Beaver v. Omni Hotels Mgmt. Corp.
| Docket Number | 20-cv-00191-AJB-DEB |
| Decision Date | 18 September 2023 |
| Parties | DEAN BEAVER, et al., Plaintiff, v. OMNI HOTELS MANAGEMENT COPRORATION., et al., Defendants. |
| Court | U.S. District Court — Southern District of California |
(1) GRANTING MOTION FOR CLASS CERTIFICATION;
(2) GRANTING MOTION FOR APPOINTMENT OF CO-LEAD CLASS COUNSEL; and
(3) GRANTING MOTION TO SEAL EXHIBIT IN SUPPORT OF PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
Before the Court is a motion for class certification, motion for appointment of colead class counsel, and motion to seal filed by Lead Plaintiffs Dean Beaver's and Laurie Beaver's (“Lead Plaintiffs”) Motion for Class Certification. (Doc. Nos. 56, 57, 65.) Defendants Omni Hotels Management Corporation, LC Brokerage, and LC Investment 2010 (“Defendants”) filed an opposition to the class certification motion, to which Lead Plaintiffs replied. (Doc. Nos. 61, 64.) For the reasons set forth below, the Court GRANTS Lead Plaintiff's motions.
The operative pleading is the First Amended Complaint (“FAC”). (Doc. No. 31.) The Omni La Costa Resort and Spa (“the Resort”) in Carlsbad, California, has about 600 rooms. (Id. at ¶ 24.) 137 of those rooms are called Villas, and the remainder are Omni hotel rooms. (Id.) Villas are owned in fee simple by parties other than the Resort and its affiliates. (Id.) LC Brokerage is an Omni affiliate. (Id. at ¶ 8.)
98% of Villa owners rent their Villas to resort guests through LC Brokerage pursuant to a Rental Management Agreement (“RMA”) between the Villa owners and LC Brokerage.[1](Id. at ¶ 25.) Lead Plaintiffs are husband and wife, and jointly own a Villa at the Resort which is rented to hotel guests pursuant to the RMA. (Id. at ¶ 8.)
Lead Plaintiffs' claims are based on the theory that LC Brokerage operates as an alter ego of Omni. (Id. at ¶ 85.) They allege that under the RMA, LC Brokerage is required to “(1) set rental rates, (2) act as the Villa owners' exclusive rental agent; (3) collect rent; and (4) account for revenues and expenditures.” (Id. at ¶ 26.) Lead Plaintiffs further allege that LC Brokerage must “‘maximize revenues' on behalf of villa owners.” (Id. at ¶ 27.) The RMA stipulates that LC Brokerage and Villa owners share Villa revenue. (Id. at ¶ 28.) LC Brokerage is entitled to 50% of Villa revenue in exchange for managing Villa rentals, and Villa owners receive the remaining 50%. (Id.) Alternatively, when resort guests stay at an Omni hotel room, and not a Villa, Omni earns 100% of the rental revenue for those hotel rooms. (Id. at ¶ 49.) In sum, Lead Plaintiffs allege that when Omni rents its hotel rooms directly to guests, it earns 100% of the revenue, as compared to only 50% of the revenue from Villas rented to guests by LC Brokerage (its alter ego).
Lead Plaintiffs' complaint centers around the allegation that Omni has been engaged in a fraudulent scheme of self-dealing. (Id. at ¶ 9.) Specifically, they allege that as the alter ego of LC Brokerage, Omni controls the Villa rental program and intentionally steers guests into Omni's own hotel rooms. (Id. at ¶ 127.) Further, Lead Plaintiffs allege that the terms imposed on Villa owners who rent their Villas outside of the RMA, coupled with Omni's control over the Villa homeowner's associations, force class members to participate in the RMA. (Id.) Lead Plaintiffs allege that because of Omni's self-dealing, Lead Plaintiffs and the putative class have been deprived of “tens of millions of dollars” in Villa revenue. (Id. at ¶ 10.)
The Court previously ruled on a motion to dismiss the FAC, sustaining certain claims and dismissing others. (Doc. No. 38.) Lead Plaintiffs' surviving causes of action are the following: (1) breach of contract; (2) breach of fiduciary duty; (3) aiding and abetting breach of fiduciary duty; (4) a violation of California Business and Professions Code § 17200 under the “unfair” prong; (5) RICO violations; (6) conspiracy to violate RICO; and (7) unjust enrichment. (Doc. No. 56 at 20.)
Lead Plaintiffs now seek class certification and appointment of Tyler Meade, Michael Reiser, and Sam Ferguson as co-lead class counsel. (Doc. Nos. 56, 57.) This Order follows.
A plaintiff seeking to represent a class must satisfy the threshold requirements of Rule 23(a) as well as the requirements for certification under one of the subsections of Rule 23(b). Rule 23(a) provides that a case is appropriate for certification as a class action 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.” Fed.R.Civ.P. 23(a). “In addition to meeting the conditions imposed by Rule 23(a), the party seeking class certification must also show that the action is appropriate under Rule 23(b)(1), (2) or (3).” Astiana v. Kashi Co., 291 F.R.D. 493, 503 (S.D. Cal. 2013) (citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997)).[2]
The plaintiff bears the burden of demonstrating that each element of Rule 23 is satisfied, and a district court may certify a class only if it determines the plaintiff has carried his or her burden. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 158-61 (1982); Doninger v. Pac. Nw. Bell, Inc., 564 F.2d 1304, 1308 (9th Cir. 1977). The court must conduct a “rigorous analysis,” which may require it “to probe behind the pleadings before coming to rest on the certification question.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Ultimately, the class certification determination is committed to the court's discretion. See Loc. Joint Exec. Bd. of Culinary/Bartender Tr. Fund v. Las Vegas Sands, Inc., 244 F.3d 1152, 1161 (9th Cir. 2001).
Lead Plaintiffs seeks to certify the following class:
All villa owners who entered the RMA with LC Brokerage beginning four years before this action was filed to the present, excluding the defendants/counterclaimants in LC Investment 2010 v. La Costa Investments, San Diego Sup. Court. Case No. 37-2016-3113, or any officers, directors, employees, affiliates and immediate family members of the Defendants.
(Doc. No. 56 at 21.)[3]
Defendants assert Lead Plaintiffs failed to satisfy the requirements for class certification under Rules 23(a) and 23(b). (Doc. No. 61.) The Court discusses each requirement in turn. See Gen. Tel. Co. of Sw., 457 U.S. at 161 ().
Rule 23(a) sets forth four requirements for class certification: numerosity, commonality, typicality, and adequacy of representation. Fed.R.Civ.P. 23(a).
As a preliminary matter, while not delineated in Rule 23, courts have generally required a party seeking class certification under Rule 23(b)(3) to demonstrate the putative class is ascertainable. See McCrary v. Elations Co., No. EDCV 13-00242 JGB (OPx), 2014 WL 1779243, at *3 (C.D. Cal. Jan. 13, 2014). A class is ascertainable if it is administratively feasible for the court to determine whether a particular individual is a member using objective criteria. See Keegan v. Am. Honda Motor Co., Inc., 284 F.R.D. 504, 521 (C.D. Cal. 2012).
Lead Plaintiffs assert that documents Defendants produced in discovery allow for identification of class members. More specifically, Lead Plaintiffs point to annual summaries of revenue disbursements to all villa owners in the RMA from 2015 through 2021. According to Lead Plaintiff, these documents and the class definition are objective criteria by which membership in the proposed class can be ascertained. The Court agrees, and Defendants do not contend otherwise. See, e.g., Bennet v. N. Am. Bancard, LLC, 17-CV-00586-AJB-KSC, 2022 WL 1667045, at *3 (S.D. Cal. May 25, 2022) (). Accordingly, the Court concludes the proposed class is ascertainable.
Rule 23(a)(1) requires the proposed class to be “so numerous that joinder of all members is impracticable[.]” Fed.R.Civ.P. 23(a)(1). “[I]mpracticability does not mean impossibility”; rather, the inquiry focuses on the “difficulty or inconvenience of joining all members of the class.” Harris v. Palm Springs Alpine Ests., Inc., 329 F.2d 909, 913-14 (9th Cir. 1964). “As a general matter, courts have found that numerosity is satisfied when class size exceeds 40 members, but not satisfied when membership dips below 21.” Slaven v. BP Am., Inc., 190 F.R.D. 649, 654 (C.D. Cal. 2000).
In determining whether numerosity is satisfied, the court may draw reasonable inferences from the facts before it. See Gay v. Waiters' & Dairy Lunchmen's Union, 549 F.2d 1330, 1332 at n.5 (9th Cir. 1977).
According to Lead Plaintiffs, approximately 80 villa owners joined in the RMA during the relevant period, which the proposed class definition describes as “four years before this action was filed. (Doc. No. 56 at 22.)
Defendants contend that numerosity is not met because the proposed class consists of only 23 members. (Doc. No. 61 at 11.) Defendants arrive at this number by pointing to language in Lead Plaintiffs proposed class definition, which defines the class as including those who “entered the RMA with LC Brokerage beginning four years before the date this action was filed[.]” (Id. at 10.) Defendants also argue that Lead Plaintiffs have not shown that joinder would be impracticable. The...
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