Luis Virgilio v. Terrabrook Vista Lakes, L.P. ( 2012 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 11-11027 MAY 18, 2012
________________________ JOHN LEY
CLERK
D.C. Docket No. 6:08-cv-00815-GAP-GJK
LUIS VIRGILIO,
NORMA VIRGILIO,
Plaintiffs - Appellants,
versus
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.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(May 18, 2012)
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.
*
Honorable Richard Smoak, United States District Judge for the Northern District of
Florida, sitting by designation.
1
The Virgilios commenced this litigation against Ryland in the Circuit Court of Orange
County, Florida, on April 17, 2008. On May 21, 2008, Ryland removed the case to the United
States District Court for the Middle District of Florida pursuant to 28 U.S.C. § 1441(a) and the
Class Action Fairness Act of 2005, Pub. L. 109-2, 119 Stat. 4, codified in part at 28 U.S.C. §§
1332(d) and 1453. The court had diversity jurisdiction under 28 U.S.C. § 1332 because Ryland
and the Virgilios and presumably several other members of the plaintiff class had diverse
citizenship.
2
Pinecastle was formerly known as the Tactical Demonstration Range, the Orlando
Range, the Pinecastle Jeep Range, and the Pinecastle Chemical Demonstration Range. Vista
Lakes consists of 948 acres of land, part of which had been devoted to Pinecastle.
2
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.
3
I.
A.
1.
The claims denied by the District Court are presented in four counts of
Plaintiff’s 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
3
The complaint before us is Plaintiffs’ Third Amended Complaint. We refer to it in this
opinion as the “complaint.” The complaint contained 11 counts in all. We have recast the counts
at issue here as Counts 1, 2, 3, and 4.
4
Complaint ¶ 16, Virgilio v. Ryland Grp. Inc., No. 6:08-cv-815-ORL-37GJK (M.D. Fla.
Mar. 6, 2009).
5
Complaint ¶ 16, 17.
6
Complaint ¶ 16. The complaint also asserts, in a conclusory way and without any
factual support, that the other defendants received the 1.5 percent disbursement. We assume that
the basis for the allegation is the allegation that the four Defendants were agents for one another.
See id. ¶ 20.
4
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
7
Complaint ¶ 18.
8
Complaint ¶ 19.
9
Complaint ¶ 20.
5
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.
10
Complaint ¶ 79.
11
Complaint ¶ 124.
12
Complaint ¶ 142.
6
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
13
Terrabrook received $2,507.85 from the proceeds of the sale to the Virgilios.
14
The court gave Plaintiffs leave to amend Count 3. Plaintiffs chose to stand on Count 3
as pled, and the dismissal of Count 3 became a dismissal with prejudice when the court entered
final judgment for Defendants.
15
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a plaintiff’s claim
on the ground that the plaintiff “fail[ed] to state a claim upon which relief can be granted[.]”
7
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 noted that 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
16
Virgilio v. Ryland Grp., Inc. (Virgilio I), No. 6:08-cv-815-Orl-31GJK, slip. op. at 9
(M.D. Fla. June 6, 2009) (order partially granting Defendants’ motion to dismiss Plaintiffs’ Third
Amended Complaint).
17
The district court, in previously dismissing Plaintiffs’ unjust enrichment count without
prejudice, had concluded that Plaintiffs conferred no benefit on Defendants. See Virgilio v.
Ryland Grp., Inc., No. 6:08-cv-815-Orl-31GJK, slip op. at 10 (M.D. Fla. Feb. 9, 2009) (order
partially granting Defendants’ motion to dismiss Plaintiffs’ Second Amended Complaint).
18
Virgilio I, slip op. at 11.
8
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
19
Virgilio I, slip op. at 12.
9
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 1252, 1261 (11th
Cir.2009)). As to Count 4, we apply the same standard the District Court
employed; we consider in the light most favorable to Plaintiffs the evidence before
the District Court and all reasonable inferences that evidence yields. Centurion,
420 at 1149. Defendants are entitled to summary judgment if, after doing this, we
conclude that there exists no genuine issue of material fact and that Count 4 fails
as a matter of law to present a claim for relief. Holloman v. Mail-Well Corp., 443
F.3d 832, 836–37 (11th Cir. 2006).
Florida law provides the rule of decision for all four counts. In the absence
of a rule, we “must ‘decide the case the way it appears the [Florida Supreme
Court] would.’” Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1290
(11th Cir. 2001) (quoting Royal Ins. Co. of Am. v. Whitaker Contracting Corp.,
242 F.3d 1035, 1040 (11th Cir. 2001)).
10
A.
Plaintiffs argue that the District Court erred in concluding that Defendants
were not subject to the Johnson v. Davis duty to disclose. 480 So. 2d 625, 629
(Fla. 1985). We find no error.
In Johnson, the Florida Supreme Court abrogated the doctrine of caveat
emptor in a case where, in an arms-length transaction between the sellers and
buyers of a house, the sellers had knowledge of facts that materially affected the
value of the house but the buyers did not. Id. The Davises entered into a contract
to buy the Johnsons’ home. Id. at 626. The contract required the Davises to pay a
$5,000 deposit upon signing the contract and an additional $26,000 at closing. Id.
Before the closing, Mrs. Davis noticed “buckling and peeling plaster around the
corner of a window frame in the family room and stains on the ceilings in the
family room and kitchen.” Id. Mr. Johnson, upon Mrs. Davis’s inquiry, told Mrs.
Davis that the window had once leaked, but the leak had been repaired and that the
stains on the ceilings were from wallpaper glue and ceiling beams having been
moved. Id.
After the sale closed, Mrs. Davis entered the house following a heavy rain.
To her surprise, rainwater was gushing in through the window frame and the
ceiling. Id. After the Davises informed the Johnsons that the roof was inherently
11
defective and needed to be replaced, the Johnsons refused to replace it, and the
Davises sued them in the Dade County Circuit Court, seeking the rescission of the
contract and the return of their deposits. Id. Both sides prevailed. Id. The
Davises were awarded $26,000, the deposit paid at closing; the Johnsons were
allowed to retain the $5,000 deposit the Davises paid on signing the contract. Id.
at 626–27. On appeal, the Third District Court of Appeal affirmed the Davises’
$26,000 award, but reversed the Johnsons’ $5,000 award. Id. The Johnsons then
petitioned the Florida Supreme Court for review, which the court granted to
resolve a conflict between the Third District Court of Appeal’s decision and the
decisions of two other District Courts of Appeal. Id.
The issue before the Florida Supreme Court was whether the Davises could
recover the deposit they paid before the Johnsons had made any statements
regarding the window frame and the stains on the ceiling. The general rule at the
time, the court explained, was that “where the parties are dealing at arm’s length
and the facts lie equally open to both parties, with equal opportunity of
examination, mere nondisclosure does not constitute fraudulent concealment.” Id.
at 628 (citing Ramel v. Chasebrook Constr. Co., 135 So. 2d 876 (Fla. 2d Dist. Ct.
App. 1961)). The court concluded, however, that the rule was “not in tune with
the times and [did] not conform with current notions of justice, equity and fair
12
dealing.” Id. It pointed out that the law appeared to be working toward the
conclusion that “full disclosure of all material facts must be made whenever
elementary fair conduct demands it.” Id. The court accordingly held “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.” Id. at 629.
Since the Johnson decision, the District Courts of Appeal have extended
Johnson’s duty to disclose to real estate brokers acting as the seller’s agent. See
Rayner v. Wise Realty Co. of Tallahassee, 504 So. 2d 1361, 1363–65 (Fla. 1st
Dist. Ct. App. 1987); Revitz v. Terrell, 572 So. 2d 996, 998 n.5 (Fla. 3d Dist. Ct.
App. 1990) (citing Rayner, 504 So. 2d at 1363–65). But the District Courts of
Appeal have gone no further, which explains why Plaintiffs have failed to cite an
appellate decision extending Johnson’s disclosure duty to parties standing in
Defendants’ shoes.20
Plaintiffs nonetheless asks us to anticipate that the Florida Supreme Court,
were it called on to decide the instant case, would hold that Defendants had a duty
20
Plaintiffs argue that Billian v. Mobil Corp., 710 So. 2d 984 (Fla. 4th Dist. Ct. App.
1998), has extended Johnson’s duty to parties in Defendants’ factual positions. Billian is
inapposite. Billian was a suit by the purchasers of a condominium against the developer that sold
them the unit, not a suit against a party remote from the sale. Id. at 986.
13
to disclose Pinecastle’s existence because Plaintiffs needed to know whether the
price Ryland was quoting represented “the fair market value” of the home under
consideration, i.e., the price that would be paid for the home to a willing seller, not
compelled to sell, by a willing buyer, not compelled to buy, considering all
reasonable uses to which the property is adapted.21 Plaintiffs needed to know
about Pinecastle so they could determine whether to accept Ryland’s offer to sell
or make a counteroffer for substantially less for the house.22 The Florida Supreme
Court would rule their way and sustain Count 1, Plaintiffs submit, because Count
1 alleges that Defendants, in failing to inform Plaintiffs about Pinecastle, were
acting as Ryland’s agents.
Count 1’s allegation that Defendants were acting as Ryland’s agent is a
mere conclusion. The Florida Supreme Court would surely look past this
conclusory allegation and search Count 1 for facts from which the alleged agency
could be inferred. All the court would find is that Defendants marketed Vista
Lakes and that Terrabrook received 1.5 percent of the gross sale price of each
21
Savers Fed. Sav. & Loan Ass’n v. Sandcastle Beach Joint Venture, 498 So. 2d 519,
521–22 (Fla. 1st Dist. Ct. App. 1986) (citing State Road Dept. v. Stack, 231 So. 2d 859 (Fla. 1st
Dist. Ct. App. 1969)).
22
If the Florida Supreme Court so held for Plaintiffs, we suggest that its holding would
require the disclosure of any information Defendants possessed but Plaintiffs could not readily
obtain that would bear significantly on the fairness of Ryland’s offers.
14
home Ryland sold. The court would accept those facts as true, but those facts do
not yield a reasonable inference that Defendants marketed Vista Lakes and
participated in the sales to plaintiffs as Ryland’s agent. Count 1 is missing an
essential allegation—the critical element of an agency relationship—that the
principal exercised, or had the ability to exercise, control over the agent.23
Plaintiffs’ argument would require us to accept that Defendants had a duty
to disclose even without knowing Plaintiffs’ identities. Plaintiffs’ argument, in
effect, is that to comply with their Johnson duty to disclose, Defendants should
have warned the public about Pinecastle when they first learned of its existence.
That the Florida Supreme Court would extend the Johnson duty to those standing
in Defendants’ shoes is not, in our view, a reasonable claim.24 We therefore affirm
the District Court’s dismissal of Count 1.
B.
Plaintiffs argue that the District Court erred in dismissing Count 2, their
23
An essential element of the existence of an actual agency relationship is “control by the
principal over the actions of the agent.” Goldschmidt v. Holman, 571 So. 2d 422, 424 n. 5 (Fla
1990) (citing Restatement (Second) of Agency § 1 (1957)). Nothing in Plaintiffs complaint
comes close to alleging that Ryland controlled Defendants. That Defendants were agents of one
another and acted in concert did not establish this control element.
24
We reject the notion that Defendants should have warned the public at large, and thus
Plaintiffs, in our discussion of Plaintiffs’ Count 4 negligence claim. See infra part II.D.2
15
claim for unjust enrichment. They assert that the court erred because it mistakenly
concluded that they had not conferred a benefit on Defendants and that it would
not be inequitable for Defendants to retain the 1.5 percent of gross sales Ryland
paid Terrabrook. We agree with the District Court that Plaintiffs failed to allege
that they conferred a benefit on Defendants.
A claim for unjust enrichment has three elements: (1) the plaintiff has
conferred a benefit on the defendant; (2) the defendant voluntarily accepted and
retained that benefit; and (3) the circumstances are such that it would be
inequitable for the defendants to retain it without paying the value thereof. Fla.
Power Corp. v. City of Winter Park, 887 So. 2d 1237, 1241 n. 4 (Fla. 2004)
(quoting Ruck Bros. Brick, Inc. v. Kellogg & Kimsey, Inc., 668 So. 2d 205, 207
(Fla. 2d Dist. Ct. App. 1995)). The crux of Plaintiffs’ argument is that they
“indirectly” conferred a benefit on Defendants because the 1.5 percent fee Ryland
paid for Defendants’ marketing services represented 1.5 percent of the price
Ryland received from Plaintiffs at closing. As support for their argument,
Plaintiffs cite the unpublished opinion in MacMorris v. Wyeth, Inc., No. 2:04-cv-
596-FTM-29-DNF, 2005 WL 1528626 (M.D. Fla. June 27, 2005), a products
liability case in which the plaintiffs claimed, under the theory of unjust
enrichment, the money paid by the intermediary from whom they purchased drugs
16
to the manufacturer of the drugs. In ruling on the manufacturer’s motion to
dismiss the plaintiffs’ claims, the court rejected the argument that, because the
plaintiffs had purchased the drugs through an intermediary, they conferred no
benefit on Wyeth. Id. at *4. Even putting aside the notable distinction that
MacMorris was a products liability case, the claims in MacMorris are
distinguishable from the one here. In the instant case, Plaintiffs do not seek to
recover money Terrabrook received as partial payment for the houses they bought;
instead, they seek the money Ryland paid for marketing services under an entirely
separate services contract. McMorris is inapposite.
Plaintiffs contend that they conferred a benefit on Defendants because
“Ryland was merely a pass-through conduit required to deliver” the 1.5 percent fee
to Defendants. We are unconvinced that the manner of Ryland’s payment
supports Plaintiffs’ contention. Indeed, to the extent that Ryland had no right to
retain 1.5 percent of the sale prices of Plaintiffs’ houses, it was because
Defendants fulfilled their contractual duty to market Vista Lakes. If Ryland
concluded that Defendants had not fulfilled their contractual duty, it could have
refused to pay the fee and sued for breach of contract. The mere fact that Ryland
bargained away its right to 1.5 percent of the purchase price of Plaintiffs’ houses
did not change the fact that Ryland, not Plaintiffs, conferred the benefit on
17
Defendants. The District Court therefore ruled correctly in dismissing Count 2.
C.
The District Court dismissed Count 3, Plaintiffs’ FDUTPA claim, because
Defendants did not engage in the only deceptive act or unfair practice that Count 3
alleged—they did not breach of any duty to disclose the existence of Pinecastle.25
Plaintiffs argue that claim should not have been dismissed because a duty to
disclose is not, of necessity, an element of a claim.
The problem with Plaintiffs’ argument is that, whether or not a duty to
disclose is an element of a FDUTPA claim, the sole basis alleged for Count 3’s
FDUTPA claim is Defendants’ breach of “an affirmative duty of disclosure” when
Defendants “knowingly omitted any disclosure of the existence of [Pinecastle].”26
As we held in affirming the District Court’s dismissal of Count 1, and will hold in
affirming the dismissal of Court 4, the alleged duty of disclosure did not exist
under Florida law. Court 3 therefore fails to state a claim for relief.
D.
Plaintiffs argue that the summary judgment the District Court granted
25
“A consumer claim for damages under FDUTPA has three elements: (1) a deceptive
act or unfair practice; (2) causation; and (3) actual damages.” Rollins, Inc. v. Butland, 951 So.
2d 860, 869 (Fla. 2d Dist. Ct. App. 2006) (citing Chicken Unlimited, Inc. v. Bockover, 374 So.
2d 96, 97 (Fla. 2d Dist. Ct. App. 1979)).
26
Virgilio I, slip op. at 12.
18
Defendants on Count 4 should be vacated and remanded for two reasons. First,
the court abused its discretion in denying their Federal Rule of Civil Procedure
56(f) request for a continuance based on their need to conduct additional
discovery.27 Second, and alternatively, the court erred in concluding that Florida
negligence law did not require Defendants to inform Plaintiffs about Pinecastle
before they contracted with Ryland. We consider these two reasons in turn.
1.
At the time Plaintiffs moved the District Court for a continuance, Rule 56(f)
read as follows:
WHEN AFFIDAVITS ARE UNAVAILABLE. If a party opposing [a]
motion [for summary judgment] shows by affidavit that, for specified
reasons, it cannot present facts essential to justify its opposition, the court
may:
(1) deny the motion;
(2) order a continuance to enable affidavits to be obtained,
depositions to be taken, or other discovery to be undertaken; or
(3) issue any other just order.
Fed. R. Civ. P. 56(f) (2009). “Because the burden on a party resisting summary
judgment is not a heavy one, one must conclusively justify his entitlement to the
shelter of [R]ule 56(f) by presenting specific facts explaining the inability to make
27
We review the District Court’s denial of Plaintiffs’ Rule 56(f) motion for abuse of
discretion. Fla. Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1315 (11th Cir.
1990).
19
a substantive response.” SEC v. Spence & Green Chem. Co., 612 F.2d 896, 901
(5th Cir. 1980).28
The only issue presented by Defendants’ motion for summary judgment was
whether, under Florida negligence law, Defendants had a duty to disclose the
existence of Pinecastle to Plaintiffs. Resolution of that issue required the court to
examine Defendants’ involvement, if any, in the transactions between Ryland and
Plaintiffs and Defendants’ personal relationships, if any, with Plaintiffs.29 The
nature of those transactions was never in dispute and was clearly spelled out in the
record.
Plaintiffs’ Rule 56(f) motion sought discovery of matters irrelevant to those
transactions: Defendants’ knowledge of Pinecastle and the relationship between
Defendants and Ryland. Since such information would have no bearing on the
“purely legal” issue before the court, Plaintiffs failed to present “specific facts
explaining the[ir] inability to make a substantive response” to Defendants’ motion
for summary judgment.
In addition to this substantive Rule 56(f) deficiency, Plaintiffs waited until
28
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down before
October 1, 1981.
29
See infra part II.D.2
20
the day before the clock ran out for filing a response to the Rule 56(f) motion.
This coupled with the substantive Rule 56(f) deficiency gave the District Court an
adequate basis for denying the requested continuance. We thus find no abuse of
discretion in the denial.
2.
To be sustained as a claim of negligence, Count 4 must allege four
elements: a duty, breach of that duty, causation, and damages. See Curd v. Mosaic
Fertilizer, L.L.C., 39 So. 3d 1216, 1227 (Fla. 2010) (quoting Clay Elec. Coop.,
Inc. v. Johnson, 873 So. 2d 1182, 1185 (Fla. 2003)). “[E]stablishing the existence
of a duty under [Florida’s] negligence law is a minimum threshold legal
requirement that opens the courthouse doors . . . , and is ultimately a question of
law for the court rather than a jury.” Williams v. Davis, 974 So. 2d 1052, 1057 n.
2 (Fla. 2007) (citing McCain v. Florida Power Corp., 593 So. 2d 500, 502 (Fla.
1992)).
Plaintiffs would have us hold that entities engaged in creating a residential
community by subdividing the land and selling lots to builders for the construction
of houses for sale by the builders to the public are liable to the purchasers of those
houses for the economic loss they suffer because—as a result of negative
information possessed by the entities but not the purchasers—the price they paid
21
for the houses turned out to be more than their fair market value once the
information became public knowledge. Plaintiffs have found nothing to support
such a holding in the Florida case law, but they insist that the Florida Supreme
Court would reach that conclusion were it to review the allegations of Count 4.
To provide a foundation for the Florida Supreme Court’s decision, Plaintiffs direct
us to a statement the court made in McCain, that “Florida . . . recognizes that a
legal duty will arise whenever a human endeavor creates a generalized and
foreseeable risk of harming others.” 593 So. 2d at 503. As the court explained,
that standard is meant to recognize a duty of care where a defendant’s conduct
creates a “foreseeable zone of risk.” Id. (quoting Kaisner v. Kolb, 543 So. 2d 732,
735 (Fla. 1989)).
A new duty is more likely to be imposed under the “foreseeable zone of
risk” standard under circumstances where the plaintiff has suffered personal or
property damage.30 Where the plaintiff seeks only the recovery of an economic
loss, the duty element of negligence law serves as an important barrier to over-
extension of liability.31 See Indem. Ins. Co. of N.h Am. v. Am. Aviation, 891 So.
30
In McCain v Fla. Power Corp., the plaintiff sustained personal injury when the blade of
a mechanical trencher he was operating struck an underground electrical cable belonging to the
defendant. 593 So. 2d 500, 501 (Fla. 1992).
31
In arguing that this court should hold Defendants liable for purely economic loss,
Plaintiffs rely primarily on Curd v. Mosaic Fertilizer, L.L.C., 39 So. 3d 1216 (Fla. 2010). There,
22
2d 532, 546 (Fla. 2004) (Cantero, J., concurring) (explaining that, although the
economic loss rule had been eliminated except in certain circumstances, “[t]he
‘duty’ prong remains a strong filter in [cases involving only economic
damages]—virtually as strong as the rule itself”—and that “[t]he plaintiff still
must demonstrate an independent duty to protect that plaintiff’s purely economic
interests”). With that in mind, it is important to consider whether the specific
relationship between the plaintiff and defendant warrants imposing a duty on the
defendant to protect the plaintiff’s purely economic interests. See Monroe v.
Sarasota Cnty. Sch. Bd., 746 So. 2d 530, 534 n. 6 (Fla. 2d Dist. Ct. App. 1999)
(explaining that “[d]ifficult economic loss cases all seem to examine the
the Florida Supreme Court held that the owner of a fertilizer storage facility that introduced
pollutants into Tampa Bay, killing a substantial number of fish and other marine life, owed a duty
of care to licensed commercial fishermen for their economic losses. Id. at 1218, 1227. The court
discussed several cases from other jurisdictions holding that defendants polluting public waters
have a duty to those who derive their living from those waters. See id. at 1225–27. Considering
the “nature of [the defendant’s] business and the special interest of the commercial fisherman in
the use of the public waters,” the court concluded that the defendant had a duty to the fishermen.
Id. at 1228.
We are not convinced that Curd would require the Florida Supreme Court to hold that
Defendants owed a duty to Plaintiffs in this case. The issue in Curd was whether the fisherman
could recover in negligence “despite the fact that the fishermen do not own any real or personal
property damaged by the pollution.” Id. at 1222. The court concluded, citing a breadth of case
law from other appellate courts, that the fisherman had a “special interest” in the property—the
marine life—that had been damaged. Id. at 1228. In the case at hand, however, the issue is not
whether Plaintiffs have a property interest in the property that was damaged; indeed, Plaintiffs do
not allege that any real or personal property was damaged. Thus, because Plaintiffs allege only a
diminution in the value of their houses, the reasoning in Curd does not require imposing a duty in
this case.
23
relationship between the parties to determine whether it warrants creating a duty to
protect economic interests outside contract and statutory law”); cf Am. Aviation,
891 So. 2d at 547 (Cantero, J., concurring) (“Courts have considered allowing
recovery from service providers for purely economic loss where a special or
fiduciary relationship exists.”). We consider the inquiry into the plaintiff and
defendant’s relationship even more pertinent where, as here, the plaintiff seeks to
impose on the defendant an affirmative duty to disclose facts to another.
We find Plaintiffs’ argument—that because Defendants developed and
marketed Vista Lakes, they had a duty to warn prospective purchasers of
Pinecastle’s existence—without merit. Plaintiffs do not indicate whether, as a
matter of principle, Defendants’ duty to disclose such “inside information” has any
limits, i.e, whether the duty would extend to any inside information which, if made
public, would have a negative effect on market value. Nor do Plaintiffs tell us
how far down the line of purchasers Defendants would have the duty to disclose.
Terrabrook informed Ryland of the Pinecastle problem when it sold Ryland
the undeveloped land that became the Newport subdivision. Plaintiffs argue that
Terrabrook (and Terrabrook GP, Newland, and Westerra, due to their legal
relationship with Terrabrook and one another) had a duty to warn those with
whom Ryland contracted. What about those to whom Ryland’s home buyers sold
24
their houses? Would Terrabrook have a duty to them as well? Since Terrabrook
was not a party to Ryland’s contracts with the buyers, and thus did not know the
buyers’ identities, under Plaintiffs’ approach the only way Defendants could
discharge their duty of care would be through marketing: Defendants could not
escape liability unless they saturated the market place with the negative
information. And, as posited above, would not they be obliged to publicize any
information they possessed that a buyer’s due diligence would not uncover, but
that, if made public, would indicate that the prices Ryland was quoting for its
houses were, in Plaintiffs’ words, “artificially inflated”?32 Under Plaintiffs’
approach, as long as Defendants marketed Vista Lakes, they could be sued for
withholding information unavailable to buyers that would show that the prices the
buyers paid for their houses were artificially inflated. In other words, whenever
Defendants acquired material information that a buyer’s due diligence would not
uncover, Defendants would have to disclose it. And even if they disclosed the
negative information, they still could be sued for failing to disclose it soon enough
or in adequate detail. In the end, what started out as a claim of simple negligence
might, as an economic matter, become a claim of strict liability.
In sum, we anticipate that the Florida Supreme Court would decline to reach
32
Complaint ¶ 6.
25
the holding Plantiffs propose. Given that circumstance, the District Court’s grant
of summary judgment on Count 4 must be affirmed.
III.
For the reasons stated above, the District Court’s dismissal of Counts 1, 2,
and 3 and the summary judgment granted on Count 4 are
AFFIRMED.
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