Fairfax Financial Holdings Limited v. S.A.C.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0963-12T1

FAIRFAX FINANCIAL HOLDINGS

LIMITED and CRUM & FORSTER

HOLDINGS CORP., APPROVED FOR PUBLICATION

Plaintiffs-Appellants/ April 27, 2017

Cross-Respondents, APPELLATE DIVISION

v.

S.A.C. CAPITAL MANAGEMENT, L.L.C.,

S.A.C. CAPITAL ADVISORS, L.L.C.,

S.A.C. CAPITAL ASSOCIATES, L.L.C.,

SIGMA CAPITAL MANAGEMENT, L.L.C.,

STEVEN A. COHEN, ROCKER PARTNERS,

L.P., COPPER RIVER PARTNERS, L.P.,

DAVID ROCKER, THIRD POINT L.L.C.,

DANIEL S. LOEB, JEFFREY PERRY,

INSTITUTIONAL CREDIT PARTNERS, L.L.C.,

WILLIAM GAHAN,1 JAMES S. CHANOS, and

KYNIKOS ASSOCIATES, L.P.,

Defendants-Respondents,

and

EXIS CAPITAL MANAGEMENT, INC.,

EXIS CAPITAL, L.L.C., EXIS

DIFFERENTIAL PARTNERS, L.P., EXIS

INTEGRATED PARTNERS, L.P., ADAM D.

SENDER, ANDREW HELLER, and MORGAN

KEEGAN & COMPANY, INC.,

Defendants-Respondents/

Cross-Appellants,

1 Defendants Institutional Credit Partners, L.L.C. and William

Gahan entered into a stipulation of dismissal with plaintiffs

prior to oral argument.

and

SPYRO CONTOGOURIS, MAX BERNSTEIN,

MI4 INVESTORS, L.L.C., MI4

RECONNAISSANCE, L.L.C., MI4

LIMITED PARTNERSHIP, JOHN D. GWYNN,2

and CHRISTOPHER BRETT LAWLESS,

Defendants.

______________________________________________

Argued October 17, 2016 – Decided April 27, 2017

Before Judges Fisher, Ostrer and Leone.

On appeal from the Superior Court of New

Jersey, Law Division, Morris County, Docket

No. L-2032-06.

Michael J. Bowe (Kasowitz, Benson, Torres &

Friedman, L.L.P.) of the New York bar,

admitted pro hac vice, argued the cause for

appellants/cross-respondents (Nagel Rice,

L.L.P. and Kasowitz, Benson, Torres &

Friedman, L.L.P., attorneys; Bruce H. Nagel,

Jay J. Rice, Marc E. Kasowitz of the New

York bar, admitted pro hac vice, Daniel R.

Benson of the New York bar, admitted pro hac

vice, and Mr. Bowe, of counsel and on the

briefs).

2 Defendant John Gwynn passed away in 2009. He had filed a

counterclaim, which alleged defamation, and the absence of a

disposition of that claim generated inquiries about finality

from this court soon after the appeal was filed. We were advised

that a representative of Gwynn's estate had been substituted in

his place pursuant to Rule 4:34-1, but that the estate had not

appeared in response to the claims asserted against him or to

prosecute his counterclaim. A remand to the trial court resulted

in the filing of a stipulation of dismissal with prejudice of

Gwynn's counterclaim. Gwynn's estate has neither appeared nor

taken any part in this appeal.

2 A-0963-12T1

Benjamin P. McCallen (Willkie Farr &

Gallagher, L.L.P.) of the New York bar,

admitted pro hac vice, argued the cause for

respondents S.A.C. Capital Management,

L.L.C., S.A.C. Capital Advisors, L.L.C.,

S.A.C. Capital Associates, L.L.C., Sigma

Capital Management, L.L.C. and Steven A.

Cohen (Parker Ibrahim & Berg, L.L.C. and Mr.

McCallen, attorneys; Joseph T. Boccassini,

Martin B. Klotz of the New York bar,

admitted pro hac vice, and Scott S. Rose of

the New York bar, admitted pro hac vice, on

the brief).

Mark S. Werbner (Sayles Werbner, P.C.) of

the Texas bar, admitted pro hac vice, argued

the cause for respondents/cross-appellants

Exis Capital Management, Inc., Exis Capital,

L.L.C., Exis Differential Partners, L.P.,

Exis Integrated Partners, L.P., Adam D.

Sender and Andrew Heller (Walder Hayden &

Brogan, P.A., and Mr. Werbner, attorneys;

Richard A. Sayles of the Texas bar, admitted

pro hac vice, Mr. Werbner, Mark D. Strachan

of the Texas bar, admitted pro hac vice, and

Mark Torian, of the Texas bar, admitted pro

hac vice, of counsel; Rebekah R. Conroy and

Joseph A. Hayden, Jr., on the brief).

Gavin J. Rooney argued the cause for

respondents Copper River Partners, L.P.,

Rocker Partners, L.P. and David Rocker

(Lowenstein Sandler, L.L.P., attorneys; Mr.

Rooney, on the brief).

Tibor L. Nagy, Jr., argued the cause for

respondents Third Point L.L.C., Daniel S.

Loeb and Jeffrey Perry (Tompkins, McGuire,

Wachenfeld & Barry, L.L.P. and Matthew S.

Dontzin (Dontzin Nagy & Fleissig, L.L.P.) of

the New York bar, admitted pro hac vice,

attorneys; Mr. Dontzin, Mr. Nagy, and

William McGuire, on the brief).

Thomas F. Campion argued the cause for

respondent/cross-appellant Morgan Keegan &

3 A-0963-12T1

Company, Inc. (Greenberg, Traurig, L.L.P.,

Drinker Biddle & Reath, L.L.P., and Bruce W.

Collins (Carrington, Coleman, Sloman &

Blumenthal, L.L.P.) of the Texas bar,

admitted pro hac vice, attorneys; Philip R.

Sellinger, Roger B. Kaplan, Aaron Van

Nostrand, Mr. Collins, Diane M. Sumoski of

the Texas bar, admitted pro hac vice, Todd

A. Murray of the Texas bar, admitted pro hac

vice and Bryan A. Erman, of the Texas bar,

admitted pro hac vice, on the briefs).

Stewart D. Aaron (Arnold & Porter, L.L.P.)

of the New York bar, admitted pro hac vice,

argued the cause for respondents Kynikos

Associates, L.P. and James S. Chanos

(Gibbons, P.C., and Mr. Aaron, attorneys;

Mr. Aaron, Susan L. Shin of the New York

bar, admitted pro hac vice, Joel D. Rohlf of

the New York bar, admitted pro hac vice, and

Marco J. Martemucci of the New York bar,

admitted pro hac vice, of counsel; Brian J.

McMahon and Joshua R. Elias, on the brief).

The opinion of the court was delivered by

FISHER, P.J.A.D.

In describing the adjudication of ostensibly difficult

cases, Justice Holmes observed that "when you walk up to the

lion and lay hold the hide comes off and the same old donkey of

a question of law is underneath."3 This case's leonine demeanor

is well-deserved. Discovery generated millions of pages of

documents, the parties conducted more than 150 depositions, the

3 Letter of December 11, 1909 appearing in 1 Holmes-Pollock

Letters: The Correspondence of Mr. Justice Holmes and Sir

Frederick Pollock 1874-1932, at 156 (Mark DeWolfe Howe ed.,

1941).

4 A-0963-12T1

joint appendix consists of nearly 200,000 pages, and the

parties' excellent written submissions — succinct though they

are – total nearly 600 pages.4 Nevertheless, as predicted by

Holmes, after grappling with this lion's fearsome hide, we have

found not unfamiliar issues lurking beneath. The sheer size of

this case and the number of issues, however, has frustrated the

normal desire to succinctly describe the implements of decision

and, in the final analysis, overwhelmed our preference for

brevity. Consequently, we take the unusual step of presenting,

for the reader's ease, the following table of contents for this

overlength opinion:

TABLE OF CONTENTS

I. INTRODUCTION……………………………………………………………………………………………………… 8

II. PLAINTIFFS' STORY …………………………………………………………………………………… 9

A. The Plot Alleged …………………………………………………………………………… 10

B. The Suit At Hand …………………………………………………………………………… 21

III. A BRIEF HISTORY OF THE PROCEEDINGS …………………………………… 22

IV. THE ISSUES POSED ……………………………………………………………………………………… 25

A. The Viability of the

Racketeering Claims ……………………………………………………………… 26

1. Plaintiffs' Arguments ………………………………………………… 26

4 So numerous were the filings in the trial court that the clerk

was required to assign a second docket number because the

court's database was unable to accommodate more than 999 filings

within a single docket number.

5 A-0963-12T1

2. The Judge's Decision …………………………………………………… 29

3. Our Holding …………………………………………………………………………… 34

(a) Some General Principles …………………………… 35

(b) Ginsberg's Impact …………………………………………… 36

(c) New Jersey's

Racketeering Laws ……………………………………………………… 40

(d) New York's

Racketeering Laws ……………………………………………………… 46

(e) The Choice ……………………………………………………………… 48

(i) Legislative Directive ………………… 50

a. Is There an Express

Directive? ………………………………… 50

b. Is There an Implied

Directive? ………………………………… 52

(ii) Application of the

Second Restatement ……………………………………… 56

a. Section 6 ………………………………………… 56

b. Section 145 …………………………………… 61

c. Specific Tort

Principles ………………………………… 64

(iii) Conclusion …………………………………………… 72

B. The Maintainability of the

Common Law Claims …………………………………………………………………… 73

1. The Statute of Limitations

Applicable to Plaintiffs'

Disparagement Claim ……………………………………………… 73

2. Dismissal of Plaintiffs'

Disparagement and Tortious

6 A-0963-12T1

Interference With Prospective

Economic Advantage Claims Based

on the Absence of

Special Damages …………………………………………………………… 82

(a) Choice of Law ……………………………………………………… 82

(b) Common Law Requirements …………………………… 83

(i) Disparagement ………………………………………… 83

(ii) Tortious Interference

With Prospective

Economic Advantage ………………………… 85

(c) Damages Asserted ……………………………………………… 86

3. Summary ……………………………………………………………………………………… 88

C. The Personal Jurisdiction Rulings ……………………………… 89

1. General Jurisdiction ………………………………………………… 91

(a) Kynikos ……………………………………………………………………… 91

(b) Third Point …………………………………………………………… 92

2. Specific Jurisdiction ………………………………………………… 95

3. Conspiracy-Based Jurisdiction …………………………… 96

4. Summary ……………………………………………………………………………………… 112

D. The Summary Judgments In Favor of

the SAC Defendants and the

Rocker Defendants …………………………………………………………………………… 113

1. The SAC Defendants ………………………………………………………… 113

(a) The Parties' Arguments ……………………………… 113

(b) The Trial Judge's Ruling ………………………… 115

(c) Our Holding …………………………………………………………… 117

2. The Rocker Defendants ………………………………………………… 123

7 A-0963-12T1

(a) The Parties' Arguments ……………………………… 123

(b) The Trial Judge's Ruling ………………………… 125

(c) Our Holding …………………………………………………………… 128

E. Lost Profits and the Elson Reports …………………………… 129

1. General Principles ………………………………………………………… 132

2. The Judge's Disposition of

the In Limine Motion

Regarding Elson's

Expert Testimony ………………………………………………………… 133

3. Our Ruling ……………………………………………………………………………… 136

V. THE CROSS-APPEALS ……………………………………………………………………………………… 141

A. Standing ………………………………………………………………………………………………… 141

B. First Amendment Grounds ………………………………………………………… 145

1. The Parties' Arguments ……………………………………………… 145

2. The Trial Judge's Decision …………………………………… 147

3. Our Holding …………………………………………………………………………… 149

V. CONCLUSION ………………………………………………………………………………………………………… 155

APPENDIX ……………………………………………………………………………………………………………………… A-1

I

INTRODUCTION

In this complex litigation, which was summarily dismissed

in many stages over the course of six years, the Canadian and

New Jersey plaintiffs asserted, among other things, that

defendants – most of whom were located in New York – engaged in

8 A-0963-12T1

a racketeering enterprise that caused plaintiffs billions of

dollars in damages. That claim required a careful consideration

of choice-of-law principles because New Jersey recognizes that a

plaintiff may maintain a private civil RICO cause of action and

New York doesn't. We agree the trial court correctly chose and

applied New York law in dismissing the RICO claim. We reject,

however, the trial court's determination that plaintiffs' common

law causes of action were governed by a New York statute of

limitations and hold instead that our own statute of limitations

applies; any past uncertainty about that evaporated with the

illumination provided by our Supreme Court's recent decision in

McCarrell v. Hoffmann-La Roche, Inc., 227 N.J. 569 (2017). We

also conclude that New York substantive law applies and limits –

but does not eliminate – plaintiffs' common law causes of

action. Consequently, we affirm in part, reverse in part, and

remand for further proceedings.

II

PLAINTIFFS' STORY

Because our Brill5 standard governed the trial court's

disposition of the many issues presented, as it also guides our

review, Townsend v. Pierre, 221 N.J. 36, 59 (2015), we examine

5 Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540

(1995).

9 A-0963-12T1

the disposition of plaintiffs' claims by assuming the truth of

their allegations and by giving plaintiffs the benefit of all

reasonable inferences. Consequently, our description of the

occurrences that triggered this suit are based on plaintiffs'

allegations and should not be construed as our acceptance of

their truth; in short, we only assume their truth. "I cannot

tell how the truth may be; I say the tale as 't was said to me."

Sir Walter Scott, The Lay of the Last Minstrel, canto II, st. 22

(1805).

A. The Plot Alleged

We are told plaintiff Fairfax Financial Holdings Limited

(Fairfax) is a Canadian insurance holding company located in

Toronto, and Crum & Forster Holdings Corp. (C&F) is a New Jersey

corporation headquartered in Morristown. In 1998, Fairfax sought

to rescue C&F from failure by purchasing it for hundreds of

millions of dollars. C&F's turnaround, however, took longer and

proved more difficult than Fairfax originally anticipated. Chief

among its difficulties was what plaintiffs have claimed is a

"racketeering scheme" designed to "kill" them both.

Plaintiffs assert they were the victims of a "bear raid,"

by which short-sellers borrow securities, sell them, and then

drive the price of that stock down through lies and other forms

of market manipulation. See, e.g., Robert G. DeLaMater, Target

10 A-0963-12T1

Defensive Tactics As Manipulative Under Section 14(e), 84 Colum.

L. Rev. 228, 244 n.114 (1984). The short-seller then repurchases

the shares at the lower price – or not at all if the prey

becomes bankrupt and its shares are rendered worthless – and

profits from the difference between the higher price at which it

sold the borrowed shares and the lower price it pays for the

shares it returns to the lender. Because short-selling has its

risks – the short-seller must pay interest and post collateral

on the borrowed shares that may prove costly – a "short squeeze"6

quickly causes an increase in the losses suffered.

Plaintiffs claim the short-sellers here were shorted so

heavily that the way to a profit and the avoidance of massive

losses required that they cause Fairfax to fail. Plaintiffs

quote the statements of various defendants that they intended to

"kill this company," "crush this company," "drive a stake

through that pig Fairfax's heart," and "tak[e] this baby down

for the count." Plaintiffs also quote various defendants'

statements that the alleged plan involved "get[ting] them where

they eat, like the credit [analysts] and [stock] holders" and

"stop [their] being able to write biz"; in short, they claim the

short-sellers were intent on inflicting "death by a thousand

6 The profitability of a short position fluctuates with changes

in the values of the borrowed shares. A sudden increase in the

cost of borrowing shares is known as a "short squeeze."

11 A-0963-12T1

knives" by getting Fairfax's subsidiaries "downgraded" and

having C&F go into "runoff," causing a loss of rating and

rendering the company "pretty much worthless."

Plaintiffs claim that, so motivated, defendants engaged in

a RICO enterprise. See Boyle v. United States, 556 U.S. 938,

948, 129 S. Ct. 2237, 2245, 173 L. Ed. 2d 1265, 1277 (2009)

(defining such an enterprise as "a continuing unit that

functions with a common purpose" that "need not have a

hierarchical structure or a 'chain of command'"). Plaintiffs

allege that all defendants were associated in this RICO

enterprise, and they described in detail the involvement of the

dramatis personae, which we summarize in the following brief

way:

 defendant Morgan Keegan & Company,

Inc., a registered broker-dealer that

provides investment services to hedge

funds and others; defendant John Gwynn

was a Morgan Keegan analyst. According

to plaintiffs, Morgan Keegan dissemin-

ated more than sixty materially false

and misleading research reports on

Fairfax and C&F that were authored by

Gwynn, and Morgan Keegan and Gwynn also

uttered numerous disparaging communica-

tions;

 defendant S.A.C. Capital Management,

L.L.C., S.A.C. Capital Advisors,

L.L.C., S.A.C. Capital Associates,

L.L.C., and Sigma Capital Management,

L.L.C., are alleged to be hedge funds

controlled by defendant Steven A. Cohen

(collectively "the SAC defendants");

12 A-0963-12T1

according to plaintiffs, the SAC

defendants engaged defendant Spyro

Contogouris on a similar past bear raid

of a different company and, according

to plaintiffs, similarly engaged him to

do the same with plaintiffs. The SAC

defendants were the largest investors

in the Exis defendants7 and non-party

Bridger Capital Management, which both

possessed an economic interest in the

alleged scheme.

 Contogouris was, according to plain-

tiffs, an enterprise operative who

posed as an independent research

analyst and disseminated disinforma-

tion, instigated a Securities &

Exchange Commission investigation, and

generated negative news stories about

plaintiffs8 via the so-called "MI4"

reports.9

 The Exis defendants were alleged to be

hedge funds that secured a substantial

short position in Fairfax. They and

their chief executive and chief

operating officers, defendants Adam D.

Sender and Andrew Heller, respectively,

were alleged to have maintained the

closest relationship with Contogouris;

they allegedly provided him with office

7 Namely, Exis Capital Management, Inc., Exis Capital, L.L.C.,

Exis Differential Partners, L.P., and Exis Integrated Partners,

L.P.

8 Adding to the drama, plaintiffs allege Contogouris acted

through the use of aliases, such as "Monsieur Skaramanga," a

James Bond villain.

9 The names of these reports refer to defendants MI4 Limited

Partnership, MI4 Reconnaissance L.L.C., and MI4 Investors,

L.L.C. (the MI4 defendants), all entities controlled by

Contogouris.

13 A-0963-12T1

space, assistants and a most sub-

stantial compensation package.

 defendants Rocker Partners, L.P., and

Copper River Partners, L.P., are

alleged to be hedge funds based in

Millburn primarily owned and managed by

defendant David Rocker (collectively,

the Rocker defendants); according to

plaintiffs, the Rocker defendants

worked closely with defendant Kynikos

Associates, L.P., Morgan Keegan and

other members of the alleged enterprise

in shorting Fairfax at the scheme's

inception.

 defendant Institutional Credit Part-

ners, L.L.C. (ICP) is a financial firm

alleged to have paid and worked closely

with Contogouris, and to have traded in

advance of negative events allegedly

generated by Contogouris. According to

plaintiffs, ICP directly disseminated

false claims about them; ICP employees

are alleged to have worn surgical

gloves to avoid leaving fingerprints on

materials they transmitted, and William

Gahan, an ICP credit analyst, obtained

the bail bond that secured Conto-

gouris's release after he was arrested

by the Federal Bureau of Investigation

on an unrelated fraud charge months

after this suit was filed.

 defendant Kynikos Associates, L.P. – a

limited partnership organized in 1985

in Delaware with its principal place of

business in New York – is an investment

advisor and management company special-

izing in short-selling; it has managed

over $1 billion for its clients.

Plaintiffs alleged that Kynikos and its

founder and president, James S. Chanos,

participated in the enterprise in that

they worked closely with other defen-

dants, including Contogouris.

14 A-0963-12T1

 defendant Christopher Brett Lawless, a

New Jersey resident, worked as a

research analyst for Fitch Ratings in

New York City and for the Center for

Financial Research and Analysis in

Maryland. Lawless allegedly tutored

Contogouris to enable him to pose as a

research analyst and thereafter

continued to collaborate with Morgan

Keegan, Contogouris and those paying

Contogouris.

 defendants Third Point, L.L.C., is an

investment management firm created

under the laws of Delaware and

headquartered in New York. During the

times in question, Third Point provided

management services to several invest-

ment funds that traded in Fairfax

securities. Defendant Daniel S. Loeb is

the founder and managing member of

Third Point, and defendant Jeffrey

Perry was a senior analyst.

According to plaintiffs, in 2002, the SAC defendants,

Kynikos, the Rocker defendants, and others, were collaborating

and either aggressively shorting or preparing to short Fairfax.

Plaintiffs claim that C&F had begun to favorably turn its

position around at that time, so defendants' enterprise sought a

"negative catalyst" to drive down C&F's price, and the

enterprise began to "educate[] rating agencies and other

research analysts about their negative views."

On December 18, 2002, the day after deciding to cover their

position, the SAC defendants learned that Gwynn of Morgan Keegan

was about to issue a report that Fairfax and its subsidiaries

15 A-0963-12T1

were under-reserved by billions of dollars and effectively

insolvent. Gwynn tipped off Kynikos and faxed an outline of the

issues. Upon receiving this tip, the SAC defendants began

communicating directly with Gwynn, and Kynikos and Third Point

thereafter traded in advance of the report based on the tipped

information.10

Morgan Keegan published its report on January 17, 2003.

Plaintiffs allege that Morgan Keegan falsely claimed that

Fairfax had overstated its equity by more than $5 billion and

that Morgan Keegan's alleged false claim devastated Fairfax's

stock price, which fell thirteen percent in one day and further

in the days that followed. Two weeks later, Morgan Keegan issued

a second report acknowledging it "possibly" double-counted $2

billion in purported subsidiary liabilities, including at C&F.

As a result, the stock price recovered somewhat but remained

down.

10 Plaintiffs claim that Kynikos re-shorted over $5 million in

shares just before the first report. And, after not shorting for

four months, Third Point sold short $1,500,000 in shares the day

before publication. The SAC defendants did not cover its short

positions by year-end as originally planned but completed their

cover after the report was issued and the stock price dropped

sharply. Plaintiffs assert that many of the trades involving

these and other parties or accounts controlled by the enterprise

members violated insider-trading laws and support their RICO

claim.

16 A-0963-12T1

According to plaintiffs, enterprise members traded heavily

on Morgan Keegan's tips concerning its initial report. In

exchange, Morgan Keegan benefited from these tips by way of

commissions through referred trades, and with the expectation of

greater future benefits. According to plaintiffs, Morgan Keegan

understood their big payoff – what a Morgan analyist referred to

as "our 7-8 digit trade!!" – would come when Fairfax's "stock

goes to zero." Consequently, for the next four years, Morgan

Keegan published more than sixty research reports that portrayed

plaintiffs and their affiliates as "an insolvent, Enron-like

fraud[]"; this disinformation was, according to plaintiffs,

orchestrated, and Morgan Keegan was urged to make sure its

reports were "really negative." Morgan Keegan communicated in

other ways that Fairfax and its executives were "crook[s]" and

"felons" who manipulated financial information to "mak[e] it

look like they have a profit." Plaintiffs claim Morgan Keegan

knew of the falsity of its disseminated statements.

Plaintiffs allege that, despite the inflicted harm, their

turnaround was progressing, causing defendants' enterprise to

either quit its position at a loss or increase the short

position and intensify their efforts. Information amassed in the

joint appendix evokes scenes from Oliver Stone's 1987 film, Wall

Street. One hedge fund manager – defendant Adam Sender, who was

17 A-0963-12T1

affiliated with the Exis defendants – explained to Contogouris

that he "want[ed] [Prem Watsa's11] head in a box," and another

viewed the dissemination of negative reports as the equivalent

of needing to "keep . . . this gun loaded with bullets" and

"eventually this pig will roll over and die." Meanwhile, to add

content to the negative reports, Morgan Keegan allegedly fed

Contogouris with the false claims that: Fairfax was disguising

billions in debt as reinsurance; Fairfax was turning its

investment subsidiaries – with the use of "[s]moke and

[m]irrors" – into "an illegal enterprise"; and that Watsa was

"transferring his personal holdings into asset protection

schemes that he thinks will be safe from regulators."

Over the course of nearly two years, Contogouris –

allegedly at the direction and with the support of Morgan

Keegan, Lawless, the Exis defendants, Third Point and Kynikos –

disseminated false claims to the FBI, federal prosecutors, the

SEC, the media, ratings agencies, research analysts and

investors, that Fairfax was engaged in an Enron-like fraud.12 In

June 2005, the SAC defendants re-shorted Fairfax – a month after

11 Watsa is Fairfax's chairman and chief executive officer.

12 Contogouris anonymously created a website called

Premwatsa.com, which compared Fairfax to the disgraced Enron and

Watsa to Enron's CEO, Kenneth Lay. Much has been written about

the Enron debacle. See, e.g., Kurt Eichenwald, Conspiracy of

Fools: A True Story (2005).

18 A-0963-12T1

Contogouris's approach to the FBI that resulted in the service

of SEC subpoenas on Fairfax in September 2005. Three weeks

earlier, the investors of Exis, of which SAC was the largest,

were tipped off that "subpoenas from the regulators . . . should

be announced in the next three weeks." The Exis defendants and

the SAC defendants increased their short positions in advance of

the subpoenas.

Plaintiffs further allege, and refer to the voluminous

record in support, that Contogouris provided false and negative

information to various media and targeted as part of this

campaign: investors, institutions and research analysts; rating

agencies13; Fairfax executives and staff14; and even to Watsa's

parish pastor.15 Contogouris allegedly made harassing telephone

calls to Watsa's home and office at night to "rattle his cage."

Plaintiffs assert that Contogouris kept Morgan Keegan and

Lawless advised of his activities, and Morgan Keegan reported

these activities to other enterprise members.

13 Contogouris sent his FraudFacts report to Standard & Poor's

and A.M. Best.

14 Plaintiffs allege that Contogouris sent, through the use of

aliases, threatening emails to Watsa's staff in an effort to

find "a way in" via a staff member willing to be a mole.

15 Contogouris allegedly sent information to Watsa's parish

pastor, warning that Watsa, who handled the church's investment

fund, might defraud the church.

19 A-0963-12T1

According to plaintiffs, the enterprise members learned

during the Summer of 2006 that the FBI and federal prosecutors

intended to expand their investigation into Fairfax in light of

Contogouris' disseminations, and they also learned that The New

York Post was about to publish a series of negative stories.

Contogouris used code in communicating this information to

enterprise members, referring to the FBI as the "meteorologist,"

The New York Post reporter as the "Postman," and what he

expected to imminently occur as the "Hurricane," which was due

in August. Sender encouraged others to short the stock and the

SAC defendants, which allegedly were in contact with Sender and

Contogouris "all the time" during this period, increased their

short position in June 2006. To fuel the flames, rumors were

allegedly spread on June 22 and 23, 2006, that Watsa had

transferred his assets into his wife's name and that he fled the

country as the Royal Canadian Mounted Police raided Fairfax's

offices.

The day after these rumors started, the Exis defendants

rewarded Morgan Keegan with substantial trading business.

Fairfax's stock price plummeted for two days before Fairfax

issued a statement debunking the rumors.

20 A-0963-12T1

B. The Suit At Hand

Plaintiffs commenced this lawsuit on July 26, 2006. Their

complaint was filed just before what they allege were to be the

final steps in the enterprise's scheme but not before they

allegedly suffered significant monetary damages. Plaintiffs

claim Fairfax suffered damages to its assets and equity, as well

as those of its subsidiaries, in the billions of dollars.16

Particularly relevant in light of the issues on appeal,

plaintiffs claim C&F incurred a loss of nearly $1 billion,

including: (1) approximately $200,000,000 in capital costs and

interest incurred in and paid from New Jersey in the form of

having to raise capital not otherwise needed; (2) lost profits

estimated at $545,000,000; and (3) increased costs and expenses

in the form of higher directors and officers (D&O) insurance

premiums with far less coverage, and greater legal, accounting,

16 The parties even dispute the purpose of this suit. Morgan

Keegan contends that Fairfax has been a "troubled company for

years," and launched, as part of a "public relations campaign,"

this "sensational" RICO suit, claiming $6 billion in

compensatory damages, which, if trebled as permitted by New

Jersey law, would result in "a headline-grabbing $18 billion,"

caused by "a veritable cabal of short sellers and research

analysts bent on destroying the company" for their own profit.

The matter having come before us by way of summary rulings in

favor of all defendants, we place no reliance on Morgan Keegan's

argument about the motivation of this suit and assume, without

deciding, the bona fides of plaintiffs' claims.

21 A-0963-12T1

and administrative costs to deal with the enterprise's alleged

wrongful actions.

III

A BRIEF HISTORY

OF THE PROCEEDINGS

As mentioned, plaintiffs commenced this action in 2006. A

second amended complaint was filed in 2007 and a third in 2008.

Plaintiffs alleged defendants' manipulations violated New

Jersey's RICO statute and gave rise to several common law

claims, specifically commercial or product disparagement,

tortious interference with prospective economic advantage,

tortious interference with contractual relationships, and civil

conspiracy.

On July 11, 2008, the Rocker defendants moved for summary

judgment, asserting that insufficient evidence existed to

establish that it participated in the alleged conspiracy. The

judge then presiding over the matter17 granted, on September 25,

2008, the Rocker defendants' application, but did so without

prejudice.

17Numerous judges presided over this leviathan of a case during

its long life in the trial court. To avoid confusion, we make no

attempt to distinguish which of the able judges ruled on which

motion. Regardless of the outcome of the many issues raised, we

commend all these judges for their efforts.

22 A-0963-12T1

On May 5, 2011, the SAC defendants sought summary judgment

on grounds substantially similar to those that the Rocker

defendants had successfully advanced, namely, that there was

insufficient evidence to demonstrate the SAC defendants'

participation in the alleged scheme against plaintiffs. On

September 12, 2011, the court granted the SAC defendants' motion

for summary judgment.

Meanwhile, Kynikos moved for summary judgment, claiming our

courts could not assert personal jurisdiction over it. Third

Point and ICP also moved for summary judgment on the same or

similar grounds. Kynikos and Third Point also sought a choice-

of-law determination, arguing New York law both governed

plaintiffs' conspiracy claims and required a dismissal of

plaintiffs' RICO claims. And, in the same period of time, the

Rocker defendants sought a determination that the September 25,

2008 grant of summary judgment "without prejudice" be converted

to a dismissal "with prejudice."

On December 23, 2011, the court granted the Rocker

defendants' application to convert its prior determination to

summary judgment with prejudice and dismissed the third amended

complaint against Kynikos, Third Point and ICP for lack of

personal jurisdiction.

Many more motions followed.

23 A-0963-12T1

On April 13, 2012, Morgan Keegan, Lawless, the Exis

defendants and the MI4 defendants filed a consolidated motion

for summary judgment with respect to all the common law claims

plaintiffs had asserted against them.18 And, on April 20, 2012,

plaintiffs cross-moved for reconsideration of the court's prior

dismissal of the Rocker defendants with prejudice.

On May 11, 2012, the trial court granted partial summary

judgment in favor of Lawless. Finding New York law governed

plaintiffs' racketeering allegations, the trial court dismissed

plaintiffs' RICO claims. And plaintiffs' reconsideration motion

of the with-prejudice dismissal of the claims against the Rocker

defendants was denied.

In June 2012, the trial court heard and summarily dismissed

plaintiffs' claim of tortious interference with prospective

economic advantage but sustained plaintiffs' remaining common

law claims.

Also in June 2012, Morgan Keegan moved for partial summary

judgment, seeking dismissal of plaintiffs' disparagement claim

based on its alleged untimeliness; the motion was denied in

August 2012. Later that month, the judge denied plaintiffs'

request to reconsider its ruling that New York law controlled

18Namely, tortious interference with contractual relationships,

tortious interference with prospective economic advantage, and

civil conspiracy.

24 A-0963-12T1

plaintiffs' racketeering and conspiracy claims. The judge also

granted Morgan Keegan's application for reconsideration of the

denial of summary judgment on the tortious-interference-with-

contract claim but rejected Morgan Keegan's assertion that a

one-year statute of limitations applied to plaintiffs'

disparagement claim.

On September 5, 2012, plaintiffs stipulated to the

dismissal of Lawless without prejudice. On September 11, 2012,

in accordance with a partial settlement agreement, the judge

signed a consent order, which dismissed without prejudice

plaintiffs' claims against Contogouris and the MI4 defendants.

And, on September 12, 2012, the judge entered final judgment

dismissing the entirety of the remainder of plaintiffs' third

amended complaint, finding "a complete absence of proof" of

proximately-caused damages.

Plaintiffs filed a notice of appeal. Cross-appeals were

also asserted.

IV

THE ISSUES POSED

In appealing the summary dismissal of its causes of action,

plaintiffs argue the trial court erred: (a) in dismissing their

RICO claims by applying New York rather than New Jersey law; (b)

in dismissing certain of their common law claims by applying New

25 A-0963-12T1

York's statute of limitations rather than New Jersey's; (c) in

dismissing the claims against Kynikos, Third Point and the ICP

defendants19 for lack of personal jurisdiction; (d) in granting

summary judgment in favor of both the SAC defendants and the

Rocker defendants; and (e) in excluding the expert opinion of

Craig Elson on damages that plaintiffs intended to elicit at

trial, thereby shutting the door on any trial at all.

A. The Viability of

The Racketeering Claims

In reviewing the disposition based on the trial court's

application of choice-of-law principles, we describe (1) the

parties' arguments and (2) the judge's decision, and then

express (3) our agreement with the trial court's disposition of

the RICO claim.

1. Plaintiffs' Arguments

Plaintiffs claim the trial court erred by dismissing their

RICO claims through application of New York law. Indeed, they

argue that choice-of-law questions do not even arise when a

matter falls within the intended scope of a New Jersey statute;

that is, they claim our Legislature intended to provide a remedy

19As noted earlier, plaintiffs and the ICP defendants resolved

their differences shortly before oral argument took place in

this court.

26 A-0963-12T1

for every New Jersey domiciliary harmed by a RICO violation,

which the law defines as harm arising from conduct of a

prohibited kind that satisfies the enactment's territorial

predicates, with no distinction between criminal and private

prosecutions. And they argue there was sufficient conduct by

defendants that either occurred within or had a sufficient

effect in New Jersey to satisfy the statute, even apart from the

conspiracy, which by itself – in their view – involved enough

activity within New Jersey to satisfy the Criminal Code's

definition of such an offense.

Plaintiffs argue further that the court had no basis for

"inventing" or "importing" common law principles to impose the

territorial limitations on jurisdiction over traditional torts,

noting that the limitations were not included in either the RICO

statute or in the Criminal Code's general territoriality

statute. On the contrary, they claim the Legislature has

specified that the RICO provisions for civil remedies must be

liberally construed to affect that enactment's remedial purpose

and that all remedies be cumulative to one another and to other

remedies at law.

In addition, plaintiffs argue that the trial judge erred by

failing to recognize there was no policy conflict between New

Jersey and New York law because both states' enactments "provide

27 A-0963-12T1

civil remedies to deter and compensate for" the same proscribed

conduct. And they argue New Jersey's allowance of private civil

remedies does not constitute a different approach toward the

shared goal of deterring racketeering, "only a different

judgment about how best to use each state's judicial system to

do so." Although both states seek to vindicate the same

policies, plaintiffs argue New Jersey's broader remedies made it

the better vehicle for achieving that goal, and thus the correct

law to apply.

Plaintiffs contend further that, even if New Jersey and New

York law generated a true conflict, section 6 of the Restatement

(Second) of Conflict of Laws (1971) (Am. Law Inst., amended

1988),20 provided an independent basis for applying New Jersey

law to the RICO claims. They assert section 6 warranted

application of New Jersey law due to this State's interest in

protecting C&F, which sustained injuries at its New Jersey

headquarters, and because New Jersey had an interest in

protecting other in-state businesses, such as the rating

agencies and business news organizations that the enterprise is

20Our many references to the Restatement (Second) of Conflict of

Laws shall hereafter in the text be "Second Restatement" and in

citations be "Restatement (Second)," with reference to a

specific section or comment. To avoid confusion, we will provide

greater specificity when referring to the Restatements dealing

with torts and contracts that are cited as well.

28 A-0963-12T1

alleged to have deliberately misled in order to promote their

scheme. Plaintiffs contend they reasonably expected the

protection of New Jersey law to the extent of their business

affecting this State, whereas defendants had no expectation that

their misconduct would be any less violative of New York law

than it would of New Jersey law. In addition, they contend that

failing to apply New Jersey's RICO statute as intended would

inject an unanticipated and unneeded balancing test between New

Jersey law and out-of-state law.

Finally, plaintiffs argue that the Second Restatement's

section 145 standards favored application of New Jersey law due

to the predominance of this case's contacts with New Jersey.

They call New Jersey the situs of "the injury" because C&F had

its domicile and principal place of business here, and they note

that several enterprise members were New Jersey residents or

engaged in enterprise activity within the State.

2. The Judge's Decision

In May 2012, the trial judge determined that New York's

local law – that is, the law that applied within New York before

any consideration of choice-of-law principles21 – applied to the

21 The judge's definition of "the local law" accords with the

Second Restatement, which describes "the local law" as the law

that would apply if all parties and relevant events were within

(continued)

29 A-0963-12T1

RICO claims and, accordingly, compelled the entry of summary

judgment in defendants' favor. He first found an actual conflict

existed – because New Jersey recognizes a private civil RICO

action and New York doesn't – and observed that a statutory

mandate for New Jersey jurisdiction over private civil claims

would have precluded a choice-of-law analysis here, but then

found no such mandate existed. The judge explained that RICO's

own territoriality provision was expressly limited to criminal

cases, and that the Legislature did not intend civil RICO claims

to have the same jurisdictional reach or to be exempt from the

"accepted, traditional common law principles of jurisdiction"

for civil claims, which included application of choice-of-law

principles.

The trial judge recognized that the first step in a choice-

of-law analysis was to determine whether any state was presumed

to satisfy the Second Restatement's most fundamental touchstone

of being the state with "the most significant relationship" to

the matter and found that, though choice-of-law principles might

deem C&F's loss of customers to have been an injury sustained in

(continued)

one state, without application of that state's choice-of-law

rules. Restatement (Second), supra, § 145 cmt. h and § 4. In

this context, a reference to "state law" without qualification

means the entire body of a state's law, including its choice-of-

law rules. Ibid.

30 A-0963-12T1

New Jersey, it was "improper" to presume New Jersey jurisdiction

on that basis, because C&F was "a minor player in this matter,"

there was a "complex interrelationship between [the]

plaintiffs," and the RICO allegations here were broader and more

complex than a particular injury to one subsidiary.

According to the trial judge, the "most direct consequence"

of the alleged RICO enterprise was to decrease the market prices

of plaintiffs' securities, a claim for which Fairfax was the

"lead" plaintiff. All the other alleged injuries caused by the

enterprise, namely, the increase in "capital costs," the costs

of responding to the SEC investigation, and the increased legal

and accounting costs, "were a consequence of that deflation."

The "most direct" injury and its derivatives arose from the

alleged enterprise activity that involved the financial markets

and financial news media and, as the judge observed, "[t]he

financial markets, the news media and the parties are clearly

based predominantly in New York." Accordingly, the New Jersey

connections to the RICO claims – namely, the domiciles of C&F,

A.M. Best,22 and Lawless – did not suffice to give New Jersey the

"most significant relationships" to a RICO enterprise as broad

22 A.M. Best is a major rating company headquartered in New

Jersey.

31 A-0963-12T1

and complex as alleged. Consequently, the trial judge found that

New York's local law presumptively applied.

As for the other section 145 factors, the judge found that

the "vast majority" of the alleged misconduct manifestly

occurred in New York and only a fraction was committed by

Lawless, the one defendant located in New Jersey. The judge

determined that all other enterprise members were domiciled or

incorporated elsewhere and conducted their activities elsewhere,

and, also, that the enterprise members did not have a prior

relationship, much less one centered in New Jersey. Furthermore,

Fairfax and its other main United States operating Odyssey

subsidiaries,23 were domiciled or incorporated elsewhere and

operated outside New Jersey. Accordingly, even if the decrease

in the price of C&F securities was deemed a direct injury to

C&F, as opposed to a derivative injury largely arising from its

exposure to Fairfax's troubles, "the place where the injury

occurred," as defined by section 145(2)(a) of the Second

Restatement, was nonetheless in New York's financial markets,

and the enterprise members had "minimal contact with New Jersey"

in causing it.

23 What we refer to as Odyssey consists of: Odyssey Re Holding

Corp., which was incorporated in Delaware and had principal

executive offices in New York; wholly-owned Odyssey Re Group;

and Odyssey America Reinsurance Corp., which had its principal

offices in Connecticut.

32 A-0963-12T1

The trial judge then turned to the general choice-of-law

principles set out in section 6 of the Second Restatement. For

comity's sake, he explained that, although New York and New

Jersey had competing interests about whether private actors

should be able to enforce a RICO statute, the two states'

enactments were nonetheless similar and shared the "fundamental

policies" of preventing racketeering and other organized crime.

The two states' policies were therefore not in fundamental

conflict, so interstate comity required New Jersey to respect

New York's deliberate decision about how to serve that policy

that included a decision to withhold a private RICO cause of

action. The judge found that was also true from the perspective

of "[t]hose involved in the financial markets based in New York"

because they "should be able to depend on New York law" as the

law governing "their conduct."

As for the interests of the parties and the interests

underlying the field of tort law, the judge observed that the

parties knew New York law precluded exposure to private RICO

claims regardless of their conduct. And, because New York had

the "most significant relationship" to the matter, defendants

had "no reasonable expectation" that such exposure could arise

due to the application of another state's local law. The judge

reasoned the result should not change just because the conduct,

33 A-0963-12T1

which was focused on "the New York financial industry," also had

tangential connections outside that state, such as the

communications with A.M. Best, the one major rating agency

located in New Jersey.

The trial judge also observed that the only factor favoring

application of New Jersey law instead of New York law was the

greater involvement in this litigation of New Jersey's courts.

He noted, however, that this factor did not outweigh the need to

serve the choice-of-law "values," which were "certainty,

predictability and uniformity of results" in their application.

Consequently, the judge ruled that the "qualitative balance" of

all the section 145 and section 6 factors of the Second

Restatement compelled application of New York local law, which,

upon application, compelled dismissal of the RICO claims.

3. Our Holding

For the reasons that follow, we conclude that New York law,

which does not permit a private civil racketeering action,

applies in this case and, as held by the trial court, requires

the dismissal of plaintiffs' RICO claim.

We first consider (a) some general principles, as well as

(b) the impact of the Supreme Court's recent decision in

Ginsberg v. Quest Diagnostics, Inc., 227 N.J. 7, 18 (2016), on

the issues raised. Then, because an early but pivotal step in

34 A-0963-12T1

resolving a choice-of-law problem requires a determination that

a true conflict exists, we examine (c) New Jersey's racketeering

laws, and their intent and purposes, and we thereafter similarly

analyze (d) New York's racketeering laws. We then conclude this

part of the opinion with a description of (e) the choice of law

required in these circumstances.

(a) Some General Principles

In considering the propriety of the choice-of-law

determinations in question, we observe, first, that the trial

judge's interpretation of the RICO statutes is not entitled to

deference. ADS Assocs. Grp., Inc. v. Oritani Sav. Bank, 219 N.J.

496, 511 (2014). Choice-of-law determinations present legal

questions, which are subjected to de novo review. Bondi v.

Citigroup, Inc., 423 N.J. Super. 377, 418 (App. Div. 2011),

certif. denied, 210 N.J. 478 (2012); Arias v. Figueroa, 395 N.J.

Super. 623, 627 (App. Div.), certif. denied, 193 N.J. 223

(2007). And choice-of-law decisions are made not only issue-by-

issue, Cornett v. Johnson & Johnson, 211 N.J. 362, 374 (2012),

but also, at times, party-by-party, Ginsberg, supra, 227 N.J. at

18.

When New Jersey is the forum state, its choice-of-law rules

control. McCarrell, supra, 227 N.J. at 588; Erny v. Estate of

Merola, 171 N.J. 86, 94 (2002). For tort claims, our Supreme

35 A-0963-12T1

Court has expressly embraced the Second Restatement for choice-

of-law determinations. P.V. ex rel. T.V. v. Camp Jaycee, 197

N.J. 132, 139-43 (2008).

New Jersey courts have also recognized that a parent

corporation may have standing to participate in litigation over

wrongs sustained by its subsidiary if the parent itself has a

sufficient financial interest in the outcome. See, e.g., Bondi,

supra, 423 N.J. Super. at 436-39. See also Section V(A), infra.

Bondi did not declare a categorical rule that the same

jurisdiction's local law always applies to both the parent and

the subsidiary with regard to a particular claim, and, at the

time the trial judge ruled, neither Bondi nor any other reported

New Jersey opinion had suggested a general reason not to adopt

such a rule.

(b) Ginsberg's Impact

Recently, our Supreme Court recognized that, in multi-party

actions, choice-of-law principles may call for the application

of a different state's laws from party-to-party or claim-to-

claim. Ginsberg, supra, 227 N.J. at 18.24 But plaintiffs have

24 To be precise, Ginsberg specifically held that "in the

majority of cases, a defendant-by-defendant analysis furthers

the [Second] Restatement principles and provides the most

equitable method of resolving choice-of-law questions." 227 N.J.

at 18 (emphasis added). But, in explaining this aspect of its

(continued)

36 A-0963-12T1

never sought separate choice-of-law analyses. In fact,

plaintiffs have blurred the distinctions between them and their

subsidiaries, perhaps for strategic reasons,25 thereby

frustrating any attempt at rendering an informed,

individualized, choice-of-law analysis from each plaintiff's

standpoint.

That is, we recognize that in many instances in which

multiple claims are asserted by multiple plaintiffs against

multiple defendants, a court may be asked to make individualized

choice-of-law determinations that "exponentially" increase in

difficulty with every increase in the number of parties and

claims. See Georgine v. Amchem Products, Inc., 83 F.3d 610, 627

(3d Cir. 1996). We do not think, however, that where two or more

related corporate plaintiffs file a single action based on the

(continued)

holding, the Court observed that Second Restatement principles

"focus[] on the state's relationship to the parties," and

recognized that, in referring to "parties," the Second

Restatement was not limited and included plaintiffs, defendants,

and "any third party defendants." Ibid. (emphasis added).

Consequently, we do not view Ginsberg's particular holding,

which required in some instances a "defendant-by-defendant

analysis," as applying only in that circumstance. Instead, the

same principles may at times warrant plaintiff-by-plaintiff

analyses as well.

25 For example, if it had pursued its claims separately from

C&F's, Fairfax would have had no plausible argument for applying

New Jersey substantive law to a dispute between a Canadian

corporation based in Toronto and various New York-based

defendants.

37 A-0963-12T1

same operative set of facts, and assert causes of action and

demands for damages allegedly caused to their corporate family –

as if that family constituted a single entity – that a court

must nevertheless disentangle all the possibilities in

identifying the correct state law to be applied to each

plaintiff's claim or claims. Ginsberg does not require that a

court make such determinations when the court is deprived of the

parties' assistance. In short, since plaintiffs do not seek a

separate resolution of each choice-of-law problem from each of

their standpoints, we will not pursue that possibility further.

We would add that to the extent multiple plaintiffs would have a

court treat them differently for choice-of-law purposes, they

must come forward and make that argument26 and, moreover, be

26 We do not interpret our rules as requiring a plaintiff or

plaintiffs to affirmatively plead the application of another

jurisdiction's laws; indeed, we have shown particular liberality

in allowing defendants to assert another jurisdiction's laws in

moving for summary judgment even when not having first asserted

that other jurisdiction's law as an affirmative defense. See

Rowe v. Hoffman-La Roche Inc., 383 N.J. Super. 442, 450-51 (App.

Div. 2006), rev’d on other grounds, 189 N.J. 615 (2007); Erny v.

Russo, 333 N.J. Super. 88, 96 (App. Div. 2000), rev’d on other

grounds, 171 N.J. 86 (2002). But that liberality is stretched

beyond breaking if we were to allow a party to advocate on

appeal, for the first time, an entirely different approach to

already difficult choice-of-law questions. As we said in our

decision in Ginsberg, which the Supreme Court affirmed, "choice-

of-law determination[s] ideally should be made as early in a

case as possible." Ginsberg v. Quest Diagnostics, Inc., 441 N.J.

Super. 198, 223 (App. Div. 2015); see also Bailey v. Wyeth,

Inc., 422 N.J. Super. 343, 350 (Law Div. 2008), aff’d on other

(continued)

38 A-0963-12T1

willing to be treated separately for all other purposes as

well.27

In the final analysis, Ginsberg not only held that an

individualized assessment is "not feasible in every matter," 227

N.J. at 20, but also that, in each case, a court must ascertain

"the most equitable method of resolving choice-of-law

questions," Id. at 18. A sudden alteration in course – sought

by no one here, even now on appeal – that might arguably be

(continued)

grounds, 433 N.J. Super. 360 (App. Div. 2011), certif. denied,

211 N.J. 274 (2012). And it is well-established in the federal

courts that choice-of-law issues may be waived when not asserted

by the parties, Williams v. BASF Catalysts LLC, 765 F.3d 306,

316-17 (3d Cir. 2014), a concept that we hold should be applied

here as well. Having said all that, we do not mean to suggest

that plaintiffs have sought a sudden change in course; to the

contrary, even after both our decision and the Supreme Court's

decision in Ginsberg, plaintiffs have continued to pursue their

rights as if they were the same juridical creature and have not

sought an individualized choice-of-law assessment from each

plaintiff's standpoint. Consequently, we hold that in light of

the arguments plaintiffs have posed, and in consideration of

their suggestions as to how we are to exit this choice-of-law

labyrinth, we should not now pursue a wholly different path that

plaintiffs – even in the wake of Ginsberg – have never urged as

the proper or required course.

27 When multiple plaintiffs seek individualized choice-of-law

determinations, we would think concerns about standing, such as

those raised here, would warrant a less liberal approach than

suggested by Bondi, supra, 423 N.J. Super. at 436-39, which we

discussed above and again later in this opinion. In short, a

court should not be expected to choose the law appropriate for

each plaintiff as to each claim, only to have, for example,

plaintiff X lay claim to a right to pursue an award of damages

based on injuries sustained by plaintiff Y.

39 A-0963-12T1

permitted by Ginsberg, does not serve our chief, overarching

goal of seeking an equitable method for resolving the parties'

choice-of-law disputes.

(c) New Jersey's

Racketeering Laws

In enacting anti-racketeering legislation, N.J.S.A. 2C:41-1

to -6.2,28 the Legislature utilized federal statutes as its

model. Accordingly, federal case law provides a useful guide in

understanding our own RICO law. Cagno, supra, 211 N.J. at 508.

In this regard, it is noteworthy that the federal and New Jersey

enactments expressly afford a private civil cause of action, see

18 U.S.C.A. § 1964(c); N.J.S.A. 2C:41-4(c), whereas New York's

similar law, which we discuss in Section IV(A)(3)(d), infra,

does not. The New Jersey and federal enactments allow "[a]ny

person," who is injured "in his business or property by reason

of a violation" of the statute, to "sue therefore" and recover

treble damages, plus costs of suit including a reasonable

attorney's fee. 18 U.S.C.A. § 1964(c); N.J.S.A. 2C:41-4(c).

All remedies permitted by our RICO law are "cumulative with

each other and other remedies at law," N.J.S.A. 2C:41-6.1, and

28Better known as our RICO law. State v. Cagno, 211 N.J. 488,

508 (2012), cert. denied, ___ U.S. ___, 133 S. Ct. 877, 184 L.

Ed. 2d 687 (2013); State v. Ball, 268 N.J. Super. 72, 98 (App.

Div. 1993), aff'd, 141 N.J. 142 (1995), cert. denied, 516 U.S.

1075, 116 S. Ct. 779, 133 L. Ed. 2d 731 (1996).

40 A-0963-12T1

the Legislature has instructed that our RICO law must be

"liberally construed to effect [its] remedial purposes,"

N.J.S.A. 2C:41-6.

The required "racketeering activity," also known as a

predicate act, must itself be a criminal offense. N.J.S.A.

2C:41-1(a)(1), (2); Ball, supra, 141 N.J. at 162; Karo Mktg.

Corp. v. Playdrome Am., 331 N.J. Super. 430, 438 (App. Div.),

certif. denied, 165 N.J. 603 (2000). In fact, the predicate act

may not only be one of the crimes the Legislature has identified

but also an "equivalent crime" under the law of "any other

jurisdiction," N.J.S.A. 2C:41-1(a).

A "pattern of racketeering activity" requires two predicate

acts, N.J.S.A. 2C:41-1(d)(1), that have "either the same or

similar purposes, results, participants or victims or methods of

commission or are otherwise interrelated by distinguishing

characteristics and are not isolated incidents," N.J.S.A. 2C:41-

1(d)(2). Participation in a conspiracy to commit prohibited RICO

activity is also prohibited activity. N.J.S.A. 2C:41-2(d). The

designation of conspiracy as racketeering activity under federal

law means that the conspiracy itself may be one of the required

predicate acts. State v. Bisaccia, 319 N.J. Super. 1, 20-21

(App. Div. 1999). In a private civil RICO action, the predicate

act must be the proximate cause of the plaintiff's injury.

41 A-0963-12T1

Interchange State Bank v. Veglia, 286 N.J. Super. 164, 178 (App.

Div. 1995) (citing Holmes v. Sec. Inv'r Prot. Corp., 503 U.S.

258, 265, 112 S. Ct. 1311, 1316-18, 117 L. Ed. 2d 532, 543

(1992)), certif. denied, 144 N.J. 377 (1996).

The prohibited RICO activity relevant here is participation

in an "enterprise" which engages in "a pattern of racketeering

activity." N.J.S.A. 2C:41-2(c). The Legislature did not intend

"to punish mere repeated offenses," so the term "pattern" also

requires "relatedness," which means "some temporal connection or

continuity over time," but nonetheless encompasses "short-term

criminal activity" of the proscribed kind as well as "long-term

criminal activity." Ball, supra, 141 N.J. at 167-69.

"Enterprise" is broadly defined to include all kinds of

entities, as well as "any individual" and any "group of

individuals" who are "associated in fact although not a legal

entity." N.J.S.A. 2C:41-1(c). The enterprise may be "licit" or

"illicit." Ibid.

The enterprise is a statutory element "distinct from the

incidents constituting the pattern of activity." Ball, supra,

141 N.J. at 162. Because it is distinct, the enterprise must

have an "organization" but the organization need not have "a

structure with a particular configuration." Ibid.; accord Cagno,

supra, 211 N.J. at 494. "[A]n informal organization functioning

42 A-0963-12T1

as a continuing unit" is sufficient to facilitate "those kinds

of interactions that become necessary when a group, to

accomplish its goal, divides among its members the tasks that

are necessary to achieve a common purpose." Ball, supra, 141

N.J. at 161-62.

Although evidence establishing the enterprise must "focus"

on "how the participants associated with each other" and on the

extent and nature of the planning, id. at 162-63, it "need not

be distinct or different from the proof that establishes the

pattern of racketeering activity," id. at 162, and a defendant

only needs to possess "some minimal knowledge" of "'the general

nature of the enterprise . . . beyond his individual role.'" Id.

at 176 (quoting United States v. Eufrasio, 935 F.2d 553, 577 (3d

Cir. 1991)). In this regard, our Supreme Court has declined to

endorse a definition of enterprise. Id. at 177. An enterprise

may be as little as "the sum of the racketeering acts," with

neither a "definable structure" nor any "purpose . . . greater

than the predicate acts," as we held in Ball, supra, 268 N.J.

Super. at 143-44.

For an enterprise's pattern of racketeering to constitute a

RICO violation, it must "affect trade or commerce," N.J.S.A.

2C:41-2, which is defined as including "all economic activity

involving or relating to any commodity or service," N.J.S.A.

43 A-0963-12T1

2C:41-1(h). That definition of "trade or commerce" does not

specify that the trade or commerce occur within this State,

N.J.S.A. 2C:41-1(h), but the Legislature declared the

enactment's purpose to be the protection of "the legitimate

trade or commerce of this State" and "the general health,

welfare and prosperity of the State and its inhabitants" from

"the infiltration" of the prohibited kinds of activity.

N.J.S.A. 2C:41-1.1(c).

We have held that those declarations, along with the

Legislature's finding of harm to "this State's economy" from

racketeering, N.J.S.A. 2C:41-1.1(b), require that a plaintiff

show the prohibited conduct has affected the trade or commerce

of this State." State v. Casilla, 362 N.J. Super. 554, 563-64

(App. Div.) (quoting N.J.S.A. 2C:41-1.1(c); emphasis omitted),

certif. denied, 178 N.J. 251 (2003). We have also observed that

the Legislature would have had no reason to address the effects

of racketeering in other states, many of which have their own

RICO statutes, or in interstate commerce, as to which federal

legislation applies. Id. at 564-65.

In a criminal prosecution, in addition to subject matter

and personal jurisdiction, a New Jersey court must have

"territoriality," meaning territorial jurisdiction pursuant to

N.J.S.A. 2C:1-3. State v. Denofa, 187 N.J. 24, 36 (2006). That

44 A-0963-12T1

statute recognizes various ways in which an offense may have "a

direct nexus to New Jersey" that would justify its prosecution

as a criminal offense here. State v. Sumulikoski, 221 N.J. 93,

102 (2015).

The plainest examples of territoriality are when the

"result" of the offense "occurs within this State," or when the

"conduct which is an element of the offense" occurs here.

N.J.S.A. 2C:1-3(a)(1). Conduct committed outside the State has a

nexus to New Jersey if New Jersey law would view such acts as

"constitut[ing] an attempt to commit a crime within the State,"

N.J.S.A. 2C:1-3(a)(2), meaning an attempt to cause a result

within the State that would be an offense if caused by in-state

conduct. See State v. Bragg, 295 N.J. Super. 459, 464-65 (App.

Div. 1996). Outside conduct is also sufficient if New Jersey law

would deem it "a conspiracy to commit an offense within the

State," as long as there is also an "overt act in furtherance

of" the conspiracy that is committed here. N.J.S.A. 2C:1-

3(a)(3). Conversely, our courts have jurisdiction over conduct

occurring within the State that causes a result in another

state, or is part of an attempt or conspiracy to do so, as long

as that conduct would be an offense under both New Jersey law

and the other state's law. N.J.S.A. 2C:1-3(a)(4).

45 A-0963-12T1

(d) New York's

Racketeering Laws

Turning to New York's Organized Crime Control Act (OCCA),

1986 N.Y. Laws, c. 516, § 2; N.Y. Penal Law §§ 460.00 to 460.80

(Consol. 2014), we first observe that a violation is called the

crime of "enterprise corruption," N.Y. Penal Law § 460.20.

Unlike New Jersey's law, OCCA is not modeled on federal

statutes. It "is far more restrictive than" federal RICO,

because New York "calculatedly narrowed the definition of the

requisite pattern of criminal activity" to avoid conflating an

ordinary "criminal offense or criminal transaction" with the

ongoing "pattern" that characterizes organized crime. Simpson

Elec. Corp. v. Leucadia, Inc., 515 N.Y.S.2d 794, 799 (App. Div.

1987), aff’d, 530 N.E.2d 860 (N.Y. 1988); N.Y. Penal Law

§ 460.10.

OCCA allows designated county and state officials to

prosecute charges of enterprise corruption. N.Y. Penal Law

§ 460.50. Although the New York Legislature's findings declare

OCCA's purposes to include "making both criminal and civil

remedies available," N.Y. Penal Law § 460.00, the only penalties

it provides, beyond incarceration, are criminal forfeiture and

fines allocated primarily to victim restitution. N.Y. Penal Law

§ 460.30. Those penalties may only be imposed on persons

convicted of enterprise corruption. Ibid.

46 A-0963-12T1

Unlike our Legislature's approach, the New York Legislature

rejected a policy of either liberal or strict construction in

order to preserve a role for "discretion." N.Y. Penal Law

§ 460.00. Even when "the letter of the law" defining an OCCA

violation is satisfied, "the question whether to prosecute"

under OCCA "is essentially one of fairness." Ibid. Such

"fairness" was preserved by leaving the decision to label

alleged criminal conduct as "enterprise corruption" to "those

institutions of government which have traditionally exercised

that function: the grand jury, the public prosecutor, and an

independent judiciary." Ibid. OCCA accordingly does not provide

for a private civil cause of action, see, e.g., Simpson, supra,

515 N.Y.S.2d at 807 (Spatt, J., dissenting), as the parties

concede.

OCCA liability requires the personal commission of "a

pattern of criminal activity" comprising two felonies: a

conspiracy to engage in a "criminal enterprise" and a knowing

participation in the activity or finances of the criminal

enterprise, or of any other enterprise. N.Y. Penal Law § 460.20.

OCCA also specifies that the pattern of criminal activity may

not serve as the "criminal enterprise." N.Y. Penal Law

§ 460.10(1). Instead, the criminal enterprise must consist of "a

group of persons sharing a common purpose of engaging in

47 A-0963-12T1

criminal conduct, associated in an ascertainable structure

distinct from a pattern of criminal activity, and with a

continuity of existence, structure and criminal purpose beyond

the scope of individual criminal incidents." Ibid. In Ball,

supra, 141 N.J. at 159, our Supreme Court observed that OCCA was

unique among the federal and other state RICO enactments because

it explicitly required an ascertainable structure, separate from

the underlying crimes that constituted the pattern of

racketeering activity.

Unlike New Jersey law, OCCA does not specify that a

violation must affect trade or commerce, or indeed, that any

particular effect must have occurred or be deemed to have

occurred within New York's borders.

Consequently, in light of the vastly different approaches

engaged by New Jersey and New York to combat racketeering, there

is no doubt that a true conflict exists for choice-of-law

purposes.

(e) The Choice

In examining the trial court's choice, we start with our

Supreme Court's observation that, "[a]lthough we have

traditionally denominated our conflicts approach as a flexible

'governmental interest' analysis, we have continuously resorted

to the [Second Restatement] in resolving conflict disputes

48 A-0963-12T1

arising out of tort." P.V., supra, 197 N.J. at 135-36. The

Second Restatement's approach focuses on the state with "the

'most significant relationship'" to the parties and issues. Id.

at 136.

"Probably the most important function of choice-of-law

rules" is to foster comity by promoting "harmonious relations"

and facilitating "commercial intercourse" between and among

states. Restatement (Second), supra, § 6 cmt. d. The first step

is to establish that "an actual conflict exists" between the

laws of the involved states. P.V., supra, 197 N.J. at 143. A

conflict arises, like here, when one state provides a cause of

action but the other does not, especially when that provision or

denial reflects an intent to regulate conduct rather than

allocate losses. Id. at 143-44, 148-51 (observing that a

conflict existed between New Jersey law, which maintained

statutory immunity from tort liability for charitable

corporations, and Pennsylvania law, which "definitively

abrogated its charitable immunity laws").

A conflict, however, does not always lead to a choice-of-

law analysis. The analysis is preempted when our Legislature has

determined that New Jersey public policy requires the

application of our substantive law whenever our courts have

jurisdiction over the kind of claim at issue, regardless of the

49 A-0963-12T1

interest of another state. See id. at 140 (citing Restatement

(Second), supra, § 6(1)).

(i) Legislative Directive

Because a choice-of-law analysis may be precluded or

preempted by law, our first task, in light of the arguments

posed, requires that we ascertain whether there is a legislative

direction regarding the application of substantive law. For the

reasons that follow, we conclude that our Legislature has not

made such a declaration for cases like this, either (a)

expressly, or (b) by implication.

a. Is There an

Express Directive?

Plaintiffs are mistaken in arguing that our Legislature has

expressly required the application of our RICO laws to out-of-

state conduct. In this respect, plaintiffs rely on provisions in

our Criminal Code that express its territorial parameters. The

Code recognizes its application to conduct occurring "outside

the State" so long as it "constitute[s] an attempt to commit a

crime within the State," N.J.S.A. 2C:1-3(a)(2), or to "conduct

occurring outside the State" so long as it "is sufficient under

the law of this State to constitute a conspiracy to commit an

offense within the State and an overt act in furtherance of such

conspiracy occurs within the State," N.J.S.A. 2C:1-3(a)(3).

50 A-0963-12T1

Because the criminal racketeering laws are also included

within the Criminal Code, plaintiffs argue that the territorial

reach applicable to a criminal prosecution under those

racketeering laws also applies to a private RICO action brought

under those same laws and principles. We disagree. The

territorial parameters delineated in N.J.S.A. 2C:1-3(a), by

their very terms, apply to criminal prosecutions, not private

civil causes of action that may be based on provisions of the

Criminal Code. N.J.S.A. 2C:1-3(a) unmistakably states that its

six territorial rules apply to "a person [who] may be convicted

under the law of this State of an offense . . . for which he is

legally accountable" (emphasis added).

Consequently, despite plaintiffs' forceful argument, this

provision does not contain the "preemptive legislative

expression," State Farm Mut. Auto. Ins. Co. v. Estate of

Simmons, 84 N.J. 28, 39 (1980), necessary to support the

imposition of our substantive law to conduct occurring outside

the State. Because such an extensive reach would likely

constitute "an impermissible intrusion into the affairs of other

states," O'Connor v. Busch Gardens, 255 N.J. Super. 545, 549-50

(App. Div. 1992), we reject the contention that N.J.S.A. 2C:1-

3(a) constitutes a legislative directive as to the reach of New

Jersey substantive law in a private RICO cause of action.

51 A-0963-12T1

b. Is There an

Implied Directive?

We also reject any contention that such a legislative

directive may be found by implication here.

The preeminent expression of New Jersey public policy is

the Legislature's enactments. State Farm, supra, 84 N.J. at 39.

If a statute declares that a substantive rule applies in a

situation that would otherwise pose a choice-of-law question,

"New Jersey courts would follow that directive even when the law

of other jurisdictions dictated a contrary result." Ibid. That

understanding conforms with the Second Restatement's instruction

that, "subject to constitutional restrictions," a court "will

follow a statutory directive of its own state on choice of law."

Restatement (Second), supra, § 6(1). Examples include the

Uniform Commercial Code provisions that direct courts to choose

the law "of a particular state" or of the state that the parties

specified. Id. at § 6 cmt. a.

But, because statutes are usually not so "explicit," a

court may determine whether the issue presented "falls within

the intended range of application of a particular statute." Id.

at § 6 cmt. b & cmt. c. The Legislature's intended "range of

application" should be enforced "when these intentions can be

ascertained and can constitutionally be given effect," even if

52 A-0963-12T1

another state's substantive law "would be applicable under usual

choice-of-law principles." Id. at § 6 cmt. b. Thus, if the

forum's legislature "intended that the statute should be applied

to the out-of-state facts involved, the court should so apply

it[.]" Ibid. "On the other hand, if the legislature intended

that the statute should be applied only to acts taking place

within the state, the statute should not be given a wider range

of application." Ibid.

The absence of such a declaration in an enactment implies

the Legislature intended application only to conduct or results

that occur within the State, and that it did not have an

interest in facilitating or preventing developments occurring

elsewhere. Van Slyke v. Worthington, 265 N.J. Super. 603, 613-14

(Law Div. 1992). The Second Restatement similarly recognizes

that laws are commonly "formulated solely with the intrastate

situation in mind," with no suggestion they are "intended to

have extraterritorial application." Restatement (Second), supra,

§ 6 cmt. e. That would explain the absence in P.V., supra, 197

N.J. at 148-49, of a suggestion that the Charitable Immunity Act

could be understood as containing such a declaration,

notwithstanding the "importance" of that enactment's remedial

53 A-0963-12T1

policy and the Legislature's mandate to construe the enactment

liberally.29

The higher standards for criminal liability in New York's

OCCA, when compared to those in New Jersey's RICO statutes,

meant that a defendant would be exposed to liability under New

Jersey's local law for conduct that would not be illegal under

New York's law. The New York Legislature made its enactment

narrower than federal RICO, instead of broader as did our

Legislature. See Ball, supra, 268 N.J. Super. at 107. New York

29Plaintiffs emphasize two decisions from other jurisdictions in

support of their position. We do not find they suggest a

contrary view than that which we have reached. In Marshall v.

Fenstermacher, 388 F. Supp. 2d 536, 547 (E.D. Pa. 2005), the

court was required to apply "the conflicts regime of the forum

state," Pennsylvania. The plaintiff had asserted common law

torts under both Pennsylvania and New Jersey law but asserted

RICO claims only under New Jersey and federal law, id. at 546,

presumably because Pennsylvania's statute, like New York's, did

not afford a private civil cause of action. See 18 Pa. Cons.

Stat. § 911. The court simply stated that it would consider the

New Jersey RICO claims under the New Jersey statute, with no

mention of choice-of-law doctrine and without citation to New

Jersey's RICO or general territoriality statutes. Marshall,

supra, 388 F. Supp. 2d at 562 n.29. In the other case urged by

plaintiffs, Houston v. Whittier, 216 P.3d 1272, 1278-80 (Idaho

2009), it was explained that Idaho courts were not automatically

compelled to let a plaintiff assert Oregon causes of action

simply because they were statutory. Instead, the court had to

find the absence of a conflict with "the public policy of the

forum," and allowed the maintenance of the causes of action only

after finding that Oregon statutes were "virtually identical" to

Idaho's. Id. at 1279-80. Thus, plaintiffs are mistaken in

suggesting that Houston presents an instance in which the

existence of a statutory cause of action precluded a court from

conducting a choice-of-law analysis.

54 A-0963-12T1

also precluded private litigants from pursuing cases that

prosecutors with limited resources might decline, as opposed to

New Jersey's decision to encourage private litigants with the

prospect of treble damages and counsel fee awards. Cf. Lindsey

v. Allstate Ins. Co., 34 F. Supp. 2d 636, 646 (W.D. Tenn. 1999)

(observing that Congress included a private cause of action in

federal RICO "[t]o facilitate the enforcement of its

provisions"); Metro Int'l, Inc. v. Alco Standard Corp., 657 F.

Supp. 627, 634 (M.D. Pa. 1986) (recognizing that, "[t]o

facilitate and strengthen enforcement," Congress created RICO

with a private right of action for treble damages).

As in P.V., supra, 197 N.J. at 148-49, the difference in

approaches reflected a difference in policy and not a reflection

of mere variations in the procedural rules to be followed in

establishing a liability that both states recognized in

principle for the alleged conduct, as was the case in both State

Farm, supra, 84 N.J. at 42-43, and Cornett, supra, 211 N.J. at

377-78. We, thus, recognize that it is immaterial whether the

New York Legislature's motivation was to protect individuals or

the preeminence of its financial marketplace by limiting the

vehicles that private litigants could use to inhibit incidental

activity. It only matters that New York and New Jersey reached

"conflicting resolutions of a particular policy issue." See

55 A-0963-12T1

Boyes v. Greenwich Boat Works, Inc., 27 F. Supp. 2d 543, 548

(D.N.J. 1998). In other words, New York did not intend, by

enacting OCCA, to regulate all the conduct New Jersey intended

to reach in enacting its RICO laws; consequently, we reject

plaintiffs' characterization of the New Jersey private right of

action as simply a stronger remedy to advance an out-of-state

policy that is otherwise the same as the in-state policy.

(ii) Application of

The Second Restatement

Having found no legislative directive that would govern the

choice-of-law problem, we turn to the Second Restatement and

examine its: (a) section 6 factors; (b) section 145 principles;

and (c) specific tort principles.

a. Section 6

In the absence of an explicit statutory directive or a

directive that can "be ascertained by a process of

interpretation and construction," Restatement (Second), supra,

§ 6 cmt. b, there is a nonexclusive list of seven factors to be

considered in choosing the applicable law:

(a) the needs of the interstate and inter-

national systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other

interested states and the relative interests

56 A-0963-12T1

of those states in the determination of the

particular issue,

(d) the protection of justified expecta-

tions,

(e) the basic policies underlying the

particular field of law,

(f) certainty, predictability and uniform-

ity of result, and

(g) ease in the determination and applica-

tion of the law to be applied.

[Id. at § 6(2).]

The factor that deserves the greatest emphasis in a

particular case is that which furthers the most relevant policy

interest, such as "protecting the justified expectations of the

parties" or "favoring uniformity of result." Id. at § 6 cmt. c.

"Generally speaking, it would be unfair and improper to hold a

person liable under a local law of one state when he had

justifiably molded his conduct to conform to the requirements of

another state," as opposed to acting "without giving thought to

the legal consequences of [his] conduct or to the law that may

be applied." Id. at § 6 cmt. g. When "the purposes sought to be

achieved by a local statute or common law rule would be

furthered by its application to out-of-state facts, however,

this is a weighty reason why such application should be made."

Id. at § 6 cmt. e.

57 A-0963-12T1

The proper choice often "represents an accommodation of

conflicting values" that requires the forum court to name the

"general principle" that deserves the most weight and then

analyze the circumstances of the case in that regard. Id. at § 6

cmt. c. Without a statutory mandate to apply its own local law,

a court "must decide for itself whether the purposes sought to

[be] achieved by a local statute or rule should be furthered at

the expense of" other relevant factors. Id. at § 6 cmt. e. Those

include "the relevant policies of all other interested states"

and their "relative interest" in regulating the underlying

conduct that gave rise to the litigation, or in providing a

remedy for a particular plaintiff against a particular

defendant. Id. at § 6 cmt. f. "[W]here the policies of the

interested states are largely the same but where there are

nevertheless minor differences between their relevant local law

rules," there is "good reason for the court to apply the local

law of that state which will best achieve the basic policy, or

policies, underlying the particular field of law involved." Id.

at § 6 cmt. h.

In applying section 6 of the Second Restatement in P.V.,

supra, 197 N.J. at 152-53, the Court noted that interstate

comity additionally counsels that the forum state should defer

to the other state's local law if: (1) applying the forum

58 A-0963-12T1

state's local law would "substantially impair" the other state's

ability "to regulate the conduct of those who chose to operate

within its borders," and (2) applying the other state's local

law would not inhibit the forum's ability to regulate conduct

that occurs within its own borders. For example, the plaintiff

in P.V. was a New Jersey resident pursuing a tort claim against

a Pennsylvania charity for conduct that occurred in

Pennsylvania. Id. at 135. The Court found both of the conditions

that it noted for affording comity: (1) applying New Jersey's

broad charitable immunity to the activity in Pennsylvania would

"substantially impair[]" Pennsylvania's "ability to regulate the

conduct of those who chose to operate within its borders," and

(2) applying Pennsylvania law would not prevent New Jersey from

applying its law of charitable immunity to activities within New

Jersey. Id. at 153.

The parallel of this case to P.V. rests on the fact that

the alleged RICO activity predominantly occurred in New York

rather than New Jersey, and was primarily aimed at harming

plaintiffs indirectly by damaging their reputation by

influencing the mostly New York-based financial markets and

financial news media. In those circumstances, the application of

New York law would not set a precedent that inhibits New Jersey

from providing a civil cause of action for in-state activities

59 A-0963-12T1

that qualify as racketeering under New Jersey's statute; New

Jersey could still protect its domiciliaries and New Jersey

commerce from harm that is felt mostly within its borders.

In contrast, applying New Jersey's civil cause of action

would nullify New York's policy of protecting analogous activity

from being prosecuted as "racketeering" by private litigants,

who lack the institutional constraints of prosecutors and grand

juries. These distinctions in the two neighboring state's laws

created differing expectations about what conduct each would

allow or prohibit.

This case is, thus, distinguishable from those in which

courts declined to dismiss claims recognized under New Jersey

local law, even though out-of-state plaintiffs might have been

unable to pursue such causes of action under their own state's

local law. In those matters, the plaintiffs were allowed to

pursue their claims on the ground that their home states had no

reason to deny them the fortuity of a remedy for what both

states recognized as "the same evil," even if they did not

recognize it to the same degree. See Boyes, supra, 27 F. Supp.

2d at 547-48 (recognizing that Pennsylvania had no interest in

denying its residents the greater damages available under New

Jersey consumer fraud statutes for claims against a New Jersey

seller); Smith v. Alza Corp., 400 N.J. Super. 529, 542-51 (App.

60 A-0963-12T1

Div. 2008) (recognizing that Alabama had no interest in denying

its residents the procedural and substantive advantages afforded

under New Jersey's product liability and consumer fraud

statutes, but not Alabama's, for claims against a New Jersey

manufacturer); Almog v. Isr. Travel Advisory Serv., Inc., 298

N.J. Super. 145, 159 (App. Div. 1997) (recognizing Israel had no

interest in denying its citizens the substantive advantages of

New Jersey defamation law in New Jersey residents' claims for

defamation published in New Jersey), appeal dismissed, 152 N.J.

361, cert. denied, 525 U.S. 817, 119 S. Ct. 55, 142 L. Ed. 2d 42

(1998).

That, however, is not what's before us. As we have

observed, New Jersey and New York local law do not just differ

in the degree to which they deal with an otherwise common policy

of allowing a private civil RICO cause of action. They share no

such interest, as demonstrated by the fact that New Jersey law

permits, and New York law categorically disallows, such private

claims. Thus, we conclude that the section 6 factors favor

choosing New York as the state providing the applicable law.

b. Section 145

In addition, when a cause of action sounds in tort, the

general choice-of-law rule is to ascertain the state with "the

most significant relationship to the occurrence and the parties

61 A-0963-12T1

under the principles stated in [section] 6." Restatement

(Second), supra, § 145(1). That determination is to be made for

each "issue in tort," ibid., meaning each element needed to

establish the tort or a defense to it. Id. at § 145 cmt. d. In

making that determination, certain contacts are "to be taken

into account," including:

(a) the place where the injury occurred,

(b) the place where the conduct causing the

injury occurred,

(c) the domicil, residence, nationality,

place of incorporation and place of business

of the parties, and

(d) the place where the relationship, if

any, between the parties is centered.

[Id. at § 145(2).]

Accord P.V., supra, 197 N.J. at 141. Plaintiffs and defendants

have not asserted or alleged a prior relationship that preceded

the alleged events in this dispute.

The contacts analysis is "not merely quantitative." Id. at

147. Its purpose is to assess the contacts in terms of the

guiding touchstones of the Second Restatement's section 6,

which, "[r]educed to their essence," are: "(1) the interests of

interstate comity; (2) the interests of the parties; (3) the

interests underlying the field of tort law; (4) the interests of

judicial administration; and (5) the competing interests of the

62 A-0963-12T1

states." Ibid. (citations omitted). The "relative importance"

of the matter's contacts with a state may vary according to "the

nature of the tort involved." Restatement (Second), supra, § 145

cmt. f. Furthermore, for each tort issue, the contacts "are to

be evaluated according to their relative importance with respect

to the particular issue." Id. at § 145 & cmt. d.

If the primary purpose of the local "tort rule" is to deter

or punish misconduct, then the most important contact will be

the conduct's location. Id. at § 145 cmt. c. "[T]he same is true

when the conduct was required or privileged by the local law of

the state where it took place," id. at § 145 cmt. e, so "[a]

rule [of tort] which exempts the actor from liability for

harmful conduct is entitled to the same consideration in the

choice-of-law process as is a rule which imposes liability," id.

at § 145 cmt. c. In that way, the tort policies behind New

Jersey's local law and New York's local law on private civil

causes of action for racketeering are entitled to equal

consideration, even if the purpose of New York's "tort rule" was

to prevent private civil liability for certain conduct that

would create such liability in New Jersey. In short, were we to

apply section 145's general rule for torts, we would choose New

York as providing the applicable law because it has the most

significant relationship under section 6.

63 A-0963-12T1

c. Specific Tort Principles

In addition to section 145's general factors for torts, the

Second Restatement also provides more specific choice-of-law

rules for particular torts. P.V., supra, 197 N.J. at 141. There

are rules for personal injuries, injuries to tangible things,

injuries resulting from a plaintiff's reliance on fraud or

misrepresentations, and injuries resulting from defamation or

injurious falsehood. Restatement (Second), supra, §§ 146-51.

Only injurious falsehood is germane to plaintiffs' RICO claim.

For Second Restatement purposes, an "injurious falsehood"

is any false statement that causes pecuniary loss. Id. at § 151

cmt. a; see also Restatement (Second) of Torts § 623A (1976)

(declaring that an injurious falsehood creates liability for one

who publishes it with knowledge or reckless disregard of its

falsity and with intent "to result in harm to interests of the

other having a pecuniary value"). An injurious falsehood "need

not cast any reflection upon the plaintiff's personal reputation

in order to be actionable." Restatement (Second), supra, § 151

cmt. a. It is enough that the false statement "disparage[s] the

plaintiff's title to his property, or its quality or the

character or conduct of the plaintiff's business." Ibid. This

description encompasses defendants' alleged RICO scheme.

64 A-0963-12T1

The Second Restatement does not have another tort rule that

might cover plaintiffs' RICO claims. Plaintiffs' alleged RICO

injuries are not a form of defamation, nor do they constitute a

form of "personal injury" for choice-of-law purposes, because

"personal injury" is limited to "physical harm or mental

disturbance," which means that "injuries to a person's

reputation . . . are not 'personal injuries' in the sense here

used." Id. at § 146 cmt. b. Plaintiffs' RICO injuries are not

"Injuries to Tangible Things" as used in section 147 of the

Second Restatement. Plaintiffs' alleged injuries do not arise

from "Fraud and Misrepresentation" for choice-of-law purposes

because plaintiffs do not allege that they "suffered pecuniary

harm on account of [their own] reliance on the defendant[s']

false representations." Id. at § 148(1). Rather, plaintiffs

allege reliance by others. Plaintiffs do not assert a defamation

claim, but the rules for "Defamation" and "Multistate

Defamation" in sections 149 and 150 of the Second Restatement

are incorporated into section 151, which covers "Injurious

Falsehood." Thus, the only rules for specific torts relevant to

plaintiffs' RICO claim are sections 149 through 151 of the

Second Restatement.

65 A-0963-12T1

For defamation,30 "the local law of the state where the

publication occurs determines the rights and liabilities of the

parties, except as stated in [section] 150, unless, with respect

to the particular issue, some other state has a more significant

relationship under the principles stated in [section] 6 to the

occurrence and the parties." Id. at § 149. That same rule

governs the choice of law analysis for injurious falsehood. Id.

at § 151 & cmt. b. Here, the state where the publications

primarily occurred was the state with the most significant

relationship – New York.

Next, we must consider whether section 150 calls for a

different result. For multistate defamation, an "aggregate

communication" is "any one edition of a book or newspaper, or

any one broadcast over radio or television, exhibition of a

motion picture," or a similar act of publication, id. at

§ 150(1), meaning "a single aggregate communication to a large

number of persons at one time." Id. at § 150 cmt. c. Multiple

publications of a defamatory statement to numerous individuals

30To be clear, plaintiffs did not assert a defamation claim nor

complained in this appeal that their allegations should have

been interpreted as if they had sought damages based on a claim

of defamation. Nevertheless, their disparagement claims may –

for these purposes – be viewed similarly due to their

theoretical kinship. Cf. Dairy Stores, Inc. v. Sentinel Pub.

Co., 104 N.J. 125, 133 (1986) (recognizing that the torts of

product disparagement and defamation "sometimes overlap").

66 A-0963-12T1

are not necessarily "aggregate communications" subject to

section 150, as they can be separate acts that require an

individual choice-of-law analysis that may lead to differing

results. Id. at § 149 cmt. a. Although plaintiffs have alleged

multiple publications of certain defamatory statements, which

might not qualify as section 150 multistate defamations, they

primarily allege aggregate communications published in a manner

intended to influence all persons and entities who follow or

participate in the financial marketplace and financial news

media.

The "single publication rule" applies to section 150

aggregate communications, so the matter may be determined as if

plaintiff has only one cause of action, regardless of the number

of jurisdictions in which the aggregate communication was

published. Id. at § 150 cmt. c; Restatement (Second) of Torts,

supra, § 577A cmts. e & f.

In addition, we must consider that, in this context, a

corporation is a legal person and therefore without domicile in

the choice-of-law sense. Restatement (Second), supra, § 150

cmt. f; see also id. at § 11 cmt. 1. Thus, when a corporation

claims multistate defamation, the state with the most

significant relationship to the matter "will usually be the

state where the corporation . . . had its principal place of

67 A-0963-12T1

business" as long as that state was one in which the multistate

defamation was published. Id. at § 150(3). This is because it is

assumed that a corporation sustains its greatest injury from

defamation there. Id. at § 150 cmt. f. Another state, however,

may have the "most significant relationship with respect to the

particular issue if it is the state where the defamatory

communication caused plaintiff the greatest injury to its

reputation." Ibid. That can occur if "the matter claimed to be

defamatory related to an activity of the plaintiff that is

principally located in this state," id. at § 150 cmt. f(b), or

"the plaintiff suffered greater special damages in this state

than in the state of its principal place of business," id. at §

150 cmt. f(c), or "the place of principal circulation of the

matter claimed to be defamatory was in this state," id. at § 150

cmt. f(d).

As alleged by plaintiffs, defendants' RICO scheme targeted

plaintiffs' use of the New York financial markets for securities

offerings and for third-party trading of their securities, which

was an "activity" of plaintiffs that was "principally located

in" New York. Ibid. As a result, New York was the state where

defendants' false communications caused plaintiffs "the greatest

injury to [their] reputation" because the main injury from the

alleged RICO scheme was the decrease in offering and market

68 A-0963-12T1

share prices due to the reputational harm that plaintiffs

suffered in the markets where plaintiffs conducted such

"activity." That is bolstered because, although defendants'

publications were multistate, "the place of principal

circulation of the matter claimed to be defamatory was in" New

York. Ibid. Thus, New York is the state with the most

significant relationship under section 150 as well as sections 6

and 145.

That conclusion remains undisturbed when considering

"special damages." If the injury was the loss of particular

customers or of market share in particular locations, those

would also be important contacts in determining which state's

law to apply. See Pony Comput., Inc. v. Equus Comput. Sys. of

Miss., Inc., 162 F.3d 991, 996 (8th Cir. 1998); Jelec USA, Inc.

v. Safety Controls, Inc., 498 F. Supp. 2d 945, 952-53 (S.D. Tex.

2007). As we discuss elsewhere, plaintiffs' cognizable special

damages are the alleged loss of 180 customers throughout the

country. There was no evidence that any loss of customers or

market share occurred to a greater degree in New Jersey than in

New York or elsewhere.

We also are presented with no ground upon which to conclude

that defamation or disparagement of a parent company generally

amounts to defamation or disparagement of a subsidiary, or vice

69 A-0963-12T1

versa. The issue of entity separation for corporate parents and

subsidiaries raises additional questions concerning the locus of

the injury. For example, in a case that concerned the looting of

a corporation rather than its defamation, we favored application

of Delaware's equitable principles to pierce the corporate veil,

and gave the parent standing to protect financial interests

against the adverse party, because the parent's interests were

not as distinct from its subsidiary's contractual rights as the

doctrine of "entity separateness" generally presumes. Bondi,

supra, 423 N.J. Super. at 437-39. Although such recognition

implies that the subsidiary's injury is also an injury to the

parent, we intended no implication that the locus of the injury

necessarily moved from where the subsidiary as a separate entity

would have felt it to where the parent as a separate entity

would feel it.

Plaintiffs have alleged and argued that C&F's finances were

inextricably intertwined with Fairfax's. And they have argued

that the market viewed Fairfax and its subsidiaries as so

inseparable that some defendants bought shares of the

subsidiaries and affiliates as proxies for Fairfax shares, which

had become too costly to borrow due to demand from those

shorting Fairfax. Plaintiffs have further argued that

defendants' defamation of C&F served the main goal of destroying

70 A-0963-12T1

the entirety of Fairfax itself, and defendants rarely bothered

to distinguish among its subsidiaries. According to plaintiffs,

the RICO enterprise operated by spreading false information in

the financial markets and the financial news media, and by

encouraging federal law enforcement and securities officials

outside New Jersey to investigate Fairfax's use of reinsurance.

The goal was to damage Fairfax's reputation in order to reduce

the market share price, and the proceeds of securities

offerings, of all Fairfax entities.

In responding, defendants mostly view Fairfax as an

integrated company whose general financial instability reached

every branch of the Fairfax family tree.31 And defendants'

criticisms of C&F served more as criticism of the Fairfax

edifice than criticisms of C&F individually. Indeed, some

defendants expressly articulated an intent for their criticisms

of a subsidiary, or their short positions in a subsidiary, to

harm plaintiff Fairfax Financial Holdings. In addition, we

observe that the parent corporation of the financially-

intertwined Fairfax entities was located in Toronto, and all

share-trading occurred on the New York Stock Exchange or the

Toronto Stock Exchange.

31 We have appended to this opinion a graph setting forth the

relationship of the various Fairfax entities.

71 A-0963-12T1

In summary, the weight of the conduct in this alleged

enterprise of multistate disparagement was in New York, not New

Jersey. The financial markets and financial news media were

predominantly located in New York, making New York central to

defendants' publications. New York is "the state where the

[harmful] communication[s] caused the greatest injury to

[plaintiffs'] reputation." Restatement (Second), supra, § 150

cmt. f. For all these reasons, New York has "a more significant

relationship to the occurrences and the parties." Ibid.

(iii) Conclusion

For these reasons, we conclude that the trial judge

correctly gave C&F's direct alleged losses little weight in

balancing the state contacts and interests for the RICO claims.

We, thus, affirm the determination that New York law applied and

that, in applying New York law, plaintiffs' racketeering claim

could not stand.

72 A-0963-12T1

B

THE MAINTAINABILITY OF

THE COMMON LAW CLAIMS

Plaintiffs contend the trial judge erroneously dismissed

two of their common law claims.32 They first argue the trial

judge mistakenly applied New York's statute of limitations

rather than New Jersey's more generous time-bar to their

disparagement claim,33 and, second, they argue the judge

erroneously excluded evidence of damages on their claims of

disparagement and tortious interference with prospective

economic advantage.

(1) Statute of Limitations

Applicable to Plaintiffs'

Disparagement Claim

Plaintiffs argue the trial judge erred in ascertaining the

appropriate statute of limitations to be applied to their

disparagement claim. They argued in the trial court that New

32 Plaintiffs do not address in their appeal the trial court's

disposition of their tortious interference with contractual

relations claim.

33Morgan Keegan has not only responded to plaintiffs' arguments

about the applicable time-bar, but has also cross-appealed and

argues, among other things, that the trial judge erred in

applying New York's three-year statute of limitations instead of

New York's one-year limitation period.

73 A-0963-12T1

Jersey's six-year statute of limitations34 applied, Morgan Keegan

argued for application of New York's one-year statute of

limitations,35 and the trial judge found controlling the three-

year New York statute of limitations.36

After this appeal was argued the Supreme Court decided

McCarrell v. Hoffmann-LaRoche, Inc., supra, 227 N.J. at 574-75,37

which illuminates our way by holding that section 142 of the

Second Restatement "is now the operative choice-of-law rule for

resolving statute-of-limitations conflicts because it . . .

channel[s] judicial discretion and lead[s] to more predictable

and uniform results that are consistent with the just

expectations of the parties." The Court described its holding as

"a natural progression in [its] conversion from the

governmental-interest test to the Second Restatement [which

34N.J.S.A. 2A:14-1 (declaring that "[e]very action at law for .

. . any tortious injury to real or personal property . . . shall

be commenced within 6 years next after the cause of any such

action shall have accrued").

35N.Y. C.P.L.R. § 215(3) (declaring that "an action to recover

damages for," among other things, "libel, slander, [and] false

words causing special damages" "shall be commenced within one

year").

36N.Y. C.P.L.R. § 214(4) (declaring that "an action to recover

damages for an injury to property" "must be commenced within

three years").

37We invited and recently received and considered the parties'

supplemental briefs on McCarrell's impact on the issues in this

case.

74 A-0963-12T1

began] in P.V.[, supra,] 197 N.J. 132," and which adopted the

methodology described earlier in this opinion for resolving

conflicts concerning substantive tort law. McCarrell, supra, 227

N.J. at 574-75. McCarrell's approach has certainly simplified

the disposition of most conflicts concerning a choice between

two or more states' statutes of limitations.

The process starts with an understanding that when an

action is commenced here, "New Jersey's choice-of-law rules

[apply] in deciding whether this State's or another state's

statute of limitations governs the matter." Id. at 583. In

defining New Jersey choice-of-law rules, the McCarrell Court

instructed that the first matter of interest is whether there is

a "true conflict." Id. at 584. "When application of the forum

state's or another state's statute of limitations results in the

same outcome, no conflict exists, and the law of the forum state

governs." Ibid. (citing Rowe v. Hoffmann-La Roche, Inc., 189

N.J. 615, 621 (2007)). A true conflict occurs "when a complaint

is timely filed within one state's statute of limitations but is

filed outside another state's." Ibid. (citing Schmelze v. ALZA

Corp., 561 F. Supp. 2d 1046, 1048 (D. Minn. 2008)).

We can perceive a circumstance – perhaps applicable here –

where a complaint is filed within time regardless of which

competing state's statute of limitations is applied, but the

75 A-0963-12T1

scope of the claim is limited or enhanced depending on the

statute of limitations applied. For example, a plaintiff may sue

on a series of defamatory statements occurring over the course

of two years. If one state has a one-year statute of limitations

and the other has a two-year statute of limitations, the

plaintiff's suit – if filed within one year of the last

defamatory statement – would be timely filed pursuant to either

state's statute of limitations. But, if the one-year statute of

limitations is found applicable, the allegations or resulting

damages would be limited by that choice of law because

allegations of defamatory statements made more than a year

before the suit's commencement would not be cognizable. That

particular problem was not likely contemplated in McCarrell

because the facts didn't warrant its consideration; that product

liability action was either timely if our statute of limitations

applied or entirely barred if Alabama's applied.

In any event, other than referring to a "true conflict" as

one which makes a difference as to the timeliness of the suit,

the Court also emphasized that the test is whether the choice of

"statute of limitations is outcome determinative." Id. at 584

(emphasis added). In the example we have provided, the outcome

would be impacted if a suit would be timely under either statute

of limitations because, if the shorter limitations period was

76 A-0963-12T1

applied, only the defamatory statements asserted within one year

of the filing would be actionable. In ascertaining the existence

of a true conflict, we assume the McCarrell Court intended the

broader view suggested by its "outcome determinative" language.

Indeed, later in the opinion, the Court again emphasized that

whether the conflict is "outcome determinative" is the question,

and, in that regard, the Court quoted with approval a federal

judge who stated, in a different way, that there is no conflict

if "'there is no divergence between the potentially applicable

laws.'" Id. at 591 n.9 (quoting Spence-Parker v. Del. River &

Bay Auth., 656 F. Supp. 2d 488, 497 (D.N.J. 2009)). Because some

or most of defendants' allegedly disparaging statements from

2002 to 2006 would cease to be actionable if a shorter New York

statute – either New York's one-year or its three-year statute

of limitations – were to be applied to this 2006 complaint

rather than New Jersey's six-year statute of limitations,

N.J.S.A. 2A:14-1, we conclude that the choice-of-law decision

here is "outcome determinative" and requires a resolution.

There being a true conflict, McCarrell instructs, 227 N.J.

at 592-93, that we must apply the Second Restatement's section

142, which states that, "barring exceptional circumstances

[that] make such a result unreasonable":

(1) The forum will apply its own statute of

limitations barring the claim.

77 A-0963-12T1

(2) The forum will apply its own statute of

limitations permitting the claim unless:

(a) maintenance of the claim would

serve no substantial interest of

the forum; and

(b) the claim would be barred

under the statute of limitations

of a state having a more

significant relationship to the

parties and the occurrence.

Because application of N.J.S.A. 2A:14-1 permits the maintenance

of the claim, subsection (1) of section 142 has no application.

We, thus, gaze toward section 142's subsection (2). And, as the

Court held, under section 142(2)(a), "the statute of limitations

of the forum state generally applies whenever that state has a

substantial interest in the maintenance of the claim."

McCarrell, supra, 227 N.J. at 593. If that is so, then "the

inquiry ends." Ibid. It is "[o]nly when the forum state has 'no

substantial interest' in the maintenance of the claim [that] a

court [would] consider [s]ection 142(2)(b) – whether 'the claim

would be barred under the statute of limitations of a state

having a more significant relationship to the parties and the

occurrence.'" Ibid.

In this case, section 142 is easily applied, as anticipated

by McCarrell's description of the test. Ibid. (observing that

section 142: "benefits from an ease of application; places both

78 A-0963-12T1

this State's and out-of-state's citizens on an equal playing

field, thus promoting principles of comity; advances

predictability and uniformity in decision-making; and allows for

greater certainty in the expectations of the parties"). Section

142 "makes clear that when New Jersey has a substantial interest

in the litigation and is the forum state, it will generally

apply its statute of limitations." Ibid. Stated another way,

under section 142, the forum state "presumptively applies its

own statute of limitations unless . . . [it] has no significant

interest in the maintenance of the claim and the other state,

whose statute has expired, has 'a more significant relationship

to the parties and the occurrence,' . . . or . . . given 'the

exceptional circumstances of the case,' following the Second

Restatement rule would lead to an unreasonable result."

McCarrell, supra, 227 N.J. at 597.

There is no doubt that New Jersey has a substantial

interest in this litigation. One of the plaintiffs – C&F – has

its principal place of business in New Jersey and claims

injuries to its business caused by the alleged disparagement of

it and its products. Because New Jersey has a significant

interest, it is irrelevant under section 142 that New York has a

"more significant relationship to the parties and the

occurrence." Ibid. Absent "exceptional circumstances," not

79 A-0963-12T1

remotely suggested here, that this would "lead to an

unreasonable result," the test described in McCarrell requires

application of our own statute of limitations. Ibid.

Consequently, the timeliness of plaintiffs' disparagement

cause of action – the only claim as to which plaintiffs argue

the judge erred in applying a shorter, New York statute of

limitations – is governed by our six-year statute of

limitations. N.J.S.A. 2A:14-1.38 See Patel v. Soriano, 369 N.J.

Super. 192, 247 (App. Div.), certif. denied, 182 N.J. 141

(2004). Although New Jersey has a one-year statute of

limitations for libel and slander of a person, N.J.S.A. 2A:14-3,

plaintiffs claim commercial disparagement of their business and

products, sometimes referred to as trade libel. Patel, supra,

369 N.J. Super. at 246-47. In New Jersey, "a claim for trade

libel is subject to the general six-year statute of limitations

applicable to malicious interference claims." Id. at 247.

Moreover, that statute of limitations applies to disparagement

whether "the aspersion reflects only on the quality of

plaintiff's products, or on the character of plaintiff's

38For these same reasons, we reject the argument Morgan Keegan

asserted in its cross-appeal that the trial judge erred in

applying New York's three-year statute of limitations, instead

of New York's one-year statute of limitations.

80 A-0963-12T1

business as such." Ibid.39 Therefore, "the more restricted

statute of limitations for slander does not apply" here. Id. at

249.

The six-year statute of limitations applies to plaintiffs'

disparagement claims, as well as their other common law causes

of action. The trial judge erred in applying a shorter statute

of limitations.

39 As the trial judge recognized, a statement that attacks an

insurance company as a fraud or a Ponzi scheme, or an assertion

that it is insolvent or bankrupt, among other similar things,

may constitute an attack on its products. Here, statements

disparaging the financial condition of plaintiffs may have a

direct link to its products; plaintiffs are in the business,

through the sale of insurance policies, of making promises to

clients to pay them money in the future in the event of certain

occurrences. Statements that question plaintiffs' ability to

make those payments strike at both the heart of their reputation

and the products they sell – a view that can be seen in the

assertions of Fairfax's chairman and chief executive officer:

When you're in the insurance business and

you are selling a promise to pay a claim in

a year or two or three or four, when you

have all of this noise . . . when there

[are] statements made that the company is

bankrupt, of course, you have clients who

would not do business with you. Why would a

client do business with a property casualty

insurance company that's going bankrupt?

81 A-0963-12T1

2. Dismissal of Plaintiffs'

Disparagement and Tortious Interference

With Prospective Economic Advantage Claims

Based on the Absence of Special Damages

Plaintiffs also argue the trial court erred in excluding

evidence of damages allegedly incurred because of both

disparagement and tortious interference with prospective

economic advantage. This involves not only a determination of

which state's substantive law applies in assessing the

maintainability of those common law actions but also the content

of that substantive law.

(a) Choice of Law

We need not discuss at length our determination that New

York provides the substantive law applicable to plaintiffs'

common law causes of action. Although the choice-of-law

principles discussed in Section IV(B)(1), supra, required

application of this State's statute of limitations, other

choice-of-law principles – already discussed in Section IV(A),

supra, which led to our affirmance of the dismissal of the

racketeering claim – compel the adoption of New York's common

law in assessing the sufficiency of plaintiffs' claims of

82 A-0963-12T1

disparagement and tortious interference with prospective

economic advantages.40

(b) Common Law

Requirements

The parties' chief bone of contention concerns the types of

damages plaintiffs were required to assert and prove to sustain

their claims of disparagement and tortious inference with

prospective economic advantage. We discuss these separately.

(i) Disparagement

We initially observe that, in New York, defamation claims,

which are akin to disparagement claims, require "special

damages," meaning an economic loss resulting from the harm to

the plaintiff's reputation. Liberman v. Gelstein, 605 N.E.2d

344, 347 (N.Y. 1992); Matherson v. Marchello, 473 N.Y.S.2d 998,

1000 (App. Div. 1984). This requires the identification of

customers who would have dealt with the plaintiff but for the

reputational harm. Squire Records, Inc. v. Vanguard Recording

Soc'y, Inc., 226 N.E.2d 542, 543 (N.Y. 1967); Drug Research

Corp. v. Curtis Publ'g Co., 166 N.E.2d 319, 322 (N.Y. 1960);

DiSanto v. Forsyth, 684 N.Y.S.2d 628, 629 (App. Div. 1999);

40We will not conduct an individualized choice-of-law assessment

regarding plaintiffs' common-law claims for reasons expressed

earlier. See Section IV(A)(3)(b), supra.

83 A-0963-12T1

Waste Distillation Tech., Inc. v. Blasland & Bouck Eng'rs, P.C.,

523 N.Y.S.2d 875, 877 (App. Div. 1988).

This principle seems to have emanated from New York state

courts' disagreements with one federal case in New York that had

allowed a substitute measure of damages for a plaintiff that

sold its product only by mail order. Charles Atlas, Ltd. v.

Time-Life Books, Inc., 570 F. Supp. 150, 156 (S.D.N.Y. 1983).

The district judge in Charles Atlas held that it was "virtually

impossible to identify those who did not order the plaintiff's

product because of the" product disparagement, and allowed the

plaintiff "to prove lost sales by other means" as long as

"'other factors [are] satisfactorily excluded by sufficient

evidence[.]'" Ibid. (quoting William L. Prosser, Handbook of the

Law of Torts § 128, at 923-24 (4th ed. 1971)).41 In rejecting

41 Dean Prosser observed:

[T]he whole modern tendency is away from any

such arbitrary rule. Starting with a few

cases involving goods offered for sale at an

auction, and extending to others in which

there has been obvious impossibility of any

identification of the lost customers, a more

liberal rule has been applied, requiring the

plaintiff to be particular only where it is

reasonable to expect him to do so. It is

probably still the law everywhere that he

must either offer the names of those who

have failed to purchase or explain why it is

impossible for him to do so; but where he

cannot, the matter is dealt with by analogy

(continued)

84 A-0963-12T1

Charles Atlas, New York's Appellate Division held that a

disparagement claim is dependent on "evidence of particular

persons who ceased to be or refused to become customers." De

Marco-Stone Funeral Home Inc. v. WEBG Broadcasting Inc., 610

N.Y.S.2d 666, 668 (App. Div. 1994); see also Prince v. Fox

Television Stations, Inc., 941 N.Y.S.2d 488, 488 (App. Div.

2012).

(ii) Tortious Interference With

Prospective Economic Advantage

To sustain a claim for tortious interference with

prospective economic advantage pursuant to New York substantive

law: there must be a prospective business relationship between

the plaintiff and a third party; the defendant must know of that

relationship and intentionally interfere with it; the

defendant's means of interference must amount to a crime, an

independent tort, or conduct that arose solely out of malice;

and the result must be some injury to the relationship with the

third party. Posner v. Lewis, 965 N.E.2d 949, 952 n.2 (N.Y.

(continued)

to the proof of lost profits resulting from

breach of contract. If the possibility that

other factors have caused the loss of the

general business is satisfactorily excluded

by sufficient evidence, this seems entirely

justified by the necessities of the

situation.

85 A-0963-12T1

2012); Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1102-03 (N.Y.

2004); Amaranth LLC v. J.P. Morgan Chase & Co., 888 N.Y.S.2d

489, 494-96 (App. Div. 2009). The requirement to specifically

identify the business lost is the same as noted above with

regard to disparagement claims.

The business prospect must be identifiable, and the

plaintiff must show that it would have obtained that prospect's

business but for the interference. Learning Annex Holdings, LLC

v. Gittelman, 850 N.Y.S.2d 422, 423 (App. Div. 2008). The

defendant must know of the specific third party and the

prospective business relationship. See GS Plasticos Limitada v.

Bureau Veritas Consumer Prods. Servs., Inc., 931 N.Y.S.2d 567,

568 (App. Div.), appeal denied, 957 N.E.2d 1159 (N.Y. 2011).

(c) Damages Asserted

To maintain its common law claims, C&F's marketing

department developed a list of 180 specifically-identified

customers or potential customers whose business it claims C&F

would have maintained or secured but for defendants' wrongful

acts. C&F employees developed a model of the lost revenue and

profits for each such customer. For the period between 2003 and

2009, they estimated the lost revenue at $102 million and lost

profits at $19 million; the total volume of business "quoted but

not written" by C&F during that period was approximated at $14

86 A-0963-12T1

billion, of which the revenue lost on those 180 accounts

represented less than one percent.

Jorge Echemendia, a corporate representative of United

States Fire Insurance Company, a wholly-owned subsidiary of C&F,

testified at a deposition that he and another C&F employee

developed the list from C&F's records, which included the

customer call report system that was used to archive notes on

existing and potential accounts, and from communications with

brokers and other producers. C&F recognized in 2004 that

customers were paying greater attention to an insurer's ratings

and financial capacity, and it accordingly added those concerns

to the list of reasons that could be cited in a call report as a

cause for losing a particular customer. Approximately 170 of

the 180 accounts in the list were identified due to the

selection of such a reason in the call report, while the rest

were identified from emails that attributed the loss of an

account to those reasons.

The trial court found no proof the 180 customers relied on

defendants' statements. But plaintiffs proffered that

defendants' scheme was designed to disparage and interfere by

lowering C&F's ratings and to cast doubt on the financial

soundness of C&F and its parent. Plaintiffs' proofs that these

180 customers relied on the resulting reduced ratings and

87 A-0963-12T1

financial reputation indicated these customers relied on

defendants' statements indirectly, as defendants allegedly

intended. For example, plaintiffs cited a March 2005 email,

which followed a March 2005 rating agency report. Echemendia

also asserted that "a few" of "the articles distributed by the

defendants" were named in a call report or in an email.

The question before us is not whether these assertions of

lost business are persuasive or even whether they must be

presented through expert opinion. The question as we understand

it, in light of the trial court's disposition and in light of

New York law, requires a determination of whether plaintiffs

asserted a loss of business sufficient to withstand summary

disposition. We find plaintiffs' allegations regarding the 180

lost customers were sufficiently specific to meet the

requirements of New York law.42

3. Summary

For these reasons, our review of the trial judge's

disposition of the two common law causes of action referred to

in plaintiffs' appeal – disparagement and the tortious

42 Because plaintiffs' disparagement and tortious interference

with prospective economic advantage claims survive, their claim

of a civil conspiracy may also be further maintained. Corris v.

White, 289 N.Y.S.2d 371, 374 (App. Div. 1968); see also Banco

Popular N. Am. v. Gandi, 184 N.J. 161, 177-78 (2005).

88 A-0963-12T1

interference with prospective economic advantage – leads us to

conclude that: New Jersey's six-year statute of limitations

applies to those claims; New York law imposes a requirement that

plaintiffs allege special damages; and summary judgment was

erroneously granted because the claim of 180 lost business

prospects was sufficient to meet the requirements of New York

law.

C

THE PERSONAL JURISDICTION RULINGS

Plaintiffs argue that the trial judge erred in dismissing

the Kynikos and Third Point defendants for lack of personal

jurisdiction. Plaintiffs assert that those defendants ought to

be held subject to suit in New Jersey because they participated

in the overarching conspiracy to harm them. In response, these

defendants argue that our courts do not recognize conspiracy-

based jurisdiction and, alternatively, that plaintiffs have not

presented any competent evidence to show they were part of a

conspiracy. As required by Brill, supra, 142 N.J. at 540, we

assume plaintiffs' allegations regarding these defendants are

true for purposes of determining whether the trial court

properly granted summary judgment on personal jurisdiction

grounds.

89 A-0963-12T1

Before examining the relationship of these defendants to

New Jersey, we first observe that the due process clause permits

the assertion of personal jurisdiction over a nonresident in two

ways – general and specific jurisdiction. Waste Mgmt., Inc. v.

Admiral Ins. Co., 138 N.J. 106, 119 (1994), cert. denied, 513

U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995). A

nonresident's continuous and systematic contacts that

approximate an actual presence give rise to general

jurisdiction. Ibid. Specific or "case-linked" jurisdiction

"depends on an 'affiliatio[n] between the forum and the

underlying controversy,' principally, activity or an occurrence

that takes place in the forum State and is therefore subject to

the State's regulation." Goodyear Dunlop Tires Operations, S.A.

v. Brown, 564 U.S. 915, 919, 131 S. Ct. 2846, 2851, 180 L. Ed.

2d 796, 803 (2011) (quoting Arthur T. von Mehren & Donald T.

Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79

Harv. L. Rev. 1121, 1136 (1966)).

We, thus, turn to the relationship between these two groups

of defendants – the Kynikos and Third Point defendants – and

this State, and examine whether there is jurisdiction in this

State over these defendants through a consideration of the

concepts of (1) general, (2) specific, and (3) conspiracy-based

jurisdiction.

90 A-0963-12T1

1. General Jurisdiction

(a) Kynikos

Kynikos – formed in 1985 as a limited partnership organized

in Delaware with its principal place of business in New York –

is an investment advisor and management company that specializes

in short-selling and has managed over $1 billion for its

clients. During the relevant period, Kynikos purchased services

and products from New Jersey vendors; it did not, however, have

any property, an office, a mailing address, a phone number, or a

bank account in this State. Kynikos was not registered to

conduct business in New Jersey, and any employees who were

residents of New Jersey reported to Kynikos's offices in New

York or London.

Kynikos did not advertise its services in New Jersey. It

operated a password-protected website, which only its existing

or prospective clients could access. Kynikos had seven New

Jersey clients between 2002 and 2007; those relationships were

client-initiated and comprised less than one-half of one percent

of Kynikos's total investment assets. Kynikos filed partnership

tax returns in New Jersey only because some of its related

entities shared partial ownership of airplanes that were

occasionally hangared at Teterboro Airport in Bergen County.

91 A-0963-12T1

Defendant James S. Chanos, Kynikos's founder and president,

was a New York resident; he did not have a New Jersey mailing

address, phone number or bank account. Chanos did not own

property in New Jersey, and he was not obligated to file a

personal income tax return in New Jersey. Like Kynikos, Chanos

only filed partnership returns in connection with the airplanes

in Bergen County.

In September 2000, defendant Jeffrey Perry, formerly of

SAC, joined Kynikos as a co-manager. After an alleged "falling

out" with Chanos, Perry left Kynikos in 2005 and joined Third

Point as a senior analyst. He was a New York resident and had

no New Jersey mailing address, phone number or bank account.

Perry did not own property in, and did not regularly travel to,

New Jersey. Although he paid New Jersey taxes in 2005 for

earnings from an unrelated investment, he otherwise has not been

obligated to file a personal income tax return in New Jersey.

Kynikos traded in Fairfax stock between March 2002 and June

2007, and in Odyssey stock between January 2006 and March 2007.

Kynikos never held stock in, nor traded any interest in, C&F.

(b) Third Point

Third Point – a Delaware limited liability company with its

principal office in New York and a satellite office in

California – was an employee-owned hedge fund that serviced

92 A-0963-12T1

pooled investments and institutional investors and had an

investment relationship with the Exis defendants.

During the relevant period, Third Point provided management

services to a number of funds that traded the securities of

Fairfax and related entities. Those funds paid Third Point

management fees; the funds themselves, however, are not parties

to this suit and, in any event, had no New Jersey presence. The

brokers who executed those trades were not located in New Jersey

and no Third Point member resided in New Jersey.

Between 2002 and 2006, New Jersey residents comprised only

four percent of the investors in Third Point's funds, and less

than two percent of the cash Third Point managed belonged to New

Jersey investors. Third Point paid New Jersey taxes on behalf of

its investors, but the Third Point funds reimbursed those

outlays; Third Point itself did not pay New Jersey taxes.

Third Point purchased services and products from New Jersey

vendors, but those payments were minimal, representing less than

one percent of Third Point's operating budgets between 2002 and

2007. Third Point was not registered to conduct business in New

Jersey, did not own or lease property here, and did not have any

New Jersey-based offices, mailing addresses, phone numbers or

bank accounts. Third Point did not send general solicitations to

New Jersey residents unless such information was requested.

93 A-0963-12T1

Defendant Daniel S. Loeb was the managing member and

founder of Third Point and, as noted previously, Perry was a

senior analyst. Both Loeb and Perry had their primary residences

in New York and did not travel to New Jersey on a regular basis.

Neither owned nor leased property in New Jersey or maintained a

New Jersey mailing address or phone number.

Loeb had personal accounts with various New Jersey savings

banks, but he was not required to pay New Jersey income taxes.

Plaintiffs alleged that Loeb directed Perry to help Contogouris

develop and disseminate false information about Fairfax's

health.

Third Point traded extensively in the following entities

and at the following times: (1) Fairfax, between June 2002 and

February 2007; (2) Odyssey, between November 2005 and December

2006; (3) Northbridge Financial Corporation, a Fairfax

subsidiary located in Canada, between June 2002 and November

2006; and (4) C&F, between July 2006 and April 2007. Third

Point's trading of C&F-related interests amounted to only three

percent of its overall Fairfax-related transactions. Those

interests, however, consisted of bonds that were not issued by

C&F; they were instead originally issued by non-party Crum &

Forster Funding Corp., a Delaware corporation. C&F assumed those

94 A-0963-12T1

bonds on June 30, 2003, through a transaction conducted in New

York purportedly in accordance with New York law.

Considering the contacts of the Kynikos and Third Point

defendants, we conclude they are insufficient to give our courts

general jurisdiction over them because the contacts do not

constitute "continuous and systematic activities in the forum."

Waste Mgmt., supra, 138 N.J. at 119.

2. Specific Jurisdiction

There being no basis upon which to assert general

jurisdiction over these defendants, we consider whether they had

specific contacts with persons or entities in New Jersey that

relate to the alleged enterprise or conspiracy. Although we do

not have the benefit of the trial judge's view of plaintiffs'

specific allegations of communications by these defendants

toward entities or persons in New Jersey, we have closely

examined the record in light of the parties' arguments. We find

any such communications to be so inconsequential as to justify

rejection of the argument that the court was authorized to

exercise specific jurisdiction over these defendants.

95 A-0963-12T1

As for Kynikos, plaintiffs allude to a handful of

communications it had with A.M. Best,43 CNBC,44 and "a New Jersey-

based" Dow Jones reporter, Carol Redmond.45 And, as for

This text is long and has been trimmed here. Open the source document for the complete record.