misrepresentation – Pete's Take

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I recently wrote about Garmeaux v. DNV Consepts, Inc., a case in which the Appellate Division held that, under New Jersey's Consumer Fraud Act, successful plaintiffs can, in certain circumstances, recover legal fees they incurred in connection with both the prosecution of their affirmative claims and the defense against any counterclaims. If the facts relevant to a counterclaim are "inextricably caught up with," and related to the common core of, the facts relevant to an affirmative CFA claim, then legal fees can be awarded for both claims. In another recent decision, Riccardi v. Bruno, the Appellate Division addressed a similar issue but arrived at a result that was less favorable to plaintiff than the result in Garmeaux.

In Riccardi, plaintiff purchased a home from one of the defendants. The home had been damaged in a fire and required "extensive renovations" before being put on the market. (Although it was not listed as having been fire damaged, the certificate of occupancy issued by the township at the closing noted "rehab after fire.") After the closing, plaintiff allegedly discovered numerous problems with the house, including mold, burnt and fractured joists, and damaged foundation walls. He sued the seller and several related entities (architect, contractor, home inspector, etc.), alleging breach of contract and a violation of the CFA.

Default was entered against several defendants for failing to answer the complaint, and the claims against several others were dismissed either by summary judgment or at the close of plaintiff's case in chief. The jury then determined that the two remaining defendants — the prior owners of the property — violated the CFA. The jury's verdict was based on a "knowing concealment, suppression, or omission of a material fact with the intent that other would rely upon that fact." (The decision does not identify the fact that was omitted.) The jury found no cause of action under the CFA based on an unconscionable commercial practice, fraud, false pretense, false promise , or misrepresentation. And, it awarded plaintiff only $4,500, which was "attributable to the cost to repair a damaged window frame and to dispose of buried construction litter."

Continue reading “Court Awards Attorney Almost $100,000 Less Than He Requested In New Jersey Consumer Fraud Act Case” →

by: Peter J. Gallagher

In a recent decision, the Appellate Division restated and clarified the rules regarding when a condominium association has standing to sue a developer. In Belmont Condominium Association v. Geibel, an association sued the sponsor/developer/contractor of the Belmont, a seven-story, thirty-four unit condominium in Hoboken, asserting common law fraud and negligence claims along with statutory claims under both the New Jersey Consumer Fraud Act (“CFA”) and The Planned Real Estate Development Full Disclosure Act (“PREDFDA”). The claims arose out of the allegedly faulty construction of the Belmont, and certain pre-construction statements from the developer, including that it had “overseen the building and renovation of Over 400 Single Family & Condominium Homes.” (Although largely irrelevant to the issues addressed by the Appellate Division, it turned out that the Belmont was actually the first building that the developer’s owner and general manager had ever constructed.) As it relates to the faulty construction, the association alleged that the building was “plagued by water leaks” almost immediately after construction was complete. These leaks impacted both the individual units and the common elements. After years of repairs that did not correct the problem, the association sued the developer. The association argued that construction defects were the cause of the water filtration, while the developer blamed the problems on poor and inadequate maintenance.

Among other things, the developer in Belmont argued that the association lacked standing to bring claims under the CFA. At the outset, the Appellate Division observed that New Jersey courts take a liberal approach to standing, and have historically given wide recognition to suits by condominium associations. It then analyzed the language of the New Jersey Condominium Act (“NJCA”) to determine whether the association had standing. As it related to claims arising out of damage to the common elements, the Appellate Division held that the association had standing to sue because the NJCA vests condominium associations with the “exclusive right”(emphasis in original) to sue a developer for defects pertaining to the common elements, and generally prohibits individual unit owners from doing so.

The Appellate Division rejected the developer’s argument that the association lacked standing because it could not demonstrate reliance by the original purchasers on any of the alleged misstatements. On this point, the Appellate Division noted that reliance is not an element required to sustain a claim under the CFA. The Appellate Division also rejected the developer’s argument that the association could only recover damages for the unit owners who actually sustained damage as a result of the developer’s alleged misrepresentations. The Appellate Division held that because the NJCA allows associations to sue for damages to the common areas sustained by “any or all” of the unit owners, it was entitled to recover all of the damages necessary to repair any damages, not a prorated amount based on the number of unit owners who identified damages.

However, the Appellate Division held that the association lacked standing to sue for damages to the individual units because the NJCA only vests it with authority to sue or be sued in connection with damages to common elements. In Belmont, the damages associated with individual units all related to the windows, which the Appellate Division held were “personal to the unit owners,” and therefore not part of the Belmont’s common elements. On this point, the Appellate Division reviewed the definition of common elements contained in both the NJCA and the master deed for the Belmont, neither of which identified windows as common elements. Once the Appellate Division concluded that the windows were unit elements, not common elements, its decision on standing was a simple one because it had already concluded that an association has standing to sue for damage to common elements, but lacks standing to sue for unit elements.