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Hermenegildo ("Jay") Martinez, An v. the Welk Group

January 11, 2011

HERMENEGILDO ("JAY") MARTINEZ, AN
INDIVIDUAL, ON HIS OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
THE WELK GROUP, INC.; WELK RESORT AND GROUP INC.; WELK MUSIC GROUP, INC.; SOLEIL COMMUNICATIONS, INC.; ANDTO DOES 1 THROUGH 25, STRIKE DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

ORDER:(1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS; [Doc. No. 42] (2) GRANTING IN PART DENYING IN PART DEFENDANTS' MOTION

[Doc. No. 47]

Defendants The Welk Group, Inc., Welk Resort Group, Inc., Welk Music Group, Inc., and Soleil Communications, Inc. ("Defendants") filed a motion to dismiss and a motion to strike Plaintiff Hermenegildo ("Jay") Martinez's ("Plaintiff") Third Amended Complaint ("TAC"). [Doc. Nos. 42, 47.] Defendants also requested the Court take judicial notice of certain documents in support of their motions. Plaintiff filed his oppositions [Doc. Nos. 50, 51, 52], to which Defendants replied. [Doc. Nos. 54, 55.] The Court, finding the matters suitable for resolution without oral argument, took the matters under submission pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss, and GRANTS IN PART and DENIES IN PART Defendants' motions to strike.

BACKGROUND

Plaintiff brings this putative class action on behalf of himself and other time-share owners of the Welk Resorts. Resort accommodations include resorts in Maui Hawaii; Palm Desert; Branson, Missouri; Cabo San Lucas, and a "flagship property" at the Welk Resort San Diego, California. In 2007, Plaintiff entered into an agreement to purchase a time-share interest, represented by 120,000 points in the "Welk Resort Platinum Program." [Doc. No. 39-1, p. 4.] In April 2009, Plaintiff "upgraded" his ownership interest to 240,000 points. The ownership grants Plaintiff "the right to use and occupy an individual dwelling unit at any of the Resort Accommodations within the Program . . . ." [Id. at 34.]

On September 17, 2010, Plaintiff filed the TAC. [Doc. No. 39.] Plaintiff alleges the Welk Resort San Diego developed substantial water leaks, which caused mold, mildew, and fungus to grow in time-share units throughout the complex. Plaintiff alleges Defendants knew of, or were able to ascertain, the water leaks and the problems that were the result of these leaks. He contends Defendants failed to resolve the problems by, among other things, failing to investigate and cure the problems, ignoring recommendations to hire professionals to clean up the units, and charging fees for repairs that were not made.

Plaintiff alleges six claims in his TAC: (1) breach of contract; (2) breach of fiduciary duty; (3) negligence; (4) private nuisance; (5) unfair competition in violation of CAL. BUS. & PROF. CODE § 17200 et seq.; and (6) breach of implied warranty of habitability. Attached to the TAC is a sixty-two page exhibit that Plaintiff alleges comprise the "Purchase and Sales Agreement." The exhibit contains documents Plaintiff signed in 2007 when he originally purchased his time-share interest ("2007 Agreement"), and documents Plaintiff signed in 2009 when he upgraded his ownership interest to 240,000 points ("2009 Agreement").

On October 1, 2010, Defendants filed the instant motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), or in the alternative to require Plaintiff to provide a more definite statement under Rule 12(e). Defendants filed the instant motion to strike portions of Plaintiff's TAC under Federal Rule of Civil Procedure 12(f). Defendants also submitted a request for judicial notice of certain documents in support of their motions.

DISCUSSION

A. Request for Judicial Notice

In deciding a motion to dismiss or motion to strike, a court may consider matters of which the judge may take judicial notice. US v. 14.02 Acres of Land, 547 F.3d 943, 955 (9th Cir. 2007). Federal Rule of Evidence 201 provides that a judicially noticed adjudicative fact must be "one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." FED. R. EVID. 201.

"Legislative facts are 'established truths, facts or pronouncements that do not change from case to case but [are applied] universally.'" Korematsu v. U.S., 584 F.Supp. 1406, 1414 (C.D.Cal. 1984) (quoting United States v. Gould, 536 F.2d 216, 220 (8th Cir.1976)). Unlike adjudicative facts, judicial access to legislative facts is not subject to a limitation of indisputability, or to any other formal requirements of notice. See Fed. R. Evid. 201 advisory committee's note.

Defendants request the Court take judicial notice of three exhibits. Exhibit A is the California Department of Public Health's Toxic Mold Protection Act of 2001 Implementation Update. Exhibit B is the Barclays Official California Code of Regulations; Part II: Table of Statutes to Regulations. Exhibit C is the Final Time-Share Plan Public Report Multiple-Site TimeShare Plan (Non-Specific Time-Share Interest) for Welk Resorts Platinum Program ("Public Report"), issued by the Department of Real Estate of California. [Doc. No. 47.] The Court addresses each of Defendants' requests in turn.

Exhibit A, the California Department of Public Health's Toxic Mold Protection Act of 2001 Implementation Update, is a matter of public record. Courts may take judicial notice of undisputed matters of public record. U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Where the court takes judicial notice of a public record, the court may not take judicial notice of "disputed facts stated in public records." See Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001) (emphasis in original). Here, Plaintiff argues the Court should not take judicial notice of Exhibit A because it is being offered to dispute Plaintiff's factual allegations and to assert Defendants' version of the facts regarding mold exposure. [Doc. No. 52.] The Court disagrees. Defendants are not asking the Court to take judicial notice of disputed facts pertinent to the case that are stated in public records. Rather, Defendants are offering the document to "demonstrate[] the legal infirmity of Plaintiff's unfair business practices allegations." [Doc. No. 55 at 3.] Accordingly, the Court GRANTS Defendants' request for judicial notice of Exhibit A, however, the Court shall not rely upon this document to determine disputed factual issues.

Exhibit B is a table of statutes to the California Code of Regulations and is a public record of state law. Courts routinely take judicial notice of state or federal statutes and regulations. See Roemer v. Board of Public Works of Maryland, 426 U.S. 736, 743 n.2 (1976) (taking judicial notice of state regulations); Mora v. Vasquez, 199 F.3d 1024, 1028 n.7 (9th Cir. 1999) (taking judicial notice of Code of Federal Regulations). Here, the table of statutes is readily ascertainable, and Defendants are offering the exhibit to show that no mold exposure standards or guidelines have been promulgated. A court may properly take judicial notice of the existence -- or in this case nonexistence -- of certain documents. Accordingly, the Court GRANTS Defendants' request for judicial notice of Exhibit B.

Exhibit C is a copy of the "Public Report" issued by the Department of Real Estate regarding the Welk Resort Platinum Program. Defendants contend the Court may take judicial notice of Exhibit C because it may be considered as part of, and incorporated by reference into, Exhibit 1 of the TAC. Plaintiff contends Defendants are improperly using Exhibit C to dispute Plaintiff's factual allegations regarding his property interests.

The Court cannot take judicial notice of Exhibit C to the extent Defendants offer the exhibit for the contents of the Public Report. Defendants offer the Public Report to support their contention that Plaintiff acquired no real property interest, which contradicts Plaintiff's factual allegations regarding the nature of his property interests. See Lee v. City of Los Angeles, 250 F.3d at 690. The Public Report is, however, a document the Court may properly take into consideration on a motion to dismiss under the doctrine of incorporation by reference. "Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim." U.S. v. Ritchie, 342 F.3d at 908 (internal citations omitted). "A court may consider a writing referenced in a complaint but not explicitly incorporated therein if the complaint necessarily relies on the document and its authenticity is unquestioned." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir.1998), (superseded by statute on other grounds in Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir. 2006)); Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). The "incorporation by reference" doctrine has been "extended to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint." Kneivel v. ESPN, 393 F.3d 1068, 1077 (9th Cir. 2005).

Plaintiff makes numerous references to the Purchase and Sales Agreement documents in his TAC. Because Plaintiff's claims rest on the contents and terms of the Purchase and Sales Agreement, documents that are explicitly referenced in the Purchase and Sales Agreement, and that help define the terms of the Purchase and Sales Agreement, are essential to his claims. The Public Report includes explanations regarding the rights Plaintiff acquired by entering into the Agreement. Plaintiff contends Defendants offer no support as to why the facts contained in the Public Report "cannot reasonably be questioned," thereby indirectly questioning the authenticity of the document. The Court finds Plaintiff's attempt to dispute the authenticity of Exhibit C is unsupported, given that Plaintiff's Purchase and Sales Agreement documents explicitly state that Plaintiff read and received a copy of the Public Report.

Accordingly, the Court DENIES Defendants' request for judicial notice of Exhibit C, but takes into consideration the Public Report under the doctrine of incorporation by reference.

Plaintiff argues that if the Court takes judicial notice of the exhibits, it must convert this motion into a motion for summary judgment. The Court disagrees. "If the district court relies on materials outside the pleadings in making its ruling, it must treat the motion to dismiss as one for summary judgment and give the nonmoving party an opportunity to respond. Fed. R. Civ. P. 12(d); see United States v. Ritchie, 342 F.3d at 907. "A court may, however, consider certain materials--documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice--without converting the motion to dismiss into a motion for summary judgment." Id. at 908. Here, Exhibits A and B are matters of judicial notice, and Exhibit C is a document incorporated by reference in the TAC. Thus, the Court need not convert Defendants' motion to dismiss into a motion for summary judgment.

B. Motion to Dismiss

A complaint survives a motion to dismiss if it contains "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The court reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. Knievel v. ESPN, 393 F.3d at 1072. Notwithstanding this deference, the reviewing court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S. Ct. 1937, 1949 (2009). Moreover, it is improper for a court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Accordingly, a reviewing court may begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft, supra, 129 S. Ct. at 1950.

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 1949. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (citing Twombly, 550 U.S. at 557).

Defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6) Plaintiff's claims for breach of contract; breach of fiduciary duty; private nuisance; and breach of the implied warranty ...


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