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Last week, I discussed when New Jerseycourts would not have jurisdiction over a defendant attorney. It is only fitting to discuss when jurisdiction would be proper for this week. First American Title Insurance Co. v. Kapchan, A-5953-08T2, 2010 WL 1881896, ... 

Last week, I discussed when New Jerseycourts would not have jurisdiction over a defendant attorney. It is only fitting to discuss when jurisdiction would be proper for this week. First American Title Insurance Co. v. Kapchan, A-5953-08T2, 2010 WL 1881896, (N.J. Super. Ct. App. Div. April 12, 2010) is a case which involves a legal malpractice case filed inNew Jersey against an attorney inNew York, involving a property inPrinceton,New Jersey.

The litigation originally arose in relation to a mortgage loan for a single home property in Princeton Borough. At the time, the record owner was Gertrude Banks, and she sought a loan from Accredited Homes, Inc., aCaliforniacompany. As with all refinancing transactions, title insurance was required. Allstates Title Service was the broker that provided the requisite insurance, and its offices were inNew Jersey. Finally, First American Title insurance company provided the actual insurance policy.

The defendant, Kapchan, was licensed inNew Yorkat the time, and did not have offices in the State ofNew Jersey. He did not actively solicitNew Jerseyclients, nor was he licensed to practice inNew Jersey. When asked about his relationship to the property transaction, Kapchan described himself as a settlement agent between Banks and Accredited. The funding for the loan passed through Kapchan's trust account.

As part of his settlement agent role, Kapchan received instructions concerning how the loan should be disbursed. The instructions specifically denoted 5 relatives of Gertrude Banks that were to receive a portion of the funds. Those identified relatives were all grandchildren of the property's original owner. Gertrude was the wife of the sixth grandchild who had passed away while still owning the home. The $30,000 specified was signed by Banks, and also by Kapchan, who identified himself as "closing officer."

There was no closing ceremony where all the papers were signed. Rather, the requisite documents were sent from Kapchan to Banks, in Washington D.C. Eventually, Kapchan sent 5 paychecks to the Banks grandchildren, which were returned to him, because Gertrude was to pay the Banks 5, from her own proceeds. After several years, in 2008, the mortgage note went into foreclosure. In response, the Banks 5 filed actions which reflected a possible cloud on the title, because they were never paid their interests out of the loan proceeds. First American then paid a settlement to each Banks party member, to prevent a cloud on title.

In April, 2009, First American sued Kapchan for their costs of suit, as well as $150,000 in damages. When sued, Kapachan alleged he was a "settlement agent" and that all work related to the loan took place inNew York, precluding suit inNew Jersey. After hearing arguments, the motion judge dismissed for lack of jurisdiction. First American appealed, because they believed that Kapchan had enough minimum contacts to warrant jurisdiction by the State ofNew Jersey.

As recognized in last week's case, State courts have jurisdiction over individuals to the limits allowed by the Constitution. There are several requirements which must be met for jurisdiction to be Constitutional. First, the defendant must have certain minimum contacts if they are not in theforumState, orNew Jerseyin this case. Second, these contacts must be sufficient to the point that jurisdiction would not work an unfair disadvantage to the defendant. In this case, First American was alleging jurisdiction based simply on the loan transaction between Kapchan and Banks. This is as opposed to general jurisdiction, where a person continuously maintains contacts with a State.

The minimum contacts question must focus on the connection of the defendant to the State, as well as to the litigation. One of the main questions is whether a defendant intentionally acted in a way which allowed them to receive benefit from theforumState. There are several specific interests the court must weigh in making the final determination, including the burden on the defendant, the interests of theforumState, and the plaintiff's interest in obtaining relief. The court advised that interstate interests and relationships in fostering social policy must also be analyzed.

After reviewing the facts of this case, the court ruled that minimum contacts did exist for the purposes of this lawsuit. It seems one of the court's main reasons for deciding the case in this direction was that the residence which was at the center of litigation was inNew Jersey. Even though none of the individuals involved resided inNew Jersey, the property itself was a substantial nexus between the State and Kapchan. All disputes developed from the loan transaction related to theNew Jerseyproperty.

The court also determined that Kapchan should have foreseen that his actions could have led to economic damages in theforumState. The court based this on a "but-for" analysis where First American alleged there would have been no damages if Kapchan had not listened to the contrary directions of Gertrude's attorney. By disbursing the loan to Gertrude, Kapchan set up a potential unfunded liability inNew Jersey.

Kapchan also had relations with Allstates at itsNew Jerseyoffice. He also delivered a bill to that office, and the mortgage note by mail to be recorded. The court believed that Kapchan had a business relationship with Allstates which gave rise to jurisdiction inNew Jerseyas well.

The court believed that physical presence alone did not determine whether a State had jurisdiction. It was the interests which were triggered by the contacts withNew Jersey. Finally, the court noted there was little difficulty for Kapchan to travel fromNew YorktoNew Jersey, and that was not enough of a hardship. Nor was there any problem with the States of the other people involved, since the land at the center of the disputes was inNew Jersey.

The major take-away from this case is that a client will usually be able to know where a malpractice suit is filed based on the scope of representation. Venue is important in lawsuits because different juries may decide cases are worth different amounts. Prior to initiating a lawsuit, a client should sit down with the malpractice attorney representing them, and detail all transactions. At many times, there is more than one State where "minimum contacts" may be fulfilled.

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