Lawsuit May Proceed Against CCRC For Misleading Marketing

In DeSimone v. Springpoint Senior Living, the son of a deceased CCRC resident sued the owner/operator and CEO of five continuing care retirement communities (“CCRCs”) in New Jersey. The suit, which was brought individually and as a class action, alleged violations of the CCRC Act and the Consumer Fraud Act (“CFA”), in addition to common law claims, based on misleading advertising information regarding the CCRCs’ refund policy.

A CCRC is a long-term housing option for aging seniors that offers various levels of care, from independent living to skilled nursing. Mrs. DeSimone chose the Monroe Village CCRC and was given the option of two available plans: the “traditional” plan, which was a non-refundable option offered at a lower entrance fee, and the “refundable” plan, which was a 90% refundable option offered at a higher entrance fee. The DeSimone family chose the “refundable” plan, and later sought a return of Mrs. DeSimone’s entrance fee when she was ultimately unable to move into her unit because of her health downturn and death.

The statutorily-mandated disclosure statement provided to the DeSimones stated that the refundable plan allowed for “up to 90%” of the entrance fee to be refunded, and stated that the refundability of that fee was “described in detail” in the Residence and Care Agreement. That agreement, captioned “90% Refundable,” explained that the refund would be “equal to the lessor of the original entrance fee or the subsequent resident’s entrance fee.” The plaintiff  claimed that the DeSimone family had relied on the CCRC disclosure statement (which did not contain the “lessor of” language) as well as advertising and sales personnel, and were not informed that the refund could be significantly lower than 90% of the entrance fee if the subsequent resident occupying the unit were given a discounted entrance fee (which occurred in the DeSimones’ case, after Monroe Village began offering discounted entrance fees because of a financial downturn).

The motion court had dismissed the complaint for failure to state a claim on which relief can be granted, after finding that the plaintiff failed to plead that the DeSimones had actually seen the allegedly misleading marketing material. The court also found that amending the complaint would be futile, because the DeSimones could not have seen the marketing material because it was not used until after Mrs. DeSimone’s death.

However, the Appellate Division reversed, finding that the CFA prohibits misleading advertising, whether or not the consumer has in fact been misled. It found that the proposed amended complaint claimed that the DeSimones had relied on a marketing pamphlet that failed to describe the “lesser of” term. The Appellate Division also found that the CCRC Act, which requires that CCRC disclosure statements be “written in plain English” and contain designated information “unless the information is contained in the contract,” could be read to prohibit a disclosure statement or staff statements that “mislead seniors by failing to reveal hidden costs only ascertainable by a lawyer reviewing the contract.”

Because it concluded that the CCRC staff or brochures may have misled the DeSimones regarding the “lesser of” term, it reasoned that the plaintiff may be able to prevail in its causes of action, including violation of the Consumer Fraud Act. Therefore, the Appellate Division reversed the motion judge, restored the complaint, and permitted the plaintiff to amend its complaint.

 A copy of DeSimone v. Springpoint Senior Living can be found here:  DeSimone v. Springpoint Senior Living

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