Enforcement Of New Jersey’s Affidavit Of Merit Statute: A Pair Of Recent Appellate Decisions Send Mixed Signals On How Strictly Courts Will Interpret The Requirement To Timely File An Affidavit Of Merit

Two recent Appellate Division decisions have added to the growing body of jurisprudence interpreting New Jersey’s Affidavit of Merit Statute, N.J.S.A. §§ 2A:53A-26 to 29. One of the cases deals with third-party claims, and the other discusses the effect of the court’s failure to schedule a case management conference within 90 days of the filing of the defendant’s answer.

In Highland Lakes Country Club and Community Assoc. v. Nicastro, et al., 406 N.J. Super. 145 (App. Div. 2009), the court confronted the situation arising when a defendant files a third-party action against a licensed professional based on a plaintiff’s claim against the defendant. In Highland Lakes, the plaintiff country club sued the defendants, who were owners of an adjoining residential property, contending that defendants were encroaching on six acres of the country club’s property. The defendants commenced a third-party action against their surveyor, arguing that they relied on a survey prepared by the surveyor prior to commencing construction. The defendants opted not to file an Affidavit of Merit, rationalizing that their claims for contribution, indemnification, and damages would not accrue unless and until the plaintiff country club established an error in the survey on which the defendants relied. The trial court denied the surveyor’s motion to dismiss.

On appeal, the Appellate Division affirmed the trial court’s decision, holding that the defendants were not required to file an Affidavit of Merit because their third-party claims against the surveyor were not yet ripe. The court’s rationale was that the Affidavit of Merit Statute’s goal of preventing frivolous claims against professionals from proceeding was not implicated by third-party claims that are asserted to protect against possible liability based on the negligence of the professional. As the defendants had not asserted that the survey was inaccurate or that they had been damaged by errors in the survey, the court found that, as a practical matter, application of the Statute was not necessary to preclude the defendants’ claims because they would only pursue those claims when and if the plaintiff provided evidence of an error in the survey to support its claim against the defendants.

The court was also persuaded by the unfairness to the defendants that would result if they were required to file an Affidavit of Merit at this stage, stating that the Affidavit of Merit requirement was not intended to “eliminate claims not yet ripe for adjudication without regard to merit when assertion of probable merit would require a defendant to support the claims asserted against it by a plaintiff who has not come forward with competent proof of the error it alleges.” 406 N.J. Super. at 154-155. The court suggested, however, that once the plaintiff provides evidence of an error in the survey, the defendants’ claim for professional negligence accrues, which would likely trigger the 120-day clock for filing an Affidavit of Merit.

The New Jersey Supreme Court recently affirmed the Appellate Division decision in a short per curiam opinion. Highland Lakes Country Club & Cmty. Ass’n v. Nicastro, 2009 N.J. LEXIS 1291 (Dec. 8, 2009). In doing so, the Court noted that its affirmance was based on “substantially . . . the reasons expressed in the thorough and thoughtful opinion” of the Appellate Division, and concluded that the Appellate Division correctly determined that application of the Statute in this case was inconsistent with the purposes of the Statute. The Court also rejected the argument advanced by the surveyor that the defendants should have deferred their claims against the surveyor until the conclusion of the dispute between plaintiffs and defendants, finding that to impose such an obligation would violate the spirit, if not the letter of New Jersey’s Entire Controversy Doctrine.

In Paragon Contractors, Inc. v. Peachtree Condominium Assn., 406 N.J. Super. 568 (App. Div. 2009), the Appellate Division addressed the trial court’s failure to conduct a case management conference within 90 days of the filing of the third-party defendant’s answer, as mandated by the Supreme Court in Ferreira v. Rancocas Orthopedic Associates, 178 N.J. 144 (2003). In this case, the plaintiff contractor sought damages from the defendant condominium association for unpaid fees in connection with a construction project. The defendant filed a third-party complaint against a design professional alleging that its work was incomplete and defective, but did not file a timely Affidavit of Merit. In response to the design professional motion to dismiss, the defendant argued that the civil division manager’s office advised a legal assistant in its counsel’s office that a case management conference would be scheduled, and that the Affidavit of Merit need not be filed prior to the conference. The trial court rejected this argument and dismissed the defendant’s third-party complaint.

The Appellate Division affirmed the trial court, holding that the trial court’s failure to conduct the case management conference within 90 days of the filing of an answer does not serve to toll the time to file or otherwise excuse the requirement to file an Affidavit of Merit. In rejecting the argument that the court’s failure to schedule the conference required by Ferreria should toll the time in which to file the Affidavit of Merit, the Paragon Court noted that the Supreme Court did not impose the early conference requirement “as a means of altering or amending the statute, nor, in adopting this innovation, did the Court reveal any intention other than to continue to enforce and respect the 120-day deadline crafted by the Legislature.” 406 N.J. Super. at 582. As such, the attorney’s failure to file the Affidavit of Merit was fatal to the professional negligence claim.

In its discussion, the court also noted that the defendant’s counsel’s failure was excused by neither of the equitable remedies – substantial compliance or extraordinary circumstances – available to claimants in the Affidavit of Merit context, as there was no indication that the defendant ever had an Affidavit of Merit in its possession, notwithstanding its counsel’s acknowledgment of the need to file one. Further, the court noted that neither attorney inadvertence nor counsel’s carelessness constitute extraordinary circumstances in the context of the Affidavit of Merit Statute.

These two recent Appellate Division cases provide additional guidance for practitioners dealing with claims against licensed professionals. Certainly the Paragon decision reinforces the strict timing requirements for filing an Affidavit of Merit. And while the Highland Lakes decision appears to signal a slightly more liberal view than previously thought, the decision suggests that the exception to the filing requirement addressed in that case was limited to the factual circumstances presented. As such, prudent counsel would be wise to file the Affidavit of Merit within the 120-day window, even when prosecuting third-party contribution and indemnification claims, whenever those claims will ultimately require a finding that the professional deviated from the appropriate standard of care.