On appeal from the Superior Court of New Jersey, Law Division, Hudson County, HUD-L-3071-01. Leonard Z. Kaufmann argued the cause for appellants (Cohn Lifland Pearlman Herrmann & Knopf, attorneys; Mr. Kaufmann, on the brief).
Before Judges Pressler, Axelrad and Hoens
The opinion of the court was delivered by: Pressler, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
The issue raised by this appeal is whether plaintiffs' otherwise fatal failure to file this complaint prior to the expiration of the six-year limitations period is curable under the doctrine of substantial compliance. The trial court, concluding that it was not, dismissed the complaint. Plaintiffs appeal, and we reverse.
Plaintiffs are some three hundred investors in a worthless cable television security allegedly advertised by talk-show host Harry I. "Sonny" Bloch on WOR Radio, owned by defendant Buckley Broadcasting Corporation.
The advertising and soliciting ceased in June 1994. Plaintiffs commenced an action in the Federal Court for the District of New Jersey on December 19, 1994, against Bloch, who died during the pendency of the action, Buckley, and others, alleging violation of Section 12(1) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78a, et seq. They also pleaded common-law tort causes cognizable under New Jersey law. The federal action was unequivocally terminated by the Third Circuit on February 27, 2001, when it dismissed as untimely plaintiffs' appeal from the district court's summary- judgment dismissal with prejudice of the federal claim and, predicated upon its declination to exercise its supplemental jurisdiction pursuant to 28 U.S.C.A. § 1367(c), its dismissal without prejudice of the state law claims. Berke v. Bloch, 242 F.3d 131 (3d Cir. 2001). This action was commenced in the Law Division by complaint filed on May 10, 2001, some two and a half months after the Third Circuit's dismissal and some eleven months after the running of the statute of limitations. Although defendant moved for summary judgment on the merits as well, the trial court's dismissal was based exclusively on the statute of limitations and the merits were not considered. We therefore do not address them. Accordingly, we confine our recitation of the facts to the procedural history of the federal litigation, which, plaintiffs assert and we agree, is sufficient to invoke the doctrine of substantial compliance.
As we have noted, the federal action was commenced in December 1994, five or six months after accrual of the stated causes of action. The jurisdictional predicate of the federal action was an alleged securities violation. The state claims against Buckley, alleging causes of action sounding in negligent misrepresentation, fraud, negligence, and gross negligence, were joined under the federal court's supplemental jurisdiction as authorized by 28 U. S. C. A. § 1367(a). The matter proceeded through discovery, having survived a defense motion in 1997 to dismiss for failure to state a claim. Fed. R. Civ. P. 12(b)(6). Five years later, and after the litigation had terminated as to other defendants, Buckley moved for summary judgment dismissing the federal claim. The motion was granted by order entered on December 14, 1999, the court's reasons therefor having been set forth in a letter opinion of that date. Having concluded that plaintiffs had failed to demonstrate a prima facie case under Section 12(1) of the Securities Exchange Act, the federal judge, in his letter opinion, then addressed the issue of supplemental jurisdiction. Noting that 28 U.S.C.A. § 1367(c)(1) authorizes the federal court to decline to exercise supplemental jurisdiction over a claim that "raises a novel or complex issue of State law," the judge opined that the "state law claims against Buckley raise unique issues with respect to radio broadcasting, i.e., a radio broadcaster's duties in connection with advertisements on syndicated programs broadcast on their stations." Accordingly, he declined to exercise supplemental jurisdiction and dismissed the state claims without prejudice.
Plaintiffs appealed the December 14, 1999 order to the Third Circuit within the thirty days prescribed by Fed. R. App. P. 4(a). They were, however, notified by the clerk of that court that an appeal did not lie because the December 14 order was interlocutory in that there had been no final disposition in respect of two of the named defendants, Raymond Fillweber and William Geronimo. Consequently plaintiffs withdrew the appeal asserting their intention to refile it upon finality of the district court's disposition, and the matter remained unresolved in the district court. It appears that plaintiffs then moved for summary judgment against these two defendants.
By letter dated March 1, 2000, plaintiffs' attorney wrote to the district court judge, confirming their conversation of that date, in which plaintiffs' attorney advised the judge that the summary judgment motion was being withdrawn because settlements had been reached with Fillweber and Geronimo. He further advised that he could not file appropriate stipulations of dismissal until client approval and that approval would "take some time" because of the number of plaintiffs who had to be contacted. The letter went on to advise that "[i]n the interim, we wanted to make the Court aware of the procedures which we must undertake, so that the Court understands why the stipulations of dismissal will not be immediately forthcoming." The judge's response was the sua sponte entry on the same date, March 1, 2000, of a so-called conditional dismissal without prejudice to plaintiffs' right "within 60 days to reopen the action if the settlement is not consummated." The 60 days ran on May 1, 2000. Plaintiffs submitted the stipulation of dismissal as to Fillweber on May 4, 2000, to which the judge appended a "so ordered" notation at its foot, which he signed. On June 8, 2000, plaintiffs submitted the stipulation of dismissal as to Geronimo, which was filed without a "so ordered' notation.
Believing that there was finality of the district court disposition as of June 8, 2000, plaintiffs refiled a notice of appeal from the December 14, 1999 order with the Third Circuit on June 21, 2000. The sole remaining defendant, Buckley, moved for dismissal of the appeal on the ground of untimeliness. The Third Circuit reserved on the motion pending the filing of merit briefs. It then, on February 27, 2001, by its reported opinion, supra, 242 F.3d 131, granted defendant's motion to dismiss the appeal. The court held that plaintiffs had misapprehended the date of finality, which was not, as they believed, June 8, 2000, the date on which the final stipulation of dismissal was filed, but rather May 1, 2000, the expiration of the sixty-day without- prejudice condition of the district court's order of March 1, 2000.
This action against Buckley, essentially reiterating the state claims made against it in the federal complaint, was filed in the Superior Court, Law Division, on May 10, 2001, some ten weeks after the Third Circuit dismissal of the appeal. The action was dismissed on defendant's motion, the trial court concluding that plaintiffs' filing of an untimely appeal in the Third Circuit from the December 14, 1999 order did not justify application of the doctrine of substantial compliance. It was the trial court's view that at the latest, finality was measured from the date of plaintiffs' filing of the second stipulation of dismissal on June 8, 2000, and, consequently, that the eleven months that had elapsed from that date to the filing date was too long to justify equitable relief from the statute of limitations which had run in June 2000. We disagree.
Before addressing New Jersey's equitable substantial compliance jurisprudence as it relates to statutes of limitation, we consider plaintiffs' contention that their action is saved by 28 U.S.C.A. § 1367(d), under which, they assert, the statute of limitations on the state claims was tolled during the entire period of the federal litigation. Thus, they claim, since they filed the federal action in the first instance in December 1994, only five months after accrual, there remained to them, after dismissal of the federal action, an additional five years and seven months in which to commence their state claims. Accordingly, they assert that even if the dismissal of the federal action were measured as of December 14, 1999, their May 2001 complaint in the state court was timely. Defendant disagrees, arguing that the federal statute merely provides a grace period of thirty ...