Recent Blog Posts

• New Jersey’s Consumer Fraud Act Applied to Home Improvement
  In a recent unpublished decision under New Jersey’s Consumer Fraud Act, the Appellate Division in D. Wyatt Stone and Stone Foundation, LLC v. Kahr Properties, LLC, December 2008 App. Div. 09-2-2471), decided the appeal of a judgment in the Plaintiff’s favor for damages, attorneys' fees and costs arising from a home improvement project. The Plaintiff was a limited liability company engaged in the business of buying, renovating and reselling residential properties. The Defendant was a family-owned company whom the Plaintiff contracted with to renovate a residential property. The project met with delays, shoddy workmanship and overcharges, which prompted suit by the Plaintiff under the Consumer Fraud Act. The Defendant appealed the judgment in Plaintiff’s favor by arguing that the Consumer Fraud Act was not intended to apply to a corporate entity such as the Plaintiff that is engaged in the business of buying, renovating and reselling residential properties. The Appellate Division ....
• Nevada Supreme Court Denies Builder's Request in "Stucco Case"
  Last Thursday the Nevada Supreme Court denied attempts from Del Webb (a national builder of active adult communities) and their contractors seeking to limit the number of homeowners within a community from pursuing construction defect claims. The court stated that subsequent buyers of a home (in addition to the original owners) which had been deemed defective have the right to sue under the Nevada State defect law. The ruling, also referred to as the “Stucco Case,” found in favor of 700 homeowners who had been involved in litigation since the original complaint was filed in June 2003. Defects in the stucco installation resulted in the formation of mold, which caused the homes to be deemed dangerous and hazardous to residents. According to several of the homeowners’ attorneys, not including attorney’s fees and interest accrued over the past five years, the estimated cost to repair the damage to the homes was nearly $90 million. Though the case is expected to be appealed to the United ....
• What every builder should know about the New Jersey Consumer Fraud Act
  Every builder operating in New Jersey is most likely aware that our state has plaintiff-friendly laws in the context of construction defect litigation. Even so, the gravity of claims made against builders for alleged defects typically has a direct correlation to relatively known and controllable factors, i.e. their contract performance and quality of product. However, there is another category of claims being made with increasing success in defect cases made under New Jersey’s Consumer Fraud Act (CFA). The CFA is aimed at unlawful sales and advertising practices designed to induce consumers to purchase merchandise or real estate. Intended to give New Jersey one of the strongest consumer protection laws in the nation, it receives liberal interpretation from the Courts in favor of consumers. The CFA declares as an unlawful practice “[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or ....
• Claims may exist under Consumer Fraud Act whether or not direct contact occurred between consumer and violator of Act
  Matera et. al. v. M.G.C.C. Group, Inc. et. al., Docket No. L-1812-04 Judge Louis Locascio of the New Jersey Superior Court recently ruled in the matter of Matera et. al. v. M.G.C.C. Group, Inc. et. al., Docket No. L-1812-04, that a cause of action under New Jersey’s Consumer Fraud Act exists where there is no direct contact between the parties but there is a connection between the defendants’ “alleged violation of the Consumer Fraud Act and plaintiff’s ascertainable loss.” The Plaintiffs, homeowners who purchased homes in a development called Crystal Creek Estates, argued that the defendant Bank of America (“BOA”) had concealed information and made misrepresentations to its purchaser, Defendant Developer M.G.C.C. Group, Inc., and to the Howell Township Planning Board, in order to gain approval for constructing the final phase of Crystal Creek Estates, known as Section III. The Plaintiffs all bought homes within Section II of Crystal Creek Estates and began experiencing flooding in ....
• Municipalities Cannot Require Builders to Provide Common Open Spaces
  The New Jersey Appellate Division ruled this month in two companion cases, New Jersey Shore Builders Association v. Township of Jackson, A-5805-06 (June 23, 2008) and Builders’ League of South Jersey v. Egg Harbor Township, A-1563-07 (June 23, 2008), that municipalities cannot require as a condition of approval that builders and developers provide on-site recreation areas or facilities, or common open space, outside the context of planned unit developments. The Court also held that municipalities cannot require payment of monies to built such facilities off-site in lieu of providing them on-site. The Court found that ordinances requiring such conditions of development approvals were not authorized under the Municipal Land Use Law (MLUL). Through this ruling, the Court has ended a longstanding practice of municipalities to exact these types of conditions from developers, and, for developers who have in the past been made to remit payments in lieu of providing on-site recreation areas, ....
• Homeowner's Association Standing To Assert Without Joining the Homeowners
  Donald B. Brenner, Shareholder and Chair of Stark & Stark's Construction Litigation group, authored the article Homeowner's Association Standing To Assert Without Joining the Homeowners for the March 24, 2008 edition of the New Jersey Law Journal. You can read the full article here. ....
• $5 Million Verdict In Favor Of New Jersey Residential High-Rise Building
  On March 11, 2008, in the matter of Camelot Condominium Association, Inc v. Dryvit Systems, Inc., pending before the Superior Court of New jersey, Docket No. BER-L-012457-04, a jury entered a verdict in favor of the Plaintiff and against Dryvit Systems, Inc ("Dryvit") for violations of the New Jersey Consumer Fraud Act. Dryvit Systems is the largest manufacturer of Exterior Insulation and Finish Systems for residential and commercial construction in the United States. With settlements the Plaintiff obtained before and during trial from other defendants, the total irecovery for the Plaintiff following the jury verdict was $5,046,000. The case involved a joint repair project done in 1998 on what was then a 16 year old high rise building clad with roughly 300 panels coated with Dryvit's EIFS. The jury returned a verdict that charged Dryvit with knowledge that the Dryvit EIFS finish coating on the buildng's exterior panels softened when exposed to substantial water penetration. That ....
• Condo Association Equitably Estopped from Consumer Fraud Act Relief When Its Conduct Resulted in the Violation
  After a condominium association president declined a contractor’s request to execute a written change order and directed the contractor to proceed with the additional work, the association was barred from seeking relief under the Consumer Fraud Act (“CFA”) (N.J.S.A. 56:8-1 to -167) provisions requiring that all modifications to contracts for home improvements be in writing. B & H Securities, Inc., v. CKC Condominium Ass’n, Inc., 2008 WL 508082 (App. Div., February 27, 2008). Defendant Association hired Plaintiff contractor to complete installation of a fire alarm system in its building that had been begun, but not completed, by a prior contractor. After Plaintiff inspected the premises, its engineer, Charles Hamburger, briefly inspected a portion of the building and estimated the time and expense necessary to complete the project. The parties entered into a time-and-materials contract for completion of the fire alarm system , which was necessary for the building to pass a municipal ....
• Property Owner Did Not Waive Arbitration Clause by Participating in Lawsuit
  In an unpublished case, the Appellate Division recently affirmed the trial court’s decision that defendant property owner did not waive the arbitration clause of its AIA construction contract with plaintiff construction company by participating in plaintiff lawsuit for a year before invoking the arbitration clause. Delam Construction Corp. v. 15 Thornton Road, L.L.C., A-0582-06T1 (App. Div., December 10, 2007. After weighing a variety of factors, including plaintiff’s incurring the expenses of litigation, plaintiff’s bringing a lawsuit although it must have known of the arbitration clause, and defendant’s “playing fast and loose” with the court until invoking the arbitration clause on the eve of trial, the court concluded that plaintiff would not be prejudiced by remitting the case to an arbitrator since the discovery accomplished during the pendency of the lawsuit would be useful in the arbitration. Neither party disputed that $187,368 plus interest remained unpaid to plaintiff ....
• Consumers Cannot Waive Regulatory Requirement for Written Home Improvement Contracts
  The Appellate Division recently denied a landscaping contractor’s suit to collect amounts due for extra work in addition to that called for in his contract for complete landscaping of the defendants’ home. Online Contracting, Inc. v. Tripucka, No. A-2622-06 (App. Div., December 6, 2007). The defendants counterclaimed for treble damages and attorneys’ fees under the Consumer Fraud Act (N.J.S.A. 56:8-1 to 116). The court concluded that the contractor’s failure to secure a written agreement for extras totaling $32,994 violated N.J.A.C. 13:45A-16.2(a)(12), which requires all home improvement contracts exceeding $500 to be memorialized by a writing signed by the parties, specifying the work to be performed and the materials to be used, and identifying the start and end date. The contractor argued that the following language, included within the underlying agreement for landscaping purposes, authorized verbal change orders: Any alteration or deviation from the description of the work listed ....
• Gehry - Construction Defects are Inevitable
  World famous architect Frank Gehry, and his firm Gehry Partners is a defendant in a recent lawsuit brought by the Massachusetts Institute of Technology alleging design and construction defects in a $300 Million building on the Cambridge, Massachusetts campus. MIT also sued the contractors who built the building, alleging that design and construction defects caused leaking, cracking, and poor drainage, and that MIT will have to pay millions to fix the problems. Gehry, when interviewed about the lawsuit, said that construction problems in complex buildings are inevitable, and “The chances of it getting done ever without something colliding or some misstep are small.” Gehry, like most architects surely believes that his design is fine, and that the builder made mistakes in execution. The builder, a the New Jersey arm of a Swedish firm called Skanska AB, when asked for comment, stated “This is not a construction issue, has never been.” So, the builder believes, of course, that the design ....
• Builder's Risk Policy Does Not Cover Damage to City Sewer Pipe
  Plaintiff WHP9, the developer of a multi-building residential project in North Bergen, secured a builder’s risk policy from defendant Centennial Insurance and liability insurance from another carrier before beginning construction. WHP 9, Inc. v. Centennial Ins. Company, A-1454-06T1 (App. Div. October 23, 2007). Plaintiff’s application for the builder’s risk coverage stated the development’s value when complete as $6 million, without reporting the municipality’s sewer pipe or its cost in any way. While driving piles for footings, a subcontractor punctured a 36-inch cast iron sewer line that ran beneath the property. The damage was discovered in 2002, and the municipality issued a stop work order in March 2003. Plaintiff’s liability insurer defended plaintiff in the municipality’s damage suit, ultimately settling with the municipality. Asa a result of the stoppage, Plaintiff incurred lost rental income and other expenses exceeding $3 million. Defendant denied coverage under the builder’s ....
• Appellate Division Enforces Terms of Association’s Insurance Policy
  In an unpublished decision, the Appellate Division recently enforced an insurer’s duty to indemnify and defend a condominium association for damages resulting from an occurrence during the policy period even though they were not discovered until after the policy had expired. Steinbauer v. East Coast Acquisitions, LLC, 2007 WL 2593007 (App. Div. September 11, 2007). In March 2003, Ramapo Ridge Condominium Association Phase II (“the association”) discovered that a pipe had burst and flooded an abandoned unit. After the municipality declared the unit unsafe, Sirius American Insurance Co. (“Sirius”), which insured the association under a property damage and general liability policy effective from July 2002 through July 2003, undertook to repair and remediate the damaged unit, which was thereafter acquired by East Coast Acquisitions (“East Coast”) at a foreclosure sale. After additional repairs and upgrades, East Coast conveyed the unit to the plaintiff in July 2004. When plaintiff’s ....
• New Jersey Federal Court Declines to Hear Minnesota Insurance Coverage Dispute.
  Judge Noel L. Hillman of the United States District Court for the District of New Jersey, sitting in Trenton, recently dismissed a case before her on the grounds that the New Jersey court was an inappropriate place to hear the dispute. The case is First Colonial Insurance Co., et. al, v. Custom Flooring, Inc., et. al., 2007 WL 1651155 (D.N.J. June 4, 2007). The claims in the case involved a flooring project in a building in Minnesota. The general contractor on the job was a New Jersey Corporation named Stone Cor. There was a suit filed in Minnesota over defects in the flooring installation against Stone Cor and its subcontractor Custom Flooring, Inc. This suit was eventually settled, with participation from one of Custom Flooring’s insurance companies, First Colonial. Stone Cor was also an additional insured on a policy issued by Farmer’s Insurance Exchange, which denied coverage in the Minnesota case and declined to provide a defense. The New Jersey action was filed by First Colonial ....
• District Court Defines "Residential Construction"
  As the real estate market contracts, contractors, subcontractors and suppliers with unpaid balances will need to protect their interests by, among other things, taking advantage of applicable lien laws. In construing New Jersey’s lien laws, definitions of “residential” and “commercial” construction have long been considered by many to be a gray area. The Bankruptcy Court for the District of New Jersey recently addressed the distinction. It held that agreements with general contractors or developers in which contractors, subcontractors, and suppliers agree to provide work, services, material or equipment to large-scale residential developments are residential construction contracts. In re: Kara Homes, ____ F.Supp. _____ (D.N.J. August 29, 2007).This means that such contractors, subcontractors and suppliers must follow the more complex provisions applicable to residential construction contracts when they wish to secure an unpaid balance with a construction lien. In New Jersey, the ....