Zwicky v. Premiere Vacation Collection Owners Ass'n

• Decision Date: 23 January 2018
• Docket Number: No. 1 CA-CV 16-0659,1 CA-CV 16-0659
• Citation: 418 P.3d 1001
• Parties: Norman ZWICKY, Plaintiff/Appellee, v. PREMIERE VACATION COLLECTION OWNERS ASSOCIATION, Defendant/Appellant.
• Court: Arizona Court of Appeals

418 P.3d 1001

Norman ZWICKY, Plaintiff/Appellee,

v.PREMIERE VACATION COLLECTION OWNERS ASSOCIATION, Defendant/Appellant.

No. 1 CA-CV 16-0659

Court of Appeals of Arizona, Division 1.

FILED January 23, 2018

Phelps & Moore PLLC, Phoenix, By Jon L. Phelps, Robert M. Moore, Shannon A. Lindner, Co–Counsel for Plaintiff/Appellee

Edward L. Barry Attorney at Law, Christiansted, Virgin Islands, By Edward L. Barry, Co–Counsel for Plaintiff/Appellee

Coppersmith Brockelman, PLC, Phoenix, By John E. DeWulf, Katherine DeStefano, Co–Counsel for Defendant/Appellant

Baker & Hostetler, LLP, Orlando, Florida, By Brandon T. Crossland, Co–Counsel for Defendant/Appellant

Judge Patricia A. Orozco¹ delivered the opinion of the Court, in which Presiding Judge Kenton D. Jones and Judge Jon W. Thompson joined.

OPINION

OROZCO, Judge:

¶ 1 Premiere Vacation Collection Owners Association, Inc. (the Association) appeals the superior court's rulings in favor of Norman Zwicky. For the following reasons, we affirm the summary judgment in favor of Zwicky enforcing his statutory right to inspect Association records but vacate the order modifying the protective order and directing the Association to send a notice to its members. We remand for further proceedings relating to the protective order.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 The Association is an incorporated association of members holding an interest in the Premiere Vacation Collection timeshare plan. See Arizona Revised Statutes (A.R.S.) section 33–2202(13)² (defining timeshare plan). Zwicky is a member of the Association.

¶ 3 In 2004, Zwicky paid approximately $26,000 for his timeshare interest. See A.R.S. § 33–2202(11) (defining timeshare interest). After a subsidiary of Diamond Resorts Corporation acquired a substantial portion of the timeshare assets, Zwicky experienced a significant increase in his annual assessments. Zwicky alleges that the high assessments rendered his membership interest "essentially worthless."

¶ 4 Zwicky filed a lawsuit in superior court seeking "judicial enforcement of his right to inspect the books and records" of the Association pursuant to A.R.S. §§ 10–11602, 33–2209, and common law. See A.R.S. § 10–11602 (providing a statutory right of inspection for members of nonprofit corporations); A.R.S. § 33–2209 (providing a statutory right of inspection for members of timeshare associations). His stated purpose was to determine whether the Association's board "acted reasonably and in good faith in calculating and approving the assessments in question."

¶ 5 In response to discovery, the Association produced some documents. After reviewing the documents, Zwicky's counsel determined they were insufficient to "clearly ascertain and verify the basis for calculating Mr. Zwicky's annual assessments." Accordingly, Zwicky moved for summary judgment seeking inspection of additional documents. The Association cross-moved for summary judgment asserting that it had already provided the documents requested in the complaint and all documents to which Zwicky was entitled under A.R.S. § 33–2209.

¶ 6 Following oral argument on the cross-motions, the superior court granted summary judgment in favor of Zwicky. In a subsequent ruling, the court specified the documents Zwicky could inspect and issued a protective order stating they "shall be maintained in confidence" and disclosed only to Zwicky, his attorneys, accountants, and experts. Thereafter, the Association produced more than one thousand pages of documents, designating some as "confidential," claiming they contained "sensitive personal information, personnel records, trade secrets, proprietary business information, or other confidential research, development, financial, or commercial information."

¶ 7 After reviewing the documents produced, Zwicky moved to modify the protective order. He explained that the documents revealed a good faith basis for a federal class action lawsuit, and asked the superior court to permit him to "quot[e], refer[ ] to, or otherwise utiliz[e]" the documents in his proposed lawsuit. At the same time, Zwicky moved for an order requiring the Association to send a letter or notice to Association members informing them that the Association was under court order to produce records in conjunction with Zwicky's lawsuit.

¶ 8 After oral argument, the superior court granted Zwicky's motion and modified its prior order to authorize Zwicky and his attorneys to use the documents produced by the Association "in a complaint or other court filing in the proposed class action litigation." The court also ordered the Association to send a Notice of Court Order (Notice) to timeshare members, pursuant to A.R.S. § 33–2210, advising them of the document production and providing them with contact information for Zwicky's counsel.

¶ 9 Thereafter, the superior court entered final judgment, and the Association timely appealed.³ We have jurisdiction pursuant to A.R.S. §§ 12–120.21(A)(1) and –2101(A)(1).

DISCUSSION

I. Summary Judgment

¶ 10 The Association first argues the superior court erred in entering summary judgment on Zwicky's claim to inspect its documents. We review the court's grant of summary judgment de novo. See Price v. City of Mesa , 236 Ariz. 267, 269, ¶ 7, 339 P.3d 650, 652 (App. 2014). We also review questions of law de novo, including the court's interpretation of statutes. See id.

¶ 11 In 2005, the Arizona Legislature enacted the Timeshare Owner's Association and Management Act, A.R.S. §§ 33–2201 to –2211. See 2005 Ariz. Sess. Laws, ch. 132 (1st Reg. Sess.). The Act grants timeshare owners the right to "inspect and copy all financial and other records of the association" that are "directly related to the timeshare plan." A.R.S. § 33–2209(A). Pursuant to A.R.S. § 33–2209(B), an owner's written request for records must be made "in good faith and for a proper purpose." A.R.S. § 33–2209(B)(2).

A. Compliance with A.R.S. § 33–2209

¶ 12 The Association argues that Zwicky's request did not comply with the requirements of A.R.S. § 33–2209. Our review of the record, however, reflects that Zwicky followed the statutory procedure in making his request. Before filing his lawsuit, Zwicky sent a letter to the Association asking for specific records as required by A.R.S. § 33–2209. When the Association did not produce all the records requested, Zwicky filed a lawsuit seeking judicial enforcement of his statutory inspection rights.

¶ 13 Contrary to the Association's assertion, the records the superior court ordered the Association to produce fall within the scope of A.R.S. § 33–2209. Specifically, the court ordered production of reports filed with the Arizona Department of Real Estate, property management agreements, profit and loss statements, annual budgets, occupancy rates, room rental revenue, and expense information. These documents qualify as "financial and other records of the association" that are "directly related to the timeshare plan." A.R.S. § 33–2209(A).

¶ 14 In addition, our review of the record supports the superior court's finding that Zwicky made his request "in good faith and for a proper purpose." A.R.S. § 33–2209(B)(2). The requirement of "proper purpose" dates back to territorial times when the Supreme Court of the Territory of Arizona applied it to a stockholder's request for corporate documents. See Hallenborg v. Cobre Grande Copper Co. , 8 Ariz. 329, 336, 74 P. 1052, 1054 (1904) ("[T]he courts of this territory are not loath to lend their aid ... to enable a stockholder to obtain access to the records of his corporation in a proper case, and for a proper purpose."). Also, in Tucson Gas & Electric Co. v. Schantz , 5 Ariz. App. 511, 428 P.2d 686 (1967), the Arizona Supreme Court addressed a shareholder's request for corporate records and explained that a proper purpose is one that enables a shareholder to "derive any information that will enable him to protect his interest." Id . at 513, 428 P.2d 686.

¶ 15 We hold that this definition of "proper purpose" applies to a timeshare owner's statutory right to inspect records under A.R.S. § 33–2209. "Proper purpose" means a desire by a timeshare owner to derive information that will enable him to protect his interest in the timeshare plan and that reasonably relates to his interest as a timeshare member.

¶ 16 Here, the stated purpose of Zwicky's statutory record request was:

to determine whether the [Association's] Board acted reasonably and in good faith in calculating and approving the assessments in question ... and to determine whether [Diamond Resorts International (DRI) ] has been paying a fair, equitable and proportionate share of common expenses for units DRI owns, controls, and/or rents to the general public on a profit-generating basis.^{[4 ]}

As more fully explained in later pleadings, Zwicky was attempting to determine why his annual assessments had roughly tripled to the point that his financial interest in the timeshare had become "worthless" and "specifically whether those problems [we]re due to improper management practices."

¶ 17 Zwicky's inquiry could enable him to protect his interest in the timeshare plan and was reasonably related to his interest as a timeshare member. Therefore, Zwicky has articulated a proper purpose for his record request.⁵

B. Mootness

¶ 18 The Association also argues that "[a]t the time Mr. Zwicky sought summary judgment, [the Association] had already provided all of the information and documents requested in Paragraph 20 of the Verified Complaint, rendering this action moot."

¶ 19 Paragraph 20 of Zwicky's complaint listed the information he had previously requested from the Association "to no avail." The list included: (1) the number of points in each resort held by private owners, DRI, the local resort association, and the Association, as well as the corresponding percentages of ownership those points represented, and (2) the amount paid by DRI or its affiliates to each local resort association and to the Association in the form of assessments...