Jed Goldfarb v. David Solimine (083256)(Essex County & Statewide)
240 N.J. 83 (2019) (2021)
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Rule of Law:
The New Jersey Uniform Securities Law, which bars any 'suit on the contract' for an unwritten investment advisory agreement, does not prohibit a claim for promissory estoppel seeking reliance damages because such a claim is a distinct cause of action based on detrimental reliance on a promise, not on the enforcement of the unwritten contract itself.
Facts:
- Jed Goldfarb was employed as a research analyst, earning between approximately $308,000 and $466,000 per year from commissions.
- In March 2013, Goldfarb met David Solimine and, after several conversations, Solimine offered Goldfarb a job managing the Solimine family's investment portfolio.
- The verbal offer included terms of a base salary between $250,000 and $275,000 plus a percentage of profits generated.
- On June 20, 2013, Solimine assured Goldfarb that he had the job.
- Goldfarb requested a written term sheet, but no written employment agreement was ever produced or provided by Solimine.
- In reliance on Solimine's verbal promise of employment, Goldfarb quit his job and began providing Solimine with financial advice.
- In August 2013, Solimine informed Goldfarb that he would not be employing him.
Procedural Posture:
- Jed Goldfarb filed suit against David Solimine in the New Jersey Superior Court, Law Division (trial court).
- The trial court denied Solimine's motion for summary judgment, which argued the claim was barred by the Securities Law.
- The case proceeded to a jury on a theory of promissory estoppel, and the jury found in favor of Goldfarb on liability, awarding him $237,000 in expectation damages.
- The trial court denied Solimine's post-trial motion for judgment notwithstanding the verdict.
- Solimine, as appellant, appealed the liability verdict to the Superior Court, Appellate Division, and Goldfarb, as appellee, cross-appealed on other grounds.
- The Appellate Division affirmed the liability verdict but reversed the damages award, remanding for a new trial limited to reliance damages.
- The Supreme Court of New Jersey granted Solimine's petition for certification.
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Issue:
Does New Jersey's Uniform Securities Law, which prohibits suits 'on the contract' for unwritten investment advisory agreements, also bar a promissory estoppel claim seeking reliance damages for a broken promise of employment as an investment advisor?
Opinions:
Majority - LaVecchia, J.
No. The New Jersey Uniform Securities Law does not bar a promissory estoppel claim for reliance damages, as such a claim is not a 'suit on the contract' prohibited by the statute. The court distinguished between a breach of contract claim, which seeks forward-looking expectation damages (the benefit of the bargain) and is barred by the statute, and a promissory estoppel claim, which seeks backward-looking reliance damages to restore the plaintiff to the position they were in before the broken promise. A claim for reliance damages is based on the promise and the detrimental reliance, not on the unwritten contract itself, and thus serves a separate equitable purpose of deterring promisors from causing harm through broken promises. The court also rejected the Appellate Division's alternative reasoning that a 'family office' exception applied, finding no factual basis in the record and expressing constitutional concerns about incorporating a later-enacted federal exception into state law.
Dissenting - Albin, J.
Yes. The claim should be barred by the New Jersey Uniform Securities Law. The majority's decision creates a loophole that undermines the statute's consumer protection purpose by allowing a sophisticated professional to circumvent the clear statutory writing requirement. Permitting a suit for reliance damages under promissory estoppel is functionally equivalent to allowing a suit 'on the contract,' as it allows recovery based on an oral agreement the Legislature has deemed unenforceable. This contravenes the plain language of the Act and the principle that 'equity follows the law,' ultimately eviscerating the writing requirement by allowing any barred contract claim to be recast as a permissible promissory estoppel claim.
Analysis:
This decision clarifies the scope of the New Jersey Uniform Securities Law's prohibition on enforcing unwritten advisory contracts. It establishes that while the statute bars traditional breach of contract claims seeking expectation damages, it does not extinguish all remedies for a party who detrimentally relies on an oral promise of employment. The ruling carves out a path for recovery through promissory estoppel for reliance damages, thereby balancing the statute's investor protection goals with equitable principles against unjust harm from broken promises. This creates a critical distinction between suing to enforce the benefit of a bargain versus suing to recover losses incurred from relying on a promise.
