Court Opinion

ID: 3048339
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:23:53.978544+00
Date Added: 2024-06-11T12:44:40.213462
License: Public Domain

[PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                       ________________________
                                                             FILED
                               No. 09-13253         U.S. COURT OF APPEALS
                        ________________________ ELEVENTH CIRCUIT
                                                      SEPTEMBER 7, 2011
                                                           JOHN LEY
                      D.C. Docket No. 08-14020-CV-FJL
                                                            CLERK

JAMES D. GENTRY,
DONALD J. HUNT,
R. SCOTT STONE, JR.,
PATRICIA STONE,

                                                   Plaintiffs-Appellees,

                                    versus

HARBORAGE COTTAGES-STUART, LLLP, a
Florida limited liability limited partnership,
NORTHSIDE MARINA VENTURE, LLC, a
Florida limited liability company,

                                                   Defendants-Appellants.

                        ________________________

                              No. 09-14636
                        ________________________

                      D.C. Docket No. 08-14020-CV-FJL

JAMES D. GENTRY,
DONALD J. HUNT,

                                                   Plaintiffs-Appellees,
R. SCOTT STONE, JR.,
PATRICIA STONE,

                                                                    Consolidated-Plaintiffs-
                                                                    Appellees,

                                             versus

HARBORAGE COTTAGES-STUART, LLLP, a
Florida limited liability limited partnership,

                                                                    Defendant-Appellant,

NORTHSIDE MARINA VENTURE, LLC, a
Florida limited liability company,

                                                                    Defendant-Consolidated-
                                                                    Defendant-Appellant.

                               ________________________

                      Appeals from the United States District Court
                          for the Southern District of Florida
                             ________________________
                                  (September 7, 2011)

Before PRYOR and COX, Circuit Judges, and PANNELL, District Judge.*

COX, Circuit Judge:

       Several purchasers of condominium units sued developer Harborage Cottages-

Stuart, LLLP (“Harborage”), alleging that Harborage violated the Interstate Land

       *
       Honorable Charles A. Pannell, Jr., United States District Judge for the Northern District of
Georgia, sitting by designation.

                                                2
Sales Full Disclosure Act (“ILSFDA”), 15 U.S.C. § 1701, et seq., and several Florida

statutes. The district court granted summary judgment in favor of the purchasers.

Central to this appeal is the court’s conclusion that Harborage violated 15 U.S.C. §

1703(a)(1)(B) by failing to provide the purchasers with a property report prior to their

signing the purchase agreements. In finding that Harborage violated § 1703(a)(1)(B),

the court rejected Harborage’s contention that the purchasers’ condominium units

were exempt from the requirements of the ILSFDA. The court rejected this

contention, finding that Harborage structured the sale of the condominium units “for

the purpose of evasion” of the ILSFDA, and therefore Harborage was not entitled to

an exemption under 15 U.S.C. § 1702. The court ordered the return of the

purchasers’ deposits as damages for the ILSFDA violation, and awarded the

purchasers attorneys’ fees and costs.

      We agree with the district court that Harborage is not entitled to an exemption

under 15 U.S.C. § 1702. Thus, we affirm the court’s grant of summary judgment in

favor of the purchasers on their claim that Harborage violated § 1703(a)(1)(B) by

failing to provide a property report. And, we affirm the court’s award of damages,

attorneys’ fees, and costs.

                I. BACKGROUND & PROCEDURAL HISTORY

A.    Factual Background

                                           3
      Harborage develops and sells luxury condominiums.             It developed the

Harborage Yacht Condominiums (“Harborage Condominiums”), a nine-building

development on the St. Lucie River in Stuart, Florida. In May 2005, Plaintiffs R.

Scott Stone, Jr. and Patricia Stone (“the Stones”) contracted to purchase a unit in the

Westport building of the Harborage Condominiums for $430,000, and put down an

$86,000 deposit. The following month, Plaintiffs James D. Gentry and Donald J.

Hunt (“Gentry-Hunt”) contracted to purchase a unit in the St. Martin building of the

Harborage Condominiums for $350,000, and put down a $70,000 deposit. We refer

to the Stones and Gentry-Hunt collectively as “Plaintiffs.”

      The Harborage Condominiums had not been built at the time the Plaintiffs

entered into these contracts. The Harborage project included 126 units. Thirty-six

units were covered by contracts that obligated Harborage to complete construction

within two years. The other ninety units, including the units purchased by Plaintiffs,

were sold under contracts that did not contain the two-year construction provision.

      Harborage used an artist’s rendering of the Harborage Condominiums, known

as a Site Plan, to market the project. The Site Plan shows the location of each

condominium building, the Yacht Club and marina, and several areas that are marked

for future development. One of the areas marked for future development is located

at the project’s southernmost edge, near the St. Martin building. Though not depicted

                                          4
on the Site Plan, two commercial buildings are located in this future development

area next to the St. Martin building. The Site Plan includes a disclaimer: “All

renderings are artist’s conception and are subject to change, without notice at the

developer’s sole discretion. Renderings used for representative purposes only.” (Dkt.

1-1 at 23-24.)

B.     Procedural History

       The Stones and Gentry-Hunt filed separate lawsuits against Harborage, and the

district court consolidated them.1 As pertinent to this appeal, Gentry-Hunt and the

Stones both allege that Harborage violated the ILSFDA in two main ways. They

allege that Harborage violated 15 U.S.C. § 1703(a)(1)(B) and (c) by failing to provide

a required property report. And, they allege that Harborage violated 15 U.S.C. §

1703(a)(2) by making material misrepresentations in the Site Plan.

       Gentry-Hunt and the Stones also allege several state law claims against

Harborage. Both Gentry-Hunt and the Stones allege that Harborage violated Fla. Stat.

§ 501.204(1) by making false representations in the Site Plan. Gentry-Hunt, but not

the Stones, also filed a claim alleging that Harborage violated Fla. Stat. § 718.506 by

       1
        Gentry-Hunt also sued Northside Marina Venture, LLC (“Northside”). The district court
granted summary judgment in favor of Northside on all claims asserted against it. Gentry-Hunt has
not appealed the dismissal of its claims against Northside, and Northside is not a party to this appeal.

                                                   5
publishing false and misleading information in the Site Plan. All parties filed motions

for summary judgment.

      1. Exemptions Under 15 U.S.C. § 1702(a)(2) and (b)(1)

      In Harborage’s summary judgment motion, it conceded that it did not provide

a property report to the Plaintiffs as required by 15 U.S.C. § 1703(a)(1)(B) and (c).

Harborage argued, however, that it did not have to provide the report because 15

U.S.C. § 1702(a)(2) and (b)(1) exempted Plaintiffs’ units from the requirements of

the ILSFDA. Section 1702(a)(2) exempts properties upon which a contract obligates

the seller to erect a building within two years. See 15 U.S.C. § 1702(a)(2).

Harborage argued that thirty-six of the 126 units were exempt under § 1702(a)(2)

because the purchase agreements covering those units obligated Harborage to

complete construction within two years. Section 1702(b)(1) exempts subdivisions

containing fewer than one hundred units which are not exempt under § 1702(a)(2).

See 15 U.S.C. § 1702(b)(1). Harborage argued that the ninety units not exempt under

§ 1702(a)(2), including the units purchased by Plaintiffs, were exempt under §

1702(b)(1).

      The district court concluded that Harborage failed to establish entitlement to

the exemptions afforded by 15 U.S.C. § 1702(a)(2) and (b)(1). The court determined

that, in order to invoke these exemptions, Harborage was obligated to establish that

                                          6
its method of selling the condominium units was not adopted for the sole purpose of

evading the ILSFDA’s protections. The district court’s analysis centered on whether

Harborage’s use of two different purchase agreements, which largely exempted

Harborage from the ILSFDA’s requirements, was adopted for the purpose of evading

the ILSFDA’s requirements. Gentry v. Harborage Cottages-Stuart, LLLP, 602 F.

Supp. 2d 1239, 1246-50 (S.D. Fla. 2009). The district court noted that this circuit has

no clear definition of what constitutes “evasion” for the purposes of § 1702, but

concluded that Harborage had failed to prove that two different sales contracts were

not used for the purpose of evading the ILSFDA. Therefore, the court held

Harborage was not entitled to invoke the ILSFDA’s exemptions. Id. at 1250-51.

      In so ruling, the district court placed the burden on Harborage, the

developer/seller, to produce “factual evidence demonstrating that the method of

disposition has some bona fide, real world objective that manifests a legitimate

business purpose.” Id. at 1248. Applying that standard, the district court held that,

while “[i]t is not inconceivable that there could be some legitimate business reason”

for Harborage to use two different purchase agreements, Harborage could not avail

itself of § 1702(b)(1)’s ninety-nine lot exemption because “no legitimate business

purpose is evident” from the record. Id. at 1249. Because Harborage failed to meet

its burden of showing that the § 1702 exemptions apply in this case, and because

                                          7
Harborage conceded it did not provide a property report as required by 15 U.S.C. §

1703(a)(1)(B) and (c), the district court granted summary judgment to Plaintiffs on

this claim.

      2. Florida Condominium Act, Fla. Stat. § 718.506

      In Gentry-Hunt’s summary judgment motion, they contended that Harborage

violated Fla. Stat. § 718.506 by publishing false and misleading information in the

Site Plan. They argued that the Site Plan presented an untrue statement of material

fact because it misled purchasers to believe that an area marked “Future

Development” was vacant land when, in fact, it contained an operating business and

a storage facility. The district court granted summary judgment in favor of Gentry-

Hunt on this § 718.506 claim. The court also granted summary judgment in favor of

the Stones under § 718.506 even though the Stones never asserted such a claim in

their complaint.

      3. ILSFDA, 15 U.S.C. § 1703(a)(2) and the Florida Deceptive and Unfair
         Trade Practices Act, Fla. Stat. § 501.204(1)

      The court granted summary judgment to Plaintiffs on their claims asserted

under the ILSFDA anti-fraud provision, 15 U.S.C. § 1703(a)(2), and their claim

asserted under Fla. Stat. § 501.204(1). Plaintiffs concede, however, that they did not

seek summary judgment on these claims.

                                          8
      4. Damages

      After determining that Harborage violated 15 U.S.C. § 1703(a)(1)(B) and (c)

by failing to provide a property report, the court referred the issue of damages to a

magistrate judge. For the violations of the ILSFDA under 15 U.S.C. § 1703(a)(1)(B)

and (c), the court awarded Plaintiffs the return of their deposits as equitable relief

under 15 U.S.C. § 1709. Plaintiffs were also awarded attorneys’ fees and costs under

§ 1709(c). The court noted that Fla. Stat. § 718.506 provided an alternative basis for

Gentry-Hunt’s recovery of their deposit.

                                    II. ISSUES

      Harborage raises the following issues on appeal: (1) whether the district court

erred in concluding that Harborage failed to show that it is exempt under 15 U.S.C.

§ 1702(a)(2) and (b)(1) from the requirements of the ILSFDA; (2) whether the court

erred in granting summary judgment to Plaintiffs on their claims asserted under Fla.

Stat. § 718.506; (3) whether the court erred in granting summary judgment to

Plaintiffs on their claims asserted under 15 U.S.C. § 1703(a)(2) and Fla. Stat. §

501.204(1), which Plaintiffs did not assert in their motion for summary judgment; and

(4) whether the court erred in awarding Plaintiffs a refund of their deposits and

attorneys’ fees as damages under 15 U.S.C. § 1709.

                          III. STANDARD OF REVIEW

                                           9
      We review de novo the district court’s grant of summary judgment. Gish v.

Thomas, 516 F.3d 952, 954 (11th Cir. 2008) (citation omitted). “We apply the same

legal standards as the district court and view all facts and reasonable inferences in the

light most favorable to the nonmoving party.” Id. (citation omitted).

                                  IV. DISCUSSION

A.    ILSFDA Exemptions Under 15 U.S.C. § 1702(a)(2) and (b)(1)

      Plaintiffs claim that Harborage violated the disclosure provisions of the

ILSFDA. Under 15 U.S.C. § 1703(a)(1)(B), a developer is prohibited from selling

or leasing a lot “unless a printed property report, meeting the requirements of section

1707 of this title, has been furnished to the purchaser or lessee in advance of the

signing of any contract or agreement by such purchaser or lessee.” When a property

report has not been provided to the buyer before executing the contract of sale, “such

contract or agreement may be revoked at the option of the purchaser or lessee within

two years from the date of such signing, and such contract or agreement shall clearly

provide this right.” 15 U.S.C. § 1703(c). It is undisputed in this case that Harborage

did not provide a property report and consequently did not notify Plaintiffs of their

revocation rights.

      Harborage contends that it did not have to provide this report because the

Plaintiffs’ condominium units were exempt from the ILSFDA’s disclosure

                                           10
requirements. Two exemptions are at issue in this case. The first exemption, known

as the “two-year exemption,” exempts properties upon which a contract obligates the

seller to erect a building within two years. See 15 U.S.C. § 1702(a)(2). Section

1702(a)(2) states:

      Unless the method of disposition is adopted for the purpose of evasion
      of this chapter, the provisions of this chapter shall not apply to –

      ...

      (2) the sale or lease of any improved land on which there is a residential,
      commercial, condominium, or industrial building, or the sale or lease of
      land under a contract obligating the seller or lessor to erect such a
      building thereon within a period of two years . . . .

The second exemption at issue, known as the “99 unit exemption,” exempts

subdivisions containing fewer than one hundred units which are not exempt under §

1702(a)(2). See 15 U.S.C. § 1702(b)(1). Section 1702(b)(1) states:

      Unless the method of disposition is adopted for the purpose of evasion
      of this chapter, the provisions requiring registration and disclosure . . .
      shall not apply to –

      (1) the sale or lease of lots in a subdivision containing fewer than one
      hundred lots which are not exempt under subsection (a) of this section
      ....

      The Department of Housing and Urban Development (HUD), the federal

agency responsible for promulgating the ILSFDA’s rules and regulations applicable

                                          11
in this case,2 has adopted guidelines that allow a developer to combine exemptions.

Guidelines to the Interstate Land Sales Registration Program, 61 Fed. Reg. 13596

(Mar. 27, 1996).3 For example:

       [A] developer of a subdivision containing a total of 129 lots . . . qualifies
       for [the one hundred lot exemption] if at least 30 lots are sold in
       transactions that are exempt because the lots had completed homes
       erected on them. The 30 exempt transactions may fall within any one
       exemption or a combination of exemptions noted in [Section 1702(a)(2)-
       (8)] and may be either past or future sales . . . . Developers of
       subdivisions containing more than 99 lots who wish to operate under
       this exemption must assure themselves that all lots in excess of 99 have
       been and will be sold in transactions exempt under [Section 1702(a)(2)-
       (8)] . . . .

Id. at 13604.

       In this case, the development contained a total of 126 units. Of the 126 units,

thirty-six units were sold under contracts that obligated Harborage to complete

construction within two years, thereby exempting these thirty-six units under §

       2
          Effective July 21, 2011, the Interstate Land Sales Full Disclosure Act will be administered
and enforced by the Consumer Financial Protection Bureau. See U.S. Dep’t of Hous. & Urban
Dev. (August 23, 2011), http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmr
a/ils/ilshome.
       3
         “Because the HUD Guidelines are not published regulations subject to the rigors of the
Administrative Procedure Act, including public notice and comment, they do not deserve full []
deference.” Stein v. Paradigm Mirasol, LLC, 586 F.3d 846, 858 n.7 (11th Cir. 2009) (citing Reno
v. Koray, 515 U.S. 50, 61, 115 S. Ct. 2021, 2027 (1995)) (internal quotation marks omitted). “A
guidelines position is entitled to only as much deference as it merits based on the ‘thoroughness
evident in its consideration, the validity of its reasoning, its consistency with earlier and later
pronouncements, and all those factors which give it power to persuade, if lacking power to control.’”
Stein, 586 F.3d at 858 n.7 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 164
(1944)).

                                                 12
1702(a)(2). The remaining ninety units, including the Plaintiffs’ units, were covered

by a different purchase agreement that did not obligate the developer to complete

construction within two years. Harborage argues that these remaining ninety units

are exempt under the § 1702(b)(1) ninety-nine unit exemption.

      Plaintiffs contend that the exemptions do not apply in this case. They argue

that the exemptions in § 1702(a)(2) and (b)(1) do not apply if “the [developer’s]

method of disposition is adopted for the purposes of evasion of this chapter.” See 15

U.S.C. § 1702(a)(2) and (b)(1). According to Plaintiffs, Harborage structured the sale

of the various units specifically to avoid the ILSFDA’s requirements, and thus the

exemptions do not apply.

      The question in this case, therefore, is whether the use of two separate purchase

agreements, which technically exempt Harborage from the ILSFDA’s requirements,

constitutes a method of disposition that was adopted for the purpose of evading the

ILSFDA’s requirements. If so, then Harborage is not entitled to any exemptions

found in § 1702. If not, then Harborage is exempt from the ILSFDA’s requirements.

This question turns on what constitutes “evasion” within the meaning of § 1702.

      When construing a statute, “we must begin, and often should end as well, with

the language of the statute itself.” Am. Gen. Fin., Inc. v. Paschen, 296 F.3d 1203,

1207 (11th Cir. 2002) (citation omitted). With statutory construction, a court’s “first

                                          13
step is to determine whether the language . . . has a plain and unambiguous meaning.”

Delgado v. U. S. Att’y Gen., 487 F.3d 855, 862 (11th Cir. 2007) (citation and internal

quotations omitted). Subparts (a)(2) and (b)(1) of Section 1702 state in pertinent part

that the enumerated exemptions in the ILSFDA do not apply if the developer’s

“method of disposition is adopted for the purpose of evasion of this chapter.”

      Two principles are implicit in the text and structure of the exemptions in §

1702. First, a developer may take conscious action to ensure that a subdivision meets

the requirements of an exemption. “[T]he mere fact that a developer structures the

sales of a subdivision in a way that makes the project exempt from the ILSFDA is not,

without more, sufficient to conclude that the seller has taken such action for the

purpose of evading the ILSFDA’s requirements.” Gentry, 602 F. Supp. 2d at 1247.

We find no “evasion” in a seller’s conscious decision to seek an exemption because

Congress, through a roster of exemptions in § 1702, clearly intended that not all

interstate land sales should be regulated by federal law. And, HUD’s Guidelines

specifically allow a developer to combine exemptions. See 61 Fed. Reg. 13596,

13604.

      The second principle limits the first. While a developer may take conscious

action to ensure that a sale meets the requirements of an exemption, the developer

cannot do so “for the purpose of evasion” of the ILSFDA. Because Congress clearly

                                          14
prohibited a developer from acting with “the purpose of evasion,” the developer

cannot merely show that the sale technically meets the requirements of an exemption.

The developer must also show that its purpose for seeking the exemption was not

solely to evade the requirements of the ILSFDA.

      To accommodate both of these principles, a sensible distinction must be drawn

“between conduct which has as its primary object avoidance of the ILSFDA’s

requirements and conduct that seeks to meet the requirements of an exemption for

some legitimate business purpose.” Gentry, 602 F. Supp. 2d at 1248. A developer

must be able to structure a transaction in order to meet an exemption, but it cannot do

so for the sole purpose of avoiding the ILSFDA. We therefore hold that a developer

seeking an exemption under § 1702(a)(2) and (b)(1) must produce factual evidence

demonstrating that the method of disposition has a real world objective that manifests

a legitimate business purpose. The “legitimate business purpose” standard asks the

party invoking the exemption to articulate some legitimate business reason for its

method of disposition other than the avoidance of the ILSFDA’s consumer

protections. Contrary to Harborage’s contention, the “legitimate business purpose”

standard does not “rewrite” the ILSFDA.          Instead, the standard explains in

straightforward terms what a party must prove in order to claim an exemption. The

standard accommodates both Congress’s intent in making the exemptions available

                                          15
to developers while at the same time ensuring that the exclusive reason for invoking

the method of disposition is not to evade the ILSFDA.

      Our interpretation of the exemptions in § 1702(a)(2) and (b)(1) is consistent

with the remedial purposes of the ILSFDA. The ILSFDA is “an antifraud statute

utilizing disclosure as its primary tool” with the principal purpose of “protect[ing]

purchasers from unscrupulous sales of undeveloped home sites.” Winter v.

Hollingsworth Props., Inc., 777 F.2d 1444, 1447 (11th Cir. 1985). When interpreting

exemptions in a remedial statute such as the ILSFDA, the general rule is that

exemptions should be narrowly construed. See Markowitz v. Ne. Land Co., 906 F.2d
100, 105 (3d Cir. 1990) (noting that exemptions from the ILSFDA should be

narrowly construed); De Luz Ranchos Inv., Ltd. v. Coldwell Banker & Co., 608 F.2d
1297, 1302 (9th Cir. 1979) (same); Pigott v. Sanibel Dev., LLC, 576 F. Supp. 2d
1258, 1268 (S.D. Ala. 2008) (same). Allowing a developer to structure the sale to

comply with an exemption while also requiring a developer to provide evidence that

it did so for a legitimate business purpose is consistent with the consumer protection

policies in the ILSFDA.

      Our interpretation that the exemptions in § 1702(a)(2) and (b)(1) require the

developer to provide evidence of a legitimate business purpose conflicts with the

Eighth Circuit’s fraudulent-intent test. In Atteberry v. Maumelle Co., 60 F.3d 415

                                         16
(8th Cir. 1995), the Eighth Circuit held that a seller’s actions only constitute evasion

within the meaning of § 1702(a) and (b) if the seller’s attempt to exempt itself from

the ILSFDA’s requirements is accompanied by fraudulent intent. Id. at 421. In other

words, the court held that plaintiffs challenging a developer’s entitlement to an

exemption must prove that the developer entered into the sales contract with a

fraudulent purpose, such as never intending to actually construct the condominiums.

Id.

      The Eighth Circuit’s fraudulent-intent test does not accurately reflect the text

and policies of § 1702. As a textual matter, “evasion” does not mean the same thing

as “fraud,” and in drafting § 1702 Congress gave no indication that evasion should

be construed as tantamount to fraud. The fraudulent-intent test also expands the

scope of all exemptions in § 1702 and undermines the fundamental consumer

protection purposes of the ILSFDA. By focusing only on the goal of preventing

fraud, the fraudulent-intent test ignores other key purposes of the ILSFDA–“to insure

that a buyer, prior to purchasing certain kinds of real estate, is informed of facts

which will enable him to make an informed decision about purchasing the property.”

Law v. Royal Palm Beach Colony, Inc., 578 F.2d 98, 99 (5th Cir. 1978) (citation

omitted). We therefore conclude that the legitimate-business-purpose standard is

                                          17
more consistent with the ILSFDA’s text and policies than the Eighth Circuit’s

fraudulent-intent standard.

      Harborage also contends that the district court erred in placing on it the burden

of proving entitlement to an exemption from the ILSFDA. Harborage argues that

Plaintiffs bear the burden of proving that Harborage is not entitled to the exemption

because the “evasion” provision is an exception to an otherwise-applicable

exemption. (Appellant Br. at 23.) We disagree. Generally, the party claiming an

exemption to a statute’s requirements carries the burden of establishing its entitlement

thereto. See, e.g., NLRB v. Ky. River Cmty. Care, Inc., 532 U.S. 706, 711, 121 S. Ct.
1861, 1866 (2001) (“‘[T]he burden of proving justification or exemption under a

special exception to the prohibitions of a statute generally rests on one who claims

its benefits.’”) (quoting FTC v. Morton Salt Co., 334 U.S. 37, 44-45, 68 S. Ct. 822,

827 (1948)). The exemptions in the ILSFDA are not out of step with this general

rule. The Code of Federal Regulations provides: “If a developer elects to take

advantage of an exemption, the developer is responsible for maintaining records to

demonstrate that the requirements of the exemption have been met.” 24 C.F.R. §

1710.4(d) (1987). One of the requirements of the exemption in § 1702(a)(2) and

(b)(1) is that the developer cannot devise a method of disposition for the purpose of

                                          18
evading the ILSFDA. Instead, the developer has the burden of demonstrating that the

evasion of the ILSFDA is not the only reason for seeking the exemption.4

       Having concluded that § 1702(a)(2) and (b)(1) require the developer to produce

evidence of a legitimate business purpose, we turn to whether Harborage has met its

burden in this case. It clearly has not. While the burden of showing a legitimate

business purpose is not a heavy one, Harborage did not present any evidence of a

legitimate business purpose for disposing of its property using two separate contracts.

The most we can adduce from the record is that Harborage relied on the advice of

legal counsel in deciding to dispose of its property by means of two different

contracts. But Harborage’s counsel never offered a legitimate business reason for

structuring the condominium sale in this manner. As we have explained, a developer

must show that it sought an exemption for reasons other than evasion of the ILSFDA.

We recognize that reliance on legal advice could, in some instances, meet a

       4
         Harborage cites Inner City Press/Cmty. on the Move v. Bd. of Governors of Fed. Reserve
Sys., 463 F.3d 239, 245 (2d Cir. 2006) and Cal. Dep’t of Toxic Substances Control v. Interstate Non-
Ferrous Corp., 298 F. Supp. 2d 930, 967 (E.D. Cal. 2003) in support of its position that the burden
should be on Plaintiffs to prove the so-called “evasion exception” in § 1702. Those cases do not
help Harborage. The burden of proof in those cases turned on the language of the particular statutes
at issue and the policy consequences of requiring a party to prove a particular fact. In this case, the
language in § 1702 does not require a shifting of the burden of proof. And, the policy concerns that
may support a shift in the burden of proof are not present in this case. There is nothing inefficient
or unfair about requiring a developer to articulate its own business purpose for claiming an
exemption to the ILSFDA.

                                                  19
developer’s burden to prove entitlement to an ILSFDA exemption, i.e., in cases where

the record demonstrates that counsel drafted purchase agreements for legitimate

business purposes other than the avoidance of the ILSFDA. Under the facts presented

in this case, however, the legal advice relied upon by Harborage demonstrates no

clear understanding of the ILSFDA’s “evasion” language. Because Harborage failed

to submit evidence of a legitimate business purpose, it cannot claim an ILSFDA

exemption.5

       Harborage admits that it did not provide a property report as required by 15

U.S.C. § 1703(a)(1)(B) and (c). Because Harborage failed to prove that it was

entitled to an exemption from the ILSFDA, its admitted failure to provide the report

violates the ILSFDA. We therefore affirm the district court’s grant of summary

judgment in favor of the Plaintiffs on their claim that Harborage violated §

1703(a)(1)(B) and (c).

B.     Violation of the Florida Condominium Act, Fla. Stat. § 718.506

       Florida law prohibits the publication of false and misleading information by

condominium developers. Under Fla. Stat. § 718.506, a purchaser can sue to rescind

       5
          Harborage’s corporate representative explained in his deposition that Marin County, unlike
most jurisdictions, would not issue a certificate of occupancy for individual units within a building;
instead, the entire building had to be issued a certificate of occupancy. The County’s certificate of
occupancy process could provide a legitimate business reason why certain buildings were completed
within two years while other buildings were not. But Harborage’s representative never attempted
to justify the sales decision on these grounds.

                                                 20
a contract or collect damages from a developer when induced to enter a purchase

contract by false or misleading promotional materials:

      Any person who, in reasonable reliance upon any material statement or
      information that is false or misleading and published by or under
      authority from the developer in advertising and promotional materials,
      including, but not limited to, a prospectus, the items required as exhibits
      to a prospectus, brochures, and newspaper advertising, pays anything of
      value toward the purchase of a condominium parcel located in this state
      shall have a cause of action to rescind the contract or collect damages
      from the developer for his or her loss prior to the closing of the
      transaction . . . .

Fla. Stat. § 718.506(1).

      The district court found that Harborage violated Fla. Stat. § 718.506 by

publishing false and misleading information in the Site Plan. Specifically, the court

determined that, even though Harborage’s Site Plan contained a disclaimer, it was

deceptive and presented “an untrue statement of material fact” because it misled

purchasers to believe that an area marked “Future Development” was vacant land

when, in fact, it contained an operating business and a storage facility. Gentry, 602
F. Supp. 2d at 1253-55. The court also found that it would have been near-impossible

for a potential purchaser to discern that these buildings were located in the area

designated as “Future Development” by the Site Plan. Id. at 1254. Because a

purchaser can sue to rescind a contract or collect damages from a developer when

induced to enter into a purchase contract by false or misleading promotional

                                          21
materials, the district court found that the misrepresentations in the Site Plan were

enough to make Harborage liable to Plaintiffs under this Florida statute. Id. at 1255.

       Harborage argues that Gentry-Hunt’s § 718.506 claims are barred because the

purchase agreements themselves disclaimed reliance on extra-contractual materials.

Harborage cites cases that stand for the proposition that there can be no recovery for

reliance on a misrepresentation that is expressly contradicted in a later contract. E.g.,

Garcia v. Santa Maria Resort, Inc., 528 F. Supp. 2d 1283, 1295 (S.D. Fla. 2007);

Mac-Gray Servs., Inc. v. DeGeorge, 913 So. 2d 630, 634 (Fla. 4th DCA 2005). This

argument was raised in the district court and the court found that there were no terms

in   the   purchase     agreements      that    expressly    contradicted     Harborage’s

misrepresentations and omissions concerning the “Future Development” area. We

agree with the court’s conclusion. And, because the purchase agreements failed to

dispel the Site Plan’s misrepresentations, the district court correctly held that

Harborage violated § 718.506.

       Though the district court correctly determined that Harborage violated §

718.506, the court’s analysis is written as if Harborage violated § 718.506 for both

Gentry-Hunt and the Stones. However, only Gentry-Hunt filed a § 718.506 claim

against Harborage based on the Site Plan. The Stones admit that, to the extent that

the district court’s ruling implies that the Stones filed a § 718.506 claim, it is in error.

                                               22
(Dkt. 138 at 4-5.) We therefore conclude that the district court erred in granting

summary judgment to the Stones under § 718.506. We affirm the grant of summary

judgment to Gentry-Hunt on the § 718.506 claim.

C.    Violation of the ILSFDA’s Anti-Fraud Provision and the Florida Deceptive
      and Unfair Trade Practices Act, Fla. Stat. § 501.204(1)

      Harborage argues that the district court erred in granting summary judgment

to Plaintiffs on their claim asserted under the ILSFDA anti-fraud provision, 15 U.S.C.

§1703(a)(2), and their claim asserted under Fla. Stat. § 501.204(1). Plaintiffs concede

that they did not seek summary judgment under the ILSFDA’s anti-fraud provision

or § 501.204(1). (Appellee Br. at 23.) Pursuant to Fed. R. Civ. P. 56 (a), a party

seeking summary judgment must “identify[] each claim . . . on which summary

judgment is sought.” Id. A court may grant a motion for summary judgment on

grounds not raised by a party only “[a]fter giving notice and a reasonable time to

respond . . . .” Fed. R. Civ. P 56(f). In this case, the court entered judgment on

claims not identified by Plaintiffs in their Rule 56 motion and without advance notice.

This was error. Consequently, we vacate the district court’s grant of summary

judgment to Gentry-Hunt and the Stones on their ILSFDA fraud claims and §

501.204(1) claims.

D.    Damages for the ILSFDA Violation

                                          23
        As we have explained, Defendants violated 15 U.S.C. § 1703(a)(1)(B) and (c)

because they failed to furnish a property report in advance of signing the purchase

agreement and they failed to inform Plaintiffs of their right to revoke the contract

within two years of signing the purchase agreement.6 It is undisputed in this case that

both Gentry-Hunt and the Stones did not attempt to revoke their contracts within two

years of signing their purchase agreements. As a result, Plaintiffs are not entitled to

the automatic statutory revocation remedies provided in 15 U.S.C. § 1703(c).

        Plaintiffs nonetheless contend that they are entitled to the return of their

deposits as equitable relief under 15 U.S.C. § 1709. Section 1709 reads, in pertinent

part:

        6
            15 U.S.C. § 1703(a)(1)(B) provides:
                  It shall be unlawful for any developer or agent, directly or indirectly,
                  to make use of any means or instruments of transportation or
                  communication in interstate commerce, or of the mails–
                  (1) with respect to the sale or lease of any lot not exempt under
                  section 1702 of this title–
                  ...
                  (B) to sell or lease any lot unless a printed property report, meeting
                  the requirements of section 1707 of this title, has been furnished to
                  the purchaser or lessee in advance of the signing of any contract or
                  agreement by such purchaser or lessee . . . .

        15 U.S.C. § 1703(c) provides:
               In the case of any contract or agreement for the sale or lease of a lot
               for which a property report is required by this chapter and the
               property report has not been given to the purchaser or lessee in
               advance of his or her signing such contract or agreement, such
               contract or agreement may be revoked at the option of the purchaser
               or lessee within two years from the date of such signing, and such
               contract or agreement shall clearly provide this right.

                                                     24
      (a) Violations; relief recoverable
      A purchaser . . . may bring an action at law or in equity against a
      developer or agent if the sale or lease was made in violation of section
      1703(a) of this title. In a suit authorized by this subsection, the court
      may order damages, specific performance, or such other relief as the
      court deems fair, just, and equitable. In determining such relief the court
      may take into account, but not be limited to, the following factors: the
      contract price of the lot . . . [and] the amount the purchaser . . . actually
      paid . . . .

      (b) Enforcement of rights by purchaser or lessee
      A purchaser . . . may bring an action at law or in equity against the seller
      . . . to enforce any right under subsection (b), (c), (d), or (e) of section
      1703 of this title.

      (c) Amounts recoverable
      The amount recoverable in a suit authorized by this section may include,
      in addition to matters specified in subsections (a) and (b) of this section,
      interest, court costs, and reasonable amounts for attorneys’ fees . . . .

15 U.S.C. § 1709.

      Plaintiffs argue that the plain language of § 1709 contemplates that an action

in equity may be brought against Harborage, notwithstanding that § 1703(c) affords

a right of rescission for a developer’s failure to provide the required property report.

In support of this contention, Plaintiffs point out that § 1709 authorizes the district

court to grant such legal and equitable relief as the court deems just, fair, and

equitable.

      We agree with Plaintiffs that the district court’s damages award is permitted

under § 1709. Even though Plaintiffs are not entitled to the automatic statutory

                                           25
revocation remedies provided in 15 U.S.C. § 1703(c) because they did not attempt to

revoke their contracts within two years from the date of signing the purchase

contracts, they may still be entitled to the return of their deposits as equitable relief

under § 1709. Where, as here, a developer violates § 1703(c)’s notice requirement

obligating the developer to disclose to Plaintiffs their right to rescind, the purchaser

may be entitled to relief under § 1709(b). See Murray v. Holiday Isle, LLC, 620 F.

Supp. 2d 1302, 1312 (S.D. Ala. 2009) (“Where a purchaser has been damaged by

nondisclosure of these rescission rights as required by § 1703(c), the purchaser

plainly has an actionable ILSFDA claim pursuant to § 1709(b).”).

      Defendants argue that permitting Plaintiffs to claim their deposits as equitable

relief under § 1709(b) effectively reads the time requirements of § 1703(c) out of that

subsection. We disagree. The two-year limitation period in § 1703(c) governs those

circumstances in which an aggrieved purchaser seeks to enforce an automatic,

unconditional right to revoke if the requirements of the subsection are met. On the

other hand, the three-year limitation period in 15 U.S.C. § 1711 governs those

circumstances in which a purchaser seeks rescission that is not automatic, but must

be supported by proper proof. In other words, the automatic revocation or recision

remedy in § 1703(c) itself is not the only revocation or recision remedy. In addition

to that remedy, § 1709(b) permits a purchaser to obtain the deposit as an equitable

                                           26
remedy if the purchaser shows that the remedy is justified by the facts of a specific

case.

        In this case, the district court concluded that Plaintiffs were entitled to recoup

their deposits as equitable relief under § 1709(b). We find no error in this conclusion.

Plaintiffs filed affidavits stating that they would have timely revoked their contracts

had they been notified of the two-year window within which they could rescind.

(Dkt. 86-1: ¶17; 93-1: ¶5; 94-1: ¶15.) Plaintiffs’ testimony in this regard was not

disputed by Harborage. Also undisputed is the amount paid by Plaintiffs to

Harborage as deposits that were not returned. We therefore agree with the district

court that the return of Plaintiffs’ deposits is a logical and appropriate remedy for

Harborage’s unlawful failure to disclose that Plaintiffs had a right to rescind the

purchase agreements within two years of signing them. And, having found no error

in the return of the deposits as equitable relief, we reject Harborage’s contention that

the attorneys’ fees award is not supported by a valid damages award.

                                            27
                                 V. CONCLUSION

      We affirm the district court’s grant of summary judgment in favor of the

Plaintiffs on their claim that Harborage violated 15 U.S.C. § 1703(a)(1)(B) and (c)

by failing to provide a property report. We affirm the court’s award of damages and

attorney’s fees on this claim under 15 U.S.C. § 1709.

      We affirm the grant of summary judgment in favor of Gentry-Hunt on the claim

that Harborage violated Fla. Stat. § 718.506. We vacate the judgment in favor of the

Stones on the § 718.506 claim.

      We vacate the grant of summary judgment in favor of Plaintiffs on the claim

that Harborage violated the anti-fraud provision of the ILSFDA, 15 U.S.C. §

1703(a)(2), and the claim asserted under Fla. Stat. § 501.204(1).

      AFFIRMED IN PART AND VACATED IN PART.

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