MTK FOOD SERVICES, INC. D/B/A THE PALACE RESTAURANT VS. SIRIUS AMERICA INSURANCE COMPANY (L-1227-12, MONMOUTH COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: June 29, 2018
• Docket: A-1309-17T2
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1309-17T2

MTK FOOD SERVICES, INC. d/b/a THE PALACE RESTAURANT, APPROVED FOR PUBLICATION

Plaintiff-Respondent, June 29, 2018

v. APPELLATE DIVISION

SIRIUS AMERICA INSURANCE COMPANY; NORTH AMERICAN RISK SERVICES; SPENCER B. ROBBINS, ESQ.; ROBBINS & ROBBINS, LLC; CRAWFORD CLAIMS MANAGEMENT SERVICES; ALLIED WORLD ASSURANCE COMPANY (U.S.) INC. and DARWIN SELECT INSURANCE COMPANY,

Defendants,

and

ARCHER & GREINER, PC, and RICHARD GRUNGO, JR., ESQ.,

Defendants-Appellants,

JAVERBAUM WURGAFT HICKS KAHN WIKSTROM & SININS, PC, and DAVID WIKSTROM, ESQ.,

Defendants-Respondents. ___________________________________

Argued May 30, 2018 – Decided June 29, 2018

Before Judges Hoffman, Gilson and Mayer. On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1227-12.

Ellis I. Medoway argued the cause for appellants (Archer & Greiner, PC, attorneys; Ellis I. Medoway, on the briefs).

Wendy M. Crowther argued the cause for respondent MTK Food Services, Inc. (Schibell & Mennie, LLC, attorneys; Wendy M. Crowther, of counsel and on the brief).

Patrick J. Galligan argued the cause for respondents Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, PC and David Wikstrom, Esq. (Donnelly Minter & Kelly, LLC, attorneys; Patrick J. Galligan, of counsel; Jared J. Limbach, on the brief).

David R. Kott argued the cause for amicus curiae New Jersey State Bar Association (New Jersey State Bar Association, attorneys; Robert B. Hille, President, of counsel and on the brief; David R. Kott, William T. Reilly and Christopher A. Rojao, on the brief).

The opinion of the court was delivered by

HOFFMAN, J.A.D.

Plaintiff MTK Food Services, Inc. alleges defendants,

attorney Richard Grungo, Jr. and his former firm, Archer &

Greiner, P.C. (Archer),1 committed legal malpractice regarding an

insurance claim for fire damage at plaintiff's restaurant. The

malpractice claim against appellants required a choice-of-law

1 We refer to Grungo and Archer collectively as appellants.

2 A-1309-17T2 analysis because plaintiff sued appellants beyond Pennsylvania's

two-year statute of limitations, but within New Jersey's six-

year statute of limitations. By leave granted, appellants

challenge a May 10, 2017 Law Division order applying New

Jersey's six-year statute of limitations and therefore

reinstating plaintiff's malpractice claim against them. Because

we find Pennsylvania's two-year statute of limitations applies

under the circumstances presented, we reverse and dismiss

plaintiff's claims against appellants.

I

In December 2002, a fire damaged plaintiff's Bethlehem,

Pennsylvania restaurant. Plaintiff retained defendant Spencer

Robbins, a New Jersey attorney, to pursue an insurance claim

against defendant Sirius America Insurance Company (Sirius).

Robbins allegedly negotiated a settlement with Sirius for

$240,000, but neglected to inform plaintiff of the settlement

offer. Robbins eventually asked Grungo to assist with

litigation in Pennsylvania. Grungo is licensed in both New

Jersey and Pennsylvania. At his deposition, Grungo testified,

I recall Spencer Robbins calling me, [and] asking me . . . to file a writ in Pennsylvania as a placeholder in a matter that he was involved in and . . . [was] close to settling or resolving.

. . . .

3 A-1309-17T2 Under Pennsylvania rules you can file a writ in order to toll a statute of limitations, as opposed to filing a formal complaint.

In January 2006, Grungo accommodated Robbins' request and

filed a writ of summons in Pennsylvania on behalf of plaintiff

against Sirius. According to Grungo, he never had any contact

with plaintiff, explaining "my only point of contact was Spencer

Robbins." Approximately eighteen months after he filed the

writ, Grungo informed Robbins he could no longer remain as

counsel of record in the placeholder proceeding due to a

conflict. The Pennsylvania court eventually dismissed the

matter, and the statute of limitations on the insurance claim

had run by the time plaintiff learned of the dismissal.

Plaintiff next consulted with attorney Nick Sabatine, who

wrote to Grungo in March 2009, requesting a copy of his file and

alerting him of a possible "legal malpractice claim." In August

2010, plaintiff retained another attorney, defendant David

Wikstrom, to pursue the legal malpractice claim. Wikstrom never

filed a claim against Robbins or appellants; instead, in May

2011, Wikstrom informed plaintiff he believed plaintiff had a

legitimate malpractice claim, but he did not wish to pursue a

claim against Archer "for political reasons." In 2012,

plaintiff filed its initial complaint in Monmouth County. On

4 A-1309-17T2 October 10, 2014, plaintiff amended its complaint to join

appellants, asserting legal malpractice claims against them.

In December 2014, appellants moved to dismiss all claims

against them, arguing the Pennsylvania statute of limitations

barred the claims. On February 20, 2015, the trial court

granted appellants' dismissal motion. The court found an

undisputed "conflict between New Jersey and Pennsylvania

regarding the statute of limitations for a legal malpractice

claim." In determining whether Pennsylvania's two-year statute

of limitations or New Jersey's six-year statute of limitations

applied, the court applied the most-significant-relationship

test found in the Restatement (Second) of Conflicts of Laws §§

145 and 6 (Am. Law Inst. 1971).

In applying the most-significant-relationship test, the

court found "both states have a substantial interest in

regulating the conduct of attorneys [who] practice within their

borders"; however, the court concluded Pennsylvania had the more

significant relationship. As a result, the court applied

Pennsylvania's two-year statute of limitations and dismissed

plaintiff's complaint against appellants.

On January 24, 2017, our Supreme Court decided McCarrell v.

Hoffman-La Roche, Inc., 227 N.J. 569, 574 (2017), which held

courts should use the substantial-interest test to resolve

5 A-1309-17T2 statute-of-limitations conflicts, as set forth in the

Restatement (Second) of Conflicts of Laws § 142 (Am. Law Inst.

1971). Based upon McCarrell, plaintiff successfully moved for

reconsideration and the trial court vacated its order dismissing

the malpractice claims against appellants. The court concluded,

"Maintenance of the claim would serve a substantial interest of

the forum state[:] regulating licensed New Jersey attorneys

[who] practice law within the state." The court noted that it

previously found "both states have a substantial interest in

regulating the conduct of attorneys [who] practice within their

borders . . . ." The court therefore applied New Jersey's six-

year statute of limitations and reinstated plaintiff's

malpractice claims against appellants.

II

We apply a de novo standard when reviewing an order

dismissing a complaint for failure to state a claim. State ex

rel. Campagna v. Post Integrations, Inc., 451 N.J. Super. 276,

279 (App. Div. 2017). "The analytical framework for deciding

how to resolve a choice-of-law issue is a matter of law."

McCarrell, 227 N.J. at 583-84. We review issues of law de novo

and accord no deference to the trial judge's conclusions on

issues of law. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).

6 A-1309-17T2 Here, the record reflects no dispute as to the underlying

facts of the case. The parties agree that if Pennsylvania's

two-year statute of limitations applies, then plaintiff's claims

against appellants fail. However, if New Jersey's six-year

statute of limitations applies, then plaintiff's claims against

appellants stand. This appeal therefore presents the narrow

issue of which state's statute of limitations applies; because

this constitutes a strictly legal issue, we review de novo.

III

In McCarrell, the Supreme Court held "that section 142 of

the Second Restatement is now the operative choice-of-law rule

for resolving statute-of-limitations conflicts . . . ." 227

N.J. at 574. Section 142 provides:

Whether a claim will be maintained against the defense of the statute of limitations is determined under the principles stated in § 6. In general, unless the exceptional circumstances of the case make such a result unreasonable:

(1) The forum will apply its own statute of limitations barring the claim.

(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.

7 A-1309-17T2 [Restatement (Second) of Conflicts of Laws § 142 (Am. Law Inst. 1971).]

"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, 227 N.J. at 593. "Section 142's presumption in favor

of a forum state with a substantial interest in the litigation

can be overcome only by exceptional circumstances that would

render that result unreasonable." Id. at 596. The Court chose

Section 142 because it: "benefits from an ease of application;

places both 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." Id. at

593.

McCarrell involved a products liability claim. Id. at 596.

The plaintiff alleged the defendants — both incorporated in New

Jersey — "designed, manufactured, distributed, and labeled" the

defective product in New Jersey. Id. at 596-97. The Court

found "New Jersey has a substantial interest in deterring its

manufacturers from developing, making, and distributing unsafe

products . . . ." Id. at 597. The Court therefore applied New

Jersey's statute of limitations. Id. at 599.

8 A-1309-17T2 The Court in McCarrell also discussed two previous products

liability cases decided under the most-significant-relationship

test, and concluded the outcome would remain the same under the

substantial-interest test. Id. at 595-96. First, in Heavner v.

Uniroyal, Inc., 63 N.J. 130 (1973), the Court "found that the

only connection between New Jersey and the products liability

action was [the defendant's] incorporation in this State."

McCarrell, 227 N.J. at 586 (citing Heavner, 63 N.J. at 134 n.3).

The allegedly defective product was manufactured and sold

outside of New Jersey. Id. at 585-86 (citing Heavner, 63 N.J.

at 134). The Court reaffirmed that incorporation of a defendant

in New Jersey, without more, does not establish a substantial

interest. Id. at 586 (citing Heavner, 63 N.J. at 141). In the

end, the Court held "plaintiff's complaint was time barred under

North Carolina law and therefore dismissed." Ibid. (citing

Heavner, 63 N.J. at 141-42).

Second, in Gantes v. Kason Corp., 145 N.J. 478 (1996), in

contrast to Heavner, the defendant manufactured the allegedly

defective part in New Jersey. McCarrell, 227 N.J. at 587

(citing Gantes, 145 N.J. at 481-82). The Court reasoned it

would not frustrate Georgia's public policy to allow a claim "to

proceed against a New Jersey manufacturer in a New Jersey

court." Id. at 587-88 (citing Gantes, 145 N.J. at 498). The

9 A-1309-17T2 Court found New Jersey had a "substantial interest in

deterrence," and applied New Jersey's statute of limitations

allowing the claim to proceed. Id. at 588 (citing Gantes, 145

N.J. at 493, 499).

IV

Here, the trial court initially found both New Jersey and

Pennsylvania "have a substantial interest in regulating the

conduct of attorneys [who] practice within their borders";

however, because it found Pennsylvania has a more significant

relationship, it applied Pennsylvania's statute of limitations.

After the Supreme Court decided McCarrell, the trial court

reconsidered its decision and repeated its finding that New

Jersey has a substantial interest. Therefore, it applied the

New Jersey statute of limitations in reinstating the claims

against appellants.

Appellants contend the trial court misapplied McCarrell in

finding New Jersey's statute of limitations applicable.

Plaintiff counters that New Jersey has a substantial interest in

regulating the conduct of New Jersey licensed attorneys. In

reply, appellants emphasize the absence of any "causal nexus"

between Grungo's New Jersey attorney license and plaintiff's

claimed damages.

10 A-1309-17T2 We agree with appellants that the trial court erred in

concluding the New Jersey statute of limitations applied to this

case. The only pertinent connection to New Jersey – that

Grungo, a New Jersey licensed attorney, worked in a New Jersey

office – falls short of establishing a substantial interest for

New Jersey to apply its statute of limitations here. All other

relevant facts point to Pennsylvania: the fire and resulting

loss occurred in Pennsylvania; plaintiff is incorporated in

Pennsylvania; Robbins enlisted Grungo because he is licensed in

Pennsylvania; and Grungo filed the underlying complaint in

Pennsylvania. The circumstances here are analogous to Heavner

where the only connection to New Jersey was the defendant's

incorporation in New Jersey. See Heavner, 63 N.J. at 134 n.3.

Also, unlike the defendants in McCarrell and Gantes that

manufactured allegedly defective products in New Jersey, here

appellants allegedly acted negligently in Pennsylvania by

allowing a Pennsylvania court to dismiss a case concerning a

loss sustained by a Pennsylvania corporation to its Pennsylvania

restaurant. Therefore we find New Jersey does not have a

substantial interest in plaintiff's claims against appellants.

Furthermore, as the New Jersey State Bar Association

contends in its amicus brief, applying New Jersey's six-year

statute of limitations here would frustrate the purpose of

11 A-1309-17T2 adopting the substantial-interest test and defy public policy.

In McCarrell, the Court explained that the substantial-interest

test: "places both 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." McCarrell, 227 N.J. at 593. If Robbins had obtained

assistance from an attorney in Pennsylvania, the Pennsylvania

statute of limitations would apply without question. That

Robbins sought assistance from an attorney, who holds a New

Jersey license and works in New Jersey, bears no relation to the

malpractice allegation and therefore should not change the

outcome here. To hold otherwise would subject New Jersey

attorneys also practicing in other states to disparate, unfair

treatment.

We also note defendant Wikstrom filed a brief arguing the

Rules of Professional Conduct establish that New Jersey has a

substantial interest in regulating the conduct of New Jersey

attorneys, whether that conduct occurs within or outside New

Jersey borders. That argument lacks persuasion. While RPC

8.5(a) does provide for disciplinary action for conduct outside

of New Jersey, RPC 8.5(b) clarifies that disciplinary action

12 A-1309-17T2 based on claims filed outside of New Jersey should apply the

rules of the jurisdiction where the claim is filed.

For the reasons stated, we vacate the trial court's May 10,

2017 order, and remand for the court to enter an order

dismissing the claims against appellants as barred by

Pennsylvania's two-year statute of limitations. We do not

retain jurisdiction.

Vacated and remanded.

13 A-1309-17T2