New Jersey Attorney Law Review Blog

In a case of first impression, the New Jersey Appellate Division affirmed the dismissal of negligence claims brought against securities brokerage firm Merrill Lynch, finding that Merrill Lynch owed no duty of care to third parties who claimed the company should have policed its customer's account for fraud.  Frederick vs. Smith, et als. , Superior Court of New Jersey, Appellate Division, Docket A-1620-09T2 (November 9, 2010). In this case the plaintiffs alleged that defendant Maxwell Baldwin Smith (Smith) convinced them to invest in Healthcare Financial Partnership (HFP), a fictitious entity.  As part of the fraud, Smith instructed plaintiffs to convey the invested funds to an account that he maintained with Merrill Lynch.  Plaintiffs were not Merrill Lynch clients, yet Merrill Lynch accepted payment directly from the plaintiffs and the funds were deposited into Smith's account.  In support of their negligence claims, plaintiffs alleged that Smith convinced t...

Banks beware! In a case of first impression, a New Jersey appeals court held that a bank that pursues criminal charges against an innocent third party whose identify is stolen and used to defraud the bank can be sued civilly for negligence and malicious prosecution. In this particular case, Brunson v. Affinity Federal Credit Union , A-4439-06, the bank employed a fraud and loss prevention specialist (Mr. Wilcox) who happened to be a certified fraud examiner. According to the appellate record, an imposter posing as the plaintiff Brunson opened an Affinity account in Brunson's name using Brunson's social security number and an out-of-state driver's license bearing Brunson's date of birth and a Paterson, NJ address (misspelled with two "t's".) Within days of opening this account, the imposter successfully cashed $9,506 in phony checks drawn against a corporation known as Viva International Group. The bank's fraud and loss prevention specialist Wilcox wa...

Richard A. Pulaski Construction Co., Inc. v. Air Frame Hangars, Inc. (A-40-07, July 1, 2008). The New Jersey Supreme Court leaves open the question of whether New Jersey common law recognizes a prima facie tort claim. The legal definition of "prima facie" is evidence sufficient in law to establish a fact unless rebutted. In this case the New Jersey Supreme Court had to decide whether New Jersey common law provides a remedy for misconduct that did not meet the traditional standards of a tort cause of action (i.e., such as fraud). This was not the first time the Court confronted this issue, for 10 years earlier in Taylor v. Metzger , 152 N.J. 490 (1998), the Court expressly declined to recognize a prima facie tort claim under New Jersey common law. However, in Taylor the Court noted that a leading treatise (Restatement) explained that such a cause of action encompasses the intentional, willful and malicious harms that "fall within the gaps of the law" and have been m...