July 2, 2018 News

Morrison Cohen Obtains Summary Judgment for Commercial Real Estate Finance Firm in Dispute over Real Estate Project

July 2, 2018 – Morrison Cohen successfully obtained summary judgment for a commercial real estate finance and advisory firm (“the Client”) in a litigation pending in the Superior Court of New Jersey.  The action was brought by an investor who, after a long and distinguished career in finance, founded a real estate investment and management private equity firm.

In the action, the plaintiff asserted claims against the Client for fraud, securities fraud under the New Jersey Uniform Securities Law, negligent misrepresentation, and aiding-and-abetting fraud relating to the alleged assistance that the Client provided to the sponsor of a real estate project in New Jersey.  In late-2007, the Client assisted the sponsor in preparing an offering memorandum for the investment.  The offering memorandum was presented to the plaintiff the same year. The plaintiff invested in the transaction in mid-2008, and began receiving reports about his investment’s performance within months.

After discovery, Morrison Cohen moved for summary judgment seeking dismissal of the plaintiff’s claims against the Client.  In its motion, Morrison Cohen argued that the relevant statutes of limitations barred all of the plaintiff’s claims, and that the plaintiff had failed to support the claims in his complaint.

The Court agreed with all of Morrison Cohen’s arguments, granting the Client’s motion in its entirety.  In the decision, the Court determined that the plaintiff’s claims against the Client were untimely because they accrued when the offering memorandum was prepared and presented to the plaintiff, over eight years before he brought his claims.  In reaching that conclusion, the Court analyzed the applicability of the “discovery rule,” an equitable principle that under limited circumstances tolls the statute of limitations for certain claims.  The Court concluded that the discovery rule did not save the plaintiff’s claims from being time-barred because the plaintiff knew or should have known that his claims accrued only shortly after he made his investment and began receiving records of his investment’s performance.

The Court also determined that, as an independent basis for dismissal, none of the statements made by the Client were actionable representations of fact.  Rather, the Court agreed with Morrison Cohen’s arguments that the statements in the offering memorandum attributed to the Client were projections of future financial performance and value, which do not present an actionable basis to assert a fraud or misrepresentation claim.  In reaching its decision, the Court further concluded that an express provision in the offering memorandum informing the plaintiff that the information was not verified by the Client prevented liability stemming from the particular statements.

As a result of the decision, the Court dismissed the action against the Client in its entirety. 

The Court’s decision presents important reminders about the strict time bar to stale claims presented by statutes of limitations, as well as the protections afforded to forward-looking statements concerning financial projections that are accompanied by appropriate disclaimers.

The Morrison Cohen team included Y. David Scharf, Mary E. Flynn, Alvin C. Lin, and Daniel C. Isaacs.