United States District Court, S.D. California
[Copyrighted Material Omitted]
For Dean Beaver, Husband and Wife, Laurie Beaver, Husband and Wife, Steven Adelman, an individual, Abram Aghachi, an individual, Dinesh Gauba, an individual, Kevin Kenna, husband and wife, on behalf of themselves and all others similarly situated, Veronica Kenna, husband and wife, on behalf of themselves and all others similarly situated, Plaintiffs: Donald Eugene Chomiak, LEAD ATTORNEY, Talisman Law, P.C., Glendale, CA; Michael Lawrence Schrag, Tyler R. Meade, LEAD ATTORNEYS, Meade & Schrag, LLP, Berkeley, CA; Michael Rubin, Altshuler Berzon LLP, San Francisco, CA; Wendy C. Fostvedt, PRO HAC VICE, Fostvedt Legal Group, LLC, Basalt, CO.
For Tarsadia Hotels, a California corporation, Tushar Patel, an individual, B.U. Patel, an individual, Gregory Casserly, an individual, 5th Rock LLC, a Delaware limited liability company, MKP One, LLC, a California limited liability company, Gaslamp Holdings, LLC, a California limited liability company, Defendants: Alicia Natalie Vaz, Perry Hughes, LEAD ATTORNEYS, Cox Castle and Nicholson, Los Angeles, CA; Frederick H Kranz, Jr, Cox Castle & Nicholson LLP, Irvine, CA; Lynn T Galuppo, Cox Castle & Nicholson, Irvine, CA.
For Playground Destination Properties, Inc., a Washington corporation, Defendant: Daniel M. Benjamin, LEAD ATTORNEY, John J. Rice, Thomas W McNamara, Ballard Spahr, LLP, San Diego, CA.
For Gregory Casserly, an individual, MKP One, LLC, a California limited liability company, Tushar Patel, an individual, 5th Rock LLC, a Delaware limited liability company, Gaslamp Holdings, LLC, a California limited liability company, Tarsadia Hotels, a California corporation, B.U. Patel, an individual, ThirdParties Plaintiffs: Alicia Natalie Vaz, Perry Hughes, LEAD ATTORNEYS, Cox Castle and Nicholson, Los Angeles, CA; Frederick H Kranz, Jr, Cox Castle & Nicholson LLP, Irvine, CA.
For Greenberg Traurig, LLP, a limited liability partnership, ThirdParty Defendant: Michael P McNamara, LEAD ATTORNEY, Dylan Ruga, Steptoe & Johnson LLP, Los Angeles, CA.
ORDER RE RETROACTIVITY OF RECENT 2014 AMENDMENT TO THE INTERSTATE LAND SALES ACT; SUA SPONTE CERTIFYING ORDERS FOR INTERLOCUTORY APPEAL
HON. GONZALO P. CURIEL, United States District Judge.
On September 26, 2014, a bill that amended the Interstate Land Sales Disclosure Act (" ILSA" ) to exclude condominiums from the registration and disclosure requirements was enacted. As a result, the liability of Tarsadia Defendants depends on whether the amendment applies to the pending case. Therefore, on October 1, 2014, the Court directed the parties to brief whether the recent legislation enacted on September 26, 2014 applies retroactively to this case. (Dkt. No. 170.) On October 17, 2014, both parties filed a supplemental brief regarding retroactivity of the ILSA legislation. (Dkt. Nos. 171, 172.) On October 24, 2014, the parties filed a response to the supplemental briefs. (Dkt. Nos. 173, 174.) Based on the reasoning below, the Court concludes that the 2014 amendment to the ILSA does not apply retroactively to the instant case.
On October 16, 2013, the Court, inter alia, denied Plaintiffs' motion for summary judgment on the " unlawful prong" of California's Unfair Competition Law (" UCL" ) for violations of the registration and disclosure requirements under 15 U.S.C. § 1703(a)(1) as time barred. (Dkt. No. 128.) On July 2, 2014, Court, inter alia, granted Plaintiffs' motion for reconsideration of the Court's ruling on the " unlawful prong" of the UCL as timely, and as such, the Court granted Plaintiffs' motion for summary judgment on the " unlawful prong" of the UCL claim for violations of the registration and disclosure requirements under 15 U.S.C. § 1703(a)(1). (Dkt. No. 153.)
Subsequently, on July 30, 2014, Tarsadia Defendants filed a motion for reconsideration of the Court's prior order granting in part and denying in part Plaintiff's motion for reconsideration, (Dkt. No. 155), and on August 1, 2014, they filed a motion for certification of the Court's orders for interlocutory appeal and a stay of the action pending appeal. (Dkt. No. 158.) The motions were fully briefed.
Then, on September 23, 2014, Tarsadia Defendants filed a supplement to their motion for reconsideration along with a request for judicial notice. (Dkt. No. 167.) On September 26, 2014, Plaintiff filed a response to Tarsadia Defendants' supplemental brief. (Dkt. No. 169.)
In the request for judicial notice, Tarsadia Defendants informed the Court that the United States House of Representatives, on September 26, 2013, and the United States Senate, on September 18, 2014, unanimously passed an amendment to the Interstate Land Sales Full Disclosure Act (" ILSA" ) whereby the sale or lease of condominium units are exempt from certain registration and disclosure requirements under the ILSA. (Dkt. No. 167-1, Ds' RJN, Exs.) On September 26, 2014, the bill was signed by the President.
The bill is entitled, " To amend the Interstate Land Sales Full Disclosure Act to
clarify how the Act applies to condominiums." (Id.) If the recent amendment applies to the instant case, it would affect the Court's recent decision granting Plaintiffs' motion for summary judgment on the UCL cause of action for violations of the registration and disclosure requirements. Plaintiffs support the position that the presumption against retroactivity applies in this case while Tarsadia Defendants assert that the amendment is a clarification of prior law which should be applied retrospectively to this case. Accordingly, the Court must determine whether the amendment should be applied retroactively to the instant case.
The United States Supreme Court in Landgraf v. USI Film Prods., 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), held that there is a presumption against retroactive legislation. Id. at 265. The presumption is deeply rooted in our jurisprudence which is based on considerations of fairness that individuals should know what the law is in order to conform their conduct accordingly.
Landgraf, 511 U.S. at 265. If retroactivity is an issue, it raises constitutional concerns that courts need to address by conducting a three inquiry analysis. Id. at 266-67, 280. Despite the presumption, the United States Supreme Court recognized that retroactive legislation can serve benign and legitimate purposes such as " respond to emergencies, to correct mistakes, . . . or simply to give comprehensive effect to a new law Congress considers salutary." Id. at 268.
" Congress may amend a statute to establish new law, but it also may enact an amendment 'to clarify existing law, to correct a misinterpretation, or to overrule wrongly decided cases.'" Brown v. Thompson, 374 F.3d 253, 259 (4th Cir. 2004) (quoting United States v. Sepulveda, 115 F.3d 882, 885 n. 5 (11th Cir. 1997) (internal quotation marks and citation omitted)). " Statutes may be passed purely to make what was intended all along even more unmistakably clear." United States v. Montgomery County, 761 F.2d 998, 1003 (4th Cir. 1985).
The Ninth Circuit has held that if an amendment clarifies preexisting legislation rather than effect a change in the law, a Landgraf analysis is not needed. ABKCO Music, Inc. v. LaVere, 217 F.3d 684, 689 (9th Cir. 2000); Beverly Comm. Hosp. Ass'n v. Belshe, 132 F.3d 1259, 1266 (9th Cir. 1997). Therefore, the Court must first determine whether the 2014 ILSA amendment is a clarification of a prior statute or a substantive change in the law.
A. Clarification or Substantive Change in the Law
Plaintiffs contend that there is no legislative intent that the amendment should be
applied retroactively. They argue that the history of HUD regulations and court decisions treating condominiums as lots under ILSA for over thirty years strongly suggest that the amendment is a change in the law, and not a clarification. Second, they contend that the amendment provides for an effective date of 180 days after enactment which strongly indicates an intent to have the law apply prospectively only. Tarsadia Defendants argue that the amendment should apply retroactively because it is merely clarifying ILSA as demonstrated by the title of the amendment and comments made by sponsors of the bill.
Whether an amendment is a clarification of a prior statute or a substantial change in the law is key to determining whether the amendment has a retroactive effect that raises constitutional issues. See Beverly Comm. Hosp. Ass'n v. Belshe, 132 F.3d 1259, 1265 (9th Cir. 1997). If an amendment is determined to be a " clarification" then it has no retroactive effect and not subject to any presumption against retroactivity but if an amendment constitutes a substantial change in the law, then it raises issues as to retroactivity. Id.; ABKCO Music, Inc. v. LaVere, 217 F.3d 684, 689 (9th Cir. 2000). " 'When an amendment is deemed clarifying rather than substantive, it is applied retroactively.'" ABKCO Music, Inc., 217 F.3d at 689 (citation omitted) (" [C]larifying legislation is not subject to any presumption against retroactivity and is applied to all cases pending as of the date of its enactment" ).
" Several factors are relevant when determining if an amendment clarifies, rather than effects a substantive change to prior law."
Dept. of Toxic Substances Control v. Interstate Non-Ferrous Corp., 99 F.Supp.2d 1123, 1129-30 (E.D. Cal. 2000). " A significant factor is whether a conflict or ambiguity existed with respect to the interpretation of the relevant provision when the amendment was enacted. If such an ambiguity existed, courts view this as an indication that a subsequent amendment is intended to clarify, rather than change, the existing law." Id. at 1129 (quoting Piamba Cortes v. American Airlines, Inc., 177 F.3d 1272, 1283-84 (11th Cir. 1999)). In addition, courts " may rely on upon a declaration by the enacting body that its intent is to clarify the prior enactment." Id. at 1284; see also Brown, 374 F.3d at 259.
In ABKCO Music, Inc., the Ninth Circuit held that a 1997 amendment to the Copyright Act providing that distribution of phonorecords before January 1, 1978 did not constitute publication of the musical work embodied clarified prior law. ABKCO Music, Inc., 217 F.3d at 691-92. In its analysis, the court looked at the congressional record and the ambiguity of the prior statute noting there was a circuit split as to the term " publication" as it was not defined under the Copyright Act. Id. at 690-91. As to the circuit split, the Court noted that in 1976, prior to the amendment, the Second Circuit held that the sale of phonorecord in the 1950s did not constitute a publication. See Rosette v. Rainbo Record Mfg. Corp., 546 F.2d 461 (2d Cir. 1976). Rosette was the leading case until the Ninth Circuit decision in La Cienega Music Co. v. ZZ Top, 53 F.3d 950 (9th Cir. 1995), where it held the contrary that selling a recording constitutes a " publication" under the Copyright ...