EGG HARBOR CARE CENTER VS. PATRICIA SCHERALDI (L-0166-16, ATLANTIC COUNTY AND STATEWIDE) , 455 N.J. Super. 343 ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2956-16T4
EGG HARBOR CARE CENTER,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
July 10, 2018
v.
APPELLATE DIVISION
PATRICIA SCHERALDI and
BETTY TERHUNE DAVIS,
Defendants,
and
COREY PAGANO,
Defendant-Respondent.
_________________________________
Argued June 5, 2018 - Decided July 10, 2018
Before Judges Fisher, Sumners, and Natali.
On appeal from Superior Court of New Jersey,
Law Division, Atlantic County, Docket No.
L-0166-16.
Kevin S. Englert argued the cause for
appellant (Law Office of Laurie M. Fierro, PA,
attorneys; Laurie M. Fierro, of counsel; Kevin
S. Englert, on the brief).
Jennifer M. Carlson argued the cause for
respondent (Richard M. Pescatore, PC,
attorneys; Jennifer M. Carlson, on the brief).
The opinion of the court was delivered by
NATALI JR., J.S.C. (temporarily assigned).
In this collection action we must determine whether a New
Jersey court may, consistent with the Due Process Clauses of the
State and Federal Constitutions, permissibly exercise specific
personal jurisdiction over a California resident for losses
incurred by a New Jersey nursing facility that was caring for the
Californian's mother. Because we conclude the quantity and nature
of the California resident's contacts with New Jersey are so remote
and insufficient that to hale him into New Jersey to defend this
action would offend "traditional notions of fair play and
substantial justice,"1 we affirm the trial judge's decision to
dismiss the case. We remand only to permit the entry of an amended
order dismissing the action without prejudice.
Before moving to New Jersey, Patricia Scheraldi lived in
Virginia where she executed a durable, general power of attorney
naming her son, defendant Corey Pagano as her attorney-in-fact.
Pagano has not lived in New Jersey in over three decades and has
not set foot in our state in seventeen years.
Scheraldi became a resident of plaintiff Egg Harbor Care
Center after suffering a stroke and broken hip. Prior to her
admission on July 7, 2014, she and her sister, Betty Terhune Davis,
also a New Jersey resident, executed an admission agreement with
1
Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945) (quoting
Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
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Egg Harbor that contained provisions detailing the parties’
respective responsibilities related to Scheraldi’s care and, of
course, payment. Among the obligations Davis agreed to shoulder
was to advocate on Scheraldi’s behalf before social services and
to be a co-guarantor for Scheraldi’s payment obligation. Pagano
was neither presented with nor signed the admission
document. Rather, he was merely listed as an "other person to be
notified."
Consistent with these obligations and shortly after
Scheraldi’s admission, Davis filed for Medicaid benefits with the
Atlantic County Medicaid Long Term Care Unit (Medicaid Office).
Davis’ application was denied because Pagano was in control of a
California bank account in Scheraldi’s name in the amount of $4700,
which was above the maximum allowed for Medicaid eligibility.
Pagano attempted to contact the Medicaid office on numerous
occasions via telephone, email, and facsimile to provide
information and ask questions surrounding Scheraldi's application.
Pagano ultimately spent down Scheraldi's assets and she was granted
coverage beginning January 1, 2015. As a result of Pagano’s delay,
Egg Harbor did not receive payment from Medicaid for Scheraldi's
care from July through December of 2014. The loss of reimbursement
from Scheraldi during these five months forms the factual basis
for Egg Harbor’s damages.
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After an appeal of the Medicaid disqualification period was
filed, an Administrative Law Judge (ALJ) reversed the decision of
the Medicaid Office. The ALJ also noted the submission of a letter
that Pagano sent outlining his efforts to contact the Medicaid
Office. The ALJ's decision was reversed by the Director of the
Division of Medical Assistance and Health Services (Director).
Egg Harbor filed a complaint in the Law Division to recover
the approximately $19,000 allegedly owed by Scheraldi, Davis and
Pagano. As to Pagano, Egg Harbor alleged that he committed
negligence, breached his fiduciary obligation and interfered with
Egg Harbor’s contractual relations and economic advantage by
failing to timely pay down Scheraldi’s assets. Davis was dismissed
from the case after declaring bankruptcy and Egg Harbor obtained
default judgment against Scheraldi.
Pagano moved to dismiss the complaint claiming New Jersey
lacked personal jurisdiction over him. Egg Harbor challenged
Pagano’s contacts by relying upon the certification of Rosemarie
Barruos, Egg Harbor’s accounts receivable supervisor. According
to Barruos, in addition to being Scheraldi's attorney-in-fact,
Pagano served as the representative payee of Scheraldi’s monthly
pension income, which means that he "receive[d] it on her behalf
each month and pays it monthly to Egg Harbor through the mail from
California to New Jersey." Barruos also averred that since
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Scheraldi's admission, she and her staff "have had many
conversations and email communications with Mr. Pagano." Although
she failed to detail precisely the substance of those
conversations, Egg Harbor's merits brief provides that Pagano
"maintained regular contact with Egg Harbor by email and telephone"
and that the contact was "presumably related to Scheraldi's ongoing
health care." Finally, Barruos contended that Pagano’s contacts
with New Jersey included communications with social services in
New Jersey and his direct and indirect prosecution of the action
before the ALJ and the Director.
The trial judge agreed with Pagano and dismissed the complaint
with prejudice. On appeal, Egg Harbor makes the same arguments
rejected by the trial judge claiming: (1) Pagano’s email and
telephone contacts with Egg Harbor related to Scheraldi's care;
and (2) Pagano’s communications with Medicaid and actions with
respect to the proceedings before the ALJ and the Director are
sufficient to exercise personal jurisdiction over him. We disagree
and affirm.
"We review the [trial] court's factual findings with respect
to jurisdiction to determine whether they were supported by
substantial, credible evidence" in the record. Mastondrea v.
Occidental Hotels Mgmt. S.A., 391 N.J. Super. 261, 268 (App. Div.
2007). "A trial court's interpretation of the law and the legal
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consequences that flow from established facts are not entitled to
any special deference[,]" and, as such, our review of a trial
judge's legal conclusions surrounding personal jurisdiction is
plenary. Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378
(1995).
The "Due Process Clause of the Fourteenth Amendment operates
as a limitation on the jurisdiction of state courts to enter
judgments affecting rights or interests of nonresident
defendants." Kulko v. Super. Ct. of Cal., 436 U.S. 84, 91 (1978).
"[A] valid judgment imposing a personal obligation or duty in
favor of the plaintiff may be entered only by a court having
jurisdiction over the person of the defendant." Ibid.; see also
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980).
A New Jersey court "may exercise in personam jurisdiction
over a non-resident defendant 'consistent with due process of
law.'" Bayway Refining Co. v. State Utilities, Inc., 333 N.J.
Super. 420, 428 (App. Div. 2000) (quoting R. 4:4-4(b)(1)). A two-
part test governs our analysis:
[D]ue process requires only that in order to
subject a defendant to a judgment in personam,
if he be not present within the territory of
the forum, [(1)] he have certain minimum
contacts with it [(2)] such that the
maintenance of the suit does not offend
"traditional notions of fair play and
substantial justice."
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[Int'l Shoe, 326 U.S. at 316 (quoting
Milliken, 311 U.S. at 463).]
The necessary "quality and quantum of contacts" depends on
whether specific or general jurisdiction is asserted. Citibank,
N.A. v. Estate of Simpson, 290 N.J. Super. 519, 526 (App. Div. 1996).
Specific jurisdiction, which Egg Harbor invokes here, is established
when "a cause of action arises directly out of a defendant's
contacts with the forum state." Waste Mgmt. v. Admiral Ins. Co.,
138 N.J. 106, 119 (1994).2
"'Minimum contacts' are the threshold requirements for
specific personal jurisdiction," ibid., and we evaluate minimum
contacts on a case-by-case basis, Blakey v. Cont'l Airlines, 164
N.J. 38, 66 (2000). The inquiry "must focus on the relationship
among the defendant, the forum, and the litigation." Baanyan
Software Servs., Inc. v. Kuncha, 433 N.J. Super. 466, 474 (App.
Div. 2013) (quoting Lebel, 115 N.J. at 323). There must be "some
act by which the defendant purposefully avails itself of the
2
If the suit "is not related directly to the defendant's contacts
with the forum state, but is based instead on the defendant's
continuous and systematic activities in the forum, then the State's
exercise of jurisdiction is 'general.'" Waste Mgmt., 138 N.J. at
119. When general jurisdiction exists, the defendant is subjected
"to suit on virtually any claim." Lebel v. Everglades Marina,
Inc., 115 N.J. 317, 323 (1989). Because Egg Harbor does not
contend that Pagano's contacts with New Jersey rise to the level
necessary to exercise general jurisdiction, we do not address the
issue.
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privilege of conducting activities within the forum state, thus
invoking the benefit and protection of its laws." Waste Mgmt.,
138 N.J. at 120 (quoting Hanson v. Denckla, 357 U.S. 235, 253
(1958)).
The minimum contacts requirement is satisfied if the
defendant's contacts resulted from their "purposeful conduct and
not the unilateral activities of the plaintiff," Lebel, 115 N.J.
at 323, or the "unilateral activity of another who merely claims
a relationship to the defendant," Charles Gendler & Co. v. Telecom
Equip. Corp., 102 N.J. 460, 471 (1986). In evaluating "whether
the defendant's contacts are purposeful, a court must examine the
defendant's 'conduct and connection' with the forum state and
determine whether the defendant should 'reasonably anticipate
being haled into court [in the forum state].'" Bayway Refining
Co., 333 N.J. Super. at 429 (quoting World-Wide Volkswagen, 444
U.S. at 297)). Simply put, the purposeful availment requirement
"ensures that a defendant will not be haled into a jurisdiction
solely as a result of 'random,' 'fortuitous,' or 'attenuated'
contacts." Lebel, 115 N.J. at 323-24 (quoting Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 475 (1985)). In terms of purposeful
availment, it is recognized that "the mere transmittal of messages
by mail or telephone within the state is not the critical factor,
it is the nature of the contact." Lebel, 115 N.J. at 325.
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Once it is established that a defendant's activities
establish minimum contacts with the forum state, we must then
evaluate whether it would be reasonable to exercise that
jurisdiction. Baanyan, 433 N.J. Super. at 476-78. In other
words, we must consider whether it would "offend 'traditional
notions of fair play and substantial justice'" to entertain the
suit. Id. at 473-74 (quoting Int'l Shoe, 326 U.S. at 316). To
do so, we evaluate the burden on the defendant, the forum state's
interests, and the interests of the plaintiff in obtaining relief.
Id. at 476 (quoting Asahi Metal Indus. Co., Ltd. v. Super. Ct. of
Cal., 480 U.S. 102, 113 (1987)).
We accept, as did the trial judge, the established
jurisdictional facts and also recognize, as did the United States
Supreme Court over forty years ago, that any jurisdictional
analysis is not subject to mechanical application in which answers
are rarely written "in black and white. The greys are dominant
and even among them the shades are innumerable." Kulko, 436 U.S.
at 92 (quoting Estin v. Estin, 334 U.S. 541, 545 (1948)).
It is clear upon consideration of the relationship "among
[Pagano], the forum, and the litigation," Lebel, 115 N.J. at 323(quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)), that Pagano
did not purposefully avail himself of the laws and protections of
New Jersey. Pagano's "conduct and connection," Bayway Refining
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Co., 333 N.J. Super. at 429 (quoting World-Wide Volkswagen, 444
U.S. at 297), with New Jersey arises out of his relationship with
his mother and her residency in the state: (1) he is the payee for
her incurred obligations; (2) he contacted Egg Harbor regarding
her healthcare; and (3) he was involved in efforts to obtain her
Medicaid coverage. Despite Egg Harbor's argument that Pagano's
contacts support a finding of specific jurisdiction, Pagano could
not "reasonably anticipate being haled into court" in New Jersey
based upon his actions for the benefit of his mother. Ibid.(quoting World-Wide Volkswagen, 444 U.S. at 297). In other words,
Pagano did not "purposely create[] contacts with New Jersey."
Lebel, 115 N.J. at 324. He did not sign the admission agreement
and did not otherwise assent to a single term that would have
obligated him for his mother’s expenses. This absence of any
contractual relationship with Egg Harbor, when combined with his
lack of residency and lack of physical presence for such an
extended period, fairly characterize his contacts as "attenuated."
Id. at 323.
Stated differently, we conclude it is inappropriate for a
court to find a nonresident defendant such as Pagano subject to
personal jurisdiction based upon contacts with the forum state
when he cannot reasonably prevent those contacts or encounters.
In other words, purposeful availment exists where it is reasonably
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feasible for a defendant to sever contacts with a forum, but
chooses not to do so. See Henry S. Noyes, The Persistent Problem
of Purposeful Availment, 45 Conn. L. Rev. 1, 34 (2012); World-Wide
Volkswagen, 444 U.S. at 297 ("When a corporation 'purposefully
avails itself of the privilege of conducting activities within the
forum State,' Hanson v. Denckla, 357 U.S., at 253, it has clear
notice that it is subject to suit there, and can act to alleviate
the risk of burdensome litigation. . . .").
Here, Pagano’s relevant interactions with Egg Harbor and his
attendant contacts to secure benefits for his mother were not
affirmative choices that he could reasonably prevent. Indeed, his
power-of-attorney (formed in Virginia) obligated him to address
issues related to his mother’s assets. That those contacts took
place in New Jersey reflects the fortuitous status of his mother’s
residence in a New Jersey facility, a decision to which he played
no meaningful role. On these facts, we conclude Pagano’s
communications with New Jersey were not purposeful in the context
of a minimum contacts analysis.
In light of our finding that Pagano fails to possess the
requisite minimum contacts necessary to permit a New Jersey court
to invoke jurisdiction, we are not required to consider, and
therefore do not discuss extensively, the second part of the test:
whether it would offend "traditional notions of fair play and
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substantial justice," Int'l Shoe, 326 U.S. at 316 (quoting
Milliken, 311 U.S. at 463), to hale Pagano into a New Jersey court.
But, even if we were to consider the issue, for the reasons we
have detailed, it would clearly be unreasonable to require Pagano
to defend this case in New Jersey. And, while Egg Harbor's
"interest in obtaining relief is but one of the facts that we must
consider in determining whether the exercise of personal
jurisdiction" over Pagano is reasonable, Baanyan, 433 N.J. Super.
at 478, Pagano should not be burdened with defending a New Jersey
lawsuit simply because Egg Harbor has been unsuccessful in
obtaining relief from Scheraldi and Davis.
Finally, as the dismissal of the complaint was not an
adjudication on the merits, the dismissal order should have been
without prejudice, not with prejudice. "As a general rule, a
dismissal on the merits is with prejudice while a dismissal based
on the court's procedural inability to consider a case is without
prejudice." Pressler & Verniero, Current N.J. Court Rules, cmt.
4 on R. 4:37-2 (2018) (citing Watkins v. Resorts Int'l Hotel &
Casino, 124 N.J. 398, 415-16 (1991)). Dismissal for lack of
jurisdiction is not an adjudication on the merits. R. 4:37-2(d)
("[A]ny dismissal not specifically provided for by R. 4:37, other
than a dismissal for lack of jurisdiction, operates as an
adjudication on the merits."). See also Korvettes, Inc. v. Brous,
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617 F.2d 1021, 1024 (3d Cir. 1980) ("A dismissal for lack of
jurisdiction is plainly not a determination of the merits of a
claim. Ordinarily, such a dismissal is 'without prejudice.'");
A.A. v. Gramiccioni, 442 N.J. Super. 276, 281 n.3 (App. Div. 2015)
("A dismissal based on the court's procedural inability to consider
a case is without prejudice."); Exxon Research & Eng'g Co. v.
Indus. Risk Insurers, 341 N.J. Super. 489, 519 (App. Div. 2001)
(finding that a dismissal for lack of jurisdiction should be
without prejudice because such a dismissal is not an adjudication
on the merits).
Affirmed and remanded with directions to amend the order to
dismiss the case without prejudice.
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