Judge says DOJ erred, in part, in Pine Haven opinion

A Superior Court judge has ruled the hearing officer for the state’s Department of Justice erred, in part, when issuing an opinion, and about $800,000 worth of fines, against Blue Beach Bungalows earlier this year.

The hearing officer’s opinion and fines were related to supposed violations of the Consumer Fraud Act, the Manufactured Homes and Manufactured Home Communities Act and the Deceptive Trade Practices Act against the residents of Pine Haven manufactured home community south of Milford.

As a result, the number of findings against Blue Beach decrease by a third and the fines have decreased by about 40%.

Pine Haven is located near Argos Corner off Route 1. It’s owned by Blue Water Development Corporation of Ocean City, Md., the parent company of Blue Beach Bungalows.

A DOJ administrative hearing officer issued an opinion in April. In addition to $800,000 in penalties, Blue Beach was ordered to rebate excess rent paid by residents. Blue Beach appealed the ruling.

Superior Court Judge Craig A. Karsnitz issued his opinion Dec. 4. In a summary of his decisions, he said the Delaware Department of Justice Consumer Protection Unit substantially, but not totally, overplayed its hand. He spent three dozen pages going over each violation to explain why or why not the officer’s findings should stand.

In the end, Karsnitz reversed the hearing officer’s findings on five issues and vacated the attached penalties, which totaled $331,500. However, he upheld 10 of the officer’s findings and upheld the attached penalties, which total $454,500.

Karsnitz also ruled the DOJ hearing process Blue Beach Bungalows went through was constitutional.

Mat Marshall, DOJ spokesperson, said the state is discussing next steps, but this ruling is encouraging for the state and for the victims in Pine Haven.

In addition to a significant monetary penalty, the court ruled that Blue Beach Bungalows acted illegally, upheld the constitutionality of the hearing process and affirmed the applicability of the Consumer Fraud Act to post-transaction conduct, he said.

Marshall pointed to an analogy used by Karsnitz in his ruling that he said helps illustrate why the question of temporal limits is important for real consumers.

“In many transactions, the parties raise issues after transfer of title or possession. Is the car conforming to its warranties? Are the dogs safe? Were the investments safe and appropriate? Issues arising after the sale, transfer of title, or transfer of possession are ubiquitous, and for me they are ‘in connection with’ the transactions,” said Karsnitz.

Marshall said he understands the dollar amounts are easy to isolate, but he would be careful not to mistake this one for a summary of the ruling.

“Key elements of Judge Karsnitz’s ruling bode well for the DOJ’s ability to seek accountability – both now, for the residents of Pine Haven, and in the future,” said Marshall.

Attorney Stephen A. Spence is representing Blue Beach Bungalows. He said he and his client have no statement on the matter.

Both the DOJ and Blue Beach Bungalows have 30 days to appeal the judge’s decision to the Delaware Supreme Court.