PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6) CASE NO. 2:17-CV-01932-RSM TERRELL MARSHALL LAW GROUP PLLC 936 North 34th Street, Suite 300 Seattle, Washington 98103-8869 TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 THE HONORABLE RICARDO S. MARTINEZ U.S. DISTRICT COURT WESTERN DISTRICT OF WASHINGTON LAWRENCE HART, CLYDE STEPHEN LEWIS, JAMES PRESTI, and MICHAEL RALLS, individually and on behalf of all others similarly situated, Plaintiffs, v. CF ARCIS VII LLC d/b/a THE CLUB AT SNOQUALMIE RIDGE, d/b/a TPC AT SNOQUALMIE RIDGE, and d/b/a SNOQUALMIE RIDGE GOLF CLUB, CF ARCIS IV HOLDINGS, LLC, ARCIS EQUITY PARTNERS, LLC, BLAKE S. WALKER, individually and on behalf of the marital community of BLAKE S. WALKER and JANE DOE WALKER, and BRIGHTSTAR GOLF SNOQUALMIE, LLC, Defendants. NO. 2:17-CV-01932-RSM PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6) Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 1 of 33
33
Embed
T PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO ...
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6) CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
THE HONORABLE RICARDO S. MARTINEZ U.S. DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
LAWRENCE HART, CLYDE STEPHEN LEWIS, JAMES PRESTI, and MICHAEL RALLS, individually and on behalf of all others similarly situated,
Plaintiffs,
v.
CF ARCIS VII LLC d/b/a THE CLUB AT SNOQUALMIE RIDGE, d/b/a TPC AT SNOQUALMIE RIDGE, and d/b/a SNOQUALMIE RIDGE GOLF CLUB, CF ARCIS IV HOLDINGS, LLC, ARCIS EQUITY PARTNERS, LLC, BLAKE S. WALKER, individually and on behalf of the marital community of BLAKE S. WALKER and JANE DOE WALKER, and BRIGHTSTAR GOLF SNOQUALMIE, LLC,
Defendants.
NO. 2:17-CV-01932-RSM
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6)
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 1 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - i CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
I. INTRODUCTION .............................................................................................................1 II. STATEMENT OF FACTS ................................................................................................2 A. The Club at Snoqualmie and the Rules in place before May 2013 .......................2 B. The Arcis Defendants and Brightstar colluded to amend the rules in
May 2013 ...............................................................................................................3 C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’
liability ...................................................................................................................5 III. ARGUMENT AND AUTHORITY ..................................................................................6 A. Standard of Review ...............................................................................................6 B. Plaintiffs sufficiently plead all elements of a breach of contract claim ................6 1. Plaintiffs have properly alleged breach .....................................................6 2. Plaintiffs allege facts that support damages and equitable
remedies .....................................................................................................9 C. Plaintiffs sufficiently plead all elements of a CPA claim ....................................10 1. Plaintiffs plead sufficient facts to show Defendants engaged in
unfair acts ................................................................................................11 2. Plaintiffs plead sufficient facts to show Defendants engaged in
deceptive acts ...........................................................................................13 3. Plaintiffs plead sufficient facts to show injury to the public
interest .....................................................................................................15 a. The CPA was amended in 2009. Public interest impact
is satisfied when the alleged unfair or deceptive act “injured other persons” ................................................................15
b. Plaintiffs do not complain about a “private” dispute
between two parties .....................................................................16
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 2 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - ii CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
c. Public interest impact is also satisfied under the multifactor test .............................................................................18
4. Plaintiffs plead sufficient facts to show they have been injured .............19 5. Plaintiffs plead sufficient facts to show causation ..................................20 D. Plaintiffs sufficiently plead all elements of a conversion claim ..........................21 E. Plaintiffs plead sufficient facts to support piercing the corporate veil ................23 IV. CONCLUSION ...............................................................................................................25
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 3 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iii CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
556 U.S. 662 (2009) .........................................................................................................6 Barker v. Riverside Cnty. Office of Educ.,
584 F.3d 821 (9th Cir. 2009) .............................................................................................6 Davis v. HSBC Bank Nev., N.A.,
691 F.3d 1152 (9th Cir. 2012) .........................................................................................12 Eagle View Techs., Inc. v. Xactware Sols., Inc.,
No. C12-1913-RSM, 2013 WL 5945810 (W.D. Wash. Nov. 6, 2013) ...........................10 Eye Care Ctr. of Snohomish v. Chemat Tech., Inc.,
No. C08-558RSM, 2009 WL 112674 (W.D. Wash. Jan. 14, 2009) ....................22, 23, 24 Hall v. Santa Barbara,
833 F.2d 1270 (9th Cir. 1986) ...........................................................................................6 Jet Parts Eng’g, Inc. v. Quest Aviation Supply, Inc.,
2015 WL 4523497 (W.D. Wash. July 27, 2015) .............................................................17 Segal Co. v. Amazon.com,
280 F. Supp. 2d 1229 (W.D. Wash. 2003) ......................................................................15 Skansgaard v. Bank of Am., N.A.,
896 F. Supp. 2d 944 (W.D. Wash. 2011) ........................................................................14 Veridian Credit Union v. Eddie Bauer, LLC,
295 F. Supp. 3d 1140 (W.D. Wash. 2017) ......................................................................12
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 4 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iv CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
86 Wn. App. 732, (1997) .................................................................................................14 Griffith v. Centex Real Estate Corp.,
93 Wn. App. 202 (1998) ..................................................................................................11 Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co.,
105 Wn.2d 778 (1986) .............................................................................10, 13, 16, 17, 18 Hearst Comm’ns, Inc. v. Seattle Times Co.,
154 Wn.2d 493 (2005) ...................................................................................................6, 7 Holiday Resort Cmty. Ass’n v. Echo Lake Assocs., LLC,
134 Wn. App. 210 (2006) ................................................................................................13 In re Marriage of Langham and Kolde,
153 Wn.2d 553 (2005) .....................................................................................................21 Klem v. Wash. Mut. Bank,
166 Wn.2d 27 (2009) ...........................................................................................13, 17, 19 Paullus v. Fowler,
59 Wn.2d 204 (1961) .........................................................................................................7 Pohlman Inv. Co. v. Va. City Gold Mining Co.,
184 Wash. 273 (1935) .....................................................................................................23 Rekhter v. Dep’t of Soc. & Health Servs.,
496 F. App’x 760 (9th Cir. 2012) ....................................................................................14 Schmidt v. Cornerstone Invs., Inc,
115 Wn.2d 148 (1990) .....................................................................................................12 Tanner Elec. Co-op. v. Puget Sound Power & Light Co.,
`128 Wn.2d 656 (1996) .....................................................................................................6 Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n,
Fed. R. Civ. P. 8(a)(2) ...................................................................................................................6 Fed. R. Evid. 201(b) ................................................................................................................5, 18
OTHER AUTHORITIES
In re Int’l Harvester Co., 104 F.T.C. 949, 1984 WL 565290 (1984) .......................................................................11
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 7 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 1 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
price) within 60 days of the sale of the Club if the new owner refuses to honor their
membership agreements. Dkt. 11, Exh. B ¶ 3.2(b)(iii). Defendants’ secret revision of the Rules
foreclosed Plaintiffs’ and Class members’ ability to voluntarily resign and obtain their 100%
refunds. SAC ¶ 6.9. Because of these omissions, Plaintiffs and at least 100 other persons
remain on the Waiting List for refunds that will never come or will be delayed. Id. ¶¶ 5.3, 6.7.
C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’ liability.
Arcis’ collusion with Brightstar to introduce Non-Refundable Memberships finally
came to light in August 2015, but Arcis did little to address member outrage for another year.
SAC ¶ 4.11. Finally, in September 2016, Mr. Walker personally traveled to Washington from
Texas to meet with angry Club members. Id. ¶ 3.8. One month later, the Arcis Defendants
addressed this issue and others in a written “20/20 Plan” presented to members. See Declaration
of Adrienne D. McEntee (“McEntee Decl.”), Exh. 1 (“TPC SR 20/20 Plan”).1 In the Plan, the
Arcis Defendants admitted they had made just “one refund” in three years, acknowledged
frustration “with the slow pace of refunds being made to those on the resigned list and the
perception that the club has not been fully forthcoming with the information regarding
memberships sold by the club,” and promised “Full Transparency and Disclosure.” Id.
Although Arcis said it would “take steps necessary to ensure that the club remains
healthy for the benefit of all of the members,” the Plan did not offer retroactive refunds to those
who should have received refunds during the prior three years. McEntee Decl., Exh. 1. Instead,
Arcis’ Plan renamed the Non-Refundable Premier Family Golf Memberships “Ridge Family
Golf Memberships” to avoid “confusion,” and implemented a “Voluntary Refund Policy” that
purports to make refunds at a 3-1 ratio from the sale of both Refundable and Non-Refundable
Memberships. Id.; see also Dkt. 11, Exh. D. The Policy is “non-binding.” Arcis has “sole
discretion” to adhere, or not adhere, to the Policy. Dkt. 11, Exh. D.
1 Plaintiffs respectfully request that the Court take judicial notice of the 20/20 Plan, which the Arcis Defendants used to introduce the Voluntary Refund Policy that Defendants included with their motion (Dkt. 11, Exh. D). See Fed. R. Evid. 201(b) (“The court may judicially notice a fact that is not subject to reasonable dispute because it … can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned”).
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 12 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 6 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
Times Co., 154 Wn.2d 493, 503 (2005). A court considers only what the parties wrote, giving
words in a contract their ordinary, usual, and popular meaning unless the agreement as a whole
clearly demonstrates a contrary intent. Id. at 504. A contract must be read “as the average
person would read it; it should be given a ‘practical and reasonable rather than a literal
interpretation,’ and not a ‘strained or forced construction’ leading to absurd results.” Allstate
Ins. Co. v. Hammonds, 72 Wn. App. 664, 667 (1994) (citation omitted). Washington courts
favor an interpretation giving effect to all of a contract’s provisions over one that renders some
language meaningless or ineffective. See Newsom v. Miller, 42 Wn.2d 727, 731 (1953). In
order to give effect to all the contract’s provisions, courts harmonize clauses that seem to
conflict. Nishikawa v. U.S. Eagle High, LLC, 138 Wn. App. 841, 849 (2007).2
Three key provisions of the 2008 Rules bear on the issues here. Paragraph 6.2 provides:
AMENDMENT. Club Operator reserves the right, in its sole and absolute discretion, to amend these Membership and Operating Policies at any time and in any manner which it deems appropriate, except that no amendment shall materially adversely affect the rights of any existing Member under Section 3.2(b) unless approved by at least two-thirds of the affected Members. Any amendment shall become effective when notice thereof is delivered to the Members.3
Dkt. No. 11, Exh. B ¶ 6.2 (emphasis added). Paragraph 3.2(b)(i) provides, in relevant part:
REFUNDS. A resigning member shall have no right to any payment upon termination of membership except as follows:
(i) In the event of voluntary resignation of an Individual Golf Membership … the former Member shall be entitled to receive 70% of the Membership Fee published at the time Club Operator reissues the resigned or terminated membership pursuant to Section 3.2(c) … to be paid within 30 days after reissuance.
2 “An assignee of a contract stands in the shoes of his assignor.” Paullus v. Fowler, 59 Wn.2d 204, 212 (1961). The Arcis Defendants assumed Brightstar’s refund obligations. Id. ¶¶ 8.6, 8.10. Although they dispute liability for the claims alleged, the Arcis Defendants do not dispute they are valid assignees. SAC ¶ 8.6; Dkt. 20 at 22:25-23:1. 3 Defendants fail to cite the entire paragraph 6.2, leaving out the last sentence altogether. Dkt. No. 20 at 25:22-25.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 14 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 8 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
Dkt. No. 11, Exh. B ¶ 3.2(b)(i) (emphasis added). Finally, paragraph 6.1 provides in relevant part:
NOTICES. Except as otherwise specifically provided in these Membership and Operating Policies, all notices or other communications (other than regular statements of account) required to be given or made hereunder shall be in writing and shall be delivered or mailed…. Notices to a Member shall be addressed to the Member at the address specified in the Member’s Membership Agreement, unless the Member has requested that notices be given at a different address by written notice to Club Operator….
Dkt. No. 11, Exh. B ¶ 6.1. Together, these provisions impose on Defendants a duty to give
members notice of a proposed rule change to their refund rights, and an obligation to obtain the
approval of two-thirds of the membership before such change can be effective.
The Arcis Defendants disagree with Plaintiffs’ interpretation. They argue there was no
breach because Defendants claim they have the “unfettered right” under paragraph 1.1 to create
new classes of membership. Dkt. 20 at 26:18-21. But Arcis’ myopic focus on paragraph 1.1
ignores paragraph 6.1, which requires Defendants to give members hand-delivered or mailed
notice, and paragraph 6.2, which requires a vote of two-thirds of the membership for changes
that adversely affect refund rights. SAC, Exh. A. If the Court were to interpret the contract in
the manner suggested by the Arcis Defendants, the language regarding the notice and voting
requirements would be entirely superfluous. Arcis’ interpretation is untenable.
Defendants’ amendment of the Rules without notice and approval materially and
adversely affected Plaintiffs’ interests and the interests of hundreds of others who are similarly
situated to Plaintiffs. By marketing Non-Refundable Memberships at half the price of
Refundable Memberships, Defendants diverted all sales to Non-Refundable Memberships,
guaranteeing that future consumers would choose to purchase the discounted Non-Refundable
Memberships over the more expensive Refundable Memberships, and made it impossible for
members on the Waiting List to receive refunds. SAC ¶¶ 4.10, 4.12. Because the facts plausibly
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 15 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 9 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
Plaintiffs seek both equitable remedies here. Specifically, “Plaintiffs and member of the Class
are entitled to specific performance of the Rules” as they existed before Defendants adopted the
2013 Revised Rules and began selling Non-Refundable Memberships. SAC ¶ 8.13. Plaintiffs
also seek injunctive relief “requiring Defendants to refund the memberships of members who
join the Waiting List in the future pursuant to the terms of the pre-2013 Rules.” Id. at X(B).
Plaintiffs have alleged sufficient bases to support their request for damages and equitable relief.
C. Plaintiffs sufficiently plead all elements of a CPA claim.
To survive a motion to dismiss their CPA claims, Plaintiffs must plead plausible
allegations for the following elements: (1) an unfair or deceptive act or practice, (2) occurring
in trade or commerce, (3) a public interest impact, (4) injury to Plaintiffs’ business or property,
and (5) a causal relationship between the unfair or deceptive act and Plaintiffs’ injuries. See
Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780 (1986).
4 Defendants also argue that the Revised Rules did not change the ratio of refunds from 3-1 to 4-1, as Plaintiffs allege in SAC ¶ 4.9, because the term “3-1 ratio” remains. But they ignore language in ¶ 3.2(c) of the Revised Rules that confirms memberships “will be refunded after every third” membership is sold (Dkt. 18, Exh. A), as opposed to language in the former ¶ 3.2(c), which provides a refund with “every third membership” sold (Dkt. 11, Exh. B). Regardless, the sale of Refundable Memberships has been virtually nonexistent since May 2013. 5 Based on the $39,000 price at which Defendants offered the memberships in October 2016 (Dkt. 11, Exh. D), Defendants should have refunded at least 36 Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6).
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 17 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 11 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
The Arcis Defendants’ motion fails to reference RCW 19.86.093, instead citing to pre-
2009 authority. Until 2009, the statutory basis for the public interest impact element was the
CPA’s statement of legislative intent that it “not be construed to prohibit acts which . . . are not
injurious to the public interest.” Hangman Ridge, 105 Wn.2d at 788 (quoting RCW 19.86.920).
The Washington Supreme court established two multifactor tests for determining whether the
public interest impact element was satisfied, and the application of these tests “depend[ed]
upon the context in which the alleged acts were committed.” Id. at 789-90. The first applied
when “the transaction was essentially a consumer transaction,” and the second applied when
“the transaction was essentially a private dispute.” Id. at 790.6
In 2009, Washington’s legislature added a new section to the CPA, which specifically
addresses the public interest impact element. The statute now provides:
In a private action in which an unfair or deceptive act or practice is alleged under RCW 19.86.020, a claimant may establish that the act or practice is injurious to the public interest because it:
(1) Violates a statute that incorporates this chapter; (2) Violates a statute that contains a specific legislative declaration of public interest impact; or (3)(a) Injured other persons; (b) had the capacity to injure other persons; or (c) has the capacity to injure other persons.
RCW 19.86.093 (emphasis added). As of 2009, a private plaintiff may establish public interest
impact by showing that the challenged act or practice injured others. Klem, 176 Wn.2d at 804
(Madsen, C.J., concurring) (“The legislature has recently codified the requirement that the
unfair act or practice be injurious to the public interest and specifically set out how this element
may be satisfied.”) (emphasis added). Here, Plaintiffs allege that Defendants’ conduct “injured
other persons,” namely the more than 100 other persons on the Waiting List. SAC ¶ 5.3. They
have alleged sufficient facts to support public interest impact under RCW 19.86.093.
b. Plaintiffs do not complain about a “private” dispute between two parties.
A dispute between only two parties, such as “a breach of a private contract affecting no
6 The court also recognized that violation of a statute containing a specific legislative declaration of public interest impact satisfied the public interest impact element “per se.” Id. at 791.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 23 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 17 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
satisfying the public interest element of a CPA claim and is contrary to the purpose of the CPA.
c. Public interest impact is also satisfied under the multifactor test.
This case does not involve an “essentially private” dispute. Even under that assumption,
the four-factor test for determining whether private disputes impact the public interest applied
is satisfied. The factors “indicating public interest” in the context of a private dispute are:
(1) Were the alleged acts committed in the course of the defendant’s business? (2) Did defendant advertise to the public in general? (3) Did defendant actively solicit this particular plaintiff, indicating potential solicitation of others? (4) Did plaintiff and defendant occupy unequal bargaining positions?
Hangman Ridge, 105 Wn.2d at 790. “[N]ot one of these factors is dispositive, nor is it
necessary that all be present.” Id. at 791. Instead, the factors “represent indicia of an effect on
public interest from which a trier of fact could reasonably find public interest impact.” Id.
Ultimately, as noted above, “it is the likelihood that additional plaintiffs have been or will be
injured in exactly the same fashion that changes a factual pattern from a private dispute to one
that affects the public interest.” Id. at 790.
The first factor is clearly met. Defendants acted in the course of their business when
they surreptitiously amended the rules to introduce Non-Refundable memberships and used
money from the sale of Non-Refundable memberships for other purposes than for the payment
of refunds. Those Club members paid substantial sums of money for memberships that
Defendants promised would be refunded when new memberships were sold. They also acted in
the course of their business when they made these changes without notice and approval.
The second factor is also met because the Club advertised7 to members of the public in
order to get them to join. Although some Class members joined when Brightstar owned the
Club, there is a reasonable inference from Plaintiffs’ allegation that more than 100 people are
on the Waiting List that others joined between May 2013, when Defendants colluded to
7 Plaintiffs respectfully request that the Court take judicial notice of the fact that the Club at Snoqualmie Ridge operates a website, https://www.clubatsnoqualmieridge.com/membership, through which it advertises its golf memberships and members of the public can obtain information about joining the club, including information about the Club’s non-refundable and refundable memberships. See Fed. R. Evid. 201(b).
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 25 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 19 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6). See Dkt. 11, Exh. D.
Next, Plaintiffs allege that they would not have purchased Refundable Memberships
had they known Defendants would render their memberships valueless. SAC ¶ 6.8. The Arcis
Defendants argue that Plaintiffs were not injured because “any deception in the sale of their
memberships had to occur, if at all, many years before the Arcis Defendants bought the Club.”
Arcis’ argument fails because Plaintiffs do not allege deception related to the sale of their
memberships. They allege deception related to the sale to Arcis. Specifically, Plaintiffs allege
that deceptive and unfair acts occurred in May 1, 2013 when Arcis colluded with Brightstar to
amend the Rules just months before Arcis purchased the Club. SAC ¶¶ 4.8, 5.4.4, Exh. A.
Finally, the 2008 Rules allow members to resign within 60 days of the sale of the Club
and receive 100% of their refunds (rather than 70% of the listing price) if the new owner does
not honor its obligation to the members. Dkt. 11, Exh. B ¶ 3.2(b)(iii). But Defendants’ secret
revision of the Rules foreclosed Plaintiffs’ and the Class’ ability to take advantage of the 100%
refund provision. SAC ¶ 6.9. Defendants argue that Plaintiffs cannot rely on paragraph
3.2(b)(iii) because Plaintiffs Lewis, Presti, and Hart, joined the Waiting List prior to May 1,
2013, before Arcis purchased the Club. However, Plaintiff Ralls, who joined the Waiting List
in August 2013, and all other Class members who joined the Club after May 1, 2013, would
have been entitled to 100% refunds. SAC ¶ 3.4.8 Plaintiffs have sufficiently alleged injury.
5. Plaintiffs plead sufficient facts to show causation.
“Causation under the CPA is a factual question to be decided by the trier of fact.”
Deegan v. Windermere Real Estate/Ctr.-Isle, Inc., 197 Wn. App. 875, 885 (2017). In cases
involving affirmative misrepresentations, “[t]he plaintiff must establish that, but for the
defendant’s affirmative misrepresentation, the plaintiff would not have suffered an injury.” Id.
at 885-86. “But causation is different for omissions of material fact.” Id. at 886. In CPA cases
8 Arcis also argues that language in paragraph 3.2(b)(iii) authorizing the 100% refund does not apply where “the new owner agrees to take title subject to the rights of a Member under the Member’s existing Membership Agreement.” Dkt. 20 at 22:24-23:2. But which “rights” were in place when Arcis bought the Club, the June 30, 2008 Rules or the May 1, 2013 Revised Rules, is a factual question that cannot be decided at the pleading stage.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 27 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 21 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
involving omissions, courts apply a rebuttable presumption of reliance. Id. (citations omitted).
The presumption of reliance is important because a CPA claim based on an omission of
material fact puts the person seeking relief “in the impossible position of proving a negative;
that is, that they believed the opposite of the omitted fact….” Id. (citation omitted).
Defendants’ omissions caused Plaintiffs’ and the Class’ injuries. Plaintiffs allege that,
for two years, the Arcis Defendants failed to disclose that they had colluded with Brightstar to
amend the Rules, including that it had introduced Non-Refundable Memberships. Id. ¶ 6.4.2.
They failed to disclose that the Non-Refundable Memberships would be sold at half the price of
Refundable Memberships. Id. 4.10. And they failed to disclose that they would not refund
Refundable Memberships with the sale of Non-Refundable Memberships. Id. ¶ 4.12. Arcis’
omission of these material facts was likely to mislead, and did mislead, Plaintiffs and the Class.
By the time Plaintiffs filed suit, there were at least 100 others on the Waiting List for refunds
that would never come or would be unreasonably delayed.9
The Arcis Defendants ignore the presumption of reliance, and instead incorrectly argue
that Plaintiffs have failed to establish “but for” causation. Because the allegations in the SAC
and consistent “hypothetical facts” establish that Defendants omitted material facts, reliance
must be presumed and the CPA claim must go forward. Deegan, 197 Wn. App. at 890.
D. Plaintiffs sufficiently plead all elements of a conversion claim.
Conversion is defined as “the unjustified, willful interference with a chattel which
deprives a person entitled to the property of possession.” In re Marriage of Langham and
Kolde, 153 Wn.2d 553, 564 (2005) (quotation omitted). Money is treated as a chattel “if the
defendant wrongfully received the money or was under an obligation to return the specific
money to the party claiming it.” Davenport v. Wash. Educ. Ass’n, 147 Wn. App. 704, 722
(2008) (quotation omitted).
9 There is no basis in the record for the Arcis Defendants’ statement that there was a “backlog” of over 100 members on the Waiting List when Defendants amended the Rules on May 1, 2013. See Dkt. 20 at 21:19-21. Rather, Plaintiffs’ allegations and all reasonable inferences therefrom establish there were at least 100 members on the Waiting List at the time they filed suit on November 20, 2017.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 28 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 22 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
case where Plaintiffs’ allegations centered on the failure of a debtor to pay on a promissory
note following an asset transfer. Unlike Arcis’ express agreement to assume Brightstar’s
obligations related to the Waiting List and Refundable Memberships, the purchasing entity in
Gremp did not assume the former entity’s liabilities. As a result, the plaintiffs could not show
that the transferred money belonged to them. In addition, the plaintiffs’ theory went too far; it
“would fundamentally alter the structure of creditor and debtor rights,” allowing creditors to
bring claims of conversion against any recipient of any transfer of a debtor’s funds, and any
subsequent transferee of that money, regardless of its source. Gremp, 2009 WL 112674, at *9.
Here, in contrast, Plaintiffs ask only that Defendants return their wrongfully diverted funds.10
Because Plaintiffs’ claim is undoubtedly supported by sufficient facts to state a claim
for conversion against Defendants, the motion should be denied.
E. Plaintiffs plead sufficient facts to support piercing the corporate veil.
“Where a private person so dominates and controls a corporation that such corporation
is his alter ego, a court is justified in piercing the veil of corporate entity and holding that the
corporation and private person are one and the same.” Pohlman Inv. Co. v. Va. City Gold
Mining Co., 184 Wash. 273, 283 (1935). “[W]hen the corporation has been intentionally used
to violate or evade a duty owed to another,” courts may disregard the corporate entity. Morgan
v. Burks, 93 Wn.2d 580, 585 (1980) (citation omitted). Plaintiffs allege that Mr. Walker
“intentionally used [the Arcis] entities to violate or evade a duty owed to the members.” SAC ¶
3.8. The limited liability form should be disregarded and liability attached to Mr. Walker and
the other Arcis Defendants. Id.
The Arcis Defendants argue that Plaintiffs’ corporate disregard theory fails because
there are no facts “suggesting Mr. Walker was a party to any contract they entered, or agreed
10 The Arcis Defendants’ reliance on First Glob. Commc’ns, Inc. v. Bond, No. C05-749P, 2006 WL 231634, at *5 (W.D. Wash. Jan. 27, 2006) is also misplaced. There, “Defendants [did] not allege that Plaintiff wrongfully received any money.” Likewise, the Arcis Defendants improperly compare Plaintiffs’ allegations to an “unsecure debt” and argue their claims are barred by Davenport v. Washington Educ. Ass’n, 147 Wn. App. 704, 722, 197 P.3d 686, 695 (2008), but fail to note that the claim in Davenport was dismissed because a statute expressly authorized the defendant to keep the money at issue. Id. Defendants make no such claim here. Nor can they.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 30 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 24 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
I, Adrienne D. McEntee, hereby certify that on June 29, 2018, I electronically filed the
foregoing with the Clerk of the Court using the CM/ECF system which will send notification of
such filing to the following: Stephen M. Rummage, WSBA #11168 Email: [email protected] Rebecca J. Francis, WSBA #41196 Email: [email protected] DAVIS WRIGHT TREMAINE LLP 1201 Third Avenue, Suite 2200 Seattle, Washington 98101 Attorneys for Defendants
DATED this 29th day of June, 2018.
TERRELL MARSHALL LAW GROUP PLLC By: /s/ Adrienne D. McEntee, WSBA #34061`
Adrienne D. McEntee, WSBA #34061 Email: [email protected] 936 North 34th Street, Suite 300 Seattle, Washington 98103 Telephone: (206) 816-6603 Facsimile: (206) 319-5450
Attorneys for Plaintiffs
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 33 of 33