Opinion ID: 806790
Heading Depth: 1
Heading Rank: 4

Heading: Choice of Law and the AOM Statute

Text: Nuveen raises two choice-of-law arguments regarding the application of the AOM Statute and certain protections abating its harsh consequences in federal court. First, it cites Chamberlain v. Giampapa, 210 F.3d 154, 161 (3d Cir. 2000), in which we held that the Statute was “substantive state law that must be applied by federal courts sitting in diversity” because Federal Rules of Civil Procedure 8 and 9 did not “collide” with the Statute under Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), and its progeny. Nuveen argues (as significantly developed by the amicus curiae brief filed by Professor Geoffrey C. Hazard, Jr.) that this holding has been overruled impliedly by the combination of the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), with Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010) (plurality opinion). The assertion is that the pleading standard established by Twombly and Iqbal, when considered against the Statute under the Shady Grove analysis, makes the Statute procedurally in conflict with Rule 8 such that it no longer can be applied by a federal court. On the flip side, Nuveen and amicus also argue that the two protections the New Jersey Supreme Court has 9 Because the District Court held that it had jurisdiction over this action under 28 U.S.C. § 1334(b), it did not address whether it also had jurisdiction under 28 U.S.C. § 1332. We likewise need not address jurisdiction under § 1332. 30 established to dull the severe consequences of the failure to file a timely affidavit of merit—the addition to New Jersey’s Civil Case Information Sheet referencing the AOM Statute and the accelerated case management conference—are substantive requirements of the Statute that must be applied in federal court. 10
Before considering these two issues, we confront Withum’s and Lindabury’s contention that Nuveen failed to advance arguments about them before the District Court. Nuveen counters that it raised the distinction between federal and state law before the Court, specifically citing Burns v. Belafsky, 766 A.2d 1095 (N.J. 1999), and Ferreira v. Rancocas Orthopedic Assocs., 836 A.2d 779 (N.J. 2003), the cases in which the New Jersey Supreme Court established the two protections. Though it did not cite Erie or Shady Grove, Nuveen asserts that the implications of its argument were 10 Amicus further argues that the AOM Statute is an affirmative defense under Federal Rule of Civil Procedure 8(c), and Withum’s and Lindabury’s failure to assert it as an affirmative defense in their responses to the complaint constitutes waiver. An amicus cannot expand the scope of an appeal with issues not presented by the parties on appeal. See N.J. Retail Merchs. Ass’n v. Sidamon-Eristoff, 669 F.3d 374, 383 n.2 (3d Cir. 2012) (rejecting an attempt by an amicus to raise an issue not addressed by the parties); Universal City Studios, Inc. v. Corley, 273 F.3d 429, 445 (2d Cir. 2001) (“Although an amicus brief can be helpful in elaborating issues properly presented by the parties, it is normally not a method for injecting new issues into an appeal, at least in cases where the parties are competently represented by counsel.”). We thus do not address this argument. 31 clear and that its citation of Erie now is a natural extension and refinement of its argument below. An argument is not waived if it “is inherent in the parties’ positions throughout [the] case.” Huber v. Taylor, 469 F.3d 67, 75 (3d Cir. 2006). However, the argument must do more than “emanat[e] from the ethers of briefs filed in the district court.” Brennan v. Norton, 350 F.3d 399, 418 (3d Cir. 2003). The party must “present[] the argument with sufficient specificity to alert the district court.” Id. (quoting Keenan v. City of Philadelphia, 983 F.2d 459, 471 (3d Cir. 1993)). Before the District Court, Nuveen argued (without reference to Erie) that the absence in federal court of (1) a New Jersey Civil Case Information Sheet referring to the AOM Statute and (2) an accelerated case management conference created “extraordinary circumstances” under New Jersey law that excused any failure to file a timely AOM, and thus required its complaint to be dismissed without prejudice. “Extraordinary circumstance” is one of four limited exceptions that the Supreme Court of New Jersey has recognized to the affidavit requirement under the AOM Statute. See Ferreria, 836 A.2d at 783. This is the argument that Nuveen advanced to the District Court with its citation of Burns and Ferreira, and we address it below. See infra Part V.B. Before doing so, however, we consider two choice-oflaw issues (see infra Part IV. B-C) that were not presented to the District Court and are distinct from Nuveen’s contentions regarding the exceptions to the Statute’s requirements. Merely citing Burns and Ferreira in its argument regarding extraordinary circumstances was not sufficient to alert the District Court that it also was raising these choice-of-law issues. Nonetheless, we have not adopted a consistent rule regarding whether choice-of-law issues can be waived. Huber, 469 F.3d at 75 n.12. In Parkway Baking Co., Inc. v. 32 Freihofer Baking Co., 255 F.2d 641, 646 (3d Cir. 1958), and United States v. Certain Parcels of Land, 144 F.2d 626, 630 (3d Cir. 1944), we held that choice-of-law questions are not waivable. We noted in Certain Parcels that “[t]he appropriate law must be applied in each case and upon a failure to do so appellate courts should remand the cause to the trial court to afford it opportunity to apply the appropriate law, even if the question was not raised in the court below.” 144 F.2d at 630. In Neely v. Club Med Mgmt. Servs., 63 F.3d 166, 180 n.10 (3d Cir. 1995) (en banc), however, we deemed the choice-of-law question waived. Neely, however, did not overrule Parkway Baking specifically or even address the case. Moreover, we may review waived issues at our discretion. See Wright v. Owens Corning, 679 F.3d 101, 105 (3d Cir. 2012). We have exercised our discretion in exceptional circumstances, such as when the “public interest . . . so warrants,” and particularly when issues are not fact dependent. Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 834–35 (3d Cir. 2011) (quoting Rogers v. Larson, 563 F.2d 617, 620 n.4 (3d Cir. 1977)); see also Wright, 679 F.3d at 105. Nuveen’s choice-of-law arguments involve issues purely of law, and given that they involve choice of law, the public interest weighs toward our consideration of them. This is an appropriate circumstance for us to do so.
Requirement Our last encounter with choice of law and the AOM Statute was in Chamberlain. As noted, under an Erie analysis we concluded that the Statute is substantive state law. Erie provides that a federal court sitting in diversity must apply 33 substantive state law and federal procedural law. 11 304 U.S. at 78. Under Erie, a court assesses the substantive/procedural dichotomy with the objective that “the outcome of the litigation in the federal court [will] be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.” Guar. Trust Co. of N.Y. v. York, 326 U.S. 99, 109 (1945). This “outcome determinative test” focuses on the “twin aims” of discouraging forum shopping and avoiding “the inequitable administration of the laws.” Hanna v. Plumer, 380 U.S. 460, 468 (1965). Consideration of the “twin aims” should produce a decision favoring application of state law only if one of the aims is furthered: [T]he importance of a state rule is indeed relevant, but only in the context of asking whether application of the rule would make so important a difference to the character or result of the litigation that failure to enforce it would unfairly discriminate against citizens of the forum State, or whether application of the rule would have so important an effect upon the fortunes of one or both of the litigants that 11 Where a claim that derives from state law is before a federal court based on “related to” jurisdiction, that court also must apply state law. See, e.g., Statek Corp. v. Dev. Specialists, Inc. (In re Coudert Bros. LLP), 673 F.3d 180, 187 (2d Cir. 2012) (“28 U.S.C. § 1334(b) vests the district courts with original jurisdiction over civil proceedings ‘arising under,’ ‘arising in,’ or ‘related to’ cases under the Bankruptcy Code. Such jurisdiction extends not only to questions of federal law, but also to many state law disputes. Erie made clear that state law provides the rules of decision for the merits of state law claims in bankruptcy court.”). 34 failure to enforce it would be likely to cause a plaintiff to choose the federal court. Id. at 468 n.9 (emphasis added). There are two caveats to the Erie analysis. First, notwithstanding that its application should further the “twin aims,” if a “strong countervailing federal interest” dictates application of a federal rule, the federal rule controls. Chamberlain, 210 F.3d at 159. Second, the Erie rule cannot void a Federal Rule of Civil Procedure “so long as the federal rule is authorized by the Rules Enabling Act and consistent with the Constitution.” 12 Id. Prior to Shady Grove, to determine whether a state law voided a Rule, we considered whether the Rule “directly collided” with the state law. Id. (citing Hanna, 380 U.S. at 470–74). Absent a direct conflict, we followed the Erie dichotomy. Id. Proceeding under this analysis in Chamberlain, we found “no direct conflict” between Federal Rules 8 and 9 and the AOM Statute: The affidavit of merit statute has no effect on what is included in the pleadings of a case or the specificity thereof. The required affidavit is not a pleading, is not filed until after the pleadings are closed, and does not contain a statement of the factual basis for the claim. Its purpose is not to give notice of the plaintiff’s claim, but rather to assure that malpractice claims for which there is no expert support will be terminated at an early stage in the 12 Rule 8 is within the scope of the Rules Enabling Act and consistent with the Constitution. See Chamberlain, 210 F.3d at 160. 35 proceedings. This state policy can be effectuated without compromising any of the policy choices reflected in Federal Rules 8 and 9. Id. at 160. We also addressed the Statute’s provision that failure to file an affidavit is “deemed a failure” to state a cause of action. N.J. Stat. Ann. § 2A:53A-29. “We read the ‘deeming’ language to be no more than the New Jersey legislature’s way of saying that the consequences of a failure to file shall be the same as those of a failure to state a claim.” Chamberlain, 210 F.3d at 160–61. Failure to file the required affidavit thus does not render pleadings insufficient. Id. at 160. Nuveen and amicus counsel question the continued validity of our conclusion that the AOM Statute does not “collide” with Rule 8 in light of Twombly, Iqbal, and Shady Grove. Twombly and Iqbal established the pleading standard under Rule 8 that a party must demonstrate the plausibility, as opposed to conceivability, of its causes of action in the complaint. See Phillips v. Cnty. of Allegheny, 515 F.3d 224, 230–35 (3d Cir. 2008) (discussing Twombly and Iqbal). Shady Grove clarified the second caveat to the Erie analysis. In determining that certification of a class action under Rule 23 alleging violations of New York law was proper even though New York law prohibited the action from proceeding as a class action, a plurality of the Court stated that the “collision” inquiry does not depend on “the substantive or procedural nature or purpose of the affected state law,” but rather “substantive or procedural nature of the Federal Rule.” Shady Grove, 130 S. Ct. at 1444; see Knepper v. Rite Aid Corp., 675 F.3d 249, 264–65 (3d Cir. 2012) (discussing Shady Grove). 36 However, as we held in Chamberlain, the affidavit of merit is not a pleading requirement. It is not part of the complaint, nor does it need to be filed with the complaint. Rather, the affidavit must be filed within 60, or possibly 120 days, after the defendant files its answer. See N.J. Stat. Ann. § 2A:53A-27. The requirement exists to provide expert verification of the merits of the assertions in the complaint so that “malpractice claims for which there is no expert support will be terminated at an early stage in the proceedings.” Chamberlain, 210 F.3d at 160 (emphasis added). Our holding in Chamberlain was premised on the temporal separation of the filing of the complaint and the affidavit. The AOM Statute “has no effect on what is included in the pleadings of a case or the specificity thereof.” Id. Rule 8 does not collide with the Statute, as it is not even implicated by the Statute. Twombly, Iqbal, and Shady Grove do not alter this conclusion. 13 See also Liggon-Reading v. Estate of 13 That the affidavit is not a pleading requirement counsels that a defendant seeking to “dismiss” an action based on the plaintiff’s failure to file a timely affidavit should file a motion for summary judgment under Rule 56, and not a motion to dismiss for failure to state a claim under Rule 12(b)(6). Though the AOM Statute directs courts to dismiss actions in which a timely affidavit has not been filed for “failure to state a claim,” because the affidavit is not a pleading requirement, this language merely provides that the consequences of not filing a timely affidavit are the same as failing to state a claim. Chamberlain, 210 F.3d at 610. Indeed, because the affidavit is not part of the pleadings, dismissing an action based on the lack of an affidavit necessarily seems to involve matters outside the pleadings, which would require a court to consider a motion to dismiss for failure to state a claim as a 37 Sugarmann, 659 F.3d 258, 262–63 (3d Cir. 2011) (concluding that Pennsylvania’s similar requirement that a certificate of merit be filed in malpractice cases is substantive state law that federal courts must apply under Erie). The AOM Statute can be applied by a federal court without voiding any Federal Rules. 14 C. New Jersey Civil Information Cover Sheet and Expedited Case Management Conference as Substantive State Law Having concluded that an action subject to the AOM Statute can be maintained in federal court, we proceed to the Erie analysis and consider whether the District Court should have afforded Nuveen the two protections the New Jersey Supreme Court has established to cut back the severe consequences of the failure to file a timely affidavit of merit—the addition to New Jersey’s Civil Case Information Sheet referencing the Statute and the accelerated case management conference (often called the “Ferreira conference,” see Ferreira, 836 A.2d at 785). Nuveen and the amicus characterize these protections as part of a three-step process that includes the Statute, the Civil Case Information Sheet, and the accelerated conference. According to them, though the protections are procedural, their objective is substantive and thus they are outcome determinative. motion for summary judgment, as provided by Rule 12(d). See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”). 14 There also is no strong countervailing federal interest that precludes application of the AOM Statute. See Chamberlain, 210 F.3d at 161. 38 Turning to the information sheet first, the use of a particular form generally is a procedure of a state court, and the information provided to parties by a state court via its forms usually will not result in forum shopping. Here, a plaintiff either will file in state court and be reminded of the affidavit requirement via the Civil Case Information Sheet, or will file in federal court and not be reminded of the requirement. Moreover, plaintiffs (and their attorneys) are required to know the law. 15 They should not need to be reminded of the affidavit requirement on an information sheet; thus the lack of a reminder does not result in inequitable administration of the AOM Statute. In addition, a defendant has no incentive to remove a case from state to federal court based on the reminder of the affidavit requirement on the Civil Case Information Sheet because the burden is on the plaintiff to know the requirements for initiation of an action. At bottom, the requirement that the Civil Case Information Sheet reference the Statute in New Jersey state actions is not a substantive requirement. The same is true for the Ferreira conference. Though the New Jersey Supreme Court requires the conference, Ferreira, 836 A.2d at 785, it has held that its absence will not prevent an action from being dismissed based on the failure to file a timely affidavit. See Paragon Contrs., Inc. v. Peachtree Condo. Ass’n, 997 A.2d 982, 987 (N.J. 2010) (“[O]ur creation of a tickler system to remind attorneys and their clients about critical filing dates plainly cannot trump the statute. In other words, the absence of [the accelerated] conference cannot toll the legislatively prescribed time frames.”). The timing of a conference that will not affect the outcome of a proceeding is 15 The problem here is that both firms acting as Nuveen’s counsel were not from New Jersey. This underscores the need to engage local counsel to avoid state-specific pitfalls. 39 unlikely to promote forum shopping and will not result in an inequitable administration of the Statute. Moreover, a defendant has no incentive to remove a case from state to federal court solely to prevent the accelerated conference from being held because the plaintiff already will have been reminded of the affidavit requirement when it filed the Civil Case Information Sheet along with its complaint. Neither protection furthers the “twin aims” of discouraging forum shopping and preventing the inequitable administration of state laws. The protections are procedural. The District Court thus was not required to provide Nuveen with a reminder of the affidavit requirement on the cover sheet that Nuveen filed along with its complaint or to hold an accelerated conference. The Court acted appropriately.