Fairfax Financial Holdings Limited v. S.A.C.

160 A.3d 44, 450 N.J. Super. 1

• Court: New Jersey Superior Court Appellate Division
• Decided: April 27, 2017
• Docket: A-0963-12T1
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0963-12T1

FAIRFAX FINANCIAL HOLDINGS LIMITED and CRUM & FORSTER HOLDINGS CORP., APPROVED FOR PUBLICATION

Plaintiffs-Appellants/ April 27, 2017 Cross-Respondents, APPELLATE DIVISION

v.

S.A.C. CAPITAL MANAGEMENT, L.L.C., S.A.C. CAPITAL ADVISORS, L.L.C., S.A.C. CAPITAL ASSOCIATES, L.L.C., SIGMA CAPITAL MANAGEMENT, L.L.C., STEVEN A. COHEN, ROCKER PARTNERS, L.P., COPPER RIVER PARTNERS, L.P., DAVID ROCKER, THIRD POINT L.L.C., DANIEL S. LOEB, JEFFREY PERRY, INSTITUTIONAL CREDIT PARTNERS, L.L.C., WILLIAM GAHAN,1 JAMES S. CHANOS, and KYNIKOS ASSOCIATES, L.P.,

Defendants-Respondents,

and

EXIS CAPITAL MANAGEMENT, INC., EXIS CAPITAL, L.L.C., EXIS DIFFERENTIAL PARTNERS, L.P., EXIS INTEGRATED PARTNERS, L.P., ADAM D. SENDER, ANDREW HELLER, and MORGAN KEEGAN & COMPANY, INC.,

Defendants-Respondents/ Cross-Appellants,

1 Defendants Institutional Credit Partners, L.L.C. and William Gahan entered into a stipulation of dismissal with plaintiffs prior to oral argument. and

SPYRO CONTOGOURIS, MAX BERNSTEIN, MI4 INVESTORS, L.L.C., MI4 RECONNAISSANCE, L.L.C., MI4 LIMITED PARTNERSHIP, JOHN D. GWYNN,2 and CHRISTOPHER BRETT LAWLESS,

Defendants. ______________________________________________

Argued October 17, 2016 – Decided April 27, 2017

Before Judges Fisher, Ostrer and Leone.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2032-06.

Michael J. Bowe (Kasowitz, Benson, Torres & Friedman, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for appellants/cross-respondents (Nagel Rice, L.L.P. and Kasowitz, Benson, Torres & Friedman, L.L.P., attorneys; Bruce H. Nagel, Jay J. Rice, Marc E. Kasowitz of the New York bar, admitted pro hac vice, Daniel R. Benson of the New York bar, admitted pro hac vice, and Mr. Bowe, of counsel and on the briefs).

2 Defendant John Gwynn passed away in 2009. He had filed a counterclaim, which alleged defamation, and the absence of a disposition of that claim generated inquiries about finality from this court soon after the appeal was filed. We were advised that a representative of Gwynn's estate had been substituted in his place pursuant to Rule 4:34-1, but that the estate had not appeared in response to the claims asserted against him or to prosecute his counterclaim. A remand to the trial court resulted in the filing of a stipulation of dismissal with prejudice of Gwynn's counterclaim. Gwynn's estate has neither appeared nor taken any part in this appeal.

2 A-0963-12T1 Benjamin P. McCallen (Willkie Farr & Gallagher, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for respondents S.A.C. Capital Management, L.L.C., S.A.C. Capital Advisors, L.L.C., S.A.C. Capital Associates, L.L.C., Sigma Capital Management, L.L.C. and Steven A. Cohen (Parker Ibrahim & Berg, L.L.C. and Mr. McCallen, attorneys; Joseph T. Boccassini, Martin B. Klotz of the New York bar, admitted pro hac vice, and Scott S. Rose of the New York bar, admitted pro hac vice, on the brief).

Mark S. Werbner (Sayles Werbner, P.C.) of the Texas bar, admitted pro hac vice, argued the cause for respondents/cross-appellants Exis Capital Management, Inc., Exis Capital, L.L.C., Exis Differential Partners, L.P., Exis Integrated Partners, L.P., Adam D. Sender and Andrew Heller (Walder Hayden & Brogan, P.A., and Mr. Werbner, attorneys; Richard A. Sayles of the Texas bar, admitted pro hac vice, Mr. Werbner, Mark D. Strachan of the Texas bar, admitted pro hac vice, and Mark Torian, of the Texas bar, admitted pro hac vice, of counsel; Rebekah R. Conroy and Joseph A. Hayden, Jr., on the brief).

Gavin J. Rooney argued the cause for respondents Copper River Partners, L.P., Rocker Partners, L.P. and David Rocker (Lowenstein Sandler, L.L.P., attorneys; Mr. Rooney, on the brief).

Tibor L. Nagy, Jr., argued the cause for respondents Third Point L.L.C., Daniel S. Loeb and Jeffrey Perry (Tompkins, McGuire, Wachenfeld & Barry, L.L.P. and Matthew S. Dontzin (Dontzin Nagy & Fleissig, L.L.P.) of the New York bar, admitted pro hac vice, attorneys; Mr. Dontzin, Mr. Nagy, and William McGuire, on the brief).

Thomas F. Campion argued the cause for respondent/cross-appellant Morgan Keegan &

3 A-0963-12T1 Company, Inc. (Greenberg, Traurig, L.L.P., Drinker Biddle & Reath, L.L.P., and Bruce W. Collins (Carrington, Coleman, Sloman & Blumenthal, L.L.P.) of the Texas bar, admitted pro hac vice, attorneys; Philip R. Sellinger, Roger B. Kaplan, Aaron Van Nostrand, Mr. Collins, Diane M. Sumoski of the Texas bar, admitted pro hac vice, Todd A. Murray of the Texas bar, admitted pro hac vice and Bryan A. Erman, of the Texas bar, admitted pro hac vice, on the briefs).

Stewart D. Aaron (Arnold & Porter, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for respondents Kynikos Associates, L.P. and James S. Chanos (Gibbons, P.C., and Mr. Aaron, attorneys; Mr. Aaron, Susan L. Shin of the New York bar, admitted pro hac vice, Joel D. Rohlf of the New York bar, admitted pro hac vice, and Marco J. Martemucci of the New York bar, admitted pro hac vice, of counsel; Brian J. McMahon and Joshua R. Elias, on the brief).

The opinion of the court was delivered by

FISHER, P.J.A.D.

In describing the adjudication of ostensibly difficult

cases, Justice Holmes observed that "when you walk up to the

lion and lay hold the hide comes off and the same old donkey of

a question of law is underneath."3 This case's leonine demeanor

is well-deserved. Discovery generated millions of pages of

documents, the parties conducted more than 150 depositions, the

3 Letter of December 11, 1909 appearing in 1 Holmes-Pollock Letters: The Correspondence of Mr. Justice Holmes and Sir Frederick Pollock 1874-1932, at 156 (Mark DeWolfe Howe ed., 1941).

4 A-0963-12T1 joint appendix consists of nearly 200,000 pages, and the

parties' excellent written submissions — succinct though they

are – total nearly 600 pages.4 Nevertheless, as predicted by

Holmes, after grappling with this lion's fearsome hide, we have

found not unfamiliar issues lurking beneath. The sheer size of

this case and the number of issues, however, has frustrated the

normal desire to succinctly describe the implements of decision

and, in the final analysis, overwhelmed our preference for

brevity. Consequently, we take the unusual step of presenting,

for the reader's ease, the following table of contents for this

overlength opinion:

TABLE OF CONTENTS

I. INTRODUCTION……………………………………………………………………………………………………… 8

II. PLAINTIFFS' STORY …………………………………………………………………………………… 9

A. The Plot Alleged …………………………………………………………………………… 10

B. The Suit At Hand …………………………………………………………………………… 21

III. A BRIEF HISTORY OF THE PROCEEDINGS …………………………………… 22

IV. THE ISSUES POSED ……………………………………………………………………………………… 25

A. The Viability of the Racketeering Claims ……………………………………………………………… 26

1. Plaintiffs' Arguments ………………………………………………… 26

4 So numerous were the filings in the trial court that the clerk was required to assign a second docket number because the court's database was unable to accommodate more than 999 filings within a single docket number.

5 A-0963-12T1 2. The Judge's Decision …………………………………………………… 29

3. Our Holding …………………………………………………………………………… 34

(a) Some General Principles …………………………… 35

(b) Ginsberg's Impact …………………………………………… 36

(c) New Jersey's Racketeering Laws ……………………………………………………… 40

(d) New York's Racketeering Laws ……………………………………………………… 46

(e) The Choice ……………………………………………………………… 48

(i) Legislative Directive ………………… 50

a. Is There an Express Directive? ………………………………… 50

b. Is There an Implied Directive? ………………………………… 52

(ii) Application of the Second Restatement ……………………………………… 56

a. Section 6 ………………………………………… 56

b. Section 145 …………………………………… 61

c. Specific Tort Principles ………………………………… 64

(iii) Conclusion …………………………………………… 72

B. The Maintainability of the Common Law Claims …………………………………………………………………… 73

1. The Statute of Limitations Applicable to Plaintiffs' Disparagement Claim ……………………………………………… 73

2. Dismissal of Plaintiffs' Disparagement and Tortious

6 A-0963-12T1 Interference With Prospective Economic Advantage Claims Based on the Absence of Special Damages …………………………………………………………… 82

(a) Choice of Law ……………………………………………………… 82

(b) Common Law Requirements …………………………… 83

(i) Disparagement ………………………………………… 83

(ii) Tortious Interference With Prospective Economic Advantage ………………………… 85

(c) Damages Asserted ……………………………………………… 86

3. Summary ……………………………………………………………………………………… 88

C. The Personal Jurisdiction Rulings ……………………………… 89

1. General Jurisdiction ………………………………………………… 91

(a) Kynikos ……………………………………………………………………… 91

(b) Third Point …………………………………………………………… 92

2. Specific Jurisdiction ………………………………………………… 95

3. Conspiracy-Based Jurisdiction …………………………… 96

4. Summary ……………………………………………………………………………………… 112

D. The Summary Judgments In Favor of the SAC Defendants and the Rocker Defendants …………………………………………………………………………… 113

1. The SAC Defendants ………………………………………………………… 113

(a) The Parties' Arguments ……………………………… 113

(b) The Trial Judge's Ruling ………………………… 115

(c) Our Holding …………………………………………………………… 117

2. The Rocker Defendants ………………………………………………… 123

7 A-0963-12T1 (a) The Parties' Arguments ……………………………… 123

(b) The Trial Judge's Ruling ………………………… 125

(c) Our Holding …………………………………………………………… 128

E. Lost Profits and the Elson Reports …………………………… 129

1. General Principles ………………………………………………………… 132

2. The Judge's Disposition of the In Limine Motion Regarding Elson's Expert Testimony ………………………………………………………… 133

3. Our Ruling ……………………………………………………………………………… 136

V. THE CROSS-APPEALS ……………………………………………………………………………………… 141

A. Standing ………………………………………………………………………………………………… 141

B. First Amendment Grounds ………………………………………………………… 145

1. The Parties' Arguments ……………………………………………… 145

2. The Trial Judge's Decision …………………………………… 147

3. Our Holding …………………………………………………………………………… 149

V. CONCLUSION ………………………………………………………………………………………………………… 155

APPENDIX ……………………………………………………………………………………………………………………… A-1

I

INTRODUCTION

In this complex litigation, which was summarily dismissed

in many stages over the course of six years, the Canadian and

New Jersey plaintiffs asserted, among other things, that

defendants – most of whom were located in New York – engaged in

8 A-0963-12T1 a racketeering enterprise that caused plaintiffs billions of

dollars in damages. That claim required a careful consideration

of choice-of-law principles because New Jersey recognizes that a

plaintiff may maintain a private civil RICO cause of action and

New York doesn't. We agree the trial court correctly chose and

applied New York law in dismissing the RICO claim. We reject,

however, the trial court's determination that plaintiffs' common

law causes of action were governed by a New York statute of

limitations and hold instead that our own statute of limitations

applies; any past uncertainty about that evaporated with the

illumination provided by our Supreme Court's recent decision in

McCarrell v. Hoffmann-La Roche, Inc., 227 N.J. 569 (2017). We

also conclude that New York substantive law applies and limits –

but does not eliminate – plaintiffs' common law causes of

action. Consequently, we affirm in part, reverse in part, and

remand for further proceedings.

II

PLAINTIFFS' STORY

Because our Brill5 standard governed the trial court's

disposition of the many issues presented, as it also guides our

review, Townsend v. Pierre, 221 N.J. 36, 59 (2015), we examine

5 Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

9 A-0963-12T1 the disposition of plaintiffs' claims by assuming the truth of

their allegations and by giving plaintiffs the benefit of all

reasonable inferences. Consequently, our description of the

occurrences that triggered this suit are based on plaintiffs'

allegations and should not be construed as our acceptance of

their truth; in short, we only assume their truth. "I cannot

tell how the truth may be; I say the tale as 't was said to me."

Sir Walter Scott, The Lay of the Last Minstrel, canto II, st. 22

(1805).

A. The Plot Alleged

We are told plaintiff Fairfax Financial Holdings Limited

(Fairfax) is a Canadian insurance holding company located in

Toronto, and Crum & Forster Holdings Corp. (C&F) is a New Jersey

corporation headquartered in Morristown. In 1998, Fairfax sought

to rescue C&F from failure by purchasing it for hundreds of

millions of dollars. C&F's turnaround, however, took longer and

proved more difficult than Fairfax originally anticipated. Chief

among its difficulties was what plaintiffs have claimed is a

"racketeering scheme" designed to "kill" them both.

Plaintiffs assert they were the victims of a "bear raid,"

by which short-sellers borrow securities, sell them, and then

drive the price of that stock down through lies and other forms

of market manipulation. See, e.g., Robert G. DeLaMater, Target

10 A-0963-12T1 Defensive Tactics As Manipulative Under Section 14(e), 84 Colum.

L. Rev. 228, 244 n.114 (1984). The short-seller then repurchases

the shares at the lower price – or not at all if the prey

becomes bankrupt and its shares are rendered worthless – and

profits from the difference between the higher price at which it

sold the borrowed shares and the lower price it pays for the

shares it returns to the lender. Because short-selling has its

risks – the short-seller must pay interest and post collateral

on the borrowed shares that may prove costly – a "short squeeze"6

quickly causes an increase in the losses suffered.

Plaintiffs claim the short-sellers here were shorted so

heavily that the way to a profit and the avoidance of massive

losses required that they cause Fairfax to fail. Plaintiffs

quote the statements of various defendants that they intended to

"kill this company," "crush this company," "drive a stake

through that pig Fairfax's heart," and "tak[e] this baby down

for the count." Plaintiffs also quote various defendants'

statements that the alleged plan involved "get[ting] them where

they eat, like the credit [analysts] and [stock] holders" and

"stop [their] being able to write biz"; in short, they claim the

short-sellers were intent on inflicting "death by a thousand

6 The profitability of a short position fluctuates with changes in the values of the borrowed shares. A sudden increase in the cost of borrowing shares is known as a "short squeeze."

11 A-0963-12T1 knives" by getting Fairfax's subsidiaries "downgraded" and

having C&F go into "runoff," causing a loss of rating and

rendering the company "pretty much worthless."

Plaintiffs claim that, so motivated, defendants engaged in

a RICO enterprise. See Boyle v. United States, 556 U.S. 938,

948, 129 S. Ct. 2237, 2245, 173 L. Ed. 2d 1265, 1277 (2009)

(defining such an enterprise as "a continuing unit that

functions with a common purpose" that "need not have a

hierarchical structure or a 'chain of command'"). Plaintiffs

allege that all defendants were associated in this RICO

enterprise, and they described in detail the involvement of the

dramatis personae, which we summarize in the following brief

way:

 defendant Morgan Keegan & Company, Inc., a registered broker-dealer that provides investment services to hedge funds and others; defendant John Gwynn was a Morgan Keegan analyst. According to plaintiffs, Morgan Keegan dissemin- ated more than sixty materially false and misleading research reports on Fairfax and C&F that were authored by Gwynn, and Morgan Keegan and Gwynn also uttered numerous disparaging communica- tions;

 defendant S.A.C. Capital Management, L.L.C., S.A.C. Capital Advisors, L.L.C., S.A.C. Capital Associates, L.L.C., and Sigma Capital Management, L.L.C., are alleged to be hedge funds controlled by defendant Steven A. Cohen (collectively "the SAC defendants");

12 A-0963-12T1 according to plaintiffs, the SAC defendants engaged defendant Spyro Contogouris on a similar past bear raid of a different company and, according to plaintiffs, similarly engaged him to do the same with plaintiffs. The SAC defendants were the largest investors in the Exis defendants7 and non-party Bridger Capital Management, which both possessed an economic interest in the alleged scheme.

 Contogouris was, according to plain- tiffs, an enterprise operative who posed as an independent research analyst and disseminated disinforma- tion, instigated a Securities & Exchange Commission investigation, and generated negative news stories about plaintiffs8 via the so-called "MI4" reports.9

 The Exis defendants were alleged to be hedge funds that secured a substantial short position in Fairfax. They and their chief executive and chief operating officers, defendants Adam D. Sender and Andrew Heller, respectively, were alleged to have maintained the closest relationship with Contogouris; they allegedly provided him with office

7 Namely, Exis Capital Management, Inc., Exis Capital, L.L.C., Exis Differential Partners, L.P., and Exis Integrated Partners, L.P.

8 Adding to the drama, plaintiffs allege Contogouris acted through the use of aliases, such as "Monsieur Skaramanga," a James Bond villain.

9 The names of these reports refer to defendants MI4 Limited Partnership, MI4 Reconnaissance L.L.C., and MI4 Investors, L.L.C. (the MI4 defendants), all entities controlled by Contogouris.

13 A-0963-12T1 space, assistants and a most sub- stantial compensation package.

 defendants Rocker Partners, L.P., and Copper River Partners, L.P., are alleged to be hedge funds based in Millburn primarily owned and managed by defendant David Rocker (collectively, the Rocker defendants); according to plaintiffs, the Rocker defendants worked closely with defendant Kynikos Associates, L.P., Morgan Keegan and other members of the alleged enterprise in shorting Fairfax at the scheme's inception.

 defendant Institutional Credit Part- ners, L.L.C. (ICP) is a financial firm alleged to have paid and worked closely with Contogouris, and to have traded in advance of negative events allegedly generated by Contogouris. According to plaintiffs, ICP directly disseminated false claims about them; ICP employees are alleged to have worn surgical gloves to avoid leaving fingerprints on materials they transmitted, and William Gahan, an ICP credit analyst, obtained the bail bond that secured Conto- gouris's release after he was arrested by the Federal Bureau of Investigation on an unrelated fraud charge months after this suit was filed.

 defendant Kynikos Associates, L.P. – a limited partnership organized in 1985 in Delaware with its principal place of business in New York – is an investment advisor and management company special- izing in short-selling; it has managed over $1 billion for its clients. Plaintiffs alleged that Kynikos and its founder and president, James S. Chanos, participated in the enterprise in that they worked closely with other defen- dants, including Contogouris.

14 A-0963-12T1  defendant Christopher Brett Lawless, a New Jersey resident, worked as a research analyst for Fitch Ratings in New York City and for the Center for Financial Research and Analysis in Maryland. Lawless allegedly tutored Contogouris to enable him to pose as a research analyst and thereafter continued to collaborate with Morgan Keegan, Contogouris and those paying Contogouris.

 defendants Third Point, L.L.C., is an investment management firm created under the laws of Delaware and headquartered in New York. During the times in question, Third Point provided management services to several invest- ment funds that traded in Fairfax securities. Defendant Daniel S. Loeb is the founder and managing member of Third Point, and defendant Jeffrey Perry was a senior analyst.

According to plaintiffs, in 2002, the SAC defendants,

Kynikos, the Rocker defendants, and others, were collaborating

and either aggressively shorting or preparing to short Fairfax.

Plaintiffs claim that C&F had begun to favorably turn its

position around at that time, so defendants' enterprise sought a

"negative catalyst" to drive down C&F's price, and the

enterprise began to "educate[] rating agencies and other

research analysts about their negative views."

On December 18, 2002, the day after deciding to cover their

position, the SAC defendants learned that Gwynn of Morgan Keegan

was about to issue a report that Fairfax and its subsidiaries

15 A-0963-12T1 were under-reserved by billions of dollars and effectively

insolvent. Gwynn tipped off Kynikos and faxed an outline of the

issues. Upon receiving this tip, the SAC defendants began

communicating directly with Gwynn, and Kynikos and Third Point

thereafter traded in advance of the report based on the tipped

information.10

Morgan Keegan published its report on January 17, 2003.

Plaintiffs allege that Morgan Keegan falsely claimed that

Fairfax had overstated its equity by more than $5 billion and

that Morgan Keegan's alleged false claim devastated Fairfax's

stock price, which fell thirteen percent in one day and further

in the days that followed. Two weeks later, Morgan Keegan issued

a second report acknowledging it "possibly" double-counted $2

billion in purported subsidiary liabilities, including at C&F.

As a result, the stock price recovered somewhat but remained

down.

10 Plaintiffs claim that Kynikos re-shorted over $5 million in shares just before the first report. And, after not shorting for four months, Third Point sold short $1,500,000 in shares the day before publication. The SAC defendants did not cover its short positions by year-end as originally planned but completed their cover after the report was issued and the stock price dropped sharply. Plaintiffs assert that many of the trades involving these and other parties or accounts controlled by the enterprise members violated insider-trading laws and support their RICO claim.

16 A-0963-12T1 According to plaintiffs, enterprise members traded heavily

on Morgan Keegan's tips concerning its initial report. In

exchange, Morgan Keegan benefited from these tips by way of

commissions through referred trades, and with the expectation of

greater future benefits. According to plaintiffs, Morgan Keegan

understood their big payoff – what a Morgan analyist referred to

as "our 7-8 digit trade!!" – would come when Fairfax's "stock

goes to zero." Consequently, for the next four years, Morgan

Keegan published more than sixty research reports that portrayed

plaintiffs and their affiliates as "an insolvent, Enron-like

fraud[]"; this disinformation was, according to plaintiffs,

orchestrated, and Morgan Keegan was urged to make sure its

reports were "really negative." Morgan Keegan communicated in

other ways that Fairfax and its executives were "crook[s]" and

"felons" who manipulated financial information to "mak[e] it

look like they have a profit." Plaintiffs claim Morgan Keegan

knew of the falsity of its disseminated statements.

Plaintiffs allege that, despite the inflicted harm, their

turnaround was progressing, causing defendants' enterprise to

either quit its position at a loss or increase the short

position and intensify their efforts. Information amassed in the

joint appendix evokes scenes from Oliver Stone's 1987 film, Wall

Street. One hedge fund manager – defendant Adam Sender, who was

17 A-0963-12T1 affiliated with the Exis defendants – explained to Contogouris

that he "want[ed] [Prem Watsa's11] head in a box," and another

viewed the dissemination of negative reports as the equivalent

of needing to "keep . . . this gun loaded with bullets" and

"eventually this pig will roll over and die." Meanwhile, to add

content to the negative reports, Morgan Keegan allegedly fed

Contogouris with the false claims that: Fairfax was disguising

billions in debt as reinsurance; Fairfax was turning its

investment subsidiaries – with the use of "[s]moke and

[m]irrors" – into "an illegal enterprise"; and that Watsa was

"transferring his personal holdings into asset protection

schemes that he thinks will be safe from regulators."

Over the course of nearly two years, Contogouris –

allegedly at the direction and with the support of Morgan

Keegan, Lawless, the Exis defendants, Third Point and Kynikos –

disseminated false claims to the FBI, federal prosecutors, the

SEC, the media, ratings agencies, research analysts and

investors, that Fairfax was engaged in an Enron-like fraud.12 In

June 2005, the SAC defendants re-shorted Fairfax – a month after

11 Watsa is Fairfax's chairman and chief executive officer.

12 Contogouris anonymously created a website called Premwatsa.com, which compared Fairfax to the disgraced Enron and Watsa to Enron's CEO, Kenneth Lay. Much has been written about the Enron debacle. See, e.g., Kurt Eichenwald, Conspiracy of Fools: A True Story (2005).

18 A-0963-12T1 Contogouris's approach to the FBI that resulted in the service

of SEC subpoenas on Fairfax in September 2005. Three weeks

earlier, the investors of Exis, of which SAC was the largest,

were tipped off that "subpoenas from the regulators . . . should

be announced in the next three weeks." The Exis defendants and

the SAC defendants increased their short positions in advance of

the subpoenas.

Plaintiffs further allege, and refer to the voluminous

record in support, that Contogouris provided false and negative

information to various media and targeted as part of this

campaign: investors, institutions and research analysts; rating

agencies13; Fairfax executives and staff14; and even to Watsa's

parish pastor.15 Contogouris allegedly made harassing telephone

calls to Watsa's home and office at night to "rattle his cage."

Plaintiffs assert that Contogouris kept Morgan Keegan and

Lawless advised of his activities, and Morgan Keegan reported

these activities to other enterprise members.

13 Contogouris sent his FraudFacts report to Standard & Poor's and A.M. Best.

14 Plaintiffs allege that Contogouris sent, through the use of aliases, threatening emails to Watsa's staff in an effort to find "a way in" via a staff member willing to be a mole.

15 Contogouris allegedly sent information to Watsa's parish pastor, warning that Watsa, who handled the church's investment fund, might defraud the church.

19 A-0963-12T1 According to plaintiffs, the enterprise members learned

during the Summer of 2006 that the FBI and federal prosecutors

intended to expand their investigation into Fairfax in light of

Contogouris' disseminations, and they also learned that The New

York Post was about to publish a series of negative stories.

Contogouris used code in communicating this information to

enterprise members, referring to the FBI as the "meteorologist,"

The New York Post reporter as the "Postman," and what he

expected to imminently occur as the "Hurricane," which was due

in August. Sender encouraged others to short the stock and the

SAC defendants, which allegedly were in contact with Sender and

Contogouris "all the time" during this period, increased their

short position in June 2006. To fuel the flames, rumors were

allegedly spread on June 22 and 23, 2006, that Watsa had

transferred his assets into his wife's name and that he fled the

country as the Royal Canadian Mounted Police raided Fairfax's

offices.

The day after these rumors started, the Exis defendants

rewarded Morgan Keegan with substantial trading business.

Fairfax's stock price plummeted for two days before Fairfax

issued a statement debunking the rumors.

20 A-0963-12T1 B. The Suit At Hand

Plaintiffs commenced this lawsuit on July 26, 2006. Their

complaint was filed just before what they allege were to be the

final steps in the enterprise's scheme but not before they

allegedly suffered significant monetary damages. Plaintiffs

claim Fairfax suffered damages to its assets and equity, as well

as those of its subsidiaries, in the billions of dollars.16

Particularly relevant in light of the issues on appeal,

plaintiffs claim C&F incurred a loss of nearly $1 billion,

including: (1) approximately $200,000,000 in capital costs and

interest incurred in and paid from New Jersey in the form of

having to raise capital not otherwise needed; (2) lost profits

estimated at $545,000,000; and (3) increased costs and expenses

in the form of higher directors and officers (D&O) insurance

premiums with far less coverage, and greater legal, accounting,

16 The parties even dispute the purpose of this suit. Morgan Keegan contends that Fairfax has been a "troubled company for years," and launched, as part of a "public relations campaign," this "sensational" RICO suit, claiming $6 billion in compensatory damages, which, if trebled as permitted by New Jersey law, would result in "a headline-grabbing $18 billion," caused by "a veritable cabal of short sellers and research analysts bent on destroying the company" for their own profit. The matter having come before us by way of summary rulings in favor of all defendants, we place no reliance on Morgan Keegan's argument about the motivation of this suit and assume, without deciding, the bona fides of plaintiffs' claims.

21 A-0963-12T1 and administrative costs to deal with the enterprise's alleged

wrongful actions.

III

A BRIEF HISTORY OF THE PROCEEDINGS

As mentioned, plaintiffs commenced this action in 2006. A

second amended complaint was filed in 2007 and a third in 2008.

Plaintiffs alleged defendants' manipulations violated New

Jersey's RICO statute and gave rise to several common law

claims, specifically commercial or product disparagement,

tortious interference with prospective economic advantage,

tortious interference with contractual relationships, and civil

conspiracy.

On July 11, 2008, the Rocker defendants moved for summary

judgment, asserting that insufficient evidence existed to

establish that it participated in the alleged conspiracy. The

judge then presiding over the matter17 granted, on September 25,

2008, the Rocker defendants' application, but did so without

prejudice.

17Numerous judges presided over this leviathan of a case during its long life in the trial court. To avoid confusion, we make no attempt to distinguish which of the able judges ruled on which motion. Regardless of the outcome of the many issues raised, we commend all these judges for their efforts.

22 A-0963-12T1 On May 5, 2011, the SAC defendants sought summary judgment

on grounds substantially similar to those that the Rocker

defendants had successfully advanced, namely, that there was

insufficient evidence to demonstrate the SAC defendants'

participation in the alleged scheme against plaintiffs. On

September 12, 2011, the court granted the SAC defendants' motion

for summary judgment.

Meanwhile, Kynikos moved for summary judgment, claiming our

courts could not assert personal jurisdiction over it. Third

Point and ICP also moved for summary judgment on the same or

similar grounds. Kynikos and Third Point also sought a choice-

of-law determination, arguing New York law both governed

plaintiffs' conspiracy claims and required a dismissal of

plaintiffs' RICO claims. And, in the same period of time, the

Rocker defendants sought a determination that the September 25,

2008 grant of summary judgment "without prejudice" be converted

to a dismissal "with prejudice."

On December 23, 2011, the court granted the Rocker

defendants' application to convert its prior determination to

summary judgment with prejudice and dismissed the third amended

complaint against Kynikos, Third Point and ICP for lack of

personal jurisdiction.

Many more motions followed.

23 A-0963-12T1 On April 13, 2012, Morgan Keegan, Lawless, the Exis

defendants and the MI4 defendants filed a consolidated motion

for summary judgment with respect to all the common law claims

plaintiffs had asserted against them.18 And, on April 20, 2012,

plaintiffs cross-moved for reconsideration of the court's prior

dismissal of the Rocker defendants with prejudice.

On May 11, 2012, the trial court granted partial summary

judgment in favor of Lawless. Finding New York law governed

plaintiffs' racketeering allegations, the trial court dismissed

plaintiffs' RICO claims. And plaintiffs' reconsideration motion

of the with-prejudice dismissal of the claims against the Rocker

defendants was denied.

In June 2012, the trial court heard and summarily dismissed

plaintiffs' claim of tortious interference with prospective

economic advantage but sustained plaintiffs' remaining common

law claims.

Also in June 2012, Morgan Keegan moved for partial summary

judgment, seeking dismissal of plaintiffs' disparagement claim

based on its alleged untimeliness; the motion was denied in

August 2012. Later that month, the judge denied plaintiffs'

request to reconsider its ruling that New York law controlled

18Namely, tortious interference with contractual relationships, tortious interference with prospective economic advantage, and civil conspiracy.

24 A-0963-12T1 plaintiffs' racketeering and conspiracy claims. The judge also

granted Morgan Keegan's application for reconsideration of the

denial of summary judgment on the tortious-interference-with-

contract claim but rejected Morgan Keegan's assertion that a

one-year statute of limitations applied to plaintiffs'

disparagement claim.

On September 5, 2012, plaintiffs stipulated to the

dismissal of Lawless without prejudice. On September 11, 2012,

in accordance with a partial settlement agreement, the judge

signed a consent order, which dismissed without prejudice

plaintiffs' claims against Contogouris and the MI4 defendants.

And, on September 12, 2012, the judge entered final judgment

dismissing the entirety of the remainder of plaintiffs' third

amended complaint, finding "a complete absence of proof" of

proximately-caused damages.

Plaintiffs filed a notice of appeal. Cross-appeals were

also asserted.

IV

THE ISSUES POSED

In appealing the summary dismissal of its causes of action,

plaintiffs argue the trial court erred: (a) in dismissing their

RICO claims by applying New York rather than New Jersey law; (b)

in dismissing certain of their common law claims by applying New

25 A-0963-12T1 York's statute of limitations rather than New Jersey's; (c) in

dismissing the claims against Kynikos, Third Point and the ICP

defendants19 for lack of personal jurisdiction; (d) in granting

summary judgment in favor of both the SAC defendants and the

Rocker defendants; and (e) in excluding the expert opinion of

Craig Elson on damages that plaintiffs intended to elicit at

trial, thereby shutting the door on any trial at all.

A. The Viability of The Racketeering Claims

In reviewing the disposition based on the trial court's

application of choice-of-law principles, we describe (1) the

parties' arguments and (2) the judge's decision, and then

express (3) our agreement with the trial court's disposition of

the RICO claim.

1. Plaintiffs' Arguments

Plaintiffs claim the trial court erred by dismissing their

RICO claims through application of New York law. Indeed, they

argue that choice-of-law questions do not even arise when a

matter falls within the intended scope of a New Jersey statute;

that is, they claim our Legislature intended to provide a remedy

19As noted earlier, plaintiffs and the ICP defendants resolved their differences shortly before oral argument took place in this court.

26 A-0963-12T1 for every New Jersey domiciliary harmed by a RICO violation,

which the law defines as harm arising from conduct of a

prohibited kind that satisfies the enactment's territorial

predicates, with no distinction between criminal and private

prosecutions. And they argue there was sufficient conduct by

defendants that either occurred within or had a sufficient

effect in New Jersey to satisfy the statute, even apart from the

conspiracy, which by itself – in their view – involved enough

activity within New Jersey to satisfy the Criminal Code's

definition of such an offense.

Plaintiffs argue further that the court had no basis for

"inventing" or "importing" common law principles to impose the

territorial limitations on jurisdiction over traditional torts,

noting that the limitations were not included in either the RICO

statute or in the Criminal Code's general territoriality

statute. On the contrary, they claim the Legislature has

specified that the RICO provisions for civil remedies must be

liberally construed to affect that enactment's remedial purpose

and that all remedies be cumulative to one another and to other

remedies at law.

In addition, plaintiffs argue that the trial judge erred by

failing to recognize there was no policy conflict between New

Jersey and New York law because both states' enactments "provide

27 A-0963-12T1 civil remedies to deter and compensate for" the same proscribed

conduct. And they argue New Jersey's allowance of private civil

remedies does not constitute a different approach toward the

shared goal of deterring racketeering, "only a different

judgment about how best to use each state's judicial system to

do so." Although both states seek to vindicate the same

policies, plaintiffs argue New Jersey's broader remedies made it

the better vehicle for achieving that goal, and thus the correct

law to apply.

Plaintiffs contend further that, even if New Jersey and New

York law generated a true conflict, section 6 of the Restatement

(Second) of Conflict of Laws (1971) (Am. Law Inst., amended

1988),20 provided an independent basis for applying New Jersey

law to the RICO claims. They assert section 6 warranted

application of New Jersey law due to this State's interest in

protecting C&F, which sustained injuries at its New Jersey

headquarters, and because New Jersey had an interest in

protecting other in-state businesses, such as the rating

agencies and business news organizations that the enterprise is

20Our many references to the Restatement (Second) of Conflict of Laws shall hereafter in the text be "Second Restatement" and in citations be "Restatement (Second)," with reference to a specific section or comment. To avoid confusion, we will provide greater specificity when referring to the Restatements dealing with torts and contracts that are cited as well.

28 A-0963-12T1 alleged to have deliberately misled in order to promote their

scheme. Plaintiffs contend they reasonably expected the

protection of New Jersey law to the extent of their business

affecting this State, whereas defendants had no expectation that

their misconduct would be any less violative of New York law

than it would of New Jersey law. In addition, they contend that

failing to apply New Jersey's RICO statute as intended would

inject an unanticipated and unneeded balancing test between New

Jersey law and out-of-state law.

Finally, plaintiffs argue that the Second Restatement's

section 145 standards favored application of New Jersey law due

to the predominance of this case's contacts with New Jersey.

They call New Jersey the situs of "the injury" because C&F had

its domicile and principal place of business here, and they note

that several enterprise members were New Jersey residents or

engaged in enterprise activity within the State.

2. The Judge's Decision

In May 2012, the trial judge determined that New York's

local law – that is, the law that applied within New York before

any consideration of choice-of-law principles21 – applied to the

21 The judge's definition of "the local law" accords with the Second Restatement, which describes "the local law" as the law that would apply if all parties and relevant events were within (continued)

29 A-0963-12T1 RICO claims and, accordingly, compelled the entry of summary

judgment in defendants' favor. He first found an actual conflict

existed – because New Jersey recognizes a private civil RICO

action and New York doesn't – and observed that a statutory

mandate for New Jersey jurisdiction over private civil claims

would have precluded a choice-of-law analysis here, but then

found no such mandate existed. The judge explained that RICO's

own territoriality provision was expressly limited to criminal

cases, and that the Legislature did not intend civil RICO claims

to have the same jurisdictional reach or to be exempt from the

"accepted, traditional common law principles of jurisdiction"

for civil claims, which included application of choice-of-law

principles.

The trial judge recognized that the first step in a choice-

of-law analysis was to determine whether any state was presumed

to satisfy the Second Restatement's most fundamental touchstone

of being the state with "the most significant relationship" to

the matter and found that, though choice-of-law principles might

deem C&F's loss of customers to have been an injury sustained in

(continued) one state, without application of that state's choice-of-law rules. Restatement (Second), supra, § 145 cmt. h and § 4. In this context, a reference to "state law" without qualification means the entire body of a state's law, including its choice-of- law rules. Ibid.

30 A-0963-12T1 New Jersey, it was "improper" to presume New Jersey jurisdiction

on that basis, because C&F was "a minor player in this matter,"

there was a "complex interrelationship between [the]

plaintiffs," and the RICO allegations here were broader and more

complex than a particular injury to one subsidiary.

According to the trial judge, the "most direct consequence"

of the alleged RICO enterprise was to decrease the market prices

of plaintiffs' securities, a claim for which Fairfax was the

"lead" plaintiff. All the other alleged injuries caused by the

enterprise, namely, the increase in "capital costs," the costs

of responding to the SEC investigation, and the increased legal

and accounting costs, "were a consequence of that deflation."

The "most direct" injury and its derivatives arose from the

alleged enterprise activity that involved the financial markets

and financial news media and, as the judge observed, "[t]he

financial markets, the news media and the parties are clearly

based predominantly in New York." Accordingly, the New Jersey

connections to the RICO claims – namely, the domiciles of C&F,

A.M. Best,22 and Lawless – did not suffice to give New Jersey the

"most significant relationships" to a RICO enterprise as broad

22 A.M. Best is a major rating company headquartered in New Jersey.

31 A-0963-12T1 and complex as alleged. Consequently, the trial judge found that

New York's local law presumptively applied.

As for the other section 145 factors, the judge found that

the "vast majority" of the alleged misconduct manifestly

occurred in New York and only a fraction was committed by

Lawless, the one defendant located in New Jersey. The judge

determined that all other enterprise members were domiciled or

incorporated elsewhere and conducted their activities elsewhere,

and, also, that the enterprise members did not have a prior

relationship, much less one centered in New Jersey. Furthermore,

Fairfax and its other main United States operating Odyssey

subsidiaries,23 were domiciled or incorporated elsewhere and

operated outside New Jersey. Accordingly, even if the decrease

in the price of C&F securities was deemed a direct injury to

C&F, as opposed to a derivative injury largely arising from its

exposure to Fairfax's troubles, "the place where the injury

occurred," as defined by section 145(2)(a) of the Second

Restatement, was nonetheless in New York's financial markets,

and the enterprise members had "minimal contact with New Jersey"

in causing it.

23 What we refer to as Odyssey consists of: Odyssey Re Holding Corp., which was incorporated in Delaware and had principal executive offices in New York; wholly-owned Odyssey Re Group; and Odyssey America Reinsurance Corp., which had its principal offices in Connecticut.

32 A-0963-12T1 The trial judge then turned to the general choice-of-law

principles set out in section 6 of the Second Restatement. For

comity's sake, he explained that, although New York and New

Jersey had competing interests about whether private actors

should be able to enforce a RICO statute, the two states'

enactments were nonetheless similar and shared the "fundamental

policies" of preventing racketeering and other organized crime.

The two states' policies were therefore not in fundamental

conflict, so interstate comity required New Jersey to respect

New York's deliberate decision about how to serve that policy

that included a decision to withhold a private RICO cause of

action. The judge found that was also true from the perspective

of "[t]hose involved in the financial markets based in New York"

because they "should be able to depend on New York law" as the

law governing "their conduct."

As for the interests of the parties and the interests

underlying the field of tort law, the judge observed that the

parties knew New York law precluded exposure to private RICO

claims regardless of their conduct. And, because New York had

the "most significant relationship" to the matter, defendants

had "no reasonable expectation" that such exposure could arise

due to the application of another state's local law. The judge

reasoned the result should not change just because the conduct,

33 A-0963-12T1 which was focused on "the New York financial industry," also had

tangential connections outside that state, such as the

communications with A.M. Best, the one major rating agency

located in New Jersey.

The trial judge also observed that the only factor favoring

application of New Jersey law instead of New York law was the

greater involvement in this litigation of New Jersey's courts.

He noted, however, that this factor did not outweigh the need to

serve the choice-of-law "values," which were "certainty,

predictability and uniformity of results" in their application.

Consequently, the judge ruled that the "qualitative balance" of

all the section 145 and section 6 factors of the Second

Restatement compelled application of New York local law, which,

upon application, compelled dismissal of the RICO claims.

3. Our Holding

For the reasons that follow, we conclude that New York law,

which does not permit a private civil racketeering action,

applies in this case and, as held by the trial court, requires

the dismissal of plaintiffs' RICO claim.

We first consider (a) some general principles, as well as

(b) the impact of the Supreme Court's recent decision in

Ginsberg v. Quest Diagnostics, Inc., 227 N.J. 7, 18 (2016), on

the issues raised. Then, because an early but pivotal step in

34 A-0963-12T1 resolving a choice-of-law problem requires a determination that

a true conflict exists, we examine (c) New Jersey's racketeering

laws, and their intent and purposes, and we thereafter similarly

analyze (d) New York's racketeering laws. We then conclude this

part of the opinion with a description of (e) the choice of law

required in these circumstances.

(a) Some General Principles

In considering the propriety of the choice-of-law

determinations in question, we observe, first, that the trial

judge's interpretation of the RICO statutes is not entitled to

deference. ADS Assocs. Grp., Inc. v. Oritani Sav. Bank, 219 N.J.

496, 511 (2014). Choice-of-law determinations present legal

questions, which are subjected to de novo review. Bondi v.

Citigroup, Inc., 423 N.J. Super. 377, 418 (App. Div. 2011),

certif. denied, 210 N.J. 478 (2012); Arias v. Figueroa, 395 N.J.

Super. 623, 627 (App. Div.), certif. denied, 193 N.J. 223

(2007). And choice-of-law decisions are made not only issue-by-

issue, Cornett v. Johnson & Johnson, 211 N.J. 362, 374 (2012),

but also, at times, party-by-party, Ginsberg, supra, 227 N.J. at

18.

When New Jersey is the forum state, its choice-of-law rules

control. McCarrell, supra, 227 N.J. at 588; Erny v. Estate of

Merola, 171 N.J. 86, 94 (2002). For tort claims, our Supreme

35 A-0963-12T1 Court has expressly embraced the Second Restatement for choice-

of-law determinations. P.V. ex rel. T.V. v. Camp Jaycee, 197

N.J. 132, 139-43 (2008).

New Jersey courts have also recognized that a parent

corporation may have standing to participate in litigation over

wrongs sustained by its subsidiary if the parent itself has a

sufficient financial interest in the outcome. See, e.g., Bondi,

supra, 423 N.J. Super. at 436-39. See also Section V(A), infra.

Bondi did not declare a categorical rule that the same

jurisdiction's local law always applies to both the parent and

the subsidiary with regard to a particular claim, and, at the

time the trial judge ruled, neither Bondi nor any other reported

New Jersey opinion had suggested a general reason not to adopt

such a rule.

(b) Ginsberg's Impact

Recently, our Supreme Court recognized that, in multi-party

actions, choice-of-law principles may call for the application

of a different state's laws from party-to-party or claim-to-

claim. Ginsberg, supra, 227 N.J. at 18.24 But plaintiffs have

24 To be precise, Ginsberg specifically held that "in the majority of cases, a defendant-by-defendant analysis furthers the [Second] Restatement principles and provides the most equitable method of resolving choice-of-law questions." 227 N.J. at 18 (emphasis added). But, in explaining this aspect of its (continued)

36 A-0963-12T1 never sought separate choice-of-law analyses. In fact,

plaintiffs have blurred the distinctions between them and their

subsidiaries, perhaps for strategic reasons,25 thereby

frustrating any attempt at rendering an informed,

individualized, choice-of-law analysis from each plaintiff's

standpoint.

That is, we recognize that in many instances in which

multiple claims are asserted by multiple plaintiffs against

multiple defendants, a court may be asked to make individualized

choice-of-law determinations that "exponentially" increase in

difficulty with every increase in the number of parties and

claims. See Georgine v. Amchem Products, Inc., 83 F.3d 610, 627

(3d Cir. 1996). We do not think, however, that where two or more

related corporate plaintiffs file a single action based on the

(continued) holding, the Court observed that Second Restatement principles "focus[] on the state's relationship to the parties," and recognized that, in referring to "parties," the Second Restatement was not limited and included plaintiffs, defendants, and "any third party defendants." Ibid. (emphasis added). Consequently, we do not view Ginsberg's particular holding, which required in some instances a "defendant-by-defendant analysis," as applying only in that circumstance. Instead, the same principles may at times warrant plaintiff-by-plaintiff analyses as well.

25 For example, if it had pursued its claims separately from C&F's, Fairfax would have had no plausible argument for applying New Jersey substantive law to a dispute between a Canadian corporation based in Toronto and various New York-based defendants.

37 A-0963-12T1 same operative set of facts, and assert causes of action and

demands for damages allegedly caused to their corporate family –

as if that family constituted a single entity – that a court

must nevertheless disentangle all the possibilities in

identifying the correct state law to be applied to each

plaintiff's claim or claims. Ginsberg does not require that a

court make such determinations when the court is deprived of the

parties' assistance. In short, since plaintiffs do not seek a

separate resolution of each choice-of-law problem from each of

their standpoints, we will not pursue that possibility further.

We would add that to the extent multiple plaintiffs would have a

court treat them differently for choice-of-law purposes, they

must come forward and make that argument26 and, moreover, be

26 We do not interpret our rules as requiring a plaintiff or plaintiffs to affirmatively plead the application of another jurisdiction's laws; indeed, we have shown particular liberality in allowing defendants to assert another jurisdiction's laws in moving for summary judgment even when not having first asserted that other jurisdiction's law as an affirmative defense. See Rowe v. Hoffman-La Roche Inc., 383 N.J. Super. 442, 450-51 (App. Div. 2006), rev’d on other grounds, 189 N.J. 615 (2007); Erny v. Russo, 333 N.J. Super. 88, 96 (App. Div. 2000), rev’d on other grounds, 171 N.J. 86 (2002). But that liberality is stretched beyond breaking if we were to allow a party to advocate on appeal, for the first time, an entirely different approach to already difficult choice-of-law questions. As we said in our decision in Ginsberg, which the Supreme Court affirmed, "choice- of-law determination[s] ideally should be made as early in a case as possible." Ginsberg v. Quest Diagnostics, Inc., 441 N.J. Super. 198, 223 (App. Div. 2015); see also Bailey v. Wyeth, Inc., 422 N.J. Super. 343, 350 (Law Div. 2008), aff’d on other (continued)

38 A-0963-12T1 willing to be treated separately for all other purposes as

well.27

In the final analysis, Ginsberg not only held that an

individualized assessment is "not feasible in every matter," 227

N.J. at 20, but also that, in each case, a court must ascertain

"the most equitable method of resolving choice-of-law

questions," Id. at 18. A sudden alteration in course – sought

by no one here, even now on appeal – that might arguably be

(continued) grounds, 433 N.J. Super. 360 (App. Div. 2011), certif. denied, 211 N.J. 274 (2012). And it is well-established in the federal courts that choice-of-law issues may be waived when not asserted by the parties, Williams v. BASF Catalysts LLC, 765 F.3d 306, 316-17 (3d Cir. 2014), a concept that we hold should be applied here as well. Having said all that, we do not mean to suggest that plaintiffs have sought a sudden change in course; to the contrary, even after both our decision and the Supreme Court's decision in Ginsberg, plaintiffs have continued to pursue their rights as if they were the same juridical creature and have not sought an individualized choice-of-law assessment from each plaintiff's standpoint. Consequently, we hold that in light of the arguments plaintiffs have posed, and in consideration of their suggestions as to how we are to exit this choice-of-law labyrinth, we should not now pursue a wholly different path that plaintiffs – even in the wake of Ginsberg – have never urged as the proper or required course.

27 When multiple plaintiffs seek individualized choice-of-law determinations, we would think concerns about standing, such as those raised here, would warrant a less liberal approach than suggested by Bondi, supra, 423 N.J. Super. at 436-39, which we discussed above and again later in this opinion. In short, a court should not be expected to choose the law appropriate for each plaintiff as to each claim, only to have, for example, plaintiff X lay claim to a right to pursue an award of damages based on injuries sustained by plaintiff Y.

39 A-0963-12T1 permitted by Ginsberg, does not serve our chief, overarching

goal of seeking an equitable method for resolving the parties'

choice-of-law disputes.

(c) New Jersey's Racketeering Laws

In enacting anti-racketeering legislation, N.J.S.A. 2C:41-1

to -6.2,28 the Legislature utilized federal statutes as its

model. Accordingly, federal case law provides a useful guide in

understanding our own RICO law. Cagno, supra, 211 N.J. at 508.

In this regard, it is noteworthy that the federal and New Jersey

enactments expressly afford a private civil cause of action, see

18 U.S.C.A. § 1964(c); N.J.S.A. 2C:41-4(c), whereas New York's

similar law, which we discuss in Section IV(A)(3)(d), infra,

does not. The New Jersey and federal enactments allow "[a]ny

person," who is injured "in his business or property by reason

of a violation" of the statute, to "sue therefore" and recover

treble damages, plus costs of suit including a reasonable

attorney's fee. 18 U.S.C.A. § 1964(c); N.J.S.A. 2C:41-4(c).

All remedies permitted by our RICO law are "cumulative with

each other and other remedies at law," N.J.S.A. 2C:41-6.1, and

28Better known as our RICO law. State v. Cagno, 211 N.J. 488, 508 (2012), cert. denied, ___ U.S. ___, 133 S. Ct. 877, 184 L. Ed. 2d 687 (2013); State v. Ball, 268 N.J. Super. 72, 98 (App. Div. 1993), aff'd, 141 N.J. 142 (1995), cert. denied, 516 U.S. 1075, 116 S. Ct. 779, 133 L. Ed. 2d 731 (1996).

40 A-0963-12T1 the Legislature has instructed that our RICO law must be

"liberally construed to effect [its] remedial purposes,"

N.J.S.A. 2C:41-6.

The required "racketeering activity," also known as a

predicate act, must itself be a criminal offense. N.J.S.A.

2C:41-1(a)(1), (2); Ball, supra, 141 N.J. at 162; Karo Mktg.

Corp. v. Playdrome Am., 331 N.J. Super. 430, 438 (App. Div.),

certif. denied, 165 N.J. 603 (2000). In fact, the predicate act

may not only be one of the crimes the Legislature has identified

but also an "equivalent crime" under the law of "any other

jurisdiction," N.J.S.A. 2C:41-1(a).

A "pattern of racketeering activity" requires two predicate

acts, N.J.S.A. 2C:41-1(d)(1), that have "either the same or

similar purposes, results, participants or victims or methods of

commission or are otherwise interrelated by distinguishing

characteristics and are not isolated incidents," N.J.S.A. 2C:41-

1(d)(2). Participation in a conspiracy to commit prohibited RICO

activity is also prohibited activity. N.J.S.A. 2C:41-2(d). The

designation of conspiracy as racketeering activity under federal

law means that the conspiracy itself may be one of the required

predicate acts. State v. Bisaccia, 319 N.J. Super. 1, 20-21

(App. Div. 1999). In a private civil RICO action, the predicate

act must be the proximate cause of the plaintiff's injury.

41 A-0963-12T1 Interchange State Bank v. Veglia, 286 N.J. Super. 164, 178 (App.

Div. 1995) (citing Holmes v. Sec. Inv'r Prot. Corp., 503 U.S.

258, 265, 112 S. Ct. 1311, 1316-18, 117 L. Ed. 2d 532, 543

(1992)), certif. denied, 144 N.J. 377 (1996).

The prohibited RICO activity relevant here is participation

in an "enterprise" which engages in "a pattern of racketeering

activity." N.J.S.A. 2C:41-2(c). The Legislature did not intend

"to punish mere repeated offenses," so the term "pattern" also

requires "relatedness," which means "some temporal connection or

continuity over time," but nonetheless encompasses "short-term

criminal activity" of the proscribed kind as well as "long-term

criminal activity." Ball, supra, 141 N.J. at 167-69.

"Enterprise" is broadly defined to include all kinds of

entities, as well as "any individual" and any "group of

individuals" who are "associated in fact although not a legal

entity." N.J.S.A. 2C:41-1(c). The enterprise may be "licit" or

"illicit." Ibid.

The enterprise is a statutory element "distinct from the

incidents constituting the pattern of activity." Ball, supra,

141 N.J. at 162. Because it is distinct, the enterprise must

have an "organization" but the organization need not have "a

structure with a particular configuration." Ibid.; accord Cagno,

supra, 211 N.J. at 494. "[A]n informal organization functioning

42 A-0963-12T1 as a continuing unit" is sufficient to facilitate "those kinds

of interactions that become necessary when a group, to

accomplish its goal, divides among its members the tasks that

are necessary to achieve a common purpose." Ball, supra, 141

N.J. at 161-62.

Although evidence establishing the enterprise must "focus"

on "how the participants associated with each other" and on the

extent and nature of the planning, id. at 162-63, it "need not

be distinct or different from the proof that establishes the

pattern of racketeering activity," id. at 162, and a defendant

only needs to possess "some minimal knowledge" of "'the general

nature of the enterprise . . . beyond his individual role.'" Id.

at 176 (quoting United States v. Eufrasio, 935 F.2d 553, 577 (3d

Cir. 1991)). In this regard, our Supreme Court has declined to

endorse a definition of enterprise. Id. at 177. An enterprise

may be as little as "the sum of the racketeering acts," with

neither a "definable structure" nor any "purpose . . . greater

than the predicate acts," as we held in Ball, supra, 268 N.J.

Super. at 143-44.

For an enterprise's pattern of racketeering to constitute a

RICO violation, it must "affect trade or commerce," N.J.S.A.

2C:41-2, which is defined as including "all economic activity

involving or relating to any commodity or service," N.J.S.A.

43 A-0963-12T1 2C:41-1(h). That definition of "trade or commerce" does not

specify that the trade or commerce occur within this State,

N.J.S.A. 2C:41-1(h), but the Legislature declared the

enactment's purpose to be the protection of "the legitimate

trade or commerce of this State" and "the general health,

welfare and prosperity of the State and its inhabitants" from

"the infiltration" of the prohibited kinds of activity.

N.J.S.A. 2C:41-1.1(c).

We have held that those declarations, along with the

Legislature's finding of harm to "this State's economy" from

racketeering, N.J.S.A. 2C:41-1.1(b), require that a plaintiff

show the prohibited conduct has affected the trade or commerce

of this State." State v. Casilla, 362 N.J. Super. 554, 563-64

(App. Div.) (quoting N.J.S.A. 2C:41-1.1(c); emphasis omitted),

certif. denied, 178 N.J. 251 (2003). We have also observed that

the Legislature would have had no reason to address the effects

of racketeering in other states, many of which have their own

RICO statutes, or in interstate commerce, as to which federal

legislation applies. Id. at 564-65.

In a criminal prosecution, in addition to subject matter

and personal jurisdiction, a New Jersey court must have

"territoriality," meaning territorial jurisdiction pursuant to

N.J.S.A. 2C:1-3. State v. Denofa, 187 N.J. 24, 36 (2006). That

44 A-0963-12T1 statute recognizes various ways in which an offense may have "a

direct nexus to New Jersey" that would justify its prosecution

as a criminal offense here. State v. Sumulikoski, 221 N.J. 93,

102 (2015).

The plainest examples of territoriality are when the

"result" of the offense "occurs within this State," or when the

"conduct which is an element of the offense" occurs here.

N.J.S.A. 2C:1-3(a)(1). Conduct committed outside the State has a

nexus to New Jersey if New Jersey law would view such acts as

"constitut[ing] an attempt to commit a crime within the State,"

N.J.S.A. 2C:1-3(a)(2), meaning an attempt to cause a result

within the State that would be an offense if caused by in-state

conduct. See State v. Bragg, 295 N.J. Super. 459, 464-65 (App.

Div. 1996). Outside conduct is also sufficient if New Jersey law

would deem it "a conspiracy to commit an offense within the

State," as long as there is also an "overt act in furtherance

of" the conspiracy that is committed here. N.J.S.A. 2C:1-

3(a)(3). Conversely, our courts have jurisdiction over conduct

occurring within the State that causes a result in another

state, or is part of an attempt or conspiracy to do so, as long

as that conduct would be an offense under both New Jersey law

and the other state's law. N.J.S.A. 2C:1-3(a)(4).

45 A-0963-12T1 (d) New York's Racketeering Laws

Turning to New York's Organized Crime Control Act (OCCA),

1986 N.Y. Laws, c. 516, § 2; N.Y. Penal Law §§ 460.00 to 460.80

(Consol. 2014), we first observe that a violation is called the

crime of "enterprise corruption," N.Y. Penal Law § 460.20.

Unlike New Jersey's law, OCCA is not modeled on federal

statutes. It "is far more restrictive than" federal RICO,

because New York "calculatedly narrowed the definition of the

requisite pattern of criminal activity" to avoid conflating an

ordinary "criminal offense or criminal transaction" with the

ongoing "pattern" that characterizes organized crime. Simpson

Elec. Corp. v. Leucadia, Inc., 515 N.Y.S.2d 794, 799 (App. Div.

1987), aff’d, 530 N.E.2d 860 (N.Y. 1988); N.Y. Penal Law

§ 460.10.

OCCA allows designated county and state officials to

prosecute charges of enterprise corruption. N.Y. Penal Law

§ 460.50. Although the New York Legislature's findings declare

OCCA's purposes to include "making both criminal and civil

remedies available," N.Y. Penal Law § 460.00, the only penalties

it provides, beyond incarceration, are criminal forfeiture and

fines allocated primarily to victim restitution. N.Y. Penal Law

§ 460.30. Those penalties may only be imposed on persons

convicted of enterprise corruption. Ibid.

46 A-0963-12T1 Unlike our Legislature's approach, the New York Legislature

rejected a policy of either liberal or strict construction in

order to preserve a role for "discretion." N.Y. Penal Law

§ 460.00. Even when "the letter of the law" defining an OCCA

violation is satisfied, "the question whether to prosecute"

under OCCA "is essentially one of fairness." Ibid. Such

"fairness" was preserved by leaving the decision to label

alleged criminal conduct as "enterprise corruption" to "those

institutions of government which have traditionally exercised

that function: the grand jury, the public prosecutor, and an

independent judiciary." Ibid. OCCA accordingly does not provide

for a private civil cause of action, see, e.g., Simpson, supra,

515 N.Y.S.2d at 807 (Spatt, J., dissenting), as the parties

concede.

OCCA liability requires the personal commission of "a

pattern of criminal activity" comprising two felonies: a

conspiracy to engage in a "criminal enterprise" and a knowing

participation in the activity or finances of the criminal

enterprise, or of any other enterprise. N.Y. Penal Law § 460.20.

OCCA also specifies that the pattern of criminal activity may

not serve as the "criminal enterprise." N.Y. Penal Law

§ 460.10(1). Instead, the criminal enterprise must consist of "a

group of persons sharing a common purpose of engaging in

47 A-0963-12T1 criminal conduct, associated in an ascertainable structure

distinct from a pattern of criminal activity, and with a

continuity of existence, structure and criminal purpose beyond

the scope of individual criminal incidents." Ibid. In Ball,

supra, 141 N.J. at 159, our Supreme Court observed that OCCA was

unique among the federal and other state RICO enactments because

it explicitly required an ascertainable structure, separate from

the underlying crimes that constituted the pattern of

racketeering activity.

Unlike New Jersey law, OCCA does not specify that a

violation must affect trade or commerce, or indeed, that any

particular effect must have occurred or be deemed to have

occurred within New York's borders.

Consequently, in light of the vastly different approaches

engaged by New Jersey and New York to combat racketeering, there

is no doubt that a true conflict exists for choice-of-law

purposes.

(e) The Choice

In examining the trial court's choice, we start with our

Supreme Court's observation that, "[a]lthough we have

traditionally denominated our conflicts approach as a flexible

'governmental interest' analysis, we have continuously resorted

to the [Second Restatement] in resolving conflict disputes

48 A-0963-12T1 arising out of tort." P.V., supra, 197 N.J. at 135-36. The

Second Restatement's approach focuses on the state with "the

'most significant relationship'" to the parties and issues. Id.

at 136.

"Probably the most important function of choice-of-law

rules" is to foster comity by promoting "harmonious relations"

and facilitating "commercial intercourse" between and among

states. Restatement (Second), supra, § 6 cmt. d. The first step

is to establish that "an actual conflict exists" between the

laws of the involved states. P.V., supra, 197 N.J. at 143. A

conflict arises, like here, when one state provides a cause of

action but the other does not, especially when that provision or

denial reflects an intent to regulate conduct rather than

allocate losses. Id. at 143-44, 148-51 (observing that a

conflict existed between New Jersey law, which maintained

statutory immunity from tort liability for charitable

corporations, and Pennsylvania law, which "definitively

abrogated its charitable immunity laws").

A conflict, however, does not always lead to a choice-of-

law analysis. The analysis is preempted when our Legislature has

determined that New Jersey public policy requires the

application of our substantive law whenever our courts have

jurisdiction over the kind of claim at issue, regardless of the

49 A-0963-12T1 interest of another state. See id. at 140 (citing Restatement

(Second), supra, § 6(1)).

(i) Legislative Directive

Because a choice-of-law analysis may be precluded or

preempted by law, our first task, in light of the arguments

posed, requires that we ascertain whether there is a legislative

direction regarding the application of substantive law. For the

reasons that follow, we conclude that our Legislature has not

made such a declaration for cases like this, either (a)

expressly, or (b) by implication.

a. Is There an Express Directive?

Plaintiffs are mistaken in arguing that our Legislature has

expressly required the application of our RICO laws to out-of-

state conduct. In this respect, plaintiffs rely on provisions in

our Criminal Code that express its territorial parameters. The

Code recognizes its application to conduct occurring "outside

the State" so long as it "constitute[s] an attempt to commit a

crime within the State," N.J.S.A. 2C:1-3(a)(2), or to "conduct

occurring outside the State" so long as it "is sufficient under

the law of this State to constitute a conspiracy to commit an

offense within the State and an overt act in furtherance of such

conspiracy occurs within the State," N.J.S.A. 2C:1-3(a)(3).

50 A-0963-12T1 Because the criminal racketeering laws are also included

within the Criminal Code, plaintiffs argue that the territorial

reach applicable to a criminal prosecution under those

racketeering laws also applies to a private RICO action brought

under those same laws and principles. We disagree. The

territorial parameters delineated in N.J.S.A. 2C:1-3(a), by

their very terms, apply to criminal prosecutions, not private

civil causes of action that may be based on provisions of the

Criminal Code. N.J.S.A. 2C:1-3(a) unmistakably states that its

six territorial rules apply to "a person [who] may be convicted

under the law of this State of an offense . . . for which he is

legally accountable" (emphasis added).

Consequently, despite plaintiffs' forceful argument, this

provision does not contain the "preemptive legislative

expression," State Farm Mut. Auto. Ins. Co. v. Estate of

Simmons, 84 N.J. 28, 39 (1980), necessary to support the

imposition of our substantive law to conduct occurring outside

the State. Because such an extensive reach would likely

constitute "an impermissible intrusion into the affairs of other

states," O'Connor v. Busch Gardens, 255 N.J. Super. 545, 549-50

(App. Div. 1992), we reject the contention that N.J.S.A. 2C:1-

3(a) constitutes a legislative directive as to the reach of New

Jersey substantive law in a private RICO cause of action.

51 A-0963-12T1 b. Is There an Implied Directive?

We also reject any contention that such a legislative

directive may be found by implication here.

The preeminent expression of New Jersey public policy is

the Legislature's enactments. State Farm, supra, 84 N.J. at 39.

If a statute declares that a substantive rule applies in a

situation that would otherwise pose a choice-of-law question,

"New Jersey courts would follow that directive even when the law

of other jurisdictions dictated a contrary result." Ibid. That

understanding conforms with the Second Restatement's instruction

that, "subject to constitutional restrictions," a court "will

follow a statutory directive of its own state on choice of law."

Restatement (Second), supra, § 6(1). Examples include the

Uniform Commercial Code provisions that direct courts to choose

the law "of a particular state" or of the state that the parties

specified. Id. at § 6 cmt. a.

But, because statutes are usually not so "explicit," a

court may determine whether the issue presented "falls within

the intended range of application of a particular statute." Id.

at § 6 cmt. b & cmt. c. The Legislature's intended "range of

application" should be enforced "when these intentions can be

ascertained and can constitutionally be given effect," even if

52 A-0963-12T1 another state's substantive law "would be applicable under usual

choice-of-law principles." Id. at § 6 cmt. b. Thus, if the

forum's legislature "intended that the statute should be applied

to the out-of-state facts involved, the court should so apply

it[.]" Ibid. "On the other hand, if the legislature intended

that the statute should be applied only to acts taking place

within the state, the statute should not be given a wider range

of application." Ibid.

The absence of such a declaration in an enactment implies

the Legislature intended application only to conduct or results

that occur within the State, and that it did not have an

interest in facilitating or preventing developments occurring

elsewhere. Van Slyke v. Worthington, 265 N.J. Super. 603, 613-14

(Law Div. 1992). The Second Restatement similarly recognizes

that laws are commonly "formulated solely with the intrastate

situation in mind," with no suggestion they are "intended to

have extraterritorial application." Restatement (Second), supra,

§ 6 cmt. e. That would explain the absence in P.V., supra, 197

N.J. at 148-49, of a suggestion that the Charitable Immunity Act

could be understood as containing such a declaration,

notwithstanding the "importance" of that enactment's remedial

53 A-0963-12T1 policy and the Legislature's mandate to construe the enactment

liberally.29

The higher standards for criminal liability in New York's

OCCA, when compared to those in New Jersey's RICO statutes,

meant that a defendant would be exposed to liability under New

Jersey's local law for conduct that would not be illegal under

New York's law. The New York Legislature made its enactment

narrower than federal RICO, instead of broader as did our

Legislature. See Ball, supra, 268 N.J. Super. at 107. New York

29Plaintiffs emphasize two decisions from other jurisdictions in support of their position. We do not find they suggest a contrary view than that which we have reached. In Marshall v. Fenstermacher, 388 F. Supp. 2d 536, 547 (E.D. Pa. 2005), the court was required to apply "the conflicts regime of the forum state," Pennsylvania. The plaintiff had asserted common law torts under both Pennsylvania and New Jersey law but asserted RICO claims only under New Jersey and federal law, id. at 546, presumably because Pennsylvania's statute, like New York's, did not afford a private civil cause of action. See 18 Pa. Cons. Stat. § 911. The court simply stated that it would consider the New Jersey RICO claims under the New Jersey statute, with no mention of choice-of-law doctrine and without citation to New Jersey's RICO or general territoriality statutes. Marshall, supra, 388 F. Supp. 2d at 562 n.29. In the other case urged by plaintiffs, Houston v. Whittier, 216 P.3d 1272, 1278-80 (Idaho 2009), it was explained that Idaho courts were not automatically compelled to let a plaintiff assert Oregon causes of action simply because they were statutory. Instead, the court had to find the absence of a conflict with "the public policy of the forum," and allowed the maintenance of the causes of action only after finding that Oregon statutes were "virtually identical" to Idaho's. Id. at 1279-80. Thus, plaintiffs are mistaken in suggesting that Houston presents an instance in which the existence of a statutory cause of action precluded a court from conducting a choice-of-law analysis.

54 A-0963-12T1 also precluded private litigants from pursuing cases that

prosecutors with limited resources might decline, as opposed to

New Jersey's decision to encourage private litigants with the

prospect of treble damages and counsel fee awards. Cf. Lindsey

v. Allstate Ins. Co., 34 F. Supp. 2d 636, 646 (W.D. Tenn. 1999)

(observing that Congress included a private cause of action in

federal RICO "[t]o facilitate the enforcement of its

provisions"); Metro Int'l, Inc. v. Alco Standard Corp., 657 F.

Supp. 627, 634 (M.D. Pa. 1986) (recognizing that, "[t]o

facilitate and strengthen enforcement," Congress created RICO

with a private right of action for treble damages).

As in P.V., supra, 197 N.J. at 148-49, the difference in

approaches reflected a difference in policy and not a reflection

of mere variations in the procedural rules to be followed in

establishing a liability that both states recognized in

principle for the alleged conduct, as was the case in both State

Farm, supra, 84 N.J. at 42-43, and Cornett, supra, 211 N.J. at

377-78. We, thus, recognize that it is immaterial whether the

New York Legislature's motivation was to protect individuals or

the preeminence of its financial marketplace by limiting the

vehicles that private litigants could use to inhibit incidental

activity. It only matters that New York and New Jersey reached

"conflicting resolutions of a particular policy issue." See

55 A-0963-12T1 Boyes v. Greenwich Boat Works, Inc., 27 F. Supp. 2d 543, 548

(D.N.J. 1998). In other words, New York did not intend, by

enacting OCCA, to regulate all the conduct New Jersey intended

to reach in enacting its RICO laws; consequently, we reject

plaintiffs' characterization of the New Jersey private right of

action as simply a stronger remedy to advance an out-of-state

policy that is otherwise the same as the in-state policy.

(ii) Application of The Second Restatement

Having found no legislative directive that would govern the

choice-of-law problem, we turn to the Second Restatement and

examine its: (a) section 6 factors; (b) section 145 principles;

and (c) specific tort principles.

a. Section 6

In the absence of an explicit statutory directive or a

directive that can "be ascertained by a process of

interpretation and construction," Restatement (Second), supra,

§ 6 cmt. b, there is a nonexclusive list of seven factors to be

considered in choosing the applicable law:

(a) the needs of the interstate and inter- national systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests

56 A-0963-12T1 of those states in the determination of the particular issue,

(d) the protection of justified expecta- tions,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniform- ity of result, and

(g) ease in the determination and applica- tion of the law to be applied.

[Id. at § 6(2).]

The factor that deserves the greatest emphasis in a

particular case is that which furthers the most relevant policy

interest, such as "protecting the justified expectations of the

parties" or "favoring uniformity of result." Id. at § 6 cmt. c.

"Generally speaking, it would be unfair and improper to hold a

person liable under a local law of one state when he had

justifiably molded his conduct to conform to the requirements of

another state," as opposed to acting "without giving thought to

the legal consequences of [his] conduct or to the law that may

be applied." Id. at § 6 cmt. g. When "the purposes sought to be

achieved by a local statute or common law rule would be

furthered by its application to out-of-state facts, however,

this is a weighty reason why such application should be made."

Id. at § 6 cmt. e.

57 A-0963-12T1 The proper choice often "represents an accommodation of

conflicting values" that requires the forum court to name the

"general principle" that deserves the most weight and then

analyze the circumstances of the case in that regard. Id. at § 6

cmt. c. Without a statutory mandate to apply its own local law,

a court "must decide for itself whether the purposes sought to

[be] achieved by a local statute or rule should be furthered at

the expense of" other relevant factors. Id. at § 6 cmt. e. Those

include "the relevant policies of all other interested states"

and their "relative interest" in regulating the underlying

conduct that gave rise to the litigation, or in providing a

remedy for a particular plaintiff against a particular

defendant. Id. at § 6 cmt. f. "[W]here the policies of the

interested states are largely the same but where there are

nevertheless minor differences between their relevant local law

rules," there is "good reason for the court to apply the local

law of that state which will best achieve the basic policy, or

policies, underlying the particular field of law involved." Id.

at § 6 cmt. h.

In applying section 6 of the Second Restatement in P.V.,

supra, 197 N.J. at 152-53, the Court noted that interstate

comity additionally counsels that the forum state should defer

to the other state's local law if: (1) applying the forum

58 A-0963-12T1 state's local law would "substantially impair" the other state's

ability "to regulate the conduct of those who chose to operate

within its borders," and (2) applying the other state's local

law would not inhibit the forum's ability to regulate conduct

that occurs within its own borders. For example, the plaintiff

in P.V. was a New Jersey resident pursuing a tort claim against

a Pennsylvania charity for conduct that occurred in

Pennsylvania. Id. at 135. The Court found both of the conditions

that it noted for affording comity: (1) applying New Jersey's

broad charitable immunity to the activity in Pennsylvania would

"substantially impair[]" Pennsylvania's "ability to regulate the

conduct of those who chose to operate within its borders," and

(2) applying Pennsylvania law would not prevent New Jersey from

applying its law of charitable immunity to activities within New

Jersey. Id. at 153.

The parallel of this case to P.V. rests on the fact that

the alleged RICO activity predominantly occurred in New York

rather than New Jersey, and was primarily aimed at harming

plaintiffs indirectly by damaging their reputation by

influencing the mostly New York-based financial markets and

financial news media. In those circumstances, the application of

New York law would not set a precedent that inhibits New Jersey

from providing a civil cause of action for in-state activities

59 A-0963-12T1 that qualify as racketeering under New Jersey's statute; New

Jersey could still protect its domiciliaries and New Jersey

commerce from harm that is felt mostly within its borders.

In contrast, applying New Jersey's civil cause of action

would nullify New York's policy of protecting analogous activity

from being prosecuted as "racketeering" by private litigants,

who lack the institutional constraints of prosecutors and grand

juries. These distinctions in the two neighboring state's laws

created differing expectations about what conduct each would

allow or prohibit.

This case is, thus, distinguishable from those in which

courts declined to dismiss claims recognized under New Jersey

local law, even though out-of-state plaintiffs might have been

unable to pursue such causes of action under their own state's

local law. In those matters, the plaintiffs were allowed to

pursue their claims on the ground that their home states had no

reason to deny them the fortuity of a remedy for what both

states recognized as "the same evil," even if they did not

recognize it to the same degree. See Boyes, supra, 27 F. Supp.

2d at 547-48 (recognizing that Pennsylvania had no interest in

denying its residents the greater damages available under New

Jersey consumer fraud statutes for claims against a New Jersey

seller); Smith v. Alza Corp., 400 N.J. Super. 529, 542-51 (App.

60 A-0963-12T1 Div. 2008) (recognizing that Alabama had no interest in denying

its residents the procedural and substantive advantages afforded

under New Jersey's product liability and consumer fraud

statutes, but not Alabama's, for claims against a New Jersey

manufacturer); Almog v. Isr. Travel Advisory Serv., Inc., 298

N.J. Super. 145, 159 (App. Div. 1997) (recognizing Israel had no

interest in denying its citizens the substantive advantages of

New Jersey defamation law in New Jersey residents' claims for

defamation published in New Jersey), appeal dismissed, 152 N.J.

361, cert. denied, 525 U.S. 817, 119 S. Ct. 55, 142 L. Ed. 2d 42

(1998).

That, however, is not what's before us. As we have

observed, New Jersey and New York local law do not just differ

in the degree to which they deal with an otherwise common policy

of allowing a private civil RICO cause of action. They share no

such interest, as demonstrated by the fact that New Jersey law

permits, and New York law categorically disallows, such private

claims. Thus, we conclude that the section 6 factors favor

choosing New York as the state providing the applicable law.

b. Section 145

In addition, when a cause of action sounds in tort, the

general choice-of-law rule is to ascertain the state with "the

most significant relationship to the occurrence and the parties

61 A-0963-12T1 under the principles stated in [section] 6." Restatement

(Second), supra, § 145(1). That determination is to be made for

each "issue in tort," ibid., meaning each element needed to

establish the tort or a defense to it. Id. at § 145 cmt. d. In

making that determination, certain contacts are "to be taken

into account," including:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

[Id. at § 145(2).]

Accord P.V., supra, 197 N.J. at 141. Plaintiffs and defendants

have not asserted or alleged a prior relationship that preceded

the alleged events in this dispute.

The contacts analysis is "not merely quantitative." Id. at

147. Its purpose is to assess the contacts in terms of the

guiding touchstones of the Second Restatement's section 6,

which, "[r]educed to their essence," are: "(1) the interests of

interstate comity; (2) the interests of the parties; (3) the

interests underlying the field of tort law; (4) the interests of

judicial administration; and (5) the competing interests of the

62 A-0963-12T1 states." Ibid. (citations omitted). The "relative importance"

of the matter's contacts with a state may vary according to "the

nature of the tort involved." Restatement (Second), supra, § 145

cmt. f. Furthermore, for each tort issue, the contacts "are to

be evaluated according to their relative importance with respect

to the particular issue." Id. at § 145 & cmt. d.

If the primary purpose of the local "tort rule" is to deter

or punish misconduct, then the most important contact will be

the conduct's location. Id. at § 145 cmt. c. "[T]he same is true

when the conduct was required or privileged by the local law of

the state where it took place," id. at § 145 cmt. e, so "[a]

rule [of tort] which exempts the actor from liability for

harmful conduct is entitled to the same consideration in the

choice-of-law process as is a rule which imposes liability," id.

at § 145 cmt. c. In that way, the tort policies behind New

Jersey's local law and New York's local law on private civil

causes of action for racketeering are entitled to equal

consideration, even if the purpose of New York's "tort rule" was

to prevent private civil liability for certain conduct that

would create such liability in New Jersey. In short, were we to

apply section 145's general rule for torts, we would choose New

York as providing the applicable law because it has the most

significant relationship under section 6.

63 A-0963-12T1 c. Specific Tort Principles

In addition to section 145's general factors for torts, the

Second Restatement also provides more specific choice-of-law

rules for particular torts. P.V., supra, 197 N.J. at 141. There

are rules for personal injuries, injuries to tangible things,

injuries resulting from a plaintiff's reliance on fraud or

misrepresentations, and injuries resulting from defamation or

injurious falsehood. Restatement (Second), supra, §§ 146-51.

Only injurious falsehood is germane to plaintiffs' RICO claim.

For Second Restatement purposes, an "injurious falsehood"

is any false statement that causes pecuniary loss. Id. at § 151

cmt. a; see also Restatement (Second) of Torts § 623A (1976)

(declaring that an injurious falsehood creates liability for one

who publishes it with knowledge or reckless disregard of its

falsity and with intent "to result in harm to interests of the

other having a pecuniary value"). An injurious falsehood "need

not cast any reflection upon the plaintiff's personal reputation

in order to be actionable." Restatement (Second), supra, § 151

cmt. a. It is enough that the false statement "disparage[s] the

plaintiff's title to his property, or its quality or the

character or conduct of the plaintiff's business." Ibid. This

description encompasses defendants' alleged RICO scheme.

64 A-0963-12T1 The Second Restatement does not have another tort rule that

might cover plaintiffs' RICO claims. Plaintiffs' alleged RICO

injuries are not a form of defamation, nor do they constitute a

form of "personal injury" for choice-of-law purposes, because

"personal injury" is limited to "physical harm or mental

disturbance," which means that "injuries to a person's

reputation . . . are not 'personal injuries' in the sense here

used." Id. at § 146 cmt. b. Plaintiffs' RICO injuries are not

"Injuries to Tangible Things" as used in section 147 of the

Second Restatement. Plaintiffs' alleged injuries do not arise

from "Fraud and Misrepresentation" for choice-of-law purposes

because plaintiffs do not allege that they "suffered pecuniary

harm on account of [their own] reliance on the defendant[s']

false representations." Id. at § 148(1). Rather, plaintiffs

allege reliance by others. Plaintiffs do not assert a defamation

claim, but the rules for "Defamation" and "Multistate

Defamation" in sections 149 and 150 of the Second Restatement

are incorporated into section 151, which covers "Injurious

Falsehood." Thus, the only rules for specific torts relevant to

plaintiffs' RICO claim are sections 149 through 151 of the

Second Restatement.

65 A-0963-12T1 For defamation,30 "the local law of the state where the

publication occurs determines the rights and liabilities of the

parties, except as stated in [section] 150, unless, with respect

to the particular issue, some other state has a more significant

relationship under the principles stated in [section] 6 to the

occurrence and the parties." Id. at § 149. That same rule

governs the choice of law analysis for injurious falsehood. Id.

at § 151 & cmt. b. Here, the state where the publications

primarily occurred was the state with the most significant

relationship – New York.

Next, we must consider whether section 150 calls for a

different result. For multistate defamation, an "aggregate

communication" is "any one edition of a book or newspaper, or

any one broadcast over radio or television, exhibition of a

motion picture," or a similar act of publication, id. at

§ 150(1), meaning "a single aggregate communication to a large

number of persons at one time." Id. at § 150 cmt. c. Multiple

publications of a defamatory statement to numerous individuals

30To be clear, plaintiffs did not assert a defamation claim nor complained in this appeal that their allegations should have been interpreted as if they had sought damages based on a claim of defamation. Nevertheless, their disparagement claims may – for these purposes – be viewed similarly due to their theoretical kinship. Cf. Dairy Stores, Inc. v. Sentinel Pub. Co., 104 N.J. 125, 133 (1986) (recognizing that the torts of product disparagement and defamation "sometimes overlap").

66 A-0963-12T1 are not necessarily "aggregate communications" subject to

section 150, as they can be separate acts that require an

individual choice-of-law analysis that may lead to differing

results. Id. at § 149 cmt. a. Although plaintiffs have alleged

multiple publications of certain defamatory statements, which

might not qualify as section 150 multistate defamations, they

primarily allege aggregate communications published in a manner

intended to influence all persons and entities who follow or

participate in the financial marketplace and financial news

media.

The "single publication rule" applies to section 150

aggregate communications, so the matter may be determined as if

plaintiff has only one cause of action, regardless of the number

of jurisdictions in which the aggregate communication was

published. Id. at § 150 cmt. c; Restatement (Second) of Torts,

supra, § 577A cmts. e & f.

In addition, we must consider that, in this context, a

corporation is a legal person and therefore without domicile in

the choice-of-law sense. Restatement (Second), supra, § 150

cmt. f; see also id. at § 11 cmt. 1. Thus, when a corporation

claims multistate defamation, the state with the most

significant relationship to the matter "will usually be the

state where the corporation . . . had its principal place of

67 A-0963-12T1 business" as long as that state was one in which the multistate

defamation was published. Id. at § 150(3). This is because it is

assumed that a corporation sustains its greatest injury from

defamation there. Id. at § 150 cmt. f. Another state, however,

may have the "most significant relationship with respect to the

particular issue if it is the state where the defamatory

communication caused plaintiff the greatest injury to its

reputation." Ibid. That can occur if "the matter claimed to be

defamatory related to an activity of the plaintiff that is

principally located in this state," id. at § 150 cmt. f(b), or

"the plaintiff suffered greater special damages in this state

than in the state of its principal place of business," id. at §

150 cmt. f(c), or "the place of principal circulation of the

matter claimed to be defamatory was in this state," id. at § 150

cmt. f(d).

As alleged by plaintiffs, defendants' RICO scheme targeted

plaintiffs' use of the New York financial markets for securities

offerings and for third-party trading of their securities, which

was an "activity" of plaintiffs that was "principally located

in" New York. Ibid. As a result, New York was the state where

defendants' false communications caused plaintiffs "the greatest

injury to [their] reputation" because the main injury from the

alleged RICO scheme was the decrease in offering and market

68 A-0963-12T1 share prices due to the reputational harm that plaintiffs

suffered in the markets where plaintiffs conducted such

"activity." That is bolstered because, although defendants'

publications were multistate, "the place of principal

circulation of the matter claimed to be defamatory was in" New

York. Ibid. Thus, New York is the state with the most

significant relationship under section 150 as well as sections 6

and 145.

That conclusion remains undisturbed when considering

"special damages." If the injury was the loss of particular

customers or of market share in particular locations, those

would also be important contacts in determining which state's

law to apply. See Pony Comput., Inc. v. Equus Comput. Sys. of

Miss., Inc., 162 F.3d 991, 996 (8th Cir. 1998); Jelec USA, Inc.

v. Safety Controls, Inc., 498 F. Supp. 2d 945, 952-53 (S.D. Tex.

2007). As we discuss elsewhere, plaintiffs' cognizable special

damages are the alleged loss of 180 customers throughout the

country. There was no evidence that any loss of customers or

market share occurred to a greater degree in New Jersey than in

New York or elsewhere.

We also are presented with no ground upon which to conclude

that defamation or disparagement of a parent company generally

amounts to defamation or disparagement of a subsidiary, or vice

69 A-0963-12T1 versa. The issue of entity separation for corporate parents and

subsidiaries raises additional questions concerning the locus of

the injury. For example, in a case that concerned the looting of

a corporation rather than its defamation, we favored application

of Delaware's equitable principles to pierce the corporate veil,

and gave the parent standing to protect financial interests

against the adverse party, because the parent's interests were

not as distinct from its subsidiary's contractual rights as the

doctrine of "entity separateness" generally presumes. Bondi,

supra, 423 N.J. Super. at 437-39. Although such recognition

implies that the subsidiary's injury is also an injury to the

parent, we intended no implication that the locus of the injury

necessarily moved from where the subsidiary as a separate entity

would have felt it to where the parent as a separate entity

would feel it.

Plaintiffs have alleged and argued that C&F's finances were

inextricably intertwined with Fairfax's. And they have argued

that the market viewed Fairfax and its subsidiaries as so

inseparable that some defendants bought shares of the

subsidiaries and affiliates as proxies for Fairfax shares, which

had become too costly to borrow due to demand from those

shorting Fairfax. Plaintiffs have further argued that

defendants' defamation of C&F served the main goal of destroying

70 A-0963-12T1 the entirety of Fairfax itself, and defendants rarely bothered

to distinguish among its subsidiaries. According to plaintiffs,

the RICO enterprise operated by spreading false information in

the financial markets and the financial news media, and by

encouraging federal law enforcement and securities officials

outside New Jersey to investigate Fairfax's use of reinsurance.

The goal was to damage Fairfax's reputation in order to reduce

the market share price, and the proceeds of securities

offerings, of all Fairfax entities.

In responding, defendants mostly view Fairfax as an

integrated company whose general financial instability reached

every branch of the Fairfax family tree.31 And defendants'

criticisms of C&F served more as criticism of the Fairfax

edifice than criticisms of C&F individually. Indeed, some

defendants expressly articulated an intent for their criticisms

of a subsidiary, or their short positions in a subsidiary, to

harm plaintiff Fairfax Financial Holdings. In addition, we

observe that the parent corporation of the financially-

intertwined Fairfax entities was located in Toronto, and all

share-trading occurred on the New York Stock Exchange or the

Toronto Stock Exchange.

31 We have appended to this opinion a graph setting forth the relationship of the various Fairfax entities.

71 A-0963-12T1 In summary, the weight of the conduct in this alleged

enterprise of multistate disparagement was in New York, not New

Jersey. The financial markets and financial news media were

predominantly located in New York, making New York central to

defendants' publications. New York is "the state where the

[harmful] communication[s] caused the greatest injury to

[plaintiffs'] reputation." Restatement (Second), supra, § 150

cmt. f. For all these reasons, New York has "a more significant

relationship to the occurrences and the parties." Ibid.

(iii) Conclusion

For these reasons, we conclude that the trial judge

correctly gave C&F's direct alleged losses little weight in

balancing the state contacts and interests for the RICO claims.

We, thus, affirm the determination that New York law applied and

that, in applying New York law, plaintiffs' racketeering claim

could not stand.

72 A-0963-12T1 B

THE MAINTAINABILITY OF THE COMMON LAW CLAIMS

Plaintiffs contend the trial judge erroneously dismissed

two of their common law claims.32 They first argue the trial

judge mistakenly applied New York's statute of limitations

rather than New Jersey's more generous time-bar to their

disparagement claim,33 and, second, they argue the judge

erroneously excluded evidence of damages on their claims of

disparagement and tortious interference with prospective

economic advantage.

(1) Statute of Limitations Applicable to Plaintiffs' Disparagement Claim

Plaintiffs argue the trial judge erred in ascertaining the

appropriate statute of limitations to be applied to their

disparagement claim. They argued in the trial court that New

32 Plaintiffs do not address in their appeal the trial court's disposition of their tortious interference with contractual relations claim.

33Morgan Keegan has not only responded to plaintiffs' arguments about the applicable time-bar, but has also cross-appealed and argues, among other things, that the trial judge erred in applying New York's three-year statute of limitations instead of New York's one-year limitation period.

73 A-0963-12T1 Jersey's six-year statute of limitations34 applied, Morgan Keegan

argued for application of New York's one-year statute of

limitations,35 and the trial judge found controlling the three-

year New York statute of limitations.36

After this appeal was argued the Supreme Court decided

McCarrell v. Hoffmann-LaRoche, Inc., supra, 227 N.J. at 574-75,37

which illuminates our way by holding that section 142 of the

Second Restatement "is now the operative choice-of-law rule for

resolving statute-of-limitations conflicts because it . . .

channel[s] judicial discretion and lead[s] to more predictable

and uniform results that are consistent with the just

expectations of the parties." The Court described its holding as

"a natural progression in [its] conversion from the

governmental-interest test to the Second Restatement [which

34N.J.S.A. 2A:14-1 (declaring that "[e]very action at law for . . . any tortious injury to real or personal property . . . shall be commenced within 6 years next after the cause of any such action shall have accrued").

35N.Y. C.P.L.R. § 215(3) (declaring that "an action to recover damages for," among other things, "libel, slander, [and] false words causing special damages" "shall be commenced within one year").

36N.Y. C.P.L.R. § 214(4) (declaring that "an action to recover damages for an injury to property" "must be commenced within three years").

37We invited and recently received and considered the parties' supplemental briefs on McCarrell's impact on the issues in this case.

74 A-0963-12T1 began] in P.V.[, supra,] 197 N.J. 132," and which adopted the

methodology described earlier in this opinion for resolving

conflicts concerning substantive tort law. McCarrell, supra, 227

N.J. at 574-75. McCarrell's approach has certainly simplified

the disposition of most conflicts concerning a choice between

two or more states' statutes of limitations.

The process starts with an understanding that when an

action is commenced here, "New Jersey's choice-of-law rules

[apply] in deciding whether this State's or another state's

statute of limitations governs the matter." Id. at 583. In

defining New Jersey choice-of-law rules, the McCarrell Court

instructed that the first matter of interest is whether there is

a "true conflict." Id. at 584. "When application of the forum

state's or another state's statute of limitations results in the

same outcome, no conflict exists, and the law of the forum state

governs." Ibid. (citing Rowe v. Hoffmann-La Roche, Inc., 189

N.J. 615, 621 (2007)). A true conflict occurs "when a complaint

is timely filed within one state's statute of limitations but is

filed outside another state's." Ibid. (citing Schmelze v. ALZA

Corp., 561 F. Supp. 2d 1046, 1048 (D. Minn. 2008)).

We can perceive a circumstance – perhaps applicable here –

where a complaint is filed within time regardless of which

competing state's statute of limitations is applied, but the

75 A-0963-12T1 scope of the claim is limited or enhanced depending on the

statute of limitations applied. For example, a plaintiff may sue

on a series of defamatory statements occurring over the course

of two years. If one state has a one-year statute of limitations

and the other has a two-year statute of limitations, the

plaintiff's suit – if filed within one year of the last

defamatory statement – would be timely filed pursuant to either

state's statute of limitations. But, if the one-year statute of

limitations is found applicable, the allegations or resulting

damages would be limited by that choice of law because

allegations of defamatory statements made more than a year

before the suit's commencement would not be cognizable. That

particular problem was not likely contemplated in McCarrell

because the facts didn't warrant its consideration; that product

liability action was either timely if our statute of limitations

applied or entirely barred if Alabama's applied.

In any event, other than referring to a "true conflict" as

one which makes a difference as to the timeliness of the suit,

the Court also emphasized that the test is whether the choice of

"statute of limitations is outcome determinative." Id. at 584

(emphasis added). In the example we have provided, the outcome

would be impacted if a suit would be timely under either statute

of limitations because, if the shorter limitations period was

76 A-0963-12T1 applied, only the defamatory statements asserted within one year

of the filing would be actionable. In ascertaining the existence

of a true conflict, we assume the McCarrell Court intended the

broader view suggested by its "outcome determinative" language.

Indeed, later in the opinion, the Court again emphasized that

whether the conflict is "outcome determinative" is the question,

and, in that regard, the Court quoted with approval a federal

judge who stated, in a different way, that there is no conflict

if "'there is no divergence between the potentially applicable

laws.'" Id. at 591 n.9 (quoting Spence-Parker v. Del. River &

Bay Auth., 656 F. Supp. 2d 488, 497 (D.N.J. 2009)). Because some

or most of defendants' allegedly disparaging statements from

2002 to 2006 would cease to be actionable if a shorter New York

statute – either New York's one-year or its three-year statute

of limitations – were to be applied to this 2006 complaint

rather than New Jersey's six-year statute of limitations,

N.J.S.A. 2A:14-1, we conclude that the choice-of-law decision

here is "outcome determinative" and requires a resolution.

There being a true conflict, McCarrell instructs, 227 N.J.

at 592-93, that we must apply the Second Restatement's section

142, which states that, "barring exceptional circumstances

[that] make such a result unreasonable":

(1) The forum will apply its own statute of limitations barring the claim.

77 A-0963-12T1 (2) The forum will apply its own statute of limitations permitting the claim unless:

(a) maintenance of the claim would serve no substantial interest of the forum; and

(b) the claim would be barred under the statute of limitations of a state having a more significant relationship to the parties and the occurrence.

Because application of N.J.S.A. 2A:14-1 permits the maintenance

of the claim, subsection (1) of section 142 has no application.

We, thus, gaze toward section 142's subsection (2). And, as the

Court held, under section 142(2)(a), "the statute of limitations

of the forum state generally applies whenever that state has a

substantial interest in the maintenance of the claim."

McCarrell, supra, 227 N.J. at 593. If that is so, then "the

inquiry ends." Ibid. It is "[o]nly when the forum state has 'no

substantial interest' in the maintenance of the claim [that] a

court [would] consider [s]ection 142(2)(b) – whether 'the claim

would be barred under the statute of limitations of a state

having a more significant relationship to the parties and the

occurrence.'" Ibid.

In this case, section 142 is easily applied, as anticipated

by McCarrell's description of the test. Ibid. (observing that

section 142: "benefits from an ease of application; places both

78 A-0963-12T1 this State's and out-of-state's citizens on an equal playing

field, thus promoting principles of comity; advances

predictability and uniformity in decision-making; and allows for

greater certainty in the expectations of the parties"). Section

142 "makes clear that when New Jersey has a substantial interest

in the litigation and is the forum state, it will generally

apply its statute of limitations." Ibid. Stated another way,

under section 142, the forum state "presumptively applies its

own statute of limitations unless . . . [it] has no significant

interest in the maintenance of the claim and the other state,

whose statute has expired, has 'a more significant relationship

to the parties and the occurrence,' . . . or . . . given 'the

exceptional circumstances of the case,' following the Second

Restatement rule would lead to an unreasonable result."

McCarrell, supra, 227 N.J. at 597.

There is no doubt that New Jersey has a substantial

interest in this litigation. One of the plaintiffs – C&F – has

its principal place of business in New Jersey and claims

injuries to its business caused by the alleged disparagement of

it and its products. Because New Jersey has a significant

interest, it is irrelevant under section 142 that New York has a

"more significant relationship to the parties and the

occurrence." Ibid. Absent "exceptional circumstances," not

79 A-0963-12T1 remotely suggested here, that this would "lead to an

unreasonable result," the test described in McCarrell requires

application of our own statute of limitations. Ibid.

Consequently, the timeliness of plaintiffs' disparagement

cause of action – the only claim as to which plaintiffs argue

the judge erred in applying a shorter, New York statute of

limitations – is governed by our six-year statute of

limitations. N.J.S.A. 2A:14-1.38 See Patel v. Soriano, 369 N.J.

Super. 192, 247 (App. Div.), certif. denied, 182 N.J. 141

(2004). Although New Jersey has a one-year statute of

limitations for libel and slander of a person, N.J.S.A. 2A:14-3,

plaintiffs claim commercial disparagement of their business and

products, sometimes referred to as trade libel. Patel, supra,

369 N.J. Super. at 246-47. In New Jersey, "a claim for trade

libel is subject to the general six-year statute of limitations

applicable to malicious interference claims." Id. at 247.

Moreover, that statute of limitations applies to disparagement

whether "the aspersion reflects only on the quality of

plaintiff's products, or on the character of plaintiff's

38For these same reasons, we reject the argument Morgan Keegan asserted in its cross-appeal that the trial judge erred in applying New York's three-year statute of limitations, instead of New York's one-year statute of limitations.

80 A-0963-12T1 business as such." Ibid.39 Therefore, "the more restricted

statute of limitations for slander does not apply" here. Id. at

249.

The six-year statute of limitations applies to plaintiffs'

disparagement claims, as well as their other common law causes

of action. The trial judge erred in applying a shorter statute

of limitations.

39 As the trial judge recognized, a statement that attacks an insurance company as a fraud or a Ponzi scheme, or an assertion that it is insolvent or bankrupt, among other similar things, may constitute an attack on its products. Here, statements disparaging the financial condition of plaintiffs may have a direct link to its products; plaintiffs are in the business, through the sale of insurance policies, of making promises to clients to pay them money in the future in the event of certain occurrences. Statements that question plaintiffs' ability to make those payments strike at both the heart of their reputation and the products they sell – a view that can be seen in the assertions of Fairfax's chairman and chief executive officer:

When you're in the insurance business and you are selling a promise to pay a claim in a year or two or three or four, when you have all of this noise . . . when there [are] statements made that the company is bankrupt, of course, you have clients who would not do business with you. Why would a client do business with a property casualty insurance company that's going bankrupt?

81 A-0963-12T1 2. Dismissal of Plaintiffs' Disparagement and Tortious Interference With Prospective Economic Advantage Claims Based on the Absence of Special Damages

Plaintiffs also argue the trial court erred in excluding

evidence of damages allegedly incurred because of both

economic advantage. This involves not only a determination of

which state's substantive law applies in assessing the

maintainability of those common law actions but also the content

of that substantive law.

(a) Choice of Law

We need not discuss at length our determination that New

York provides the substantive law applicable to plaintiffs'

common law causes of action. Although the choice-of-law

principles discussed in Section IV(B)(1), supra, required

application of this State's statute of limitations, other

choice-of-law principles – already discussed in Section IV(A),

supra, which led to our affirmance of the dismissal of the

racketeering claim – compel the adoption of New York's common

law in assessing the sufficiency of plaintiffs' claims of

82 A-0963-12T1 disparagement and tortious interference with prospective

economic advantages.40

(b) Common Law Requirements

The parties' chief bone of contention concerns the types of

damages plaintiffs were required to assert and prove to sustain

their claims of disparagement and tortious inference with

prospective economic advantage. We discuss these separately.

(i) Disparagement

We initially observe that, in New York, defamation claims,

which are akin to disparagement claims, require "special

damages," meaning an economic loss resulting from the harm to

the plaintiff's reputation. Liberman v. Gelstein, 605 N.E.2d

344, 347 (N.Y. 1992); Matherson v. Marchello, 473 N.Y.S.2d 998,

1000 (App. Div. 1984). This requires the identification of

customers who would have dealt with the plaintiff but for the

reputational harm. Squire Records, Inc. v. Vanguard Recording

Soc'y, Inc., 226 N.E.2d 542, 543 (N.Y. 1967); Drug Research

Corp. v. Curtis Publ'g Co., 166 N.E.2d 319, 322 (N.Y. 1960);

DiSanto v. Forsyth, 684 N.Y.S.2d 628, 629 (App. Div. 1999);

40We will not conduct an individualized choice-of-law assessment regarding plaintiffs' common-law claims for reasons expressed earlier. See Section IV(A)(3)(b), supra.

83 A-0963-12T1 Waste Distillation Tech., Inc. v. Blasland & Bouck Eng'rs, P.C.,

523 N.Y.S.2d 875, 877 (App. Div. 1988).

This principle seems to have emanated from New York state

courts' disagreements with one federal case in New York that had

allowed a substitute measure of damages for a plaintiff that

sold its product only by mail order. Charles Atlas, Ltd. v.

Time-Life Books, Inc., 570 F. Supp. 150, 156 (S.D.N.Y. 1983).

The district judge in Charles Atlas held that it was "virtually

impossible to identify those who did not order the plaintiff's

product because of the" product disparagement, and allowed the

plaintiff "to prove lost sales by other means" as long as

"'other factors [are] satisfactorily excluded by sufficient

evidence[.]'" Ibid. (quoting William L. Prosser, Handbook of the

Law of Torts § 128, at 923-24 (4th ed. 1971)).41 In rejecting

41 Dean Prosser observed:

[T]he whole modern tendency is away from any such arbitrary rule. Starting with a few cases involving goods offered for sale at an auction, and extending to others in which there has been obvious impossibility of any identification of the lost customers, a more liberal rule has been applied, requiring the plaintiff to be particular only where it is reasonable to expect him to do so. It is probably still the law everywhere that he must either offer the names of those who have failed to purchase or explain why it is impossible for him to do so; but where he cannot, the matter is dealt with by analogy (continued)

84 A-0963-12T1 Charles Atlas, New York's Appellate Division held that a

disparagement claim is dependent on "evidence of particular

persons who ceased to be or refused to become customers." De

Marco-Stone Funeral Home Inc. v. WEBG Broadcasting Inc., 610

N.Y.S.2d 666, 668 (App. Div. 1994); see also Prince v. Fox

Television Stations, Inc., 941 N.Y.S.2d 488, 488 (App. Div.

2012).

(ii) Tortious Interference With Prospective Economic Advantage

To sustain a claim for tortious interference with

prospective economic advantage pursuant to New York substantive

law: there must be a prospective business relationship between

the plaintiff and a third party; the defendant must know of that

relationship and intentionally interfere with it; the

defendant's means of interference must amount to a crime, an

independent tort, or conduct that arose solely out of malice;

and the result must be some injury to the relationship with the

third party. Posner v. Lewis, 965 N.E.2d 949, 952 n.2 (N.Y.

(continued) to the proof of lost profits resulting from breach of contract. If the possibility that other factors have caused the loss of the general business is satisfactorily excluded by sufficient evidence, this seems entirely justified by the necessities of the situation.

85 A-0963-12T1 2012); Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1102-03 (N.Y.

2004); Amaranth LLC v. J.P. Morgan Chase & Co., 888 N.Y.S.2d

489, 494-96 (App. Div. 2009). The requirement to specifically

identify the business lost is the same as noted above with

regard to disparagement claims.

The business prospect must be identifiable, and the

plaintiff must show that it would have obtained that prospect's

business but for the interference. Learning Annex Holdings, LLC

v. Gittelman, 850 N.Y.S.2d 422, 423 (App. Div. 2008). The

defendant must know of the specific third party and the

prospective business relationship. See GS Plasticos Limitada v.

Bureau Veritas Consumer Prods. Servs., Inc., 931 N.Y.S.2d 567,

568 (App. Div.), appeal denied, 957 N.E.2d 1159 (N.Y. 2011).

(c) Damages Asserted

To maintain its common law claims, C&F's marketing

department developed a list of 180 specifically-identified

customers or potential customers whose business it claims C&F

would have maintained or secured but for defendants' wrongful

acts. C&F employees developed a model of the lost revenue and

profits for each such customer. For the period between 2003 and

2009, they estimated the lost revenue at $102 million and lost

profits at $19 million; the total volume of business "quoted but

not written" by C&F during that period was approximated at $14

86 A-0963-12T1 billion, of which the revenue lost on those 180 accounts

represented less than one percent.

Jorge Echemendia, a corporate representative of United

States Fire Insurance Company, a wholly-owned subsidiary of C&F,

testified at a deposition that he and another C&F employee

developed the list from C&F's records, which included the

customer call report system that was used to archive notes on

existing and potential accounts, and from communications with

brokers and other producers. C&F recognized in 2004 that

customers were paying greater attention to an insurer's ratings

and financial capacity, and it accordingly added those concerns

to the list of reasons that could be cited in a call report as a

cause for losing a particular customer. Approximately 170 of

the 180 accounts in the list were identified due to the

selection of such a reason in the call report, while the rest

were identified from emails that attributed the loss of an

account to those reasons.

The trial court found no proof the 180 customers relied on

defendants' statements. But plaintiffs proffered that

defendants' scheme was designed to disparage and interfere by

lowering C&F's ratings and to cast doubt on the financial

soundness of C&F and its parent. Plaintiffs' proofs that these

180 customers relied on the resulting reduced ratings and

87 A-0963-12T1 financial reputation indicated these customers relied on

defendants' statements indirectly, as defendants allegedly

intended. For example, plaintiffs cited a March 2005 email,

which followed a March 2005 rating agency report. Echemendia

also asserted that "a few" of "the articles distributed by the

defendants" were named in a call report or in an email.

The question before us is not whether these assertions of

lost business are persuasive or even whether they must be

presented through expert opinion. The question as we understand

it, in light of the trial court's disposition and in light of

New York law, requires a determination of whether plaintiffs

asserted a loss of business sufficient to withstand summary

disposition. We find plaintiffs' allegations regarding the 180

lost customers were sufficiently specific to meet the

requirements of New York law.42

3. Summary

For these reasons, our review of the trial judge's

disposition of the two common law causes of action referred to

in plaintiffs' appeal – disparagement and the tortious

42 Because plaintiffs' disparagement and tortious interference with prospective economic advantage claims survive, their claim of a civil conspiracy may also be further maintained. Corris v. White, 289 N.Y.S.2d 371, 374 (App. Div. 1968); see also Banco Popular N. Am. v. Gandi, 184 N.J. 161, 177-78 (2005).

88 A-0963-12T1 interference with prospective economic advantage – leads us to

conclude that: New Jersey's six-year statute of limitations

applies to those claims; New York law imposes a requirement that

plaintiffs allege special damages; and summary judgment was

erroneously granted because the claim of 180 lost business

prospects was sufficient to meet the requirements of New York

law.

C

THE PERSONAL JURISDICTION RULINGS

Plaintiffs argue that the trial judge erred in dismissing

the Kynikos and Third Point defendants for lack of personal

jurisdiction. Plaintiffs assert that those defendants ought to

be held subject to suit in New Jersey because they participated

in the overarching conspiracy to harm them. In response, these

defendants argue that our courts do not recognize conspiracy-

based jurisdiction and, alternatively, that plaintiffs have not

presented any competent evidence to show they were part of a

conspiracy. As required by Brill, supra, 142 N.J. at 540, we

assume plaintiffs' allegations regarding these defendants are

true for purposes of determining whether the trial court

properly granted summary judgment on personal jurisdiction

grounds.

89 A-0963-12T1 Before examining the relationship of these defendants to

New Jersey, we first observe that the due process clause permits

the assertion of personal jurisdiction over a nonresident in two

ways – general and specific jurisdiction. Waste Mgmt., Inc. v.

Admiral Ins. Co., 138 N.J. 106, 119 (1994), cert. denied, 513

U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995). A

nonresident's continuous and systematic contacts that

approximate an actual presence give rise to general

jurisdiction. Ibid. Specific or "case-linked" jurisdiction

"depends on an 'affiliatio[n] between the forum and the

underlying controversy,' principally, activity or an occurrence

that takes place in the forum State and is therefore subject to

the State's regulation." Goodyear Dunlop Tires Operations, S.A.

v. Brown, 564 U.S. 915, 919, 131 S. Ct. 2846, 2851, 180 L. Ed.

2d 796, 803 (2011) (quoting Arthur T. von Mehren & Donald T.

Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79

Harv. L. Rev. 1121, 1136 (1966)).

We, thus, turn to the relationship between these two groups

of defendants – the Kynikos and Third Point defendants – and

this State, and examine whether there is jurisdiction in this

State over these defendants through a consideration of the

concepts of (1) general, (2) specific, and (3) conspiracy-based

jurisdiction.

90 A-0963-12T1 1. General Jurisdiction

(a) Kynikos

Kynikos – formed in 1985 as a limited partnership organized

in Delaware with its principal place of business in New York –

is an investment advisor and management company that specializes

in short-selling and has managed over $1 billion for its

clients. During the relevant period, Kynikos purchased services

and products from New Jersey vendors; it did not, however, have

any property, an office, a mailing address, a phone number, or a

bank account in this State. Kynikos was not registered to

conduct business in New Jersey, and any employees who were

residents of New Jersey reported to Kynikos's offices in New

York or London.

Kynikos did not advertise its services in New Jersey. It

operated a password-protected website, which only its existing

or prospective clients could access. Kynikos had seven New

Jersey clients between 2002 and 2007; those relationships were

client-initiated and comprised less than one-half of one percent

of Kynikos's total investment assets. Kynikos filed partnership

tax returns in New Jersey only because some of its related

entities shared partial ownership of airplanes that were

occasionally hangared at Teterboro Airport in Bergen County.

91 A-0963-12T1 Defendant James S. Chanos, Kynikos's founder and president,

was a New York resident; he did not have a New Jersey mailing

address, phone number or bank account. Chanos did not own

property in New Jersey, and he was not obligated to file a

personal income tax return in New Jersey. Like Kynikos, Chanos

only filed partnership returns in connection with the airplanes

in Bergen County.

In September 2000, defendant Jeffrey Perry, formerly of

SAC, joined Kynikos as a co-manager. After an alleged "falling

out" with Chanos, Perry left Kynikos in 2005 and joined Third

Point as a senior analyst. He was a New York resident and had

no New Jersey mailing address, phone number or bank account.

Perry did not own property in, and did not regularly travel to,

New Jersey. Although he paid New Jersey taxes in 2005 for

earnings from an unrelated investment, he otherwise has not been

obligated to file a personal income tax return in New Jersey.

Kynikos traded in Fairfax stock between March 2002 and June

2007, and in Odyssey stock between January 2006 and March 2007.

Kynikos never held stock in, nor traded any interest in, C&F.

(b) Third Point

Third Point – a Delaware limited liability company with its

principal office in New York and a satellite office in

California – was an employee-owned hedge fund that serviced

92 A-0963-12T1 pooled investments and institutional investors and had an

investment relationship with the Exis defendants.

During the relevant period, Third Point provided management

services to a number of funds that traded the securities of

Fairfax and related entities. Those funds paid Third Point

management fees; the funds themselves, however, are not parties

to this suit and, in any event, had no New Jersey presence. The

brokers who executed those trades were not located in New Jersey

and no Third Point member resided in New Jersey.

Between 2002 and 2006, New Jersey residents comprised only

four percent of the investors in Third Point's funds, and less

than two percent of the cash Third Point managed belonged to New

Jersey investors. Third Point paid New Jersey taxes on behalf of

its investors, but the Third Point funds reimbursed those

outlays; Third Point itself did not pay New Jersey taxes.

Third Point purchased services and products from New Jersey

vendors, but those payments were minimal, representing less than

one percent of Third Point's operating budgets between 2002 and

2007. Third Point was not registered to conduct business in New

Jersey, did not own or lease property here, and did not have any

New Jersey-based offices, mailing addresses, phone numbers or

bank accounts. Third Point did not send general solicitations to

New Jersey residents unless such information was requested.

93 A-0963-12T1 Defendant Daniel S. Loeb was the managing member and

founder of Third Point and, as noted previously, Perry was a

senior analyst. Both Loeb and Perry had their primary residences

in New York and did not travel to New Jersey on a regular basis.

Neither owned nor leased property in New Jersey or maintained a

New Jersey mailing address or phone number.

Loeb had personal accounts with various New Jersey savings

banks, but he was not required to pay New Jersey income taxes.

Plaintiffs alleged that Loeb directed Perry to help Contogouris

develop and disseminate false information about Fairfax's

health.

Third Point traded extensively in the following entities

and at the following times: (1) Fairfax, between June 2002 and

February 2007; (2) Odyssey, between November 2005 and December

2006; (3) Northbridge Financial Corporation, a Fairfax

subsidiary located in Canada, between June 2002 and November

2006; and (4) C&F, between July 2006 and April 2007. Third

Point's trading of C&F-related interests amounted to only three

percent of its overall Fairfax-related transactions. Those

interests, however, consisted of bonds that were not issued by

C&F; they were instead originally issued by non-party Crum &

Forster Funding Corp., a Delaware corporation. C&F assumed those

94 A-0963-12T1 bonds on June 30, 2003, through a transaction conducted in New

York purportedly in accordance with New York law.

Considering the contacts of the Kynikos and Third Point

defendants, we conclude they are insufficient to give our courts

general jurisdiction over them because the contacts do not

constitute "continuous and systematic activities in the forum."

Waste Mgmt., supra, 138 N.J. at 119.

2. Specific Jurisdiction

There being no basis upon which to assert general

jurisdiction over these defendants, we consider whether they had

specific contacts with persons or entities in New Jersey that

relate to the alleged enterprise or conspiracy. Although we do

not have the benefit of the trial judge's view of plaintiffs'

specific allegations of communications by these defendants

toward entities or persons in New Jersey, we have closely

examined the record in light of the parties' arguments. We find

any such communications to be so inconsequential as to justify

rejection of the argument that the court was authorized to

exercise specific jurisdiction over these defendants.

95 A-0963-12T1 As for Kynikos, plaintiffs allude to a handful of

communications it had with A.M. Best,43 CNBC,44 and "a New Jersey-

based" Dow Jones reporter, Carol Redmond.45 And, as for Third

Point, other than what has already been discussed, plaintiffs

refer to communications – a few days before plaintiffs commenced

this suit between Third Point and A.M. Best, as well as a number

of other individuals, only a few of whom may have been located

in New Jersey – that attached an article from The New York Post

concerning Fairfax.

These few communications are far too inconsequential to

warrant the assertion of jurisdiction over these defendants.

3. Conspiracy-Based Jurisdiction

Plaintiffs also contend that the court was authorized to

assert jurisdiction over these defendants because of the actions

of other alleged co-conspirators.

43As for A.M. Best, the allegations seem to relate to a single email, which appears to have little significance to the issues at hand, since it appears to only pose questions about Fairfax subsidiaries other than C&F.

44Plaintiffs do not claim Kynikos had direct contact with CNBC in New Jersey. Rather, plaintiffs referred in their opposing papers in the trial court to communications with a financial journalist located outside New Jersey who occasionally appeared on a show on CNBC, which broadcasts from Englewood Cliffs.

45These communications related only to Kynikos's inclusion as a party to this lawsuit.

96 A-0963-12T1 The trial judge determined, as he explained in his December

23, 2011 written decision, that plaintiffs had to show

defendants affirmatively injected themselves into New Jersey and

that mere allegations of a conspiracy were insufficient to

establish the requisite minimum contacts. The court also

rejected plaintiffs' contention that Fairfax's injuries could be

attributed to C&F for the purpose of analyzing minimum contacts

and concluded that a "comment made as to a Canadian company

cannot by inference be applied to any and all subsidiaries of

Fairfax. That [w]ould unknowingly impose jurisdiction upon

defendants anywhere throughout the world."

We review these summary determinations de novo. Spring

Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158,

180 (App. Div.), certif. denied, 196 N.J. 85 (2008); YA Global

Invs., L.P. v. Cliff, 419 N.J. Super. 1, 8 (App. Div. 2011). To

survive these motions, plaintiffs were required to identify

genuine disputes of material fact that could lead a rational

factfinder to resolve the dispute in their favor. Brill, supra,

142 N.J. at 540; Turner v. Wong, 363 N.J. Super. 186, 198-99

(App. Div. 2003). Bare opposing conclusions and speculation are

insufficient. Brill, supra, 142 N.J. at 541.

In applying this standard, we return to the legal

principles that govern a court's exercise of personal

97 A-0963-12T1 jurisdiction. To start, it is of course self-evident that a

court lacking personal jurisdiction has no authority over the

nonresident. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-

72, 105 S. Ct. 2174, 2181, 85 L. Ed. 2d 528, 540 (1985);

McKesson Corp. v. Hackensack Med. Imaging, 197 N.J. 262, 275

(2009). Although New Jersey's long-arm provision permits our

courts to assert jurisdiction over nonresidents, the use of that

authority must comply with the due process limits imposed by the

United States Constitution. Avdel Corp. v. Mecure, 58 N.J. 264,

268 (1971); Reliance Nat'l Ins. Co. in Liquidation v. Dana

Transp., Inc., 376 N.J. Super. 537, 543 (App. Div. 2005).

As we have already observed, those limits recognize two

types of personal jurisdiction, specific and general. Waste

Mgmt., Inc., supra, 138 N.J. at 119. A nonresident's direct

contacts with the forum may vest the court with specific

jurisdiction; suits premised on a nonresident's continuous and

systematic contacts give rise to general jurisdiction when they

approximate an actual presence in the forum. Ibid.; Lebel v.

Everglades Marina, Inc., 115 N.J. 317, 322-23 (1989).

In assessing the sufficiency of the relationship between

the forum and the nonresident, the initial step examines two

factors: whether minimum contacts exist at all and whether those

contacts provide adequate grounds for asserting jurisdiction. If

98 A-0963-12T1 a plaintiff demonstrates the existence of minimum contacts, the

inquiry shifts to verifying that "the maintenance of the suit

[would] not offend 'traditional notions of fair play and

substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S.

310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 102 (1945) (quoting

Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 85 L.

Ed. 278, 283 (1940)); accord Blakey v. Cont'l Airlines, Inc.,

164 N.J. 38, 71 (2000). Relevant factors in the "fair play"

evaluation include "the burden on [the] defendant, the interests

of the forum state, the plaintiff's interest in obtaining

relief, the interstate judicial system's interest in efficient

resolution of disputes, and the shared interest of the states in

furthering fundamental substantive social policies." Waste

Mgmt., supra, 138 N.J. at 124-25.

With respect to intentional torts, as alleged here, the

question is whether an intentional act was "calculated to create

an actionable event in a forum state." Blakey, supra, 164 N.J.

at 67 (quoting Waste Mgmt., supra, 138 N.J. at 126). The Court

recently reinforced in Walden v. Fiore, 571 U.S. 12, 14-15, 134

S. Ct. 1115, 1125, 188 L. Ed. 2d 12, 23 (2014), that the focus

is on whether the nonresident "directed his conduct" at the

plaintiff whom he knew had connections with the forum. The

plaintiff "cannot be the only link between the defendant and the

99 A-0963-12T1 forum." Id. at 14, 134 S. Ct. at 1122, 188 L. Ed. 2d at 21. It

is "the defendant's conduct that must form the necessary

connection with the forum State that is the basis for its

jurisdiction over him." Ibid. As stated in Burger King, supra,

471 U.S. at 478, 105 S. Ct. at 2185, 85 L. Ed. 2d at 544-45,

"[i]f the question is whether an individual's contact with an

out-of-state party alone can automatically establish sufficient

minimum contacts in the other party's home forum, we believe the

answer clearly is that it cannot."

In Walden, supra, 571 U.S. at 15, 134 S. Ct. at 1122, 188

L. Ed. 2d at 21, the Court found, in searching for the

"necessary connection" between the nonresident's conduct and the

forum, no such link even though the defendant in Georgia might

have known that the plaintiffs could have felt the impact of his

conduct in the forum. On the other hand, in an earlier case, the

Court found a sufficient nexus when Florida defendants published

an allegedly libelous article about a California plaintiff

knowing their publication had a subscription base of

approximately 600,000 readers in California. Calder v. Jones,

465 U.S. 783, 785, 104 S. Ct. 1482, 1485, 79 L. Ed. 2d 804, 809-

10 (1984). The principles emanating from these cases, and

others, direct that we first determine whether those defendants

seeking to justify the dismissal based on personal jurisdiction

100 A-0963-12T1 had minimum contacts with New Jersey and, if so, whether those

contacts represented deliberate attempts by those defendants to

avail themselves of the forum. Lebel, supra, 115 N.J. at 322-24.

With respect to the first question – whether these

defendants had minimum contact with New Jersey — plaintiffs rely

heavily on their position that the in-forum contacts of a

co-defendant can, as a matter of law, be imputed to other

purported enterprise members by applying conspiracy or agency

theories of liability. Although accepted in some courts, see

Compania Brasileira Carbureto De Calicio v. Applied Indus.

Materials Corp., 640 F.3d 369, 372 (D.C. Cir. 2011); Melea, Ltd.

v. Jawer Sa, 511 F.3d 1060, 1069 (10th Cir. 2007); Lolavar v. De

Santibanes, 430 F.3d 221, 229 (4th Cir. 2005); Textor v. Board

of Regents of N. Ill. Univ., 711 F.2d 1387, 1392-93 (7th Cir.

1983), even those jurisdictions recognize that the theory might,

at times, "subvert the due process principles that govern

personal jurisdiction," Newsome v. Gallacher, 722 F.3d 1257,

1265 (10th Cir. 2013). Other courts have rejected the theory.

See Ploense v. Electrolux Home Prods., 882 N.E.2d 653, 665-67

(Ill. App. 2007); OpenRisk, LLC v. Roston, 59 N.E.3d 456 (Mass.

App. 2016); Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769,

773 (Tex. 1995). One commentator has argued that its use is

unconstitutional:

101 A-0963-12T1 [B]efore [a court] may properly assert jurisdiction, [it] must find actual or constructive knowledge on the part of each defendant that the conspiracy could lead to the kind of significant contact with the state that would support jurisdiction. It cannot rely on a conspiracy "theory" to hold every individual defendant to the expectation of a particular forum simply because one of the alleged co-conspirators happened to choose that state as the place to perform an act.

. . . .

[I]nsofar as conspiracy theory becomes a device to bypass due process analysis, it is plainly unconstitutional.

[Ann Althouse, The Use of Conspiracy Theory to Establish In Personam Jurisdiction: A Due Process Analysis, 52 Fordham L. Rev. 234, 253-54 (1983).]

See also Rhett Traband, The Case Against Applying the Co-

Conspiracy Venue Theory in Private Securities Actions, 52

Rutgers L. Rev. 227, 262 (1999) (criticizing this conspiracy

approach because of its tendency to rely on "self-serving and

often conclusory allegations," and because it can result in

subjecting a nonresident to "expedited and broad discovery," and

the expenditure of funds "to defend in a forum with which the

defendant had no contact"); Stuart Riback, Note, The Long Arm

and Multiple Defendants: The Conspiracy Theory of In Personam

Jurisdiction, 84 Colum. L. Rev. 506, 521 (1984) (concluding that

"the conspiracy theory does not take into proper account the

102 A-0963-12T1 International Shoe requirements [and] leads to undesirable and

often unconstitutional results").

Plaintiffs mistakenly rely on State, Department of Treasury

v. Qwest Communications International, Inc., 387 N.J. Super. 487

(App. Div. 2006), in support of this theory. There, the

plaintiff sued Qwest and its executive officers for damages

incurred when they allegedly conspired to inflate the price of

Qwest's stock. Id. at 493-94. The plaintiff accused the

individual defendants, who were executive officers responsible

for approving defendant's financial statements for filing with

the SEC, of intentionally disseminating false financial

statements through the company's investor relations division as

an inducement to invest. Id. at 501-02. Those nonresidents

disputed personal jurisdiction on the ground that they had not

known the company's investor relations division would transmit

the disputed information to New Jersey investors. Ibid. We

rejected the nonresidents' "individual protestations of

ignorance," recognizing "that a 'conspiracy theory' of personal

jurisdiction is based on the 'time[-]honored notion that the

acts of [a] conspirator in furtherance of a conspiracy may be

attributed to the other members of the conspiracy.'" Id. at 503

(quoting Textor, supra, 711 F.2d at 1392-93).

103 A-0963-12T1 Even assuming this language was an endorsement of

conspiracy-based personal jurisdiction, Qwest is

distinguishable. There, "[t]he crux of the cause of action [was]

the dissemination of fraudulent statements into this State that

caused harm to NJT," a division of New Jersey's Department of

Treasury. Id. at 499. The three individual defendants "all

signed filings with the SEC that included allegedly false

statements that induced NJT to purchase and hold Qwest stock.

NJT received in New Jersey specific notice of those filings and

accompanying press releases from Qwest's investor relations

division that included statements from all three defendants."

Id. at 501. We found it reasonable to infer that the defendants

were aware of this system of dissemination to major investors

such as NJT. Id. at 502. Thus, it was a reasonable "inference

and imputation of knowledge that the investor relations division

would transmit the false statements to" NJT in New Jersey. Id.

at 504.

Here, by contrast, the crux of this alleged conspiracy was

the dissemination of false statements to affect the financial

markets in New York in order to cause harm to a Canadian

corporation. These defendants did not make statements their

alleged co-conspirators distributed into New Jersey.

Importantly, there is no basis for an inference that these

104 A-0963-12T1 defendants were aware of any particular actions taken by their

alleged co-conspirators in New Jersey. See Glaros v. Perse, 628

F.2d 679, 682 (1st Cir. 1980) (holding that the conspiracy

theory of personal jurisdiction requires that "the out-of-state

co-conspirator was or should have been aware" of the acts

performed in the forum state in furtherance of the conspiracy);

Althouse, supra, 52 Fordham L. Rev. at 253 (observing that "a

court must find actual or constructive knowledge on the part of

each defendant that the conspiracy could lead to the kind of

significant contact with the state that would support

jurisdiction").

Absent such evidence, we reject the blanket rule urged by

plaintiffs in favor of a defendant-by-defendant approach.

Blakey, supra, 164 N.J. at 66; see also Lebel, supra, 115 N.J.

at 321-22 (rejecting a "'stream-of-commerce' theory of

jurisdiction" and opting to "stay with the basics"). Indeed, in

other cases involving multiple defendants, our Supreme Court has

warned that

if a suit contains multiple defendants, their individual contacts to the forum state cannot be aggregated to find minimum contacts for a single defendant. Similarly, jurisdiction over one defendant may not be based on the activities of another defendant, nor on the plaintiff's connection to the forum state. The requirements of minimum contacts analysis "must be met as to

105 A-0963-12T1 each defendant over whom a state court exercises jurisdiction."

[Waste Mgmt., supra, 138 N.J. at 127 (quoting Rush v. Savchuk, 444 U.S. 320, 332, 100 S. Ct. 571, 579, 62 L. Ed. 2d 516, 527 (1980)).]

In applying this standard, we must reject plaintiffs' claims

that courts may assert personal jurisdiction over these

defendants based solely on actions that other defendants

allegedly committed within New Jersey absent evidence these

defendants knew or should have known their alleged co-

conspirators would take action in this State.

Plaintiffs have referred to a variety of emails and text

messages exchanged between the defendants who obtained dismissal

for lack of personal jurisdiction and other defendants.

"[C]ommunications with individuals and entities located in New

Jersey alone," however, constitute "insufficient minimum

contacts to establish personal jurisdiction over a defendant."

Baanyan Software Servs., Inc. v. Kuncha, 433 N.J. Super. 466,

477 (App. Div. 2013). More importantly, the communications that

plaintiffs highlight consist of information-sharing and

speculation about the profitability of Fairfax's securities

exchanges. There was nothing objectively actionable in the

substance of the communications in which these defendants

participated. Plaintiffs' claims otherwise are based entirely on

106 A-0963-12T1 speculation and innuendo and are wholly distinct from Qwest,

supra, 387 N.J. Super. at 500, where the "gravamen of the

conduct alleged [was] the communication" itself. At best, any

discussions among these defendants were "peripheral to the

conspiracy alleged" and do not form grounds for exercising

personal jurisdiction. Id. at 503.

Apart from plaintiffs' inability to show that the Kynikos

and Third Point defendants had significant contacts with New

Jersey, plaintiffs have not shown that whatever limited contacts

these defendants may have had with New Jersey were sufficiently

"purposeful" to impose jurisdiction. Plaintiffs were required to

demonstrate that the contacts of these nonresidents with New

Jersey resulted from deliberate conduct. Lebel, supra, 115 N.J.

at 322-24 (citing World-Wide Volkswagen Corp. v. Woodson, 444

U.S. 286, 297-98, 100 S. Ct. 559, 567-68, 62 L. Ed. 2d 490, 501-

02 (1980)). The goal of that requirement is to ensure

predictability and to shield parties from being "haled into

court in a foreign jurisdiction solely on the basis of random,

fortuitous, or attenuated contacts or as a result of the

unilateral activity of some other party." Waste Mgmt., supra,

138 N.J. at 121.

Plaintiffs claim that these defendants purposely availed

themselves of New Jersey's benefits because, in their view,

107 A-0963-12T1 defendants knew any harm to Fairfax would have a "cascading

effect" that would extend to its subsidiaries, including the New

Jersey-based C&F. Kynikos and Third Point's respective trading

activities, however, belie plaintiffs' allegation that they

specifically targeted C&F. In fact, Kynikos never held any

investments in C&F. Third Point extensively traded securities

related to Fairfax and many Fairfax's subsidiaries, but trades

specific to C&F amounted to only three percent of those

transactions.

Further, the bonds underlying those C&F trades were issued

by Crum & Forster Funding Corp., a Delaware corporation, and

then assumed by C&F. These facts are significant when viewed

through the lens of the generally-accepted principle that the

situs of intangible interests, like stock, is usually the state

in which the entity is incorporated. State v. Garford Trucking,

Inc., 4 N.J. 346, 351-53 (1950). Because the bonds in this

matter were issued by out-of-state entities, they arguably never

found themselves within New Jersey's borders. Thus, Third Point

could not have "reasonably anticipate[d] being haled into court"

in New Jersey based on C&F's assumption of the bonds. World-Wide

Volkswagen, supra, 444 U.S. at 297, 100 S. Ct. at 567, 62 L. Ed.

2d at 501. Although relevant, even if those bonds could be

deemed to have entered New Jersey, the mere presence of Third

108 A-0963-12T1 Point's property in New Jersey, standing alone, does not

establish jurisdiction; plaintiff was required to identify other

facts to show minimum contacts. Shaffer v. Heitner, 433 U.S.

186, 209, 97 S. Ct. 2569, 2582, 53 L. Ed. 2d 683, 701 (1977);

Appaloosa Inv., L.P.I. v. J.P. Morgan Sec., Inc., 398 N.J.

Super. 52, 58 (App. Div. 2008). Given the number of Fairfax-

related entities in which Third Point traded, the transactions

involving C&F are not significant; that Third Point's trading of

C&F-related interests represented only three percent of its

overall Fairfax holdings, and that those trades involved bonds

that at the time of purchase were issued outside the state,

defeat plaintiff's claim that Third Point set out to harm C&F.

Focusing on C&F's lost customers does not alter the result.

There is no more evidence that those relationships were targeted

through specific conduct in New Jersey or that defendants'

conduct was geared toward causing an effect in New Jersey than

there was in Walden, where the defendant's conduct in Georgia

interfered with the plaintiffs' possession of money they brought

with them on a flight from Puerto Rico to Georgia, with an

intention to travel on to either of their residences in

California and Nevada:

[Plaintiffs'] claimed injury does not evince a connection between [defendant] and Nevada. Even if we consider the continuation of the seizure in Georgia to be a distinct injury,

109 A-0963-12T1 it is not the sort of effect that is tethered to Nevada in any meaningful way. [Plaintiffs] and only [plaintiffs] lacked access to their funds in Nevada not because anything independently occurred there, but because Nevada is where respondents chose to be at a time when they desired to use the funds seized by [defendant]. . . . Unlike the broad publication of the forum-focused story in Calder, the effects of [defendant's] conduct on [plaintiffs] are not connected to the forum State in a way that makes those effects a proper basis for jurisdiction.

[Walden, supra, 571 U.S. at 23, 134 S. Ct. at 1125, 188 L. Ed. 2d at 23-24.]

Mere "random" and "attenuated contacts" with New Jersey are

insufficient. Waste Mgmt., supra, 138 N.J. at 121; Baanyan,

supra, 433 N.J. Super. at 475. Plaintiffs rely on the fact that

C&F was a facet of Fairfax's consolidated financial statements

in arguing that an attack on one entity was an attack on another

or all. But they also recognize that harm to C&F was a byproduct

and "cascading effect" of Fairfax's injuries. Therefore, unlike

Qwest, supra, 387 N.J. Super. at 503, where there was a direct

link between the defendants' financial misrepresentations and

the impact to the New Jersey plaintiff, the harm to C&F, and

thus to New Jersey, was largely derivative of that to Fairfax.

Plaintiffs cite to authorities which are inapposite because in

those cases the defendants knew their conduct would have a New

Jersey impact. See Blakey, supra, 164 N.J. at 46 (finding "that

110 A-0963-12T1 defendants who published defamatory electronic messages, with

knowledge that the messages would be published in New Jersey and

could influence a claimant's efforts to seek a remedy under New

Jersey's Law Against Discrimination, may properly be subject to

the State's jurisdiction"); Lebel, supra, 115 N.J. at 320

(considering that the defendant actively solicited the business

of a New Jersey plaintiff); Goldhaber v. Kohlenberg, 395 N.J.

Super. 380, 389-90 (App. Div. 2007) (recognizing that the

defendant "not only knew that plaintiffs resided in New Jersey,

he knew the municipality in which they resided and made specific

disparaging references to that municipality in many of his

postings"); cf. Matsumoto v. Matsumoto, 335 N.J. Super. 174,

180-85 (App. Div.) (holding there was no personal jurisdiction

over a foreign national who helped her son in an out-of-state

conspiracy to violate his former wife's custody rights under

their New Jersey divorce decree, even if she had retained title

to the New Jersey marital home), aff'd in part, mod. in part on

other grounds, 171 N.J. 110 (2000).

In many ways, plaintiffs seek to base jurisdiction for

their claims against these defendants on the in-forum contacts

of plaintiff's own subsidiary, C&F. By this logic, defendants

would be subject to jurisdiction in any forum in which plaintiff

had a subsidiary. Imposing jurisdiction on such "random" and

111 A-0963-12T1 "fortuitous" grounds would undermine the due process

considerations on which the minimum contacts analysis is based.

See Waste Mgmt., supra, 138 N.J. at 121; see also Kulko v.

Superior Ct. of Cal., 436 U.S. 84, 93-94, 98 S. Ct. 1690, 1698,

56 L. Ed. 2d 132, 142 (1978). Indeed, such an exercise of

personal jurisdiction is precluded by well-established due

process principles. Walden, supra, 571 U.S. at 15, 134 S. Ct. at

1122, 188 L. Ed. 2d at 21 (holding that "plaintiff cannot be the

only link between the defendant and the forum").

4. Summary

There being no grounds for the assertion of general

jurisdiction, plaintiffs were required to demonstrate, in

support of the exercise of specific jurisdiction or in support

of their conspiracy-based theory of jurisdiction, that these

defendants "purposefully availed [them]sel[ves] of the privilege

of engaging in activities within the forum state, thereby

gaining the benefits and protections of its laws." Waste Mgmt.,

supra, 138 N.J. at 120-21. For the reasons we have discussed, we

conclude that these defendants could not have reasonably

anticipated "being haled into court in a foreign jurisdiction

solely on the basis of [the] random, fortuitous, or attenunated

contacts" asserted here. Id. at 121.

112 A-0963-12T1 We affirm the dismissal of the Kynikos and Third Point

defendants on personal jurisdiction grounds.

D

THE SUMMARY JUDGMENTS IN FAVOR OF THE SAC DEFENDANTS AND THE ROCKER DEFENDANTS

Plaintiffs also contend that the trial court erred in

granting summary judgment to the SAC defendants and the Rocker

defendants. We view these matters separately.

1. The SAC Defendants

(a) The Parties' Arguments

In granting summary judgment in favor of the SAC

defendants, the trial court concluded that SAC had not engaged

in short-selling Fairfax equity securities and would actually

"stand to lose" money if the alleged scheme succeeded.

Plaintiffs, however, rely on evidence that suggests the SAC

defendants worked with enterprise members to try to find a

negative catalyst to drive Fairfax's stock price down, and,

after receiving non-public information of the anticipated

adverse report by Morgan Keegan, Cohen and Sigma Capital

Management, L.L.C., maintained or added to their short positions

in Fairfax so they could profitably cover the stock price drop

that would result when that report became public. Plaintiffs

113 A-0963-12T1 assert the record further shows the SAC defendants continued

participation in the conspiracy in 2003 to 2006, well beyond the

initial acts, by increased investments in Exis. In general,

plaintiffs claim the trial judge erred in failing to give them

the benefit of all favorable inferences regarding these facts,

and, in that way, assumed or usurped the jury's fact-finding

role.

The SAC defendants argue that, unlike the other defendants

that conceded trading in or communicating about Fairfax, they

denied "any significant trading in Fairfax securities or having

worked with or even communicated with the other [d]efendants

regarding Fairfax." They reject plaintiffs' characterization

that Contogouris admitted a relationship with the SAC

defendants, noting that Contogouris's testimony, in context,

constituted a denial that he spoke with defendant Cohen about

Fairfax.

The SAC defendants also argue that, for the entirety of the

alleged conspiracy, its economic interests in Fairfax were

"either neutral or aligned with Fairfax's," a circumstance that

would conclusively demonstrate they "had no economic interest in

seeing the so-called conspiracy succeed." SAC invested in

Fairfax prior in time to when plaintiffs allege the conspiracy

began; SAC was closing that short position in early 2003, and by

114 A-0963-12T1 mid-September 2003 had "completely closed" its short position in

Fairfax. A long-position purchase in 2004 aligned SAC's

interests with Fairfax and, therefore, contrary to the purposes

of the alleged conspiracy. SAC had no position in Fairfax in

2005, and considered its subsequent short positions

inconsequential. And, to the extent SAC invested in outside

entities, such as Exis and Bridger Capital Management, which

both had invested in Fairfax, the SAC defendants assert these

were inconsequential, and they denied control of or

communications about them with anyone relevant to the alleged

conspiracy. The SAC defendants therefore contend plaintiffs

failed to meet their burden of showing that they "purposefully

and knowingly" engaged in a conspiracy, supported by permissible

inferences in plaintiffs' favor that were not "inherently

implausible," and that the trial judge was correct in dismissing

the claims asserted against the SAC defendants.

(b) The Trial Judge's Ruling

The trial judge agreed with the SAC defendants' view. In

September 2011, the judge determined that although over 200

"disputed facts" were presented, "there really appears to be

nothing more than broad speculation based on circumstantial

evidence" and plaintiffs failed to suggest "any inferences based

upon reasonable facts and evidence" that would suggest

115 A-0963-12T1 otherwise. The judge, instead, believed plaintiffs had "tr[ied]

to distort the record in an attempt to create their speculative

assertions," and concluded that "the evidence on record is not

enough to support a rational finding that whatever disputed

issues are alleged by plaintiffs, can be found in favor of

Fairfax." The court recognized that New Jersey's RICO and civil

conspiracy laws can be viewed with leniency, allowing for some

inferences because activities may have taken place "behind

closed doors," but basing a case entirely "on pure speculation

is too big of a leap to take." The trial judge added:

Plaintiffs have pointed to no direct evidence which establishes a conspiracy of which SAC was a part. . . . Most tellingly, is SAC's trading reports in Fairfax securities. The fact that at no time did SAC trade similarly to its alleged [e]nterprise [m]embers is baffling, and without explanation by plaintiffs. It does not make sense that the alleged leader of the conspiracy would not only NOT act as its alleged cohorts did, but in fact, stand to lose money as a result of the allege[d] conspiracy.

Finding "no direct evidence of any sort of conspiracy

involving SAC to take down Fairfax, and any allegation of such,"

viewing plaintiffs' allegations as "too much speculation based

on circumstantial evidence to get past summary judgment," and

concluding "[t]here is simply no evidence of motivation of [the]

116 A-0963-12T1 SAC [defendants] to participate, much less coordinate the

'conspiracy,'" the judge granted summary judgment.

(c) Our Holding

We disagree. The judge was presented with a forty-eight

page list of the statement of items relevant to the motion. To

be sure, mere quantity will not tilt the scale, but summary

judgment is "too fragile a foundation," Grow Co. v. Chokshi, 403

N.J. Super. 443, 470 (App. Div. 2008) (quoting Petition of

Bloomfield S.S. Co., 298 F. Supp. 1239, 1242 (S.D.N.Y. 1969),

aff’d, 422 F.2d 728 (2d Cir. 1970)), for a disposition on the

merits here. Indeed, there are assertions in the factual record

that raise genuine issues regarding the claim of the SAC

defendants' participation in the scheme as to preclude summary

judgment regardless of the extraordinary size of the record.

The expert opinion submitted by plaintiffs could support a

factfinder's determination that SAC took certain short positions

that gave it financial goals aligned with the alleged

conspiracy. In a certification submitted in response to the SAC

defendants' motion, plaintiffs' expert, Stanley Fortgang,46

opined that SAC had a "substantial known short interest in

46Fortgang was a consultant with approximately twenty-five years experience trading equities, bonds, and other securities for securities firms and hedge funds.

117 A-0963-12T1 Fairfax throughout the duration of the conspiracy and a

significant financial incentive to have acted in concert with

other defendants and enterprise members in furtherance of the

conspiracy." He also explained that the SAC defendants

"collaborated with other defendants and enterprise members with

respect to their trading in Fairfax in order to depress the

price of Fairfax stock, and profit from its short positions."

These bald assertions were not enough to defeat summary

judgment, but Fortgang observed that, in moving for summary

judgment, the SAC defendants

conveniently ignore[] trading in Fairfax's related entities, specifically Odyssey . . . under the ticker symbol ORH. However, the ledger of ORH trades shows that [SAC] held a short position in ORH during April 2002, from June 2002 through February 23, 2004 (excepting for 2 distinct periods totaling approximately 30 days) and from July 2005 to September 2006 (except for a 15 day period from late July through early August 2006).

Fortgang explained that the "stock price of Fairfax and

Odyssey are directly related such that a conspiracy to

manipulate the price of Fairfax could certainly include trading

in ORH." He further found it "significant enough to justify its

conduct" in the alleged conspiracy that SAC held a significant

interest in outside funds including Exis and Bridger. SAC was

Exis's largest investor and, through Exis, indirectly possessed

short positions in Fairfax. And, according to Contogouris,

118 A-0963-12T1 Exis's "head analyst," defendant Steven Cohen had frequent

communications with him.

Fortgang explained how this could be significant even where

SAC's actual trading activity differed from the activity of

other defendants:

[SAC] is well known in the marketplace for having a unique and distinct trading strategy more focused on short term gains than other [d]efendants. It is therefore reasonable to conclude that while pursuing its own trading strategy, [SAC] traded in collaboration with the enterprise despite the fact that their trading records are not identical to other enterprise members[].

He added that the trading records showed that SAC "was

certainly involved in trading on specific days and in the same

direction as other defendants" and that the record further shows

that many of those trades occurred "at times when significant

communication occurred among the enterprise members." Fortgang

further alluded to the fact that the SAC defendants' expert

focused only on whether there was coordination with other

defendants and enterprise members "over long periods of time,"

noting that instead SAC could have chosen to "coordinate[] its

trading at specific critical time periods." SAC's trading

approach was, nevertheless, "consistent with a stock

manipulation scheme designed to profit from the artificially

depressed price of [Fairfax] and [Odyssey] stock . . . ." Even

119 A-0963-12T1 SAC's trading expert, Denise Martin, "concedes that a possible

short strategy to take advantage of an anticipated negative

event could be . . . to cover a short position in advance of

that event after the anticipation of that event has already had

an effect on the stock price."

These contentions are further illuminated by SAC's guilty

plea to a 2013 federal indictment, in which SAC admitted

widespread solicitation and use of illegal inside information

and insider trading, for which it agreed to pay an aggregate

financial penalty of $1.8 billion and agreed to terminate the

investment advisory businesses of several named SAC entities.47

Although this settlement occurred in November 2013, the

stipulation and order of settlement recites that the period

during which insider trading took place was between 1999 through

at least in or about 2010, thus including the period relevant to

plaintiffs' allegations.

Plaintiffs' statement of material facts submitted in

response to the SAC defendants' motion, includes numerous pages

citing to and quoting documents describing SAC's early shorting

of Fairfax in late 2002, its coordination with other alleged

47 United States v. S.A.C. Capital Advisors, L.P., 13 Cr. 541 (LTS), 13 Civ. 5182 (RJS) (S.D.N.Y. Nov. 2013), available at https://www.justice.gov/usao-sdny/pr/sac-capital-management- companies-plead-guilty-insider-trading-charges-manhattan- federal?print=1.

120 A-0963-12T1 enterprise members regarding Fairfax and the need for a

"catalyst" for short sellers, and its involvement in contacting

analysts and reporters with an intent to trade ahead of negative

articles. Citing to emails and SAC trading ledgers, plaintiffs

claimed that SAC and its Bridger Capital account shorted in

advance of an expected Canadian Imperial Bank of Commerce report

by Quentin Broad on Fairfax, and SAC's Sigma account began

covering when it appeared that Broad's report would be delayed,

but it then began "reshorting those covered shares after

learning about the imminent publication of the Gwynn report,"

covering at least 500 shares "at a drastically lower price –

near the low of the day – after Gwynn published his report."

Plaintiffs further described various contacts between SAC

representatives and Morgan Keegan, including a request in

September 2003 for a reminder of what Gwynn had said about

Fairfax's use of finite insurance. Plaintiffs also cited to

SAC's $48 million interest as of May 2004 in Exis's Walrus Fund,

Exis's employment of Contogouris in March 2005 to work on

Fairfax, and the fact that Steven Cohen knew Contogouris from

his prior experience with him on the Hanover Compressor

investment as to which defendant Cohen took a short position

based on insider information from Contogouris. Accordingly,

plaintiffs relied on Contogouris's assertion that in the spring

121 A-0963-12T1 of 2006, SAC "called Sender and wanted some of . . .

[Contogouris's] research." Based on the information gleaned

through Contogouris's work on behalf of the alleged enterprise,

plaintiffs were entitled to an inference that the SAC defendants

were able to reap "substantial profitable returns from massive

short positions that S.A.C.-related funds had assumed in Fairfax

. . . ."

Plaintiffs also asserted that, although the SAC defendants

"attempt[] to narrowly interpret the relevant trading activity

in an effort to minimize the extent of its involvement in

trading Fairfax securities, the trading records produced by the

[SAC] [d]efendants show thousands of trades in Fairfax,

including short trades that are not individually reflected in

the [Fairfax] Ledger." Additional extensive trading was seen in

Odyssey shares, and in options trades with Fairfax's stock – a

lower cost way to "synthetically short Fairfax." Plaintiffs

asserted that although SAC at times "took smaller and more

short-term positions than other defendants, it often traded on

the same days and in the same directions as those defendants,"

citing a March 2006 SAC short position taken in Fairfax.

Consequently, plaintiffs contend the trading records

"demonstrate the opposite of what they have stated" in moving

122 A-0963-12T1 Considering that the matter was disposed of by way of

summary judgment, and considering that we, too, are obligated to

apply the Brill standard, see, e.g., Murray v. Plainfield Rescue

Squad, 210 N.J. 581, 584 (2012), we conclude there are genuine

factual disputes that precluded summary judgment. We agree with

plaintiffs that the trial judge overlooked or otherwise resolved

material factual disputes about SAC's trading during the period

of the alleged enterprise. To be sure, at the conclusion of a

trial, the factfinder could choose to reject Fortgang's

conclusions and find plaintiffs' interpretations of the facts

less credible than others it may hear, Poliseno v. General

Motors Corp., 328 N.J. Super. 41, 59 (App. Div.), certif.

denied, 165 N.J. 138 (2000), but for purposes of summary

judgment, plaintiffs were entitled to the benefit of the doubt

on those matters.

2. The Rocker Defendants

Plaintiffs contend that, in granting summary judgment to

the Rocker defendants, the judge erred because judgment was

granted years before discovery was completed – indeed, before

any depositions were taken – and because the judge relied on the

opinion of a discovery master, who, in plaintiffs' view,

improperly resolved disputed factual issues and incorporated his

123 A-0963-12T1 personal view of how securities markets operate in concluding

that "Rocker's quick reaction to the negative report it received

about Fairfax is hardly out of the ordinary." That conclusion

purported to resolve disputed questions about when the Morgan

Keegan report was officially published, when Rocker traded, and

what inferences could be drawn from the "speed and

aggressiveness" of Rocker's trades at and around the time of the

report's publication.

A discovery master found that Rocker began trading ten

minutes after receiving word about the report, and without

having seen the report. Plaintiffs contend these facts supported

an inference that the Rocker defendants had prior knowledge of

the report and the further inference that they were engaged in

the conspiracy. Moreover, plaintiffs assert that the discovery

master relied upon an in camera review of Rocker's detailed

trading records, which plaintiffs were not permitted to see and

thus could not test. Plaintiffs additionally argue that the

trial judge erred by improperly limiting the relevant issues for

Rocker's participation in the conspiracy to just two events: (1)

paying Contogouris, and (2) trading in advance of Morgan

Keegan's initial January 2003 report.

124 A-0963-12T1 (b) The Trial Judge's Ruling

To be sure, the resolution of the claims against the Rocker

defendants was unusual. In considering dispositive motions in

2007, the trial judge stated a number of times: "I still don't

know what the Rocker defendants did." She asked plaintiffs'

counsel how quickly he could depose David Rocker if the motion

to dismiss were to be denied, and counsel responded he could

perhaps address the issue with more specific pleading, which was

to be accomplished within two weeks, if needed. In clarifying

and restating what would occur next, the trial judge stated that

she would deny Rocker's motion, without prejudice, and that

plaintiffs' and Rocker's counsel should talk. The judge added:

If you haven't been able to work it out, he's going to amend the complaint. Yours is going to be the first deposition, and you can re[-]move . . . and . . . incorporate the papers that you've already submitted, with just . . . a summary brief on what happened as far as the new pleading, and – I'm trying to make it as inexpensive as possible.

The Rocker defendants again moved for dismissal because

plaintiffs did not avail themselves of the opportunity to depose

Rocker. At the beginning of the argument, the court set forth

the procedural background for the motion, specifically regarding

the assertion by plaintiffs' counsel that plaintiffs "haven't

had a chance to take the Rocker depositions." The trial judge

125 A-0963-12T1 stated "that's not accurate[,] . . . just simply not accurate";

she explained that, on September 7, 2007, "over a year ago, I

told the plaintiffs to take Mr. Rocker's deposition."

The trial judge recalled having been "ready to dismiss them

on their motion to dismiss a year ago," but plaintiffs were

given the time they requested to get together documents which

would show a good faith basis for Rocker's continued inclusion

as defendants. The judge recalled having told plaintiffs'

counsel "to share the evidence that they had with counsel for

that particular defendant and if they didn't have a good faith

basis for having them in the suit they should be dismissed." And

she added, that she "didn't expect them to have to come in here

and make another motion." More specifically, with regard to the

Rocker defendants, the judge expressed that she "was assured

that plaintiffs had a good faith basis, that somebody had given

them the information." And she then recounted that she "said, .

. . show them what it is, get it in the complaint, . . . and

take a deposition" so that only individuals and entities that

rightly belonged in the case would remain.

At the motion's conclusion, the judge ruled that: "The

Rocker defendants are going to be dismissed from the suit

without prejudice to an amended complaint being filed that comes

forth with some specific conduct." The judge relied on her

126 A-0963-12T1 conclusion that the proofs of any wrongdoing by the Rocker

defendants in December 2002 were "too slippery and too tenuous,"

and were further attenuated by the Rocker defendants'

contentions that they engaged in no trading as to Fairfax in

December 2002 and had no Fairfax position until January 17,

2003. The trial judge was further troubled by plaintiffs'

failure to provide clear evidence as to when the Morgan Keegan

report was published, even though their arguments as to the

Rocker defendants assumed an afternoon publication on January

17, 2003.

The judge's decision also acknowledged "there may very well

be reason[s] for bringing Rocker back into the complaint," if

the discovery master's review showed some culpability. At the

time, however, the judge found "there's really nothing" that

implicated the Rocker defendants and rejected an inference of

culpability just because Rocker and Chanos had a longtime

friendship. As to plaintiffs' allegation that Rocker paid

Contogouris to do the things he did to hurt Fairfax, "if that is

so, there has to be something before March of 2007 to link

them," and the judge was shown no evidence of any such link.

In December 2011, after the conclusion of discovery, the

trial judge converted the summary judgment to a dismissal with

prejudice, explaining that plaintiffs had failed to develop any

127 A-0963-12T1 evidence to support the claims asserted against the Rocker

defendants.

The manner in which the action against the Rocker

defendants was disposed of is foreign to us. The problem is that

the judge's "dismissal without prejudice" put the claims against

the Rocker defendants in the unusual position of being neither

in nor out, neither fish nor fowl. For these reasons, plaintiffs

have argued that summary judgment was prematurely granted and,

with no support, contend the Rocker defendants stonewalled them

on discovery before a discovery master could look into the

issues they raised.

It is clear to us that the trial judge dismissed with

prejudice only after plaintiffs had a full and fair opportunity

to obtain further discovery from the Rocker defendants and as to

their alleged involvement. Plaintiffs also have presented very

little about what they expected to find, so it all truly does

seem more like a fishing expedition. With the vast amount of

discovery available as it came from other parties, the trial

judge was not unreasonable in believing plaintiffs had not

sufficiently shown there was a sound basis for keeping the

Rocker defendants in the case. With the completion of discovery

128 A-0963-12T1 years later, there is nothing to suggest any substance to

plaintiffs' claims against the Rocker defendants.

Consequently, we conclude that the trial judge did not err

in granting summary judgment to the Rocker defendants, and we

find plaintiffs' arguments to be without sufficient merit to

warrant further discussion in this opinion. R. 2:11-3(e)(1)(E).

E

LOST PROFITS AND THE ELSON REPORTS

In September 2012, the last judge to preside over the

matter addressed the maintainability of plaintiffs'

disparagement claim. The judge found sufficient evidence for a

jury to find that defendants had intended to harm plaintiffs'

interests; he further found those interests consisted of

plaintiffs' "ability to sell their insurance policies," which

involved their "actual business dealings" rather than just their

reputations. Product disparagement, however, as we have held,

required proof of "special damages," and the trial judge ruled

that only one alleged kind of loss could satisfy it, namely,

C&F's injury from "products that were not sold." He concluded

that plaintiffs' general financial losses, such as losses

arising from plaintiffs' offering of securities or the market

trading in their securities, were the indirect results of

129 A-0963-12T1 defendants' disparagement rather than the "direct and immediate"

results of more targeted misconduct, and therefore could not be

included in the disparagement claim. The judge found the same

was true of plaintiffs' increased auditing costs and D&O

insurance premiums, plaintiffs' inability to finance strategic

acquisitions, and any legal costs. As a general matter, we agree

with this conceptualization.

These rulings narrowed the alleged cognizable "special

damages" to C&F's lost customers. Plaintiffs proffered

Echemendia's in-house report that named approximately 180 lost

customers from whom C&F would have earned profits of $19

million. Earlier, we concluded that plaintiffs' assertions as to

the 180 alleged lost customers were sufficient to survive

summary judgment. See Section IV(B)(3), supra.

But plaintiffs also offered Craig Elson's expert report on

the value of the share of the insurance market that C&F would

have secured but for defendants' alleged misconduct. The trial

judge found Elson's expert report to be a net opinion, which

failed to show the special damages required by law, leaving only

the 180 lost customers named in Echemendia's report. As to those

customers, the judge found "a complete absence of proof that any

of the brokers in question actually made the decision . . . not

to sell [C&F] insurance" products "based on the alleged

130 A-0963-12T1 statements," i.e., a failure of proof on proximate cause, which

compelled dismissal of what remained of plaintiffs' entire case.

We reject the judge's determination that plaintiffs could

not continue to pursue its claim to the 180 alleged lost

customers for reasons already expressed, but we agree with the

argument that Elson's theory of recovery as to a lost market

share cannot constitute damages permitted by way of plaintiffs'

New York common law claims because New York law requires proof

of the specific customers whose present or future relationship

with plaintiffs was impinged, frustrated or precluded. It is for

this reason alone that we affirm the judge's determination to

bar the testimony Elson would have provided had the case gone to

trial.

Although not necessary for our disposition of the appeal

concerning Elson's report, we nevertheless consider and address

other concerns about that report and Elson's proposed expert

testimony. The judge, as we have noted, barred Elson's expert

testimony because he found it to be a net opinion. Plaintiffs

additionally argue the trial judge erred in failing to conduct a

hearing pursuant to N.J.R.E. 104. We agree the judge erred in

finding Elson's proposed testimony constituted a net opinion but

we find no error in the judge's decision not to conduct a

N.J.R.E. 104 hearing.

131 A-0963-12T1 1. General Principles

N.J.R.E. 702 provides that when "scientific, technical or

other specialized knowledge will assist the trier of fact to

understand the evidence or to determine a fact in issue, a

witness qualified as an expert by knowledge, skill, experience,

training or education may testify thereto in the form of an

opinion or otherwise." Although the facts upon which a qualified

expert's testimony is based need not be admissible, those facts

must be "of a type reasonably relied upon by experts in the

particular field in forming opinions or inferences upon the

subject." N.J.R.E. 703. Consequently, expert opinions must

satisfy three requirements:

(1) the intended testimony must concern a subject matter that is beyond the ken of the average juror;

(2) the field testified to must be at a state of the art such that an expert's testimony could be sufficiently reliable; and

(3) the witness must have sufficient expertise to offer the intended testimony.

[Landrigan v. Celotex Corp., 127 N.J. 404, 413 (1992).]

A corollary of these principles — the net opinion rule —

forbids the admission of an expert's conclusions when

unsupported by factual evidence or other data. State v.

132 A-0963-12T1 Townsend, 186 N.J. 473, 494 (2006). An expert witness is

required "to give the why and wherefore of [an] expert opinion,

not just a mere conclusion." Jimenez v. GNOC, Corp., 286 N.J.

Super. 533, 540 (App. Div.), certif. denied, 145 N.J. 374

(1996). The "key to admission" is the validity of the expert's

"reasoning and methodology," and in that regard, a court's

function "is to distinguish scientifically sound reasoning from

that of the self-validating expert, who uses scientific

terminology to present unsubstantiated personal beliefs."

Landrigan, supra, 127 N.J. at 414.

2. The Judge's Disposition Of the In Limine Motion Regarding Elson's Expert Testimony

Even in relatively simple cases, determining whether a

proffered expert opinion passes the "why and wherefore" test

described above often proves difficult. On appeal, a dispute

about admissibility – even considering an appellate court's

reticence in intervening absent an abuse of discretion, Hisenaj

v. Kuehner, 194 N.J. 6, 16 (2008) – can prove perplexing. See,

e.g., Townsend, supra, 221 N.J. at 53-57. And it doesn't get any

better when a trial judge has failed to fully explain the

grounds for exclusion; such is the case here.

The trial judge found Elson lacked the requisite expertise

because, although highly educated, he did not possess experience

133 A-0963-12T1 in the insurance industry. The judge also deemed Elson's

methodology to be unreliable by highlighting the lack of any

objective data or evidence to demonstrate a causal link between

an insurance company's rating and its market share growth. The

trial judge, however, did little more than express this view in

a conclusory fashion.

On the return date of an in limine motion, the judge

provided only the following to guide us in determining whether

he soundly exercised his discretion. First, the judge stated

that "Mr. Elson is an MBA with no experience in the insurance

business or anything relating to the insurance business at

all[,] as is clear from his report and perfectly clear from his

testimony." The judge then referred to an obligation "in cases

of this kind" for a plaintiff – whether applying New York or New

Jersey law – to prove "actual loss of business." The judge

followed that with an acknowledgement that "New Jersey law

allows for an alternative approach when you can't prove . . .

actual lost business." But, because, as the judge observed,

"plaintiff was capable of proving actual loss of business

involving approximately 180 producers of business, who it claims

chose not to place insurance with [C&F] subsidiaries because of

the so-called noise or negativity in the market," he apparently

concluded that plaintiffs could not take an alternative approach

134 A-0963-12T1 when actual lost business cannot be proven. And the judge

lastly, through citation to some brief excerpts from Elson's

deposition testimony, found Elson's methodology – viewed as

being based on a "proposition that because companies are

similarly rated by rating agencies and are similar in various

respects, that, therefore, they would have grown at the same

rate" – to constitute a theory that is "counterintuitive" and

"simply . . . not supported by any standard."

The judge's brief oral decision provides little that

demonstrates to us how – in this particularly complex aspect of

the case – the expert's opinion should be barred for theoretical

reasons. The judge's opinion does not demonstrate how Elson's

opinion is "counterintuitive" or unsupported by known standards.

The judge stated at the outset of his oral decision that he

would "expand" on his reasoning by way of "a written opinion to

follow," but that written opinion never issued. If Elson's

testimony was not barred because of the application of New York

law, and if admissibility turned on the net-opinion

determination, we would simply remand for further amplification

from the trial judge on this question. But, in light of the

considerable time, expense and energy devoted to bringing the

case to this point, we instead have analyzed the parties'

arguments about the sufficiency of Elson's credentials and

135 A-0963-12T1 methodology. Based upon our review of the record, we conclude

his expert testimony did not constitute one or more net

opinions, although, as we have already mentioned, the damages

claimed by way of the Elson report are not recoverable.

3. Our Ruling

Elson provided two detailed expert reports that were

explored at a lengthy deposition. In essence, he compared C&F's

sales and growth rates to comparable competitors. Except in

certain respects not relevant here, the admissibility of

evidence is governed by the law of the forum. See Restatement

(Second), supra, § 138.

Elson may not have previously provided an opinion of this

nature in the insurance setting – a fact greatly relied upon by

the trial judge48 – but that is not dispositive. See Quinlan v.

Curtiss-Wright Corp., 425 N.J. Super. 335, 372 (App. Div. 2012)

(observing that it "was not necessary for . . . a well-qualified

economist quantifying plaintiff's alleged losses [to also] be an

expert on employability"); see also Hammond v. Int'l Harvester

Co., 691 F.2d 646, 652-53 (3d Cir. 1982) (holding that an

engineer, whose only qualifications were sales experience in the

48The trial judge held: "In order to give expert testimony . . . you have to have knowledge, experience, training, something in the area about which you're testifying. He has nothing with respect to insurance, nothing at all."

136 A-0963-12T1 field of automatic and agricultural equipment and teaching high

school automobile repair, could testify in a products liability

action involving tractors); Knight v. Otis Elevator Co., 596

F.2d 84, 87-88 (3d Cir. 1979) (holding that an expert could

testify that unguarded elevator buttons constituted a design

defect despite the expert's lack of a specific background in

design and manufacture of elevators). Although the determination

as to whether our evidence rules permit admission of a

particular expert's testimony lies within the sound exercise of

the trial judge's discretion, see Hisenaj, supra, 194 N.J. at

16, we agree the trial judge mistakenly rested his order

excluding Elson's testimony on Elson's lack of expertise in the

insurance industry. Any gaps in his conclusions about the damage

caused to C&F that were dependent on the jury's understanding of

the insurance industry could be supplied by other witnesses or

evidence, as N.J.R.E. 703 clearly permits. See, e.g., Indus.

Dev. Assocs. v. Commercial Union Surplus Lines Ins. Co., 222

N.J. Super. 281, 296-97 (App. Div. 1988). Consequently, we

conclude the trial judge mistakenly exercised his discretion in

excluding Elson's testimony solely on the basis of his lack of

expertise in the insurance industry.

The judge also excluded Elson's testimony on another

premise. The judge recognized that a plaintiff may prove damages

137 A-0963-12T1 in this context without showing an "actual loss of business"

but, because plaintiffs were able to show the loss of business

from approximately 180 producers of business, they could no

longer take advantage of a looser standard for damages when the

claim is a loss of prospective business. We agree, as we have

already held, that a looser standard for damages is barred by

the application of New York substantive law to this claim.

The trial judge lastly based his determination on Elson's

methodology. He said: "[t]here is nothing in his first report or

his reply report that supports the proposition that because

companies are similarly related by rating agencies and are

similar in various respects, that, therefore, they would have

grown at the same rate." Our review of the lengthy and detailed

reports reveals that Elson compared C&F's actual performance

with the actual weighted average performance of peer companies

that were sufficiently similar to provide a meaningful

comparison for the benefit of the factfinder. Although

significantly more complex than other cases routinely heard and

considered by our courts, we see nothing more disqualifying

about Elson's methodology than we would with an appraiser

quantifying an injury to real estate through comparison to

another similar parcel of property, or in quantifying an injury

to a restaurant by comparing it to another similar restaurant.

138 A-0963-12T1 See, e.g., RSB Lab. Servs., Inc. v. BSI, Corp., 368 N.J. Super.

540, 551-53 (App. Div. 2004).

Elson identified those business lines most susceptible to

the information disseminated by defendants and then ascertained

a similar group of businesses – what he referred to as a cohort

group – that compete with C&F in those areas. He then drew

conclusions based on the performances of the cohort group in

those areas and through consideration of numerous other factors,

including historical performance, the ratings provided by

entities whose opinions are of a type relied upon in the

industry, as well as underwriting strategy, appetite for risk,

and product pricing. In calculating the results of these

comparisons, Elson determined the weighted average of these

cohorts in the specific markets identified and compared that to

C&F's performance in those markets to calculate damages. We find

nothing disqualifying about Elson's approach.

For the reasons we have outlined, we draw the following

conclusions. First, Elson's expert testimony is barred by the

application of New York law. But, second, if New Jersey

substantive law governed plaintiffs' common law claims, a

different conclusion may have been warranted49 because it has not

49As a matter of New Jersey law, a plaintiff's inability to fix "with precision" its lost-profits damages may not always (continued)

139 A-0963-12T1 been shown that Elson lacked the necessary qualifications or

that he provided only net opinions.50

(continued) preclude a recovery of damages, as we have held in different settings. See V.A.L. Floors, Inc. v. Westminster Communities, Inc., 355 N.J. Super. 416, 424 (App. Div. 2002) (quoting Inter Med. Supplies v. EBI Med. Sys., 181 F.3d 446, 463 (3d Cir. 1999)). That is, our courts have held at times that "mere uncertainty as to the amount [of damages] will not preclude the right of recovery." Tessmar v. Grosner, 23 N.J. 193, 203 (1957); see also Am. Sanitary Sales Co. v. State, Dep't of Treas., Div. of Purchase & Prop., 178 N.J. Super. 429, 435 (App. Div.), certif. denied, 87 N.J. 420 (1981). These authorities do not expressly hold that this looser standard would apply to a tortious interference with prospective economic advantage, and we need not determine here whether it should.

50Although not necessary for our disposition of this aspect of the appeal, we would further observe in the interest of completeness that we see no error in the judge's refusal to conduct a hearing regarding the admissibility of Elson's expert testimony. We agree that ordinarily the best practice would be for a trial judge to permit the examination of the scope of an expert's opinion – when its admissibility is challenged – at a pretrial N.J.R.E. 104(a) hearing. See Kemp ex rel. Wright v. State, 174 N.J. 412, 432 (2002). We see no error in the failure to conduct such a hearing here because Elson was examined at great length at his deposition about his methodology and that deposition testimony was available to and considered by the trial judge at the time of his ruling. We have no reason to believe – in light of the voluminous record on appeal – that a N.J.R.E. 104(a) hearing would have better amplified the disputes about his expert testimony; indeed, it seems to us that in this particular instance the efficient administration of justice would have been disserved if such a hearing were conducted.

140 A-0963-12T1 V

THE CROSS-APPEALS

We turn to the cross-appeals filed by Morgan Keegan and the

Exis defendants. Morgan Keegan argues that the trial judge erred

in allowing plaintiffs to seek damages allegedly incurred by

non-party subsidiaries and that the trial judge erred in denying

Morgan Keegan's motion for summary judgment on First Amendment

grounds.51 We reject both these arguments.

A. Standing

Morgan Keegan argues the trial judge erred in declining to

dismiss plaintiffs' claims to the extent plaintiffs sought

damages incurred by nonparty subsidiaries. Morgan Keegan asserts

that three categories of damages were sustained not by Fairfax

and C&F – the only named plaintiffs – but instead represent

damages sustained by subsidiaries. Specifically, the argument

focuses on plaintiffs' claim to: (1) $545 million in alleged

lost profits related to insurance that would have been written

by C&F's subsidiaries; (2) $805 million in alleged losses

relating to the sale of stock held in the ICICI Bank and sold by

51The Exis defendants also filed a cross-appeal and have argued that the trial judge erred in denying their motion for summary judgment on the disparagement claim based on standing and statute of limitations grounds. The Exis defendants rely on the arguments thoroughly posed by Morgan Keegan on these issues.

141 A-0963-12T1 Fairfax's subsidiary Hamblin Watsa Investment Counsel, Ltd.; and

(3) $42 million in allegedly increased D&O liability insurance

costs paid by Fairfax but reimbursed by its subsidiaries.

As we have already ruled, New York law applies and limits

the damages available on the disparagement and tortious

interference with prospective economic advantage claims to

profits emanating from the alleged lost 180 customers. New York

law does not permit recovery for collateral damages, such as the

losses related to the sale of the ICICI stock or the increased

cost of D&O insurance. We consider, therefore, the argument

insofar as Morgan Keegan alleges the 180 customers were lost not

by C&F but by its subsidiaries.

In this regard, Morgan Keegan argues that a parent

corporation lacks standing to bring the claims of a subsidiary –

regardless of whether New York or New Jersey law applies 52 – and

that the trial judge erred in holding that material factual

issues existed without identifying them, as Rule 4:46-3

requires. Morgan Keegan further argues that even if, as the

trial judge stated, plaintiffs might have been entitled to other

damages properly asserted, the trial court still should have

52There is no doubt, and no party has argued otherwise, that the law of the forum governs this question of standing. See Restatement (Second), supra, § 125.

142 A-0963-12T1 granted partial summary judgment as to any damages sought on

behalf of subsidiaries.

Plaintiffs respond that courts broadly construe standing

and allow a plaintiff to assert a third party's rights if the

plaintiff states a "sufficient personal stake and adverseness

[to the defendant]." Jersey Shore Med. Ctr.-Fitkin Hosp. v.

Estate of Baum, 84 N.J. 137, 144 (1980); Assocs. Commercial

Corp. v. Langston, 236 N.J. Super. 236, 242 (App. Div.), certif.

denied, 118 N.J. 225 (1989). Parent corporations have been held

to meet that standard. Bondi, supra, 423 N.J. Super. at 436-37.

The judge explained the motion was denied in this regard

because, in pertinent part, plaintiffs argued that C&F's

subsidiaries' "losses are incorporated into C&F's consolidated

financial statements, and moreover, C&F writes its insurance

policies through its subsidiaries[,] [which] are wholly-owned by

plaintiffs." The judge concluded:

[E]ven if defendants' allegations are assumed to be accurate, there are still genuine issues of material fact with regard to whether plaintiffs have standing to pursue those actions on behalf of their subsidiaries . . . . Defendants' motion for summary judgment is not granted based on this rationale.

The denial of the summary judgment motion was warranted, based

on the trial judge's sound reasoning and reliance on Bondi,

which we discussed earlier. See Section IV(A)(3), supra.

143 A-0963-12T1 Briefly, the plaintiff Bondi was an administrator appointed by

the Italian government to oversee the collapse of the Italian

company Parmalat. The defendant Citigroup (Citi) asserted a

counterclaim as to which Bondi claimed it lacked standing to

pursue because the claims belonged to Citi's subsidiaries.

Bondi, supra, 423 N.J. Super. at 436. We rejected that argument,

finding Citi "was the operating agent for the transactions," the

subsidiaries' business on the matter at issue "appeared on Citi

consolidated financial statements, and all profits and losses

flowed through Citi books. In short, any losses incurred by even

one subsidiary was considered a loss of Citi funds." Ibid. We

held "the evidence established that the funds loaned or extended

to Parmalat all originated from Citi." Id. at 438. Citi had

standing, therefore, because in New Jersey, "[a] financial

interest in the outcome of litigation is ordinarily sufficient

to confer standing." Ibid. (quoting Assocs. Commercial Corp.,

supra, 236 N.J. Super. at 242).

We agree this reasoning requires a rejection of Morgan

Keegan's argument. We conclude, as to the alleged lost insurance

profits suffered by C&F's insurance subsidiaries, there is merit

to the trial judge's view that the effect on C&F's consolidated

financial statements gave C&F a sufficient "financial interest

in the outcome of litigation" to preclude a dismissal on

144 A-0963-12T1 standing grounds. We find insufficient merit in Morgan Keegan's

arguments on standing to warrant further discussion in a written

opinion. R. 2:11-3(e)(1)(E).

B. First Amendment Grounds

1. The Parties' Arguments

Morgan Keegan also argues that the trial judge erroneously

applied First Amendment principles because "no reasonable jury

could find by clear and convincing evidence that Morgan Keegan

published any false factual assertion with actual malice – that

is, with knowledge that it was false." Morgan Keegan argues that

the actual-malice standard applies because "large corporations

active in the public arena" like Fairfax and C&F are considered

public figures, and the law affords greater protection for

speech concerning public figures. It claims that despite more

than 150 depositions and the production of more than 15,000,000

pages of documents, plaintiffs were unable to identify a single

piece of evidence to support a contention that Morgan Keegan or

its analyst, Gwynn, did not believe the statements they made

were true. Morgan Keegan additionally argues that whether

advance tipping was provided about their reporting is not

probative as to whether they believed the information in the

report was false. Morgan Keegan contends there was no evidence

of an incentive to report falsely, and asserts that the fact

145 A-0963-12T1 Gwynn's reporting contained an error in calculating Fairfax's

reserve deficiency, which was promptly corrected, does not raise

a fact issue as to the malice requirement.

In addition, Morgan Keegan contends the First Amendment

provides absolute protection to "opinions that do not imply

false facts" or that are "pure opinions" for which the factual

basis is disclosed. It argues that because estimates about

insurance company reserves are not verifiable, First Amendment

analysis mandates a presumption that statements about reserves

are protected because they are mere opinions. Morgan Keegan

contends further that the trial judge misconstrued the nature of

"context" in the First Amendment analysis; it claims that rather

than referring to what was happening at the time of the

statement, context refers only to how a reader would have

interpreted the statement's content in view of the information

disclosed. Based on the disclaimers in Morgan Keegan analyst

reports, and with the underlying factual basis set forth, Morgan

Keegan contends the context reinforced its position that Gwynn's

statements were not actionable – that they were inherently

subjective, completely protected "pure" opinions.

Plaintiffs respond that the trial judge's denial of the

motion was entirely correct because genuine issues of material

fact precluded summary judgment. Plaintiffs point out that

146 A-0963-12T1 Morgan Keegan's collaboration and coordination in furtherance of

the conspiracy went well beyond the statements in its reports,

so the possibility of First Amendment protection for a limited

number of statements provides no basis for dismissing Morgan

Keegan as a defendant. Plaintiffs further set out several

statements from the reports to support their contention that

Morgan Keegan either knew or recklessly disregarded the truth.

For example, plaintiffs contend Morgan Keegan admitted violating

its own policies, and those of the New York Stock Exchange,

because "it did not 'do a single thing' to determine whether its

claims were true and/or [sic] reasonable" and its supervisory

analyst provided no meaningful oversight. The First Amendment,

they contend, does not protect such knowingly or recklessly

false and misleading statements and, therefore, the trial judge

properly denied Morgan Keegan's motion.

2. The Trial Judge's Decision

Relying on Romaine v. Kallinger, 109 N.J. 282 (1988), the

trial judge held that where a statement is capable of more than

one meaning, with only one being defamatory, "the question of

whether its content is defamatory is one that must be resolved

by the trier of fact." Although the judge acknowledged that the

dispute presented a difficult question as to whether a

statement's defamatory nature must be viewed solely within the

147 A-0963-12T1 four corners of the report, or whether it could be considered

within the broader context of the alleged conspiracy, the judge

was satisfied that there were material issues of fact that

required the motion's denial. For example, the judge determined

that a fact issue remained whether Morgan Keegan disclosed to

hedge fund investors the information contained in Gwynn's report

prior to its actual release; in that case, even if the

information was true, the release "probably [constituted] an

illegal insider trading act," in which case, according to the

judge, "maybe that's not protected."

The trial judge also relied on DeAngelis v. Hill, 180 N.J.

1 (2004), and Ward v. Zelikovsky, 136 N.J. 516 (1994), as

support for the view that courts do consider context and "do not

automatically decide a case on the literal meaning of a

challenged statement." Consequently, the judge observed that

"[c]ontext to me is also not just simply words on the paper but

when it was said, how it was said, to whom it was said."

Questions of fact, according to the trial judge, remained about

whether Gwynn or Lawless correctly represented certain facts

about Fairfax's financial condition, and the verifiability of

those facts. The judge recognized that "[d]efendants want to

have their reports characterized as pure opinion," but he

148 A-0963-12T1 determined that "even pure opinion requires me to analyze the

context of the matter and that's most troubling."

Ultimately, however, the judge never applied these

principles to the parties' assertions. He recognized the

questions posed were fact-sensitive but believed the process of

determining whether the First Amendment afforded protection to

Morgan Keegan was so "daunting" as to preclude the painstaking,

statement-by-statement analysis, which the law requires, through

what the judge referred to as "38 boxes" of materials.53

To be sure, our courts have held that the "summary judgment

practice is particularly well-suited for the determination of

libel [and defamation] actions" because those actions "tend to

'inhibit comment on matters of public concern.'" DeAngelis,

supra, 180 N.J. at 12 (quoting Dairy Stores, supra, 104 N.J. at

157). This lion of a case, however, mocks those beliefs. Indeed,

although the summary judgment procedure is favored in such

53In his March 16, 2012 oral decision, the trial judge observed that "everybody agrees that the statement-by-statement analysis the [c]ourt must go through is an extremely-daunting task and I think it's an unreasonable – let me not say that, I think it's the kind of task – I don't want to put it that way either. I did go through the statements, I did – I did go through the reports, but for me to conclude that there's no[t] one element of lack of truth in those – in that record is, I don't think that's inappropriate – well, it's not that it's inappropriate, I can't do that, I can't make that finding."

149 A-0963-12T1 instances, that is chiefly so because putting a speaker or

publisher through the discovery process could have a chilling

effect on free speech. See Armstrong v. Simon & Schuster, Inc.,

649 N.E.2d 825, 828 (N.Y. 1995). Considering the amount of

discovery already taken here, it seems a little late in the day

– maybe ten years late – to express concern for the chilling

effect of litigation and discovery.

Moreover, the question is particularly elusive on appeal

because the judge failed to engage in the process required by

law. The statement-by-statement analysis that is required should

not occur for the first time on appeal, and we decline to make

an exception here.

We remand on this point for the trial judge to consider

further the application of First Amendment principles to the

disparagement claims asserted against Morgan Keegan and the Exis

defendants.54 Applied to a claim of disparagement, New York law

would require a determination of whether any of the statements

in question were "susceptible of a defamatory connotation,"

54These same First Amendment principles apply even if the claim does not sound in defamation but in some other theory of recovery. See, e.g., Hustler Magazine v. Falwell, 485 U.S. 46, 56, 108 S. Ct. 876, 882, 99 L. Ed. 2d 41, 52 (1988); Food Lion, Inc. v. Capital Cities/ABC, Inc., 194 F.3d 505, 522 (4th Cir. 1999); Hornberger v. Am. Broad. Cos., Inc., 351 N.J. Super. 577, 628-30 (App. Div. 2002); LoBiondo v. Schwartz, 323 N.J. Super. 391, 415-17 (App. Div.), certif. denied, 162 N.J. 488 (1999).

150 A-0963-12T1 Davis v. Boeheim, 22 N.E.3d 999, 1003-04 (N.Y. 2014), as

outlined in cases such as Thomas H. v. Paul B., 965 N.E.2d 939,

942 (N.Y. 2012) (for example, false statements "that tend[] to

expose a person to public contempt, hatred, ridicule, aversion

or disgrace"), and that the statements do not constitute "pure

opinion," which would not be actionable because "[e]xpressions

of opinion, as opposed to assertions of fact, are deemed

privileged . . . no matter how offensive," Mann v. Abel, 885

N.E.2d 884, 885-86 (N.Y. 2008). Stated another way, no matter

"how[] pernicious an opinion may seem, we depend for its

correction not on the conscience of judges and juries but on the

competition of other ideas." Steinhilber v. Alphonse, 501 N.E.2d

550, 552 (N.Y. 1986) (quoting Gertz v. Robert Welch, Inc., 418

U.S. 323, 339-40, 94 S. Ct. 2997, 3007, 41 L. Ed. 2d 789, 805

(1974)). And, "[w]hile a pure opinion cannot be the subject" of

an actionable claim, Davis, supra, 22 N.E.3d at 1004, an opinion

that "implies that it is based upon facts which justify the

opinion but are unknown to those reading or hearing it, . . . is

a 'mixed opinion' and is actionable." Steinhilber, supra, 501

N.E.2d at 552-53.

"What differentiates an actionable mixed opinion from a

privileged, pure opinion is 'the implication that the speaker

knows certain facts, unknown to [the] audience, which support

151 A-0963-12T1 [the speaker's] opinion and are detrimental to the person' being

discussed." Davis, supra, 22 N.E.3d at 1004 (quoting

Steinhilber, supra, 501 N.E.2d at 553). For guidance in

determining whether a reasonable reader would consider a

statement as connoting facts or nonactionable opinions, New York

law provides three factors: "(1) whether the specific language

in issue has a precise meaning which is readily understood; (2)

whether the statements are capable of being proven true or

false; and (3) whether either the full context of the

communication in which the statement appears or the broader

social context and surrounding circumstances are such as to

signal . . . readers or listeners that what is being read or

heard is likely to be opinion, not fact." Brian v. Richardson,

660 N.E.2d 1126, 1129 (N.Y. 1995). The third factor "lends both

depth and difficulty to the analysis," ibid., and requires a

consideration of "the content of the communication as a whole,

its tone and apparent purpose." Davis, supra, 22 N.E.3d at 1005.

We would also add that Morgan Keegan's claim to summary

judgment is impacted by whether plaintiffs can show that any

false statements of fact were made with "malice," which would

require evidence of actual knowledge or reckless disregard of a

statement's falsity. Gertz, supra, 418 U.S. at 334, 94 S. Ct. at

2997, 41 L. Ed. 2d at 802. Whether a finding of actual malice

152 A-0963-12T1 requires clear and convincing evidence or only a preponderance

of the evidence depends upon whether plaintiffs are public

figures, see Weldy v. Piedmont Airlines, 985 F.2d 57, 63-65 (2d

Cir. 1993) (applying New York law); see also Masson v. New

Yorker Magazine, 501 U.S. 496, 610, 111 S. Ct. 2419, 2429, 115

L. Ed. 2d 447, 468 (1991) (observing that "[w]hen . . . the

plaintiff is a public figure, he cannot recover unless he proves

by clear and convincing evidence that the defendant published

the defamatory statement with actual malice"). Plaintiffs have

not been clear about their position on this point; Morgan Keegan

asserts that plaintiffs did not contest in the trial court that

they are public figures.

The particular question of whether a business entity may be

characterized as a public figure has proved vexing. See Dairy

Stores, supra, 104 N.J. at 139. Courts have held that a

corporation becomes a public figure when inviting reviews and by

advertising extensively, Bose Corp. v. Consumers Union of U.S.,

Inc., 508 F. Supp. 1249, 1273 (D. Mass. 1981), rev’d on other

grounds, 692 F.2d 189 (1st Cir. 1982), aff’d on other grounds,

466 U.S. 485, 104 S. Ct. 1949, 80 L. Ed. 2d 502 (1984), or when

the corporation has "considerable access to the media" or

"voluntar[il]y ent[ers] into a [public] controversy," United

States Healthcare, Inc. v. Blue Cross of Greater Phila., 898

153 A-0963-12T1 F.2d 914, 938 & n.29 (3d Cir. 1990). By way of example, in

Reliance Ins. Co. v. Barron's, 442 F. Supp. 1341, 1348 (S.D.N.Y.

1977), the court held that an insurance company – regulated by

state insurance law and required to file reports with the SEC –

whose "shares [we]re traded on the New York Stock Exchange,"

possessed "more than a billion dollars in assets," and "offered

to sell its stock to the public," had "voluntarily thrust[ed]

itself into the public arena, at least as to all issues

affecting that proposed stock sale," and was, therefore, to be

treated as a public figure "with respect to issues involving its

offering of securities to the public."55

There remains a lack of clarity since our Supreme Court

expressed uncertainty about this thirty years ago. Dairy Stores,

supra, 104 N.J. at 139 (recognizing "that the constitutional

concepts do not comfortably fit the activities or products of a

corporation"). But we need not delve further into this area. As

noted above, plaintiffs may not have disputed the point.

Moreover, the questions whether plaintiffs are public figures

are not presently reviewable. Although we apply the same summary

judgment standards that governed the trial judge, Townsend,

55 Whether a corporation possesses fame and notoriety or seeks out attention raises questions as to whether it should be viewed as a general-purpose public figure or a limited-purpose public figure. See Steaks Unlimited v. Deaner, 623 F.2d 264, 273 (3d Cir. 1980).

154 A-0963-12T1 supra, 221 N.J. at 59, and are required to examine the same

materials that were presented to the trial judge, Lombardi v.

Masso, 207 N.J. 517, 542 (2011); Noren v. Heartland Payment

Sys., __ N.J. Super. __, __ (App. Div. 2017) (slip op. at 3), we

are not expected, in applying those principles, to canvass the

record to determine whether plaintiffs' claims may be maintained

against Morgan Keegan and the Exis defendants when the trial

judge has not first undertaken this task. We certainly

appreciate the size of the record and the burdensome nature of

the task, but our procedures require that the effort first be

exerted in the trial court.

VI

CONCLUSION

For these reasons, we affirm: the May 11, 2012 order which

dismissed the RICO claims (counts one and two56); the December

23, 2011 order which dismissed in all respects as to defendants

Kynikos, Third Point, Chanos, Perry and Loeb on personal

jurisdiction grounds; the September 25, 2008 order which granted

summary judgment in all respects in favor of Copper River

Partners, David Rocker, and Rocker Partners, L.P.; that part of

56We refer in this paragraph to the counts as they appear in the third amended complaint.

155 A-0963-12T1 the September 12, 2012 order that precluded Elson's expert

testimony; and the August 14, 2012 order57 that denied Morgan

Keegan's motion for summary judgment. We reverse: the August 21,

2012 order, which determined that the disparagement claim (count

three) and the tortious inference with prospective economic

advantage claim (count five) were governed by New York's three-

year statute of limitations; the September 12, 2011 order

granting summary judgment in the SAC defendants' favor; and that

part of the September 12, 2012 order that found the allegations

concerning 180 lost customers to be inadequate.

Affirmed in part, reversed in part, and remanded for

further proceedings, in conformity with this opinion, on the

claims set forth in counts three, five, and six,58 as they

pertain to Morgan Keegan, S.A.C. Capital Management, S.A.C.

Capital Advisors, S.A.C. Capital Associates, Sigma Capital

Management, Steven A. Cohen, Exis Capital, Exis Capital

Management, Exis Differential Partners, and Exis Integrated

Partners.

We do not retain jurisdiction.

57 This order was mistakenly dated October 12, 2012.

58 Count six alleges a civil conspiracy by all defendants. Because there are other maintainable tort causes of action, this civil conspiracy claim may also be maintained.

156 A-0963-12T1 1 FAIRFAX SIMPLIFIED ORGANIZATIONAL CHART

A-1 A-0963-12T1 Sources include: JA178259; JA152968-JA152974 charts as of December 31, 2001