677 F.3d 579
4th Cir.2012Background
- Nahigians bought undeveloped Creighton Farms lots in 2007 from Juno-Loudoun, LLC in Virginia.
- ILSFDA requires disclosure and registration for certain land sales and allows rescission as a remedy.
- District court granted Nahigians summary judgment on ILSFDA claims and awarded rescission plus purchase price and equity interest prejudgment interest.
- Juno appeals challenging ILSFDA exemption, materiality, and restoration rubric; Nahigians cross-appeal for prejudgment interest on debt.
- Court held ILSFDA rescission remedy proper, denied 99-lot exemption to exclude the development from registration, found material ILSFDA violations, and awarded comprehensive rescission with interest (reversing on debt prejudgment interest).
- Dissenting views argue the court should have allowed future builder sales to count for the exemption and would award no prejudgment interest on the debt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ILSFDA rescission limitations apply which period? | Nahigians rely on §1709(a) three-year window. | Juno argues §1703(c) two-year limit governs automatic rescission. | Three-year limitations period applies to equitable rescission under §1709(a). |
| Does the 164-lot Creighton Farms exceed the 99-lot exemption? | Exemption rules count already-sold lots and limit future counting. | Sales-to-builders exemption may include future builder sales. | Development not exempt; ILSFDA regime applies to the sale to Nahigians. |
| Were ILSFDA violations material to the Nahigians’ decision? | Disclosures about Ritz involvement were material to purchasing decision. | Subjective desire to have Ritz branding is not material. | Violations were material; property report disclosures would have influenced the decision. |
| What restoration remedy is proper under equitable rescission? | Return of property and purchase price plus accrued interest. | Rescission may be limited by market changes; value recovery may differ. | Return of title to Juno and purchase price plus interest is proper remedy; equity-based relief maintained. |
| Should pre-judgment interest be awarded on the debt portion? | Interest on the debt portion should be awarded to fully compensate. | No statutory basis for debt-prejudgment interest under ILSFDA. | District court abused discretion; award 7% prejudgment interest on debt portion. |
Key Cases Cited
- Gentry v. Harborage Cottages-Stuart, LLLP, 654 F.3d 1247 (11th Cir. 2011) (applies three-year limitations for rescission under ILSFDA §1709(a))
- Nickell v. Beau View of Biloxi, L.L.C., 636 F.3d 752 (5th Cir. 2011) (limits 99-lot exemption to actual sales under §1702(a)(7))
- Bodansky v. Fifth on Park Condo, LLC, 635 F.3d 75 (2d Cir. 2011) (restricts future builder sales counting under exemption)
- Orsi v. Kirkwood, 999 F.2d 86 (4th Cir. 1993) (discusses limitations of rescission under ILSFDA §1703 and §1711)
- 200 East Partners, LLC v. Gold, 997 So.2d 466 (Fla. Dist. Ct. App. 2008) (HUD guidelines not binding but persuasive on exemptions)