Terrence O’Reilly: Plaintiff
The individual who brought suit, a former employee and property owner of The Club at Spanish Peaks, alleged that the developer had withheld unfavorable geology reports. The case was filed in Gallatin County, Montana in 2007 and confidentially settled in 2009.
New West Bozeman investigative reporters, Elizabeth Diehl and Megan McLean, offer a look at the documents submitted in the O’Reilly Complaint in their August 10, 2009 article “Spanish Peaks Lawsuit Alleges Deception on Landslide Risk.”
The Club at Spanish Peaks Hazardous-Land Report
Court records show that as part of Spanish Peaks approval process subdivision home sites were evaluated for hazardous-land conditions. In March 2000 NTL Engineering and Geoscience, Inc. provided the developer, James Dolan, with a “geotechnical reconnaissance report.“ Each lot was color-coded to reflect the risk of landslides and unstable soils. Spanish Peaks lot sales were initiated in 2004.
Behind the Scenes
Emails procured during the discovery process reveal the company's unwillingness to share the NTL report with prospective clients.
In a February 2004 email exchange between company executives the question is posed: “Soil tests and stability seem to be coming up pretty regularly with potential buyers. Any suggestions on how to handle this based on your past experiences?”
The reply: “With regard to geotechnical stability, this seems to be one of those areas where we should baffle them with BS rather than provide the actual report.”
Sales continued for the next two years with the developer remaining silent about the subdivision’s hazardous-land report. In another email the NTL report is discussed again:
Any interim report would open the lodge and settlement to scrutiny. The more information in the public eye today may only cause additional and unnecessary concern in the public that will leak its way into the real estate community and the approval process.”Harbaugh Lawsuit
The evidential NTL report is the issue in another lawsuit filed against the Spanish Peaks developer. According to allegations in the August 2009 Gallatin County District Court Complaint, the developer failed to disclose that lots were sold on an “active landslide.”
If there is a moving landslide inside the subdivision, property owners face incalculable costs: absence of landslide insurance, repair of roads, loss of equity and inability to refinance.
Interstate Land Sales Full Disclosure Act
Although not referenced in the New West Bozeman article, Spanish Peaks property owners have protection under federal law. The Interstate Land Sales Full Disclosure Act, administered through the U. S. Department of Housing and Urban Development, seeks to protect purchasers from fraudulent actions by requiring developers to disclose all material facts affecting the value of land in their subdivisions. Relevant information is conveyed to purchasers via a legal document called the Property Report.
Hazardous-land assessments are material to purchasers and the failure to disclose them would be a violation of the Act.