In New Jersey, pursuant to N.J.S.A. 2A:53A-27, when a person is suing for “damages for personal injuries, wrongful death or property damage resulting from an alleged act of malpractice or negligence by a licensed person in his profession or occupation,” an affidavit of merit is required to make a threshold showing that the claim is meritorious so that claims lacking merit can be identified and dismissed early in the litigation. Recently, in Nuveen Municipal Trust v. Withsum Brown, the United States Court of Appeals for the Third Circuit examined this statute and how it applies to money damages and fraud claims.
According to the New Jersey Law Journal, in October 2006, a Chicago-based business trust and municipal bond fund, Nuveen, bought a $10 million bond anticipation note from Bayonne Medical Center. This loan was made approximately six months before Bayonne Medical Center filed for bankruptcy. In agreeing to purchase the bond anticipation note, Nuveen relied on an audit report from Bayonne’s accountant and an opinion letter from its counsel. The audit report showed that the hospital was solvent and capable of repaying the money. The opinion letter stated that there was no pending action against the hospital that would make it unable to repay the debt. However, the hospital had had to repay $3.5 million to Medicare a few weeks earlier. Nuveen claimed that, had it known this fact, it would not have made the loan. Nuveen brought claims of malpractice and negligent misrepresentation against the hospital’s counsel, and fraud, aiding and abetting fraud, and negligent misrepresentation against the accountant seeking $9.5 million in damages.
The Court looked to whether the cause of action was one that required an affidavit of merit under the statute. The Court explained that the action does not need to be deemed malpractice or negligence to qualify for an affidavit of merit. Rather, an affidavit of merit is required when the underlying factual allegations of the claim require the plaintiff to prove that the defendant deviated from the professional standard of care required by the specific profession. In this case, the fraud claims against the accountant required proof that he deviated from the professional standard of care, so an affidavit of merit was required. Therefore, because the claims against the law firm and accounting firm were subject to the affidavit of merit statute, and Nuveen failed to satisfy the statute, the suit was dismissed.