Builder's claims of fraud win case

Builder's claims of fraud win case

November 24th, 2011 by Dave Flessner in Business Around the Region

The developer of the failed Rarity Club in Marion County has been ordered to pay a Chattanooga homebuilder nearly $5.8 million for not fulfilling promises for a golf course, marina and luxury resort on Nickajack Lake.

A Marion County Circuit Court jury ordered that Maryville, Tenn., developer Mike Ross and his Rarity Communities pay nearly $1.9 million in compensatory damages and nearly $3.9 million in punitive damages to Bill Worley Construction Co.

Following a weeklong trial in Marion County Circuit Court, a 12-member jury found that Ross "made fraudulent and intentional misrepresentations" to Worley about his project. The jury also concluded that Ross trespassed on Worley's land by digging a drainage ditch and "committed unfair and deceptive trade practices" under Tennessee's consumer protection statutes.

Worley and others who collectively paid Ross' businesses more than $26 million for their properties in Rarity Club contend they are unable to use or sell their lots because Ross diverted their money to other Rarity Communities.

Ross, who has 30 days to appeal the judgment, declined Wednesday to comment on the jury's verdict.

But David Harrison, an attorney for Worley, said he thought the outcome "was a fair decision." The court judgment is one of the biggest ever in Marion County, attorneys said.

"The punitive damages are substantial, particularly for Marion County, and to me indicates that the jury was strongly dissatisfied with what occurred at Rarity Club," Harrison said.

Worley's lawsuit is the first of at least three lawsuits Ross is facing over his role in the failed Rarity Club on Nickajack Lake.

Ross also is being sued by other property owners at Rarity Bay and by Chattanooga developer John "Thunder" Thornton, who sold the property to Ross but claims he was not paid the full amount he was due.

Ross' Rarity Communities took over the project after Thornton assembled 578 acres of prime lakefront property near Little Cedar Mountain from the Tennessee Valley Authority more than five years ago.

Ross planned a $500 million resort with an 18-hole golf course, a 300-slip marina and residential lots for more than 500 luxury homes built around a community and wellness center.

Worley and his wife, Rebecca, acquired five lakefront lots from Ross and built a luxury home in what was to be a 578-acre luxury residential development. Worley's house is one of only two built at Rarity Club.

The development firm for Rarity Club, Nickajack Shores Holdings LLC, is bankrupt, and Green Bank, which financed much of the development, took over Rarity Club through foreclosure in August 2009. The bank took a similar foreclosure action in May 2009 at Rarity Rivers, another 594-acre luxury golf course and housing development Ross planned to build in Meigs County.