22A — May 31 - June 13, 2013 — Owners, Developers & Managers — Mid Atlantic Real Estate Journal


C onstruction L aw

eal estate develop- ers and construction contractors in New By Jason T. Shafron, Esq., Archer & Greiner, P.C. Attorneys at Law Real estate developers in New Jersey: Navigating the minefield of personal liability R

particular concern as the CFA provides for the award of triple damages and attorneys’ fees to a prevailing plaintiff. The Allen decision did not itself create a new cause of action under the CFA against individuals, but rather con- firmed that contractors can be personally liable if they violate statutory protections for con- sumers, such as New Jersey’s Home Improvement Practices (“HIP”) regulations. While the Supreme Court in Allen spe- cifically addressed violations under the HIP regulations, the Court may also have increased

the threat of personal liability to individuals who develop a residential planned real estate development in New Jersey. In Allen, the plaintiffs re- tained defendant V &ABroth- ers, Inc. (“V & A”) to do some site work to enable plaintiffs to install a swimming pool. The work involved leveling the property and building a retaining wall. The owners of V&Awere defendants Vincent andAngela DiMeglio, and they had one full time employee, defendant Thomas Taylor. After work was completed, the pool started tilting and

various bulges and cracks ap- peared in the retaining wall. Ultimately, the Allens filed a complaint for breach of con- tract, and they also asserted CFA claims against V & A, and the DiMeglios and Taylor personally, alleging violations of New Jersey’s HIP regula- tions which, as they are al- leged in Allen, require written contracts, final approval before accepting final payment, and consent and knowledge of the consumer for substituting products or materials. The trial court granted sum- mary judgment for plaintiffs on the CFA claim based on V & A’s failure to execute a writ- ten contract, but dismissed the claims against the individual defendants. The plaintiffs pre- vailed at trial on their breach of contract and CFA claims against V & A. Nevertheless, the plaintiffs then appealed the dismissal of their claims against the individual defen- dants, presumably because the substantial judgment could not be collected from V & A. The Appellate Division reversed, finding personal liability un- der the CFA could attach to individuals who directly par- ticipated in the regulatory vio- lations at issue. The Supreme Court granted the individual defendants’ petition for certi- fication. The Supreme Court exam- ined both the CFA and the HIP regulations at issue. In reviewing the CFA’s defini- tion of a “person,” the Court concluded that “there can be no doubt that the CFA broadly contemplates imposition of personal liability.” Turning to the operative provisions of the CFA, the Court noted that it has long recognized that it protects consumers who have fallen prey to three separate kinds of unlawful practices: 1) affirmative acts, 2) knowing omissions, and 3) violations of regulations promulgated pur- suant to statute. Specifically, by referring to “unconscionable commercial practice[s],” and by authorizing the Attorney General to promulgate regu- lations having the force of law, the CFA permits claims based on regulatory violations. Thus, the Supreme Court concluded that “it is clear that an individual who commits an affirmative act or knowing omission that the CFA has made actionable can be liable continued on page 23A

cipals and certain employees of contractors can be awarded based on regulatory violations. The risk of personal liability for such regulatory violations could now also be extended to real estate developers who previously were generally only concerned about person- al liability under the New Jersey’s Planned Real Estate Development Full Disclosure Act (“PREDFDA”), Real Es- tate Sales Full Disclosure Act (“RESFDA”) and certain of New Jersey’s environmental laws. Personal liability for CFA claims is of substantial and

Jersey have l ong f a c ed s i gn i f i cant risks with re- spect to per- sonal liability arising out of their compa- nies’ work. The New Jer-

Jason T. Shafron

sey Supreme Court in Allen v. V & A Bros., Inc. recently con- firmed that personal liability under New Jersey’s Consumer FraudAct (“CFA”) for the prin-

Archer & Greiner, P.C., is a full-service law firm with over 175 lawyers in nine offices serving Fortune 100 clients, small to medium-sized businesses and individuals throughout the region for over 80 years.

For more information on our firm and how we can help serve you, contact Jason T. Shafron, Esq. : 201-498-8510, email: jshafron@archerlaw.com


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