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

United States District Court, D. Hawaii

September 27, 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 GRANTING DEFENDANTS' MOTION TO DISMISS ORGANIZED CRIME, UNIFORM LAND SALES PRACTICES ACT, AND BREACH OF FIDUCIARY DUTY COUNTS IN CLASS PLAINTIFFS' SECOND AMENDED CLASS ACTION COMPLAINT FOR DAMAGES, DECLARATORY, AND INJUNCTIVE RELIEF, FILED APRIL 30, 2018

          LESLIE E. KOBAYASHI UNITED STATES DISTRICT JUDGE.

         On May 14, 2018, Defendants Four Seasons Hotels Ltd., Four Seasons Holdings, Inc. (collectively “Four Seasons Defendants”), Hualalai Investors, LLC, Hualalai Residential LLC, and Hualalai Rental Management, LLC (collectively “Hualalai Defendants” and all collectively “Defendants”) filed their Motion to Dismiss Organized Crime, Uniform Land Sales Practices Act, and Breach of Fiduciary Duty Counts in Class Plaintiffs' Second Amended Class Action Complaint for Damages, Declaratory, and Injunctive Relief, Filed April 30, 2018 (“Motion”). [Dkt. no. 90.] Plaintiffs Christopher Zyda (“Zyda”) and Carol Meyer (“Meyer” and collectively “Plaintiffs”), on behalf of themselves and all others similarly situated (all collectively “Class”), filed their memorandum in opposition on June 4, 2018, and Defendants filed their reply on June 8, 2018. [Dkt. nos. 96, 98.] 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 granted 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) (“Notice of Removal”), filed 11/1/16 (dkt. no. 1), 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” (“First Amended Complaint”) and, on October 13, 2016, the state court issued an order granting class certification (“Certification Order”). [Id., Exh. 2 (First Amended Complaint), Exh. 3 (Certification Order).]

         On March 28, 2018, this Court issued its Order Denying Defendants' Motion to Decertify Class Action (“3/28/18 Order”). [Dkt. no. 79.[1] The 3/28/18 Order, inter alia, ruled that Zyda was not an adequate representative for the Class's claims under the Condominium Property Act, Haw. Rev. Stat. Chapter 514B, and granted the Class leave to file an amended complaint adding a new class representative for that claim.

         On April 30, 2018, Plaintiffs filed their Second Amended Class Action Complaint for Damages, Declaratory, and Injunctive Relief (“Second Amended Complaint”). [Dkt. no. 89.] As compared to the First Amended Complaint, the Second Amended Complaint adds Meyer as a class representative, and otherwise alleges the same facts and asserts the same causes of action as the First Amended Complaint.

         According to the Second Amended Complaint, Plaintiffs own real property within the Hualalai Resort (“Resort”), which is located on the Island of Hawai`i. [Id. at ¶¶ 2-3.] The Hualalai Defendants[2] are “the owners, developers, successors in interest to, and in house realtors for the Hualalai Resort, and control the Hualalai Club (‘Club')” and the Resort.[3] [Id. at ¶ 4.] The Hualalai Defendants retained the Four Seasons Defendants[4] to manage the Resort, the Club, and the hotel at the Resort.[5] [Id. at ¶¶ 4-6.] Zyda and Meyer, respectively, purchased their home sites in 2000 and 2003. Meyer has also owned a condominium in Hualalai from 2013 to the present [Id. at ¶¶ 8-9.]

         Plaintiffs allege Defendants induced them and others to make purchases within Hualalai by promising, inter alia, that “Plaintiffs and others would enjoy membership in the Hualalai Club and that their family and guests would be able to enjoy facilities in a world-class resort environment without additional guest fees.” [Id. at ¶ 10.] After Plaintiffs and other Class members had committed substantial resources, “Defendants failed to maintain and provide adequate facilities to handle the growing population.” [Id. at ¶ 11.] Plaintiffs allege Defendants continued to build homes in Hualalai and sell new Club memberships to non-Hualalai residents, while falsely complaining that Hualalai homeowners, their families, and their guests were overburdening the Resort. Without proper cause, Defendants discouraged Class members from using their homes and Club memberships by significantly increasing fees and charges for unaccompanied guests at the Resort (“Daily Resort Guest Fees” or “DRGFs”). Plaintiffs allege the increased DRGFs: 1) violated representations Defendants made to induce sales; and 2) were imposed to favor Defendants' own interests, regardless of the harm the increased DRGFs caused to Class members' property values and use and enjoyment of the Club and Resort. [Id. at ¶¶ 12-13.] Plaintiffs allege Defendants continue to “operate the Resort and Club in secrecy, and fail and refuse to act openly and in good faith, ” in violation of the Class members' rights. [Id. at ¶ 14.]

         Plaintiffs assert claims for violation of the Condominium Property Act, Haw. Rev. Stat. Chapter 514B (“Count I”); [id. at ¶¶ 24-30;] violation of the Uniform Land Sales Practices Act, Haw. Rev. Stat. Chapter 484 (“ULSPA” and “Count II”); [id. at ¶¶ 31-37;] 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 ¶¶ 38-41;] promissory estoppel/detrimental reliance (“Count IV”); [id. at ¶¶ 42-45;] violation of the duty of good faith and fair dealing (“Count V”); [id. at ¶¶ 46-48;] negligent misrepresentation (“Count VI”); [id. at ¶¶ 49-55;] estoppel (“Count VII”); [id. at ¶¶ 56-59;] unjust enrichment (“Count VIII”); [id. at ¶¶ 60-64;] organized crime, pursuant to Haw. Rev. Stat. Chapter 842 (“Count IX”); [id. at ¶¶ 65-68;] and breach of fiduciary and other common law duties (“Count X”), [id. at ¶¶ 69-70].

         The Class 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. at pgs. 15-17.]

         In the instant Motion, Defendants seek dismissal of Counts II, IX, and X.[6]

         STANDARD

         The Ninth Circuit has described the standard applicable to a motion under Fed.R.Civ.P. 12(b)(6) as follows:

To survive a motion to dismiss for failure to state a claim after the Supreme Court's decisions in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the [plaintiff's] factual allegations “must . . . suggest that the claim has at least a plausible chance of success.” In re Century Aluminum [Co. Sec. Litig.], 729 F.3d [1104, ] 1107 [(9th Cir. 2013)]. In other words, their complaint “must allege ‘factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937).
Following Iqbal and Twombly, . . . . we have settled on a two-step process for evaluating pleadings:
First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.
[Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014)] (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)). In all cases, evaluating a complaint's plausibility is a “context-specific” endeavor that requires courts to “draw on . . . judicial experience and common sense.” Id. at 995-96 (internal quotation marks omitted).

Levitt v. Yelp! Inc., 765 F.3d 1123, 1134-35 (9th Cir. 2014) (some alterations in Levitt).

         This district court has stated, “although allegations ‘upon information and belief' may state a claim after Iqbal and Twombly, a claim must still be based on factual content that makes liability plausible, and not be ‘formulaic recitations of the elements of a cause of action.'” Klohs v. Wells Fargo Bank, N.A., 901 F.Supp.2d 1253, 1260 n.2 (D. Hawai`i 2012) (quoting Long v. Yomes, 2011 WL 4412847, at *4 (D. Haw. Sept. 20, 2011) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955) (editorial mark omitted)).

         DISCUSSION

         I. Cou ...


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