Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—4th Cir.: Developer fairly and adequately represented groundwater contamination issue, (Jul 3, 2013)

By Jody Coultas, J.D.

A district court properly rejected North Carolina Unfair and Deceptive Trade Practices Act claims brought by a land owner against a land development company, the U.S. Court of Appeals in Richmond, Virginia, has held (Sanderford v. Duplin Land Development, Inc., July 2, 2013, per curiam).

The land owner signed a lot reservation agreement to reserve a parcel of land in a residential development in North Carolina owned by Duplin Land Development, Inc. (DLD). However, environmental testing uncovered the presence of fecal coliform bacteria in the groundwater and soil. DLD advised the land owner that he could not enter into a formal lot purchase contract until the fecal coliform had deteriorated to acceptable levels.

DLD retained the Clark Group to conduct an environmental assessment, which found that the area would be suitable for residential development pending the completion of a natural degradation process associated with fecal coliform. Based on this finding, DLD entered into purchase contracts, even though the fecal contamination had not sufficiently subsided, believing that the fecal contamination levels would degrade with time and the lots would be suitable for construction. The land owner sent letters to DLD demanding a full refund of all payments after learning that the Clark Group had not actually conducted all the sampling, but had DLD do its own in-house testing.

The elements of a claim for unfair and deceptive trade practices include a showing that the defendant performed acts that possess a tendency or capacity to mislead or create a likelihood of deception.

The land owner failed to establish any false representations or concealment of material facts or intent to deceive by DLD, according to the appellate court. The claims were based on allegations that DLD misrepresented that the Clark Group would conduct all sampling and monitoring activities. However, there was no evidence that DLD ever promised that the Clark Group would conduct all sampling or that a wholly independent group would conduct sampling. Rather, an addendum to the purchaser agreement stated that the Clark Group, “or other qualified consulting firm,” would undertake sampling until fecal coliform levels degraded to an acceptable level. The land owner also made no argument why the sampling performed by employees of DLD was inadequate. The Clark Group was involved in the monitoring and assessment of fecal coliform levels at all relevant times.

The land owner also failed to state claims based on alleged misrepresentations concerning the contamination levels, according to the court. DLD allegedly misrepresented that it received a satisfactory report because one report noted levels slightly above groundwater standards. However, that fact did not stop the state’s water quality division from discontinuing monitoring and closing the issue. DLD fairly represented the water quality division’s analysis in its letter to the land owner and properly advised that his property was suitable for construction.

The case is No. 12-1350.

Attorneys: Samuel B. Potter (Broadwell, Phillips & Potter, PLLC) for James K. Sanderford. Reginald Bernard Gillespie, Jr., (Wilson & Ratledge, PLLC) for Duplin Land Development, Inc.

Companies: Duplin Land Development, Inc.; Clark Group

Cases: StateUnfairTradePractices MarylandNews NorthCarolinaNews SouthCarolinaNews VirginiaNews WestVirginiaNews