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Consult Urban Renewal Dev. Corp. v. T.R. Arnold & Assoc.

July 1, 2009

RE: CONSULT URBAN RENEWAL DEV. CORP.
v.
T.R. ARNOLD & ASSOC., INC.



The opinion of the court was delivered by: William J. Martini, U.S.D.J.

MARTIN LUTHER KING JR. FEDERAL BLDG. & U.S. COURTHOUSE 50 WALNUT STREET, P.O. BOX 419 NEWARK, NJ 07101-0419 (973) 645-6340

WILLIAM J. MARTINI JUDGE

LETTER OPINION

Dear Litigants:

This matter comes before the Court on Defendant's motion for summary judgment pursuant to Fed. R. Civ. P. R. 56. Oral arguments were not held, pursuant to Fed. R. Civ. P. R. 78. For the reasons set forth below, Defendant's motion is DENIED.

I. BACKGROUND

Plaintiff Consult Urban Renewal Development Corporation ("Consult") was the construction manager for an affordable housing project under development in North Wildwood, New Jersey (the "Project"). (Cocoziello Decl. 1.; Compl. ¶ 1.) As construction manager, Consult entered into a contract in 1998 with DeLuxe Building Systems ("DeLuxe") to manufacture and supply prefabricated, modular housing units (the "Units). (Cocoziello Decl. 1.; Compl. ¶ 2.) DeLuxe manufactured the Units at its facility in Pennsylvania, transported them to New Jersey, and installed them at the Project site. (Cocoziello Decl. 1.; Compl. ¶ 3.) Under New Jersey law, all prefabricated housing built outside the state for use within New Jersey must undergo inspection, certification, and labeling to verify compliance with state building codes and other guidelines. See generally N.J.A.C. §5.23-4A-10. Thus, the contract between Consult and DeLuxe specified that DeLuxe would maintain a relationship with an independent, third party inspection agency to fulfill all inspection requirements. The agency would inspect the Units and label them to indicate they were satisfactory. (Cocoziello Decl. Ex. A.; Compl. ¶¶ 5-6.)

To satisfy the inspection requirements imposed by the contract, DeLuxe relied upon a pre-existing agreement with Defendant T.R. Arnold & Associates ("Arnold"), an inspection services company. (Compl. ¶ 2.) In March 2000, Defendant Arnold represented that it had inspected all 366 of the Units, found all to be satisfactory, and in compliance with applicable law, labeled each one accordingly. In reliance upon this representation, Consult made a significant partial payment to DeLuxe and the Project went forward. (Compl. ¶ 11.)

Almost immediately, Consult noticed discrepancies between the actual Units and the specifications set forth in the contract with DeLuxe. Specifically, Consult observed violations of New Jersey building codes, water damage, mold infestation, and broken exterior sheathings. (Compl. ¶ 22.) Consult requested that DeLuxe repair or replace the Units, but DeLuxe refused to do so. (Id.)

In response, Consult asserted claims against DeLuxe in arbitration. (Compl. ¶ 24.) The arbitration panel awarded damages to both Consult and DeLuxe but determined there was no prevailing party. (Cocoziello Decl. Ex. D). Consult now seeks damages from Arnold, in contract and in tort. Consult alleges that although it was not a direct party to the contract between DeLuxe and Arnold, it was a third party beneficiary to that contract and therefore has standing to sue for breach. Consult also alleges that Arnold was negligent in performing its obligations as a third party inspecting agency, causing it to suffer damages.

Defendant Arnold has filed a motion for summary judgment, arguing that (1) Consult cannot bring a contract claim because it was not a third party beneficiary and thus has no standing; (2) Consult's negligence claims are barred by the economic loss doctrine; (3) Consult cannot proceed with its negligence claim because it did not produce a report from a qualified expert; and (4) Consult cannot succeed on its negligence claim because it failed to prove causation. This is Arnold's second motion for summary judgment. The first was denied in April 2007, and Arnold now concedes it was premature.

For the reasons stated below, Defendant's motion for summary judgment is DENIED in its entirety.

II. DISCUSSION

A. Summary Judgment ...


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