HKMP E-Letter

September 2020
HKMP Partner Patrick McCormick obtained a summary judgment dismissal for an environmental contractor who was found to owe no duty of care to a commercial property owner.

In the 1990s, the environmental contractor was retained by the then-property owner to abandon underground storage tanks and conduct a soil and groundwater investigation. Upon completion, in and around 1997, the environmental contractor had provided documents regarding its work to the property owner along with a No Further Action letter.  Nearly two years later, the property owner contracted to sell the property to plaintiff. The property owner provided plaintiff with the No Further Action letter, and, allegedly, at least some of the documents prepared by the environmental contractor. The contract of sale afforded plaintiff the opportunity to conduct its own due diligence inspections. The plaintiff, however, chose not to exercise that right, instead relying on the No Further Action letter and explanatory documents from the environmental contractor, some of which, by that time, were several years old. The plaintiff claimed he knew of the reputation of the contractor and trusted that everything was fine with the property and chose not to do further investigation. Plaintiff then closed on the property.

In 2015, the plaintiff leased the property to a third party who commenced construction of a convenience store. During construction, contaminants were allegedly found necessitating remediation. Plaintiff sued, among others, the original environmental contractor and alleged the seller did not turn over all relevant documents. Following preliminary discovery, HKMP, on behalf of the environmental contractor, filed a motion for summary judgment on the basis that it owed no duty of care to the plaintiff, with whom it was not in privity of contract. The contractor further argued that it would not be fair to impose a duty when the contractor had no reason to know that a remote purchaser would rely on its work product several years into the future.

The Trial Court agreed that under the circumstances of this case it would be unfair to impose a duty of care. The Court noted that the contract of sale said the property was to be sold “as is” and that the plaintiff did not undertake due diligence.  The Court remarked that the plaintiff was an experienced buyer with knowledge of environmental law. Further, the Court was persuaded by the fact that under certain statutory requirements, purchasers of property who wait more than a year between a contractor’s work and the purchase of property cannot be considered “innocent purchasers” when resisting compliance with certain federal and state environmental laws. It would have also been reasonable for the contractor to assume that the seller of the property would have turned over all the documents it prepared to a future purchaser. 

In addition to finding no duty of care, the Court held the claim was barred under the Statute of Limitations, noting that if the plaintiff conducted his due diligence, he would have discovered the conditions he now claimed to be problematic, but since he ignored his obligation to inspect, the clock started to run at the time of purchase and expired fourteen years before the lawsuit was filed.
In the recent case of Estate of Roger Waddell Pickett v. Emro, Inc., decided August 25, 2020, the New Jersey Appellate Division found a commercial general liability policy’s assault-or-battery exclusion to be unambiguous in a case arising out a bar fight on New Year’s Day.

Roger Pickett was an invitee at Moore’s Lounge in Jersey City when he became embroiled in a verbal argument with James Corley, another patron who was a retired police officer. As Pickett turned to walk away, Corley shot and killed him. Corley was convicted of aggravated manslaughter. Pickett’s estate filed suit against the tavern owner, EMRO, Inc. The estate alleged that the tavern subjected Pickett and others to a weapons search upon entry but that Corley, a regular customer, was negligently permitted entry with a concealed weapon. The estate also alleged that the tavern continued to serve Corley after he had shown signs of intoxication. The Complaint asserted causes of action for negligent hiring, training and supervision. EMRO settled with the estate but then sought indemnification and defense costs from Northfield Insurance, having previously provided a notice of claim to Northfield shortly after the shooting. Northfield invoked the policy's assault-or-battery exclusion and denied EMRO's claim. EMRO argued that the assault-or-battery exclusion was ambiguous and did not expressly exclude claims based on negligent hiring, training and retention. 

In evaluating the applicability of the assault-or-battery exclusion, the Appellate Division made clear that "if the plain language of the policy is unambiguous, we will not engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased." The Court explained that a provision is ambiguous only if it is subject to more than one reasonable interpretation.  In that the estate alleged a battery and considering that the policy defined a battery as an “intentional, reckless or offensive . . . use of force against a person without his . . . consent that inflicts some injury”, and considering that Corley was convicted of recklessly causing Pickett’s death, the Court was satisfied that the death met the policy’s definition of “battery.” The Court also found the Northfield policy excluded claims arising out of an assault or battery, "includ[ing] any act or omission in connection with the prevention or suppression of such 'assault' or 'battery.'" Thus, in the Court’s view, the exclusion encompassed negligent acts or omissions that failed to prevent the assault or battery.  
In Bartz v. Weyerhaeuser Company, et. al., decided August 26, 2020, the Appellate Division affirmed an order of the trial court which found that the arbitration clause contained in a Construction Agreement was unenforceable because it failed to comply with established guidelines laid out by the New Jersey Supreme Court and the New Jersey Plain Language Act (NJPLA). 

Plaintiffs contracted with defendant to build a new home. The contract contained an arbitration clause providing that claims arising out of the agreement would be resolved pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Thereafter, plaintiffs alleged that the wooden floor joists supporting the home emitted toxic gases in excess of acceptable levels rendering the house uninhabitable. Municipal construction officials would not issue a certificate of occupancy. Despite defense attempts to compel arbitration, the trial court determined that the arbitration clause failed to meet the criteria for arbitration clauses laid out by the New Jersey Supreme Court in Atalese v. U.S. Legal Services Group, 219 N.J. 430 (2014). 

In affirming the lower court’s decision, the Appellate Division highlighted the defects in the arbitration clause: (1) it did not explain what arbitration was; (2) it did not explain how arbitration differed from litigation; or (3) it did not explain that the parties were waiving their right to a jury trial. Moreover, the Court concluded that the clause did not satisfy the requirements of the NJPLA which mandates that a consumer contract be “easily readable” and written in at least ten-point type. In Bartz, the clause used a Times New Roman 6.5 font. Because of these defects, the court concluded there was no mutuality of assent, rendering the arbitration clause unenforceable.
In the case of Hocutt v. Minda Supply Co., decided August 7, 2020, the New Jersey Appellate Division considered whether plaintiff Carlton Hocutt, an employee of a leasing company, rather than of defendant Minda Supply Co., (where plaintiff was assigned to work) was barred under the New Jersey Workers’ Compensation Act (WCA) from suing defendant on the grounds the defendant violated federal law. Plaintiff was injured in a forklift accident while working at defendant’s warehouse. He sued defendant claiming the company was negligent in directing him to ride as a passenger on a forklift in violation of federal workplace safety regulations.  The trial court dismissed the action, finding that plaintiff’s sole remedy rested with workers’ compensation because plaintiff was a “special employee” and the defendant was a “special employer” triggering the application of the WCA.  On appeal, plaintiff argued that the WCA did not apply because he was employed by an employee leasing agency, and not directly by the defendant. Plaintiff further contended that even if he were an employee of defendant, he was not barred by the WCA because the defendant committed an intentional wrong.

The Appellate Division evaluated whether plaintiff fit the definition of a “special employee” under the WCA.  The Court applied a five-prong test in assessing the criteria of a special employer-special employee relationship with emphasis on whether there was an express or implied contract for hire with the defendant. In applying the test, the Court concluded that plaintiff was a special employee and subject to the exclusive workers compensation remedy, noting the analysis is fact-sensitive. Having concluded the plaintiff was a special employee, the Court considered whether an intentional wrong was committed. It was evident to the Court that the defendant neither knew that its actions had a “substantial certainty” to cause injury or death, nor that the circumstances of the plaintiff’s injury were nothing more than a fact of life of industrial employment. While the Court noted that the defendant adopted practices in the warehouse in a way to expedite matters, such negligence, or even recklessness, was not an intentional wrong. Given the absence of fraud or history of prior misconduct, the Appellate Division did not believe that the defendant’s misconduct was plainly beyond anything the Legislature intended to immunize. 
In the matter of Defense Distributed, et. al., v. Attorney General State of New Jersey, decided on August 25, 2020, the Third Circuit Court of Appeals ruled it lacked appellate jurisdiction on the issue of whether a lower federal court should entertain a motion for a preliminary injunction.  

The Plaintiffs in the case are various firearm interest organizations who challenged efforts by the New Jersey Attorney General to preclude unregistered and unlicensed persons from distributing computer programs that can be used to make firearms with a three-dimensional printer. Attorneys General from other states undertook similar efforts. Plaintiffs alleged that the New Jersey Attorney General’s actions violated their rights under, among other things, the First and Second Amendments. Plaintiffs moved for a preliminary injunction in the United States District Court for the State of New Jersey

Before the plaintiffs filed their action in New Jersey, some of the same plaintiffs filed a similar action in the United States District Court for the Western District of Texas (“The Texas Action”). In view of this, the New Jersey Attorney General moved to stay the New Jersey case. The New Jersey District Court agreed with the Attorney General and stayed the case until the Texas Action was resolved, explaining that the same parties could not procced in two courts, at the same time and on the same issue. In appealing to the Third Circuit, the plaintiffs sought a ruling that the District Court should not have stayed the case and that it should decide the motion for a preliminary injunction. 

In assessing the issue, the Third Circuit noted that only final decisions of the district courts are appealable, although there are limited exceptions in situations where district courts refuse injunctions.  While the District Court did not specifically deny the injunctive relief, but simply stayed the case, the Third Circuit needed to determine whether the stay had the “practical effect” of an injunction, and if it did, whether serious, perhaps irreparable, consequence would result which could only be addressed by immediate appeal. 
The Third Circuit ruled that since the District Court stayed the case, rather than denied the request for the preliminary injunction, the Third Circuit did not have jurisdiction to review plaintiff’s claims. The Court explained that the stay order was a non-appealable order.  More to the point, the Third Circuit rejected the argument that the District Court’s order resulted in serious, perhaps irreparable consequences. In this regard, the Third Circuit noted that if plaintiffs wanted immediate relief, they could have dismissed the Texas Action so the New Jersey case could proceed.  Absent those circumstances, the Third Circuit dismissed plaintiffs’ appeal.
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