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2014 October Newsletter of Hardin Kundla McKeon & Poletto

Court Dismisses Judgment Creditor’s Direct Action Against Judgment Debtors’ Insurers for Failure to State a Claim

In Marolda Farms et al v. Maryland Casualty Co. et. al., HKMP partner John Favate and associate Eileen Walsh successfully secured a decision holding plaintiffs’ failure to allege property damage occurring during the policy periods was fatal to their coverage claim and any belated attempt to assert such allegations was barred by judicial estoppel, because any new allegations were contrary to proofs previously submitted by plaintiffs in securing the default judgment for which they sought coverage.

Plaintiffs owned and operated a commercial farm in southern New Jersey and filed suit in 2011 against several insurers who issued policies in the 1970s and 1980s to two defunct entities that previously operated nearby properties designated as Superfund sites. Solvent discharges from the sites had impacted groundwater, and the USEPA implemented a remedy and sued the entities as responsible parties in federal court. The entities initiated related coverage litigation in state court. In 2002, a Consent Decree was filed incorporating settlements reached by the insurers, the entities and USEPA, including environmental site releases extended to the insurers. Plaintiffs were not parties to the USEPA action.

In 2006, NJDEP imposed limitations on the amount of groundwater plaintiffs were able to draw for use in irrigating their farm, since well usage was deemed to affect movement of the contamination plume emanating from the sites. Claiming these limitations caused them to suffer damages, plaintiffs sued the two defunct entities responsible for the contaminated sites. In their proof hearing, plaintiffs presented uncontested proofs that the water use limitations imposed in 2006 caused them to sustain crop losses and diminished development value because of inadequate potable water. A default judgment was entered against the two defunct entities for more than $9 million.

Unable to collect the default judgment against the entities, in 2011 plaintiffs filed a direct action against the insurers, whereupon the insurers moved to dismiss the complaint as barred by the settlements, site releases and Consent Decree. The trial court granted the motion and the Appellate Division affirmed, finding that plaintiffs’ challenge to the Consent Decree should be brought in federal court.

The federal court found that the Consent Decree may not bar plaintiffs’ claims if the damage forming the basis for the default judgment pre-dated the Consent Decree and settlements. The court declined to exercise jurisdiction, allowing the matter to return to state court for a determination of when plaintiffs suffered damage. Plaintiffs re-filed in state court seeking declaratory judgment, but did not allege that plaintiffs suffered property damage during the 1970s and 1980s, when the insurers’ policies were in effect. The insurers successfully moved to dismiss the complaint for failure to state a claim upon which relief may be granted.

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Notice to Plaintiff of Foreign Object Triggers Running of Statute of Limitations in Medical Malpractice Case Resulting in Dismissal of Plaintiff’s Law Suit

In the matter of Shupack v. Moore, MD, et. al. HKMP Partner Patrick Clare and associate Rosa Marques recently succeeded in achieving dismissal of a medical malpractice complaint against a hospital client on the basis of the statute of limitations. Plaintiff had undergone a lumbar spinal decompression and fusion surgery at the client’s facility on March 1, 2007 during which the “plug head” of a set screw implanted in plaintiff’s spine had broken free. The plug head remained inside plaintiff’s body following the procedure. Plaintiff complained of continued pain, but claimed that the foreign object was not discovered until an October 19, 2009 office visit with a new physician. The “plug head” was removed during a procedure conducted on July 14, 2011. Plaintiff filed her Complaint on October 17, 2011.

New Jersey has a two year statute of limitation for medical malpractice claims. However, in order to avoid the harsh effects of a mechanical application of the statute of limitations, the New Jersey Supreme Court has adopted the “discovery rule,” which provides that, in appropriate cases, “a cause of action will be held not to accrue until the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered, that he [or she] may have a basis for an actionable claim.” Lopez v. Swyer, 62 N.J. 267, 272 (1973).

On behalf of Englewood Hospital and Medical Center, HKMP moved to dismiss plaintiff’s Complaint as time barred. HKMP argued that the statute of limitations on plaintiff’s claim began to run, at the latest, as of November 12, 2008 when plaintiff visited an orthopedist who noted the existence of the foreign object and documented same in his records. A four (4) day Lopez hearing was conducted before the Hon. Estela De La Cruz, J.S.C. After hearing testimony from plaintiff and a number of witnesses Judge De La Cruz granted defendants’ motions. The Court found it more likely than not that plaintiff’s physician advised her of the existence of the foreign object during the visit of November 12, 2008 and that, as such, her October 17, 2011 Complaint was filed outside of the two (2) year statute of limitations.

This success shows that even where there is conflicting testimony, dismissal on the basis of the statute of limitations can be achieved through a well conducted Lopez hearing.

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Accident Reconstruction Expert/Biomechanical Major Factor in Defense Verdict

Plaintiff Javier Guzman had no prior history of back problems prior to his accident with defendant Louis Wongus’s tractor trailer. However, in the two years after the collision he underwent three (3) surgical procedures to the lumbar spine, including a fusion and a revision of the same. Three (3) medical doctors offered opinions relating each procedure to the accident.

Since the Wongus truck was making a left hand turn from the center lane of a three lane road, plaintiff evaluated this as a strong liability case and made a demand for defendant’s $1,000,000 policy limits and refused to consider any compromised sum.

The case was tried before the Superior Court of New Jersey, Law Division – Union County by HKMP partner Paul Daly. Mr. Daly presented the expert testimony of John Scott of SKE Consulting and Richard Bandstra, Ph.D. Mr. Scott testified that the angle of the intersection was such that defendant could not safely make the turn from the left lane and made a reasonable decision in turning from the center. He noted the accident damage was consistent with plaintiff attempting to pass Wongus on the left as he attempted to negotiate the turn, as opposed to Wongus turning into plaintiff as plaintiff claimed. More significantly, Mr. Scott performed calculations of the forces exerted upon plaintiff’s body by the collision and determined that the collision only subjected the occupants to less than 2.6 g’s of force. Using these calculations, Dr. Bandstra explained how, based on thousands of tests on live humans, cadavers and crash test dummies, it is scientifically impossible for 2.6 g’s of force to cause the injuries alleged in this matter.

Despite plaintiff’s confidence and firm stand stance against compromised settlement, after hearing testimony from Mr. Scott of SKE Consulting and Dr. Bandstra the jury returned a defense verdict.

While every soft tissue injury case may not merit the retention of multiple liability experts, the verdict in the Guzman matter demonstrates the impact that experts in the field of accident reconstruction and biomechanics can have on a jury’s perception and, ultimately, their verdict.

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HKMP Prevails on Motion for Summary Judgment for Attorney in Alleged Foreclosure Rescue Scam

HKMP partner Janet Poletto and associate Bob Blanton recently obtained an Order from the New Jersey Superior Court, Law Division granting summary judgment in favor of a defendant attorney alleged to have assisted in a scheme to defraud plaintiff as part of a purported foreclosure rescue scam and successfully defeated a motion for reconsideration of that Order. Defendant attorney had drafted a contract of sale for a co-defendant entity to purchase plaintiff’s home as well as a lease for plaintiff to remain on the premises with an option to later repurchase the property. When plaintiff was evicted from the premises for failure to pay rent under the resultant tenancy, he brought claims against the attorney for consumer fraud and violations of New Jersey Home Ownership Security Act of 2002 (“HOSA”), New Jersey Residential Mortgage Act (“RMLA”), and Federal Truth in Lending Act (“TILA) modified by the Federal Home Ownership and Equity Protection Act (“HOEPA”).

HKMP argued that, under Appellate Division case law, attorney services were not within the intention of the New Jersey Consumer Fraud Act. Likewise, HKMP contended that HOSA did not govern the attorney’s conduct as he was not a creditor and, therefore, not subject to HOSA. HKMP also prevailed in arguing that the attorney was not a mortgage loan originator subject to the RMLA. Last, HKMP argued that res judicata served to bind the Law Division to the prior adjudication that plaintiff was properly evicted from the premises in landlord-tenant court which HKMP contended implied that the transaction conveying the premises was, in fact, proper.

Plaintiff moved for reconsideration raising objection to the decision as it relied on res judicata. HKMP successfully argued that even if res judicata did not apply, the attorney’s conduct did not subject him to liability under TILA and HOEPA. The Law Division denied reconsideration accepting HKMP’s argument that the attorney’s conduct in only representing one party to the transaction and not claiming to plaintiff that the underlying transaction was simply a loan or financing was distinguishable from prior case law wherein an attorney had been found liable.

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Defense Verdict Obtained Where Plaintiff’s Physical Complaints Were Delayed

In the case of Garcia v. Massey, Superior Court of New Jersey, Middlesex County, MID-L-6610-12, HKMP recently succeeded in obtaining a defense verdict for their client after a jury trial. HKMP associate Joseph A. DiPisa presented the case before the Honorable Phillip Lewis Paley, J.S.C. and a full jury.

Liability was stipulated in this rear end collision case. Plaintiff, who was in her mid-30s, alleged that she sustained a rotator cuff tear, bursitis, impingement syndrome and an acromial derangement to the non-dominant shoulder that caused permanent pain and weakness despite arthroscopic surgery. Plaintiff also maintained that she sustained lumbar and cervical bulges. Plaintiff’s final pre-suit demand was in the amount of $100,000.

The case was defended on the basis that plaintiff’s alleged injuries were not caused by the motor vehicle accident. The defendant’s orthopedist testified that it would be expected that an individual suffering such shoulder injuries in a trauma would have immediate complaints. This was not the case, as plaintiff did not complain of shoulder pain until weeks after the accident. Also significant was testimony of the investigating police officer that following the collision involving very minor impact damage, the plaintiff made no complaints of shoulder pain at the scene of the accident.

Following a week long trial, the jury rejected plaintiff’s claims of causation and returned a unanimous verdict in favor of HKMP’s client.

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United States Magistrate Judge Denies Plaintiff’s Motion to Amend Complaint and Recommends Granting of Motion to Dismiss

HKMP partner John S. Favate and associate Eileen Walsh have recently obtained a favorable ruling in the United States District Court for the District of New Jersey, resulting in a denial of the plaintiff’s motion for leave to file an amended complaint and a recommendation that HKMP attorneys’ motion to dismiss for lack of subject matter jurisdiction be granted.

In Prince v. Orr, 13-6418, the plaintiff filed a complaint in District Court alleging various state law causes of action sounding in breach of contract and legal malpractice. HKMP attorneys brought a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) on the basis that the District Court lacked original jurisdiction over the plaintiff’s complaint. Mr. Favate and Ms. Walsh argued that the complaint did not contain a federal claim and the requirements of diversity jurisdiction were not met. In response, plaintiff filed a cross-motion seeking leave to amend his complaint to add a count for civil conspiracy pursuant 42 U.S.C. § 1983 and § 1985.

In opposition to plaintiff’s cross-motion, HKMP attorneys argued that plaintiff’s proposed amendment was futile because the proposed second amended complaint failed to plead a viable cause of action for civil conspiracy under either 42 U.S.C. § 1983 or § 1985, and as a result, would not create original jurisdiction over plaintiff’s complaint.

In an Opinion and Recommendation, the Magistrate Judge found that permitting plaintiff to amend his complaint would be futile because the proposed conspiracy allegations failed to state a claim upon which relief could be granted. Plaintiff’s application for leave to amend was denied with prejudice. In addition, the Magistrate Judge made a written recommendation to the District Court that the HKMP attorneys’ motion to dismiss for lack of subject matter jurisdiction be granted. The Court based this recommendation on the fact that the complaint contains no federal claim and there is no diversity between the parties.

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Summary Judgment Secured for Title Agent Accused of Negligently Closing a Reverse Mortgage Loan

In Cameron v. Chancellor Title Agency, Plaintiffs alleged the title agent did not fulfill its obligations in connection with a loan closing, including interviewing the applicant, verifying the lender had accurate and current information, and that loan closing documents were appropriately executed. Plaintiffs were holders of a consent judgment against the loan applicant. While litigation was pending, but before the consent judgment was filed, the loan applicant had applied for and closed upon a reverse mortgage and removed the equity in the home. Plaintiffs alleged that had the title agent interviewed the applicant and prepared an accurate affidavit of title, it would have been disclosed that there was pending litigation such that the loan transaction could not have closed.

In its defense, HKMP established no duty was owed to plaintiffs, the lender did not require the title agent to assume the duties that plaintiffs sought to impose, and at the time of the closing, there was no public record of any judgment or litigation and the title agent’s obligation was limited to securing a first lien position for the lender, which had been accomplished.

HKMP successfully maintained the existence of a duty was a question of fairness and public policy. Relevant to the determination of fairness of imposing a legal duty are the following factors: (1) nature of the risk, (2) relationship of the parties, (3) opportunity to exercise care, and (4) effect on the public of the imposition of the duty. Utilizing these factors, HKMP established that Chancellor Title Agency acted in accordance with industry standards and the instructions provided by its customer. The suit was dismissed. Inquiries regarding these issues may be addressed to HKMP partner, John R. Scott.

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HKMP Obtains Dram Shop Summary Judgment Where no Expert Opinion on Visible Intoxication

The New Jersey Licensed Alcoholic Beverage Server Fair Liability Act, N.J.S.A. §2A:22A-1 to 7, commonly referred to as the “Dram Shop Act,” limits liability for service of persons over 21 to situations where a person is served alcohol while visibly intoxicated. N.J.S.A. § 2A:22A-5. Plaintiffs generally attempt to establish this standard through eyewitness testimony of such service, or through evidence regarding the person’s alleged consumption of alcohol combined with the opinion of an expert toxicologist that, based on the alleged evidence, the person would have been visibly intoxicated at a time when the person was served alcohol. Plaintiffs frequently are able to present such cases to juries on grounds that the finder of fact should make determinations regarding the circumstances of the service of alcohol.

However, careful development of fact and expert discovery may enable servers to prevail on summary judgment where appropriate. HKMP recently obtained summary judgment dismissing dram shop claims against a server in a case where a patron was served alcohol and subsequently was involved in a physical confrontation with two other patrons, who suffered injuries and sued both the fellow patron and the server. Plaintiffs had not retained any toxicology expert, and HKMP successfully demonstrated that the evidence regarding the patron’s consumption of alcohol potentially available to the jury did not permit the jury to conclude that the patron was served while visibly intoxicated without such an expert. Plaintiffs contended that their own observations of the patron prior to the altercation and knifing were sufficient to create an issue of fact as to the patron’s level of intoxication. The court rejected this argument, agreeing with HKMP’s position that the visual observations of plaintiffs at a later point in time were not specific to behavior resulting from alcoholic intoxication, and that the later observations were insufficient circumstantial evidence to create an issue of fact as to whether the patron had been served alcohol while visibly intoxicated at an earlier point in time. Questions regarding these issues may be addressed to Art Povelones or Brian Alfson.

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Appellate Division Imposes Duty to Warn of Asbestos Contained in Regularly Replaced Component Parts

In the matter of Hughes v. AW Chesterton, 435 N.J. Super. 326 (App. Div. 2014) the Superior Court of New Jersey, Appellate Division determined that, in certain circumstances, a manufacture has a duty to warn that component parts replaced as part of regular maintenance contain asbestos. The Court, however, rejected the plaintiff’s argument that “causation may be proven by proximity” to the manufacturer’s product in the absence of proof of actual exposure to the asbestos-containing product manufactured or sold by the defendant.” Id. at 332.

The Court held that “[t]he mere absence of a warning on an asbestos-containing product does not render the product defective” and that the same are not “uniformly dangerous”. Id. at 337, citing Becker v. Baron Brothers, 138 N.J. 145 (1994). It was determined that a plaintiff must prove (1) that the product was, in fact, defective when it left the control of the manufacturer, and (2) medical causation as defined by the test set forward in Sholtis v. American Cyanamid Co., 238 N.J. Super. 8 (App. Div. 1989).

In analyzing the product defect claim, the Court held the nature of the product to be an important factor in assessing the reasonableness of the manufacturer’s failure to provide warning of the asbestos contained in gaskets and packing utilized in its pumps. Hughes, supra, 339. The Court found that, under a strict liability analysis, the manufacturer is presumed to be aware of any dangers posed to users of its products, including component parts thereof. Ibid. The Appellate Division held that the regular replacement of the gaskets and packing did not absolve defendant manufacturer of a duty to warn of their inherent danger. Id. at 431.

With respect to the issue of medical causation, the Court held that a plaintiff must prove actual exposure to the defendant’s defective product. Exposure must be demonstrated to have occurred on a frequent and regular basis with “sufficient proximity to demonstrate the requisite causal connection between exposure and the plaintiff’s illness.” Id. at 436. The Court so ruled because it believed that “industry should not be saddled with open-ended exposure based upon a casual or minimum contact.” Ibid.

HKMP considers the Appellate Division’s decision in Hughes to be a net win for the defense of asbestos claims despite the duty to warn imposed. The duty imposed is, arguably, specific to Hughes and the natural corollary of the Court’s decision is that original manufacturers will not be liable for harm caused by the asbestos-containing component parts of aftermarket manufacturers and suppliers.

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HKMP Obtains Finding of “No Probable Cause” in Connection With Discrimination Claim

HKMP partner John S. Favate recently obtained a finding of “No Probable Cause” from the New Jersey Division on Civil Rights (“DCR”) in an employment discrimination matter. In that matter, a former employee filed a Charge of Discrimination with the DCR alleging that his former employer subjected him to discrimination on the basis of disability, national origin and religion. Specifically, the employee alleged that certain of his superiors had made offensive comments to him regarding his national origin and religion. The employee also alleged that the employer retaliated against him by reducing his compensation after his return from disability leave.

On behalf of the former employer, HKMP denied the allegations and presented evidence showing that all commissions and other compensations were fully paid. HKMP also argued that the employee’s complaints were thoroughly and promptly investigated and addressed.

Following a lengthy and detailed investigation which included 4 interviews of the claimant, the DCR agreed with HKMP’s arguments. The DCR found no probable cause to support the claim and dismissed the charge with prejudice. HKMP also defeated a Wage and Hour claim brought by this same employee against his former employer.

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About HKMP

For over twenty five years, Hardin Kundla McKeon & Poletto has provided an integrated association of professionals committed to attaining clients’ goals through quality service, pragmatic guidance, and thoughtful planning. The proficiency, expertise, and experience of its attorneys creates achievable goals and practical results for its clients through communication and teamwork.

The articles in this newsletter are for informational purposes only and do not constitute legal advice.

For more information about any topic discussed in this newsletter, please contact Hardin Kundla McKeon & Poletto at 973-912-5222 or [email protected].