SAN DIEGO, Calif. (CN) — A large, corporate residential landlord operating in Southern California has agreed to an almost $20 million settlement over unpaid permitting fees.
Dallas-based Invitation Homes faced a lawsuit from Blackbird Special Project, LLC, a relator in the case. Blackbird claimed in 2020 that Invitation Homes got building permits for a fraction of some 12,000 homes it bought and renovated in cities like Los Angeles, San Diego, Sacramento and other cities. The suit later was amended to add a total of 35 cities in the Golden State.
“Invitation Homes deprived many California governments of much-needed funds by renovating rental properties without securing the permits and inspections they require,” said Vince McKnight, a partner at Sanford Heisler Sharp and lead attorney for Blackbird owner Neil Senturia, in a statement Monday. “The company’s actions had both long- and short-term adverse financial consequence for these cities.”
Blackbird, a technology firm, is a relator. Under the law, a relator can sue a corporation that’s defrauded the government in the name of the entity or agency that was defrauded. If successful, the relator can receive a portion of the money received.
The firm has asked for 50% of the settlement proceeds, pointing to no involvement from the entities and its own four-year investigation and litigation.
The firm used technology from Deckard Technologies to find information about permitting fees. Using artificial intelligence and “lookback” technology, it found and analyzed pictures of residential properties bought and renovated by Invitation Homes that had no permits. Work done included electrical and plumbing repairs, swimming pool construction and demolitions.
“The case shows the utility of False Claims Act cases, as none of the cities involved were aware that they had been wronged, but will now benefit financially and also with regard to public safety in these homes,” said co-counsel Len Simon in a statement.
Blackbird initially filed the suit in San Diego Superior Court. It was moved to federal court in February 2022. A motion to dismiss filed by Invitation Homes two months later was denied in early 2023.
Two mediation sessions with a retired federal judge facilitated the settlement agreement, which is not yet final. The cities that are part of the suit will get notice of the agreement and have a chance to comment before final approval.
“The parties have exchanged tens of thousands of documents during fact discovery,” Blackbird wrote in a Monday court filing. “Relator has received and been able to analyze over 60,000 documents from Invitation Homes, containing over 400,000 pages.
“If the case had not settled, the parties would have continued to undertake significant discovery efforts, including exchanging additional documents, taking depositions and completing expert discovery,” Blackbird added.
A judge must decide if dismissing the case and approving the settlement are in the best interests of everyone. McNight argued in court documents that the settlement contains a reasonable assessment of damages. Additionally, without the settlement, the cities would get nothing for at least a year. The trial was set for April 2025, with a likely appeal if the relator prevailed.
The settlement calls for $4 million of the $19.9 million in attorneys’ fees. The cities would receive 50% of their allocation, with Blackbird receiving the other 50%.
Blackbird wrote that it was responsible for the effort that led to the case’s successful conclusion. It found the problem, investigated it and used analysis to support its argument before litigating the matter for almost four years with no governmental assistance.
Invitation Homes in a statement said it’s called the lawsuit meritless since the beginning.
“However, the company believes reaching this settlement is in the best interest of all its stakeholders and allows the company to better focus on its core business operations,” Invitation Homes said. “Upon final approval of the settlement agreement by the U.S. District Court in the Southern District of California, the company will pay a total amount of $19,992,900 to completely resolve the dispute, thereby fully releasing the company without any admission of liability.”