Blue Beach Bungalows DE, LLC v. The Delaware Department of Justice Consumer Protection Unit
S24A-04-001 CAK
| Del. Super. Ct. | Dec 4, 2024Background
- Blue Beach Bungalows DE, LLC (Appellant) purchased Pine Haven Park, a community with both manufactured homes and RVs, from Dale Cohee, whose management style led to documentation and maintenance issues.
- Following the sale, Blue Beach Bungalows raised rents and acted forcefully to sort tenant status, triggering complaints to the Delaware DOJ Consumer Protection Unit (CPU).
- The CPU responded with a cease-and-desist order and filed a complaint alleging violations of the Consumer Fraud Act (CFA), the Manufactured Homes Act (MHA), the Deceptive Trade Practices Act (DTPA), and the order.
- An administrative hearing officer found multiple CFA and Order violations, imposing significant monetary penalties and other remedies against Appellant.
- Blue Beach Bungalows appealed, challenging the legal scope of the CFA, the hearing officer's factual findings, the process, constitutional issues, and the sufficiency of the pleadings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Application of CFA to post-closing conduct | CFA only covers pre-transaction statements | CFA covers post-transaction conduct "in connection with" transactions | CFA applies to post-closing conduct |
| Pleading specificity and legal bases | Higher standard; specific acts/theories must be pleaded; findings exceeded charged violations | Notice pleading is sufficient; violations within claims | Hearing officer erred by penalizing uncharged violations |
| Substantial evidence supporting penalties | Insufficient evidence for certain letters/rent collections; letters not deceptive | Letters and collections were misleading; threats implicit in context | Insufficient evidence for some findings; penalties vacated in part |
| Constitutionality of CFA administrative process | Jury trial required since it mirrors common law fraud | Distinct from common law fraud; legislature created new process | Process held constitutional under Delaware law |
Key Cases Cited
- Norman Gershman's Things to Wear, Inc. v. Mercedes-Benz of N. Am., Inc., 558 A.2d 1066 (Del. Super. 1989) (initially interpreted CFA as limited to pre-sale conduct)
- Lawyers Title Ins. Corp. v. Wolhar & Gill, P.A., 575 A.2d 1148 (Del. 1990) (on equitable ownership rights of a property purchaser)
- Burris v. Wilmington Tr. Co., 301 A.2d 277 (Del. 1972) (equitable title does not afford right to ejectment)
- Claudio v. State, 585 A.2d 1278 (Del. 1991) (Delaware's jury trial guarantee extends as it existed at common law)