Del. Supreme Court: Lower court erred in Pine Haven case

The Delaware Supreme Court has ruled a Superior Court judge erred when he issued an opinion in late 2024 against Blue Beach Bungalows that applied the Consumer Fraud Act to post-transaction conduct.

The case has been ongoing for years. The property in question is a 20-acre parcel located off Pine Haven Road, near Argos Corner, that used to be called Pine Haven Campground. Blue Beach Bungalows DE LLC purchased the property in September 2022. At the time, there were a number of residents living in the mobile homes year-round, despite it being a three-season park. Prior to officially buying the property and afterward, Blue Beach sent a number of letters to residents telling them the seasonality of the park would be enforced and that leases would not be renewed in the future.

In response, the residents complained to the Department of Justice, which took up the issue.

In April 2024, an administrative hearing officer for the DOJ issued an opinion finding that Blue Beach “willfully violated” Delaware’s Consumer Fraud Act when communicating with residents of the Pine Haven community and issued a fine in the amount of about $800,000.

Blue Beach appealed the hearing officer's ruling. In December 2024, Superior Court Judge Craig A. Karsnitz issued a ruling saying the hearing officer erred, in part, when determining the fine amount. He lowered the fine to about $500,000, but he did affirm the applicability of the CFA to post-transaction conduct.

Blue Beach appealed the Superior Court ruling, arguing that the CFA doesn’t apply to post-transaction conduct.

The 68-page ruling was issued Dec. 30. Justice Karen L. Valihura wrote the opinion.

“[Blue Beach] asserts that the CFA, which prohibits misleading statements ‘in connection with the sale, lease, receipt or advertisement of any merchandise,’ categorically does not apply to any communications concerning the underlying transaction after it has taken place,” said Valihura, who announced recently she is going to retire when her term ends in July. “We agree.”

The plain language of the code demonstrates that the CFA does not apply to post-transaction communications, said Valihura. This interpretation is further supported by a long line of Delaware law, she said.

Blue Beach also challenged the constitutionality of a provision in the CFA allowing for an administrative adjudication of violations because, Blue Beach argued, the provision denies the right to a jury trial. The justices disagreed with that argument and affirmed the Superior Court’s ruling.

The DOJ didn’t mince words when asked for a comment on the ruling.

In the absence of another statute the DOJ can enforce, the opinion effectively prevents the attorney general from being able to pursue cases of clear wrongdoing where that wrongdoing is based on deceptive or unfair statements and omissions made after a consumer enters into a particular transaction, said Caroline Harrison, DOJ press secretary, in an email Dec. 31.

“In essence, our office is unable to act to assist Delawareans who are lied to about the terms of their warranties, the timing of whether ,or if, their home improvement project will get completed, the safety of their rental housing or their right to continue living in their year-round manufactured home after they have entered into the transaction,” said Harrison. “Any lie or unfair practice that occurs after a consumer hands over their money is now beyond the scope of the Consumer Fraud Act.”

The Supreme Court’s ruling proactively addresses the DOJ’s statement.

“Finally, as to scope, our holding today will not leave consumers without a remedy for post-transaction wrongdoing by businesses and service providers. Post-transactional issues between businesses and consumers can be, and have been, addressed by other legal avenues such as tort, contract and statutory law,” said Valihura.

Attorney Stephen A. Spence is representing Blue Beach Bungalows. He declined to comment on the ruling.

“We appreciate the Supreme Court’s time and attention to this case and look forward to bringing the matter to a prompt conclusion,” said Spence.

The property is actively being redeveloped into a 154-unit park model home community called Pinevale. Jack Lingo Asset Management announced in early December it had closed on the property. All the old structures and a number of trees have been removed.

“We’re not a party to the lawsuit,” said Ellen Bockius, JLAM director of business development, in an email Dec. 31.

It’s unclear how the ruling will affect the fine levied by the DOJ’s hearing officer, but it’s likely to be reduced again since all but two of the communications sent by Blue Beach to the former residents were sent after a transaction was conducted.