FOR IMMEDIATE RELEASE
MIAMI (Oct. 25, 2016) – In a modern day David and Goliath story, Chapter 11 bankruptcy trustee, Barry Mukamal, of KapilaMukamal, of Genovese Joblove & Battista, P.A., secured a $16.3 million judgment against D.R. Horton, Inc. a New-York Stock Exchange company and the largest residential developer in the U.S., on behalf of the Majorca Isles Master Association, a homeowners association created by D.R. Horton as part of a planned 681-unit community called Majorca Isles located in Miami Gardens, FL.
“This is a wake-up call for developers because it demonstrates that they are responsible for pre-development turnover. This time the system worked for everyone, including the low-to-middle income homeowners at Majorca Isles that felt they did not have a voice,” said Bankruptcy Trustee Barry Mukamal, a partner at KapilaMukamal, who provides fiduciary and insolvency services, with offices in Miami and Fort Lauderdale.
On Friday, Oct. 21, following a three day trial, Judge A. Jay Cristol of the Bankruptcy Court for the Southern District of Florida entered the findings of fact, conclusions of law, and a judgment against D.R. Horton and its employees for $16.3 million in damages and a declaration that it had violated Florida’s Deceptive and Unfair Trade Practices Act. The court found that D.R. Horton and its employees engaged in “immoral, unethical, oppressive, and unscrupulous” trade practices “that offend established public policy for its financial benefit”, conspiracy, and breaches of fiduciary duty.
In the opinion, Judge Cristol concluded, “These actions by D.R. Horton can only be classified somewhere between not nice and evil.” Characterizing this as a classic “David v. Goliath” tale, the court issued a 52-page opinion condemning D.R. Horton’s acts and omissions, and sending a clear message to developers, awarding significant compensatory damages as well as punitive damages alone of $12,500,000 to punish and deter future “unlawful, malicious” conduct.
“Judge Cristol’s carefully crafted and well thought out opinion reiterates that developers have an obligation of fairness and transparency to the citizens of Florida and the courts will hold them accountable to that standard,” said Arrastia, a partner at Miami-based law firm Genovese Joblove & Battista. “In this case, corporate greed overshadowed D.R. Horton’s obligations to serve the best interests of the homeowners’ association, the homeowners, and the community. They made a choice to take shortcuts and now they have to answer for it.”
In awarding the $12,500,000 punitive damages award, Judge Cristol found “the wrongful conduct was motivated solely by greed for unreasonable financial gain and D.R. Horton, through its agents and employees, knew the conduct was certain to cause injury to the [Homeowners’ Association] and unit owners.” The court reasoned “while the imposition of punitive damages is intended to punish the wrongdoer, the amount is to be related to the net worth of the wrongdoer and a small punitive award could be accepted by a financially huge wrong doer as merely the cost of doing business, and thus not accomplish the intended purpose of a punitive award to deter bad conduct.” Judge Cristol noted “the Court can infer that D.R. Horton is not a mom-and-pop organization operation from a garage but rather a very large, nationwide operation which might not get the message if the punitive award was a puny amount that might not even show up as a footnote on its financial statement. To accomplish its purpose, the punitive award needs to be significant.”
At trial, the testimony showed that D.R. Horton appointed its employees as the board of directors of the Majorca Isles Master Association until that HOA was turned over to the homeowners. During that period, D.R. Horton made no meaningful effort to collect assessments from the unit owners and because it had failed to keep useful financial records, was unable to even identify which units had paid or not. Instead, D.R. Horton shifted the collections from the Master Association to other condominium associations, in a clear breach of the directors’ breaches of duty and loyalty. At the same time, D.R. Horton unilaterally cut promised amenities to the community, simply to cut costs that it had to pay to sustain the association before turnover. D.R. Horton also deceived existing and prospective homeowners by publishing association budgets that materially understated the uncollectable assessments and amount necessary to run the association, in part by relying on mythical and unbuilt units in creating the budgets. Then it created false financial statements that inflated the assets to make the Master Association look solvent, even though it did not have enough money to pay its bills.
KapilaMukamal, LLP provides fiduciary and insolvency services including restructuring, forensic & investigative consulting, litigation support services, expert witness testimony, business valuations and matrimonial forensics. The firm has two locations in South Florida in the SunTrust International Center, One SE 3rd Avenue, Suite 2150 in Miami and 1000 South Federal Highway, Suite 200 in Fort Lauderdale. For more information, visit www.KapilaMukamal.com.
About Genovese Joblove & Battista
Genovese Joblove & Battista, P.A. (GJB) was established in 1999 by founding partners John H. Genovese, Michael D. Joblove, and Paul J. Battista. Today, GJB has grown steadily to become a major regional firm with offices in Miami and Fort Lauderdale and an affiliate office in Caracas, serving clients throughout the U.S. GJB attorneys are recognized for their experience representing clients in large and complex litigation in a number of areas, including bankruptcy, insolvency, receiverships, franchises, and general commercial matters, as well as white collar, real estate, employment law, class actions, and securities litigation. The firm and its affiliate, GJB Consulting, also counsel clients in local, state and federal government matters. For more information, visit www.gjb-law.com