Beaver v. Tarsadia Hotels, Corp.

• Decision Date: 28 September 2017
• Docket Number: Case No. 11-cv-01842-GPC-KSC
• Court: U.S. District Court — Southern District of California
• Parties: DEAN BEAVER AND LAURIE BEAVER, HUSBAND AND WIFE; et al., Plaintiffs, v. TARSADIA HOTELS, A CALIFORNIA CORPORATION; et al., Defendants.

DEAN BEAVER AND LAURIE BEAVER, HUSBAND AND WIFE; et al., Plaintiffs, v. TARSADIA HOTELS, A CALIFORNIA CORPORATION; et al., Defendants.

Case No. 11-cv-01842-GPC-KSC

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

September 28, 2017

ORDER:

1) GRANTING PLAINTIFFS' MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND JUDGMENT;

2) GRANTING PLAINTIFFS' APPLICATION FOR ATTORNEY'S FEES AND COSTS; AND

3) GRANTING PLAINTIFFS' REQUEST FOR SERVICE AWARDS

4) GRANTING JOINT MOTION REGARDING LIEN

[Dkt. Nos. 286, 287, 309.]

On August 9, 2017, Plaintiffs Dean Beaver, Laurie Beaver, Steven Adelman, Abraham Aghachi, Dinesh Gauba, Kevin Kenna, and Veronica Kenna (collectively "Plaintiffs") filed a Motion for Final Approval of Class Settlement and Application for Attorneys' Fees and Costs, and Service Awards. (Dkt. Nos. 286, 287.) Tarsadia Defendants¹ and Third Party Defendant Greenberg Traurig LLP ("GT") do not oppose the motions. On September 1, 2017, Garden City Group, LLC ("GCG"), the Settlement Administrator, filed a declaration regarding exclusions and objections; Plaintiffs filed a status report regarding the response to the Notice Program; and GT filed a non-opposition to the motion for final approval of class action settlement, application for attorneys' fees and costs, and service awards for class representatives. (Dkt. Nos. 304, 305, 306.) The Court held a final approval hearing on September 15, 2017 at 1:30 p.m., pursuant to the Preliminary Approval Order dated May 24, 2017. (Dkt. No. 307.) Tyler Meade, Esq., Michael Schrag, Esq., and Michael Reiser, Esq. appeared on behalf of Plaintiffs, Lynn Galuppo, Esq. appeared on behalf of Tarsadia Defendants, and Michael McNamara, Esq., Kirsten Spira, Esq. and Wesley Griffith, Esq. appeared on behalf of Third Party Defendant Greenberg Traurig, LLP.

Based on the reasoning below, the Court GRANTS Plaintiffs' motion for final approval of class action settlement and judgment and GRANTS Plaintiffs' application for attorneys' fees and costs, and service awards.

Procedural Background

In May 2011, Plaintiffs filed a putative class action alleging that the Tarsadia Defendants violated various federal and state laws, including the Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701, et seq. ("ILSA") and the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq. ("UCL"), in connection with the sale of condominium units at the Hard Rock. (Dkt. No. 1.) Specifically, in the operative Third Amended Complaint ("TAC"), Plaintiffs alleged, in part, that the Tarsadia Defendants violated ILSA by failing to do three things that the statute required: (1) register the Hard Rock with the U.S. Department of Housing and Urban Development ("HUD");(2) obtain and distribute to Class members a HUD property report; and (3) include ILSA-specified cure language in the purchase contracts. (Dkt. No. 69, TAC at ¶¶ 8-10.) As a result, Plaintiffs and Class members had an absolute two-year right under ILSA to rescind their purchase contracts. (Id. at ¶ 10.) The Tarsadia Defendants were required but failed to disclose this rescission right to Plaintiffs. (Id. at ¶¶ 11-12.) This constituted the fourth ILSA violation and these ILSA violations were the unlawful acts central to Plaintiffs' UCL claim.

Tarsadia Defendants failed to disclose this rescission right and told all Class members that they would lose their substantial deposits if they failed to close escrow on their respective condominium units. (Id. at ¶¶ 68-70.) Plaintiffs and most Class members closed escrow in the latter half of 2007, when the real estate market in San Diego was beginning a steep decline and the lending market was constricting. (Id. at ¶¶ 86-88.) Plaintiffs testified that they would have cancelled their purchase contracts prior to closing escrow had the Tarsadia Defendants disclosed their rescission rights under ILSA. (Dkt. No. 81-1 at 32-33.)

Tarsadia Defendants disputed liability and class certification through six years of vigorous litigation that included extensive fact and expert discovery and motion practice. The litigation began with defendants filing four motions to dismiss plus a motion for judgment on the pleadings. Defendants did not answer until a year after the case was first filed. A year of intensive discovery followed, with defendants producing more than 400,000 pages that Class Counsel had to review and analyze. (Dkt. No. 273-1, Schrag Decl. ¶ 24.) The Parties took more than 20 depositions in 2013. (Id. ¶ 25.)

In 2013, Plaintiffs moved to certify a class, and Plaintiffs, the Tarsadia Defendants, and Playground Destination Properties, Inc. ("Playground"), which is no longer in the case, also filed cross-motions for summary judgment. In October 2013, this Court accepted Plaintiffs' arguments that uncontroverted evidence demonstrated that ILSA applied and that the Tarsadia Defendants violated it such that an unlawful prong UCL violation was established as a matter of law, but nevertheless granted the TarsadiaDefendants' motion for summary judgment on the ground that the UCL claim was barred by ILSA's three-year statute of limitations. (Dkt. No. 128.) The Court further granted summary judgment as to Playground. (Id.) This ruling represented a complete loss on the merits of the case after two and a half years of intensive litigation.

This Court's initial ruling on the statute of limitations followed several district court decisions interpreting Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1007 n. 3 (9th Cir. 2008), to mean that where a plaintiff's UCL unlawful prong claim is based on a violation of a federal law, the federal and not the UCL statute of limitations applies if the time to file under the federal statute is shorter. (Dkt. No. 128 at 40-41.) Believing that these decisions misinterpreted Silvas, Plaintiffs added appellate counsel Michael Rubin to their team and moved for reconsideration based on preemption principles. (Dkt. No. 138.)

Eight months later, in July 2014, Plaintiffs prevailed on this motion, obtaining partial summary judgment on their UCL claim. The Court held that the Tarsadia Defendants violated the unlawful prong of the UCL by failing to comply with ILSA's disclosure requirements and that the UCL's four-year statute of limitations applied to this claim. (Dkt. No. 153.)

In August 2014, Tarsadia Defendants moved for reconsideration or, in the alternative, for certification of an interlocutory appeal. (Dkt. Nos. 155, 158.) While this motion was pending, Congress amended ILSA to expressly exempt condominiums from ILSA's registration and disclosure requirements. The Tarsadia Defendants argued this amendment should be applied retroactively to bar this action. (Dkt. No. 163.) In October 2014, after extensive briefing on these issues, the Court ruled that the amendment to ILSA should not be applied retroactively, but simultaneously certified three issues for interlocutory appeal: (1) whether the Hard Rock project is subject to ILSA because its condominium units are "lots" to which the Improved Lot Exemption does not apply; (2) whether Plaintiffs' UCL claim is governed by the UCL's four-year statute of limitations or ILSA's shorter limitations period; and (3) whether Congress intended its 2014 amendment to ILSA to apply retroactively to this action. (Dkt. No. 177.) The case was on appeal fornearly a year and a half, and on March 10, 2016, the Ninth Circuit affirmed the partial summary judgment ruling in Plaintiffs' favor on all three issues. See Beaver v. Tarsadia Hotels, 816 F.3d 1170 (9th Cir. 2016). This ruling firmly established that the UCL statute of limitations applies to all UCL actions, including those that "borrow" a federal predicate violation with a shorter limitations period. Id. at 1179-1181.

Meanwhile, while the main litigation was proceeding, Tarsadia Defendants claimed in a third-party complaint that GT negligently advised them that ILSA did not apply to the Hard Rock, and that any restitution the Tarsadia Defendants may owe Plaintiffs and Class members is a result of this malpractice. (Dkt. No. 106-2, Third Party Compl.) In its answer, GT denied any wrongdoing whatsoever and raised numerous affirmative defenses. (Dkt. No. 140.) This third-party action had been stayed since June 30, 2014, (Dkt. No. 152), but following remand from the Ninth Circuit, GT moved for permission to join the litigation on Tarsadia Defendants' defense on the two remaining and related issues in the case: class certification and remedies. (Dkt. No. 211.) On June 27, 2016, the Court granted GT permission to participate in the defense of this main action. (Dkt. No. 218.)

Earlier, the Court had deferred its ruling on whether to certify a class. (Dkt. No. 108.) Plaintiffs filed a renewed motion for class certification on July 1, 2016. (Dkt. No. 219.) The Tarsadia Defendants and GT opposed, focusing primarily on the contention that Plaintiffs' proposed method for calculating UCL restitution was prohibited under Ninth Circuit authority. (Dkt. Nos. 229, 230.)

The Court stated that it was likely to certify a class on the issue of liability, but expressed its view that certifying the issue of remedies for class treatment "was a much more complicated question." (Id. at 4.) The Court explained that it was not yet convinced that Plaintiffs had proffered a viable remedies model that "matche[d] the theory of liability." Id. The Court allowed the Tarsadia Defendants and GT to file supplemental briefs on Plaintiffs' proposed restitution model. (Dkt. No. 240.) The Court also encouraged the Parties to attempt to settle the case. (Dkt. No. 273-15 at 7) ("Given that and given the uncertainty that remains with respect to any number of these issues, I wouldexpect and I would hope that the parties would look at all of this uncertainty as a means to try to resolve this case amongst yourselves"). In order to pursue mediation and potential settlement, the Parties agreed to stay the action to delay the Court...