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Clark v. Worldmark

United States District Court, E.D. California

July 25, 2019

TERINA CLARK & BRYAN CLARK, individually and as Private Attorney Generals on behalf of the general public, Plaintiffs,
v.
WORLDMARK, THE CLUB, et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DISMISSING IN PART DEFENDANTS' MOTION TO DISMISS WITH LEAVE TO AMEND AND GRANTING DEFENDANTS MOTION TO STRIKE. (ECF NO. 20)

          LAWRENCE J. O'NEILL UNITED STATES CHIEF DISTRICT JUDGE

         I. INTRODUCTION

         This case involves a putative class action initially filed by Plaintiffs Terina and Bryan Clark (“Plaintiffs”) on May 10, 2018, in the Superior Court of the State of California in the County of Kern. See ECF No. 1 ¶ 3. Defendants WorldMark, The Club (“WorldMark”), Wyndham Resort Development Corporation (“WRDC”), and Wyndham Vacation Ownership, Inc. (“WVO”) (collectively “Defendants”) were served with the Complaint on November 6, 2018, and removed the case to this Court on December 6, 2018, asserting jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”), codified in part at 28 U.S.C. § 1332(d). Id. ¶¶ 1, 4.

         Under review is Defendants' motion to dismiss under Federal Rule of Civil Procedure (“FRCP”) 12(b)(6), where Defendants argue that Plaintiffs have failed to state a claim upon which relief can be granted. ECF No. 20. Defendants also move to strike portions of the First Amended Complaint (“FAC”) under FRCP 12(f) claiming that the portions are immaterial, impertinent, and scandalous. Id. For the reasons stated below, the Court GRANTS Defendants' motion to strike and GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss with leave to amend.

         II. BACKGROUND A.

         Facts [1]

         Plaintiffs are residents of Bakersfield, California, and citizens of California. ECF No. 18 ¶ 7. Defendant WRDC is incorporated in Oregon and has its principal place of business in Florida. ECF No. 1 ¶ 12. Defendant WVO is incorporated in Delaware and has its principal place of business in Florida. Id. ¶ 13. Defendant WorldMark is incorporated in California and has its principal place of business in Washington. Id. ¶ 14. The putative class in this matter consists of all individuals “who have 1) been sold a timeshare in California by Defendants through individuals or entities not licensed to sell real estate or arrange financing for real estate purchases in California and 2) have been told by Defendants that they have earned ‘equity' on the purchase of timeshare points.” ECF No. 18 ¶ 34. Plaintiffs allege that they purchased a timeshare interest sold by Defendants WorldMark and WRDC in 2015 while on vacation in San Diego and purchased “additional timeshare points” in September 2016. Id. ¶ 13. On or around April 29, 2017, Plaintiffs received a call from an office operated by Defendants. Id. ¶ 15. The individual who spoke with Plaintiffs made “many materially false and misleading statements” and induced Plaintiffs to purchase 1, 000 additional WorldMark vacation credit points for $3, 450 plus a processing fee of $349. Id. ¶ 17. The purchase was financed by an extension of credit by WRDC, bringing the total amount owed by Plaintiffs for their timeshare interest to more than $26, 000. Id. The contract for the purchase appeared to be intended for California purchasers. Id. ¶ 21. The name of the person who signed the contract on Defendants' behalf, Brett Dean, does not appear on any list of current, or recent, holders of a California real estate broker or salesperson license. ECF No. 18 ¶ 22.

         Plaintiffs allege that Defendants have consistently represented that they have positive equity in their timeshare interest. Id. ¶ 24. On September 8, 2016, Defendants represented that Plaintiffs had $10, 089.03 in equity in their timeshare purchases. Id. ¶ 25; FAC, Exhibit 2. Plaintiffs claim that the document purporting the amount of equity was created to facilitate the sale of additional WorldMark and WRDC timeshare points to Plaintiffs. Id. ¶ 26. Plaintiffs believe the actual market value of their timeshare points in September 2016 was zero or near zero, and Plaintiffs therefore actually had negative equity. Id. ¶ 28.

         Plaintiffs allege that Defendants engaged in unfair business practices when they unlawfully sold a real estate interest within California through unlicensed individuals who earned commissions on the sales in violation of California law. Id. ¶ 38. Additionally, Plaintiffs allege that Defendants engaged in unfair business practices by making materially false representations in connection with the sale of a timeshare interest as to the equity value of their timeshare points. Id. ¶ 41. Finally, Plaintiffs allege that Defendants violated the California Vacation Ownership and Time-Share Act of 2004, Cal. Bus. & Prof. Code § 11210 et seq. (the “Timeshare Act”), by making materially false and misleading representations about the equity value of Plaintiffs' timeshare points. Id. ¶¶ 46-51.

         B. Procedural Background

         On December 12, 2018, Defendants filed their first motion to dismiss. ECF No. 4. Plaintiffs filed an opposition on December 31, 2018, ECF No. 6, and a motion to remand to state court on January 1, 2019, ECF No. 7.

         On March 1, 2019, the Court denied Plaintiffs' motion to remand the case to state court, holding that Plaintiffs had not demonstrated that CAFA's local controversy exception, 28 U.S.C. § 1332(d)(4)(A), applied to the present case. ECF No. 16, at 10. The Court then permitted Plaintiffs to file an amended complaint, stating “Plaintiffs may file any amended complaint clarifying the allegations regarding in-state Defendants' conduct within 30 days.” ECF No. 16, at 11. The Court deferred ruling on Defendants' motion to dismiss. ECF No. 16, at 12. The Plaintiffs filed the FAC on March 29, 2019. ECF No. 18.

         Defendants now move to dismiss the FAC under FRCP 12(b)(6). ECF No. 20, at 2. Defendants also ask the Court to strike paragraphs 1 through 3 of the FAC under the heading “The Timeshare Industry.” ECF No. 20 at 1. The Court has determined that the motion to dismiss is suitable for decision on the papers under Local Rule 230(g). For the reasons stated below, the Court grants in part and denies in part the motion to dismiss with leave to amend and grants the motion to strike portions of the FAC.

         III. LEGAL STANDARD

         A. Motion to strike portions of the FAC under Rule 12(f)

         Federal Rule of Civil Procedure 12(f) permits the Court to “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “Redundant allegations are those that are needlessly repetitive or wholly foreign to the issues involved in the action.” Cal. Dep't of Toxic Substances Control v. Alco Pacific, Inc., 217 F.Supp.2d 1028, 1033 (C.D. Cal. 2002) (internal quotation marks and citations omitted). Immaterial matter is “that which has no essential or important relationship to the claim for relief or the defenses being pleaded.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (internal quotation marks and citations omitted), rev'd on other grounds, 510 U.S. 517 (1994). Impertinent matter “consists of statements that do not pertain, and are not necessary, to the issues in question.” Id. A scandalous matter is that which “improperly casts a derogatory light on someone, most typically on a party to the action.” Germaine Music v. Universal Songs of Polygram, 275 F.Supp.2d 1288, 1300 (D. Nev. 2003) (internal quotation marks and citations omitted), rev'd in part on other grounds, 130 Fed.Appx. 153 (9th Cir. 2005) (unpublished).

         B. Motion to dismiss under Rule 12(b)(6)

         A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the opposing party's pleadings. Dismissal of an action under Rule 12(b)(6) is proper where there is either a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the pleading party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d ...


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