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Paragon Contractors, Inc. v. Peachtree Condominium Association

June 28, 2010

PARAGON CONTRACTORS, INC., PLAINTIFF,
v.
PEACHTREE CONDOMINIUM ASSOCIATION, SUCCESSOR-IN-INTEREST TO WASHINGTON WOODS, CONDOMINIUM ASSOCIATION, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
v.
RAYMOND HOLMES, EMAC HOLMES, PETER HOLMES, PARAGON CONTRACTORS GROUP, INC., THIRD-PARTY DEFENDANTS, AND KEY ENGINEERS, INC., THIRD-PARTY DEFENDANT-RESPONDENT.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 406 N.J. Super. 568 (2009).

SYLLABUS BY THE COURT

This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The Court considers whether the trial court correctly dismissed the third-party complaint filed by defendant Peachtree Condominium Association (Peachtree) against third-party defendant Key Engineers, Inc. (Key) because Peachtree failed to timely file the affidavit required by the Affidavit of Merit statute, N.J.S.A. 2A:53A-26 to -29, or whether the court's failure to hold a conference pursuant to Ferreira v. Rancocas Orthopedic Associates, 178 N.J. 144 (2003), tolled the statutory period for filing the affidavit.

Plaintiff Paragon Contractors, Inc. (Paragon) sued Peachtree for payment of construction work it performed on Peachtree's premises. Peachtree answered and counterclaimed for damages for Paragon's failure to properly complete drainage work at the site. Peachtree also filed a third-party complaint against Key, an entity that was hired to inspect and supervise Paragon's performance. With its third-party complaint, Peachtree filed a Case Information Statement (CIS) that identified the matter as a construction case. It did not respond to the question on the CIS whether the case involved professional malpractice. Key's answer to the complaint raised the Affidavit of Merit statute as a separate defense and its CIS characterized the case as one involving professional malpractice. However, because the case was originally filed as a breach of contract action, the matter remained categorized by the court's civil case management staff as a construction case and it was assigned to that track. As a result, Key's counsel forwarded a Certification of Good Cause to Change Track Assignment, requesting that the case be moved to the professional liability track. Peachtree's counsel acknowledged receipt of the cover letter, but not the certification.

On January 31, 2008-more than 120 days after Key filed its answer to Peachtree's third-party complaint and before Peachtree filed an affidavit of merit or the court scheduled a case management conference-Key filed a motion to dismiss the third-party action on grounds that Peachtree failed to provide an affidavit of merit within the time periods provided by N.J.S.A. 2A:53A-27. On February 21, 2008, before the motion hearing but outside the statutory period, Peachtree filed an affidavit. In defense of the late filing, Peachtree argued that the failure to schedule a Ferreira conference tolled the time frames in the Affidavit of Merit statute.

The trial judge rejected that argument and dismissed Peachtree's third-party complaint and all cross-claims against Key based on the untimeliness of the affidavit. The Appellate Division affirmed, rejecting "Peachtree's attempt to insulate its counsel's carelessness through the trial court's mistake in failing to schedule a case management conference." 406 N.J. Super. 568, 581 (App. Div. 2009). The Supreme Court granted certification. 200 N.J. 500 (2009).

HELD: The conference instituted by the Court in Ferreira v. Rancocas Orthopedic Associates, 178 N.J. 144 (2003), was created to remind parties of their obligations under the Affidavit of Merit statute and to avoid the dismissal of meritorious claims through inadvertence. It is not a tolling device. However, because of the confusion in the courts over the scheduling of the Ferreira conference and the effect of its omission, the Court concludes that relief should be afforded to the parties in the limited circumstances of this case.

1. The Affidavit of Merit statute (Statute) applies to all actions for damages based on professional malpractice. The Statute requires that in any action for damages arising from alleged malpractice or negligence by a licensed person in his or her profession or occupation, the plaintiff shall, within 60 days of the filing of the answer to the complaint, provide an affidavit by an appropriate licensed person stating that there exists a reasonable probability that the care, skill or knowledge exercised by the licensed individual being sued fell outside acceptable professional or occupational standards. The core purpose of the Statute is to require plaintiffs to make a threshold showing that the claim has merit so that meritless lawsuits can be identified at an early stage. (Pp. 5-6)

2. Although the affidavit should be filed within sixty days of the filing of the answer, if the affidavit is provided within sixty-one to 120 days after the answer is filed, it will be deemed timely so long as leave to file is sought and good cause is established. Attorney inadvertence is considered good cause within that sixty-one to 120-day period. Neglecting to provide an affidavit after the expiration of 120 days generally requires dismissal with prejudice because the absence of the affidavit strikes at the heart of the cause of action. (Pp. 6-7)

3. The Court has recognized equitable remedies to temper the draconian results of an inflexible application of the Statute. For example, where extraordinary circumstances are found to be present, a late affidavit will result is dismissal without prejudice. However, because attorney inadvertence in failing to timely file an affidavit is not an extraordinary circumstance, the Court developed in Ferreira a prophylactic measure to encourage the timely filing of affidavits. The Court instituted an accelerated case management conference to be held within ninety days of the service of an answer in all malpractice actions. At the conference, the parties and the court are to identify, among other discovery issues, any failure to comply with the Statute in time to correct it within the statutory time period. Although a Ferreira conference should be held as a matter of course, it may be omitted if the affidavit has been provided and defendants have waived any objections to its adequacy. (Pp. 7-9)

4. At issue in this case is the effect of the failure to hold a Ferreira conference on the time limits provided in the Statute. The Court determines that the answer is none. The clear purpose of the Court's creation of the Ferreira conference was to help attorneys and litigants avoid the dismissal of meritorious claims. However, it is equally true that parties are presumed to know the law and are obligated to follow it. The absence of a Ferreira conference cannot toll the legislatively prescribed time frames. (P. 10)

5. There has been a lack of unanimity in the courts over the question whether the failure to hold a Ferreira conference prevents dismissal with prejudice under the Statute. The Court takes from that lack of unanimity the understanding that lawyers also may have been unclear regarding the import of the failure to hold a Ferreira conference and may have assumed that the absence of the conference provided a safe harbor from the Statute's requirements. That confusion counsels lenience in this case and constitutes an extraordinary circumstance that may have caused counsel to slumber when he should have acted. Because the Statute is not intended as a trap for the unwary, the Court declines to permit it to be used in these circumstances to dismiss a claim before its merits have been adjudged. Going forward, however, the Court warns that reliance on the scheduling of a Ferreira conference to avoid the strictures of the Statute is unwarranted and will not serve to toll the statutory time frames. (Pp. 11-12)

The judgment of the Appellate Division is REVERSED, and the case is REMANDED to the Law Division for proceedings consistent with this opinion.

JUSTICE RIVERA-SOTO filed a separate opinion in which he concurs in the Court's opinion, but writes separately to express concern that fifteen years after the Statute's enactment some attorneys seem unable to comply with its elementary requirements. He would decline to cater to these attorneys and void the requirement that Ferreira conferences be held.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, WALLACE and HOENS join in JUSTICE LONG's opinion. JUSTICE RIVERA-SOTO ...


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