July 11, 2020

When do businessowners have a duty to conduct criminal background checks?

Posted in Real Estate by Ryan Milun |

New Jersey is a “ban the box” state, meaning that employers aren’t allowed to ask a job applicant about his or her criminal history during the initial employment application process. (Employers also can’t ask about an applicant’s expunged criminal record.) But are there business situations where you should ask about the criminal record of someone you’re dealing with? What happens if you don’t ask, and bad things happen later? Can you be held liable for an obligation the law doesn’t specifically say you had?

This is a question that can come up in many contexts, but it’s particularly significant in the real estate industry. If you run a hotel, or an inn, or a rooming house, for example, should you be required to run a background check on everyone who wants to rent a room?  That sounds a little crazy, but it’s an issue we recently dealt with in a case in the Appellate Division, captioned The Estate of Frank Campagna v. Pleasant Point Properties, LLC.

This was not a case for the squeamish.

The case involved the gruesome murder of Frank Campagna, a tenant in a rooming house in Point Pleasant, New Jersey, owned by our client. Campagna and another tenant, Anthony Strong, were hanging out together one night when things got ugly. The two started arguing while they were watching television, and  Campagna apparently punched Strong in the face.  Strong then (over)reacted by grabbing a knife from a table and stabbing Campagna over 90 times. (Yes, you read that correctly.)  Strong eventually pleaded guilty to the murder of Campagna and is currently serving a 30-year prison sentence. 

Several months after the murder, Campagna’s estate sued Pleasant Point (the owner of the rooming house). As you may know if you read our blogs, our law firm does a lot of policyholder-side insurance coverage work, so we got involved to try to resolve a liability insurance coverage issue relating to the lawsuit. Meanwhile, because the insurance company refused to defend Pleasant Point, we ended up handling the defense ourselves.    

The Estate argued that Pleasant Point was legally obligated to conduct a criminal background check of Strong before allowing him to rent a room.  According to the Estate, a background check would have disclosed that Strong had committed armed robbery when he was  only 19 years old, had served over four years in prison, and had been out on parole for approximately a year before he took up residence in the rooming house.  The Estate argued that Strong’s criminal past should have been enough to exclude him from the rooming house, and that, had he been excluded from the rooming house, the murder never would have taken place.

There are several reasons why the Appellate Division decided in favor of Pleasant Point. The critical point that I want to focus on is the fact that the Court interpreted the existing law correctly (as written) and ultimately held that there was no duty on the part of rooming house owners to conduct criminal background checks on prospective tenants.  This interpretation of the statutes governing rooming houses and the common law was important because nothing in the lengthy statutes and regulations governing rooming houses requires criminal background checks of any kind. 

Judge Sabatino, writing for the panel, noted:  “To be sure, performing background checks of rooming house applicants might keep some dangerous persons off the premises and protect other residents. Nothing in this opinion prevents owners and operators from conducting such checks if they choose to do so. However, plaintiffs have not demonstrated that such checks should be judicially mandated, given the other ramifications that would ensue. The policy choice about mandating checks is instead for the Legislature and the [Department of Community Affairs] as the administrative agency entrusted with the regulation of rooming houses.”

The Estate was essentially asking the  Appellate Division to create  a duty that had never existed before.  Even worse, had a duty been found, the Court would have had to apply the duty retroactively to Pleasant Point, when Pleasant Point had no fair notice that such a duty ever even existed.  

Rooming house owners, such as Pleasant Point, and by extension landlords in New Jersey, put themselves and their assets at risk each time they rent to a new tenant.  These property owners need to know that they can rely on the law as written. Even though reasonable minds can differ on whether a rooming house owner could or should conduct criminal background checks (which is a question for another blog post, but since you asked, I absolutely do not think rooming house owners or landlords should have to conduct such checks), this is a case where the Court deferred to the legislature and refused to create new law by judicial fiat. I’m glad that I was a part of confirming some good case law in New Jersey.

Businessowners sometimes complain about activist judges, and plaintiffs’ lawyers sometimes count on such judges to create favorable outcomes. But the bottom line here is, just because someone says you (or your client) had a duty to prevent harm, doesn’t make it so. The old saying that “ignorance of the law is no excuse” has no application when the law doesn’t actually exist.

You can read the full Pleasant Point decision (which will be an officially reported decision in New Jersey) here.

- Ryan Milun