Among recent decisions in lawsuits pitting condo buyers against developers, a federal opinion from the Southern District of Florida concerning the Opera Tower Condominium in Miami has garnered an exceptional amount of media attention. In Weaver v. Opera Tower LLC, the Court dismissed claims brought by buyers seeking to rescind purchase contracts due to alleged misrepresentations in advertising brochures. One of the key holdings is that the buyers were not entitled to rely on any representations made in the condo advertising, because the purchase contract contained boilerplate disclaimers (i.e., “legalese”) stating that the buyers were forbidden from relying on them.
Various soruces including The Wall Street Journal, CBS News, and the Daily Business Review, have covered the bases in reporting on Opera Tower, and you can read the full opinion here. (One detail that isn’t mentioned in any of the stories is that the law firm Phillips, Cantor & Berkowitz, which defended Opera Tower, did a very effective job from what I understand). I don’t have much to add to the coverage, other than the following general observation.
At some point, a court is going to need to decide what effect the provision of the Interstate Land Sales Full Disclosure Act (ILSA) in 15 U.S.C. s. 1712 has on “boilerplate” or “fine print” disclaimers in real estate purchase contracts. This provision of ILSA states that, “Any condition, stipulation, or provision binding any person . . . to waive compliance with any provision of this chapter . . . .” Interestingly, the Securities Act of 1933 — the acknowledged historical legislative model for ILSA, which is in many ways the “securities law” for real estate — contains a provision with basically the exact same language as 15 U.S.C. s. 1712. The “anti-waiver” clause of the Securities Act of 1933 can be found at 15 U.S.C. s. 78cc(a).
What is important about the fact that ILSA and the 1933 Securities Act contain identical anti-waiver provisions? The answer is in a recent securities case from an Ohio federal court which was brought by institutional investors against an investment bank, based on alleged misrepresentations in sales materials regarding the quality of a securitized note program. (For those keeping score, the case is called In re National Century Financial Enterprises, Inc., 541 F. Supp. 2d 986 (S.D. Ohio 2007)). While the investors asserted claims for securities fraud under the 1933 Act, the bank argued that they could not have relied upon the advertising, because the participation agreement for the program contained statements disclaiming the accuracy of the advertising. The court completely rejected the bank’s argument, looking at the anti-waiver provision in the 1933 Securities Act and observing that “[c]ourts have long held that general disclaimers of accuracy do not shield sellers who knowingly make false statements.”
The rationale behind the Ohio federal court’s decision is clear. The Securities Act would lose much of its power to protect investors from fraud if companies could shield themselves from liability through the liberal use of contractual boilerplate disclaimers. In my view, if ILSA is to have any teeth, then the same principle must apply.
This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the author.
Mr. Beck has a law degree from Harvard Law School, and practices law in the courts of South Florida. His law firm, Beck & Lee Business Trial Lawyers in Miami, is dedicated to the practice of business and real estate litigation, as well as pursuing the rights and remedies of consumers and investors. A significant portion of Mr. Beck’s practice is devoted to issues arising under purchase contracts for real estate, including condominiums, condo-hotels, single-family homes, and commercial property. He can be reached at 305-789-0072 or firstname.lastname@example.org