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Appellate Division decision sides with NJSBA on substantial interest test and statute of limitations in malpractice claims

In a closely watched choice-of-law case with potential far-reaching implications for New Jersey attorneys holding licenses in other states, the Appellate Division held that New Jersey attorneys cannot be held to the longer New Jersey professional malpractice statute of limitations when representing clients in other states simply because they are licensed here.

“[A]pplying New Jersey’s six-year statute of limitations here would frustrate the purpose of adopting the substantial-interest test and defy public policy,” said the Appellate Division in its decision on whether to extend New Jersey’s six-year statute of limitations to a malpractice case arising out of a Pennsylvania negligence case.

Restating the New Jersey State Bar Association’s argument in its amicus brief filed in the matter, the court reversed the trial court in MTK Food Services, Inc. v. Sirius America Insurance Co., Docket No. A-1309-17T2, on June 29, in a decision that would have had serious implications for attorneys with dual licenses in other states with shorter statutes of limitations for malpractice claims than New Jersey. The NJSBA’s brief was drafted by David R. Kott, William T. Reilly and Christopher A. Rojao of McCarter & English, and argued by Kott before the Appellate Division.

In MTK, New Jersey attorney Spencer Robbins was hired to pursue an insurance claim against Sirius for a fire that damaged the plaintiff’s restaurant, located in Pennsylvania. Robbins allegedly negotiated a settlement with Sirius, but neglected to inform the plaintiff of the settlement. Robbins asked a Pennsylvania attorney to assist with the litigation. The Pennsylvania attorney, Richard Grungo, of Archer & Greiner, P.C., who was licensed in both New Jersey and Pennsylvania, filed a writ of summons in Pennsylvania, but never had any contact with the plaintiff. Grungo later told Robbins he could no longer remain as counsel of record on the matter because of a conflict, and the matter was dismissed by a Pennsylvania court. By the time the plaintiff learned of the dismissal, the statute of limitations for the insurance matter had run.

The plaintiff filed a legal malpractice claim against the attorneys, including Grungo and Archer & Greiner. Granting their application for dismissal of the claims against them, the trial court ruled that Pennsylvania’s two-year statute of limitations applied to deny the plaintiff’s claims against Grungo and Archer & Greiner. The trial court applied the most-significant relationship test under the Restatement (Second) of Conflict of Laws §§145 and 6 (Am. Law Inst. 1971). Just under two years after this motion was decided, the plaintiff filed a motion for reconsideration in the trial court based upon the New Jersey Supreme Court’s decision in McCarrell v. Hoffman La-Roche, Inc., 227 N.J. 569 (2017), which held that courts should use the substantial interest test to resolve statute of limitations conflicts as set forth in §142 of the Restatement. The trial court reversed its prior decision and held that maintenance of the claim would serve the substantial interest of the forum state because of the substantial interest in regulating the conduct of attorneys who practice within their borders.

The NJSBA underscored the practical implications of the trial court’s decision on New Jersey attorneys. “Indeed, under this erroneous ruling anyone could take advantage of the longer statute of limitations and file a legal malpractice claim in New Jersey against any New Jersey-licensed lawyer wherever located, regardless of where the representation occurred or that state’s limitations period,” said the NJSBA in its brief. “It is important to the NJSBA and its members that this broad pronouncement and expansion of McCarrell be corrected, and that New Jersey-licensed attorneys and firms are not unfairly prejudiced for their properly authorized practice of law in other jurisdictions.”

The Appellate Division agreed, finding that the only connection to New Jersey here was that Grungo held a New Jersey license. “The only pertinent connection to New Jersey—that Grungo, a New Jersey licensed attorney, worked in a New Jersey office—falls short of establishing a substantial interest for New Jersey to apply its statute of limitations here,” said the Appellate Division.

“We are pleased the Appellate Division agreed with the NJSBA arguments in this matter,” said Association President John E. Keefe Jr. “This case illustrates the importance of the NJSBA’s pending professional malpractice legislation, which would reduce the statute of limitations for professional malpractice actions in New Jersey to two years, and would place all New Jersey professionals on more equal footing with professionals in other states.”