Commercial Litigation Developments Archives

COVID-19 Claims against Long-Term Care Facilities

Adrienne C. Rogove

Since the outbreak of the coronavirus a little more than 100 days ago, there have been approximately 12,800 known deaths attributed to COVID-19. In New Jersey, nearly 50 percent of those deaths were residents of nursing homes and long-term care facilities. Prominent in the news has been the excessive rates of infection and deaths in two of New Jersey’s state-run veterans’ nursing homes. As of mid-June, at least 28 notices of tort claim have been filed with respect to the veteran facilities in Paramus and Menlo Park, claiming gross negligence and incompetence in the veteran homes’ response to the COVID-19 pandemic.

According to data from the state, at the Menlo Park facility, 62 residents and one staff member died from the virus. At the Paramus veterans’ facility, 80 residents and one employee died from the virus.

Lawyers for the claimants estimate damages for each case at five million dollars per claim, or $140 million for all claims filed thus far. It is likely that additional notices of tort claim will be filed given the high number of deaths at these two facilities, which have been attributed to a failure to follow infection control protocols and/or institute safety measures deemed critical to controlling the spread of the virus.

The allegations of misconduct include:

Administration directing staff not to wear masks or gloves, to avoid frightening residents;
Waiting more than a month after the first patient was diagnosed with COVID-19 to isolate infected residents;
Failing to prohibit residents from congregating in common areas;
Allowing infected staff to continue working;
Preventing staff from having access to personal protection equipment (“PPE”);
Failure to implement infectious disease outbreak plans;
Failure to segregate residents with COVID-19 symptoms from the rest of the facility’s population; and
Failure to implement testing of residents.

Because the veterans’ facilities are government-run and owned, a precondition to instituting a lawsuit is the filing of “tort claim” notices. For non-government-owned facilities, there is no such requirement.

It is likely that long-term care facilities will mount defenses based on various immunities afforded by federal as well as New Jersey statutes, including the Tort Claims Act, and charitable immunities that may apply to nonprofit facilities. In addition, we will likely see other defenses based on vague and conflicting directives issued by the state as to proper protocols and the use of PPE and the lack of communication and leadership from the federal, state, and local governments. For example, initial reports from the Centers for Disease Control and Prevention and Department of Health recommended only limited measures such as washing hands, but there were no lockdown orders in place until the virus had already started its deadly spread. Facilities were unable to obtain necessary PPE; government agencies would confirm that deliveries of PPE would be made, and then when the PPE was not delivered, agencies would claim not to know anything about these PPE orders. The government was slow to implement effective safety protocols—in part because of the lack of information about the virus, which persists to this day. As a result, facilities were left to fend for themselves—often without the resources or finances to obtain the necessary PPE. At the height of the outbreak, there was little to no guidance on the nature and extent of contagion or consequences of exposure. It is noteworthy that the federal government authorized billions of dollars in funds to be used for COVID-19 relief efforts in New Jersey. This could be construed as a recognition that there is a significant need by long-term care facilities for financial and other assistance to provide the proper care to residents given the chaotic and devastating effects of the coronavirus.

There is no doubt that the long-term care industry will be the target of litigation given the disproportionate number of infected residents and deaths from COVID-19. It remains to be seen how the courts will deal with these difficult and disturbing issues.

New Jersey Halts All Non-Essential Construction after 8:00 P.M. on April 10, 2020

Jonathan M. Korn and Michael R. Darbee

On April 8, 2020, New Jersey Governor Phil Murphy signed Executive Order 122 (2020) (“EO 122”). EO 122 requires that the physical operation of all non-essential construction projects must cease by 8:00 p.m. on Friday, April 10, 2020. Only work on “essential construction projects” may continue to operate physically after that time.

EO 122 defines 14 categories of construction projects that are considered essential. Under EO 122, essential construction relates to the following areas:

1. “[T]he delivery of health care services,” such as hospitals;
2. “Transportation projects,” such as roads and bridges;
3. “Utility projects,” such as projects necessary to produce and transmit electricity;
4. “Residential projects” if they are exclusively designated as affordable housing;
5. “Pre-K–12 schools”;
6. “Projects already underway” on a single-family home or occupied apartment unit, but only if the construction crew has five or fewer individuals;
7. “Projects already underway” on a residential unit, where the work must proceed in order for the unit to be occupied by the date set in a legally binding agreement;
8. Projects involving facilities that manufacture, distribute, store, or service goods or products that are sold online or by essential retail businesses, as defined by Executive Order No. 107 (2020);
9. “[D]ata centers or facilities that are critical to a business’ ability to function”;
10. “[T]he delivery of essential social services,” such as homeless shelters;
11. First responders, such as police and fire departments, related to their response to the coronavirus emergency;
12. A contract with the federal, state, county, or municipal government;
13. Securing or abating any hazards on a non-essential construction project site; and
14. “[E]mergency repairs necessary to ensure the health and safety of residents.”

If a business is engaged in an essential construction project, it must adopt certain policies designed to mitigate the spread of the coronavirus COVID-19. Those policies are generally designed to encourage social distancing and other hygienic practices that reduce the spread of the virus. In addition, businesses engaged in essential construction projects must send home workers with symptoms of COVID-19, must notify its workers of any known exposure to COVID-19 at the worksite without violating their employees’ privacy rights, and must disinfect the worksite when a worker at the site has been diagnosed with the illness.

EO 122 will remain in effect until Governor Murphy revokes or modifies it. Unlike the Commonwealth of Pennsylvania, there does not appear to be a formal waiver process. The full text of EO 122 can be found on the State of New Jersey website here.

Blank Rome’s Princeton office and Coronavirus (“COVID-19”) Task Force are monitoring this ever-changing situation and are here to help. Please contact us if you have any questions about contract compliance during the COVID-19 crisis or any other related commercial issues.

When Things Are Not “Business as Usual”: COVID-19 and Contract Defenses

Michael R. Darbee, Jonathan M. Korn, and Adrienne C. Rogove

The coronavirus COVID-19 health crisis has interfered with ongoing and future business arrangements throughout New Jersey. As a result, New Jersey businesses that are parties to existing contracts may have rights in the event that they, or their counterparty, are unable to meet their obligations due to COVID-19. There are several legal doctrines that New Jersey businesses may look to in these situations, including impossibility, impracticability, frustration of purpose, and force majeure.

Generally, contract liability is strict liability. This means that a party who breaches a contract is liable for damages even without fault. See Restatement (Second) of Contracts, ch. 11, Introductory Note. However, a party may be able to invoke impossibility, impracticability, frustration of purpose, or force majeure to excuse its failure to perform its contract obligations based on an unforeseen supervening event. Continue reading “When Things Are Not “Business as Usual”: COVID-19 and Contract Defenses”

Blank Rome Obtains Dismissal of Putative Class Action for Legal Malpractice against Texas Law Firms

On behalf of four Texas law firms, Blank Rome on March 24, 2020, successfully obtained a dismissal of a putative legal malpractice class action in Gore, et al. v. Bruce Nagel, et al., filed in the United States District Court for the District of New Jersey, alleging that the law firms violated New Jersey Court Rule 1:21-7 by charging excessive contingency fees. Plaintiffs did not allege that the Texas law firms provided incorrect advice. In underlying personal injury litigation, the Texas law firms represented Debbie Gore, a Texas resident, and Doris Lance-Smith, an Alabama resident, against Ethicon, the manufacturer of pelvic mesh products for injuries sustained after surgical implantation of these products. On May 21, 2013, and June 2, 2012, respectively, Texas resident Gore and Alabama resident Lance-Smith, entered into retainer agreements with Texas counsel to pursue their mesh claims against Ethicon. Both Plaintiffs agreed to pay a 40 percent contingency fee, and allowed their counsel to associate with other law firms without increasing the required fee. Gore’s Retainer Agreement stated that Texas law governs and that any claims “arising under [the Gore Retainer] must be filed only in a court of competent jurisdiction in Harris County, Houston, Texas.” Lance-Smith’s Retainer Agreement did not have a choice of law provision. The Plaintiffs had sustained injuries in their home states after being implanted with the allegedly defective mesh products. Continue reading “Blank Rome Obtains Dismissal of Putative Class Action for Legal Malpractice against Texas Law Firms”

Third Circuit Adopts Rule That Removal of State Litigation to Federal Court Does Not Confer Personal Jurisdiction over the Defendant

Adrienne C. Rogove

In the last few years, the United States Supreme Court and federal courts in New Jersey and Pennsylvania have provided additional guidance on what circumstances give rise to personal jurisdiction over foreign Defendants. The Third Circuit addressed the issue of consent to jurisdiction in Danziger & DeLlano v. Morgan Verkamp, LLC, in its January 15, 2020, decision where it held that removing a case to federal court is not a waiver of the defense of personal jurisdiction. In Danziger, two law firms were engaged in a dispute over whether the plaintiff firm was entitled to a referral fee following the defendant firm’s settlement of a qui tam action allegedly referred by the Plaintiff Danziger (“Danziger”).

Danziger is a Texas law firm. Danziger alleged it referred potential qui tam clients to Morgan and Verkamp, LLC (“Morgan Verkamp”), an Ohio law firm. Danziger claimed it formed an oral contract with Morgan Verkamp to collect one-third of the attorneys’ fees as a referral fee in connection with a qui tam case filed on behalf of Michael Epp. The Epp case was settled for “hundreds of millions of dollars.” Danziger & DeLlano v. Morgan Verkamp, LLC, __ F.3d __ (3d Cir. 2020) (slip op. at 4). Continue reading “Third Circuit Adopts Rule That Removal of State Litigation to Federal Court Does Not Confer Personal Jurisdiction over the Defendant”

A Paralegal Is Guilty of the Unauthorized Practice of Law by Preparing Documents for Litigation and Providing Legal Advice without Supervision by a Licensed New Jersey Attorney

Adrienne C. Rogove

New Jersey court rules and statutes prohibit the unauthorized practice of law. While paralegals engage in activities that constitute the “practices of law,” they can only do so under the direct supervision of a licensed New Jersey attorney. R.P.C. 5.3. The Superior Court of New Jersey, Appellate Division, recently addressed this issue in an unreported decision dated November 21, 2019, in Baron v. Karmin Paralegal Services, __ N.J. Super. __ (2019) (slip. op.). In Baron, the New Jersey Superior Court, Appellate Division, affirmed the decision of the Superior Court, Law Division, Special Civil Part, which held that the defendant paralegal company, Karmin Paralegal Services, committed fraud by performing legal services on behalf of the plaintiff, John Baron. While the Appellate Division reversed that part of the trial court’s decision awarding punitive damages to the plaintiff, the Court’s guidance on what constitutes the “practice of law” and the implications under New Jersey’s Rules of Professional Conduct are important to both the legal community and New Jersey consumers of legal services. Continue reading “A Paralegal Is Guilty of the Unauthorized Practice of Law by Preparing Documents for Litigation and Providing Legal Advice without Supervision by a Licensed New Jersey Attorney”

Personal Jurisdiction and Internet Transactions

Jonathan M. Korn and Michael R. Darbee

In a recent case, the New Jersey Appellate Division addressed whether an Internet transaction between a New Jersey buyer and California seller exposed the seller to a New Jersey lawsuit initiated by the buyer.

The case, Jardim v. Overley, involved the sale of a vintage car. The seller, Overley, is a California resident. On May 2, 2018, he listed a 1960 Buick Invicta for sale on the website Hemmings.com, a marketplace used to list cars for sale. Overley explained in a certification that he is not in the business of selling cars and does not regularly conduct business over the Internet. The buyer, Jardim, is in the business of selling used cars and has an office in New Jersey. Jardim v. Overley, __ N.J. Super. __ (2019) (slip op. at 3–4).

On May 26, 2018, Jardim, through his business associate, e-mailed Overley and offered to purchase the car. In a series of e-mail and telephone communications over a two-day period, the parties negotiated and agreed on a purchase price. Once the price was set, the parties executed a bill of sale. Jardim arranged to have the car shipped from California to New Jersey, and on June 25, 2018, he received the car in New Jersey. Id. at 4–8.

When the car arrived, Jardim discovered that it was not in the condition Overley had advertised. He filed a lawsuit in the Law Division, alleging claims for breach of warranty, unjust enrichment, fraud, and consumer fraud. The trial court, however, dismissed Jardim’s claims for lack of personal jurisdiction over the seller. It reasoned that the parties’ contact was an isolated occurrence and that their negotiations did not create “sufficient minimum contacts with New Jersey to attach personal jurisdiction to Overley.” Id. at 8–9. Continue reading “Personal Jurisdiction and Internet Transactions”

Class Decertified Where Vast Majority of Members Sustained No Ascertainable Loss

Adrienne C. Rogove

In another blow to plaintiffs suing under New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”), the United States District Court for the District of New Jersey in Martinez-Santiago v. Public Storage, 2019 WL 1418118 (D.N.J. March 29, 2019), decertified a class of 160,000 members alleging that lease agreements with the Defendant Public Storage violated TCCWNA. Following the New Jersey Supreme Court’s decision last year finding that a consumer who is a party to a contract that fails to comply with New Jersey law, but who does not suffer any adverse consequences from the noncompliance, has failed to state a TCCWNA claim, United States District Judge Jerome Simandle decertified the class. The decision was based on an analysis of the Rule 23 requirements, where the Court held that the requirements of “typicality,” “predominance,” and “numerosity” under Rule 23 could not be met.

With respect to the typicality requirement, the Court found that the named plaintiff was one of “relatively few” customers who actually suffered an adverse consequence due to the form lease contract entered into with Public Storage. Since the vast majority of class members did not suffer an adverse consequence, the claims of the named plaintiff were not typical of the class members, and therefore the typicality requirement was not met.

The Court also found that the “predominance” requirement could not be met because questions of fact common to class members no longer predominated over questions affecting only individual claims. Finally, because discovery revealed that only 29 class members might be able to assert a viable claim under TCCWNA, the “numerosity” requirement of Rule 23 likewise could not be met.

The decision of the Court in Martinez-Santiago left only the named plaintiff with potentially viable claims, thereby continuing to chip away at the prospect of successful class action suits against corporate entities, and large attorneys’ fee awards to class action counsel, in suits where the class cannot meet the requirements of Federal Rule of Civil Procedure 23.

Generic Representations of Regulatory Compliance Not Actionable under Federal Securities Laws

Adrienne C. Rogove

In a case alleging violations of federal securities laws by Cigna Corporation and certain of its officers, the Second Circuit Court of Appeals affirmed the dismissal of the complaint on the basis that the statements made by the defendants were simple, generic assertions about its regulatory policies and procedures upon which no reasonable investor would reasonably rely, and were therefore not materially misleading. Singh v. Cigna Corp., No. 17-3484-cv, (2d Cir. Mar. 5, 2019). Following Cigna’s acquisition of HealthSpring, a regional Medicare insurer, Cigna issued several public statements, including 10-K filings, concerning its commitment to regulatory compliance given the significant regulatory responsibilities involved in Medicare coverage. In its 2013 Form 10-K filed on February 27, 2014, Cigna said it had “established policies and procedures to comply with applicable requirements,” and that it “expect[ed] to continue to allocate significant resources” to compliance efforts. Id. at *5. In December 2014, Cigna published a pamphlet titled “Code of Ethics and Principles of Conduct,” which affirmed the importance of compliance and integrity:

[I]t’s important for every employee. . .to handle, maintain, and report on [Cigna’s financial] information in compliance with all laws and regulations. . .

[W]e have a responsibility to act with integrity in all we do, including any and all dealings with government officials.

Id. at **4-5. In its 2014 Form 10-K, Cigna stated that it would “continue to allocate significant resources” to compliance. Id. at *6. The 10-K included a discussion of the difficulty of compliance in the regulatory environment given the “uncertainty surrounding legislation and implementation of national healthcare reform.” Id.

A 2015 audit of Cigna’s Medicare operations by the Centers for Medicare and Medicaid Services (“CMS”) revealed numerous regulatory violations. Cigna filed a Form 8-K disclosing the CMS audit conclusions and accompanying sanctions. Within several days, Cigna’s stock price fell substantially. Continue reading “Generic Representations of Regulatory Compliance Not Actionable under Federal Securities Laws”

Meet Blank Rome’s 2018 Law360 Rising Stars

Blank Rome Partners Omid Safa and Michael A. Iannucci have been named 2018 Rising Stars by Law360 in recognition of their legal accomplishments in the categories of Insurance and Class Action, respectively. Below are excerpts of their profiles, as published by Law360. Continue reading “Meet Blank Rome’s 2018 Law360 Rising Stars”