Builder “Silences” Noise Lawsuit Stemming from Alexandria Sale

A homeowner’s fraud lawsuit against builder Pulte Home Corporation based on excessive noise in the homeowner’s unit was recently dismissed by the U.S. District Court for the Eastern District of Virginia, Alexandria Division. The case is Devine v. Pulte Home Corporation, Case No. 1:15-cv-1361 (E.D.Va. Dec. 4, 2015). U.S. District Court Judge James C. Cacheris granted Pulte’s motion for judgment on the pleadings and dismissed the homeowner’s lawsuit.

The Plaintiff homeowner in that case purchased an apartment built by Pulte in Alexandria’s Potomac Yard community along Route 1. The homeowner alleged that he was initially concerned about traffic noise, but decided to purchase the unit based on Pulte’s representations that the unit would be of “airport quality” in blocking out traffic noise, and was “luxurious.”

Shortly after moving into the unit, the Plaintiff could hear traffic noise, conversations of passersby from Route 1, and noises from the upstairs apartment. Pulte responded to Plaintiff’s noise complaints stating that the unit passed Pulte’s sound tests, and no further action would be taken. Plaintiff then sued Pulte, bringing fraudulent inducement of contract and Virginia Consumer Protection Act (VCPA) claims.

The Court dismissed the homeowner’s fraud claim, determining that Pulte’s statements regarding the unit – that it was “luxurious” and of “airport quality” in blocking out traffic noise – constituted mere “puffery,” or trade talk, open to subjective interpretation, and therefore could not serve as factual grounds for an actionable fraud claim.

By way of comparison, the Court cited factual statements that were deemed actionable for fraud claims to proceed. In Yuzefovsky v. St. John’s Wood Apartments, et al., 261 Va. 97, 110-11 (2001), the actionable statement was that a development was “crime-free,” that “police officers lived there,” and that “police vehicles patrolled the development.” In Tate v. Colony House Builders, Inc., 257 Va. 78, 83-84 (1999), the actionable statement was that a new dwelling was “free from structural defects.”

The Pulte case shows how fraud claims must be carefully constructed to ensure they meet the heightened pleading standard mandated by Virginia law. Pulte’s recent dismissal further clarifies what Virginia courts deem to be actionable fraud statements, and that mere puffery or sales talk are too objective to serve as the foundation for fraud in the inducement claims.

Katie Lipp is a Senior Associate Attorney and head of the construction practice at Berenzweig Leonard LLP. She can be reached at klipp@berenzweiglaw.com. 

Virginia Courts Reject Fraud Claims Disguised as Breach of Contract Claims

A Virginia federal court recently confirmed that fraud claims seeking breach of contract damages are not allowable under Virginia law. This principle is referred to as the economic loss rule, and mandates that parties cannot “double-dip” and allege tort damages for contractual breaches in the form of fraud claims, on top of their breach of contract claims.

In other words, if you are choosing to accuse someone of fraud and breach of contract in Virginia, your lawsuit must be carefully drafted or you risk the loss of your fraud claim being dismissed at the outset of the case. Many parties fall into the trap of including as many counts as possible in their complaint, which can backfire, because if you are essentially seeking breach of contract damages with your fraud claim, such a claim will likely not survive.

The United States District Court for the Western District of Virginia, Roanoke Division recently confirmed  this principle in County of Grayson v. RA-Tech Services, Inc., 2014 WL2257155 (W.D. Va. May 29, 2014). Chief Judge Glen E. Conrad emphasized that constructive fraud claims need to specifically allege the time, place, and contents of the false statements, and preferably should include who made the fraudulent statements. The timing is critical for fraudulent inducement claims, because they must occur prior to any contract execution to stand alone and proceed past the motion to dismiss phase. The plaintiff’s constructive fraud claim failed to include the “time, place, and contents” details, and vaguely alleged that the defendant contracted with plaintiff with no intention of fulfilling its contractual responsibilities. The Western District found that it was essentially a breach of contract claim disguised as a fraud claim, dismissing plaintiff’s fraud in the inducement claim.

While many cases have viable contractual and tort claims, the construction law team at Berenzweig Leonard has experience with successfully defending our construction law clients against improper fraud claims, and preserving clients’ remedies for breach of contract and fraud.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.