Jzs Madison, LLC v. Kramer Levin Naftalis & Frankel, LLP ( 2024 )


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  •                                 NOT FOR PUBLICATION WITHOUT THE
    APPROVAL OF THE APPELLATE DIVISION
    This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
    internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
    SUPERIOR COURT OF NEW JERSEY
    APPELLATE DIVISION
    DOCKET NO. A-0326-22
    JZS MADISON, LLC,
    Plaintiff-Appellant,
    v.
    KRAMER LEVIN NAFTALIS &
    FRANKEL, LLP and JAY
    NEVELOFF,
    Defendant-Respondents.
    ____________________________
    Argued April 9, 2024 – Decided September 9, 2024
    Before Judges Sumners, Smith and O'Connor.
    On appeal from the Superior Court of New Jersey,
    Law Division, Bergen County, Docket No. L-6272-19.
    Bruce H. Nagel argued the cause for appellant (Nagel
    Rice, LLP, attorneys; Bruce H. Nagel and Robert H.
    Solomon, of counsel on the briefs).
    Anthony J. Sylvester argued the cause for respondents
    (Sherman Atlas Sylvester and Stamelman, LLP,
    attorneys; Anthony J. Sylvester and Anthony C.
    Valenziano, of counsel and on the brief).
    PER CURIAM
    Plaintiff JZS Madison, LLC (JZS), a real estate development company,
    appeals the Law Division's June 10, 2022 order dismissing their professional
    malpractice complaint against defendants, its former law firm Kramer Levin
    Naftalis & Frankel, LLP (Kramer Levin) and Jay Neveloff, a partner at the
    firm. The court determined a conflict existed between New York's three-year
    statute of limitations and New Jersey's six-year statute of limitations. After
    applying choice of law principles, the trial court found that New York's statute
    of limitations applied and dismissed JZS's claim. We affirm for the following
    reasons.
    I.
    JZS is a limited liability company incorporated in New York in August
    2010 to acquire and develop real property in New York City. JZS has two
    members: MAD74, a Delaware business; and D3N7, a New York business.
    JZS's principal and manager is Daniel Straus, who owns numerous other
    companies, including MAD74. JZS has a principal place of business in Fort
    Lee, New Jersey.
    A-0326-22
    2
    Kramer Levin is a New York law firm based in New York City. Jay 1, a
    New York resident and member of the New York bar, was a partner at Kramer
    Levin. Jay had been Straus' family attorney for many years and represented
    him and his companies in other real estate development projects.
    In 2011, JZS hired David Neveloff, Jay's son to work on one of JZS's
    New York real estate projects.        JZS and David executed an employment
    agreement at that time which paid David a salary plus a success-based
    incentive package.
    On September 9, 2013, JZS and David signed another agreement which
    memorialized a change in the scope of the project. Each agreement included a
    choice of law clause stating that the agreement would be governed by New
    Jersey law.
    JZS fired David in June 2018. Shortly afterwards, David sued JZS and
    Straus, alleging he was owed more incentive pay under the terms of the
    employment agreement. Kramer Levin then ceased representation of JZS. JZS
    asserts that it learned defendants were representing David in regard to the 2011
    and 2013 employment agreements while simultaneously representing JZS
    through the filing of David's suit.
    1
    We use his first name because he has the same last name as his son, David.
    A-0326-22
    3
    JZS sued Kramer Levin and Jay Neveloff.       The complaint included
    claims for: breach of fiduciary duty; professional negligence; forfeiture and
    recoupment; breach of contract; breach of the implied covenant of good faith
    and fair dealing; unjust enrichment; and declaratory judgment. Defendants
    moved to dismiss with prejudice pursuant to Rule 4:6-2(e). The court denied
    defendants' motion, ordering limited discovery on the choice of law question.
    Following discovery, defendants again moved to dismiss, arguing that
    discovery supported use of New York's statute of limitations which barred
    JZS's claim. This time the court granted defendants' motion and dismissed
    JZS' claim with prejudice. The court found a conflict of law existed as to
    whether to apply New York's three-year statute of limitations or New Jersey's
    six-year statute of limitations. It applied the test set forth in McCarrell v.
    Hoffman-LaRouche, Inc.,2 and found that New York's three-year statute of
    limitations applied, determining that New Jersey does not have a substantial
    interest in maintaining the lawsuit.
    JZS moved for reconsideration on September 9, 2022, which the court
    denied. JZS appeals the June 10 and September 9 orders, arguing the trial
    court erred by finding New Jersey does not have a substantial interest in the
    2
    
    227 N.J. 569
    , 584 (2017)
    A-0326-22
    4
    litigation and that New York's continuous representation doctrine is
    inapplicable.
    II.
    When a trial court dismisses a complaint for failure to state a claim, we
    apply a de novo standard when reviewing the order. MTK Food Servs., Inc. v.
    Sirius Am. Ins. Co., 
    455 N.J. Super. 307
    , 311 (App. Div. 2018) (citing State ex
    rel. Campagna v. Post Integrations, Inc., 
    451 N.J. Super. 276
    , 279 (App. Div.
    2017)).   Our framework for deciding choice-of-law issues is set forth in
    McCarrell v. Hoffmann-La Roche, Inc., 
    227 N.J. 569
    , 583 (2017).              This
    analysis is purely a question of law, and we accord no deference to the trial
    court's conclusions in such matters. MTK Food Servs., 
    455 N.J. Super. at 312
    .
    III.
    A.
    We first consider JZS's argument that New Jersey's statute of limitations
    should apply. JZS argues New Jersey has a substantial interest in this case
    because JZS's principal place of business is located in New Jersey. JZS also
    argues that even if the principal place argument is not dispositive, New
    Jersey's substantial interest is established by other facts uncovered in targeted
    discovery. We are not persuaded.
    A-0326-22
    5
    "When a civil action is brought in New Jersey, our courts apply New
    Jersey's choice-of-law rules in deciding whether this State's or another state's
    statute of limitations governs the matter." McCarrell, 
    227 N.J. at 583
    . "The
    first inquiry in any choice-of-law analysis is whether the laws of the states
    with interests in the litigation are in conflict."       
    Id. at 584
    .   "[W]hen a
    complaint is timely filed within one state's statute of limitations but is filed
    outside another state's, then a true conflict is present." 
    Ibid.
    In McCarrell, our Supreme Court held "section 142 of the Second
    Restatement is now the operative choice-of-law rule for resolving statute-of-
    limitations conflicts because it will channel judicial discretion and lead to
    more predictable and uniform results that are consistent with the just
    expectations of the parties." 
    Id. 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:
    (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
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    6
    significant relationship to the parties and the
    occurrence.
    [Restatement (Second) of Conflict of L. § 142 (Am. L.
    Inst. Supp. 1989).]
    "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
    . If the forum state has
    a substantial interest, "the inquiry ends for statute-of-limitations purposes."
    
    Ibid.
        "Only when the forum state has 'no substantial interest' in the
    maintenance of the claim does a court consider section 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.
     (quoting
    Restatement (Second) of Conflicts of L. § 142(2)(a)-(b)).
    In McCarrell, the plaintiff, an Alabama resident, brought a products-
    liability action against a pharmaceutical manufacturer within New Jersey's
    statute of limitations but after Alabama's statute of limitations had expired. Id.
    at 573-74.    The Court, applying section 142, held New Jersey's statute of
    limitations applied because "New Jersey has a substantial interest in deterring
    its manufacturers from developing, making, and distributing unsafe products . .
    . ." Id. at 597. Because the Court found that New Jersey had a substantial
    A-0326-22
    7
    interest, it did not need to address whether Alabama had a more significant
    interest than New Jersey. Id. at 598.
    In Fairfax Financial Holdings Ltd. v. S.A.C. Capital Management,
    L.L.C., we applied section 142 when Canadian and New Jersey plaintiffs
    brought a private racketeering suit against a group of defendants mostly
    located in New York. 
    450 N.J. Super. 1
    , 16-17 (App. Div. 2017). We held
    "[t]here is no doubt that New Jersey has a substantial interest in this litigation.
    One of the plaintiffs . . . has its principal place of business in New Jersey and
    claims injuries to its business. . . ." 
    Id. at 61
    .
    We also applied section 142 in MTK Food Services, 
    455 N.J. Super. 307
    (App. Div. 2018). In MTK Food Services, the plaintiff sued their former law
    firm alleging malpractice in litigating an insurance claim for fire damage to
    plaintiff's restaurant.   
    Id. at 309
    .    Plaintiff brought their claim outside of
    Pennsylvania's two-year statute of limitations, but within New Jersey's six-year
    statute of limitations. 
    Ibid.
     We held Pennsylvania law applied because the
    fact that defendant attorney was licensed in New Jersey and worked out of a
    New Jersey office was "[t]he only pertinent connection to New Jersey" and
    "falls short of establishing a substantial interest for New Jersey to apply its
    statute of limitations here." 
    Id. at 314
    . Meanwhile, "[a]ll other relevant facts
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    8
    point[ed] to Pennsylvania: the fire and resulting loss occurred in Pennsylvania;
    plaintiff [was] incorporated in Pennsylvania; [the defendant attorney was
    chosen] because he [was] licensed in Pennsylvania; and [the defendant
    attorney] filed the underlying complaint in Pennsylvania." 
    Ibid.
    We begin our analysis with the threshold question: Is there a conflict
    between New Jersey law and New York law? We conclude there is. Plaintiff's
    suit, filed September 2018, alleges malpractice that occurred between 2011
    and 2013. To file a malpractice action, New Jersey employs a six-year time
    limit, N.J.S.A. 2A:14-1, while New York employs a three-year limit, N.Y.
    C.P.L.R. 214(6).   Because a conflict exists, McCarrell directs us to apply
    section 142 of the Restatement (Second) of Conflicts of Law to determine the
    governing law. Applying the restatement, New Jersey's statute of limitations
    will govern unless "maintenance of the claim would serve no substantial
    interest of" New Jersey. Restatement (Second) of Conflicts of L. § 142(2)(a).
    We turn to that question.
    We cannot conclude that any interest New Jersey has in this case is
    "substantial." Merely having a principal place of business in the state is not
    sufficient to establish a substantial interest, as nearly all the relevant facts
    point toward New York. JZS is a New York business, defendants are a New
    A-0326-22
    9
    York law firm and a New York attorney, and the operative facts are centered in
    New York. While plaintiff does have a principal place of business in New
    Jersey and Daniel Straus, JZS's principal and manager and a New Jersey
    resident, could be financially harmed, these limited connections do not create a
    substantial interest for New Jersey. The record shows: JZS has no certificate
    of authority to do business in New Jersey; JZS neither owns nor leases any
    New Jersey real estate 3, and hence pays no property taxes or rents in New
    Jersey; Tax documents produced in discovery show JZS was formed to own
    properties in New York; and JZS's registered office and registered agent are
    located in New York. Finally, JZS's partnership tax returns, filed annually,
    state that the company is comprised exclusively of "[n]on-resident [p]artners
    without [p]hysical [n]exus to New Jersey and no percentage of its business is
    allocated to operations in New Jersey and it does not do business or employ
    capital in New Jersey and derives no income from New Jersey sources." We
    therefore conclude plaintiff has not demonstrated that New Jersey has a
    substantial interest in the subject litigation, hence New York's two-year statute
    of limitations must apply.
    3
    We note the record also shows JZS does not own or lease its Fort Lee, New
    Jersey-based principal place of business.
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    10
    JZS contends our decision in Fairfax Financial Holdings Ltd. constrains
    us to find a substantial interest whenever a plaintiff maintains a principal place
    of business in the State and claims injuries to its business here. We decline to
    use the substantial interest analysis as a bright line rule, and we conclude
    instead that it is a fact sensitive one. In comparing the facts before us to those
    in Fairfax, we find Fairfax distinguishable. In Fairfax, one of the plaintiffs
    was a New Jersey corporation headquartered in Morristown that, unlike JZS,
    actively did business, employed people, and earned income in New Jersey.
    
    450 N.J. Super. at 66
    .
    B.
    We next consider whether New York's continuous representation
    doctrine applies. The doctrine of continuous representation allows "causes of
    action alleging legal malpractice which would otherwise be barred by the
    statute of limitations" to be considered timely.       Fraumeni v. L. Firm of
    Jonathan D'Agostino, P.C., 
    187 N.Y.S.3d 99
    , 101 (N.Y. App. Div. 2023)
    (quoting Keshner v. Hein Waters & Klein, 
    125 N.Y.S.3d 582
    , 582 (N.Y. App.
    Div. 2020)). "[T]he rule of continuous representation tolls the running of the
    Statute of Limitations on the malpractice claim until the ongoing
    representation is completed." Keshner, 125 N.Y.S.3d at 582 (quoting Glamm
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    11
    v. Allen, 
    439 N.E.2d 390
     (N.Y. 1982)). "The two prerequisites for continuous
    representation tolling are a claim of misconduct concerning the manner in
    which professional services were performed, and the ongoing provision of
    professional services with respect to the contested matter or transaction." Id.
    at 583 (quoting In re Lawrence, 
    23 N.E.3d 965
    , 982 (N.Y. 2014)).
    Here, we conclude the doctrine of continuous representation does not
    apply to plaintiff's claim. JZS's claim arises specifically from its negotiation
    of David's employment agreements in 2011 and 2013. Defendants' continuous
    representation of JZS in real estate projects do not constitute "ongoing . . .
    professional services with respect to the contested matter or transaction." Id.
    at 583 (quoting In re Lawrence, 23 N.E.3d at 982) (emphasis added).
    Affirmed.
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    12
    

Document Info

Docket Number: A-0326-22

Filed Date: 9/9/2024

Precedential Status: Non-Precedential

Modified Date: 9/9/2024