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 their basements and back yards after defendant M.G.C.C. Group, Inc. constructed Section III of the development.
BOA, as the successor to the original financier of the project, took title to two undeveloped lots in Section II and all of the undeveloped lots in Section III of the Crystal Creek Estates development. BOA obtained approvals for the construction of Section III of Crystal Creek Estates from the Howell Township Planning Board before selling the land to Developer M.G.C.C. Group, Inc. In obtaining those approvals, BOA failed to disclose to either the Howell Township Planning Board or M.G.C.C. Group, Inc. that BOA knew about serious drainage problems that would occur in Section II of the development if Section III was constructed as planned and approved. BOA also knew but concealed that Section II of the development would have to be re-graded in order to deal with excessive drainage to the section caused by the planned construction of Section III, and that an engineer had provided BOA with an opinion that there were serious drainage issues between the two sections.
Judge Locascio found that BOA’s misrepresentations and omissions were not only made directly to the Howell Township Planning Board, but were also “intended to be conveyed to the buyer” (defendant M.G.C.C.), because obtaining planning board approval “was necessary to complete the real estate transaction with defendant M.G.C.C.” Id. at 5. The Judge concluded, therefore, that BOA’s misrepresentations and omissions were “in connection with the sale of real estate,” a requirement for application of the Consumer Fraud Act.
The Judge then went on to find that a “causal nexus” existed between the Plaintiffs’ damages and BOA’s misrepresentations and omissions to M.G.C.C. Group and the planning board. Noting that the Consumer Fraud Act does not require privity between a defendant and a consumer, Judge Locascio concluded that the Plaintiffs did not need to be directly exposed to BOA’s misrepresentations and omissions because the Consumer Fraud Act states that a violator of the Act “is liable for any misrepresentations whether ‘any person has in fact been misled, deceived, or damaged thereby’ … [the Act] did not say any party.” Id. at 6 to 8 (emphasis in original). The Judge found, therefore, that because BOA’s misrepresentations to the planning board and to M.G.C.C. Group ultimately damaged the Plaintiffs, there existed “a causal nexus” between BOA’s violation of the Consumer Fraud Act and the Plaintiff’s “ascertainable losses.” The Judge reasoned that if BOA “did not misrepresent facts to the Howell Township Planning Board, the planning board would not have granted the letter of compliance and section III would not have been built, or in the alternative, the drainage problems would have been corrected before the letter of compliance was granted.” Id. at 9. “Under either scenario, plaintiffs’ properties would not have been flooded.” Ibid. Therefore, it is “proper to hold BOA liable for the damages under the Consumer Fraud Act even though BOA had no contact with plaintiffs.” Ibid.
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