United States District Court, D. Hawaii
CHRISTOPHER ZYDA, On Behalf of Himself and All Others Similarly Situated, Plaintiffs,
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
E. Kobayashi, United States District Judge.
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.
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
Allegations in the Amended Complaint
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”). 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. [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.]
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 ¶¶
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.]
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
[Id. at 2.] The law firms of Lynch Hopper Smith, LLP
and Revere & Associates LLC were appointed as Class
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.
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 eight Class members who support the 2016 DRGFs and argue
they have a fundamental conflict with Zyda.Intervenors
join Defendants in seeking decertification.
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
(a) Prerequisites. One or more members of a class may sue or
be sued as representative parties on behalf of all members
(1) the class is so numerous that joinder of all members is
(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.
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).
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.
The Class Continues to Exist After Removal
first argue the state court Certification Order does not
remain in place following removal. The Ninth Circuit has
“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)).
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.
Rule 23(a) Prerequisites
Court has described the Rule 23(a) numerosity inquiry as
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