Real Estate Fraud Litigation Proceeds Against Juno Loudoun and Ritz Carlton

When a couple of home buyers in Loudoun County filed a lawsuit against Ritz-Carlton and a Loudoun developer, they chose Loudoun County Circuit Court as the forum. The immediate response of the defendants’ lawyers was to remove the case to federal court, where summary judgment is much easier to obtain than in Virginia state court. The home buyers, likely worried about having their case dismissed at an early stage by a federal judge, sought to remand the case back to Loudoun County, pointing to a forum-selection clause which provided: “In connection with any litigation between Buyer and Seller arising out of this Agreement…[t]he sole venue for any litigation shall be Loudoun County, Virginia.” The court refused to send the case back to state court. All of that procedural maneuvering meant very little in the end, however, as the court recently denied the defendants’ motion for summary judgment and allowed the case to go forward.

In Nahigian v. Ritz-Carlton, LLC, the home buyers (the Nahigians) claim the defendants fraudulently induced them into buying property by making multiple misrepresentations about the nature and extent of the involvement of the prestigious Ritz-Carlton company in the management of the property and its adjoining private golf course. The Nahigians allege they were duped into buying an expensive property at Creighton Farms near Leesburg by various statements by sales agents referring to the development as a “Ritz-Carlton community” and part of the “Ritz-Carlton Life.” As it turned out, they allege, Ritz-Carlton was merely a temporary manager of the golf club and never had any long-term commitment to the neighborhood. In March of 2009, Ritz-Carlton announced they were pulling out of the development.

The Nahigians sued for fraud and related claims, and the defendants moved for dismissal, arguing that the plaintiffs had failed to plead fraud with sufficient particularity, and that they failed to allege all the requisite elements of a fraud claim. The court disagreed and denied the motions to dismiss.

The court laid out the basic elements of fraud as: “(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled.” Under Federal Rule of Civil Procedure 9(b), each element of fraud must be plead with the required degreeEntrance.jpg of specificity identifying “at a minimum…the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation.”

The plaintiffs had alleged only that the misrepresentations were made by “Juno/Ritz representatives.” However, the court found that Rule 9(b)’s specificity requirement does not require that the full name of the person making the statement be identified. The court found the allegations of the Complaint sufficient because the defendants had been made amply aware of the “particular circumstances for which they will have to prepare a defense.” The court also rejected the defendants’ argument that the reliance element was lacking because the contract specifically disclaimed reliance on outside statements. The court reasoned that the terms of a contract fraudulently induced cannot preclude a Plaintiff from bringing suit for that fraud.

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