Opinion ID: 806790
Heading Depth: 2
Heading Rank: 2

Heading: Shady Grove and the AOM Statute as a Pleading

Text: 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.