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Zyda v. Four Seasons Hotels and Resorts

United States District Court, D. Hawaii

June 24, 2019

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, DOES 1-100, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

          Leslie E. Kobayashi, United States District Judge

         On April 3, 2019, Defendants Four Seasons Hotels Ltd.; Four Seasons Holdings, Inc.; Hualalai Investors, LLC; Hualalai Residential LLC; and Hualalai Rental Management, LLC (collectively “Defendants”) filed their Motion for Partial Summary Judgment (“Motion”). [Dkt. no. 155.] 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 May 10, 2019, and Defendants filed their reply on May 17, 2019. [Dkt. nos. 174, 179.] 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, and J. Orin Edson (“Intervenors”) filed their statement of no position on May 10, 2019. [Dkt. no. 173.] This matter came on for hearing on May 31, 2019. On June 6, 2019, this Court issued an entering order informing the parties of its rulings on the Motion. [Dkt. no. 197.] The instant Order supersedes that entering order. Defendants' Motion is hereby denied as to the unfair or deceptive acts or practices claim and granted as to the claims of promissory estoppel, detrimental reliance, violation of the duty of good faith and fair dealing, negligent misrepresentation, estoppel, and unjust enrichment.

         BACKGROUND

         The instant case arises from the policy change regarding the daily fees for renters and unaccompanied guests at the Hualalai Resort (“Resort”) that was announced in 2015 (“DRGF”). The operative pleading at the time Defendants filed the Motion was Plaintiffs' Second Amended Class Action Complaint for Damages, Declaratory, and Injunctive Relief (“Second Amended Complaint”), filed on April 30, 2018. [Dkt. no. 89.] However, pursuant to the parties' stipulation, and Zyda filed a Third Amended Class Action Complaint for Damages and Declaratory Relief (“Third Amended Complaint”) on behalf of the Class.[1][Dkt. nos. 203 (Third Amended Complaint), 204 (6/14/19 Stipulation and Order).] As stipulated by the parties, the instant Motion applies to the Third Amended Complaint, as it is not materially different from the Second Amended Complaint. [6/14/19 Stipulation and Order at ¶ 3.]

         The Third Amended Complaint alleges the following claims: unfair methods of competition (“UMOC”) and unfair or deceptive acts or practices (“UDAP”), in violation of Haw. Rev. Stat. § 480-2 (“Count III”); promissory estoppel/detrimental reliance (“Count IV”); violation of the duty of good faith and fair dealing (“Count V”); negligent misrepresentation (“Count VI”); estoppel (“Count VII”); and unjust enrichment (“Count VIII”).[2]

         Many of the facts relevant to the instant Motion are undisputed. Zyda purchased a lot in the Resort in 2000. [Defs.' concise statement of facts (“Motion CSOF”), filed 4/3/19 (dkt. no. 156), at ¶ 1; Pltfs.' concise statement of facts (“Opp. CSOF”), filed 5/10/19 (dkt. no. 175) at ¶ 1 (stating Defs.' ¶ 1 is undisputed).] The Master Declaration of Protective Covenants, Conditions and Restrictions and Reservation of Easements for Hualalai at Historic Ka`upulehu, recorded in the State of Hawai`i Bureau of Conveyances on July 31, 1996 (“Hualalai CCRs”), states:

All Lots and Condominiums shall be improved and used solely for single-Family Residential use; provided, however, that this provision shall not preclude any Owner in any Residential Area from renting or leasing all of his Lot or Condominium by means of a written lease or rental agreement subject to the Restrictions. . . .

[Mem. in Opp., Decl. of P. Kyle Smith (“Smith Decl.”), Exh. 1 (excerpts of Hualalai CCRs) at 68, § 2.1.]

         In connection with the purchase of his Resort lot, Zyda executed a Lot Purchase and Sale Agreement (“LPSA”). [Motion CSOF at ¶ 2; Opp. CSOF at ¶ 2; Motion, Decl. of Brett R. Tobin (“Tobin Decl.”), Exh. 1 (letter dated 3/29/00 to Zyda and Paul Fadoul from Wendelin L. Campbell, Principal Broker/In-House Counsel for Hualalai Realty, Inc., transmitting documents) at ZYDA000564-70 (LPSA).]

         The LPSA refers to the Rules and Regulations for the Hualalai Amenity Facilities (“Amenity Rules”), and the Amenity Rules were given to Zyda, along with various other documents, at the time he purchased his Resort lot.[3] [Motion CSOF at ¶ 4; Opp. CSOF at ¶ 4; Tobin Decl., Exh. 3 (Amenity Rules).] ¶ 2002, during the initial membership offering, Zyda joined the Club, and he signed a Hualalai Club Membership Agreement (“HCMA”), acknowledging that he read, understood, and agreed to be bound by the “Membership Plan Documents.” [Motion CSOF at ¶¶ 5-6; Opp. CSOF at ¶¶ 5-6; Tobin Decl., Exh. 4 (HCMA) at 2.] The “Membership Plan Documents” are “The Hualalai Club Membership Plan and Rules and Regulations.” [Tobin Decl., Exh. 4 at 1.] In December 2006, a letter was sent to all Resort owners and Club members notifying them about the fee that would be charged to all unaccompanied guests beginning in 2007. [Motion CSOF at ¶ 7; Opp. CSOF at ¶ 7; Tobin Decl., Exh. 7.]

         Defendants now seek summary judgment as to all claims, except for the UMOC claim.

         DISCUSSION I. UDAP Claim

         The Hawai`i Supreme Court has stated: “a deceptive act or practice is (1) a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances where (3) the representation, omission, or practice is material.” Courbat v. Dahana Ranch, Inc., 111 Hawai`i 254, 262, 141 P.3d 427, 435 (2006) (brackets, citation, and internal quotation marks omitted). This “test is an objective one, turning on whether the act or omission is likely to mislead consumers, as to information important to consumers, in making a decision regarding the product or service.” Id. (citations and internal quotation marks omitted).

         Count III is silent as to what specific acts or omissions the UDAP claim is based upon. See Third Amended Complaint at ¶¶ 21-24. The basis of Zyda's UDAP claim, and his case as a whole, must be gleaned from the evidence that he has presented: Zyda testified that, before he purchased his lot in the Resort, he was told his future renters and guests would be able to use all of the Resort's amenities without paying any fees. [Tobin Decl., Exh. 2 (trans. of 7/28/16 depo. of Zyda (“Zyda Depo.”)) at 32.] Zyda has presented evidence that other Class members were given the same, or similar, information. See Smith Decl., Exh. 10 (Decl. of Donald Evans, dated 9/27/17 (“Evans Decl.”)) at ¶ 5; id., Exh. 11 (Decl. of Jim Ullakko, dated 9/27/17, (“Ullakko Decl.”)) at ¶ 5; see also id., Exh. 3 (untitled, 11/17/15 declaration of Tom Conom (“Conom Decl.”)) at ¶¶ 4-5.[4]

         Initially, the periodic increases in the DRGF were in the range of five to ten dollars. [Pltfs.' Submission of Excerpts of the May 9, 2019 Depo. Trans. of Russell Schoon, filed 5/28/19 (dkt. no. 187) (“Depo. Submission”), Decl. of Terrance M. Revere (“Revere Suppl. Decl.”), Exh. A (“Schoon Depo.”) at 19.[5] At one point, the DRGF was increased to forty dollars; [id. at 57 (questioning of Mr. Schoon regarding a statement written by Jeremy Sosner);] on January 16, 2012, the DRGF was forty-five dollars; [id. at 81-82;] and it was fifty dollars on July 15, 2013, [id. at 104]. The increase to forty dollars coincided with the completion of spa facilities, and the completion of the spa was used as a “justification” for the DRGF increase. [Id. at 57.]

         In 2015, a policy change was announced under which the DRGF were as high as $250 during certain times of the year (“2015 DRGF Policy”). [Id. at 105.] However, there has also been testimony that, at other times of the year, the DRGF increased to only $65 when the 2015 DRGF Policy took effect. [Smith Decl., Exh. 5 (excerpts of trans. of 4/4/19 depo. of Patrick Fitzgerald (“Fitzgerald Depo.”)) at 211.[6]

         Mr. Schoon acknowledged that, for the times when the DRGF became $250, “the rate did increase dramatically.” [Schoon Depo. at 19.] Mr. Schoon also acknowledged that he is not aware of another Resort that charges its guests a $250 per day fee. [Id. at 105.] Zyda contends Defendants' hidden purpose behind this dramatic increase is to limit the number of the Resort owners' renters and guests, which allows the Hotel guests greater access to the Resort amenities.

         Since the imposition of the 2015 DRGF Policy, Resort owners still rent their homes. However, unless the DRGF is paid, their renters cannot access the Resort amenities and are treated the same renters of Resort owners who are not Club members. See Smith Decl., Exh. 2 (excerpts of trans. of 10/5/16 depo. of Robert Kildow (“Kildow Depo.”)) at 74-75 (“[T]echnically, you can rent your place without being a member of the Club, but your renters don't have access to anything so it sort of defeats the purpose. Nobody is required to get a membership unless you, actually, want to go outside and do something.”).[7] Evidence submitted points to the DRGFs arguably impairing Resort owners' ability to rent their homes:

7. I have been financially harmed by the imposition of the increased resort fees and restrictions on the resort amenities.
8. As a direct result of the increased resort fees and restrictions, the rental of my unit has been limited and I was forced to notify all of my potential renters of the resort fee that could be up to $250.00 per person per day to use the resort amenities. This directly impacted my rental sales as many potential renters were not willing to pay this extra cost on top of the rental cost of the unit.
9. I was forced to lower my rental rate up to $200.00 from $400.00 per day to maintain some sort of rental income.

[Evans Decl. at ¶¶ 7-9.] Other Class members gave similar testimony. [Smith Decl., Exh. 9 (undated, unsigned Decl. of Steve Schmautz) at ¶¶ 9-11; ...


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