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Zephyr Lofts Condominium Association, Inc. v. Henderson Lofts Urban Renewal

October 13, 2009

ZEPHYR LOFTS CONDOMINIUM ASSOCIATION, INC., PLAINTIFF-APPELLANT,
v.
HENDERSON LOFTS URBAN RENEWAL, L.L.C., A NEW JERSEY LIMITED LIABILITY COMPANY; SAVANNA JERSEY CITY, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY; SAVANNA PARTNERS, L.L.C., A NEW YORK LIMITED LIABILITY COMPANY; LUBERT-ADLER REAL ESTATE FUND II, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER REAL ESTATE FUND III, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER REAL ESTATE PARALLEL FUND II, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER REAL ESTATE PARALLEL FUND III, L.P., A DELAWARE LIMITED PARTNERSHIP; LUPERT-ADLER CAPITAL REAL ESTATE FUND II, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER CAPITAL REAL ESTATE FUND III, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER REAL ESTATE EQUITY FUND III, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER GROUP, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY; LUBERT-ADLER GROUP II, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER GROUP II, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY; LUBERT-ADLER GROUP III, L.P., A DELAWARE LIMITED PARTNERSHIP; LUBERT-ADLER GROUP III, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY; IRA LUBERT; DEAN S. ADLER; CHRISTOPHER SCHLANK; NICHOLAS BIENSTOCK; STEVEN M. SCHULMAN; JAMES S. MCNEIGHT, R.A.; CORCORAN GROUP, INC., A NEW YORK CORPORATION; NRT, INC., A DELAWARE CORPORATION; CONNELL FOLEY, L.L.P.; A NEW JERSEY LIMITED PARTNERSHIP; ANTHONY ROMANO, II, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2811-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 14, 2009

Before Judges Reisner and Yannotti.

Plaintiff Zephyr Lofts Condominium Association, Inc. appeals from an order entered by the trial court on September 29, 2008, which dismissed its complaint and ordered that it submit its claims to arbitration. For the reasons that follow, we affirm.

Plaintiff is a condominium association that is responsible for the management, administration and operation of the Zephyr Lofts Condominium (Condominium) in Jersey City. On June 3, 2008, plaintiff filed a complaint in the Law Division in which it named as defendants Henderson Lofts Urban Renewal, L.L.C. (Henderson Lofts), the sponsor/developer of the Condominium, and certain individuals and entities that allegedly have an interest in Henderson Lofts, including Savanna Jersey City, L.L.C. and Savanna Partners, L.L.C. (Savanna), Christopher Schlank (Schlank), Nicholas Bienstock (Bienstock), Steven Schulman (Schulman), Ira Lubert (Lubert), Dean S. Adler (Adler) and certain entities in which Lubert and Adler allegedly have interests.*fn1

Plaintiff also named as defendants the Corcoran Group (Corcoran) and its parent, NRT, Inc. (NRT), the parties who were allegedly responsible for the marketing and sale of units in the Condominium; Connell Foley LLP (Connell Foley) and Anthony Romano, II (Romano), the attorneys who prepared the public offering statement (POS) for the condominium; and James S. McNeight (McNeight), the architect who surveyed the property and prepared a report that appeared in the POS.

In its complaint, plaintiff asserted claims against: Henderson Lofts for negligent construction, breach of implied warranties, certain defects in the Condominium, and negligent failure to establish an adequate reserve budget for replacement of common elements and facilities (Counts I, II, III, IV); Schlank, Bienstock and Schulman for breach of fiduciary duties (Count V); Henderson Lofts and other defendants for violations of the Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-21 to -56 (Count VI); Henderson Lofts and Corcoran for common law fraud, negligent misrepresentation, and violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106 (Counts VII, VIII, IX); various defendants seeking to impose liability by piercing the corporate veils of certain entities (Count X); NRT and other defendants for liabilities imposed upon Corcoran (Count XI); Connell Foley and Romano for common law fraud and negligent misrepresentation (Counts XII and XIII); McNeight for negligence (Count XIV); and certain fictitious parties who constructed or renovated the Condominium (Count XV).

On August 15, 2008, the Henderson Lofts Defendants and the Lubert-Adler Defendants filed a joint motion seeking to dismiss the complaint and compel arbitration or, alternatively, to dismiss Counts VI, VII, VIII and IX pursuant to Rule 4:6-2(e) for failure to state a claim upon which relief can be granted and failure to plead fraud with particularity as required by Rule 4:5-8(a). Connell Foley and Romano filed a motion seeking dismissal of Counts XII and XIII or, alternatively, a stay of proceedings on the claims against them pending arbitration of the claims in the case. In addition, NRT filed a motion seeking dismissal of the claims against it or, alternatively, a stay of proceeding on the claims against it pending arbitration.

The trial court considered the motions on September 29, 2008, and placed its decision on the record on that date. The court concluded that all of plaintiff's claims should be submitted to arbitration pursuant to a provision of certain agreements between Henderson Lofts and the purchasers of certain units in the Condominium that generally require binding arbitration of claims arising from the agreements. The court entered an order dismissing plaintiff's complaint without prejudice and compelling arbitration. This appeal followed.

Plaintiff argues that the trial court erred by requiring it to submit its claims to binding arbitration. Plaintiff contends that it has standing to assert the claims in its complaint and it is not asserting claims of the unit owners. Plaintiff also argues that the arbitration agreements executed by unit owners are not binding upon it. We disagree.

In this matter, the record shows that there are 102 units in the Condominium. Upon the initial sale of 96 of those units, the purchasers executed written agreements with Henderson Lofts in which they agreed to submit to binding arbitration claims arising out of the agreements. Thereafter, 22 of the 102 units were re-sold. As of September 2008, when this matter was before the trial court, the owners of 74 of the units were persons who had executed the arbitration agreements.

In considering whether the unit owners' arbitration agreements apply to the claims asserted by plaintiff in this action, we turn first to the Condominium Act, which provides for the regulation of condominiums in New Jersey. N.J.S.A. 46:8B-1 to -38. "[C]ondominium ownership is distinct from other forms of property ownership because, when an individual purchases a condominium unit, he or she simultaneously acquires a proportionate undivided interest in the community's common elements." Fox v. Kings Grant Maintenance Ass'n, 167 N.J. 208, 218 (2001) (citing N.J.S.A. 46:8B-6).

The Condominium Act provides for the creation of an association, which has responsibility for the administration and management of the condominium and its property, "including but not limited to the conduct of all activities of common interest to the unit owners." N.J.S.A. 46:8B-12. The association is charged with the duty to maintain the common elements and to assess and collect funds for common expenses. N.J.S.A. 46:8B-13. The association is administered by a governing board and, when at ...


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