The Third Circuit Interprets New Jersey’s Affidavit of Merit Statute

Nuveen Municipal Trust v. WithumSmith Brown P.C., 752 F.3d 600 (3d Cir. 2014).  As discussed here, the Supreme Court of New Jersey has occasionally accepted requests from the the Third Circuit Court of Appeals to answer certified questions of law under New Jersey Court Rule 2:12A-1 et seq.  In this case, whcih involves the Affidavit of Merit statute, N.J.S.A. 2A:53A-26 et seq., a law that requires plaintiffs in certain lawsuits against professionals to provide an affidavit from a professional that attests to the merit of the suit. the Supreme Court declined the Third Circuit’s request to answer two certified questions of law.  The Supreme Court’s decision not to address those issues may have been influenced by the fact that the Third Circuit’s request was not unanimous.  Judge Aldisert dissented from the panel’s decision to certify questions to the Supreme Court, asserting that “no certification was necessary, as the New Jersey Supreme Court has been adequately clear on the points in question.”  Regardless, the Third Circuit was left to its own devices.  In this opinion by Judge Ambro, issued yesterday, the panel affirmed the district court’s dismissal of the case due to plaintiff’s failure to file an affidavit of merit.

Plaintiff bought a $10 million bond anticipation note issued by the Bayonne Medical Center.  In connection with that transaction, the medical center provided plaintiff with an audit report prepared by the defendant accounting firm and an opinion letter issued by another defendant, a law firm.  Not long after the transaction, the medical center filed a Chapter 11 bankruptcy petition.  Plaintiff sued the accounting firm and the law firm, alleging that those professionals had concealed apsects of Bayonne’s true financial condition.  Asserting that plaintiff would not have purchased the note had those firms made adequate disclosures, plaintiff sued for money damages on theories of fraud and negligent misrepresentation.  The district court dismissed the case because plaintiff had not provided an affidavit of merit, which that court believed was required in these circumstances.  The Third Circuit affirmed.  Judge Ambro wrote the unanimous opinion.

The panel’s opinion decided the two questions that the Supreme Court had declined to address.  The first issue was whether plaintiff’s loss of money used to purchase the note constituted a claim for “property damage,” as to which N.J.S.A. 2A:53A-27 requires an affidavit of merit.  Judge Ambro concluded that this was a claim for “property damage.”  He relied on Law Division and Appellate Division authority, as well as a statement by the Supreme Court, unquestioned by any other court though arguably dictum, that the statute applies to “all actions for damages based on professional malpractice.”

The second issue was more complex.  Plaintiff conceded that its negligence claims required an affidavit of merit, but argued that no affidavit was needed for its claims of fraud, an intentional tort.  Judge Ambro observed that the Supreme Court had stated in Couri v. Gardner, 173 N.J. 328 (2002), the “seminal case” on the affidavit of merit statute, that what matters for purposes of the statute is not the label placed on the claim but whether “the claim’s underlying factual allegations require proof of a deviation from the professional standard of care applicable to that specific profession.  If such proof is required, an affidavit of merit is required for that claim, unless some exception applies.”

Here, plaintiff’s fraud claims, like their negligence claims, hinged on the assertion that the professionals had deviated from the required standard of care.  Thus, although Judge Ambro found it “counterintuitive (one may argue illogical),” the panel was obligated to find that a fraud claim, though an intentional tort rather than negligence, requires an affidavit of merit.  Accordingly, all of plaintiff’s claims were barred by its failure to provide an affidavit of merit.