Homeowners' lawsuit against eight major homebuilders may be revisited after federal court says allegations of fraudulent marketing that led to inflated prices is sufficient for case

Lorena Madrigal

LOS ANGELES , September 22, 2011 (Industry Intelligence) – The 9th U.S. Circuit Court of Appeals in San Francisco says the dropping of a lawsuit against eight major homebuilders by a lower court was in error, and homeowners may be able to revisit their allegations, The Baltimore Sun reported Sept. 21.

Homeowners in housing developments in California’s Inland Empire are accusing Beazer Homes USA Inc, DR Horton Inc, Lennar Corp, MDC Holdings Inc, PulteGroup Inc's Centex Homes, Ryland Group Inc, Shea Homes Inc and Standard Pacific Corp. for fraudulently inflating prices by marketing to high-risk borrowers who devalued the surrounding homes after going into foreclosure.

The plaintiffs said abandoned properties, unruly yards and crime rose while their homes, bought between 2004 and 2006, lost significant value and appeal after the foreclosures.

In Riverside, California, a federal district judge had dropped the case, saying the plaintiffs had not sold their homes and thus their complaints were “speculative” and the injuries they claimed were not “fairly traceable” to the alleged fraudulent practices by the homebuilders, according to the article.

9th Circuit Court Judge Betty Fletcher said the allegations clearly showed the defendants’ fraud caused the price hikes in their home developments.

If the homeowners revise their complaint to strengthen the connection between the alleged fraud and their injuries, Judge Fletcher said their case would be revisited.

Plaintiff representative Richard McCune from the California-based Wright McCune firm said the case is important because the homebuilders are being held accountable for their harmful marketing and financing practices.

Neither the homebuilders nor their representative were able to comment.

The primary source of this article is The Baltimore Sun, Baltimore, Maryland, on Sept. 21, 2011.

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