PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_______________

No. 1 0

- 4633

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NUVEEN MUNICIPAL TRUST, on behalf of its series Nuveen High Yield Municipal Bond Fund, a Massachusetts

Business Trust, Appellant

v.

W ITHUMSMITH BROWN P.C., A New Jersey Professional Corporation; LINDABURY MCCORMICK ESTABROOK & COOPER P.C., a New Jersey Professional Corporation

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On Appeal from the United States District Court

F or the District of New Jersey (D.C. C ivi l Ac tion No. 3

- 0 8

- c v

- 0 5 994 ) District Judge: Honorable Garrett E. Brown, Jr.

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Argued June 2 1 , 2012

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Certified Question of State Law Issued to the Supreme Court of New Jersey August 17, 20122 Submitted Januar y 18, 2013 After Supreme Court of New Jersey Declines Certification

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Before: AMBRO, VANASKIE

and ALDISERT

, Circuit Judges

(Opinion filed : May 14, 2014 )

Alexander Bilus, Esquire Robert C. Heim, Esquire (Argued) Brielle M. Rey, Esquire Wayne Pollock, Esquire

Dechert LLP

2929 Arch Street

18 th Floor, Circa Centre Philadelphia, PA 19104

G. Eric Brunstad, Jr., Esquire (Argued)

Dechert LLP 90 State House Square Hartford, CT 06103

Matthew J. Delude, Esquire Primmer, Piper, Eggleston & C ramer 900 Elm Street, 16 th Floor Manchester, NH 03101

Collin O. Udell, Esquire

Jackson Lewis 90 State House Square, 8 th Floor Hartford, CT 061033 David P. Stich, Esquire Solomon Blum Heymann & Stich 40 Wall Street, 35 th Floor New York, NY 10005

Coun sel for Appellant

Micha e l J. Canning, Esquire (Argued) Catherine J. Bick, Esquire Donald F. Campbell, Jr., Esquire (Argued) Jaclyn B. Kass, Esquire Giordano, Halleran & Cielsa 125 Half Mile Road, Suite 300 Red Bank, NJ 07701

Counsel for Appellee

With umsmith Brown P C

William A. Cambria, Esquire Louis A. Modugno, Esquire (Argued) James J. DiGiulio, Esquire William F. O’Connor, Jr., Esquire McElroy, Deutsch, Mulvaney & Carpenter, LLP

1300 Mt. Kemble Avenue

P.O. Box 2075 Morristown, NJ 07962

- 2075

Coun sel for Appellee Lindabury McCormick Estabrook & Cooper4 Christian D. Wright, Esquire Benj am in Z. Grossberg, Esquire Young Conaway Stargatt & T aylor, LLP 1000 North King Street, 17 th Floor Rodney Square Wilmington, DE 19801

Amicus Counsel for

Profes sor Geoffrey C. Hazard, Jr., Esquire

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OPINION OF THE COURT

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AMBRO, Circuit Judge

New Jersey’s Affidavit of Merit Statute (the “AOM Statute” or simply “Statute”), N.J. Stat. Ann. § 2A:53A 26

- 29 , requires certain claims against professionals to include an affidavit from an independent professional attesting to the
claims’ merit. We decide whether the AOM Statute covers Nuveen Municipal Trust’s action seeking money damages for

fraud , negligent mis representation, and malpr actice

, allegedly committed by two professional firms. Though typically we conceive such statutes as applying only to malpractice claims rooted in negligence resulting from harm to a known property, New Jersey courts go further, making our answer

yes.

I. Background

This case stem s from a loan transaction between Appellant Nuveen Municipal Trust (“Nuveen”), on behalf of5 its Nuveen High Yield Municipal Bond Fund, and Bayonne Medical Center (“Bayonne”). On October 11, 2006, Nuveen purchased a $10 million B ond Anticipation Note (“BAN”) from Bayonne. In connection with the transaction, Bayonne provided Nuveen with an audit report authored by Bayonne’s accounting firm, WithumSmith+Brown, P.C. (“Withum”)

, and an opinion letter authored by Bayonne’s counsel,

Li ndabury, McCormick, Estabrook & Cooper P.C. (“Lindabury”). Soon after the transaction, Bayonne filed a Chapter 11 bankruptcy petition . Nuveen contends that the audit report and opinion letter concealed aspects of Bayonne’s financial condition and, had it known about these financial issues, it would not have purchased the BAN.

Nuveen filed this action against Withum and

Lindabu ry (collectively, “Appellees”). It asserts negligent misrepresentation and fraud as to Withum and negligent misrepresentation a nd malpractice as to Lindabury; the remedy it seeks throughout is money damages . The District Court dismissed the action with prejudice based on Nuveen’s failure to file an affidavit of merit complying with the AOM

Statute.

After initially remanding the case to the District Court on a jurisdictional issue, we issued an opinion in August 2012

– Nuveen Mun

. Trust ex rel. Nuveen High Yield Mun. Bond

Fund v. Withumsmith Brown

, P

. C

. , 692 F.3d 283 (3d Cir. 2012). In it we held, inter alia , that the District Co urt was correct in not affording Nuveen certain procedural protections with respect to the AOM Statute. Additionally, we stated that “[i]f the AOM Statute applies to the action, we believe that Nuveen’s noncompliance with it calls for the action’s

dismiss al.” Id. at 288. We questioned, however, whether the

action was subject to the Statute and thus reserved deciding
whether the District Court was correct to dismiss the action with prejudice. Instead, we certified the following two6 questions of law regar ding the Statute to the New Jersey Supreme C ourt.

o Whether the nature of the injury alleged in this

case, i.e ., the loss of money expended to purchase the BAN from Bayonne, falls within the AOM [Statute’s] coverage of “any action for damages for personal injuries, wrongful death or property damage.” Specifically, is Nuveen seeking recovery in this action for “property damage” as that term is used in N.J.

Stat. Ann. § 2A:53A

- 27?

o Whether an action alleging an intentional tort,

such as common law fraud or a iding and abetting common law fraud, which relates to alleged professional malpractice or negligence but does not require proof of malpractice or negligence, is subject to N.J. Stat. Ann. § 2A:53A

- 27?

Judge Aldisert dissented in part from our decision, con tending that no certification was necessary

, as the New Jersey Supreme Court has been adequately clear on the points in question. In his view, Nuveen’s action was subject to the

AOM Statute and , consequently, had been correctly
dismissed.

In 2013 , the New Jersey Supreme Court denied our petition for certification. Shortly thereafter, Appellees filed a supplemental brief addressing additional New Jersey state law and renewing their argument that an AOM was required in

this case and that we should affirm the District Court’s dismissal of the complaint.7 In this follow

- up opinion we address what we did not in our August 2012 o pinion

– essentially, whethe r the AOM

S tatute applies to Nuveen’s action. In light of the New Jersey Supreme Court’s denial of ou r petition for certification, we decide the question based on our best understanding of how
the New Je rsey Supreme Court would ru le. See Sheridan v. NGK Metals Corp. , 609 F.3d 239, 253

- 54 (3d Cir. 2010) (A

f ederal court sitting in diversity is “bound to f ollow state law as announced by the highest state court”; if the state’s highest court has not decided the question, we “must predict the position the court would take on [the] issue” and should look

to decisions by intermediate appellate state courts) (in ternal quotation marks and citations omitted). We conclude that

because Nuveen’s action ( 1) can be characterized as one

seeki ng recovery for property damage and ( 2) requires proof

o f Appellees’ deviation from professional standard s of care

, the AOM Statut e applies and the action was properly

dismissed under New Jersey law

.

II. Discussion

The AOM Statute provides that an affidavit of merit is required in actions seeking “damages for personal injuries, wrongful death or property damage resulting from an al leged act of malpractice or negligence by a licensed person in his profession or occupation.” N.J. Stat. Ann. § 2A:53A

- 27. The “overall purpose of the statute is to require plaintiffs in malpractice cases to make a threshold showing that their

claim is m eritorious, in order that meritless lawsuits readily could be identified at an early stage of litigation.” Couri v.
Gardner , 801 A.2d 1134 , 1137 (N.J. 2002) (internal quotation marks and citation omitted). Couri

, t he seminal New Jersey
case on the AOM St atute, set s out the following framework for analyzing whether the Statute appli e s to a particular claim:8 (1) whether the action is for “ damages for personal injuries, wro ngful death or property damage” (nature of injury); (2) whether the
action is for “mal practice or negligence” (cause

o f action); and (3) whether the “ care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of

the complaint [] fell outside acceptable professional or occupational st andards or

tr eatment practices” (standard of care).

Id. a t 1137 (alteration in original) (quoting N.J. Stat. Ann. § 2A:53A

- 27 )

. The parties do not dispute that the complaint satisfies element (3 ) . We only consider, therefore, whether
Nuveen’s allegations satisfy el ements (1) and (2)

.

Nature of Injury

Element (1) requires us to address whether the money damages sought by Nuveen in connection with its loan

transact ion with Bayonne qualify as a claim for “property damage ” required by the S tatute. Nuveen , relying on Couri

, contends that it seeks only compensatory damages and related costs and, as such, is not asserting a claim for “property damage .” See i d

. at 1138

. The plaintiff there filed a complaint against his psychiatrist for breach of contract and

breach of fi duciary duty resulting from the psychiatrist’s distribution of a preliminary report to the estranged wife of the plaintiff without his knowledge or consent. Id. at 1136

. The p laintiff initially requested “co mpensatory and punitive damages ” but later narr owed his request to the $12,000 he had already paid the psychiatrist for the report and associated

costs. Id. at 1138 . The latter moved to dismiss, arguing that the claim was for malpractice and that the plaintiff had not9 filed the requisite affidavit of merit. The Court rejected this argument, holding that because the damages sought were not “damages for personal injuries, wrongfu l death or property damage,” plaintiff’s claim did not satisfy the first element of

the Statute and no affidavit of merit was required. Id.

U nlike the plaintiff in Couri , Nuveen is not seeking to recoup money it has already paid to Appell ees. I n fact, it has

never directly dealt with Appellees. Instead, it seeks unspecified money damages stem ming from its loan

transaction with non

- party Bayonne.

Contrary to Nuveen’s contentions, case law from lower New Jersey courts comports with Couri and supports

the conclusion that the monetary recovery sought by Nuveen is of the type that triggers the AOM Statute. Cornblatt v.

Barow , 696 A.2d 65 (N.J. Super. Ct. App. Div. 1997), rev’d on other grounds by 708 A.2d 218 (N.J. 1998), for example, squarely addressed the issue of whether a “claim that [a party’s] alleged malpractice resulted in money damages was contemplated by the Legisla ture as a claim for ‘property damage’ under the [AOM] statute. ” I d

. at 6 8 . There the

C ourt held that

[m] alpractice or negligence committed by architects, engineers, or attorneys may very well result in damage to real and personal property. Personal prop erty embraces everything that may be tangible or intangib le such as a chose in
action. The right or claim to money damages

. . . is a property right

. . . beyond question. Accordingly, we conclude that a claim against an attorney for alleged malpractice is a claim for property damage within the legislati ve intent and plain meaning

of the statute.10 Id

. (internal quotation marks and citation omitted).

Similarly, in Nagim v. N.J. Transit , 848 A.2d 61 (N.J. Super. Ct. Law. Div. 2003)

, the plaintiff sued for property damage against New Jersey Transit (“Transit”)

, which in turn

filed a third

- party complaint for contractual indemnification against an engineering services company (“Urbitran”) whose project design allegedly caused the underlying damage to the plaintiff’s property. The C ourt dismissed New Jersey Transit’s complaint against Urbitran for failur e to file an affidavit of merit, noting that “jurisprudence under the [AOM Statute] has conclusively recognized that the ‘property damage’ language of the statute includes a claim for money damages

, ” and holding that Transit ’s claim aga i nst Urbitran implicated “both intangible and tangible property rights.” Id.

at 70. It specifically distinguished the case from Couri on the ground that “[t]here, the plaint iff’s initial claim for compensatory and punitive damages was narrowe d and limited solely to

. . . compensatory damage

. . . . T hat injury thus became a finite sum of money already paid by the plaintiff to the defendant and for which recompense was sough t.” Id. at 70

- 71. In Nagim , by contrast, Transit sought to assert a cause of action against a third

- party, Urbitran , “not for any monies already paid by Transit to Urbitran for services provided

. . . [but] for the actual defense and/or the yet unspecif

ied defense costs associated with plaint iff’s claims against Transit

. ” Id. at 71. This, the Court held, was a claim for property damage within the meaning of the AOM

S tatute. Id. Like the relevant party in Nagim and unlike the plaintiff in Couri , Nuveen is not seeking to recover a sum certain already paid to Appellees, but rather asks for damages

relat ing to its transaction with Bayonne. See SRC Constr. Corp. of Monroe v. Atlantic City Hous. Auth

. , No. 10

- 3461, 2011 WL 1375680, at *3

- 4 (D.N.J. Apr. 12, 2011) (considering both Couri and Nagim and concluding that plaintiff’s claims were for “property damage” under the AOM11 Statute

, as they “[did] not seek to recoup a finite sum already paid to [defendants]” but rather soug ht unspecified monetary damages ).

If any doubt remains that negligence or malpractice actions for unspecified money damages meet the property damage requirement of the AOM Statute, t he N ew Jersey Supreme Court has , post

- Couri

, stated generally that “[t]he [S] tatute applies to all actions for damages based on professional malpractice.” Paragon Contractors , Inc. v.
Peachtree Condo. Ass’n , 997 A.2d 982, 985 (2010). Although Paragon’s ultimate holding turned on the time limits for filing an affidavit of merit and so did not directly or

exte nsively address the a pplicability of the AOM S tatute, the
Court’s broad statement that the AOM Statute applies to all actions for damages based on professional malpractice has not been questioned by any other New Jersey court decision

. Thus we conclude th at Nuveen has brought an action for property damage under the AOM Statute.

Cause of Action

Nuveen asserts claims of fraud, aiding and abetting fraud, and negligent misrepresentation against Withum

, along

with claims of malpractice and negligent misre pre sentation against Lindabur y

. Nuveen concedes that the AOM S tatute applies to its negligence and malpractice claims against both Appellees. It argues, however, that its claims for common

law fraud

, and aiding and abetting common law fraud

, against
With um are intentiona l tort claims to which the AOM S tatute does not apply.

The problem for Nuveen is that in New Jersey an action need not be styled as one for malpractice or negligence12 for the AOM Statute to apply. Rather, in Cour i 1 the New Jersey Suprem e Court e xplained that

[i] t is not the label placed on the action that is pivotal but the nature of the legal inquiry.

A ccordingly, when presented with a tort or contract claim asserted against a professional specified in the statute, rathe r than focusing on whether the claim is denominated as tort or

contract, attorneys and courts should determine

if the claim’s underlying factual allegations require proof of a deviation from the professional standard of care applicable to that specific profession. I f su ch proof is required, an affidavit of merit is required for that claim, unless some exception applies.

801 A.2d at 1141

. Applying this standard to the case before it, the Couri Court he ld that no AOM was required.

Plaintiff is not claiming that defendant erred in

respect o f the conclusions that he drew

c oncerning psychiatric/medical matters or t hat defendant acted improperly from a

psyc hiatric/medical standpoint . . . . Instead, the crux of plaintiff’s complaint is that defendant acted improperly as an e xpert witness by

1 Though the New Jersey Sup reme Court in Couri acknowledged it could conclude its opinion on the first

element of the statute

– the “nature of the injury”

– alone, it continued to analyze the second element of the statute

– the

“cause of action”

– in order to resolve conflicts and provide future guidance to lower courts. 801 A.2d at 1138.13 disseminating the report to others without the knowledge or consent of plaintiff. Although

defendant’s unauthorized dissemination of the report also might implicate a deviation from prevailing professional standards of practice, proof of that deviation is not essential to the establishment of plaintiff’s right to recove r based on breach of contract.

Id. at 1142.

To determine whether an affidavit of merit was required in our case , we examine the evidence needed to prove the fraud alleg ations in Nuveen’s complaint. Those claims against Withum are premised on the theory that it made material misrepresentations and omis sions of past and present facts in its audit report. For example, Nuveen alleges

that Withum in its audit report

, inter alia

, allowed Bayonne to

count a conditional or unenforceable pledge as revenue, failed to ensure that Bayonne had adequately reserved for

un collectible accounts receivable, and failed to evaluate adequately Bayonne’s ability to continue as a going concer n. These mis representations and omissions are alleged to be a direct consequence of Withum completing its audit examination and report of Bayonne in a manner that violated Generally Accepted Auditing S tandards (“GAAS”) and Generally Accepted Auditing Prin ciples (“GAAP”)

. The complaint does not allege that Withum made any material misrepresentations other than those resulting from the failure to comply with GAAS and GAAP.

Though Nuveen’s allegations of fraud against Withum are styled as intentional tort s , rather than negligence or malpractice claims, they nonetheless require proof that14 Withum deviated from professional standards of c are

. And New Jersey Courts, following what they perceive to be the path set out by the State Supreme Court in Couri , str etch “malpractice or negligence” to include even those instances. See, e.g.

, Alpert, Goldberg, Butler, Norton & Weiss, P.C., v. Quinn , 983 A.2d 604, 621

- 22 (N.J. Super. Ct. App. Div. 2009) (requiring affidavit of merit in breach

- of

- contract claim against attorney because pleadings alleged that “the quality of work product was not sufficient,” and that the attorney “failed to do a complete and competent job”; those allegations required “proof of a deviation from the professional standard of care applicable to attorneys”); Charles A. Manganaro Consulting Eng’rs., Inc. v. Carneys Point Twp. Sewerage

Auth. , 781 A.2d 1116, 1119 (N.J. Super. Ct. App. Div. 2001) (affidavit of merit required in breach

- of

- contract claim against engineer when “the essential factual a llegations . . . [were] that [ the engineer] failed to properly prepare the plans and specifications”; this is an “allegation[] of professional malpractice

– that [he] failed to act with that degree of care, knowledge, and skill ordinarily possessed and exe rcised in similar situations by the average member of the prof ession practicing in the field” (internal quotation marks and citation

omitted ) ).

Though this is counterintuitive (one may argue illogical), it is the suit we must follow; while intentional t orts are by definition not negligent, the focus is deviation from a professional standa rd devoid of any claim label. H ence the fraud claims against Withum require an affidavit of merit.15 III. Conclusion

Based on our understanding of the Ne w Jersey court s’
view of the AOM Statute’s applicability, we conclude that the money damages sought by Nuveen are considered a claim for “property damage ” and that the underlying factual allegations of Nuveen’s fraud claims against Withum require proof of a

deviation fr om th e professional standard of care. Accordingly, the District Court correctly held that the AOM Statute applies and that Nuveen’s noncompliance with the

Statute warranted dismissal of its case.

For these reasons, we affirm.