in the review that was done were not addressed and that E&Y never showed the results of the review to Faberge.
D. Unilever's Acquisition of Arden
In December, 1988, prior to the activation of the Arden computer system, Unilever, Conopco's parent, began negotiations to purchase Arden from Faberge. In connection with the negotiations, Unilever began a "due diligence" investigation of Arden in January, 1989. After several months, in March or April, 1989, however, talks collapsed and the investigation was halted. During this initial due diligence investigation, Unilever relied on discussions with E&Y and Faberge MIS personnel. Conopco claims that although the personnel from Unilever and Chesebrough-Pond's USA Co. ("Chesebrough"), another Unilever subsidiary, concluded at this point that there would be some business disruption as a result of the cutover to the new system, they were reassured by E&Y's presence on the project.
A second opportunity for Unilever to conduct a due diligence investigation came after acquisition talks resumed, and shortly before Unilever signed the agreement to purchase Arden from Faberge. Eugene Goodmaster, the head of MIS for Chesebrough, discussed the Arden system on a conference call between Callahan and DeMartino of Faberge and McCreadie and Kornreich of E&Y. Goodmaster testified at his deposition that he was told that the system was installed and operational, but that some startup problems were being experienced. This conversation left him with the same concerns as to the viability of the new system that Unilever personnel had expressed after the initial due diligence investigation.
On or about July 12, 1989, Unilever signed an agreement to purchase the personal products business of Faberge and the operating business of Arden. The purchase was structured as a sale of assets, rather than a sale of stock, and was made contingent on the Arden computer system being "operational" at the time of closing. Purchase Agreement, Sue Aff. Exh. 22, §§ 6.19, 7.02. Between the time the Purchase Agreement was signed and the August 3, 1989 closing date, on which date Conopco acquired and took over the businesses, Chesebrough personnel had access to the Arden computer system in the United States and Europe. E&Y contends that, during this time, Unilever had an opportunity to see the Arden system in operation, the problems that were occurring, and the impact of those problems on Arden's business. Conopco claims, on the other hand, that it was only able to discern the full scope of the problems with the system, as well as how Conopco was allegedly misled or misinformed by E&Y, after it had unfettered access to the system and had "lived with it" following the acquisition. Eventually, in July or August of 1990, the decision was made to replace the Arden computer system.
III. Summary Judgment Motion
A. Professional Malpractice
Conopco, in its Second Claim for Relief, alleges professional negligence and malpractice on the part of E&Y. E&Y moves for summary judgment on this claim on several different grounds. First, E&Y contends that New Jersey does not recognize a cause of action for malpractice against management consultants.
Second, E&Y argues that even if New Jersey does recognize such a cause of action, Conopco, as the assignee of Faberge by means of the Purchase Agreement, cannot bring this tort claim because under New Jersey law tort claims are not assignable before judgment. Third, E&Y maintains that even if such a claim is recognized and assignable, it is without merit and should be dismissed as a matter of law.
Before it is appropriate to reach the merits of Conopco's claims of professional negligence and malpractice, assuming for a moment that that exercise will be necessary, the court must consider the threshold question of assignability. Conopco asserts these causes of action as the assignee of the general assignment clause of the July 12, 1989 purchase agreement. See Sue Aff., Exh. 22 § 2.01; Sue Aff., Exh. 23; Sue Aff., Exh. 63 at 15-16. As noted earlier, E&Y contends that Conopco cannot assert these claims because under New Jersey law tort claims are not assignable prior to judgment. Conopco counters that the validity of the tort claims is governed by the law of New York, rather than that of New Jersey, and that under New York law, tort claims can be assigned prior to judgment. Thus, the court must determine which state's law governs the purported assignment of the tort claims.
As a federal court sitting in diversity, this court must apply the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 491, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The purchase agreement which purported to assign the tort causes of action to Unilever (and thereby to Conopco), provides that "This Agreement shall be governed by and construed in accordance with the laws of the State of New York." Sue Aff., Exh. 22 § 12.10. Based on this provision, Conopco asserts that New York law should govern the validity of the assignment of the tort claims.
Generally speaking, New Jersey choice of law rules permit the parties to a contract to choose which state's law will govern issues arising out of that contract. "Ordinarily, when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey will uphold the contractual choice if it does not violate New Jersey's public policy." Instructional Systems, Inc. v. Computer Curriculum Corp., 130 N.J. 324, 341, 614 A.2d 124 (1992); see also Citibank, N.A. v. Errico, 251 N.J. Super. 236, 243, 597 A.2d 1091 (App. Div. 1991). In this regard, New Jersey follows the Restatement (Second) of Conflicts of Laws § 187, which provides that a contractual choice of law provision will be enforced as long as the forum chosen bears a reasonable relationship to the parties or the transaction and the application of the law of the chosen state would not violate a fundamental policy of the state whose law would otherwise apply. See Instructional Systems, 130 N.J. at 342; Kalman Floor Co. v. Jos. L. Muscarelle, Inc., 196 N.J. Super. 16, 21-22, 481 A.2d 553 (App. Div. 1984). There is no dispute that New York has a sufficient nexus to the parties and the transaction to satisfy the first prong of New Jersey's test. Assuming for the moment that the application of New York law to the assignment would not violate a fundamental public policy of New Jersey, New York law would govern the validity of the assignment.
Conopco, however, fails to address an issue which must be preliminary to a determination as to whether the assignment of the tort cause of action was valid. It is well recognized that there is a distinction between the validity of an assignment as between the parties to the assignment agreement and the general assignability of a tort chose in action. This distinction has been stated clearly by Professor Leflar:
Attempted assignments of simple nonnegotiable choses in action may present two separate conflicts questions. One question is as to the inherent assignability of the chose in action. This is most readily classifiable as a property problem, referable to the law under which the chose in action came into existence. Since most choses in action arise either out of contracts or torts, this means that the law which governed the original transaction either as a contract or as a tort normally determines the assignability of the claim, though sometimes the effort to assign a situs to the chose in action causes the reference to be made to this fictitious situs. If a chose in action is not assignable, the original obligor's obligations are not affected by a purported assignment of it, regardless of the effect of it as between the assignor and assignee.