Two recent trial court rulings in New Jersey, one federal and one state, have rejected business interruption insurance coverage for New Jersey businesses that were forced to close during the COVID-19 pandemic.  N&S Restaurant LLC v. Cumberland Mut. Fire Ins. Co. and Mac Property Group LLC v. Selective Fire and Cas. Ins. Co.;

Both courts held that coverage was barred by a virus exclusion in the insurance policies – an exclusion for any loss caused by a virus or microorganism capable of causing illness.  The insureds argued that their losses were caused not by the virus but by Governor Murphy’s Executive Order closing non-essential retail businesses; both courts rejected that argument because the virus exclusion applies to any loss caused “directly or indirectly” by a virus.  

The courts also held that, under the policies’ “anti-concurrent causation” clause, the virus exclusion applies regardless of any additional causes of loss or the sequence of causation.  In other words, the Executive Order may have caused the business closures, but the virus is what caused Governor Murphy to issue the Executive Order.

If you would like to discuss this case further please contact Shalom Stone, Stone Conroy, 973-400-4182 or sstone@stoneconroy.com.

A recent unpublished Appellate Division decision upheld the longstanding “new business” rule which bars new businesses from claiming lost profits.  Schwartz v. Menas

Under the new business rule, “prospective profits of a new business are considered too remote and speculative to meet the legal standard of reasonable certainty.”  Over the past 80-plus years, most states have rejected the new business rule and allow lost profits when they can be proved “with reasonable certainty.”  The Appellate Division observed in Schwartz that the Third Circuit has twice (in 1990 and 1993) invited the New Jersey Supreme Court to change its mind, and a plurality of the Supreme Court hinted in 1992 that the new business rule may no longer be absolute.  But the Appellate Division declared in Schwartz that until a majority of the Supreme Court says otherwise, the new business rule remains the law in this State.

The attorneys for the plaintiffs have advised NJCJI that they plan to file a petition for certification with the state Supreme Court.

If you would like to discuss this case further please contact Shalom Stone, Stone Conroy, 973-400-4182 or sstone@stoneconroy.com.

The New Jersey Supreme Court heard arguments on November 10 about whether certain keyword advertising by attorneys should be prohibited.  In re Supreme Court Advisory Committee on Professional Ethics Opinion No. 735;

At the invitation of the Court, NJCJI filed a brief and argued the issue as a friend of the court.

Like other businesses, attorneys often purchase “keyword” advertising to market their practices.  Some attorneys purchase a competitor’s name as one of those keywords, and the Supreme Court was tasked with deciding whether such advertisements are fraudulent and therefore prohibited by attorney ethics rules.

Shalom Stone (founder of Stone Conroy LLC) appeared on behalf of NJCJI and argued that the Court should tread carefully.  A finding that such keyword advertisements are fraudulent as between attorneys could lead to a finding that such advertisements are fraudulent in other business contexts, resulting in a flood of lawsuits over “fraudulent” internet advertising.  

NJCJI argued that ethics rules should also address attorney advertisements that, according to the Federal Trade Commission, could leave consumers with the “false impression” that their prescription drugs “cause harms that outweigh their benefits.”  (In 2019, the Federal Trade Commission took steps to address this growing problem, issuing a series of letters to seven lawyers and legal advertisers about their potentially misleading advertisements.)  Attorney advertisements that mislead consumers about pharmaceutical drugs and medical devices, like other misleading attorney ads, are not protected by the First Amendment, and should be prohibited.

The Court will be ruling on the case at a later date. Click here for a story from Law 360 (paywall)  on the hearing.

If you would like to discuss this case further please contact Shalom Stone, Stone Conroy, 973-400-4182 or sstone@stoneconroy.com.

A recent published opinion from the Third Circuit holds an important lesson for businesses contemplating a federal court challenge to an employee classification dispute with the State of New Jersey: file the federal court complaint before the classification dispute becomes a state administrative proceeding. 

The New Jersey Department of Labor (DOL) audited PDX, a shipping company, and concluded that PDX’s drivers were employees, not independent contractors.  PDX challenged the DOL’s determination in the New Jersey Office of Administrative Law (OAL).  Several months later, PDX filed suit in federal court arguing that New Jersey’s statutory scheme for classifying workers was preempted by federal law and violated the Constitution’s interstate commerce clause.

The federal trial court dismissed the case on the grounds of Younger abstention, and the Third Circuit affirmed.  A critical factor in that abstention analysis was whether there was an “ongoing [state] judicial proceeding.”  Opinion at 9, n.3; id. at 17, 21.  The Third Circuit held that the New Jersey OAL proceeding, initiated by PDX against the DOL, was an “ongoing judicial proceeding,” and that PDX could raise its federal challenges, if not in that OAL proceeding, then in the state-court review of the OAL proceeding.  Opinion at 21-23.

By contrast, SLS (a different shipping company that intervened in PDX’s federal court case) was not involved in an “ongoing judicial proceeding” because SLS’s dispute with DOL was still at the audit stage, and no OAL proceeding had been initiated.  Opinion at 23-26.  The Third Circuit therefore held that abstention as to SLS’s claims was not proper.  (The Third Circuit noted that, on remand to the trial court, SLS’s case might yet be dismissed for lack of jurisdiction pursuant to the Tax Injunction Act, Opinion at 9, but that is a subject for another day.)

The lesson from the case is that a New Jersey business that is involved in an employee-classification dispute with DOL, and is considering a federal court challenge to New Jersey’s classification regime, should consider initiating the federal court filing before the dispute reaches the OAL.

If you would like to discuss this case further please contact Shalom Stone, Stone Conroy 973-400-4182 or sstone@stoneconroy.com.

In a recent unpublished opinion, the New Jersey Appellate Division held that a minor can be bound by an arbitration agreement. Clare v. ACT, Inc. (N.J. App. Div., October 26, 2020). 

Plaintiff took the ACT college admissions test several times. A dispute arose concerning Plaintiff’s scores. The trial court invalidated ACT’s arbitration clauses on multiple grounds including Plaintiff’s age (he was 17 when he took the second test and 18 when he took the third test). 

The Appellate Division reversed. 

As to Plaintiff’s age, the Court stated:

“[W]e disagree that, under these circumstances, a minor cannot be bound to an arbitration agreement. As described, Brendan was informed of defendant’s contractual terms and conditions at the time of registration for the exam, and twice on testing day. There was no time pressure to complete the registration process; a registrant had all the time he or she needed to review the terms and conditions and inquire of a parent or other adult the meaning of its provisions. Brendan’s age alone is insufficient to void the arbitration agreement.” (Opinion at 14.)

Should you wish to discuss this matter further please contact Shalom Stone, Stone Conroy, sstone@stoneconroy.com or 973-400-4182.

On March 9, 2020 Governor Murphy issued Executive Order 103 declaring COVID19 a public health emergency.

On March 21, 2020 Governor Murphy issued Executive Order 107 directing all New Jerseyans to stay at home.

On June 9, 2020 Governor Murphy issued Executive Order 152 lifting the stay at home order.

On June 29, 2020 S2628 (Diegnan) and S2634 (Gopal) are introduced providing businesses immunity from COVID19 liability suits, retroactive to March 9, 2020.

On July 30, 2020 the Legislature sent to the governor’s desk S2380 (Sweeney) which presumes all essential employees who contracted COVID19 did so at work.

On September 14, 2020 Governor Murphy signed S2380, which was effective immediately and retroactive to March 9, 2020.

On September 14, 2020 S2872 (Singleton) is introduced giving liability protection to businesses, but only for employers in certain covered industries who opt-in to a program that requires a $3/hour pay increase. Bill would take effect immediately and not be retroactive to March 9, 2020.

On October 26, 2020 this NJCJI op-ed was published urging the Legislature to consider COVID-19 liability protection for businesses.

Should you wish to discuss any COVID19 matters please contact Eric DeGesero, EDGE Consulting edegesero@edgeconsultingnj.com or 973-464-9504.

On Wednesday Governor Murphy issued Executive Order 192 which requires employers to take certain measurers related to COVID19.

Among the requirements employers must:

• Ensure that all employees are six feet apart to the maximum extent possible;
• Require face masks, except when an employee is at their workstation at least six feet from others, or is alone in a walled space such as an office – Note: employers may be authorized to prevent individuals who refuse to wear a mask from entering the worksite, where such actions are consistent with state and federal law.
• Provide face masks and sanitizing wipes/hand gel for their employees at the employer’s expense.
• Provide approved sanitizing wipes/hand gel for visitors at no cost to those individuals.
• Disinfect “high touch” areas consistent with NJ Department of Health and CDC guidelines.
• Conduct daily health checks, prior to a shift starting.
• Not allow sick employees to enter workplace.
• Follow requirements of applicable leave law.
• Notify employees of any known exposure to COVID-19 at the worksite.

Employers may have to provide an accommodation to employees who can medically document they have a disability and cannot wear a mask if the employee’s disability is covered under the American’s with Disabilities Act or NJ Law Against Discrimination.

If a customer or visitor refuses to wear a mask based on a disability neither the employer or its employees can require the individual to provide medical documentation. Conversely, the employer may have to make an accommodation unless it produces an undue hardship.

The NJ Department of Labor and Workforce Development, in consultation with the NJ Department of Health and OSHA, will receive and investigate complaints against employers and give employers an opportunity to correct any deficiency. DOLWD will also provide training for employers and employees.

EO 192 states explicitly there is no private right of action to enforce its provisions.

Click here for an overview of EO 192 from the NJ COVID19 site and here for EO 192.

EO 192 is effective November 5, 2020 at 6:00am.