NJ Kicks Out Consumer Fraud as a Valid Count in a Construction Defect Lawsuit.

When you attempt to fix-up your Jersey Shore house and the construction goes wrong, do not attempt to assert New Jersey’s Consumer Fraud Act.

In Ferrell v. America’s Dream Homes, Inc., (http://www.judiciary.state.nj.us/opinions/a1151-08.pdf), the Ferrells attempted to obtain an award of attorney’s fees and treble damages due to alleged poor workmanship. However, the Appellate Division recently dismissed their cause of action based on New Jersey’s Consumer Fraud Act and limited the Ferrell’s damages, if any, to simple breach of contract claims.

The Ferrells were looking to purchase a home in a development of West Orange, New Jersey that was being built into the side of a mountain. As such, the Ferrells were told a retaining wall would need to be constructed to make their yard “more usable.” After much back and forth, the Ferrells paid an extra premium to have the retaining wall constructed and closed on their property. Disputes between the Ferrells and defendants regarding the construction of the retaining wall continued to ensue until finally the Ferrells commenced a lawsuit against the builders/developers, for among other things Cosumer Fraud under N.J.S.A. 56:8-1 to –20. The Ferrells had experts opine that the retaining wall was built improperly, was unsafe, deviated severely from construction standards and actually decreased the usable space on the property.

The trial court, as well as the Appellate court did not find any evidence that the New Jersey Consumer Fraud Act had been violated, and as such dismissed the Ferrell’s claims based on violations of N.J.S.A. 56:8-1 to –20. In order to succesfully claim a violation of the Consumer Fraud Act, a plaintiff must prove unlawful conduct, an ascertainable loss by the plaintiff, and a causal link between the unalwful conduct and the loss. In respect of Real Estate, the Appellate court specifically held that:

“Where real estate is concerned, “[n]ot just ‘any erroneous statement’ will constitute a misrepresentation prohibited by [the CFA]. The misrepresentation has to be one which is material to the transaction and which is a statement of fact, found to be false, made to induce the buyer to make the purchase.” (citations omitted)

As such, the court found that the Ferrell’s put forth no evidence that the representations regarding the retaining wall were false at the time they were made, nor did they prove that any affirmative act of misrepresentation had occurred. As such, the Ferrell’s were not entitled to maintain their Consumer Fraud claim.

This is a step in the right direction for cases involving construction defects. If the workmanship is less than perfect, Consumer Fraud is not automatically implicated, and Plaintiffs will have to work very hard to maintain those claims should they continue to choose to assert Consumer Fraud Claims.

Special thanks to Alison Weintraub for her contributions to this post. If you have any questions about WCM’s construction defect practice, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.