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Hermenegildo ("Jay") Martinez, An Individual, On His Own Behalf and On Behalf of All Others Similarly Situated v. the Welk Group

July 13, 2012

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 GROUP INC.; WELK MUSIC GROUP, INC.; SOLEIL COMMUNICATIONS, INC.; AND DOES 1 THROUGH 25,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Anthony J. BattagliaU.S. District Judge

ORDER DENYING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION [Doc. 116]

Presently before the Court is Plaintiff's motion for class certification. (Doc. 116.) The Court held a hearing on the motion on Friday, July 6, 2012. For the reasons set forth below, the Court DENIES the motion.

I. BACKGROUND

This matter is a putative class action brought by Plaintiff Martinez on behalf of a class of timeshare interest owners, alleging that Defendants failed to abate and disclose the presence of mold at the Welk Resort San Diego (the "Resort").

Plaintiff initially purchased 120,000 Platinum Points from Welk Resort Group, Inc. ("Welk") in 2007, which provided him with the opportunity to stay at Welk resorts around the world or at any other time-share resort that accepts Platinum Points for vacation stays. Plaintiff then "upgraded" his 2007 Platinum Points interest in April 2009 to 240,000 Platinum Points. (Fourth Amended Complaint, filed Feb. 1, 2011 ("4AC"), ¶ 23; Exhibit A to the 4AC, p. 24; Exhibit B to the 4AC, p. 54.) At some point during the sales process, Martinez asked Welk if the Resort were safe for his son (who previously had cancer and needed a clean environment), and the sales agent assured him the Resort was clean. (See Warren Decl., Exh. 5, pp. 36:20-37:12, 247:25-248:5.)

During a visit to the Resort in 2009, Martinez notified the front desk that his room smelled musty. Welk sent a housekeeper, who cleaned a sink, which apparently fixed the problem. (See id. at 102:9-105:6, 123:7-22.) Martinez later went looking for fishing bait in an outside utility closet (thinking it to be a cool, damp location), where he found something that may have been mold, but he could not be certain. In any event, the closet was not part of the Resort's living spaces. (See id. at 110:4-113:5; Exh. 2, p. 12:3-5.)

After Martinez stayed at the Resort in 2009, his neighbor (a former Welk employee) told him that there was mold at the Resort. This story troubled Martinez because he believed that if mold existed in one unit at the Resort, all 650 units in the 500-acre Welk complex would be uninhabitable, even if the mold were removed. (See Warren Decl., Exh. 5, p. 224:8-14.)

Martinez decided that he would never use his points again-either at Welk or any other timeshare resort. Consequently, he claims they have diminished in value. (See id. at 139:7-16, 208:23-209:5; Exh. 4, p. 3:24-26; Exh. 1, p. 12:3-27; Exh. 3, p. 8:12-9:24.) He thus sued Welk for breach of contract, breach of fiduciary duty, negligence, nuisance, breach of the implied warranty of habitability, and for violations of California's Unfair Competition Law (UCL). Martinez now seeks to certify these claims on behalf of all Welk Platinum Points owners.

The class Plaintiff seeks to have certified is defined as all persons who owned a time-share interest in the Welk Resorts Platinum Program at any time within four years of the filing of the complaint in this matter. Martinez argues that this case warrants class treatment because (1) all Platinum Point owners signed the same contracts; (2) Welk had an obligation to disclose the alleged mold problems to points owners, but failed to do so; and (3) points are fungible, so anything that diminishes the value of points harms all owners. (Pl. Mot. for Class Cert. at 1.)

II. LEGAL STANDARD

"The class action is 'an exception' to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (citation omitted). "Class action certifications to encourage compliance with consumer protection laws are 'desirable and should be encouraged.'" Ballard v. Equifax Check Serv., Inc. , 186 F.R.D. 589, 600 (E.D. Cal. 1999) (citations omitted); see Abels v. JBC Legal Grp. , 227 F.R.D. 541, 547 (N.D. Cal. 2005) (class action is superior when "[m]any plaintiffs may not know their rights are being violated") (citation omitted).

To obtain certification, a plaintiff bears the burden of proving that the class meets all four requirements of Federal Rule of Civil Procedure 23(a)-numerosity, commonality, typicality, and adequacy- and falls within one of the three categories of Rule 23(b). Ellis , 657 F.3d at 979-80. This case involves Rule 23(b)(3), which authorizes certification when "questions of law or fact common to class members predominate over any questions affecting only individual class members," and "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

"[T]he merits of the class members' substantive claims are often highly relevant when determining whether to certify a class. More importantly, it is not correct to say a district court consider the merits to the extent that they overlap with class certification issues; rather, a district court must consider the merits if they overlap with Rule 23(a) requirements." Ellis , 657 F.3d.at 981. Nonetheless, the district court does not conduct a mini-trial to determine if the class "could actually prevail on the merits of their claims." Id. at 983 n.8; United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO v. ConocoPhillips Co. , 593 F.3d 802, 808 (9th Cir. 2010) (citation omitted) (court may inquire into substance of case to apply the Rule 23 factors, however, "[t]he court may not go so far . . . as to judge the validity of these claims."). When the court must determine the merits of an individual claim to determine who is a member of the class, then class treatment is not appropriate. Herrera v. LCS Fin. Servs. Corp. , 274 F.R.D. 666, 672-73 (N.D. Cal. 2011); 5 James W. Moore, Moore's Fed. Practice ยง 23.21[3][c] (2011). "The ...

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