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Zorba Contractors, Inc. v. Housing Authority of the City of Newark

July 11, 2003

ZORBA CONTRACTORS, INC., PLAINTIFF,
v.
HOUSING AUTHORITY OF THE CITY OF NEWARK, DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
OSMOSE WOOD PRESERVING, INC., THIRD-PARTY DEFENDANT-APPELLANT/CROSS-RESPONDENT,
AND GEORGIA-PACIFIC CORPORATION AND WOOD TREATING CORP. OF PHILADELPHIA, THIRD-PARTY DEFENDANTS-CROSS RESPONDENTS,
AND RICHARD BECKER, BECKER/WOLCZYNSKI, RAMES PATEL, P.M.K. ENGINEERING & TESTING, INC., JAMES MCCULLAR, JAMES MCCULLAR & ASSOCIATES ARCHITECTS, RICHARD JORDAN D/B/A C.J. CONTRACTORS, WEYERHAUSER CORP., HOOVER TREATED WOOD PRODUCTS, AND CIRCLE 84 LUMBER CO., THIRD-PARTY DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1555-90.

Before Judges Skillman, Cuff and Winkelstein.

The opinion of the court was delivered by: Skillman, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 3, 2002

The primary issue presented by this appeal is whether there is a right to a jury trial in a private action under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -109. We conclude that the 1971 amendment to the CFA, which authorized damages actions by defrauded consumers, reflects an implied legislative intent to provide for jury trials.

We begin with a brief sketch of the long and convoluted procedural history of this case, which is now almost fifteen years old, and the facts necessary to understand the issues presented. The case arises out of a contract between defendant third-party plaintiff Housing Authority of the City of Newark (NHA) and plaintiff Zorba Contractors (Zorba), under which Zorba undertook to modernize roofs on twenty-two garden apartment buildings in three public housing complexes operated by the NHA. The contract required Zorba to use fire-retardant-treated plywood that met performance standards established by the NHA. To satisfy this requirement, Zorba bought plywood manufactured by Georgia-Pacific Corp. (Georgia-Pacific), which contracted with Wood Treating Corp. of Philadelphia (Wood Treating) to apply fire-retardant chemicals to the plywood. Wood Treating used a product manufactured by Osmose Wood Preserving, Inc. (Osmose), called "Flameproof LHC," to provide the fire retardant treatment. After completion of the project, the NHA determined that the plywood failed to satisfy its performance standards and that the roofs were deficient in various respects. Consequently, the NHA had to replace the roofs.

The case commenced as an action by Zorba against the NHA to collect for extra work Zorba allegedly performed under various change orders. The NHA filed a counterclaim which asserted that Zorba's workmanship had been deficient and that it had submitted fraudulent change orders. The NHA also filed a third-party complaint against numerous other parties that were allegedly responsible for the defective fire-retardant plywood installed by Zorba, asserting claims for negligence, strict liability in tort, products liability and breach of warranty. The third-party complaint was amended several times to name additional third party defendants, including Georgia-Pacific, Wood Treating and Osmose, and to assert additional causes of action, including claims for common-law fraud and violations of the CFA. The NHA demanded a jury trial on all its claims. Zorba and the NHA settled their claims at an early stage in the litigation, and the case proceeded solely on the NHA's third-party complaint.

The trial court granted a motion by Georgia-Pacific, Osmose and Wood Treating to dismiss the NHA's claims under the CFA on the ground that the NHA is not a "person" as defined by N.J.S.A. 56:8-1(d) and thus is not entitled to the protections of the Act. On an interlocutory appeal, we reversed, concluding in a published opinion that the term "person" should be "expansively construe[d]... to include a public authority when acting as a consumer." Zorba Contractors, Inc. v. Housing Auth. of Newark, 282 N.J. Super. 430, 435 (App. Div. 1995). The NHA apparently abandoned its common-law fraud and CFA claims against Georgia-Pacific and Wood Treating at some later point, electing to pursue those claims solely against Osmose.

The trial court subsequently granted Georgia-Pacific's motion to dismiss the NHA's warranty claims on the ground that it was not joined in the action within the one-year limitation period provided by the invoices and customer-order forms that accompanied its deliveries of treated plywood. By a written opinion issued on February 9, 1998, the court also granted Osmose and Wood Treating's motion for summary judgment dismissing NHA's warranty claims. As a result, the case went to trial before a jury solely on the NHA's claims against Osmose for common-law fraud and violations of the CFA.

At the close of the NHA's case, the trial court granted Osmose's motion to dismiss the common-law fraud claim but denied its motion to dismiss the CFA claim. At this point, the court discussed with counsel whether there was a right to a jury trial concerning the CFA claim and, if not, whether the jury should be discharged. The NHA suggested that even if there was no right to a jury trial, the jury could be retained to make advisory findings. At the conclusion of this colloquy, the court stated:

I'm going to go ahead and present this case to the jury. And if... you want to address... at some point down the line... in what sense I should consider that jury verdict, I'll deal with that.

During the charge conference, the court again indicated it was uncertain whether the jury's findings regarding the NHA's CFA claim would be binding:

I take it, gentlemen, we have not yet resolved that issue and this may well be an advisory jury,... you both seem to recognize that.

Counsel concurred with this statement.

The court subsequently submitted the case to the jury, which returned a verdict finding that Osmose had violated the CFA but that this violation was not a proximate cause of the damages claimed by the NHA. After receiving this verdict, the trial court informed the parties:

[A]s we discussed earlier... I will also review the evidence and... render a decision in this matter....

Four-and-a-half months later, the trial court issued an oral decision which concluded that Osmose's representations concerning its product violated the CFA and that those violations were a proximate cause of the NHA's damages. Although the court stated at the outset of its decision that "[t]he trial was conducted before an advisory jury[,]" it did not set forth the reasoning underlying its implicit decision that the NHA's CFA claim was not triable before a jury. The court also concluded that Zorba's work on the roof was negligently performed and that that negligence was a proximate cause of the NHA's damages. The court allocated 67% of the responsibility for those damages to Osmose and 33% to Zorba. The court determined that the NHA's total recoverable damages were $622,280, of which Osmose's allocable share was $416,927.60. The court trebled those damages, as required by the CFA, which resulted in a total award of $1,250,782.80. The court also awarded $137,275.65 in prejudgment interest and $162,024.25 for attorneys' fees, for a total judgment of $1,550,082.70. The court denied Osmose's motion to apply certain credits that would have reduced the amount of the judgment.

On appeal, Osmose argues that there was a right to a jury trial on the NHA's consumer fraud claim and that the jury returned a binding verdict in Osmose's favor. In the alternative, Osmose argues that even if the trial court correctly concluded that the jury's verdict was purely advisory, the NHA failed to establish various elements of a CFA cause of action and therefore the judgment in the NHA's favor must be reversed. Osmose also argues that the court erred in refusing to instruct the jury that the NHA was required to prove its claim by clear and convincing evidence and in denying a set-off for the amount the NHA collected from a settlement with another third-party defendant. The NHA has filed a cross-appeal from the pretrial dismissal of its negligence, ...


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