Commercial Litigation Update

The Supreme Court of New Jersey recently issued its decision in Comprehensive Neurosurgical, P.C. v. Valley Hospital, vacating a $24.3 million award to a neurosurgery practice. The Court’s opinion offers valuable insight regarding the scope of implied contractual obligations under New Jersey law, particularly in the hospital industry.

The underlying dispute involved Valley Hospital’s grant of exclusive privileges to a new group of neurosurgeons, which effectively revoked the longstanding privileges held by plaintiffs. These privileges included the right to use specialized medical equipment and treat “unassigned” emergency room patients, an essential part of plaintiffs’ practice. The plaintiffs alleged that Valley’s actions were retaliatory, prompted by plaintiffs’ association with a newly opened nearby hospital. As a result, plaintiffs filed suit against Valley, claiming the hospital’s decision violated public policy and the hospital’s medical staff bylaws. Valley argued that it made a valid administrative healthcare decision because plaintiffs were diverting patients to the newly opened hospital.

On April 26, 2022 the Supreme Court of New Jersey heard arguments about whether New Jersey should retain the judicially created “new business rule”. Since 1936 the rule has held that in the context of calculating damages “prospective profits of a new business are considered too remote and speculative to meet the legal standard of reasonable certainty.” RSB Lab. Servs., Inc. v. BSI, Corp. This case is interesting for aggrieved business litigants as well as interested observers of the appellate process.

The Supreme Court of New Jersey unanimously held in Linda Cowley v. Virtua Health System (A-47-18) (081891) that the “common knowledge” exception of the Affidavit of Merit Statute applies only when a simple negligence standard is at issue, and does not apply when a specific standard of care must be evaluated.  In this case involving if and how to reinsert a removed nasogastric tube, the Court reversed the judgement of the Appellate Division and dismissed the plaintiff’s complaint with prejudice because she failed to submit an affidavit of merit within the time required by the Affidavit of Merit Statute.

Enacted in 1995, the Affidavit of Merit Statute requires that plaintiffs in medical malpractice cases “provide each defendant with an affidavit of an appropriate licensed person that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint, fell outside acceptable professional or occupational standards or treatment practices.” N.J.S.A. 2A:53A-27. The statute’s primary purpose “to require plaintiffs in malpractice cases to make a threshold showing that their claim is meritorious, in order that meritless lawsuits readily [can] be identified at an early stage of litigation.” Cornblatt v. Barow, 153 N.J. 218, 242 (1998). Failure to provide an affidavit or its legal equivalent is “deemed a failure to state a cause of action,” N.J.S.A. 2A:53A-29, requiring dismissal with prejudice.

An exception to this rule is the judicially-created “common knowledge” exception which provides that an expert is not needed to demonstrate that a defendant professional breached some duty of care “where the carelessness of the defendant is readily apparent to anyone of average intelligence.” Rosenberg v. Cahill, 99 N.J. 318, 325 (1985). In those exceptional circumstances, the “jurors’ common knowledge as lay persons is sufficient to enable them, using ordinary understanding and experience, to determine a defendant’s negligence without the benefit of the specialized knowledge of experts.” Hubbard v.  Reed, 168 N.J. 387, 394 (2001). Thus, a plaintiff in a malpractice case is exempt, under the common knowledge exception, from compliance with the affidavit of merit requirement where it is apparent that “the issue of negligence is not related to technical matters peculiarly within the knowledge of [the licensed] practitioner[].” Sanzari v.  Rosenfeld, 34 N.J. 128, 142 (1961).