Virgilio v. Ryland Grp., Inc.

• Decision Date: 18 May 2012
• Docket Number: No. 11–11027.,11–11027.
• Citation: 23 Fla. L. Weekly Fed. C 1053,680 F.3d 1329
• Parties: Luis VIRGILIO, Norma Virgilio, Plaintiffs–Appellants, v. The RYLAND GROUP, INC., a Maryland corporation, et al., Defendants, Terrabrook Vista Lakes L.P., Terrabrook Vista Lakes GP, L.L.C., Newland Communities, L.L.C., Westerra Management, L.L.C., Defendants–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

680 F.3d 1329

23 Fla. L. Weekly Fed. C 1053

Luis VIRGILIO, Norma Virgilio, Plaintiffs–Appellants,

v. The RYLAND GROUP, INC., a Maryland corporation, et al., Defendants,Terrabrook Vista Lakes L.P., Terrabrook Vista Lakes GP, L.L.C., Newland Communities, L.L.C., Westerra Management, L.L.C., Defendants–Appellees.

No. 11–11027.

United States Court of Appeals, Eleventh Circuit.

May 18, 2012.

Douglas S. Wilens, Kathleen L. Barber, Mary B. Clark, Stuart Andrew Davidson, David J. George, Robert Jeffrey Robbins, Robbins, Geller, Rudman & Dowd, LLP, Boca Raton, FL, Ronnie J. Bitman, Karl E. Pearson, Powell & Pearson, LLP, John R. Overchuck, Overchuck & Byron, PA, Winter Park, FL, for Plaintiffs–Appellants.

Michael Ross D'Lugo, Patrick Michael DeLong, Richards H. Ford, Wicker, Smith, O'Hara, McCoy & Ford, PA, Orlando, FL, Laurie Webb Daniel, Holland & Knight, LLP, Atlanta, GA, Jordan Scott Cohen, Wicker, Smith, O'Hara, McCoy & Ford, PA, Ft. Lauderdale, FL, Suzanne E. Gilbert, Robert L. Rogers, III, William B. Wilson, Holland & Knight, LLP, Orlando, FL, for Defendant–Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT and BARKETT, Circuit Judges, and SMOAK,^* District Judge.

TJOFLAT, Circuit Judge:

This is a class action. It was brought in April 2008 by Luis and Norma Virgilio on behalf of themselves and others who purchased houses from a builder, the Ryland Group, Inc. (“Ryland”), in the Newport subdivision of Vista Lakes, a residential development in Orlando, Florida.¹ The Newport subdivision is adjacent to land known as “Pinecastle.” Pinecastle was used as a bombing range during World War II and remains laden with unexploded bombs, ammunition, ordnance, and related chemicals.² When the Virgilios and the other members of their class bought houses from Ryland, they were unaware of Pinecastle. Later, after Pinecastle's existence became public, their houses lost considerable market value, and the Virgilios brought this lawsuit to compensate for the loss.

In July 2008, the Virgilios amended their complaint to include as defendants, in addition to Ryland, four entities involved in the development of the Vista Lakes residential community: Terrabrook Vista Lakes LP (“Terrabrook”) and Terrabrook Vista Lakes GP, LLC (“Terrabrook GP”), Terrabrook's general partner; Newland Communities, LLC (“Newland”); and Westerra Management, LLC (“Westerra”).

The Virgilios and the members of their class (collectively “Plaintiffs”) sought damages against Ryland on multiple legal theories, all rooted in Plaintiffs' buyer-seller relationship with Ryland. The several legal theories Plaintiffs pursued against Terrabrook, Terrabrook GP, Newland, and Westerra (collectively “Defendants”) were based on their failure to inform Plaintiffs before they purchased their houses that the houses were located in close proximity to Pinecastle.

The District Court denied as legally insufficient Plaintiffs' claims against Defendants and entered judgment for Defendants on February 11, 2011. The same day, the court certified the plaintiff class, approved the $1.2 million settlement Plaintiffs had reached with Ryland, and entered judgment against Ryland. Plaintiffs now appeal the judgment entered in favor of Defendants on four of their claims.

I.

A.

1.

The claims denied by the District Court are presented in four counts of Plaintiffs' complaint.³ All of the counts allege the following facts: Terrabrook sold Ryland the undeveloped land that became the Newport subdivision of Vista Lakes and informed Ryland of Pinecastle's existence;⁴ Terrabrook and Terrabrook GP “actively marketed Vista Lakes and the fact that Ryland was building and selling” houses in the Newport subdivision of Vista Lakes;⁵ Terrabrook received from Ryland “1.5% of the gross sales price of each lot ... or home sold in the Newport subdivision ... to purchasers such as Plaintiffs”;⁶ Newland was “responsible for the subdivision, development and marketing of all of the homes in Vista Lakes, including the [Newport subdivision],” and “directly or indirectly benefitted financially from the sale of” the houses in that subdivision, including Plaintiffs';⁷ and Westerra “was actively involved in [Terrabrook's] sale of the [undeveloped land] to Ryland and benefitted financially.”⁸

In addition to these factual allegations, each count alleges that “Terrabrook, [Terrabrook GP], Newland, and Westerra [we]re agents of each other [and,] [a]cting in concert, ... were responsible for the development and marketing of all [of] Vista Lakes, ... includ[ing the] Newport [subdivision]”; that “each ... knew of the existence of [Pinecastle] prior to obtaining an ownership interest in or developing” the Newport subdivision and the sale of houses to Plaintiffs; and that Defendants failed to “disclose[ ] the existence of [Pinecastle]to Plaintiffs” before Plaintiffs purchased houses within the Newport subdivision.⁹

All four counts allege that Defendants, individually and as agents for one another, had an “affirmative duty” to inform Plaintiffs about Pinecastle, but did not. The counts differ, however, as to the source of this duty.

2.

Count 1 attributes the duty to the Florida Supreme Court's decision in Johnson v. Davis, which holds that “where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.” 480 So.2d 625, 629 (Fla.1985). Although Defendants were not the sellers of the houses Plaintiffs bought, Count 1 alleges that they are liable as Ryland's “agents.”¹⁰

Count 2 is silent as to the source of the duty but implies that it lies in equity, since it is a claim for unjust enrichment. Count 2 alleges that because Defendants failed to inform Plaintiffs about Pinecastle, it would be “inequitable for Defendants to retain th[e] benefits” Terrabrook received in the form of 1.5 percent of the gross sales price of the houses Ryland sold to Plaintiffs.¹¹

Count 3 locates the duty in the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.201, et seq., asserting that Defendants' failure to inform Plaintiffs about Pinecastle constituted a “deceptive, misleading, and unfair [trade] practice.”¹²

Count 4 locates the duty in common law negligence.

Counts 1, 3, and 4 seek compensation for the loss of value Plaintiffs' houses sustained due to their close proximity to Pincastle. The compensation sought is the difference between the current market value of Plaintiffs' houses and the price Plaintiffs paid Ryland for the houses. Count 2 seeks the recovery of 1.5 percent of the purchase price of every home Ryland sold in the Newport subdivision, a total of approximately $500,000.¹³

B.

The District Court dismissed Counts 1 and 2 with prejudice and Count 3 without prejudice on June 8, 2009,¹⁴ pursuant to Federal Rule of Civil Procedure 12(b)(6).¹⁵ The court granted Defendants summary judgment on Count 4 on February 8, 2010, pursuant to Federal Rule of Civil Procedure 56. The court's reasons for its rulings were as follows. The District Court dismissed Count 1 because Florida's appellate courts appeared unwilling to extend the seller's duty to disclose found in Johnson v. Davis beyond those in privity with the buyer or those acting as an agent for one in privity with the buyer, e.g., the seller's real estate broker. Although Count 1 alleged that Defendants, as Ryland's “agent[s],” actively marketed Vista Lakes, including the houses Ryland built in the Newport subdivision, the court notedthat Count 1 failed to allege that Defendants' “marketing efforts were at the behest or direction of Ryland, that Ryland exercised any control over [the] marketing efforts, or that [Defendants] actually listed any of the homes ... on behalf of Ryland.”¹⁶

The District Court dismissed Count 2 for the same reason it dismissed Count 1: even assuming the Plaintiffs conferred a benefit on Defendants,¹⁷ the Johnson duty to disclose did not extend to Defendants. Since Defendants did not breach a duty to Plaintiffs, Plaintiffs had not been wronged and Defendants were not unjustly enriched.¹⁸ Count 2 therefore failed to state a claim for unjust enrichment. The District Court dismissed Count 3 because the alleged FDUTPA “deceptive or unfair trade practice” was the breach of an affirmative duty of disclosure. As the court found in dismissing Count 1, Defendant had no such duty.¹⁹

The District Court granted summary judgment as to Count 4 in an order granting Defendants' motion for summary judgment. See Virgilio v. Ryland Grp., Inc. ( Virgilio II), 695 F.Supp.2d 1276 (M.D.Fla.2010). Plaintiffs were seeking to recover an economic loss, the diminished value of their houses. But Plaintiffs failed to

identif[y] a single Florida case recognizing a common law claim for negligence, or “negligent non-disclosure,” that imposes an affirmative duty on a developer, or on an entity that promotes a residential development, to publicly disclose material facts that may negatively affect the economic value of a home that the developer did not build, own or sell.

Id. at 1281.

C.

Plaintiffs claim reversible error in the District Court's denial of Counts 1 through 4. In part II below, we consider their claims of error and conclude that none has merit.

II.

We consider Plaintiffs' challenges to the District Court's rulings de novo, as follows. Hill v. White, 321 F.3d 1334, 1335 (11th Cir.2003) (per curiam); Centurion Air Cargo, Inc. v. United Parcel Serv. Co., 420 F.3d 1146, 1149 (11th Cir.2005). As to Counts 1, 2, and 3, dismissed under Rule 12(b)(6), we accept as true Plaintiffs' allegations of fact. Hill, 321 F.3d at 1335. If, however, “the facts as pled [in the count] do not state a claim for relief that is plausible on its face,” the count must be dismissed. Edwards v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir.2010) (quoting Sinaltrainal v. Coca–Cola Co., 578 F.3d...