Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.J. Super. App. Div.: Jury verdict in favor of condo buyers over loss of Manhattan skyline views upheld, (Mar 11, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by purchasers of condominiums against the building’s developers for the loss of panoramic views of the river and Manhattan skyline, resulting from the construction of another building, a jury verdict awarding treble damages of more than $4.8 million in favor of the purchasers has been upheld by a New Jersey state appellate court (Etelson v. Shore Club South Urban Renewal, LLC, March 10, 2014, Per Curiam).

In 1980, Shore Club South Urban Renewal, LLC, Lefrak Organization, Inc., and Newport Associates Development Company purchased undeveloped property along the Hudson River with the intention of building an extensive mixed-use planned community. In 2005, the developers announced the construction of a two-building condominium development, known as Shore North and Shore South, which would include retail space and an adjacent garage. The buildings were part of a master plan which envisioned the construction of other buildings nearby. The developers submitted a waterfront development permit application with the New Jersey Department of Environmental Protection (DEP) with plans depicting a third building on the site. In promoting sales for the Shore North and Shore South buildings, the developers advertised the buildings’ panoramic views of the Hudson River and Manhattan skyline. After the Shore South building was sold out, the developers began construction of the third building, known as Aquablu, which was taller than the Shore South building.

Several purchasers of units in the Shore South building filed suit against the developers, seeking damages for the loss of a panoramic view that was represented to them, in violation of the New Jersey Consumer Fraud Act (CFA). Specifically, the purchasers alleged that they purchased their units before the completion of the Aquablu building and would not have purchased their units had they known the Aquablu would be constructed as to block their views. Following a jury verdict awarding a judgment in favor of the purchasers, the developers appealed.

The court found that the trial court did not err in denying the developers’ motion to dismiss the plaintiffs’ claims under the CFA. The CFA prohibits, as an unlawful practice, the use by any person of a deceptive or fraudulent practice, misrepresentation, or omission of a material fact with the intent that others rely on that use, misrepresentation, or omission in connection with the advertisement or sale of merchandise or real estate, whether or not the person has in fact been misled, deceived, or damaged by that action. Any violation of the CFA that results in an ascertainable loss is subject to the trebling of damages.

There was sufficient evidence that the developers knowingly failed to inform the purchasers, prior to the execution of the sales contracts, of the existence of plans to construct a tall building on the Aquablu site, according to the court. It was for the jury to decide what effect to give the various clauses contained in the disclosure form for prospective purchasers, the public offering statement (POS) provided with sales contracts, the master deed, and the signed sales contracts. The developers’ marketing materials falsely depicted a smaller building even though the developers had actually requested detailed architectural plans for the Aquablu building. The general disclaimers and disclosures provided to prospective purchasers did not reflect the developers’ actual knowledge regarding their specific plans for the site. The jury was entitled to disregard the developers’ claims that the depictions in its marketing materials were “mere artistic license.”

The trial court also did not err in denying the developers’ motion in limine to bar testimony about oral representations made by the developers’ salespeople under the parol evidence rule. The purchasers’ claims that they were told by the salepeople that the future building in the marketing materials would not obstruct their views was sufficient to support a finding of fraud in the inducement. Finally, the purchasers’ counsel’s remarks in summation, regarding sales representations that condominium views would be panoramic, were fair comments on the evidence and proper responses to the developers position that they had not been selling the views in marketing the Shore South building, the court concluded.

The case is No. A-0570-11T4.

Attorneys: Michael H. Smith (Rosenberg Feldman Smith) and Stephen M. Rosenberg (Biebelberg & Martin) for Todd A. Etelson. Darren C. Barreiro (Greenbaum, Rowe, Smith & Davis, LLP) for Shore Club South Urban Renewal, LLC, Lefrak Organization, Inc., Newport Associates Development Company, and James Lefrak

Companies: Shore Club South Urban Renewal, LLC; Lefrak Organization, Inc.; Newport Associates Development Company

Cases: StateUnfairTradePractices NewJerseyNews