In its recent Assured Guaranty1 and Kerusa2 decisions, the New York Court of Appeals has made it clear that preemption is no longer an issue in private securities and real estate syndication cases where plaintiffs allege common law causes of action that overlap possible violations that only the attorney general may prosecute under New York State’s “blue sky” law, the Martin Act,3 which regulates the public sale of securities and real estate investment offerings.4 However, questions of Martin Act preemption are still raised in cases involving architect and engineer certifications that the attorney general’s regulations require to be included in offering plans filed by developers of condominium and cooperative apartments in newly built or renovated buildings.5 The theme of this article is that Martin Act preemption should no longer bar suit against architects or engineers who falsely or negligently certify offering plans.
Offering Plans
Under the attorney general’s Martin Act regulations, each offering plan must include an inspection report describing the construction and/or renovation of the property prepared by an independent architect or engineer and a certification by that professional stating, among other things: (a) that the professional inspected the existing portions of the property and examined the building plans and specifications included in the offering plan “so that prospective purchasers may rely on the report,” (b) that the “certification is made for the benefit of all persons to whom this offer is made,” (c) that the report “affords potential investors, purchasers and participants an adequate basis upon which to found their judgment concerning the description and/or physical condition of the property…as will exist upon completion of renovation and/or construction,” and (d) that the report “does not (i) omit any material facts, (ii) contain any untrue statements of a material fact, or (iii) contain any fraud, deception, concealment or suppression.”
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