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Yerkes v. Weiss

United States District Court, D. New Jersey

March 29, 2018

ERIC YERKES, Plaintiff,
v.
ANAPOL WEISS, Defendant.

          EDWARD T. KANG, ESQ. DAVID RYAN SCOTT, ESQ. KANG HAGGERTY & FETBROYT LLC ATTORNEYS FOR PLAINTIFF

          JOSEPH GOLDBERG, ESQ. WEBER, GALLAGHER, SIMPSON, STAPLETON, FIRES & NEWBY, LLP, ATTORNEY FOR DEFENDANT

          OPINION

          HON. JEROME B. SIMANDLE, Judge

         I. INTRODUCTION

         Plaintiff Eric Yerkes brings this malpractice and breach of contract case against Defendant, Annapolis Weiss, the law firm of his former attorney, on the grounds that Defendant committed legal malpractice and breached its contract with him when Plaintiff's lawyer, Paul Anapol, negligently misrepresented that certain annuity payments provided for in a settlement agreement, negotiated by Anapol, would be or were “guaranteed.” [Docket Item 1.] This matter is before the Court on Defendant's motion to dismiss on the basis of the statute of limitations, or, in the alternative, Pennsylvania's Muhammad[1] doctrine or New Jersey's “Entire Controversy Doctrine.” [Docket Item 11.] Plaintiff has filed a Response [Docket Item 16], Defendant has filed a Reply [Docket Item 18], and (with leave of the Court [Docket Item 20]), Plaintiff has filed a sur-Reply [Docket Item 21].

         The Court is obliged to undertake a choice of law analysis, first as to the statute of limitations, and subsequently to the substantive law, to determine whether Defendant's motion is properly granted. For the reasons that follow, the Court will deny Defendant's motion.

         II. BACKGROUND[2]

         Plaintiff Eric Yerkes, a New Jersey resident at all relevant times, was involved in a plane crash in a Cessna airplane, along with his brother, near the Grand Canyon in Arizona in 1981, whereupon he suffered severe and permanent injuries. [Docket Item 1 ¶¶ 7-8.] Paul Anapol, Esq., (deceased as of 2012), solicited the business of Plaintiff's brother in New Jersey, who then passed along Mr. Anapol's information to Plaintiff. Id. ¶ 11. Plaintiff then retained Mr. Anapol and his law firm, then known as Anapol, Schwartz, Weiss, and Schwartz, P.C., and now known as Anapol Weiss (the named Defendant here), to represent him in connection with the plane crash; Mr. Anapol sent Plaintiff an engagement letter at his home in New Jersey, and Plaintiff's mother agreed on to the representation on behalf of Plaintiff (then a minor). Id. ¶¶ 10, 12. Defendant communicated with Plaintiff at his home in New Jersey throughout the course of Defendant's representation. Id. ¶ 13.

         With the assistance of Defendant, Plaintiff sued both Cessna and the operator of the airplane in the United States District Court for the District of Arizona, “Docket No. CV-83-01616-PHX-WPC for the injuries he sustained in the crash.” Id. ¶ 14. Plaintiff settled with the airplane operator on or about April 6, 1984 on Defendant's advice. Id. ¶ 15.

         On or about April 1, 1986, “Plaintiff entered into a Release and Indemnity Agreement and Assignment Agreement with Cessna (the ‘Cessna Settlement Agreement') that yielded Plaintiff a cash payment of $125, 000 and periodic payments consisting of $1, 000 a month for life and the following lump sum payments (the ‘Periodic Payment')”:

$25, 000

payable

in 5 years

February

1991

$40, 000

payable

in 10 years

February

1996

$70, 000

payable

in 15 years

February

2001

$125, 000

payable

in 20 years

February

2006

$200, 000

payable

in 25 years

February

2011

$350, 000

payable

in 30 years

February

2016

$450, 000

payable

in 35 years

February

2021

$600, 000

payable

in 40 years

February

2026

$900, 000

payable

in 45 years

February

2031

$1, 200, 000

payable

in 50 years

February

2035

$2, 000, 000

payable

in 55 years

February

2041

Id. ¶ 16. Plaintiff also “received an additional $150, 000 cash settlement” from the airplane operator, pursuant to its own settlement agreement, once he executed the Cessna Settlement Agreement. Id. ¶ 19.

         Plaintiff states: “As part of the Cessna Settlement Agreement, Cessna purchased an annuity policy from Executive Life Insurance Company of New York (ELNY) for the payment of the Periodic Payments to Plaintiff and assigned all of its obligations under the Cessna Settlement Agreement to ELNY (the ‘Annuity'). The assignment of Cessna's obligations under the Cessna Settlement Agreement was approved by Plaintiff upon the advice of the Defendant. In entering into the Cessna Settlement Agreement, Plaintiff was assured by the Defendant that the Periodic Payments were ‘guaranteed.'” [Docket Item 1 ¶¶ 20-22.] In fact, the “Recapitulation/Distribution sheet” given to Plaintiff by Defendant “states that under the Cessna Settlement Agreement ‘All Periodic Payments Guaranteed to Eric N. Yerkes By The Cessna Aircraft Company' and ‘The Total Payout, Assuming a 59 Year Life-Expectancy is $6, 668, 000.00 of Which All but the Sum of $468, 000 is Guaranteed by Cessna.'” Id. ¶ 23. Plaintiff notes that, as a result of Defendant taking into account the Periodic Payments, “from the $275, 000.00 lump-sum payments, Plaintiff only received $43, 472.06 while the remaining $231, 527.94 was paid to the Defendant for its services” as a contingency fee. Id. ¶¶ 24-27.

         In subsequent years, ELNY experienced financial trouble and was placed in conservation under the California Insurance Commissioner and entered into rehabilitation under Section 7402 of the New York Insurance Law in 1991, although Plaintiff continued to receive his scheduled Periodic Payments. Id. ¶¶ 29-31.

         Twenty-one years later, in 2012, the New York Supreme Court, Nassau County, “entered an order finding ELNY to be insolvent and approved a restructuring agreement of ELNY pursuant to which ELNY's assets were liquidated and restructured.” Id. ¶ 32. The Guaranty Association Benefits Company (“GABC”) “took over the assets of ELNY, ” including Plaintiff's annuity that Cessna had purchased pursuant to the Cessna Settlement Agreement, on August 8, 2013. Id. ¶ 33. Up to that point, Plaintiff continued to receive monthly payments and the Periodic Payments in their full prescribed amounts. Id. ¶ 34. “By letter dated October 13, 2014, Plaintiff was informed by GABC that the Periodic Payments were reduced by 56.46% to a total of just 43.54% of their original amount effective August 8, 2013.” Id. ¶ 35. Because the New York Supreme Court had approved this arrangement, Plaintiff was left “with no recourse against ELNY or GABC.” Id. ¶ 36. Both the monthly payments and the periodic payments have been so reduced, and Plaintiff (who continues to reside in New Jersey) has been accordingly damaged in New Jersey. Id. ¶ 37.

         Plaintiff called Defendant after learning of the reduction; one of Defendant's lawyers, Joel Feldman, advised Plaintiff that he “would have to sue Cessna for the reduction” although Defendant could not represent him; Plaintiff subsequently filed such a suit in the U.S. District Court for the District of New Jersey, No. 1:14-cv-05925-RMB-JS, against Cessna for breach of contract and unjust enrichment. Id. ¶ 39-40. That case was dismissed on March 24, 2016 “upon a finding that the Cessna Settlement Agreement and Cessna's purchase of the annuity from ELNY fully released Cessna from all obligations for the Periodic Payments.” Id. ¶ 41. Plaintiff states that this ruling contradicted what Defendant told him: namely, that the payments were “guaranteed” by Cessna. Id. ¶¶ 42-43.

         Plaintiff states that he would not have entered into the Cessna Settlement Agreement “but for the representations of the Defendant that the Periodic Payments were guaranteed” when “in actuality, the Periodic Payments were in no way guaranteed by Cessna or anyone else and depended entirely upon the financial health and stability of ELNY”; as a result of Defendant's breach of its duty owed to Plaintiff and failure to exercise the level of skill, care, and knowledge commonly exercised by members of the legal profession, “Plaintiff is no longer receiving the full benefit of the Cessna Settlement Agreement that the Defendant encouraged him to enter into and which Plaintiff believed he would receive[, ]” resulting in damages over the life of the Cessna Settlement Agreement in excess of $3, 000, 000.00. Id. ¶¶ 44-49.

         Plaintiff submits that he did not discover Defendant's negligence “and his damages from the Defendant's malpractice did not become fixed until the March 24, 2016 Order that dismissed his claims against Cessna that the Defendant advised him to bring.” Id. ¶¶ 50.

         Plaintiff claims Defendant is liable for legal malpractice (Count I, id. ¶¶ 51-62), unjust enrichment (Count II, id. ¶¶ 63-72), and breach of contract (Count III, id. ¶¶ 73-77).

         III. STANDARD OF REVIEW

         Pursuant to Rule 8(a)(2), Fed. R. Civ. P., a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Specific facts are not required, and “the statement need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citations omitted). While a complaint is not required to contain detailed factual allegations, the plaintiff must provide the “grounds” of his “entitle[ment] to relief”, which requires more than mere labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., may be granted only if, accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the plaintiff, a court concludes that the plaintiff failed to set forth fair notice of what the claim is and the grounds upon which it rests. Id. A complaint will survive a motion to dismiss if it contains sufficient factual matter to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). Although a court must accept as true all factual allegations in a complaint, that tenet is “inapplicable to legal conclusions, ” and “[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.” Id. at 678.

         “Under Fed.R.Civ.P. 8(c), the statute of limitations constitutes an affirmative defense to an action. Under the law of this other circuits, however, the limitations defense may be raised on a motion under Rule 12(b)(6), but only if the time alleged in the statement of a claim shows that the cause of action has not been brought within the statute of limitations.” Bethel v. Jendoco Const. Corp., 570 F.2d 1168, 1174 (3d Cir. 1978)(internal citations and quotations omitted). “If the bar is not apparent on the face of the complaint, then it may not afford the basis for a dismissal of the complaint under Rule 12(b)(6).” Id.

         IV. ANALYSIS

         Defendant moves to dismiss on the basis of the statute of limitations, Pennsylvania's Muhammad doctrine (if this Court determines Pennsylvania law applies), and/or New Jersey's “Entire Controversy” doctrine (if this Court determines New Jersey law applies). [Docket Item 11.] The Court will first address the statute of limitations.

         A. Statute of Limitations

         Defendant argues that Plaintiff filed this action beyond the statute of limitations, and that it must be dismissed as untimely. Accordingly, the Court must determine the appropriate statute of limitations period to assess whether Plaintiff's suit was filed within the limitations period or, if not, if any part of the period was tolled such that he may maintain his suit.

         Plaintiff asserts the Court's jurisdiction is based on 28 U.S.C. § 1332 “as there is complete diversity of citizenship between the Plaintiff and the Defendant and the amount in controversy is in excess of $75, 000. . . . Plaintiff is a citizen of New Jersey while the Defendant is a citizen of Pennsylvania.” [Docket Item 1 ¶ 3.] “A federal court sitting in diversity applies the choice-of-law rules of the forum state- here, New Jersey-to determine the controlling law.” Maniscalco v. Brother Intern. (USA) Corp., 709 F.3d 202, 206 (3d Cir. 2013).

         “The first inquiry is whether the laws of the states with interests in the litigation are in conflict. If there is no actual distinction, there is no choice-of-law issue to be resolved, and the forum state applies its own substantive law.” In re Accutane Litigation, No. 271 (MCL), 2017 WL 3138003, at *24 (N.J. Sup. Ct. App. Div. July 25, 2017)(internal citations omitted).

         Defendant argues that Pennsylvania's statute of limitations applies; Plaintiff argues that New Jersey's does.

         In 2017, the New Jersey Supreme Court held that, in a tort action, “section 142 of the [Restatement (Second) of Conflicts of Law] is now the operative choice-of-law rule for resolving statute-of-limitations conflicts[.]” McCarrell v. Hoffmann-La Roche, Inc., 227 N.J. 569, 574, 583 (2017). Under Section 142 of the Second Restatement, “the statute of limitations of the forum state-here, New Jersey-applies if that state has a substantial interest in the maintenance of the claim and there are no ‘exceptional circumstances' that ‘make such a result unreasonable.'” Id. (citing Restatement (Second) of Conflicts of Law § 142).

         Section 142 states:

Whether a claim will be maintained against the defense of the statute of limitations is determined under the principles stated in § 6. In general, unless the exceptional circumstances of the case make such a result unreasonable:
(1) The forum will apply its own statute of limitations barring the claim.
(2) The forum will apply its own statute of limitations permitting ...

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