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$11 million Florida settlement may put developers on notice

According to a recent article published by The Real Deal in Miami, Florida, a judge approved an $11 million settlement in favor a homeowners’ association after the trial revealed the developer and its agents breached fiduciary duties to the association and acted in a manner that violated public policy. The judge also found that the developer, D.R. Horton and its employees “engaged in ‘immoral, unethical, oppressive, and unscrupulous’ trade practices.” Evidence presented at trial showed that the developer’s agents had not only failed to act in the best interests of the homeowners’ association for Majorca Isles in Miami Gardens, Florida but had engaged in “practices ‘that offend established public policy for its financial benefit.’”

In its order, published by the U.S. Government Publishing Office, the United States Bankruptcy Court for the Southern District of Florida issued its findings of facts, wherein it found that D.R. Horton’s agents were directors on the Master Association’s board as well as local associations and, consequently, owed duties of loyalty, good faith, and care to the association but simultaneously maintained conflicts of interest. According to the judge, D.R. Horton and its agents breached that duty when, among other things, they conspired to divert funds away from the association, purposely avoided the collection of revenues owed to the association, and failed to maintain meaningful financial records.

Fiduciary duties arise in a business relationship when one party is placed in a position of trust to act for the express benefit of the other party. The relationship created requires the trustee to act not only honestly but in accordance with the highest standards of honor. That requirement gives rise to the duties upon trustees to act with loyalty, due care, and good faith toward another.

Some business transactions between parties may be conducted at “arm’s length” but the duty of a trustee is much greater. It is not sufficient that parties act solely to pursue their own interests. Rather, a fiduciary relationship requires one party to act for the benefit and best interests of another. 

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