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Gary and Beth Probola, On Behalf of Themselves and All Others v. Long & Foster Real Estate

January 16, 2013

GARY AND BETH PROBOLA, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
LONG & FOSTER REAL ESTATE, INC., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2269-11.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 14, 2012

Before Judges Lihotz, Ostrer and Kennedy.

Plaintiffs Gary and Beth Probola appeal from a March 30, 2012 Law Division order dismissing their second amended class action complaint, with prejudice, for failure to state a claim. Rule 4:6-2(e). Plaintiffs alleged various causes of action against defendant Long and Foster Real Estate, Inc., resulting from a $345 "Document Fee" charged in addition to the agreed commission paid for brokerage services upon the sale of their residence.

On appeal, plaintiffs challenge as error the trial judge's analysis of their proofs and the conclusion reached that the facts alleged failed to set forth a basis for relief. We disagree and affirm. Alternatively, plaintiffs maintain the judge erred in dismissing the complaint with prejudice. We agree dismissal with prejudice was not warranted and therefore, modify the order of dismissal.

I.

Plaintiffs initiated this action disputing the propriety of a separate $345 charge issued by defendant, which acted as plaintiffs' real estate broker in the May 15, 2009 sale of their Mercer County residence. The fee was listed on a line of the Form HUD-1 separate from commissions charged by defendant. Also, the broker's agreement, executed by plaintiffs when they hired defendant to act as their broker, included disclosure of both the commission, calculated as four percent of the sales price of the realty and the flat $345 fee labeled as "Document Fees." A separate addendum to the broker's agreement explained:

[Defendant] charges a Document Fee at the time of settlement to buyers and sellers who have received real estate services from [defendant].

The Document Fee charged to buyers and sellers who have received services is:

Three Hundred and Forty[-]Five Dollars ($345.00)[.]

This Document Fee, in part, covers the increasing costs of printing, processing, transmitting and storing the numerous required documents that are associated with the closing of a real estate transaction. The New Jersey Real Estate Commission mandates that all files be retained for a period of six years. A present-day real estate transaction typically involves multiple parties, multiple settlement service providers and as many as 250 pieces of documentation. A number of these documents are required disclosure forms designed to enhance the quality and level of service provided to the buyer and seller.

As customer needs for greater communication and disclosure increases, and as state and federal requirements become greater, so do administrative costs associated with these needs and legal requirements.

[Defendant] continues to invest heavily in up-to-date training and equipment for its agents and personnel. The Document Fee covers, in part, these increasing associated costs. [Defendant] continues our commitment to provide our customers with the highest level of service in the real estate industry.

The parties executed the addendum on December 10, 2008. At settlement, plaintiffs paid defendant the agreed commissions, as well as the document fee.

On September 7, 2011, plaintiffs filed a class action complaint, brought on behalf of themselves and other similarly situated persons who bought or sold a home in New Jersey since September 7, 2005, using defendant or an affiliated independent contractor as a broker, who were charged a commission and a $345 "Document Fee" as payment for real estate services provided. Plaintiffs alleged the "Document Fee" constituted "a completely phony fee for which no service [wa]s performed" and equated to charging "two separate fees for exactly the same service[.]" Additionally, plaintiffs averred the "Document Fee" addendum used in New Jersey transactions included "uniform, false written statements" and "knowing omission[s] of material fact[s]" regarding the fee, in violation of state law.*fn1 Plaintiffs alleged defendant's conduct violated the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195, the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18, and constituted a breach of the fiduciary duties owed by real estate brokers to their principals.

Plaintiffs' complaint was amended on September 9, 2011, prior to service upon defendant. On October 28, 2011, defendant filed a Notice of Removal in the Federal District Court for the District of New Jersey. See 28 U.S.C.A. § 1441(a) (granting a statutory right to remove "any civil action brought in a State court of which the district courts of the United States have original jurisdiction"). On plaintiffs' motion, the matter was remanded to the Superior Court. Probola v. Long & Foster Real Estate, Inc., No. 11-6334 (D.N.J. Jan. 20, 2012) (slip op. at 1-2), appeal dismissed, No. 12-2199 (3d Cir. June 1, 2012). Defendant had filed a motion to dismiss, the merits of which were not considered by the district court once it concluded it lacked subject matter jurisdiction. Id. at 1-3 (citing Trent Realty Assocs. v. First Fed. Sav. & Loan Ass'n of Philadelphia, 657 F.2d 29, 36 (3d Cir. 1981)). A second amended complaint was filed on January 27, 2012, and then on February 27, 2012, defendant re-filed its motion before the Law Division to dismiss plaintiffs' complaint pursuant to Rule 4:6-2(e).

Accepting all factual statements averred as true, defendant argued plaintiffs failed to state a claim upon which relief could be granted. Defendant pointed out there were no facts supporting an unconscionable business practice, misrepresentation, or fraudulent inducement. Further noting there was full disclosure of the fee from the inception of the relationship, defendant argued plaintiffs were informed and accepted the fee, which represented an off-set to costs related to document copying, storage, and other expenses; the parties had "freely" negotiated the brokerage agreement years before; and, at that time, plaintiffs had neither objected to nor challenged the $345 charge. Finally, defendant argued, "[m]ore than twenty paragraphs of [plaintiffs'] complaint" were cognizable as an alleged violation of the federal Real Estate Settlement Procedures Act (RESPA), 12 U.S.C.A. § 2601 to § 2617, which was time-barred. Defendant sought dismissal of the second amended complaint.

Plaintiffs opposed defendant's motion, arguing the disclosure, titled "Document Fee," was misleading and false because the fee "doesn't go for printing, processing, transmitting, [or] storing numerous documents for six years" and suggesting defendant was "disguising a price increase . . . [as] a document fee"; the addendum materially omitted facts; the additional charge was an unconscionable practice, which although time-barred by the limitations period of RESPA, was a per se violation of the CFA; and the conduct was a breach of a real estate broker's fiduciary duty. Support for plaintiffs' factual claims included the fact that in several states where defendant conducted business, the fee disclosure form contained a different explanation than the one used in New Jersey. Based on this distinction, plaintiffs concluded "one of those two explanations, if not both of them, [was] false."

Defendant disputed plaintiffs' argument that the form circulated to New Jersey residents was materially different from the "Explanation of . . . Fee Structure" form circulated elsewhere. It argued both documents explained the $345 flat fee in part covered costs associated with meeting "consumer needs for services and information[,]" namely "software, equipment, high-speed telecommunications lines, and training for its agents and personnel."

The motion judge considered the parties' respective arguments and issued an oral opinion on March 30, 2012. The judge observed:

[The New Jersey form] . . . says the document fee, in part, covers increased costs of printing, processing, ...


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