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Fairfax Financial Holdings Limited v. S.A.C. Capital Management, L.L.C.

Superior Court of New Jersey, Appellate Division

April 27, 2017

FAIRFAX FINANCIAL HOLDINGS LIMITED and CRUM & FORSTER HOLDINGS CORP., Plaintiffs-Appellants/ Cross-Respondents,
v.
S.A.C. CAPITAL MANAGEMENT, L.L.C., S.A.C. CAPITAL ADVISORS, L.L.C., S.A.C. CAPITAL ASSOCIATES, L.L.C., SIGMA CAPITAL MANAGEMENT, L.L.C., STEVEN A. COHEN, ROCKER PARTNERS, L.P., COPPER RIVER PARTNERS, L.P., DAVID ROCKER, THIRD POINT L.L.C., DANIEL S. LOEB, JEFFREY PERRY, INSTITUTIONAL CREDIT PARTNERS, L.L.C., WILLIAM GAHAN, [1]JAMES S. CHANOS, and KYNIKOS ASSOCIATES, L.P., Defendants-Respondents, and EXIS CAPITAL MANAGEMENT, INC., EXIS CAPITAL, L.L.C., EXIS DIFFERENTIAL PARTNERS, L.P., EXIS INTEGRATED PARTNERS, L.P., ADAM D. SENDER, ANDREW HELLER, and MORGAN KEEGAN & COMPANY, INC., Defendants-Respondents/ Cross-Appellants, and SPYRO CONTOGOURIS, MAX BERNSTEIN, MI4 INVESTORS, L.L.C., MI4 RECONNAISSANCE, L.L.C., MI4 LIMITED PARTNERSHIP, JOHN D. GWYNN,

          Argued October 17, 2016

          On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2032-06.

          Michael J. Bowe (Kasowitz, Benson, Torres & Friedman, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for appellants/cross-respondents (Nagel Rice, L.L.P. and Kasowitz, Benson, Torres & Friedman, L.L.P., attorneys; Bruce H. Nagel, Jay J. Rice, Marc E. Kasowitz of the New York bar, admitted pro hac vice, Daniel R. Benson of the New York bar, admitted pro hac vice, and Mr. Bowe, of counsel and on the briefs).

          Benjamin P. McCallen (Willkie Farr & Gallagher, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for respondents S.A.C. Capital Management, L.L.C., S.A.C. Capital Advisors, L.L.C., S.A.C. Capital Associates, L.L.C., Sigma Capital Management, L.L.C. and Steven A. Cohen (Parker Ibrahim & Berg, L.L.C. and Mr. McCallen, attorneys; Joseph T. Boccassini, Martin B. Klotz of the New York bar, admitted pro hac vice, and Scott S. Rose of the New York bar, admitted pro hac vice, on the brief).

          Mark S. Werbner (Sayles Werbner, P.C.) of the Texas bar, admitted pro hac vice, argued the cause for respondents/cross-appellants Exis Capital Management, Inc., Exis Capital, L.L.C., Exis Differential Partners, L.P., Exis Integrated Partners, L.P., Adam D. Sender and Andrew Heller (Walder Hayden & Brogan, P.A., and Mr. Werbner, attorneys; Richard A. Sayles of the Texas bar, admitted pro hac vice, Mr. Werbner, Mark D. Strachan of the Texas bar, admitted pro hac vice, and Mark Torian, of the Texas bar, admitted pro hac vice, of counsel; Rebekah R. Conroy and Joseph A. Hayden, Jr., on the brief).

          Gavin J. Rooney argued the cause for respondents Copper River Partners, L.P., Rocker Partners, L.P. and David Rocker (Lowenstein Sandler, L.L.P., attorneys; Mr. Rooney, on the brief).

          Tibor L. Nagy, Jr., argued the cause for respondents Third Point L.L.C., Daniel S. Loeb and Jeffrey Perry (Tompkins, McGuire, Wachenfeld & Barry, L.L.P. and Matthew S. Dontzin (Dontzin Nagy & Fleissig, L.L.P.) of the New York bar, admitted pro hac vice, attorneys; Mr. Dontzin, Mr. Nagy, and William McGuire, on the brief).

          Thomas F. Campion argued the cause for respondent/cross-appellant Morgan Keegan & Company, Inc. (Greenberg, Traurig, L.L.P., Drinker Biddle & Reath, L.L.P., and Bruce W. Collins (Carrington, Coleman, Sloman & Blumenthal, L.L.P.) of the Texas bar, admitted pro hac vice, attorneys; Philip R. Sellinger, Roger B. Kaplan, Aaron Van Nostrand, Mr. Collins, Diane M. Sumoski of the Texas bar, admitted pro hac vice, Todd A. Murray of the Texas bar, admitted pro hac vice and Bryan A. Erman, of the Texas bar, admitted pro hac vice, on the briefs).

          Stewart D. Aaron (Arnold & Porter, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for respondents Kynikos Associates, L.P. and James S. Chanos (Gibbons, P.C., and Mr. Aaron, attorneys; Mr. Aaron, Susan L. Shin of the New York bar, admitted pro hac vice, Joel D. Rohlf of the New York bar, admitted pro hac vice, and Marco J. Martemucci of the New York bar, admitted pro hac vice, of counsel; Brian J. McMahon and Joshua R. Elias, on the brief).

          Before Judges Fisher, Ostrer and Leone.

          OPINION

          FISHER, P.J.A.D.

         In describing the adjudication of ostensibly difficult cases, Justice Holmes observed that "when you walk up to the lion and lay hold the hide comes off and the same old donkey of a question of law is underneath."[3] This case's leonine demeanor is well-deserved. Discovery generated millions of pages of documents, the parties conducted more than 150 depositions, the joint appendix consists of nearly 200, 000 pages, and the parties' excellent written submissions - succinct though they are - total nearly 600 pages.[4] Nevertheless, as predicted by Holmes, after grappling with this lion's fearsome hide, we have found not unfamiliar issues lurking beneath. The sheer size of this case and the number of issues, however, has frustrated the normal desire to succinctly describe the implements of decision and, in the final analysis, overwhelmed our preference for brevity. Consequently, we take the unusual step of presenting, for the reader's ease, the following table of contents for this overlength opinion:

         TABLE OF CONTENTS

         I. INTRODUCTION..................................................................................................................... 8

         II. PLAINTIFFS' STORY ................................................................................................ 9

         A. The Plot Alleged ....................................................................................... 10

         B. The Suit At Hand ....................................................................................... 21

         III.A BRIEF HISTORY OF THE PROCEEDINGS .......................................... 22

         IV.THE ISSUES POSED ................................................................................................... 25

         A. The Viability of the

Racketeering Claims ........................................................................ 2 6
1. Plaintiffs' Arguments ......................................................... 26
2. The Judge's Decision ............................................................29
3. Our Holding .......................................................................................34
(a) Some General Principles .................................35
(b) Ginsberg's Impact ...................................................36
(c) New Jersey's Racketeering Laws ...............................................................4 0
(d) New York's Racketeering Laws ...............................................................4 6
(e) The Choice ........................................................................4 8
(i) Legislative Directive .....................50
a. Is There an Express
Directive? ....................................... 50
b. Is There an Implied Directive? ....................................... 52
(ii)Application of the Second Restatement ............................................. 5
6 a. Section 6 ................................................ 56
b. Section 145 .......................................... 61
c. Specific Tort Principles ....................................... 64
(iii)Conclusion ................................................... 72

         B. The Maintainability of the Common Law Claims .............................................................................. 7 3

1. The Statute of Limitations
Applicable to Plaintiffs' Disparagement Claim ...................................................... 7 3
2. Dismissal of Plaintiffs' Disparagement and Tortious Interference With Prospective Economic Advantage Claims Based on the Absence of Special Damages .....................................................................82
(a) Choice of Law ...............................................................82
(b) Common Law Requirements .................................8 3
(i) Disparagement ................................................83
(ii) Tortious Interference With Prospective Economic Advantage ..............................85
(c) Damages Asserted ......................................................86
3. Summary ...................................................................................................88
C. The Personal Jurisdiction Rulings ....................................89
1.General Jurisdiction .........................................................91
(a) Kynikos .................................................................................91
(b) Third Point .....................................................................92
2. Specific Jurisdiction .........................................................95
3. Conspiracy-Based Jurisdiction .................................96
4. Summary ...................................................................................................112
D. The Summary Judgments In Favor of the SAC Defendants and the Rocker Defendants .......................................................................................113
1. The SAC Defendants ..................................................................113
(a) The Parties' Arguments ....................................113
(b) The Trial Judge's Ruling ..............................115
(c) Our Holding .....................................................................117
2.The Rocker Defendants .........................................................123
(a) The Parties' Arguments ....................................123
(b) The Trial Judge's Ruling ..............................125
(c) Our Holding .....................................................................128
E. Lost Profits and the Elson Reports .................................12 9
1.General Principles ..................................................................132
2 .The Judge's Disposition of the In Limine Motion Regarding Elson's Expert Testimony ..................................................................133
3.Our Ruling ..........................................................................................136
V. THE CROSS-APPEALS ...................................................................................................141
A. Standing ...............................................................................................................141
B. First Amendment Grounds ..................................................................14 5
1. The Parties' Arguments ......................................................145
2. The Trial Judge's Decision ..........................................147
3. Our Holding .......................................................................................14 9

         V. CONCLUSION ........................................................................................................................155

         APPENDIX .......................................................................................................................................A-1

         I

         INTRODUCTION

         In this complex litigation, which was summarily dismissed in many stages over the course of six years, the Canadian and New Jersey plaintiffs asserted, among other things, that defendants - most of whom were located in New York - engaged in a racketeering enterprise that caused plaintiffs billions of dollars in damages. That claim required a careful consideration of choice-of-law principles because New Jersey recognizes that a plaintiff may maintain a private civil RICO cause of action and New York doesn't. We agree the trial court correctly chose and applied New York law in dismissing the RICO claim. We reject, however, the trial court's determination that plaintiffs' common law causes of action were governed by a New York statute of limitations and hold instead that our own statute of limitations applies; any past uncertainty about that evaporated with the illumination provided by our Supreme Court's recent decision in McCarrell v. Hoffmann-La Roche, Inc., 227 N.J. 569 (2017). We also conclude that New York substantive law applies and limits - but does not eliminate - plaintiffs' common law causes of action. Consequently, we affirm in part, reverse in part, and remand for further proceedings.

         II

         PLAINTIFFS' STORY

         Because our Brill[5] standard governed the trial court's disposition of the many issues presented, as it also guides our review, Townsend v. Pierre, 221 N.J. 36, 59 (2015), we examine the disposition of plaintiffs' claims by assuming the truth of their allegations and by giving plaintiffs the benefit of all reasonable inferences. Consequently, our description of the occurrences that triggered this suit are based on plaintiffs' allegations and should not be construed as our acceptance of their truth; in short, we only assume their truth. "I cannot tell how the truth may be; I say the tale as 't was said to me." Sir Walter Scott, The Lay of the Last Minstrel, canto II, st. 22 (1805).

         A. The Plot Alleged

         We are told plaintiff Fairfax Financial Holdings Limited (Fairfax) is a Canadian insurance holding company located in Toronto, and Crum & Forster Holdings Corp. (C&F) is a New Jersey corporation headquartered in Morristown. In 1998, Fairfax sought to rescue C&F from failure by purchasing it for hundreds of millions of dollars. C&F's turnaround, however, took longer and proved more difficult than Fairfax originally anticipated. Chief among its difficulties was what plaintiffs have claimed is a "racketeering scheme" designed to "kill" them both.

         Plaintiffs assert they were the victims of a "bear raid, " by which short-sellers borrow securities, sell them, and then drive the price of that stock down through lies and other forms of market manipulation. See, e.g., Robert G. DeLaMater, Target Defensive Tactics As Manipulative Under Section 14(e), 84 Colum. L. Rev. 228, 244 n.114 (1984). The short-seller then repurchases the shares at the lower price - or not at all if the prey becomes bankrupt and its shares are rendered worthless - and profits from the difference between the higher price at which it sold the borrowed shares and the lower price it pays for the shares it returns to the lender. Because short-selling has its risks - the short-seller must pay interest and post collateral on the borrowed shares that may prove costly - a "short squeeze"[6] quickly causes an increase in the losses suffered.

         Plaintiffs claim the short-sellers here were shorted so heavily that the way to a profit and the avoidance of massive losses required that they cause Fairfax to fail. Plaintiffs quote the statements of various defendants that they intended to "kill this company, " "crush this company, " "drive a stake through that pig Fairfax's heart, " and "tak[e] this baby down for the count." Plaintiffs also quote various defendants' statements that the alleged plan involved "get[ting] them where they eat, like the credit [analysts] and [stock] holders" and "stop [their] being able to write biz"; in short, they claim the short-sellers were intent on inflicting "death by a thousand knives" by getting Fairfax's subsidiaries "downgraded" and having C&F go into "runoff, " causing a loss of rating and rendering the company "pretty much worthless."

         Plaintiffs claim that, so motivated, defendants engaged in a RICO enterprise. See Boyle v. United States, 556 U.S. 938, 948, 129 S.Ct. 2237, 2245, 173 L.Ed.2d 1265, 1277 (2009) (defining such an enterprise as "a continuing unit that functions with a common purpose" that "need not have a hierarchical structure or a 'chain of command'"). Plaintiffs allege that all defendants were associated in this RICO enterprise, and they described in detail the involvement of the dramatis personae, which we summarize in the following brief way:

•defendant Morgan Keegan & Company, Inc., a registered broker-dealer that provides investment services to hedge funds and others; defendant John Gwynn was a Morgan Keegan analyst. According to plaintiffs, Morgan Keegan disseminated more than sixty materially false and misleading research reports on Fairfax and C&F that were authored by Gwynn, and Morgan Keegan and Gwynn also uttered numerous disparaging communications;
•defendant S.A.C. Capital Management, L.L.C., S.A.C. Capital Advisors, L.L.C., S.A.C. Capital Associates, L.L.C., and Sigma Capital Management, L.L.C., are alleged to be hedge funds controlled by defendant Steven A. Cohen (collectively "the SAC defendants"); according to plaintiffs, the SAC defendants engaged defendant Spyro Contogouris on a similar past bear raid of a different company and, according to plaintiffs, similarly engaged him to do the same with plaintiffs. The SAC defendants were the largest investors in the Exis defendants[7] and non-party Bridger Capital Management, which both possessed an economic interest in the alleged scheme.
•Contogouris was, according to plaintiffs, an enterprise operative who posed as an independent research analyst and disseminated disinformation, instigated a Securities & Exchange Commission investigation, and generated negative news stories about plaintiffs[8] via the so-called "MI4" reports.[9]
•The Exis defendants were alleged to be hedge funds that secured a substantial short position in Fairfax. They and their chief executive and chief operating officers, defendants Adam D. Sender and Andrew Heller, respectively, were alleged to have maintained the closest relationship with Contogouris; they allegedly provided him with office space, assistants and a most substantial compensation package.
•defendants Rocker Partners, L.P., and Copper River Partners, L.P., are alleged to be hedge funds based in Millburn primarily owned and managed by defendant David Rocker (collectively, the Rocker defendants); according to plaintiffs, the Rocker defendants worked closely with defendant Kynikos Associates, L.P., Morgan Keegan and other members of the alleged enterprise in shorting Fairfax at the scheme's inception.
•defendant Institutional Credit Partners, L.L.C. (ICP) is a financial firm alleged to have paid and worked closely with Contogouris, and to have traded in advance of negative events allegedly generated by Contogouris. According to plaintiffs, ICP directly disseminated false claims about them; ICP employees are alleged to have worn surgical gloves to avoid leaving fingerprints on materials they transmitted, and William Gahan, an ICP credit analyst, obtained the bail bond that secured Conto-gouris's release after he was arrested by the Federal Bureau of Investigation on an unrelated fraud charge months after this suit was filed.
•defendant Kynikos Associates, L.P. - a limited partnership organized in 1985 in Delaware with its principal place of business in New York - is an investment advisor and management company specializing in short-selling; it has managed over $1 billion for its clients. Plaintiffs alleged that Kynikos and its founder and president, James S. Chanos, participated in the enterprise in that they worked closely with other defendants, including Contogouris.
•defendant Christopher Brett Lawless, a New Jersey resident, worked as a research analyst for Fitch Ratings in New York City and for the Center for Financial Research and Analysis in Maryland. Lawless allegedly tutored Contogouris to enable him to pose as a research analyst and thereafter continued to collaborate with Morgan Keegan, Contogouris and those paying Contogouris.
•defendants Third Point, L.L.C., is an investment management firm created under the laws of Delaware and headquartered in New York. During the times in question, Third Point provided management services to several investment funds that traded in Fairfax securities. Defendant Daniel S. Loeb is the founder and managing member of Third Point, and defendant Jeffrey Perry was a senior analyst.

         According to plaintiffs, in 2002, the SAC defendants, Kynikos, the Rocker defendants, and others, were collaborating and either aggressively shorting or preparing to short Fairfax. Plaintiffs claim that C&F had begun to favorably turn its position around at that time, so defendants' enterprise sought a "negative catalyst" to drive down C&F's price, and the enterprise began to "educate[] rating agencies and other research analysts about their negative views."

         On December 18, 2002, the day after deciding to cover their position, the SAC defendants learned that Gwynn of Morgan Keegan was about to issue a report that Fairfax and its subsidiaries were under-reserved by billions of dollars and effectively insolvent. Gwynn tipped off Kynikos and faxed an outline of the issues. Upon receiving this tip, the SAC defendants began communicating directly with Gwynn, and Kynikos and Third Point thereafter traded in advance of the report based on the tipped information.[10]

         Morgan Keegan published its report on January 17, 2003. Plaintiffs allege that Morgan Keegan falsely claimed that Fairfax had overstated its equity by more than $5 billion and that Morgan Keegan's alleged false claim devastated Fairfax's stock price, which fell thirteen percent in one day and further in the days that followed. Two weeks later, Morgan Keegan issued a second report acknowledging it "possibly" double-counted $2 billion in purported subsidiary liabilities, including at C&F. As a result, the stock price recovered somewhat but remained down.

          According to plaintiffs, enterprise members traded heavily on Morgan Keegan's tips concerning its initial report. In exchange, Morgan Keegan benefited from these tips by way of commissions through referred trades, and with the expectation of greater future benefits. According to plaintiffs, Morgan Keegan understood their big payoff - what a Morgan analyist referred to as "our 7-8 digit trade!!" - would come when Fairfax's "stock goes to zero." Consequently, for the next four years, Morgan Keegan published more than sixty research reports that portrayed plaintiffs and their affiliates as "an insolvent, Enron-like fraud[]"; this disinformation was, according to plaintiffs, orchestrated, and Morgan Keegan was urged to make sure its reports were "really negative." Morgan Keegan communicated in other ways that Fairfax and its executives were "crook[s]" and "felons" who manipulated financial information to "mak[e] it look like they have a profit." Plaintiffs claim Morgan Keegan knew of the falsity of its disseminated statements.

         Plaintiffs allege that, despite the inflicted harm, their turnaround was progressing, causing defendants' enterprise to either quit its position at a loss or increase the short position and intensify their efforts. Information amassed in the joint appendix evokes scenes from Oliver Stone's 1987 film, Wall Street. One hedge fund manager - defendant Adam Sender, who was affiliated with the Exis defendants - explained to Contogouris that he "want[ed] [Prem Watsa's[11] head in a box, " and another viewed the dissemination of negative reports as the equivalent of needing to "keep . . . this gun loaded with bullets" and "eventually this pig will roll over and die." Meanwhile, to add content to the negative reports, Morgan Keegan allegedly fed Contogouris with the false claims that: Fairfax was disguising billions in debt as reinsurance; Fairfax was turning its investment subsidiaries - with the use of "[s]moke and [m]irrors" - into "an illegal enterprise"; and that Watsa was "transferring his personal holdings into asset protection schemes that he thinks will be safe from regulators."

         Over the course of nearly two years, Contogouris - allegedly at the direction and with the support of Morgan Keegan, Lawless, the Exis defendants, Third Point and Kynikos - disseminated false claims to the FBI, federal prosecutors, the SEC, the media, ratings agencies, research analysts and investors, that Fairfax was engaged in an Enron-like fraud.[12] In June 2005, the SAC defendants re-shorted Fairfax - a month after Contogouris's approach to the FBI that resulted in the service of SEC subpoenas on Fairfax in September 2005. Three weeks earlier, the investors of Exis, of which SAC was the largest, were tipped off that "subpoenas from the regulators . . . should be announced in the next three weeks." The Exis defendants and the SAC defendants increased their short positions in advance of the subpoenas.

         Plaintiffs further allege, and refer to the voluminous record in support, that Contogouris provided false and negative information to various media and targeted as part of this campaign: investors, institutions and research analysts; rating agencies[13]; Fairfax executives and staff[14]; and even to Watsa's parish pastor.[15] Contogouris allegedly made harassing telephone calls to Watsa's home and office at night to "rattle his cage." Plaintiffs assert that Contogouris kept Morgan Keegan and Lawless advised of his activities, and Morgan Keegan reported these activities to other enterprise members.

          According to plaintiffs, the enterprise members learned during the Summer of 2006 that the FBI and federal prosecutors intended to expand their investigation into Fairfax in light of Contogouris' disseminations, and they also learned that The New York Post was about to publish a series of negative stories. Contogouris used code in communicating this information to enterprise members, referring to the FBI as the "meteorologist, " The New York Post reporter as the "Postman, " and what he expected to imminently occur as the "Hurricane, " which was due in August. Sender encouraged others to short the stock and the SAC defendants, which allegedly were in contact with Sender and Contogouris "all the time" during this period, increased their short position in June 2006. To fuel the flames, rumors were allegedly spread on June 22 and 23, 2006, that Watsa had transferred his assets into his wife's name and that he fled the country as the Royal Canadian Mounted Police raided Fairfax's offices.

         The day after these rumors started, the Exis defendants rewarded Morgan Keegan with substantial trading business. Fairfax's stock price plummeted for two days before Fairfax issued a statement debunking the rumors.

          B. The Suit At Hand

         Plaintiffs commenced this lawsuit on July 26, 2006. Their complaint was filed just before what they allege were to be the final steps in the enterprise's scheme but not before they allegedly suffered significant monetary damages. Plaintiffs claim Fairfax suffered damages to its assets and equity, as well as those of its subsidiaries, in the billions of dollars.[16]

         Particularly relevant in light of the issues on appeal, plaintiffs claim C&F incurred a loss of nearly $1 billion, including: (1) approximately $200, 000, 000 in capital costs and interest incurred in and paid from New Jersey in the form of having to raise capital not otherwise needed; (2) lost profits estimated at $545, 000, 000; and (3) increased costs and expenses in the form of higher directors and officers (D&O) insurance premiums with far less coverage, and greater legal, accounting, and administrative costs to deal with the enterprise's alleged wrongful actions.

         III

         A BRIEF HISTORY OF THE PROCEEDINGS

          As mentioned, plaintiffs commenced this action in 2006. A second amended complaint was filed in 2007 and a third in 2008. Plaintiffs alleged defendants' manipulations violated New Jersey's RICO statute and gave rise to several common law claims, specifically commercial or product disparagement, tortious interference with prospective economic advantage, tortious interference with contractual relationships, and civil conspiracy.

         On July 11, 2008, the Rocker defendants moved for summary judgment, asserting that insufficient evidence existed to establish that it participated in the alleged conspiracy. The judge then presiding over the matter[17] granted, on September 25, 2008, the Rocker defendants' application, but did so without prejudice.

          On May 5, 2011, the SAC defendants sought summary judgment on grounds substantially similar to those that the Rocker defendants had successfully advanced, namely, that there was insufficient evidence to demonstrate the SAC defendants' participation in the alleged scheme against plaintiffs. On September 12, 2011, the court granted the SAC defendants' motion for summary judgment.

         Meanwhile, Kynikos moved for summary judgment, claiming our courts could not assert personal jurisdiction over it. Third Point and ICP also moved for summary judgment on the same or similar grounds. Kynikos and Third Point also sought a choice-of-law determination, arguing New York law both governed plaintiffs' conspiracy claims and required a dismissal of plaintiffs' RICO claims. And, in the same period of time, the Rocker defendants sought a determination that the September 25, 2008 grant of summary judgment "without prejudice" be converted to a dismissal "with prejudice."

         On December 23, 2011, the court granted the Rocker defendants' application to convert its prior determination to summary judgment with prejudice and dismissed the third amended complaint against Kynikos, Third Point and ICP for lack of personal jurisdiction.

         Many more motions followed.

          On April 13, 2012, Morgan Keegan, Lawless, the Exis defendants and the MI4 defendants filed a consolidated motion for summary judgment with respect to all the common law claims plaintiffs had asserted against them.[18] And, on April 20, 2012, plaintiffs cross-moved for reconsideration of the court's prior dismissal of the Rocker defendants with prejudice.

         On May 11, 2012, the trial court granted partial summary judgment in favor of Lawless. Finding New York law governed plaintiffs' racketeering allegations, the trial court dismissed plaintiffs' RICO claims. And plaintiffs' reconsideration motion of the with-prejudice dismissal of the claims against the Rocker defendants was denied.

         In June 2012, the trial court heard and summarily dismissed plaintiffs' claim of tortious interference with prospective economic advantage but sustained plaintiffs' remaining common law claims.

         Also in June 2012, Morgan Keegan moved for partial summary judgment, seeking dismissal of plaintiffs' disparagement claim based on its alleged untimeliness; the motion was denied in August 2012. Later that month, the judge denied plaintiffs' request to reconsider its ruling that New York law controlled plaintiffs' racketeering and conspiracy claims. The judge also granted Morgan Keegan's application for reconsideration of the denial of summary judgment on the tortious-interference-with-contract claim but rejected Morgan Keegan's assertion that a one-year statute of limitations applied to plaintiffs' disparagement claim.

         On September 5, 2012, plaintiffs stipulated to the dismissal of Lawless without prejudice. On September 11, 2012, in accordance with a partial settlement agreement, the judge signed a consent order, which dismissed without prejudice plaintiffs' claims against Contogouris and the MI4 defendants. And, on September 12, 2012, the judge entered final judgment dismissing the entirety of the remainder of plaintiffs' third amended complaint, finding "a complete absence of proof" of proximately-caused damages.

         Plaintiffs filed a notice of appeal. Cross-appeals were also asserted.

         IV

         THE ISSUES POSED

         In appealing the summary dismissal of its causes of action, plaintiffs argue the trial court erred: (a) in dismissing their RICO claims by applying New York rather than New Jersey law; (b) in dismissing certain of their common law claims by applying New

          York's statute of limitations rather than New Jersey's; (c) in dismissing the claims against Kynikos, Third Point and the ICP defendants[19] for lack of personal jurisdiction; (d) in granting summary judgment in favor of both the SAC defendants and the Rocker defendants; and (e) in excluding the expert opinion of Craig Elson on damages that plaintiffs intended to elicit at trial, thereby shutting the door on any trial at all.

         A. The Viability of The Racketeering Claims

          In reviewing the disposition based on the trial court's application of choice-of-law principles, we describe (1) the parties' arguments and (2) the judge's decision, and then express (3) our agreement with the trial court's disposition of the RICO claim.

         1. Plaintiffs' Arguments

         Plaintiffs claim the trial court erred by dismissing their RICO claims through application of New York law. Indeed, they argue that choice-of-law questions do not even arise when a matter falls within the intended scope of a New Jersey statute; that is, they claim our Legislature intended to provide a remedy for every New Jersey domiciliary harmed by a RICO violation, which the law defines as harm arising from conduct of a prohibited kind that satisfies the enactment's territorial predicates, with no distinction between criminal and private prosecutions. And they argue there was sufficient conduct by defendants that either occurred within or had a sufficient effect in New Jersey to satisfy the statute, even apart from the conspiracy, which by itself - in their view - involved enough activity within New Jersey to satisfy the Criminal Code's definition of such an offense.

         Plaintiffs argue further that the court had no basis for "inventing" or "importing" common law principles to impose the territorial limitations on jurisdiction over traditional torts, noting that the limitations were not included in either the RICO statute or in the Criminal Code's general territoriality statute. On the contrary, they claim the Legislature has specified that the RICO provisions for civil remedies must be liberally construed to affect that enactment's remedial purpose and that all remedies be cumulative to one another and to other remedies at law.

         In addition, plaintiffs argue that the trial judge erred by failing to recognize there was no policy conflict between New Jersey and New York law because both states' enactments "provide civil remedies to deter and compensate for" the same proscribed conduct. And they argue New Jersey's allowance of private civil remedies does not constitute a different approach toward the shared goal of deterring racketeering, "only a different judgment about how best to use each state's judicial system to do so." Although both states seek to vindicate the same policies, plaintiffs argue New Jersey's broader remedies made it the better vehicle for achieving that goal, and thus the correct law to apply.

         Plaintiffs contend further that, even if New Jersey and New York law generated a true conflict, section 6 of the Restatement (Second) of Conflict of Laws (1971) (Am. Law Inst., amended 1988), [20] provided an independent basis for applying New Jersey law to the RICO claims. They assert section 6 warranted application of New Jersey law due to this State's interest in protecting C&F, which sustained injuries at its New Jersey headquarters, and because New Jersey had an interest in protecting other in-state businesses, such as the rating agencies and business news organizations that the enterprise is alleged to have deliberately misled in order to promote their scheme. Plaintiffs contend they reasonably expected the protection of New Jersey law to the extent of their business affecting this State, whereas defendants had no expectation that their misconduct would be any less violative of New York law than it would of New Jersey law. In addition, they contend that failing to apply New Jersey's RICO statute as intended would inject an unanticipated and unneeded balancing test between New Jersey law and out-of-state law.

         Finally, plaintiffs argue that the Second Restatement's section 145 standards favored application of New Jersey law due to the predominance of this case's contacts with New Jersey. They call New Jersey the situs of "the injury" because C&F had its domicile and principal place of business here, and they note that several enterprise members were New Jersey residents or engaged in enterprise activity within the State.

         2. The Judge's Decision

         In May 2012, the trial judge determined that New York's local law - that is, the law that applied within New York before any consideration of choice-of-law principles[21] - applied to the RICO claims and, accordingly, compelled the entry of summary judgment in defendants' favor. He first found an actual conflict existed - because New Jersey recognizes a private civil RICO action and New York doesn't - and observed that a statutory mandate for New Jersey jurisdiction over private civil claims would have precluded a choice-of-law analysis here, but then found no such mandate existed. The judge explained that RICO's own territoriality provision was expressly limited to criminal cases, and that the Legislature did not intend civil RICO claims to have the same jurisdictional reach or to be exempt from the "accepted, traditional common law principles of jurisdiction" for civil claims, which included application of choice-of-law principles.

         The trial judge recognized that the first step in a choice-of-law analysis was to determine whether any state was presumed to satisfy the Second Restatement's most fundamental touchstone of being the state with "the most significant relationship" to the matter and found that, though choice-of-law principles might deem C&F's loss of customers to have been an injury sustained in New Jersey, it was "improper" to presume New Jersey jurisdiction on that basis, because C&F was "a minor player in this matter, " there was a "complex interrelationship between [the] plaintiffs, " and the RICO allegations here were broader and more complex than a particular injury to one subsidiary.

         According to the trial judge, the "most direct consequence" of the alleged RICO enterprise was to decrease the market prices of plaintiffs' securities, a claim for which Fairfax was the "lead" plaintiff. All the other alleged injuries caused by the enterprise, namely, the increase in "capital costs, " the costs of responding to the SEC investigation, and the increased legal and accounting costs, "were a consequence of that deflation." The "most direct" injury and its derivatives arose from the alleged enterprise activity that involved the financial markets and financial news media and, as the judge observed, "[t]he financial markets, the news media and the parties are clearly based predominantly in New York." Accordingly, the New Jersey connections to the RICO claims - namely, the domiciles of C&F, A.M. Best, [22] and Lawless - did not suffice to give New Jersey the "most significant relationships" to a RICO enterprise as broad and complex as alleged. Consequently, the trial judge found that New York's local law presumptively applied.

         As for the other section 145 factors, the judge found that the "vast majority" of the alleged misconduct manifestly occurred in New York and only a fraction was committed by Lawless, the one defendant located in New Jersey. The judge determined that all other enterprise members were domiciled or incorporated elsewhere and conducted their activities elsewhere, and, also, that the enterprise members did not have a prior relationship, much less one centered in New Jersey. Furthermore, Fairfax and its other main United States operating Odyssey subsidiaries, [23] were domiciled or incorporated elsewhere and operated outside New Jersey. Accordingly, even if the decrease in the price of C&F securities was deemed a direct injury to C&F, as opposed to a derivative injury largely arising from its exposure to Fairfax's troubles, "the place where the injury occurred, " as defined by section 145(2)(a) of the Second Restatement, was nonetheless in New York's financial markets, and the enterprise members had "minimal contact with New Jersey" in causing it.

          The trial judge then turned to the general choice-of-law principles set out in section 6 of the Second Restatement. For comity's sake, he explained that, although New York and New Jersey had competing interests about whether private actors should be able to enforce a RICO statute, the two states' enactments were nonetheless similar and shared the "fundamental policies" of preventing racketeering and other organized crime. The two states' policies were therefore not in fundamental conflict, so interstate comity required New Jersey to respect New York's deliberate decision about how to serve that policy that included a decision to withhold a private RICO cause of action. The judge found that was also true from the perspective of "[t]hose involved in the financial markets based in New York" because they "should be able to depend on New York law" as the law governing "their conduct."

         As for the interests of the parties and the interests underlying the field of tort law, the judge observed that the parties knew New York law precluded exposure to private RICO claims regardless of their conduct. And, because New York had the "most significant relationship" to the matter, defendants had "no reasonable expectation" that such exposure could arise due to the application of another state's local law. The judge reasoned the result should not change just because the conduct, which was focused on "the New York financial industry, " also had tangential connections outside that state, such as the communications with A.M. Best, the one major rating agency located in New Jersey.

         The trial judge also observed that the only factor favoring application of New Jersey law instead of New York law was the greater involvement in this litigation of New Jersey's courts. He noted, however, that this factor did not outweigh the need to serve the choice-of-law "values, " which were "certainty, predictability and uniformity of results" in their application. Consequently, the judge ruled that the "qualitative balance" of all the section 145 and section 6 factors of the Second Restatement compelled application of New York local law, which, upon application, compelled dismissal of the RICO claims.

         3. Our Holding

         For the reasons that follow, we conclude that New York law, which does not permit a private civil racketeering action, applies in this case and, as held by the trial court, requires the dismissal of plaintiffs' RICO claim.

         We first consider (a) some general principles, as well as (b) the impact of the Supreme Court's recent decision in Ginsberg v. Quest Diagnostics, Inc., 227 N.J. 7, 18 (2016), on the issues raised. Then, because an early but pivotal step in resolving a choice-of-law problem requires a determination that a true conflict exists, we examine (c) New Jersey's racketeering laws, and their intent and purposes, and we thereafter similarly analyze (d) New York's racketeering laws. We then conclude this part of the opinion with a description of (e) the choice of law required in these circumstances.

         (a) Some General Principles

         In considering the propriety of the choice-of-law determinations in question, we observe, first, that the trial judge's interpretation of the RICO statutes is not entitled to deference. ADS Assocs. Grp., Inc. v. Oritani Sav. Bank, 219 N.J. 496, 511 (2014). Choice-of-law determinations present legal questions, which are subjected to de novo review. Bondi v. Citigroup, Inc., 423 N.J.Super. 377, 418 (App. Div. 2011), certif. denied, 210 N.J. 478 (2012); Arias v. Figueroa, 395 N.J.Super. 623, 627 (App. Div.), certif. denied, 193 N.J. 223 (2007). And choice-of-law decisions are made ...


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