A recent trial court decision shows how far courts are willing to go in excusing noncompliance with New Jersey’s affidavit of merit statute. In Fairfield Board of Education v. Doerr, the court was asked to excuse the plaintiff’s failure to supply a timely affidavit of merit to support its allegations of audit malpractice. New Jersey’s affidavit of merit statute (N.J.S.A. 2A:53A-27) was enacted in 1995 as part of a tort reform package intended to curb frivolous lawsuits. It provides that in any action alleging professional negligence or malpractice against an accountant (or a defined group of other licensed professionals), the plaintiff must file, within 60 days of the answer, “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 . . . standards.” The statute provides that the court may grant one 60-day extension of the time requirement and that failure to file a timely affidavit “shall be deemed a failure to state a cause of action,” which requires a dismissal with prejudice.

In Doerr, the plaintiff failed to serve an affidavit of merit within the statutory time period and the defendant accounting firms moved to dismiss. Only later – 145 and 159 days after the filing of each defendant’s answer – did the plaintiff serve an affidavit.

As the trial court noted, despite the clear language of the statute, the New Jersey Supreme Court has judicially rewritten it to provide a “safe harbor” based on a plaintiff’s good-faith substantial compliance. The court has held that a defendant cannot show prejudice simply because it “would have to defend against a potentially meritorious claim” that did not satisfy the timing requirements of the statute. In 2003, the court engrafted onto the statute an exception providing that a case would not be dismissed if a plaintiff served an affidavit of merit any time before the defendant moved to dismiss. In fact, the court made it even easier to alert plaintiffs to the requirement by mandating that the trial courts hold status conferences in professional malpractice cases before expiration of the statutory time period. Several Appellate Division decisions have held that the trial court’s failure to schedule such a conference would excuse a plaintiff’s noncompliance with the time requirements for filing the affidavit.

In Doerr, a court conference did not take place because plaintiff’s counsel had improperly filled out the Case Information Statement, failing to identify the action as a professional negligence case. Recognizing that “counsel for plaintiff might not have quite grasped the nature of plaintiff’s causes of action,” the court blamed the court clerk’s office because some – but not all – of defendants identified it as such and “even a casual reading of the complaint would have revealed the inconsistency between its allegations and the CIS.” (This appears to be the only case in which nonlawyer personnel in the clerk’s office are required to have greater legal acumen than the plaintiff’s own counsel!)

The court also noted that the plaintiff had served upon the defendants a report from Bederson & Company detailing the derelictions in the board’s accounting practices and which “specified plaintiff’s damages and the factual bases for those damage claims.” The Bederson report identified potential liabilities associated with payroll taxes, pension contributions and questionable credit card purchases. It did not, however, identify either of the defendant accounting firms by name, criticize any of the prior audit reports or even state that they were actually reviewed. The Doerr court conceded that the Bederson report did not declare that there was a reasonable probability that the failure to detect or report the alleged faulty internal accounting practices constituted negligence by the defendant outside auditors. Although the affidavit of merit statute clearly required a dismissal with prejudice, the court nonetheless dismissed the action without prejudice, which meant that the plaintiff could re-file it.

If accountants can take any solace from Doerr, they may get it from the court’s rejection of the plaintiff’s argument that an affidavit of merit was not required because the jurors’ “common knowledge as lay persons” was sufficient to enable them, using their ordinary understanding and experience, to determine a defendant’s negligence without the specialized knowledge of an expert. The court found that “the duties of accountants in the specialized area of auditing are clearly beyond the ken of average jurors in a case such as that at bar.”