Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01878/USCOURTS-azd-2_08-cv-01878-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Frank J. Grimmelmann, et al., 

Plaintiffs, 

vs.

Pulte Home Corporation, et al., 

Defendants. 

James D. Yulga, et al.,

Plaintiffs,

vs.

Pulte Home Corporation, et al.,

Defendants.

_________________________________

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-08-1878-PHX-FJM

No. CV-08-1757-PHX-FJM

ORDER

The court has before it defendants’ motion for summary judgment (doc. 78) and

memorandum in support (doc. 79), plaintiffs’ response (doc. 83), and defendants’ reply (doc.

86). We also have before us plaintiffs’ motion to certify class (doc. 66) and memorandum

in support (doc. 73), defendants’ response (doc. 76), and plaintiffs’ reply (doc. 81). 

I

Plaintiffs Frank J. Grimmelmann, James D. Yulga, Roger E. Phillips, Stillman D.

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 1 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

Goodman, and Debra Callies, on behalf of themselves and a putative class of similarly

situated homeowners, sued defendants Del Webb Corporation, its affiliates, and its successor,

Pulte Home Corporation (collectively, “Pulte”) alleging violation of Arizona’s Consumer

Fraud Act, A.R.S. § 44-1522, and negligent misrepresentation. Pulte constructed a masterplanned housing development known as Anthem, a community of approximately 10,500

homes. Pulte, along with the Citizens Water Services Company of Arizona entities, and their

successor in interest, Arizona-American Water Company (collectively, the “Water

Company”), designed and constructed the water and wastewater treatment infrastructure for

Anthem residences (the “Water Facilities”). 

Under an agreement dated September 29, 1997 (the “Infrastructure Agreement”),

Pulte agreed to advance to the Water Company approximately $80 million for the

construction of the Water Facilities. The Infrastructure Agreement also provided that the

Water Company would reimburse Pulte for the majority of its construction advances. 

Plaintiffs claim that at the time Pulte negotiated the Infrastructure Agreement, it knew

that future utility rate hikes would be required in order to permit the Water Company to repay

the costs advanced by Pulte. However, Pulte failed to disclose to Anthem home purchasers

the existence of the Infrastructure Agreement and the fact that they would bear the burden

of repaying Pulte through future rate hikes. The homeowners believed, and some were told,

that all utility costs were included in the purchase price of their homes. Plaintiffs claim that

Pulte violated its duty to comply with Arizona’s subdivision and public reporting statute,

A.R.S. § 32-2181, which required it to report the estimated costs related to the improvements,

facilities, and utilities “that will be borne by purchasers of lots in the subdivision.” A.R.S.

§§ 21-2181(A)(18), (19) and 32-2183(A) (“Subdivision Reporting Act”). 

Beginning in June 2008, after approval of a rate increase by the Arizona Corporation

Commission, thousands of Anthem homeowners began paying significantly higher water

rates allegedly due to the Water Company’s obligation to repay Pulte for the installation of

the Water Facilities. According to plaintiffs, additional rate increases are likely. 

Plaintiffs filed this action asserting (1) that Pulte violated Arizona’s Consumer Fraud

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 2 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

Act, A.R.S. § 44-1522, by concealing material facts regarding the repayment of the

installation costs of the Water Facilities; and (2) a claim of negligent misrepresentation for

Pulte’s failure to properly disclose to Anthem home purchasers that they would ultimately

have to pay for the installation of the Water Facilities through utility rate hikes. 

II. Motion for Summary Judgment

A. Statute of Limitations

Arizona’s Consumer Fraud Act (“ACFA”) makes unlawful the use “of any deception,

. . . misrepresentation, or concealment, suppression or omission of any material fact with

intent that others rely upon such concealment, suppression, or omission, in connection with

the sale or advertisement of any merchandise.” A.R.S. § 44-1522. “Merchandise” is defined

to include “real estate.” Id. § 44-1521(5). Claims under the ACFA must be filed no later

than one year from the date that the cause of action accrues. Id. § 12-541(5). Pulte argues

that plaintiffs failed to satisfy the one-year statute of limitations and therefore the ACFA

claim must be dismissed as untimely. 

The Yulga plaintiffs filed their complaint on August 28, 2008. Grimmelmann filed

his complaint on October 14, 2008. Pulte contends, however, that as early as June 2006,

Anthem residents knew that the Water Company had filed a rate increase request, that the

request was based in substantial part on the Water Company’s obligation to repay advances

made by Pulte for water and sewer infrastructure, and that Pulte did not disclose to the home

purchasers that they would bear the burden of repaying Pulte through future utility rate

increases. According to Pulte, plaintiffs knew or should have known of the basis of their

claim as early as June 2006, and therefore the ACFA claim is time-barred.

In general, a claim accrues for limitations period purposes “when one party is able to

sue another.” Gust, Rosenfeld & Henderson v. Prudential Ins. Co., 182 Ariz. 586, 588, 898

P.2d 964, 966 (1995). Before the limitation period begins to run, a plaintiff must “possess

a minimum requisite of knowledge sufficient to identify that a wrong occurred and caused

injury.” Walk v. Ring, 202 Ariz. 310, 316, 44 P.3d 990, 996 (2002) (emphasis and quotation

omitted). 

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 3 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

To state a cause of action under the ACFA, a plaintiff must allege (1) a false promise

or misrepresentation made in connection with the sale or advertisement of merchandise, and

(2) the consumer’s consequent and proximate injury. Kuehn v. Stanley, 208 Ariz. 124, 129,

91 P.3d 346, 351 (Ct. App. 2004); Dunlap v. Jimmy GMC of Tucson, Inc., 136 Ariz. 338,

342, 666 P.2d 83, 87 (Ct. App. 1983). In other words, before a cause of action for statutory

consumer fraud can be brought, a party “must have been damaged by the prohibited

practice.” Peery v. Hansen, 120 Ariz. 266, 269, 585 P.2d 574, 577 (Ct. App. 1978). A

misrepresentation alone will not support a claim under the ACFA; actual injury or damages

must occur. “An injury occurs when a consumer relies, even unreasonably, on false or

misrepresented information.” Kuehn, 208 Ariz. at 129, 91 P.3d at 351.

Plaintiffs concede that they knew more than a year before filing their complaints that

their utility rates might increase because of the Water Company’s repayment obligation.

They argue, however, that they did not suffer an actionable injury until June 13, 2008, when

the Arizona Corporation Commission actually approved the rate hike requested by the Water

Company. Plaintiffs contend that before June 13th, any claim was inchoate and would have

been subject to dismissal. 

Regulated utilities cannot change their rates without the approval of the Arizona

Corporation Commission. Before the Commission ruled on the Water Company’s rate

increase request, plaintiffs’ damages were speculative and contingent. If the Commission

had rejected the Water Company’s attempt to pass the infrastructure costs on to the

homeowners, the plaintiffs would not have been damaged and therefore would have had no

claim. We conclude that because plaintiffs suffered no actionable damages until the

Commission approved the rate increase, the plaintiffs’ ACFA cause of action did not accrue

until June 13, 2008. Because both the Grimmelmann and Yulga complaints were filed within

one year of the Commission’s decision, the ACFA claim is timely. Pulte’s motion for

summary judgment on the issue of statute of limitations is denied. 

B. Subsequent Purchasers

Pulte also seeks summary judgment with respect to the ACFA and negligent

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 4 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

misrepresentation claims asserted by the subsequent purchasers of Anthem homes. Pulte

contends that plaintiffs who are not alleged to have dealt directly with Pulte and who neither

received nor relied on the challenged communication (specifically, the subdivision public

reports), have no standing to assert either an ACFA or negligent misrepresentation claim. 

As we previously noted, before a private party can assert a claim under the ACFA, “he

must have been damaged by the prohibited practice.” Peery, 120 Ariz. at 269, 585 P.2d at

577. Generally, “[a] prerequisite to such damages is reliance on the unlawful acts.” Id.

Therefore, plaintiffs cannot recover under the ACFA “unless they prove that they relied on

the defendant’s unlawful practice and were damaged thereby.” Arizona v. Hameroff, 180

Ariz. 380, 383 n.4, 884 P.2d 266, 269 n.4 (Ct. App. 1994); Dunlap, 136 Ariz. at 342, 666

P.2d at 87 (“The elements of a private cause of action under the [AFCA] are a false promise

or misrepresentation . . . and the hearer’s consequent and proximate injury.”) (emphasis

added). 

Reliance is also generally a prerequisite to stating a claim for negligent

misrepresentation. Arizona has recognized the tort of negligent misrepresentation as defined

by Restatement (Second) of Torts § 552(1), which provides that one who “supplies false

information for the guidance of others in their business transactions, is subject to liability for

pecuniary loss caused to them by their justifiable reliance upon the information.”

Plaintiffs argue, however, that reliance is not a requisite element of proof for either

the ACFA or negligent misrepresentation claims in this case because the “fraud” at issue

arose, not from an affirmative misrepresentation, but from Pulte’s failure to disclose material

information, specifically the fact that the purchase price of the Anthem homes did not include

the cost of the Water Facilities. 

An affirmative misrepresentation is not a necessary element of either an ACFA or

negligent misrepresentation claim. “Concealment, suppression or omission” are alternative

bases for liability under the ACFA. A.R.S. § 44-1522. Similarly, “[n]egligent

misrepresentation may be by omission or nondisclosure of material facts as well as by overt

misrepresentation.” Alaface v. Nat’l Inv. Co., 181 Ariz. 586, 598 n.3, 892 P.2d 1375, 1387

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 5 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

n.3 (Ct. App. 1994); see also Restatement (Second) of Torts § 551. 

However, even if we accept plaintiffs’ characterization of their claims as strictly

omissions, the subsequent purchasers fail to state a claim. Under both the ACFA and the

negligent misrepresentation causes of action, an omission is actionable only when there is

a duty to communicate. “Where the defendant has a legal or equitable obligation to reveal

material information, his failure to do so is equivalent to a misrepresentation.” Haisch v.

Allstate Ins. Co., 197 Ariz. 606, 610, 5 P.3d 940, 944 (Ct. App. 2000); see also Schock v.

Jacka, 105 Ariz. 131, 133, 460 P.2d 185, 187 (1969) (“A suppression of the truth is not

always actionable fraud . . . [t]here must be a concealment of facts which the party is under

a legal or equitable obligation to communicate.”); Restatement (Second) of Torts § 551

(Nondisclosure can amount to actionable negligent misrepresentation, “but only if [a party]

is under a duty . . . to exercise reasonable care to disclose to the other before the transaction

is consummated.”). 

Pulte’s duty to communicate in the instant case is defined by its obligations under the

Subdivision Reporting Act, A.R.S. § 32-2181; see also Alaface, 181 Ariz. at 595, 892 P.2d

at 1384 (concluding that a “person who violates [the Subdivision Reporting Act] is guilty of

negligence per se”). Under the Act, a subdivider has a duty to report, among other things,

the estimated costs related to the improvements, facilities, and utilities “that will be borne by

purchasers of lots in the subdivision.” A.R.S. § 21-2181(A)(18), (19). The subdivider is

required to “make the report available to each prospective customer,” and “furnish each

buyer or lessee with a copy before the buyer or lessee signs any offer to purchase or lease.”

Id. § 32-2183(A). 

Pulte’s duty to communicate ran to “each prospective customer.” A.R.S. § 32-

2183(A). “Customer” is commonly defined as “a person who purchases goods or services

from another.” Random House Dictionary 380 (2d ed. 2009). The subsequent purchasers

in this case did not enter into any business transaction with Pulte. They did not purchase

Anthem homes from Pulte. They were not Pulte’s “customers.” Pulte had no statutory duty

to provide a copy of the public report to subsequent purchasers. Subdividers are typically

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 6 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

unaware of the identity of subsequent purchasers and therefore cannot reasonably be

expected to disclose information to them. Because plaintiffs are unable to establish that

subsequent purchasers either received or relied on an affirmative misrepresentation or that

Pulte had any duty to disclose information to them, no claim is stated on behalf of these

putative class members. Pulte’s motion for summary judgment on the issue of subsequent

purchasers is granted.

III. Motion for Class Certification

Plaintiffs seek to certify a class of Anthem home buyers defined as: “All current

owners of Anthem Country Club and Anthem Parkside homes whose homes were developed

by Pulte, and whose homes were subject to the subdivision public reports in which Pulte

failed to disclose that homeowners would be responsible for repayment of the water

infrastructure costs.” Motion at 5. Because we have already concluded that current owners

who did not purchase their homes directly from Pulte have failed to state a claim, we limit

the proposed class definition to those current owners who were original purchasers of

Anthem homes.

In order to support a motion to certify a class, a plaintiff must satisfy the requirements

of both Rule 23(a) and (b), Fed. R. Civ. P. Under Rule 23(a), plaintiffs must establish (1)

numerosity of the parties; (2) commonality of legal and factual issues; (3) typicality of claims

and defenses between the class representatives and the class; and (4) adequacy of

representation. Plaintiffs must then show that the proposed class action fits within at least

one of the three categories of class actions described in Rule 23(b). 

Before we will certify a class, we must “perform a rigorous analysis to ensure that the

prerequisites of Rule 23(a) have been satisfied.” Dukes v. Wal-Mart Stores, Inc., 603 F.3d

571, 581 (9th Cir. 2010) (en banc) (citing Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160-

61, 102 S. Ct. 2364, 2372 (1982)). In certain cases, a preliminary inquiry into the merits of

an action is appropriate to the extent necessary to determine whether Rule 23 requirements

are met. Id. “[W]hether the suit is appropriate for class resolution must be actually

demonstrated, not just alleged, to the district court’s satisfaction.” Id. at 590. 

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 7 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

A. Numerosity

A class is sufficiently numerous if joinder of all members is impracticable. Fed. R.

Civ. P. 23(a)(1). Here, plaintiffs’ proposed class of original purchasers who are also current

owners of Anthem homes is comprised of more than 3,000 members. Pulte does not dispute

that this is more than sufficient to satisfy the numerosity test.

B. Commonality

A class has sufficient commonality if “there are questions of law or fact common to

the class.” Fed. R. Civ. P. 23(a)(2). To satisfy the commonality requirement, plaintiffs must

establish that there is “some shared legal issue or a common core of facts.” Rodriguez v.

Hayes, 591 F.3d 1105, 1122 (9th Cir. 2010). This factor is construed permissively and is

satisfied in this case. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).

Here, common legal issues include whether Pulte owed a duty to disclose to home

buyers that the cost of the Water Facilities was not included in the purchase price of their

homes, and if so whether Pulte breached that duty. Common factual issues include the extent

to which Pulte made the required disclosures and whether any failure to disclose caused

damage to home buyers. Plaintiffs have sufficiently demonstrated the existence of shared

legal and factual issues in satisfaction of the commonality requirement. 

C. Typicality

Under the “typicality” prong of Rule 23(a)(3), plaintiffs must establish that “the

claims or defenses of the representative parties are typical of the claims or defenses of the

class.” Again, the standard is permissive. “[R]epresentative claims are ‘typical’ if they are

reasonably co-extensive with those of absent class members; they need not be substantially

identical.” Id. at 1020. “The test of typicality is whether other members have the same or

similar injury, whether the action is based on conduct which is not unique to the named

plaintiffs, and whether other class members have been injured by the same course of

conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citation

omitted).

Plaintiffs contend that their claims are typical of the class because each putative class

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 8 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

member suffered the same or similar injury as a result of Pulte’s common course of conduct.

Specifically, Pulte treated each class member similarly by failing to disclose truthful

information about the payment of water infrastructure costs and failed to properly disclose

in the subdivision public reports that the home buyers would ultimately bear such costs. 

Pulte argues, however, that plaintiffs’ claims are not typical of those of the class

because the home buyers received numerous versions of the subdivision public reports, with

significant language differences relating to water and sewer services. Some of these public

reports are alleged to have affirmatively and falsely represented to home purchasers that the

cost of installing the Water Facilities was included in the price of their homes. Other public

reports did not contain this express language. Pulte also argues that some of the home

purchasers read their public reports, others did not, and some of the home buyers contacted

the utility company, while others did not. Pulte contends that the numerous inconsistencies

among the various claims preclude any finding that the named plaintiffs’ claims are typical

of the class. 

For purposes of the typicality test, we look not to the specific facts of plaintiffs’

claims, but only to the nature of the claim or defense of the class representative. Id. Because

the injuries plaintiffs claim to have suffered occurred in each case as a result of Pulte’s

alleged failure to disclose the same information, we conclude that their claims are sufficiently

typical to satisfy Rule 23(a)(3)’s permissive standard. 

D. Adequacy

A plaintiff must also demonstrate that he “will fairly and adequately protect the

interests of the class.” Fed. R. Civ. P. 23(a)(4). We will consider: (1) whether the named

plaintiffs and their counsel have any conflicts of interest with the proposed class, and (2)

whether the named plaintiffs and their counsel will “prosecute the action vigorously on

behalf of the class.” Hanlon, 150 F.3d at 1020. Plaintiffs and their counsel maintain that

they have no conflicts of interest with members of the class and that they will continue to

prosecute this action vigorously on behalf of the class as a whole. Noting the absence of any

objection by Pulte, we conclude that plaintiffs have met their burden under Rule 23(a)(4). 

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 9 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

E. Rule 23(b)(3)

1. Predominance

Plaintiffs must not only satisfy the four requirements of Rule 23(a), but also show that

their proposed class action fits within one of the three kinds of class actions listed in Rule

23(b). Plaintiffs seek certification under Rule 23(b)(3), which requires that “questions of law

or fact common to class members predominate over any questions affecting only individual

members.” Fed. R. Civ. 23(b)(3). The predominance inquiry considers “whether proposed

classes are sufficiently cohesive to warrant adjudication by representation.” Amchem Prods.,

Inc. v. Windsor, 521 U.S. 591, 623, 117 S. Ct. 2231, 2249 (1997). Rule 23(b)(3) requires a

court to formulate “some prediction as to how specific issues will play out in order to

determine whether common or individual issues predominate in a given case.” Dukes, 603

F.3d at 593 (citation and quotation omitted). The Ninth Circuit has explained that “[i]f the

main issues in a case require the separate adjudication of each class member’s individual

claim or defense, a Rule 23(b)(3) action would be inappropriate.” Zinser v. Accufix

Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001) (citation omitted).

Pulte contends that plaintiffs cannot satisfy the predominance test because each

putative class member must prove individual reliance as an element of both the ACFA and

negligent misrepresentation claims. According to Pulte, the need for a case-by-case inquiry

into each class member’s reliance renders these claims unsuitable for class certification. We

agree.

The Ninth Circuit recently instructed that courts should look to state law to determine

whether individual issues of reliance arising out of a state law fraud claim predominate over

common issues. See Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1089 (9th

Cir. 2010) (holding that the “dispositive issue is thus an issue of Hawaii state law, namely

whether Hawaii’s Deceptive Practices Act requires a showing of individualized reliance”).

Accordingly, we turn to Arizona law to determine whether actual reliance is a necessary

element of proof in each of the claims asserted in this case. 

In order to succeed on a claim under the ACFA, a plaintiff must show (1) a false

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 10 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

promise or misrepresentation made in connection with the sale or advertisement of

merchandise, and (2) consequent and proximate injury resulting from the promise. Kuehn,

208 Ariz. at 129, 91 P.3d at 351. The requisite “injury occurs when a consumer relies, even

unreasonably, on false or misrepresented information.” Id. Therefore, “reliance is a required

element under Arizona’s consumer fraud statute.” Id. 

Plaintiffs argue that Kuehn and other Arizona cases that have required proof of actual

reliance are distinguishable from the instant case because those cases have considered the

claim only in the context of affirmative misrepresentations. See, e.g., id. (affirmative

misrepresentations); Correa v. Pecos Valley Dev. Corp., 126 Ariz. 601, 617 P.2d 767 (Ct.

App. 1980) (same); Peery, 120 Ariz. 266, 585 P.2d 574 (same); Stratton v. Am. Med. Sec.,

Inc., 266 F.R.D. 340, 349 (D. Ariz. 2009) (requiring individual proof of reliance but

distinguishing case from one involving nondisclosures). Here, plaintiffs contend that their

claims are based primarily on a failure to disclose material information, rather than

affirmative misrepresentations. They argue that this distinction is important because

requiring an individual to prove that he actually relied on a fact that was never disclosed is

an illogical, if not impossible, burden. Instead, plaintiffs ask us to apply a “presumption of

reliance” adopted by some courts in the context of securities law violations arising from

omissions of material information. 

In Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54, 92 S. Ct. 1456, 1472

(1972), the Court held, in the context of securities law violations, that a “presumption of

reliance” applied in cases that primarily involve “a failure to disclose.” “All that is necessary

is that the facts withheld be material in the sense that a reasonable investor might have

considered them important in the making of this decision.” Id. In Binder v. Gillespie, 184

F.3d 1059 (9th Cir. 1999), the Ninth Circuit also applied a presumption of reliance in a case

involving securities fraud, and emphasized that the presumption “should be confined to cases

that primarily allege omissions.” Id. at 1064 (emphasis added). 

The presumption of reliance has since been applied to satisfy Rule 23(b)(3)’s

predominance requirement, but only in fraud cases based on omissions. See, e.g., Farmers

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 11 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

Ins. Exch. v. Benzing, 206 P.3d 812 (Colo. 2009) (and cases cited therein). In “mixed

claims” where plaintiffs allege both omissions and misrepresentations, courts have declined

to apply the presumption. See Poulos v. Caesars World, Inc., 379 F.3d 654, 666 (9th Cir.

2004) (civil RICO claims alleging a mix of omissions and misrepresentations were not

entitled to a presumption). 

Pulte argues that plaintiffs’ allegations center on both omissions and affirmative

misrepresentations and thus are not amenable to a presumption of reliance. Pulte points out

that numerous versions of the subdivision public report were presented to home buyers, some

of which contained language affirmatively representing that the cost of installing the Water

Facilities was included in the purchase price of the homes. Other reports were silent

regarding Water Facility costs. Although plaintiffs now frame their claims as primarily

asserting a failure to disclose, their complaints allege numerous instances of affirmative

misrepresentations. In both complaints the plaintiffs assert that reliance in based in part on

the “Pulte Defendants false[ ] represent[ation] to home purchasers that the cost of installing

the water infrastructure facilities was included in the price of their homes,” Grimmelmann

Complaint ¶ 39; Pulte Complaint ¶ 26. Both complaints also generally allege that

“Defendants made material omissions or misrepresentations in connection with the sale of

the homes within Anthem.” Grimmelmann Complaint ¶ 58; Pulte Complaint ¶ 34. The

Grimmelmann complaint asserts that “Pulte actually disclosed to home buyers . . . that there

were no construction costs to be borne by the home buyer and home-owner beyond the listed

purchase price.” Id. ¶¶ 36, 65.

Because plaintiffs’ ACFA and negligent misrepresentation claims are best described

as “mixed claims” of omissions and affirmative misrepresentations, the presumption of

reliance is not available in the context of a class action. See Poulos, 379 F.3d at 666 (stating

that courts typically apply a presumption of reliance only in cases involving securities fraud,

and then only in cases “primarily involving a failure to disclose”). Although the parties agree

that none of the home buyers were informed that they would bear the cost of Water Facilities

through increased utility rates, the fact that some class members received affirmative

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 12 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 -

misrepresentations that all utility costs were included in the purchase price of the home

creates the need for an individualized assessment of reliance and renders this case unsuited

for class treatment. 

We conclude that plaintiffs have failed to demonstrate that questions of law or fact

common to class members predominate over any questions affecting only individual

members as required by Rule 23(b)(3), Fed. R. Civ. P. Therefore, the motion for class

certification is denied (doc. 66). 

Even if we had concluded that plaintiffs’ claims are primarily based on omissions

rather than affirmative misrepresentations, we would nevertheless conclude that plaintiffs

have failed to demonstrate that common issues predominate. In order to raise a presumption

of reliance, plaintiffs must show not only that Pulte had a duty to disclose, but that it failed

to disclose material facts. A fact is “material if it is one to which a reasonable person would

attach importance in determining his choice of action in the transaction in question.” Hill v.

Jones, 151 Ariz. 81, 85, 725 P.2d 1115, 1119 (Ct. App. 1986). 

Here, plaintiffs make no attempt to demonstrate that the information related to the

Water Facility costs would have materially affected a reasonable buyer’s decision to

purchase a home in Anthem. For example, plaintiffs present no testimony that they

themselves would not have purchased an Anthem home if they had known that their utilities

rates would significantly increase. Plaintiffs state only that “[s]ince June 2008, [they] began

paying a significantly higher water rate.” Phillips Decl. ¶ 7; Grimmelmann Decl. ¶ 5; Pulte

Decl. ¶ 7. Nor do plaintiffs disclose the extent to which rates have already increased, or

attempt to project the amount of future rate increases. Instead, they allege in their Complaint

that “the damages suffered by individual Class members, while not inconsequential, may be

relatively small.” Grimmelmann Complaint ¶ 54. Without some showing, we are unable to

conclude that Pulte’s alleged omission was material, and without a showing of materiality,

a presumption of reliance is not available. 

IV

IT IS ORDERED GRANTING IN PART (subsequent purchasers) AND

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 13 of 14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 14 -

DENYING IN PART (statute of limitations) Pulte’s motion for summary judgment (doc.

78). 

IT IS FURTHER ORDERED DENYING plaintiffs’ motion for class certification

(doc. 66). 

We note that denial of Rule 23 class certification does not divest this court of

jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. §§ 1332(d), 1453. See

United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l

Union v. Shell Oil Co., 602 F.3d 1087, 1089 (9th Cir. 2010).

DATED this 9th day of July, 2010.

Case 2:08-cv-01878-FJM Document 129 Filed 07/09/10 Page 14 of 14