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ALERT: MTK Food Services v. Sirius Am. Inc. and Choice of Law Conflict between NJ & PA

November 5, 2018

Many lawyers practice in more than one state and we obviously need to keep straight which rules apply in which states to properly represent our clients.  However, the New Jersey courts are currently grappling with an issue of which state’s statute of limitations to apply to attorneys who are practicing in New Jersey and Pennsylvania where the limitations periods are quite different.  The statute of limitations for cases asserting negligence against a lawyer in Pennsylvania is two years, while in New Jersey a plaintiff has six years to file a case for negligence against a lawyer. Recently, in MTK Food Servs. v. Sirius Am. Inc., 2018 N.J. Super. Lexis 101, *10 (NJ. Sup. Ct. 2018), a case not handled by Zarwin Baum, the New Jersey Superior Court presided over a case that asked the question, if an attorney is sued for legal malpractice but is dual-licensed to practice in both PA and NJ, which state’s statute of limitations should apply? Using the substantial interest test provided in Section 142 of the Second Restatement, the court ruled in favor of the defendants and held that due to the overwhelming nexus of facts based in Pennsylvania, it had an equally overwhelming substantial interest to have its statute of limitations apply.

Background

MTK Food Services began after the plaintiff hired one of the defendants, Spencer Robbins, a New Jersey attorney, to represent him in an insurance claim against another defendant, Sirius America Insurance Company, for damages caused by a fire in his restaurant. Years later, Robbins solicited the services of Richard Grungo Jr., an attorney admitted to practice in both New Jersey and Pennsylvania, to file a writ in Pennsylvania, which is allowed under PA law to toll a statute of limitations rather than filing a formal complaint.

The Pennsylvania court dismissed the case and the two year statute of limitations expired. Thereafter, the plaintiff hired numerous other attorneys before finally filing a complaint in Monmouth County for legal malpractice. The trial court initially granted the defendants’ motion to dismiss as the relevant most-significant-relationship test from Section 6, 145 and 146 was used to find that Pennsylvania had the more substantial interest in this matter. Then, in 2017, in a separate case, the New Jersey Supreme Court held that Section 142 of the Second Restatement, the substantial interest test, “is the operative choice-of-law rule for resolving statute-of-limitations conflicts.” McCarrell v. Hoffman-La Roche, Inc., 153 A.3d 207, 224 (NJ 2017).

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 [*7]  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.

[Restatement (Second) of Conflicts of Laws § 142 (Am. Law Inst. 1971).]

After the McCarrell decision,  the trial court in MTK looked back at their decision and found that since New Jersey also had a substantial interest, the New Jersey statute of limitations applied to reinstate the plaintiff’s legal malpractice claim. Naturally, the defendants appealed to the Superior Court.

Superior Court’s Analysis

Following the trial court’s new holding in MTK, the Superior Court applied de novo review in the defendant’s appeal and decided to reverse the trial court’s decision in favor of the defendants. Section 142 states that the appropriate statute of limitations law is that of the state which has the “more significant relationship to the parties and the occurrence.” Here, the court determined that since the allegation was for negligence in Pennsylvania “by allowing a [PA] court to dismiss a case concerning a loss sustained by a [PA] corporation to its [PA] restaurant”, the Pennsylvania statute of limitations must apply. Id. at 10. The only connection to New Jersey, the mere existence of Grungo’s license to practice in the state, was insufficient compared to the overwhelming connection to Pennsylvania.

In addition, the court also rejected the plaintiff’s argument that the Rules of Professional Conduct state that New Jersey has “a substantial interest in regulating the conduct of New Jersey attorneys” as RPC 8.5(b) clearly states that “disciplinary action based on claims filed outside of New Jersey should apply the rules of the jurisdiction where the claim is filed.” Id. at 11-12.

Supreme Court and Possible Impact

Since the Superior Court’s holding, the case was appealed and is waiting to be granted certiorari by the NJ Supreme Court where the former’s reasoning will be placed under scrutiny. While the Superior Court was correct in applying section 142 of the Second Restatement in accordance with McCarrell, the Supreme Court could come to a different outcome than the Superior Court. Amicus briefs have been filed with the Supreme Court where the defendants argue both in support of the Superior Court’s analysis with section 142 and that there is no “irreparable injury” that would suffice to meet the standard under Rule 2:2-2(b) for appeals being granted by the Supreme Court as the Superior Court’s ruling only barred the plaintiff’s claim to one of the defendants and, so, the plaintiff is able to pursue relief from the other defendants if they so choose.

Overall, siding with the plaintiff’s argument and interpretation of McCarrell would have “frustrate[d] the purpose of adopting the substantial-interest test and defy public policy.” MTK Food Services, 2018 N.J. Super. Lexis 101 at *10. It is not uncommon for attorneys to be licensed in both New Jersey and Pennsylvania given the close ties both states have geographically, socially, and economically. Forcing an attorney to abide by New Jersey’s laws for his cases and legal actions in PA could harmfully affect local attorneys and will likely be something the NJ Supreme Court considers if they grant certiorari.

For more information please contact, Lisa Slotkin at lzslotkin@zarwin.com


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