Jeremy J. Zacharias RPLU

A decision impacting the defense of such actions from damages claims by new businesses 

In an Appellate decision impacting the defense of legal malpractice actions arising out of claims for damages by new businesses, Jack and Jeremy were successful in defending an appeal in the matter of Schwartz v. Menas, et al, A-2481-22 and A-2482-22 (App. Div. January 2, 2025). 

The decision follows the New Jersey Supreme Court’s ruling in Schwartz v. Menas, 251 N.J. 556, 561 (2022), whereby the court remanded the matter to the trial court to conduct a Rule 104 hearing regarding the admissibility of the plaintiff’s damages expert’s opinions in connection with claims for lost profits. The remand occurred because the Supreme Court agreed with Jack’s and Jeremy’s argument that, when a new business makes a claim for lost profits, New Jersey will now follow New York and Illinois law under which the claim must be proven by the standard of reasonable certainty. The trial court conducted the Rule 104 hearing and agreed with their argument. As such, it barred the damages opinions and testimony of the plaintiff’s expert and granted their motion for summary judgment, dismissing the case.

On appeal, the plaintiff argued the trial court erred in barring the opinions of their damages expert, who opined that the attorneys, and others, deprived him of the opportunity to construct an affordable housing complex in New Jersey. The plaintiffs also argued that the trial court submitted its own judgment barring the testimony, and in granting summary judgment. 

The Appellate Division affirmed the decision of the trial court and barred the opinion of the plaintiff’s expert. The Appellate Division, citing the decision of the New Jersey Supreme Court which Jack and Jeremy argued, held: “In its rules as gatekeeper, trial courts are carefully scrutinized and new business claim that, but for the conduct of the defendant, it would have gained substantial profit in the venture in which it had no experience.” See, Schwartz v. Menas, 251 N.J. 556 (2022). Significantly, the court ruled that a judge is not bound to accept the testimony of an expert witness, even if it is unrebutted by any other evidence. 

The Appellate Division held that the plaintiff fell far short of establishing his alleged lost profit damages with a reasonable degree of certainty. At most, the plaintiff established the possibility that he might, as a novice entering a new enterprise, have been able to develop the large, extremely expensive and heavily regulated construction projects. The court held that a showing of “reasonable certainty” requires significantly more than a mere possibility.

Where, as here, the new business sought lost profits that were remote, uncertain or speculative, the Appellate Division held the trial court should bar the evidence supporting the claim.

Should you need any further information regarding this recent decision, please contact Jack Slimm (jlslimm@mdwcg.com) or Jeremy Zacharias (jjzacharias@mdwcg.com). 

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^{Legal Update for Lawyers’ Professional Liability – January 13, 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2025 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.}