What You Need to Know
- Reasonable reliance is a critical element in fraud and negligent misrepresentation claims. A party that investigates is charged with knowledge of whatever it could have discovered through a reasonable investigation.
- Disclaimer language in purchase agreements and offering memorandum cannot be ignored by purchasers of real estate.
Introduction
The Superior Court of New Jersey, Law Division, recently granted a motion to dismiss a complaint alleging fraud and misrepresentation regarding the number of units that could be built at a property site As of Right (“AOR”). Amerestate Holdings, LLC. v. CBRE, Inc., 2026 N.J. Super. Unpub. LEXIS 800 (Law Div., Apr. 20, 2026). In its opinion, the Court drove home that claims for fraud and negligent misrepresentation must be based on reasonable reliance by the prosecuting party on the representations made. In that vein, a party that does its independent investigation is charged with knowledge of those facts. Here, the Plaintiff’s own consultants knew that the number of AOR units that could be built was based on a number of contingencies and any reliance on alleged representations by the Defendants that 580 AOR units could be built was therefore unreasonable.
The Closing and Allegations of Fraud and Negligent Misrepresentation
Amerestate Holdings, LLC (“Amerestate”) planned to buy several properties in Jersey City to develop commercial residential apartment units. One of the defendants, CBRE, Inc. (“CBRE”), was engaged as a broker in the sale of the property site and provided putative sellers an offering memorandum, including Amerestate. In July 2014, Amerestate retained experts, including MHS, to investigate the property site. The consultants and experts were tasked with reviewing existing documents for various properties involved in the transaction and advise Amerestate as to the development potential of the properties regarding how many units could be approved by Jersey City. They were assigned to assess the potential to increase the unit numbers to be built on the site. Amerestate next executed a Purchase Agreement with the Defendants in September 2014 and closed in February 2015.
That same year, however, Amerestate filed a complaint alleging fraud and negligent misrepresentation, asserting that it was misled by various representations that the site consisted of approximately 580 AOR apartment units. It claimed it relied on CBRE’s Offering Memorandum (“Memorandum”), which gave an approximation of the number of resident units the site had the opportunity to provide as 580.
Amerestate also claimed to rely on the email communications between Defendants Charles Berger and Elli Klapper, with Mr. Kolling, a professional planner, regarding the number of units that could be built at the site, which could be “taken to the bank.”
Lastly, Amerestate sought to bar the testimony of the Defendants’ expert, who highlighted multiple reasons why Amerestate could not establish a reasonable reliance upon any potential representations by the Defendant. Having lost that argument, Amerestate later relied on the general rule that the question of reasonable reliance for fraud claims should be a question for the jury.
Why the Court Rejected Amerestate's Reliance on Seller Representations
The Court first analyzed and decided the motion to dismiss under a summary judgment standard. Applying that standard, the Court accepted, for the purposes of the motion, that the Defendants materially misrepresented the number of AOR units that could be developed at the site.
It then relied heavily on the principle that when a purchaser conducts its own investigation, the purchaser is charged with knowledge of the facts the investigation uncovered. The Court cited this same case in the Appellate Division in Amerestate Holdings, LLC. v. CBRE, Inc., 2026 N.J. Super. Unpub. LEXIS 800, *22 (App. Div. 2018), stating “Although one who engages in fraud may not urge that the victim should have been more circumspect or astute, if the party to whom misrepresentations are made nevertheless chooses to investigate the relevant state of facts for himself, he will be deemed to have relied on his own investigation and will be charged with knowledge of whatever he could have discovered in a reasonable investigation.” Therefore, plaintiffs who investigate have no right to rely on the representor’s statements containing material that their own investigation shows is questionable.
In that context, the Court found that Amerestate had a reason to believe that any representation that 580 AOR units could be built was not reasonable to rely on because of their own internal investigation as well the disclaimers found in the Offering Memorandum, the Broker’s Opinion of Value, and the actual Purchase Agreement. For that matter, the sellers refused to provide a clause guaranteeing a certain number of units which could be developed at the site. More importantly, Amerestate conducted an independent investigation to determine the number of units which could be built on the site prior to implementing the Purchase Agreement.
The Court did note that simply undertaking an investigation does not necessarily establish that the Plaintiff relied on its investigation rather than any alleged misrepresentations by the Defendants. However, again Amerestate specifically hired the planners to determine how many units could be built on the site. Then, without an answer to the inquiry, Amerestate executed the Purchase Agreement and finalized the deal.
Regarding Amerestate’s other arguments, it claimed to rely on the CBRE Memorandum containing information on the property to assert they were defrauded into believing the property could develop approximately 580 AOR units. The Memorandum stated that the site provided an incredible opportunity to contract over 500 AOR units. It later stated that there were more or less than 580 residential units available for total development. The Court emphasized the ambiguous nature of the Memorandum, with clear language indicating that it was not to be a representation of fact. The Court held that the Memorandum specifically stated that it should not be relied on by a prospective purchaser of the property as the contents only contained projections and assumptions. Therefore, the Court explained that Amerestate could not reasonably rely on the information within the Memorandum as it lacked an intent to be a representation of the actual number of units which could be built on the property.
Further, the Court found Amerestate could not reasonably rely on the email communications with Berger, Klapper, and Kolling. The emails clearly reflected that the number of units that could be built at the site were dependent upon various conditions, so there could not be a definite calculation. Kolling further sent a letter that clearly expressed the only way to arrive at a total unit number was to consolidate the parcels as one developmental unit, but if they developed individually, the total unit count would be less than the maximum of 567 units. There were no representations toward the unit count because there was no conclusive fact the property sites could be consolidated for development, and the total number was clearly established to be significantly less than 567 units. Therefore, the Court concluded that the email communications were so conditional that there was no steady number on how many units could be built on the site.
The CBRE Broker Opinion Value also did not contain a misstatement of fact. The document expressly stated that CBRE would verify the information incorporated in the Offering Memorandum and outlined items that would be reviewed during the due diligence phase. However, none of the addressed items related to the AOR units that could be built at the site. Rather, CBRE needed to clarify the specifics on the redevelopment of the group of properties as various factors contributed to the number of AOR units that could be built.
Lastly, the Court relied on the reasoning discussed above and one of the planner’s testimonies from the investigation. He explained that he advised Amerestate at a meeting before it executed the Purchase Agreement that he would need a consolidated survey to get accurate information regarding the development potential at the site. In another meeting, he presented calculations for the number of units that could be built at the site but emphasized it was only an approximation. Therefore, the testimony, at a minimum, established that Amerestate was specifically advised that the planner could not commit to a firm, minimum number of units that the site could develop. Amerestate continued to sign the Purchase Agreement after these meetings without these firm calculations.
Takeaways
This case demonstrates that in cases of fraud and negligent misrepresentation, reasonable reliance is a critical element in establishing those claims. Thus, a party conducting an independent investigation is charged with knowledge of any facts its investigation produces that show the representations may be inaccurate. Further, the opinion shows that the appropriate disclaimer language in purchaser agreements as to reliance on statements therein is critical in defeating negligent misrepresentation and fraud claims.
For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com. Summer Associate Emily Raia contributed to this article.
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