NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________
No. 19-3977 _____________
CORNERSTONE STAFFING SOLUTIONS, INC., Appellant
v.
WEBER, SHAPIRO & COMPANY, LLP; SCOTT D. SHAPIRO _____________________________________
On Appeal from the U.S. District Court for the District of New Jersey (District Court No.: 2-18-cv-03441) District Court Judge: Hon. Susan D. Wigenton _____________
Argued November 12, 2020
(Filed: January 7, 2021)
Before: HARDIMAN, SCIRICA and RENDELL, Circuit Judges. _____________
OPINION* _____________
Thomas F. Allen, Jr. [ARGUED] Todd J. Harlow Frost Brown & Todd 2101 Cedar Springs Road Rosewood Court, Suite 900 Dallas, TX 75201
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. Steven F. Ritardi Caramagnola & Ritardi 60 Washington Street, Third Floor Morristown, NJ 07960 Counsel for Appellant
Lawrence B. Orloff [ARGUED] Alexander S. Firsichbaum Orloff Lowenbach Stifelman & Siegel 44 Whippany Road, Suite 100 Morristown, NJ 07960
George Karousatos James Passantino Biancamano & DiStefano 10 Parsonage Road, Suite 300 Edison, NJ 08837 Counsel for Appellee
RENDELL, Circuit Judge.
Cornerstone Staffing Solutions, Inc. sued Weber, Shapiro, and Company, LLP, an
accounting firm, and one of its certified public accountants, Scott Shapiro, (together
“Shapiro”) for, among other things, professional negligence, negligent misrepresentation,
and fraud. The dispute stemmed from Shapiro’s accounting work for Valtech Services,
Inc. from whom Cornerstone had purchased an IT staffing business. The District Court
granted summary judgment to Shapiro, concluding that Cornerstone’s failure to submit an
affidavit of merit (“AOM”) barred its claims. Cornerstone appealed. We will affirm.
I.
In late 2015, Cornerstone signed a letter of intent with Valtech, S.E.—a French
company—to buy its U.S.-based IT staffing business. The U.S.-based business was
operated by its subsidiary, Valtech Services. After signing the letter of intent,
2 Cornerstone and Valtech Services began the due diligence process. To complete the
process, Valtech Services hired Shapiro to assist it in responding to Cornerstone’s
requests for financial documents and information. Among the documents that Shapiro
provided were those showing that Valtech Services had generally positive EBITDA1
values for each month of 20152 and a positive year-to-date EBITDA.
After completing the due diligence process, Cornerstone and Valtech Services
negotiated a lower purchase price subject to an upward “initial payment adjustment” if
Valtech Services’ final financial performance and EBITDA for 2015 met a certain
threshold. App. PA 23–24. On December 28, 2015, they memorialized their agreement
in an Asset Purchase Agreement.
Later, Shapiro notified Cornerstone that Valtech Services’ final 2015 financial
performance triggered the “initial price adjustment” such that Cornerstone was obligated
to make an additional payment. App. PA 25, 498. Cornerstone refused and, in response,
Valtech Services began to “offset” what it believed it was owed. It effectuated this
“offset” by withholding payments made to it by its former clients—payments that should
have passed through to Cornerstone as the new owner of the business.
With their relationship at an impasse, Valtech Services sued Cornerstone in Texas
state court. Cornerstone ultimately countered with its own claims of fraud and alleged
1 “EBITDA” is an accounting term of art and an acronym for “earnings before interest, taxes, depreciation, and amortization.” App. PA 20 n.2. 2 While Cornerstone represents that Valtech Services’ documents showed it had positive EBITDA values “for each month of the year,” the documents to which Cornerstone cites for support, by contrast, show Valtech Services had some months of negative EBITDA values. Appellant’s Br. 7.
3 that Valtech Services falsely represented, among other things, that its EBITDA values
were positive in 2015 when, in fact, they were negative. The Texas litigation later
resulted in various jury findings including that Valtech Services had not defrauded
Cornerstone.
Still, as the Texas lawsuit was pending, Cornerstone initiated a separate suit
against Shapiro in New Jersey based on Shapiro’s purported role in aiding and abetting
Valtech Services’ fraud. Cornerstone brought six causes of action against Shapiro,
including fraud, fraudulent inducement, negligent misrepresentation, conspiracy,
professional negligence, and declaratory judgment3 stemming from its belief that Shapiro,
like Valtech Services, perpetrated a fraud scheme against it principally by “conceal[ing] .
. . the fact that (1) Valtech Services had an entirely separate set of [accounting] books . . .
and (2) [Valtech Services’] ‘real’ financial statements report[ed] . . . losses to Valtech
S.E.’s auditors.” App. PA 29.
Early in the New Jersey suit, the District Court held a pretrial conference in which
the parties discussed when Cornerstone might file its AOM to support its professional
negligence claim.4 After the conference, the parties executed a consent order establishing
3 As the District Court noted, while Cornerstone labeled its claim for declaratory judgment as a cause of action, it is more properly denoted as a form of relief since the availability of declaratory judgment turns on Cornerstone’s proof of its substantive claims grounded, in part, on Shapiro’s alleged violations of its “professional obligations as a licensed CPA and accounting firm.” App. PA 33. 4 Under New Jersey law, submission of a valid AOM is a prerequisite to bringing certain actions against certain licensed persons. N.J. Stat. Ann. § 2A:53A-26-29. When an AOM is required and a plaintiff fails to submit one, the result is “dismissal with prejudice.” A.T. v. Cohen, 175 A.3d 932, 937 (N.J. 2017).
4 a deadline for Cornerstone to file its AOM. The deadline came and went. Eleven
months after the deadline passed, Shapiro moved for summary judgment. Shapiro argued
that while some of Cornerstone’s claims ostensibly required no AOM because they were
styled as intentional torts, under state law those claims nonetheless required an AOM
because their success turned on proof that Shapiro’s conduct deviated from a professional
standard of care.
Although Cornerstone did not oppose entry of judgment on its claim for
professional negligence—for which an AOM was unquestionably required—it opposed
judgment on the remaining claims. See App. PA 3 n.7 (explaining that Cornerstone did
not oppose judgment on its professional negligence claim). The District Court, however,
agreed with Shapiro and concluded that while Cornerstone’s remaining claims may have
been characterized as intentional torts, the success of these remaining claims required
proof that Shapiro “deviated from professional standards of care.” App. PA 7. For this
reason, Cornerstone’s failure to submit an AOM was fatal.
The District Court further concluded that Cornerstone’s failure to submit an AOM
was not excusable under the “common knowledge exception” nor under the doctrines of
laches or estoppel. The common knowledge exception did not apply because no
reasonable juror could determine whether Shapiro was negligent or delinquent in its
conduct “without expert assistance.” App. PA 8. The District Court concluded that
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________
No. 19-3977 _____________
CORNERSTONE STAFFING SOLUTIONS, INC., Appellant
v.
WEBER, SHAPIRO & COMPANY, LLP; SCOTT D. SHAPIRO _____________________________________
On Appeal from the U.S. District Court for the District of New Jersey (District Court No.: 2-18-cv-03441) District Court Judge: Hon. Susan D. Wigenton _____________
Argued November 12, 2020
(Filed: January 7, 2021)
Before: HARDIMAN, SCIRICA and RENDELL, Circuit Judges. _____________
OPINION* _____________
Thomas F. Allen, Jr. [ARGUED] Todd J. Harlow Frost Brown & Todd 2101 Cedar Springs Road Rosewood Court, Suite 900 Dallas, TX 75201
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. Steven F. Ritardi Caramagnola & Ritardi 60 Washington Street, Third Floor Morristown, NJ 07960 Counsel for Appellant
Lawrence B. Orloff [ARGUED] Alexander S. Firsichbaum Orloff Lowenbach Stifelman & Siegel 44 Whippany Road, Suite 100 Morristown, NJ 07960
George Karousatos James Passantino Biancamano & DiStefano 10 Parsonage Road, Suite 300 Edison, NJ 08837 Counsel for Appellee
RENDELL, Circuit Judge.
Cornerstone Staffing Solutions, Inc. sued Weber, Shapiro, and Company, LLP, an
accounting firm, and one of its certified public accountants, Scott Shapiro, (together
“Shapiro”) for, among other things, professional negligence, negligent misrepresentation,
and fraud. The dispute stemmed from Shapiro’s accounting work for Valtech Services,
Inc. from whom Cornerstone had purchased an IT staffing business. The District Court
granted summary judgment to Shapiro, concluding that Cornerstone’s failure to submit an
affidavit of merit (“AOM”) barred its claims. Cornerstone appealed. We will affirm.
I.
In late 2015, Cornerstone signed a letter of intent with Valtech, S.E.—a French
company—to buy its U.S.-based IT staffing business. The U.S.-based business was
operated by its subsidiary, Valtech Services. After signing the letter of intent,
2 Cornerstone and Valtech Services began the due diligence process. To complete the
process, Valtech Services hired Shapiro to assist it in responding to Cornerstone’s
requests for financial documents and information. Among the documents that Shapiro
provided were those showing that Valtech Services had generally positive EBITDA1
values for each month of 20152 and a positive year-to-date EBITDA.
After completing the due diligence process, Cornerstone and Valtech Services
negotiated a lower purchase price subject to an upward “initial payment adjustment” if
Valtech Services’ final financial performance and EBITDA for 2015 met a certain
threshold. App. PA 23–24. On December 28, 2015, they memorialized their agreement
in an Asset Purchase Agreement.
Later, Shapiro notified Cornerstone that Valtech Services’ final 2015 financial
performance triggered the “initial price adjustment” such that Cornerstone was obligated
to make an additional payment. App. PA 25, 498. Cornerstone refused and, in response,
Valtech Services began to “offset” what it believed it was owed. It effectuated this
“offset” by withholding payments made to it by its former clients—payments that should
have passed through to Cornerstone as the new owner of the business.
With their relationship at an impasse, Valtech Services sued Cornerstone in Texas
state court. Cornerstone ultimately countered with its own claims of fraud and alleged
1 “EBITDA” is an accounting term of art and an acronym for “earnings before interest, taxes, depreciation, and amortization.” App. PA 20 n.2. 2 While Cornerstone represents that Valtech Services’ documents showed it had positive EBITDA values “for each month of the year,” the documents to which Cornerstone cites for support, by contrast, show Valtech Services had some months of negative EBITDA values. Appellant’s Br. 7.
3 that Valtech Services falsely represented, among other things, that its EBITDA values
were positive in 2015 when, in fact, they were negative. The Texas litigation later
resulted in various jury findings including that Valtech Services had not defrauded
Cornerstone.
Still, as the Texas lawsuit was pending, Cornerstone initiated a separate suit
against Shapiro in New Jersey based on Shapiro’s purported role in aiding and abetting
Valtech Services’ fraud. Cornerstone brought six causes of action against Shapiro,
including fraud, fraudulent inducement, negligent misrepresentation, conspiracy,
professional negligence, and declaratory judgment3 stemming from its belief that Shapiro,
like Valtech Services, perpetrated a fraud scheme against it principally by “conceal[ing] .
. . the fact that (1) Valtech Services had an entirely separate set of [accounting] books . . .
and (2) [Valtech Services’] ‘real’ financial statements report[ed] . . . losses to Valtech
S.E.’s auditors.” App. PA 29.
Early in the New Jersey suit, the District Court held a pretrial conference in which
the parties discussed when Cornerstone might file its AOM to support its professional
negligence claim.4 After the conference, the parties executed a consent order establishing
3 As the District Court noted, while Cornerstone labeled its claim for declaratory judgment as a cause of action, it is more properly denoted as a form of relief since the availability of declaratory judgment turns on Cornerstone’s proof of its substantive claims grounded, in part, on Shapiro’s alleged violations of its “professional obligations as a licensed CPA and accounting firm.” App. PA 33. 4 Under New Jersey law, submission of a valid AOM is a prerequisite to bringing certain actions against certain licensed persons. N.J. Stat. Ann. § 2A:53A-26-29. When an AOM is required and a plaintiff fails to submit one, the result is “dismissal with prejudice.” A.T. v. Cohen, 175 A.3d 932, 937 (N.J. 2017).
4 a deadline for Cornerstone to file its AOM. The deadline came and went. Eleven
months after the deadline passed, Shapiro moved for summary judgment. Shapiro argued
that while some of Cornerstone’s claims ostensibly required no AOM because they were
styled as intentional torts, under state law those claims nonetheless required an AOM
because their success turned on proof that Shapiro’s conduct deviated from a professional
standard of care.
Although Cornerstone did not oppose entry of judgment on its claim for
professional negligence—for which an AOM was unquestionably required—it opposed
judgment on the remaining claims. See App. PA 3 n.7 (explaining that Cornerstone did
not oppose judgment on its professional negligence claim). The District Court, however,
agreed with Shapiro and concluded that while Cornerstone’s remaining claims may have
been characterized as intentional torts, the success of these remaining claims required
proof that Shapiro “deviated from professional standards of care.” App. PA 7. For this
reason, Cornerstone’s failure to submit an AOM was fatal.
The District Court further concluded that Cornerstone’s failure to submit an AOM
was not excusable under the “common knowledge exception” nor under the doctrines of
laches or estoppel. The common knowledge exception did not apply because no
reasonable juror could determine whether Shapiro was negligent or delinquent in its
conduct “without expert assistance.” App. PA 8. The District Court concluded that
Cornerstone failed to establish its entitlement to equitable relief under laches or estoppel
because it failed to show it had been prejudiced. App. PA 8 n.11.
5 II.5
We review the grant of Shapiro’s summary judgment motion de novo. Lehman
Bros. Holdings, Inc. v. Gateway Funding Diversified Mortg. Servs., L.P., 785 F.3d 96,
100 (3d Cir. 2015). We review the District Court’s decision to deny Cornerstone
equitable relief under the doctrines of laches and estoppel for abuse of discretion.
Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 197 (3d Cir. 2014); In
re Bressman, 874 F.3d 142, 149 (3d Cir. 2017) (laches); Meyer v. CUNA Mut. Ins. Soc.,
648 F.3d 154, 162 (3d Cir. 2011) (estoppel).
III.
Cornerstone urges this Court to reverse the District Court for having committed
three errors. First, it argues the District Court erred in concluding that its claims required
proof of a deviation from a professional standard of care and, thus, was subject to the
AOM requirement. Second, Cornerstone contends the District Court erred when it
decided the common knowledge exception did not excuse Cornerstone’s noncompliance
with the AOM requirement. Third, Cornerstone contends the District Court abused its
discretion in denying Cornerstone equitable relief under laches or estoppel based on
Shapiro’s eleven-month delay in filing its summary judgment motion. We disagree.
A.
The District Court correctly articulated and applied the New Jersey Supreme
Court’s framework established in Couri v. Gardner to determine that Cornerstone’s
5 The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291.
6 claims required proof of a deviation from the professional standard of care applicable to
New Jersey certified public accountants. 801 A.2d 1134 (N.J. 2002). Accordingly,
Cornerstone was required to submit an AOM. In support of its conclusion, the District
Court cited our decision in the factually analogous case Nuveen Mun. Trust v.
Withumsmith Brown P.C. and noted at least three examples of how the success of
Cornerstone’s claims necessarily required such proof. 752 F.3d 600 (3d Cir. 2014).
First, the District Court explained that for Cornerstone to succeed on its claim that
Shapiro improperly accounted for “intercompany business operations” expenses,
resulting in an overstatement of revenue and understatement of expenses, a fact finder
would first need to “understand[] . . . how accountants should treat” those expenses.
App. PA 7 (emphasis added).
Second, the District Court explained that for Cornerstone to succeed on its claim
that Shapiro withheld material information from it—the so-called “real” financial
books—“a fact finder must first understand what documents a professional accountant
would provide to a non-client engaged in an asset purchase.” App. PA 7.
Third, the District Court explained that for Cornerstone to succeed on its claim
that Shapiro engaged in “gross accounting errors” by preparing an inaccurate and false
“AR roll forward report,” a fact finder would first need to “understand what standards
accounting professionals adhere to in preparing those reports.” App. PA 7.
We agree with the District Court’s explanation of the ways in which Cornerstone’s
claims require proof of Shapiro’s deviation from a standard of professional care. We also
note that the District Court’s citations to the varied allegations in Cornerstone’s
7 complaint are illustrative rather than exhaustive of the ways in which Cornerstone’s
claims turn on proof of Shapiro’s deviation from the standard of care. See generally App.
PA 19–34. That the District Court rightly concluded that Cornerstone’s claims require
such proof is further supported by the similarity between the claims presented in this case
and the claims presented in Nuveen, which we likewise concluded, upon application of
the Couri framework, required proof of a deviation from a professional standard of care.
752 F.3d at 606.
B.
We also agree with the District Court’s conclusion that Cornerstone’s failure to
submit an AOM is not otherwise excusable under the “common knowledge exception”
because the matters at issue in this case are beyond the ken of the average juror. The
average juror’s ordinary understanding and experience would be inadequate to evaluate
the propriety of Shapiro’s conduct, which implicates business and accounting concepts as
varied as the relationship between a parent company and its subsidiaries, the accounting
obligations and practices of “publicly-traded” foreign “société anonyme[s],” the proper
calculation of EBITDAs, the proper preparation of AR roll forward reports, and the
proper treatment of intercompany business operations, among many others. App. PA.
022–023, 026–027. Thus, we agree with the District Court. The common knowledge
exception does not apply.
8 C.
Finally, we discern no abuse of discretion in the District Court’s decision not to
apply laches or estoppel to bar Shapiro from moving for summary judgment on AOM
grounds. Therefore, we reject Cornerstone’s final claim of error.
The District Court was best positioned to consider any claim of prejudice and
concluded that Cornerstone did not carry its burden of showing it. Indeed, the District
Court noted that Cornerstone, far from having shown any prejudice, had itself
acknowledged that it was obligated to submit an AOM, “at the very least as to the count
for professional negligence, and willingly chose not to do so.” App. PA 8. And the
District Court noted that “in the eleven-month period between [the consent order]
deadline and the date Defendants filed the [summary judgment] motion, only limited
paper discovery ha[d] been exchanged and no depositions h[ad] been taken.” App. PA 8.
Thus, we agree with the District Court that neither laches nor estoppel precluded
dismissal of Cornerstone’s case.
IV.
For these reasons, we will affirm the District Court’s order.