We are playing a Underdark game all using Drow Nobles with the innate ability of levitation. When fighting in a encounter our GM informed us that by using levitation we are considered flat footed. While I understand the logic, as we often know logic does not really apply in fantasy games and while attempting to find some rule referring to this I have found none. Can anyone provide any insight?
For reference the spell levitation states the following:
Levitate allows you to move yourself, another creature, or an object up and down as you wish. A creature must be willing to be levitated, and an object must be unattended or possessed by a willing creature. You can mentally direct the recipient to move up or down as much as 20 feet each round; doing so is a move action. You cannot move the recipient horizontally, but the recipient could clamber along the face of a cliff, for example, or push against a ceiling to move laterally (generally at half its base land speed).
A levitating creature that attacks with a melee or ranged weapon finds itself increasingly unstable; the first attack has a -1 penalty on attack rolls, the second -2, and so on, to a maximum penalty of -5. A full round spent stabilizing allows the creature to begin again at -1.
First, (insert pedantic rant about the difference between flat-footed and denied dex here).
Second, no Levitate does exactly what it says it does, which is make you unstable for attacks. It does not deny dex to AC.
You aren't Flat-Footed or Denied your Dex.
So they are houseruling it.