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Zyda v. Four Seasons Hotels and Resorts Four Seasons Holdings Inc.

United States District Court, D. Hawaii

March 28, 2018

CHRISTOPHER ZYDA, On Behalf of Himself and All Others Similarly Situated, Plaintiffs,
v.
FOUR SEASONS HOTELS AND RESORTS FOUR SEASONS HOLDINGS INC.; FOUR SEASONS HUALALAI RESORT; HUALALAI RESIDENTIAL, LLC dba HUALALAI REALTY; HUALALAI INVESTORS, LLC; KAUPULEHU MAKAI VENTURE; HUALALAI DEVELOPMENT COMPANY; HUALALAI VILLAS & HOMES; HUALALAI INVESTORS, LLC; HUALALAI RENTAL MANAGEMENT, LLC; and DOES 1-100, Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO DECERTIFY CLASS ACTION

          Leslie E. Kobayashi, United States District Judge.

         On August 15, 2017, Defendants Four Seasons Hotels Ltd., Four Seasons Holdings, Inc. (collectively “Four Seasons Defendants”), Hualalai Investors, LLC, Hualalai Residential LLC, and Hualalai Rental Management, LLC's (collectively “Hualalai Defendants” and all collectively “Defendants”) filed their Motion to Decertify Class Action (“Motion”). [Dkt. no. 66.] On August 22, 2017, Intervenors James R. Mahoney, Ann Marie Mahoney, Judith Runstad, H. Jon Runstad, Jonathan Seybold, Patricia Seybold, David Keyes, Doreen Keyes, Julie Wrigley, Kevin Reedy, Lynn Reedy, Bradley Chipps, Donna Chipps, and J. Orin Edson (“Intervenors”) filed a substantive joinder in the Motion (“Joinder”). [Dkt. no. 71.] Plaintiff Christopher Zyda, on behalf of himself and all others similarly situated (“Zyda” and collectively the “Class”), filed their memorandum in opposition on September 27, 2017, and Intervenors and Defendants filed their respective reply memoranda on October 10, 2017. [Dkt. nos. 74, 75, 76.] The Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i (“Local Rules”). Defendants' Motion is hereby denied for the reasons set forth below.

         BACKGROUND

         On October 2, 2015, Zyda filed his “Class Action Complaint for Damages Declaratory and Injunctive Relief” (“Complaint”) in the Circuit Court of the Third Circuit, State of Hawai`i (“state court”). [Notice of Removal of Action Pursuant to 28 U.S.C. § 1332(d) and 28 U.S.C. § 1453(b), filed 11/1/16 (dkt. no. 1) (“Notice of Removal”), Decl. of William Meheula (“Meheula Removal Decl.”), Exh. 1 (Complaint).] On October 14, 2015, Zyda filed his “First Amended Class Action Complaint for Damages Declaratory and Injunctive Relief” (“Amended Complaint”). [Id., Exh. 2 (Amended Complaint).]

         I. Allegations in the Amended Complaint

         Zyda is the owner of real property within the Hualalai Resort community (“Hualalai”), which is located on the Island of Hawai`i. The Hualalai Defendants are owners, developers, and realtors for Hualalai. Zyda alleges the Hualalai Defendants control both the Hualalai Resort (“Resort”) and the Hualalai Club (“Club”).[1] The Hualalai Defendants retained the Four Seasons Defendants to manage the Resort, the Club, and the hotel at the Resort. [Amended Complaint at ¶¶ 4-6.] Zyda alleges Defendants induced him and others to purchase homes within Hualalai, as well as Club memberships, by promising that their family members and guests would be able to enjoy the Club and Resort facilities “without additional guest fees.” [Id. at ¶ 10.] Zyda alleges that, after he and other members of the proposed class had committed substantial resources, “Defendants failed to maintain and provide adequate facilities to handle the growing population.” [Id. at ¶ 11.] Zyda alleges Defendants continued to build homes in Hualalai and sell new Club memberships to non-Hualalai residents, while falsely complaining that Hualalai homeowners' guests overburden the Resort. Without proper cause, Defendants discouraged members of the proposed class from using their Club memberships by significantly increasing fees and charges for unaccompanied guests.[2] [Id. at ¶¶ 12-13.] Zyda alleges the 2016 DRGFs violated representations Defendants made to induce sales; and were imposed to favor Defendants' own interests regardless of the harm the 2016 DRGFs caused to Class members' property values and use and enjoyment of the Club and Resort. [Id. at ¶ 13.] Zyda alleges Defendants continue to operate the Club and Resort “in secrecy, and fail and refuse to act openly and in good faith” with regard to the Class's rights. [Id. at ¶ 14.]

         Zyda brings state law claims for: violation of the Condominium Property Act, Haw. Rev. Stat. Chapter 514B (“Count I”); [id. at ¶¶ 24-29;] violation of the Uniform Land Sales Practices Act, Haw. Rev. Stat. Chapter 484 (Count II”); [id. at ¶¶ 30-36;] unfair methods of competition (“UMOC”) and unfair or deceptive acts or practices (“UDAP”), in violation of Haw. Rev. Stat. § 480-2 (“Count III”); [id. at ¶¶ 37-40;] promissory estoppel/detrimental reliance (“Count IV”); [id. at ¶¶ 41-44;] violation of the duty of good faith and fair dealing (“Count V”); [id. at ¶¶ 45-47;] negligent misrepresentation (“Count VI”); [id. at ¶¶ 48-54;] estoppel (“Count VII”); [id. at ¶¶ 55-58;] unjust enrichment (“Count VIII”); [id. at ¶¶ 59-61;] organized crime, pursuant to Haw. Rev. Stat. Chapter 842 (“Count IX”); [id. at ¶¶ 62-65;] and breach of fiduciary and other common law duties (“Count X”), [id. at ¶¶ 66-68].

         Zyda seeks: general, special, treble, and consequential damages; attorneys' fees; punitive damages; injunctive and declaratory relief; a court order requiring various reforms to Club policies; and any other appropriate relief. [Id., Prayer for Relief ¶¶ 1-15.]

         II. Certification Order

         On October 13, 2016, the state court issued its Order Granting Plaintiff's Motion for Class Certification, Filed April 26, 2016 (“Certification Order”). [Meheula Removal Decl., Exh. 3.] The Certification Order defined the Class as:

All purchasers of residential properties in the Hualalai Resort from 1995 to the present who are members of the Hualalai Club and whose properties are subject to a guest fee or other restriction on the use of Hualalai Resort amenities for any family member or guest (including rental guest) of such owner.

[Id. at 2.] The law firms of Lynch Hopper Smith, LLP and Revere & Associates LLC were appointed as Class Counsel. [Id.]

         III. Removal

         On November 1, 2016, before any class notice was approved, Defendants removed the case pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2)(A). [Notice of Removal at ¶¶ 16-20.] On March 28, 2017, the Court issued its Order Denying Plaintiffs' Motion for Remand (“3/28/17 Order”). [Dkt. no. 36.[3]

         IV. Motion

         In the instant Motion, Defendants argue the state court's Certification Order does not survive removal. Alternatively, Defendants move to decertify the Class under Fed.R.Civ.P. 23. The Class argues all the Rule 23(a) and 23(b)(3) requirements are satisfied.

         Intervenors are eight Class members who support the 2016 DRGFs and argue they have a fundamental conflict with Zyda.[4]Intervenors join Defendants in seeking decertification.

         STANDARD

         “Class certification is proper only if the trial court has concluded, after a ‘rigorous analysis, ' that Rule 23(a) has been satisfied.” Parsons v. Ryan, 754 F.3d 657, 674 (9th Cir. 2014) (some citations and internal quotation marks omitted) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011)). The party seeking to maintain class certification must “satisfy through evidentiary proof [the Rule 23(a) requirements and] at least one of the provisions of Rule 23(b).” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013). Rule 23 states, in pertinent part:

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if:
. . . .
(3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

         The Rule 23(a) requirements are known as: “(1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation.” Parsons, 754 F.3d at 674 (footnote omitted). The Rule 23(b)(3) requirements are known as the “predominance and superiority requirements.” Baker v. Castle & Cooke Homes Hawaii, Inc., Civil No. 11-00616 SOM-RLP, 2014 WL 1669158, at *3 (D. Hawai`i Apr. 28, 2014).

         The Ninth Circuit has stated:

In evaluating whether a party has met the requirements of Rule 23, we recognize that “Rule 23 does not set forth a mere pleading standard.” Wal-Mart, 131 S.Ct. at 2551. We therefore require a party seeking class certification to “affirmatively demonstrate his compliance with the Rule - that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id. Similarly a party must affirmatively prove that he complies with one of the three subsections of Rule 23(b).

Parsons, 754 F.3d at 654.

         DISCUSSION

         I. The Class Continues to Exist After Removal

         Defendants first argue the state court Certification Order does not remain in place following removal. The Ninth Circuit has stated:

“After removal, the federal court takes the case up where the State court left it off.” Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 436, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974) (internal quotation marks omitted). “The federal court . . . treats everything that occurred in the state court as if it had taken place in federal court.” Butner v. Neustadter, 324 F.2d 783, 785 (9th Cir. 1963). Consequently, an order entered by a state court “should be treated as though it had been validly rendered in the federal proceeding.” Id. at 786. “[F]ederal rather than state law governs the future course of proceedings.” Granny Goose Foods, 415 U.S. at 437, 94 S.Ct. 1113.

Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 887 (9th Cir. 2010) (alterations in Carvalho). After removal, the state court's Certification Order remains in effect, and the Class retains its legal status separate from Zyda. See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1090 (9th Cir. 2011) (“[U]pon certification the class acquires a legal status separate from the interest asserted by the class representative.” (internal quotation marks and alterations omitted)).

         Defendants argue class certification requirements are less demanding in state court. Even if that is true, Defendants are sufficiently protected because a Rule 23 decertification motion may be brought at any time. See Lambert v. Nutraceutical Corp., 870 F.3d 1170, 1182 (9th Cir. 2017) (“The party seeking to maintain class certification bears the burden of demonstrating that the Rule 23 requirements are satisfied, even on a motion to decertify.”). The instant Motion also seeks decertification under Rule 23. The Court therefore examines the Rule 23 requirements in turn.

         II. Rule 23(a) Prerequisites

         A. Numerosity

         This Court has described the Rule 23(a) numerosity inquiry as follows:

The numerosity inquiry “requires examination of the specific facts of each case and imposes no absolute limitations.” Gen. Tel. Co. of the Nw., Inc. v. E.E.O.C., 446 U.S. 318, 330, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980). Courts, however, have found the numerosity requirement to be satisfied when a class includes at least 40 members. See Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995) (noting that “numerosity is presumed at a level of 40 members”) (citation omitted); In re Nat'l W. Life Ins. Deferred Annuities Litig., 268 F.R.D. 652, 660 (S.D. Cal. 2010) (noting that “[c]ourts have found joinder impracticable in cases involving as few as forty class members”) (citations omitted); E.E.O.C. v. Kovacevich “5” Farms, No. CV-F-06-165 OWW/TAG, 2007 WL 1174444, at *21 (E.D. Cal. Apr. 19, 2007) (noting that “[c]ourts have routinely found the numerosity requirement satisfied when the class comprises 40 or more members”); Ikonen v. Hartz Mountain ...

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