September 21, 2011
SYLVESTER MAYA; OFER MASACHI, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
CENTEX CORPORATION; CENTEX HOMES, A NEVADA GENERAL PARTNERSHIP; CTX MORTGAGE COMPANY, DEFENDANTS-APPELLEES.
REMEDIOS MARTINEZ, AS AN INDIVIDUAL AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
D.R. HORTON, INC.; DHI MORTGAGE COMPANY GP, INC., DEFENDANTS-APPELLEES.
EDILBERTO LUMALU; BRIAN DIETZ; BRENDA DIETZ; CANDICE MCDONALD, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
MDC HOLDINGS, INC., DBA RICHMOND AMERICAN; RICHMOND AMERICAN HOMES OF CALIFORNIA, INC.; HOMEAMERICAN MORTGAGE CORPORATION, DEFENDANTS-APPELLEES.
STELLA STEPHENS; TIMOTHY YOUNG, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
LENNAR CORPORATION; LENNAR HOMES OF CALIFORNIA, INC.; UNIVERSAL AMERICAN MORTGAGE COMPANY, DEFENDANTS-APPELLEES.
SOLOMON KELLY; JAMES MOLINA, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
BEAZER HOMES USA, INC.; BEAZER HOMES HOLDINGS CORPORATION; BEAZER MORTGAGE CORPORATION, DEFENDANTS-APPELLEES.
MATTHEW NIELSON; NICOLE NIELSON, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
SHEA HOMES INC.; J.F. SHEA CO., INC.; SHEA MORTGAGE, INC., DEFENDANTS-APPELLEES.
GASPARE C. ONETO; PAUL M. NAKABAYASHI; SANDRA L. NAKABAYASHI; JOHN BUTLER; LINDA BUTLER, AS INDIVIDUALS AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
THE RYLAND GROUP, INC.; RYLAND HOMES OF CALIFORNIA, INC.; RYLAND MORTGAGE COMPANY, DEFENDANTS-APPELLEES.
JAMES F. DODARO, AS AN INDIVIDUAL AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
STANDARD PACIFIC CORP., DBA STANDARD PACIFIC HOMES; STANDARD PACIFIC MORTGAGE, INC., DEFENDANTS-APPELLEES, AND SHEA HOMES; J.F. SHEA CO. INC.; SHEA MORTGAGE, INC.; CENTEX CORPORATION; CENTEX HOMES, LLP, ERRONEOUSLY SUED AS CENTER HOMES AND CENTER HOMES CORPORATION; CTX MORTGAGE COMPANY; DHI MORTGAGE COMPANY GP, INC.; THE RYLAND GROUP, INC.; RYLAND HOMES OF CALIFORNIA, INC.; RYLAND MORTGAGE COMPANY; LENNAR CORPORATION; LENNAR HOMES OF CALIFORNIA, INC.; UNIVERSAL AMERICAN MORTGAGE COMPANY, ERRONEOUSLY SUED AS UNIVERSAL MORTGAGE COMPANY; EAGLE HOME MORTGAGE OF CALIFORNIA, INC., ERRONEOUSLY SUED AS EAGLE HOME MORTGAGE INC., REAL-PARTIES-IN-INTEREST.
Appeal from the United States District Court for the Central District of California Virginia A. Phillips, District Judge, Presiding D.C. No. 5:09-cv-01671-VAP-OP D.C. No. 5:09-cv-01672-VAP-DTB D.C. No. 5:09-cv-01669-VAP-OP D.C. No. 5:09-cv-01668-VAP-DTB D.C. No. 5:09-cv-01674-VAP-DTB D.C. No. 5:09-cv-01673-VAP-DTB D.C. No. 5:09-cv-01670-VAP-DTB D.C. No. 5:09-cv-01666-VAP-OP
The opinion of the court was delivered by: B. Fletcher:
Argued and Submitted May 9, 2011-San Francisco, California
Before: Betty B. Fletcher and Sidney R. Thomas, Circuit Judges, and Nancy Gertner, District Court Judge.*fn1
Opinion by Judge B. Fletcher
This case arises against the backdrop of the national housing crisis. Nationwide, foreclosures are increasing, construction and purchase of new homes is decreasing, and home values are plummeting.*fn2 In some ways, the facts presented here echo national trends, but we decide a fairly narrow question: whether individuals who purchased homes in new developments have standing to sue the developers for injuries allegedly caused by the developers' practice of marketing neighboring homes to individuals who presented a high risk of foreclosure and abandonment of their homes, financing those high-risk buyers, concealing that information, and mis-representing the character of the neighborhoods. The district court held that plaintiffs did not have standing because none of the alleged injuries amounted to a concrete, nonconjectural injury-in-fact, and that there was no sufficiently strong causal connection between any injury and defendants' conduct. It also denied plaintiffs leave to amend their complaints. We reverse and remand for further proceedings.
Plaintiffs are individual homeowners who purchased houses in new developments constructed by one of eight large national home-builders between 2004 and 2006. Each of them made a down payment of twenty-percent or more of the home's purchase price. Defendants are some of the nation's largest housing developers, and include the developers' parent companies and subsidiary mortgage companies. Plaintiffs seek damages, attorneys fees and costs, and the option to rescind their home purchases due to defendants' fraud, negligent misrepresentation, breach of implied covenant of good faith and fair dealing, and violations of California's Business and Professional Code (CBPC). They also seek an injunction prohibiting defendants from continuing to engage in practices violating the CBPC, or providing mortgage services or financing to buyers purchasing homes from defendants.
Plaintiffs claim that defendants represented that they were building "stable, family neighborhoods occupied by owners of the homes" According to the plaintiffs, "[i]mplicit in this marketing scheme was that [d]efendants were making a good-faith effort to sell homes to buyers who they expected could afford to buy the houses and would be stable neighbors." Nevertheless, defendants marketed the houses to "unqualified buyers who posed an abnormally high risk of foreclosure."*fn3
Similarly, plaintiffs claim that defendants represented that they "discourage[ ] speculation . . . [and] intended to sell homes only to people who will occupy them" but sold homes to investors who had no intent to reside in the homes and were more likely to walk away from the homes in times of economic hardship.
Plaintiffs claim that these misrepresentations and omissions were part of a comprehensive scheme to increase defendants' profits. They allege that defendants financed at least 65% of the mortgages on homes in their communities. Plaintiffs contend that by marketing homes to high-risk buyers, and by financing buyers who may not have been able to obtain other financing, defendants created a "buying frenzy" that artificially increased demand and home prices. They maintain that defendants' marketing and lending practices were material information "related both to the value of their houses and the desirability of the properties." They allege that "[i]f ...
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