D R Horton: Judge says “greedy corporate giant” must pay $16.3 million to Miami Gardens condo
26 October 2016
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
The court ruled that D.R. Horton, America's largest homebuilder,
engaged in deceptive and unfair trade practices and breached its
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
The association declared bankruptcy in 2012 and a trustee was appointed
to manage its affairs. The trustee, Barry Mukamal, later sued the
$16.3 million Damages 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.
Judge rules that D.R. Horton engaged in deceptive practices, must pay $16.3M
The Real Deal
By Ina Cordle
26 October 2016
Majorca Isles, with Barry Mukamal, left and John Arrastia
The nation’s largest homebuilder, D.R. Horton, engaged in deceptive
practices that forced the bankruptcy of the homeowners association for
Majorca Isles in Miami Gardens, a U.S. bankruptcy judge in Miami ruled.
Following a three-day trial, Judge A. Jay Cristol of the U.S.
Bankruptcy Court for the Southern District of Florida entered a
judgment against D.R. Horton and its employees for $16.3 million in
damages, including $12.5 million in punitive damages, and said the
company violated Florida’s Deceptive and Unfair Trade Practices Act.
The court found that Fort Worth, Texas-based D.R. Horton and its
employees engaged in “immoral, unethical, oppressive, and unscrupulous”
trade practices its financial benefit, conspiracy, and breaches of
fiduciary duty. “These actions by D.R. Horton can only be classified
somewhere between not nice and evil,” the judge said, referring to the
actions as “a modern day story of David and Goliath.” He said he
awarded the punitive damages of $12.5 million to punish and deter
future “unlawful, malicious” conduct.
Bankruptcy Trustee Barry Mukamal of KapilaMukamal, and his counsel John
Arrastia of Genovese Joblove & Battista, worked for more than four
years on the case, representing the Majorca Isles Master Association, a
homeowners association created by D.R. Horton as part of the planned
681-unit community Majorca Isles in Miami Gardens.
Mukamal called it a wake-up call” for developers. “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,” Mukamal said in a
D.R. Horton said in a statement that it “strongly disputes the
plaintiff’s allegations,” and is considering its “appellate options.”
Mukamal told The Real Deal he “fully” expects D.R. Horton to appeal.
According to Mukamal, D.R. Horton appointed its employees as the board
of directors of the Majorca Isles Master Association until the
association was turned over to the homeowners. During that time, D.R.
Horton allegedly did not make a serious effort to collect assessments
from the unit owners, and because it had failed to keep useful
financial records, was unable to identify which units had paid or
not. Instead, D.R. Horton allegedly shifted the collections from
the Master Association to other condominium associations, in a breach
of the directors’ breaches of duty and loyalty, the bankruptcy trustee
said in a release.
At the same time, D.R. Horton allegedly cut amenities to cut costs and
allegedly deceived existing and prospective homeowners by publishing
association budgets that understated the uncollectable assessments and
amount necessary to run the association. Then it allegedly 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, the bankruptcy trustee said.
“They played around with the budget, they cooked the books,” Mukamal told TRD. “And the judge ruled that they cooked the books.”
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