities.  Even a corporation’s failure to object to disclosure of privileged information by an employee acting in self-interest will not later defeat assertion of the privilege.

Charitable Donation. Adler v. SAVE, 432 N.J. Super. 101 (App.Div. 2013). This case dealt with the enforceability of a conditional inter vivos gift (a gift made during an individual’s lifetime). The court held that a charity that solicits a gift from a donor, knowing that the donor’s purpose for making the gift is to fund a particular aspect of the charity’s mission, is bound to return the gift when the charity unilaterally decides not to honor the donor’s originally expressed purpose.

Consumer Fraud Act. Perez v. Professionally Green, LLC, 215 N.J. 388 (2013). Plaintiff homeowner contracted with Swim Pools for the construction of a swimming pool but the contract did not include dates for the onset or completion of performance. During construction, plaintiffs claimed that Swim Pools learned of, but failed to address, various deficiencies in the pool, which resulted in failed inspections and the subsequent hire of additional contractors.  The court found that the failure to include start and end dates in the contract amounted to technical violations of the Consumer Fraud Act (“CFA”) but granted defendant’s motion for summary judgment based upon plaintiffs’ failure to demonstrate an ascertainable loss. Plaintiffs filed a post-trial motion arguing that they were entitled to attorneys’ fees based upon the technical violation of the CFA despite their complaint being dismissed. The New Jersey Supreme Court upheld the trial court’s finding and held that plaintiffs are not entitled to attorneys’ fees when no bona fide ascertainable loss exists.

Contribution (between insurers). Potomac Ins. Co. v. PMA, 215 N.J. 409 (2013). An insurer may seek contribution against a co-insurer for defense costs incurred in litigation for a period of time when both insurers covered the insured. The right to contribution by the insurer will not be extinguished if the insured releases the co-insurer unless the former is a party to the release evidencing its intent to waive its right to contribution.

Defamation. NuWave Investment Corp. v. Hyman Beck & Co., 432 N.J. Super. 539 (App.Div. 2013). In the absence of proof of compensatory or actual damages, libelous statements permit a jury to award presumed nominal damages, or those damages that are generally expected to occur as a result of the defamatory statements  In this libel action, the jury awarded both presumed and actual damages to plaintiff. The Appellate Division reversed, holding that plaintiff could not be awarded both types of damages and, therefore, ruled that the presumed damage award could not stand.  It explained that the policy underlying the purpose of presumed damages is served if the jury accepts proof of actual harm.

Evidence (Social Security disability determination). Villanueva v. Zimmer, 431 N.J. Super. 301 (App.Div. 2013). Zimmer involved the admissibility of evidence to establish plaintiff’s alleged disability. Plaintiff argued that (1) the Social Security Administration’s finding of “disability” should have been admissible to create a presumption that plaintiff was indeed disabled and (2) the trial judge erred in denying her request to use the SSA determination in examining defendant’s witnesses concerning their opinions that plaintiff did not suffer an injury. In upholding the decision of the trial court, the Appellate Division found that the factual conclusions of the SSA regarding plaintiff’s disability were hearsay; they did not fall within either the public or business record exception; and, therefore, could not be used as substantive evidence where plaintiff had the burden of proving she suffered an injury caused by an accident and that the injury impaired her ability to work.

Frustration of Purpose. JB Pool Management, LLC v. Four Seasons at Smithville Homeowners Association, Inc., 431 N.J. Super. 233 (App. Div. 2013). In a case of first impression, the court in Smithville held that frustration of purpose should be pled as an affirmative defense when litigants rely on the doctrine to avoid contractual duties. In this case, a pool management company entered into a contract with a homeowner’s association to supply maintenance services for the association’s indoor pool. During the course of the contract, mold grew in the pool, forcing its closure for several months to allow for remediation.  The pool company sued for service fees not paid during the closure.  Despite the Association not having pled frustration of purpose as an affirmative defense, and over the pool company’s objection, the trial court charged the jury that the Association’s obligation to pay for services during that time could be excused under the doctrine.  The Appellate Division found reversible error. It concluded that the doctrine needed to be raised as an affirmative defense to avoid the prejudice which resulted from the pool company not having prior notice that the doctrine was being invoked.

Insurance (policy limits in event of fraud). Citizens United Reciprocal Exchange v. Perez, 432 N.J. Super. 526 (App.Div. 2013). Where an insurance policy was declared void from its inception due to a fraudulent application, an innocent third party victim was entitled to the statutory mandatory minimum liability coverage of up to $15,000/$30,000. In this matter, the insured had elected the alternative basic policy which had no mandatory minimum liability coverage. Regardless, the court found that the insurer could not rely on the alternative basic policy to avoid the statutory minimum coverage. Although the policy (before it was voided) only contained $10,000 in liability coverage, the court reformed it to provide the statutory mandatory minimum of $15,000/$30,000.

Insurance (right to jury trial). Allstate New Jersey Insurance Co. v. Lajara, 2013 N.J. Super. LEXIS 147 (App. Div. October 9, 2013). There is no right to a jury trial for a private civil action under New Jersey’s Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1, et seq. The Appellate Division found that the Act did not imply such a right, nor did the New Jersey Constitution’s right to trial by jury encompass a private action under the Act.

Invasion of Privacy. Soliman v. Kushner Cos., 2013 N.J. Super. LEXIS 150 (App. Div. October 17, 2013). In reversing the trial court’s grant of defendant’s motion for summary judgment, the Appellate Division found issues of fact as to whether defendants’ conduct in installing video cameras, intentionally concealed in smoke detectors in a public bathroom, violated plaintiffs’ right to privacy both under the common law, as the tort of intrusion, and also under the New Jersey Constitution.  The court held that both compensatory and punitive damages are available to plaintiffs whose causes of action are predicated on the tort of invasion of privacy and based on the subcategory of invasion of intrusion.

Legal Malpractice. Lawrence v. Schenck Price Smith & King, LLP, 2013 N.J. Super. Unpub. LEXIS 1922 (App. Div. July 30, 2013). In this legal malpractice action, plaintiff loaned $75,000 to her daughters for the purchase of a business. The daughters obtained an additional $160,000 in their own names and retained the law firm of Schenck and Garlock (“Garlock”) to represent the daughters at closing. Plaintiff was advised by one daughter to be present at closing. It was undisputed that Garlock knew that plaintiff would be signing documents exposing her to substantial financial obligations and/or exposures to liabilities above and beyond the $75,000, including liening of her home, but never informed plaintiff of such. At closing, rather than explaining the effect of each document, Garlock simply read the title of each document and gave to plaintiff to sign. Plaintiff’s daughters ultimately went bankrupt and plaintiff was left owing over $200,000.  While the trial court noted that a lawyer owes a duty to a non-client not to misrepresent the contents of a material document on which the lawyer knows, or should know, the non-client would rely, it found no such duty here because Garlock never made any misrepresentations to plaintiff at all. Summary judgment in favor of Garlock was upheld and plaintiff’s complaint dismissed.

Mediation. Willingboro Mall, Ltd. V. 240/242 Franklin Avenue, LLC, 215 N.J. 242 (2013). A settlement agreement reached at mediation will not be enforceable unless the terms of the settlement are put in writing and signed by the parties before the mediation comes to a close. If the complexity of the settlement terms cannot be drafted by the time the mediation session is expected to end, the mediation should continue for a brief period to allow for the signing of an agreement. The Court suggested that, as an alternative, an audio or video recorded agreement would make the settlement enforceable.

Medicare lien.  DuHamell v. Renal Care Group East, Inc., 431 N.J. Super. 93 (Law Div. 2012)(approved for publication May 2013). The parties reached a settlement in a personal injury lawsuit which included a set aside for future medical expenses, which would otherwise be covered or reimbursable by Medicare. The set aside was submitted to the Center for Medicare and Medical Services which issued a “no review” letter. The court was asked to enforce the settlement and declare Medicare’s interests protected notwithstanding Medicare’s no review letter. In a case of first impression, the trial court found that Medicare’s interests had been adequately protected and that the plaintiffs were required to set aside the proposed sums in self-administered interest-bearing accounts to be used solely for the purpose of satisfying future medical expenses related to the underlying accident.

Negligence (texting). Kubert v. Best, 432 N.J. Super. 495  (App. Div. 2013). Kubert will have far reaching effects. Defendant girlfriend, from a remote location, was texting her boyfriend, defendant driver, while he was driving. Driver had an accident and plaintiffs each lost one leg. Plaintiffs named both the girlfriend, the sender of the text, and the boyfriend driver as defendants. The trial court noted initially that the State Legislature had recently enacted the Kulesh, Kubert and Bolis law which creates criminal penalties for those who are distracted by use of a cell phone while driving and injuring others; the crime – assault by auto. The court then likened the sender of the text to a passenger in a vehicle, the latter of which owed a duty to the public not to distract the driver.  The court reasoned that when a text is sent to the driver knowing that the driver will immediately view the text, the sender has disregarded the foreseeable risk of harm to the public, similar to a passenger. The court held, and the Appellate Division affirmed, that the sender of a text message can potentially be liable to a third-party if an accident is caused by texting if the sender of the text message knew, or had special reason to know, the driver recipient would view the text while driving. Here, there was no evidence that the girlfriend knew her boyfriend was driving at the time and no evidence that she knew he would disregard the law and review them even if he were. Hence, under these facts, the court upheld the dismissal as to the text sending girlfriend.

Negligence (duty owed to building occupant). Vellucci v. Allstate Insurance Co., 431 N.J. Super. 39 (App.Div. 2013). Vellucci’s estate sued Mack-Cali, as a commercial office building owner, claiming that Vellucci contracted Legionnaires’ disease when he was exposed to a water borne pathogen in the building’s water supply. The Supreme Court found that Mack-Cali had no duty to take proactive measures to ensure that the building’s water supply was free of the Legionella bacteria. With no statutory or regulatory scheme imposing such a duty on owners of commercial office buildings and no prior notice of any issues with this bacteria in this office building, the Court found it was not reasonable to impose a duty upon the owner to forsee that Vellucci would contract this rare disease.

Negligence (duty of business owner to warn neighbor of fleeing criminal). Estate of Naitil Desir v. Vertus, 214 N.J. 303 (2013). This case dealt with the existence of the duty of a property owner for an off-premises injury. Vertus, an owner of a three-story apartment building, was sued by Novaly’s estate, claiming that Vertus, as a business owner, owed Novaly, his neighbor, a duty to warn him that he suspected criminal activity on his premises. Vertus,  suspecting that there was criminal activity at his office located in one of the apartments, left the premises, and tried to use Novaly’s phone to call his business. When Vertus could not reach anyone, Novaly left his apartment to find out what was going on at the premises. However, Vertus did not warn Novaly that there might be criminal activity ongoing at the building. When Novaly left his apartment, he was shot and killed by one of the robbers who had been at Vertus’ building. The Appellate Division found that there was a duty of care owed by Vertus to Novaly because he had reason to believe there was an intruder on his premises that posed a danger to others and he had a duty to that friend not to bring him into danger by a request for assistance. However, the Supreme Court reversed, finding this to be an unmerited expansion of a duty in tort.

Negligence (mode of operation). Arroyo v. Durling Realty, LLC, 2013 N.J. Super. LEXIS 155 (App. Div. October 23, 2013). In this personal injury case, the plaintiff sued Quick Chek due to injuries resulting from a fall on the sidewalk near the store entrance. She claimed that, after leaving the store, she fell on a discarded telephone calling card. The Court found that this was not an appropriate case for the imposition of a mode of operation liability. The phone card was outside the store and the nexus between the self-service rack and the eventual presence of the card on the sidewalk was extremely attenuated. Further, the court found that Quick Chek’s method of doing business created the hazard by the plaintiff on the sidewalk.

PIP. Kimba Medical Supply v. Allstate Insurance Co., 431 N.J. Super. 463 (App.Div. 2013). The question concerned whether the trial court, under the New Jersey Alternative Procedure for Dispute Resolution Act (“APDRA”) and associated PIP regulations cross-referencing the statute, has the authority to remand unresolved factual questions to a dispute resolution professional (“DRP”) after the court has vacated or modified a DRP’s decision. Forthright, the organization that contractually provides the State with DRPs to hear PIP matters, argued that the trial court has no such power to remand any PIP matters. The Appellate Division rejected Forthright’s interpretation of the law and found that such remands were authorized where the PIP arbitration award has been judicially vacated or modified.

Sidewalk. Grijalba v. Floro, 431 N.J. Super. 57 (App.Div. 2103). In this public sidewalk slip and fall case, the Appellate Division was faced with deciding whether the owner of a partially owner-occupied three family house qualified as a residential versus a commercial landowner for purposes of establishing  sidewalk liability. The court announced the following factors that needed to be determined to make this classification: (1) the nature of the ownership including whether owned for investment or business purposes; (2) the predominant use of the property including the amount of space occupied by the owner; (3) whether the property had the capacity to generate income; and (4) any other relevant factors when applying commonly accepted definitions of commercial and residential property.

Spill Act (statute of limitations). Morristown Associates v. Grant Oil Co., 432 N.J. Super. 287 (App.Div. 2013). Private claims for contribution pursuant to the New Jersey Spill Compensation and Control Act are governed by the six-year statute of limitations for damage to property but mitigated by the discovery rule.

Statute of Limitations (statute of repose and contribution). Town of Kearney v. Brandt, 214 N.J. 76 (2013). For purposes of calculating the ten-year period of the statute of repose for an architect in a construction defect claim, the Court found that the time period started to run when the first Temporary Certificate was issued for the town’s building. However, the Court also found that when a defendant is dismissed on statute of repose grounds, fault may still be apportioned (and allocated) at trial as to the dismissed defendant under comparative negligence law as a joint tortfeasor.

Statute of repose. Cumberland County Board of Chosen Freeholders v. Vitetta Group, P.C., 431 N.J. Super. 596 (App.Div. 2013). The defendant sued Gilbane Building Company which supervised the construction of the expansion and remodeling of its courthouse. Thereafter, leaking caused water damage but Gilbane was neither notified, nor involved in repair attempts. The trial court dismissed the case against Gilbane on the basis of the statute of repose that required lawsuits to be brought against design professionals in construction claims within ten years of completion of its services. The plaintiff argued that the willful exception to the statute of repose prevented the suit from being untimely filed. However, the Appellate Division upheld the dismissal, finding that this willful exception cannot trump the 6 year statute of limitations, which starts to run as soon as the plaintiff knows of the claim. Because the plaintiff waited more than 10 years from the discovery of the water leakage problem to file suit, its claim against Gilbane was dismissed.

UIM. Procopio v. Government Employees Insurance Co., 2013 N.J. Super. LEXIS (App. Div. November 21, 2013). In this case, the plaintiff settled his personal injury claim and then pursued GEICO in both a UIM and bad faith suit. The judge bifurcated the claims for trial but ordered that discovery proceed simultaneously on both matters. The Appellate Division ruled that where an insured has sued on both a UIM and bad faith claim, the bad faith claim should be held in abeyance until the UIM claim is resolved to avoid judicial inefficiency and possible prejudice to the insurer’s defense.

Workers’ Compensation (lien rights). Greene v. AIG Casualty Co., 2013 N.J. Super. LEXIS 149 (App. Div. October 16, 2013). In a case of first impression, the Appellate Division, in reversing the Judge of Compensation, ruled that an employer can enforce its lien rights as to monies previously paid, even though plaintiff’s injury is found to be non-compensable.