Court Lets Developers Slide Over Explosive Deal
(CN) - Developers had no duty to tell clients that they were buying Orlando property beside a former World War II bombing range that still contains ammunition, the 11th Circuit ruled.
Luis and Norma Virgilio filed a 2008 federal class action against the Ryland Group, Terrabrook Vista Lakes, Newland Communities and Westerra Management on behalf of homeowners in the Newport subdivision of Vista Lakes.
The subdivision sits beside a former World War II bombing range now known as Pinecastle, which is laden with unexploded bombs, ammunition, ordnance and related chemicals.
But the lead plaintiffs said they had no idea about the land's history when they bought their home, and that their property devalued as the news became public.
Concluding that the class had raised legally insufficient claims against Terrabrook, Newland and Westerra, a federal judge in Florida entered judgment for the those defendants in February 2011.
Since Ryland had settled with the plaintiffs for $1.2 million, the court also certified the class, approved the settlement and entered judgment against Ryland.
On appeal to a three-judge panel in Atlanta, the class hoped to revive four claims against the other defendants.
The homeowners say Terrabrook sold Ryland the undeveloped land and informed it of Pinecastle's existence. Ryland then allegedly marketed and sold homes without mentioning the nearby land to buyers.
All four counts allege the developers blew off an "affirmative duty" to inform buyers about Pinecastle.
The homeowners sought compensation for the loss in value of their homes.
But the federal appeals court agreed that the homeowners failed to identify a Florida case recognizing a common law claim for "negligent nondisclosure."
The class did not state whether the duty to disclose had limits, or how far down the line of purchasers the duty to disclose would extend.
For instance, if Terrabrook had a duty to warn those who contracted with Ryland, did it also have to tell those who bought houses from those homebuyers?
Also, since Terrabrook did not have a contract with the buyers, it did not know the buyers' identities.
Under the class's approach, the developers could escape liability only by saturating the market with negative information, according to the ruling.
And even if they disclosed the negatives, they could still be sued for not disclosing it soon enough or in adequate detail, the panel found.