Terre Du Lac Ass'n, Inc. v. Terre Du Lac, Inc.
| Decision Date | 14 October 1985 |
| Docket Number | No. 84-2296,84-2296 |
| Citation | 772 F.2d 467 |
| Parties | 1985-2 Trade Cases 66,766 TERRE DU LAC ASSOCIATION, INC., a not-for-profit corporation, Appellant, v. TERRE DU LAC, INC., Terre Du Lac Utilities Corp., Terre Du Lac Golf and Country Club, Inc., Terre Du Lac Country Club Association, a limited partnership, CIT Corporation, Sensibar Enterprises, Inc., Moill, Ltd. and James O. Kwon, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Kenton E. Knickmeyer, St. Louis, Mo., for appellant.
John W. Reid, Fredericktown, Mo., and Mark Arnold, St. Louis, Mo., for appellee.
Before ROSS and JOHN R. GIBSON, Circuit Judges, and COLLINSON, * District Judge.
This case involves an action filed by Terre Du Lac Association, Inc. (Association), a property owners' association, against Terre Du Lac, Inc. and other alleged developers of the Terre Du Lac Subdivision. The Terre Du Lac Subdivision is a private recreational land development area located in southeastern Missouri.
The Association's complaint included sixteen counts. Counts one through six were based on the Interstate Land Sales Full Disclosure Act (Land Sales Act), 15 U.S.C. Secs. 1701-1720; counts seven through fourteen were based on pendent state law claims; count fifteen was based on the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961-1968; and count sixteen was based on the Sherman Antitrust Act, 15 U.S.C. Secs. 1-7. Prior to trial, the defendants filed motions to dismiss all counts of the complaint. The district court granted the motions and the Association now appeals. We affirm the dismissal of the Land Sales Act counts, reverse the dismissal of the RICO and antitrust counts, and vacate the dismissal of the pendent state law counts.
Counts one through six of the Association's complaint alleged that the defendants violated the Land Sales Act by failing to fulfill the following promises and representations: 1) that the roads in the development would be paved with asphalt, 2) that the sewage disposal and water systems would be completed, 3) that all members of the Association could use certain amenities in the subdivision for free (e.g., golf courses and club house), and 4) that these amenities would be conveyed to the Association upon completion. In particular, count one alleged a violation of 15 U.S.C. Sec. 1703(a)(2)(A), count two alleged a violation of 15 U.S.C. Sec. 1703(a)(2)(B), 1 count three alleged a violation of 15 U.S.C. Sec. 1703(a)(1)(C), 2 count four alleged a violation of 15 U.S.C. Sec. 1703(a)(2)(C), count five alleged a violation of 15 U.S.C. Sec. 1703(a)(2)(D), and count six alleged that defendant CIT Corporation aided and abetted the other developers in each of these violations. These statutory sections provide that:
(a) It shall be unlawful for any developer or agent, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce, or of the mails--
(1) with respect to the sale or lease of any lot not exempt under section 1702 of this title--
* * *
* * *
(C) to sell or lease any lot where any part of the statement of record or the property report contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein pursuant to sections 1704 through 1707 of this title or any regulations thereunder; or
* * *
* * *
(2) with respect to the sale or lease, or offer to sell or lease, any lot not exempt under section 1702(a) of this title--
(A) to employ any device, scheme, or artifice to defraud;
(B) to obtain money or property by means of any untrue statement of a material fact, or any omission to state a material fact necessary in order to make the statements made (in light of the circumstances in which they were made and within the context of the overall offer and sale or lease) not misleading, with respect to any information perintent to the lot or subdivision;
(C) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a purchaser; or
(D) to represent that roads, sewers, water, gas, or electric service, or recreational amenities will be provided or completed by the developer without stipulating in the contract of sale or lease that such services or amenities will be provided or completed.
15 U.S.C. Secs. 1703(a)(1)(C), (2)(A)-(D). As relief for the defendants' violation of these provisions, the Association sought specific performance of the unfulfilled representations, plus other appropriate relief. The Land Sales Act provision authorizing such relief provides as follows:
(a) A purchaser or lessee may bring an action at law or in equity against a developer or agent if the sale or lease was made in violation of section 1703(a) of this title. In a suit authorized by this subsection, the court may order damages, specific performance, or such other relief as the court deems fair, just, and equitable. In determining such relief the court may take into account, but not be limited to, the following factors: the contract price of the lot or leasehold; the amount the purchaser or lessee actually paid; the cost of any improvements to the lot; the fair market value of the lot or leasehold at the time relief is determined; and the fair market value of the lot or leasehold at the time such lot was purchased or leased.
15 U.S.C. Sec. 1709(a) (emphasis added). See also 15 U.S.C. Sec. 1709(c) ().
The district court dismissed the Land Sales Act counts on the basis that the Association lacked standing. Initially, the court determined that the Association lacked standing to sue on its own behalf since the Association did not allege that the Terre Du Lac Subdivision lots which it owns were purchased from the defendants. The Association does not contest this finding on appeal.
The Association does, however, contest the district court's finding that it lacked associational standing to sue on behalf of its members as to the Land Sales Act counts. According to the Association's complaint, every owner of a lot in the Terre Du Lac Subdivision is required to become a member of the Association and, at the time the complaint was filed in this case, there were approximately 4,000 lot owners. Approximately 3,400 of these lot owners are alleged to have purchased their lots from the defendant developers from between sometime before 1969 to the date the complaint was filed. The Association seeks to assert the Land Sales Act claims on behalf of these 3,400 members.
recognized that an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Hunt v. Washington Apple Advertising Commission, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Each of these three requirements for associational standing must be met. Associated General Contractors v. Otter Tail Power Co., 611 F.2d 684, 690 (8th Cir.1979).
In this case, the district court found that the Association "fail[ed] to satisfy the third requirement that 'neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.' " Terre Du Lac Association, Inc. v. Terre Du Lac, Inc., 601 F.Supp. 257, 259 (E.D.Mo.1984) (quoting Hunt v. Washington Apple Advertising Commission, supra, 432 U.S. at 343, 97 S.Ct. at 2441). The court based this conclusion on the facts that: 1) some of the Land Sales Act counts required proof of reliance, which proof would necessitate testimony by individual members and, 2) there was "potential conflict" amongst the members relating to the suit necessitating individual representation of their interests. Id. at 259-61.
We agree with the district court's holding that the Association lacks associational standing to assert the Land Sales Act counts, but do not adopt the district court's reasoning. In our view, the Association lacks associational standing due to the fact that the type of relief available under the Land Sales Act, 15 U.S.C. Sec. 1709(a), requires individualized proof of the claims asserted.
Section 1709(a) provides authority for both damages and specific performance remedies. A damages remedy for a Land Sales Act violation would clearly require individualized proof necessitating the individual participation of the Association members. See Associated General Contractors v. Otter Tail Power Co., supra, 611 F.2d at 689-90 (). First, in order to establish a right to relief, the Association would have to submit evidence relating to each purchase of a subdivision lot in order to establish that the purchaser had a viable Land Sales Act claim. Second, in order to establish the amount of relief due, the Association would have to submit evidence relating to the cost and current value of each lot, as well as evidence relating to the amount by which the defendants' Land Sales Act violations diminished this value. Clearly, the need for such individualized proof renders the Association an inappropriate vehicle to bring the Land Sales Act claims of its members.
The Association seeks to avoid...
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