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Shaw v. Shand

Superior Court of New Jersey, Appellate Division

August 15, 2019

JODI SHAW and THOMAS SHAW, Plaintiffs-Appellants,

          Argued January 14, 2019

          On appeal from an interlocutory order of the Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-0408-16.

          Linda A. Peoples argued the cause for appellants (Horlacher & Peoples, LLP, attorneys; Linda A. Peoples, of counsel and on the briefs).

          Wendy B. Shepps argued the cause for respondents (Mound, Cotton, Wollan & Greengrass LLP, attorneys; Wendy B. Shepps, on the briefs).

          Jeffrey A. Koziar, Deputy Attorney General, argued the cause for amicus curiae Office of the Attorney General (Gurbir S. Grewal, Attorney General, attorney; Jason W. Rockwell, Assistant Attorney General, of counsel; Jeffrey A. Koziar, on the brief).

          Before Judges Sabatino, Haas and Mitterhoff


          MITTERHOFF, J.S.C. (temporarily assigned).

         This interlocutory appeal arises from the trial court's June 11, 2018 order entering partial summary judgment dismissing plaintiffs Jodi and Thomas Shaw's claims under the Consumer Fraud Act ("CFA"), N.J.S.A. 56:8-1 to -210. Plaintiffs challenge the court's finding that home inspectors are "learned professionals" and therefore excluded from CFA liability.

         The narrow issue before us is whether semi-professionals such as home inspectors should be deemed to be learned professionals. Because this case necessarily required us to interpret the scope of the "learned professional" exception to the CFA, which is a statute that is enforced by the Attorney General's office, and also because home inspectors are regulated by the Attorney General's Division of Consumer Affairs, we invited that office to participate as amicus curiae. We issued that invitation in order to discern both on a narrow basis the agency's view whether home inspectors should be deemed "learned professionals," and on a broader basis how and when the "learned professional" exception should be applied by courts to exempt individuals from CFA liability.

         Considering the CFA's remedial purpose and applying well-established canons of statutory construction, we conclude that the judicially created learned professional exception must be narrowly construed to exempt CFA liability only as to those professionals who have historically been recognized as "learned" based on the requirement of extensive learning or erudition. To the extent our prior decisions, including Plemmons v. Blue Chip Insurance Services, Inc., 387 N.J.Super. 551 (App. Div. 2006), have applied the learned professional exception to "semi-professionals" who are regulated by a separate regulatory scheme, we are constrained, upon further review, to depart from that reasoning as inconsistent with the Supreme Court's decision in Lemelledo v. Beneficial Management Corp. of America, 150 N.J. 255 (1997). As the Court explicitly held in Lemelledo, the existence of a separate regulatory scheme will "overcome the presumption that the CFA applies to a covered activity" only when "a direct and unavoidable conflict exists between application of the CFA and application of the other regulatory scheme or schemes." 150 N.J. at 270.

         Our decision comports with the Attorney General's persuasive interpretation of the CFA and addresses the Attorney General's policy concern that an expansive interpretation of the learned professional exception unduly curtails the authority of the Attorney General and the Division of Consumer Affairs to protect New Jersey consumers and limits the redress available to private litigants.

         Accordingly, because home inspectors are not historically recognized learned professionals and because no direct and unavoidable conflict exists between the CFA and the regulations governing home inspectors, we conclude that the CFA applies to the activities of licensed home inspectors. Therefore, we reverse the trial court's summary judgment dismissal of the CFA claim against defendants and remand for further proceedings.



         In April or May of 2015, plaintiff Thomas Shaw contracted to purchase a property located on Overlook Court in Hampton Township. Prior to purchasing the home, plaintiffs hired defendant[1] to conduct an inspection of the property. Karen Kleinman, plaintiffs' real estate broker, contacted defendant and requested he conduct a home inspection of plaintiffs' property. In response, defendant had Thomas Shaw sign a one-page pre-inspection agreement setting forth the terms of the inspection. That same day, defendant inspected the property, and on May 13, 2015, he emailed his report to Jodi Shaw. Plaintiffs paid defendant $350 for the inspection.

         Defendant's report concluded that "[t]his structure appears to be very well built utilizing quality materials and professional workmanship. It is in need of only typical maintenance and upgrading." In June 2015, plaintiffs proceeded with the purchase of the property, allegedly in reliance upon defendant's report, for the sum of $318, 000. Plaintiffs allege that "[u]pon occupying the [p]roperty in June 2015, the Shaws quickly learned that the house was in fact in poor condition, requiring a great deal of major repairs." These allegedly required repairs include: "replacement of the roof that leaked and was at the end of its useful life, the repair of their front deck/porch which collapsed when they moved in, the replacement of the driveway and replacement of windows and sliding glass doors to address leaks, drafts and rot from the leaks." Plaintiffs allege they have "been forced to expend tens of thousands of dollars" on repairs and "must still, at a minimum," spend an estimated tens of thousands of dollars on a mold issue in the home.

         At his deposition, defendant acknowledged that he had observed some problems with the home that he did not include in his report.

         Defendant testified at his deposition that he became licensed as a home inspector in January 2015. In order to become licensed, defendant had to attend "hours of schooling," though he did not recall how many offhand. Defendant also did not recall the name of the school he attended. In addition, defendant had to serve forty hours of apprenticeship with a licensed home inspector. Finally, in order to become licensed, defendant had to take a State-mandated test. After successfully completing the schooling and apprenticeship and passing the test, defendant became a licensed home inspector. Defendant's inspection of plaintiffs' home was his first assignment as a licensed inspector. Defendant allowed his home-inspector license to expire in April 2017; he now works as a painter, which does not require a license.[2]

         In their July 2016 complaint against defendant, plaintiffs alleged claims sounding in negligence, violations of the CFA, common law fraud, and breach of contract. After the parties filed cross-motions for summary judgment, the trial court issued two orders supported by a written statement of reasons. The first order, which granted, in part, defendant's motion for summary judgment by dismissing with prejudice plaintiffs' CFA claims, is the only order at issue in this appeal.[3]

         In dismissing the CFA claims against defendant, the trial court noted that "[t]here is no binding authority specifically addressing whether home inspectors should be considered semi-professionals exempt from the CFA." The court observed that two unreported Law Division decisions[4] reasoned that "they should be [considered learned professionals] because they are regulated under N.J.A.C. 13:40[-1] et seq." The court found that our decision in Herner v. Housemaster of America, Inc., 349 N.J.Super. 89 (App. Div. 2002), which held that a home inspector was liable under the CFA, did not compel a conclusion in this case that the "learned professionals" exclusion does not apply. First, the court found Herner was factually distinguishable because in that case the inspector's reports were deliberately skewed in order to please the realtor, avoid "killing deals," and have real estate agents continue to recommend the home inspector.[5]

         Second, the trial court found that Herner did not address the semi-professional exception issue. The court reasoned,

Although the Home Inspection Licensing Act (N.J.S.A. 45:8-61 through 76), became effective July 8, 1998, the regulations implementing N.J.S.A. 45:8-61 et seq. were not implemented until 2006, after the decision in Herner. See 33 N.J.R. 1318(a) N.J.A.C. 13:40 et seq. These code sections highly regulate the home inspection profession, such as further specifying the requirements for initial licensure as a home inspector, including an approved course of study of 180 hours, as prescribed by the Board, 40 hours of unpaid field-based inspections in the presence of and under the direct supervision of a licensed home inspector, maintaining an errors and omissions policy in the minimum amount of $500, 000 per occurrence, passing the Home Inspector Examination, and an application fee. N.J.A.C. 13:40-15.6. These are the regulations that [the unpublished opinions] cite to show that home inspectors are semi-professionals. Unlike Herner, which was decided before the 2006 regulations, both of the unpublished cases were decided after the 2006 regulations implementing N.J.S.A. 45:8-61 et seq. Although the unpublished cases are not binding on the court and are not cited as authority by the court, because home inspectors have become regulated since the Herner decision, they should be treated as semi-professionals exempt from the Consumer Fraud Act.[6]

         Citing our decision in Plemmons, the court concluded that defendant's status as a semi-professional exempts him from liability under the CFA. Accordingly, the court granted defendant's motion for summary judgment dismissing plaintiffs' CFA claims with prejudice.

         Thereafter, we granted plaintiffs' motion for interlocutory review, limited to the issue whether home inspectors are "learned professionals" exempt from CFA liability. As we have noted, the Attorney General accepted our invitation to participate in this appeal as amicus curiae.


         On appeal, plaintiffs contend the trial court erred in finding that home inspectors are learned professionals. In that regard, plaintiffs primarily rely on Herner, which they assert is directly on point. Alternatively, plaintiffs urge us to find that because a home inspection is a service that is rendered in connection with the sale of real estate, defendant's liability is supported by the 1976 amendment to the CFA adding 'the sale or advertisement of . . . real estate" to the provision of N.J.S.A. 56:8-2. See Papergraphics Intern., Inc. v. Correa, 389 N.J.Super. 8, 12 n.1 (App. Div. 2006) ("The holding in Neveroski was abrogated by the 1976 statutory amendment adding 'the sale or advertisement of . . . real estate' to the provision of N.J.S.A. 56:8-2." (alteration in original)); Arroyo v. Arnold-Baker & Assocs., Inc., 206 N.J.Super. 294, 296-97 (Law Div. 1985) (holding that the amendment to add the sale or advertisement of real estate to the CFA made real estate brokers, agents and salespersons subject to the CFA).

         Defendant argues that the trial court correctly analyzed and applied our decision in Plemmons and correctly concluded that home inspectors are "learned professionals" exempt from CFA liability because they are subject to regulation by the Home Inspector Advisory Committee.[7]

         The Attorney General urges us to reject the extension of the so-called "learned professional" exception to encompass "semi-professionals" such as home inspectors. The Attorney General notes that the unwarranted expansion of the "learned professional" exception to semi-professionals lacks any support in the plain text or purpose of the CFA. To adopt the trial court's reasoning, the Attorney General argues, would unduly limit the CFA, which the Legislature intended to be one of the nation's strongest consumer protection laws. The trial court's broad interpretation of the exception, the Attorney General argues, significantly curtails the authority of the Attorney General and the Division of Consumer Affairs ("Division") to protect New Jersey consumers and limits the redress available to private litigants.

         Contrary to the decision below, the Attorney General argues that the fact that home inspectors are subject to other statutory and regulatory requirements, which are enforced by a professional board located within the Division, does not excuse them from compliance with the CFA. In that regard, the Attorney General notes that the Legislature made clear that the rights, remedies and prohibitions of the CFA are "cumulative of any other statutory right, remedy or prohibition." N.J.S.A. 56:8-2.13. The Attorney General argues that as the Supreme Court held in Lemelledo, another statutory scheme will displace the CFA only when "a direct and unavoidable conflict exists between the application of the CFA and application of the other regulatory scheme or schemes." 150 N.J. at 270. In this case, the Attorney General avers that because there is no "direct and unavoidable conflict" between the CFA and the statutes and regulations specific to home inspectors, the trial court erred in concluding that the home inspector regulations preclude the application of the CFA to home inspectors.

         The trial court reached its result, the Attorney General asserts, by expanding the judicially created "learned professional" exception to the CFA well beyond the narrow parameters in Macedo v. Dello Russo, 178 N.J. 340 (2004). The expansion of the "learned professional" exception to home inspectors - who are not even required to have a college degree - stretches the exception far beyond its limited origin.[8] The Attorney General argues that the exception (which itself lacks a basis in the statutory text) should be limited to the narrow class of professionals identified in Macedo as exempt from the CFA for historical reasons: physicians, attorneys, and similar learned professionals who were not permitted to advertise at all when the Legislature enacted the 1960 precursor to the CFA, creating liability for fraud in advertising. Nothing in Macedo, the Attorney General argues, requires or even supports a CFA exemption for home inspectors on the ground that a licensure regime for home inspectors was established decades later.



         Whether licensed semi-professionals such as home inspectors are entitled to the judicially created "learned professional" immunity turns on the statutory interpretation of two statutes: the CFA and the Home Inspection Professional Licensing Act ("HIPLA"), N.J.S.A. 45:8-61 to -81. We review these issues of statutory construction de novo. Cashin v. Bello, 223 N.J. 328, 335 (2015). In considering whether the Legislature intended to exempt home inspectors and other "semi-professionals" from liability under the CFA, we adhere to well-established principles of statutory interpretation.

         "The Legislature's intent is the paramount goal when interpreting a statute and, generally, the best indicator of that intent is the statutory language." DiProspero v. Penn, 183 N.J. 477, 492 (2005). In considering the statutory language, "an appellate court must read words 'with[in] their context' and give them 'their generally accepted meaning.'" Cashin, 223 N.J. at 335 (alteration in original) (quoting N.J.S.A. 1:1-1); see also DiProspero, 183 N.J. at 492 ("We ascribe to the statutory words their ordinary meaning and significance, and read them in context with related provisions so as to give sense to the legislation as a whole." (citations omitted)).

         When a statute's plain language lends to only one interpretation, a court should not consider "extrinsic interpretative aids." DiProspero, 183 N.J. at 492 (quoting Lozano v. Frank DeLuca Const., 178 N.J. 513, 522 (2004)). "On the other hand, if there is ambiguity in the statutory language that leads to more than one plausible interpretation, we may turn to extrinsic evidence, 'including legislative history, committee reports, and contemporaneous construction.'" Id. at 492-93 (quoting Cherry Hill Manor Assocs. v. Faugno, 182 N.J. 64, 75 (2004)).


         The Attorney General argues that there is nothing in the text or the purpose of the CFA that would support a blanket exception for semi-professionals based solely on the existence of a separate regulatory scheme that also regulates the subject industry. We agree.

         At the outset, the CFA does not explicitly provide an exception for or even mention learned professionals. Moreover, the CFA is designed to prohibit unlawful conduct or practices, defined as:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby

[N.J.S.A. 56:8-2.]

         The stated purpose of the act is "to prevent deception, fraud, or falsity, whether by acts of commission or omission, in connection with the sale or advertisement of merchandise and real estate." Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 376-77 (1977). The CFA defines "merchandise" as "any objects, wares, goods, commodities, services or anything offered, directly or indirectly to the public for sale." N.J.S.A. 56:8-1(c) (emphasis added). The services of a home inspector fall squarely within the definition of merchandise under the act.

         The CFA

has three main purposes: to compensate the victim for his or her actual loss; to punish the wrongdoer through the award of treble damages; and by way of the counsel fee provision, to attract competent counsel to counteract the community scourge of fraud by providing an incentive for an attorney to take a case involving a minor loss to the individual.

[Real v. Radir Wheels Inc., 198 N.J. 511, 520-21 (2009) (quoting Lettenmaier v. Lake Constr., Inc., 162 N.J. 134, 139 (1999)).]

         "Although initially designed to combat 'sharp practices and dealings' that lured customers into purchases through fraudulent or deceptive means, the CFA is no longer aimed solely at 'shifty, fast-talking and deceptive merchant[s].'" Suarez v. Eastern Int'l Coll., 428 N.J.Super. 10, 31 (App. Div. 2012) (alteration in original) (quoting Cox v. Sears Roebuck & Co., 138 N.J. 2, 16 (1994)). The CFA's remedial goal "is to establish 'a broad business ethic,' promoting a standard of conduct that contemplates 'good faith, honesty in fact and observance of fair dealing.'" Ibid. (quoting Mechinsky v. Nichols Yacht Sales, Inc. 110 N.J. 464, 472 (1988)). Accordingly, liability under the act will lie even if the prohibited conduct is committed in good faith. Ibid.

         As originally enacted, the Attorney General had exclusive authority to enforce the CFA. Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 245 (2005). In 1971, however, the Legislature amended the CFA to provide for a private cause of action to "[a]ny person who suffers any ascertainable loss of moneys or property, real or personal," as a result of a deceptive practice. N.J.S.A. 56:8-19. If successful, the private litigant can recover treble damages, attorney's fees, and costs. Ibid. The Legislature has expressly provided that the "rights, remedies and prohibitions" created by the CFA are "in addition to and cumulative of any other right, remedy or prohibition accorded by the common law or statutes of this State." N.J.S.A. 56:8-2.13.

         The CFA "evinces a clear legislative intent that its provisions be applied broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud." Lemelledo, 150 N.J. at 264; see also Czar, Inc. v. Heath, 198 N.J. 195, 208-09 (2009) (rejecting "crabbed" approach to the CFA in favor of a faithful adherence to the CFA's broad remedial purposes); Cox, 138 N.J. at 15 (holding that the CFA must be construed liberally in favor of consumers).

         Furthermore, it is well-established that "where the purpose of legislation is remedial and humanitarian, any exemption must be narrowly construed, giving due regard to the plain meaning of the language and the legislative intent." Serv. Armament Co. v. Hyland, 70 N.J. 550, 559 (1976) (citing Phillips v. Walling, 324 U.S. 490, 493 (1945)); see also Nini v. Mercer Cty. Cmty. Coll., 202 N.J. 98, 112 (2010) ("[A]n interpretation that throws contract employees into the over-seventy exception at once narrows what should be the expansive coverage of remedial legislation like the [New Jersey Law Against Discrimination], and expands an exception in contravention of applicable principles of statutory construction."); Young v. Schering Corp., 141 N.J. 16, 29 (1995) ("As an exception to the general remedial scheme of [the New Jersey Conscientious Employee Protection Act], the waiver provision must be construed narrowly."); Marx v. Friendly Ice Cream Corp., 380 N.J.Super. 302, 310 (App. Div. 2005) ("Based upon the Legislature's remedial purpose in enacting a minimum wage law, we have held that all exemptions to N.J.S.A. 34:11-56a4 should be construed narrowly and that the employer has the obligation to prove that an employee meets the criteria for ...

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