U. S. Home Corp. v. Settlers Crossing, L.L.C.
| Decision Date | 22 October 2020 |
| Docket Number | No. 19-1485,19-1485 |
| Parties | U. S. HOME CORPORATION; LENNAR CORPORATION, Plaintiffs - Appellants, v. SETTLERS CROSSING, L.L.C.; WASHINGTON PARK ESTATES, LLC; BEVARD DEVELOPMENT COMPANY; STEVEN B. SANDLER; ISTAR FINANCIAL, INCORPORATED; DANIEL I. COLTON, Defendants - Appellees. |
| Court | U.S. Court of Appeals — Fourth Circuit |
UNPUBLISHED
Appeal from the United States District Court for the District of Maryland, at Greenbelt. Paula Xinis, District Judge. (8:08-cv-01863-PX)
Before KING and FLOYD, Circuit Judges, and Thomas S. KLEEH, United States District Judge for the Northern District of West Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: David Marroso, O'MELVENY & MYERS LLP, Los Angeles, California, for Appellants. Colin E. Wrabley, REED SMITH LLP, Pittsburgh, Pennsylvania; Geoffrey Chepiga, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLC, New York, New York, for Appellees. ON BRIEF: Daniel M. Petrocelli, Jeffrey Gurrola, O'MELVENY & MEYERS LLP, Los Angeles, California, for Appellants. Timothy F. Maloney, Veronica Nannis, JOSEPH GREENWALD & LAAKE P.A., Greenbelt, Maryland; Brent R. Gary, REED SMITH LLP, McLean, Virginia, for Appellees Steven B. Sandler, Settlers Crossing, L.L.C, Washington Park Estates, LLC, and Bevard Development Company. Eric A. Kuwana, COOLEY LLP, Washington, D.C., for Appellee iStar, Inc.
Unpublished opinions are not binding precedent in this circuit.
In April 2017, we affirmed the judgment in this District of Maryland civil action concerning a failed real estate transaction in Prince George's County. By that judgment, the district court ruled against plaintiffs Lennar Corporation and U.S. Home Corporation (collectively, "Lennar") and in favor of defendants, including iStar Financial, Incorporated, and Steven B. Sandler. In March 2019, following our affirmance of its judgment, the court awarded iStar and Sandler their costs, fees, and expenses as prevailing parties under contractual fee-shifting provisions. Lennar now appeals the court's awards of expert witness fees to iStar and attorneys' fees to Sandler. As explained herein, we affirm those awards.
The background of this dispute is relevant and therefore summarized. In November 2005, Lennar entered into a pair of agreements (the "Contract") with three entities — defendants Settlers Crossing, L.L.C., Washington Park Estates, LLC, and Bevard Development Company (collectively, the "Seller Companies"). The Contract included a Purchase and Services Agreement (the "Purchase Agreement") and a Contract for Services. Pursuant to the Contract, Lennar agreed to purchase 1,250 acres of prime land in Prince George's County (the "Property") from the Seller Companies for $200 million. Lennar then delivered the Seller Companies the sum of $20 million in deposits to secure the Contract. A month later, Sandler — sole owner of the three Seller Companies — signedtwo Guaranty Agreements, personally guaranteeing the return of Lennar's $20 million in deposits in the event the Seller Companies breached the Contract.
Beginning around late 2006, Lennar sought to renegotiate the Contract because of a decline in the residential housing market. Lennar and the Seller Companies agreed to amend the Purchase Agreement on May 16, 2007, and thereby reduced the purchase price of the Property from $200 million to $134 million. Lennar and the Seller Companies further agreed to a guarantee of specific performance by Lennar.
During that period of time, the Seller Companies obtained financing assistance from iStar in exchange for a mortgage on the Property. More specifically, iStar made a $100 million loan to the Seller Companies, secured in part by the Property and in part by the Seller Companies' assignment of their rights under the Purchase Agreement (the "Collateral Assignment"). Under the Collateral Assignment, the Seller Companies retained the "exclusive right and license to exercise all rights in, to and under" the Contract absent an "Event of Default." See J.A. 1303.1 "[U]pon the occurrence and during the continuance of such Event of Default," the Seller Companies would "neither have nor exercise any further rights" under the Contract. Id.
Because the housing market continued to decline, Lennar began seeking a partner to join in its real estate venture. Lennar was unsuccessful in that search and, in late 2007, began to develop strategies to delay the December 5, 2017 settlement date or to avoidclosing altogether. On November 21, 2007, Lennar notified the Seller Companies that they had failed to satisfy conditions precedent for closing the transaction. However, Lennar would not identify any unsatisfied conditions precedent that were a barrier to closing. Thereafter, on December 5, 2007, Lennar failed to appear for settlement.
In January 2008, Lennar sought permission from the Seller Companies to enter the Property to conduct investigations, studies, and tests, which Lennar asserted the Contract gave it the right to do. The Seller Companies, however, were suspicious of Lennar's intentions and denied access. Between January and March of 2008, the Seller Companies continued to work to resolve questions regarding whether the conditions precedent to the Contract were satisfied so that settlement could occur. In April 2008, Lennar called for the settlement to occur on May 27, 2008. On May 16, 2008, however, Lennar served a notice of default on the Seller Companies, relying on their denial of access to the Property. That notice of default triggered the Seller Companies' and iStar's cure periods under the Purchase Agreement and a separate Consent and Estoppel Agreement. Under the latter agreement, iStar had until July 2, 2008, to cure any alleged breach relating to the default notice.
Lennar did not attend the proposed May 27, 2008 settlement proceedings. As a result, the Seller Companies served their own notice of default on May 30, 2008. Lennar was subsequently granted access to the Property but made no attempt to enter it. On July 3, 2008, Lennar notified the Seller Companies that it had elected to terminate the Contract. Lennar then demanded a refund of its $20 million in deposits, but Sandler and the Seller Companies refused. Further, because the May 27, 2008 settlement date had passed, theSeller Companies defaulted on the iStar loan on July 18, 2008. The default required iStar to exercise its rights under the Collateral Assignment. As a result, iStar stepped into the shoes of the Seller Companies under the agreements and foreclosed on the Property.
On July 17, 2008, after notifying the Seller Companies of its election to terminate the Contract, Lennar initiated this civil action in the District of Maryland against iStar, Sandler, and the Seller Companies. By its operative First Amended Complaint of May 18, 2009, Lennar asserted seven claims, including breach of contract against Settlers Crossing and Washington Park Estates (Count I), breach of contract against Bevard Development (Count II), breach of guaranty against Sandler (Count III), fraudulent inducement against Settlers Crossing and Washington Park Estates (Count IV), fraud by concealment against Settlers Crossing and Washington Park Estates (Count V), and breach of environmental representations and warranties against Settlers Crossing and Washington Park Estates (Count VI). The seventh and final claim was for a declaratory judgment against iStar, Sandler, and the Seller Companies (Count VII). On June 30, 2009, iStar and the Seller Companies filed a joint counterclaim against Lennar for declaratory relief and specific performance of the Contract.
Following pretrial proceedings, two primary issues remained for trial: (1) whether the Seller Companies' denial of Lennar's access to the Property constituted a breach of contract (Counts I and II); and (2) whether Settlers Crossing and Washington Park Estates had breached the environmental representations and warranties provision in the Purchase Agreement (Count VI). If the Seller Companies were in breach of contract under eithertheory, Lennar would be entitled to the return of its $20 million in deposits, which Sandler — as guarantor of the Seller Companies — would be responsible for (Count III). A bench trial was conducted in Greenbelt from March 31 to April 15, 2014. The bulk of the trial focused on the environmental representations claim. Lennar presented three expert witnesses in support of that claim, and iStar called four experts to counter Lennar's evidence.
Following the bench trial, the district court filed a comprehensive opinion, concluding that Lennar had failed to satisfy its burdens at trial and that iStar — standing in the shoes of the Seller Companies — was entitled to specific performance. See U.S. Home Corp. v. Settlers Crossing, L.L.C., No. 8:08-cv-01863 (D. Md. July 18, 2014), ECF No. 707. With regard to the environmental representations, the court ruled that Lennar had not proved that the source of hazardous materials on the Property was something other than what was disclosed in the environmental reports provided by the Seller Companies. The court found that two of Lennar's experts on that issue were not persuasive and that one of them was not credible, whereas iStar's experts were highly credible and informative. The court concluded that the Seller Companies' denial of access was not a breach of contract because Lennar's request for access was made in bad faith to delay purchasing the Property. Thus, the court further ruled that Sandler had not breached the Guaranty Agreements.2
After additional proceedings, the district court entered judgment in favor of iStar and against Lennar. See U.S. Home Corp. v. Settlers Crossing, L.L.C., No. 8:08-cv-01863 (D. Md. Jan. 22, 2015), ECF No. 731. The court directed Lennar to proceed to settlement within thirty days. Lennar did not, however, proceed to settlement but instead appealed the judgment to this Court. In April 2017, we...
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