In a scathing opinion, a federal judge in Miami blasted the conduct of homebuilder D.R. Horton, calling it a “greedy corporate giant” and awarding damages of $16.3 million to the trustee of a bankrupt homeowner’s association in Miami Gardens that had sued the Texas-based behemoth.
The court ruled that D.R. Horton, America’s largest homebuilder, engaged in deceptive and unfair trade practices and breached its fiduciary duties.
In a statement, the company said it “strongly disputes the plaintiff's allegations” and is considering an appeal.
The case dates back to the housing bubble, when D.R. Horton built 355 condos at a low-rent community called Majorca Isles. When the market tanked, the developer pulled out and said it wouldn’t complete the project. That was legal, Judge A. Jay Cristol wrote in an opinion published last week.
These actions by D.R. Horton can only be classified somewhere between not nice and evil.
Judge A. Jay Cristol
What crossed the line was D.R. Horton’s treatment of the people who had already bought units and moved in, the judge found. The company stopped funding Majorca Isles’ homeowners association, cut off amenities to residents and failed to keep accurate financial records.
“D.R. Horton, through its employees, decided to shift the economic loss of D.R. Horton to the homeowners by cutting services and amenities which the homeowners were entitled to receive and stopping the deficit funding that D.R. Horton was obligated to supply,” Judge Cristol wrote. “These actions by D.R. Horton can only be classified somewhere between not nice and evil.”
The association declared bankruptcy in 2012 and a trustee was appointed to manage its affairs. The trustee, Barry Mukamal, later sued the developer.
$16.3 millionDamages awarded to Majorca Isles
Judge Cristol also praised the conduct of Mukamal, calling his actions as a trustee “extraordinary” in a case where he spent hundreds of thousands of dollars that may never be reimbursed.
“[Mukamal] saw the Debtor not as a defunct corporate entity, but as an association representing 355 low or moderate income families not capable of fending for themselves against a multi-million dollar financial giant,” the judge said. “He is to be praised for his selfless conduct as a trustee acting in the finest tradition of a fiduciary.”
John Arrastia of Genovese Joblove represented Mukamal and the association in a three-day trial in the U.S. Bankruptcy Court for the Southern District of Florida.