t plaintiffs’ response to arcis defendants’ motion to
TRANSCRIPT
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6) CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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THE HONORABLE RICARDO S. MARTINEZ U.S. DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
LAWRENCE HART, CLYDE STEPHEN LEWIS, JAMES PRESTI, and MICHAEL RALLS, individually and on behalf of all others similarly situated,
Plaintiffs,
v.
CF ARCIS VII LLC d/b/a THE CLUB AT SNOQUALMIE RIDGE, d/b/a TPC AT SNOQUALMIE RIDGE, and d/b/a SNOQUALMIE RIDGE GOLF CLUB, CF ARCIS IV HOLDINGS, LLC, ARCIS EQUITY PARTNERS, LLC, BLAKE S. WALKER, individually and on behalf of the marital community of BLAKE S. WALKER and JANE DOE WALKER, and BRIGHTSTAR GOLF SNOQUALMIE, LLC,
Defendants.
NO. 2:17-CV-01932-RSM
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6)
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 1 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - i CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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TABLE OF CONTENTS
Page No.
I. INTRODUCTION .............................................................................................................1 II. STATEMENT OF FACTS ................................................................................................2 A. The Club at Snoqualmie and the Rules in place before May 2013 .......................2 B. The Arcis Defendants and Brightstar colluded to amend the rules in
May 2013 ...............................................................................................................3 C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’
liability ...................................................................................................................5 III. ARGUMENT AND AUTHORITY ..................................................................................6 A. Standard of Review ...............................................................................................6 B. Plaintiffs sufficiently plead all elements of a breach of contract claim ................6 1. Plaintiffs have properly alleged breach .....................................................6 2. Plaintiffs allege facts that support damages and equitable
remedies .....................................................................................................9 C. Plaintiffs sufficiently plead all elements of a CPA claim ....................................10 1. Plaintiffs plead sufficient facts to show Defendants engaged in
unfair acts ................................................................................................11 2. Plaintiffs plead sufficient facts to show Defendants engaged in
deceptive acts ...........................................................................................13 3. Plaintiffs plead sufficient facts to show injury to the public
interest .....................................................................................................15 a. The CPA was amended in 2009. Public interest impact
is satisfied when the alleged unfair or deceptive act “injured other persons” ................................................................15
b. Plaintiffs do not complain about a “private” dispute
between two parties .....................................................................16
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 2 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - ii CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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c. Public interest impact is also satisfied under the multifactor test .............................................................................18
4. Plaintiffs plead sufficient facts to show they have been injured .............19 5. Plaintiffs plead sufficient facts to show causation ..................................20 D. Plaintiffs sufficiently plead all elements of a conversion claim ..........................21 E. Plaintiffs plead sufficient facts to support piercing the corporate veil ................23 IV. CONCLUSION ...............................................................................................................25
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 3 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iii CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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TABLE OF AUTHORITIES
Page No.
FEDERAL CASES
Am. Fin. Servs. Ass’n v. Fed. Trade Comm’n, 767 F.2d 957 (D.C. Cir. 1985) .........................................................................................11
Ashcroft v. Iqbal,
556 U.S. 662 (2009) .........................................................................................................6 Barker v. Riverside Cnty. Office of Educ.,
584 F.3d 821 (9th Cir. 2009) .............................................................................................6 Davis v. HSBC Bank Nev., N.A.,
691 F.3d 1152 (9th Cir. 2012) .........................................................................................12 Eagle View Techs., Inc. v. Xactware Sols., Inc.,
No. C12-1913-RSM, 2013 WL 5945810 (W.D. Wash. Nov. 6, 2013) ...........................10 Eye Care Ctr. of Snohomish v. Chemat Tech., Inc.,
No. C12-0203-JCC, 2012 WL 12941686 (W.D. Wash. Dec. 14, 2012) .........................15 Gremp v. Ramsey,
No. C08-558RSM, 2009 WL 112674 (W.D. Wash. Jan. 14, 2009) ....................22, 23, 24 Hall v. Santa Barbara,
833 F.2d 1270 (9th Cir. 1986) ...........................................................................................6 Jet Parts Eng’g, Inc. v. Quest Aviation Supply, Inc.,
2015 WL 4523497 (W.D. Wash. July 27, 2015) .............................................................17 Segal Co. v. Amazon.com,
280 F. Supp. 2d 1229 (W.D. Wash. 2003) ......................................................................15 Skansgaard v. Bank of Am., N.A.,
896 F. Supp. 2d 944 (W.D. Wash. 2011) ........................................................................14 Veridian Credit Union v. Eddie Bauer, LLC,
295 F. Supp. 3d 1140 (W.D. Wash. 2017) ......................................................................12
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 4 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iv CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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STATE CASES
224 Westlake, LLC v. Engstrom Properties, LLC, 169 Wn. App. 700 (2012) ..................................................................................................9
Allstate Ins. Co. v. Hammonds, 72 Wn. App. 664 (1994) ....................................................................................................7 Behnke v. Ahrens,
172 Wn. App. 281 (2012) ................................................................................................17 Carlile v. Harbor Homes, Inc.,
147 Wn. App. 195 (2008) ................................................................................................12 Davenport v. Wash. Educ. Ass’n,
147 Wn. App. 704 (2008) ....................................................................................21, 22, 23 Deegan v. Windermere Real Estate/Ctr.-Isle, Inc.,
197 Wn. App. 875 (2017) ..........................................................................................20, 21
Dix v. ICT Grp., Inc., 160 Wn.2d 826 (2007) .....................................................................................................17
Edmonds v. John L. Scott Real Estate, Inc.,
87 Wn. App. 834 (1997) ..................................................................................................13 Goodyear Tire & Rubber Co. v. Whiteman Tire Inc.,
86 Wn. App. 732, (1997) .................................................................................................14 Griffith v. Centex Real Estate Corp.,
93 Wn. App. 202 (1998) ..................................................................................................11 Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co.,
105 Wn.2d 778 (1986) .............................................................................10, 13, 16, 17, 18 Hearst Comm’ns, Inc. v. Seattle Times Co.,
154 Wn.2d 493 (2005) ...................................................................................................6, 7 Holiday Resort Cmty. Ass’n v. Echo Lake Assocs., LLC,
134 Wn. App. 210 (2006) ................................................................................................13 In re Marriage of Langham and Kolde,
153 Wn.2d 553 (2005) .....................................................................................................21 Klem v. Wash. Mut. Bank,
176 Wn.2d 771 (2013) ...............................................................................................11, 16
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - v CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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Larsen v. Walton Plywood Co.,
65 Wn.2d 1 (1964) .......................................................................................................9, 10 Maynard Inv. Co. v. McCann,
77 Wn.2d 616 (1970) .......................................................................................................22 Morgan v. Burks,
93 Wn.2d 580 (1980) .................................................................................................23, 24 Mutual of Enumclaw Ins. Co. v. Gregg Roofing, Inc.,
178 Wn. App. 702 (2013) ..................................................................................................9 Newsom v. Miller,
42 Wn.2d 727 (1953) .........................................................................................................7 Nishikawa v. U.S. Eagle High, LLC,
138 Wn. App. 841 (2007) ..................................................................................................7 Panag v. Farmers Ins. Co.,
166 Wn.2d 27 (2009) ...........................................................................................13, 17, 19 Paullus v. Fowler,
59 Wn.2d 204 (1961) .........................................................................................................7 Pohlman Inv. Co. v. Va. City Gold Mining Co.,
184 Wash. 273 (1935) .....................................................................................................23 Rekhter v. Dep’t of Soc. & Health Servs.,
180 Wn.2d 102, 323 P.3d 1036 (2014) ...........................................................................14 Riensche v. Cingular Wireless, LLC,
496 F. App’x 760 (9th Cir. 2012) ....................................................................................14 Schmidt v. Cornerstone Invs., Inc,
115 Wn.2d 148 (1990) .....................................................................................................12 Tanner Elec. Co-op. v. Puget Sound Power & Light Co.,
`128 Wn.2d 656 (1996) .....................................................................................................6 Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n,
133 Wn. App. 835 (2006) ................................................................................................22
STATE STATUTES
RCW 19.86.090 ...........................................................................................................................19
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - vi CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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RCW 19.86.093 ...........................................................................................................................16 RCW 19.86.093(3)(a) ..................................................................................................................15
FEDERAL RULES
Fed. R. Civ. P. 8(a)(2) ...................................................................................................................6 Fed. R. Evid. 201(b) ................................................................................................................5, 18
OTHER AUTHORITIES
In re Int’l Harvester Co., 104 F.T.C. 949, 1984 WL 565290 (1984) .......................................................................11
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 1 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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I. INTRODUCTION
Defendants are current and former owners of the Club at Snoqualmie Ridge (the
“Club”), the only Jack Nicklaus Signature Golf Course in Washington. Prior to May 2013,
members paid tens of thousands of dollars for golf memberships represented as “refundable”
(“Refundable Memberships”). Golfers who choose to sell back their Refundable Memberships
could join a waiting list for a refund (the “Waiting List”). For every third Refundable
Membership sold, Defendants are required to refund one membership on the Waiting List at
70% of the listed price. Plaintiffs Larry Hart, Steve Lewis, Jim Presti, and Mike Ralls are
current or former members of the Club, and like other Class members, paid a premium for a
golf membership that they believed the Club would refund back to them if they chose to sell.
In July 2013, the Arcis Defendants purchased the Club from Defendant Brightstar. As
part of the transaction, they were required to assume the Club’s obligations, including the
refund obligations to Club members. But prior to closing, Defendants colluded and deceptively
amended Club rules to add a non-refundable category of golf membership (“Non-Refundable
Memberships”) for half the price of Refundable Memberships. Thus, although the Club
continued to sell Refundable Memberships, new members had no incentive to purchase them.
The Defendants amended the rules without notice to Club members and without obtaining their
approval, steps required for changes that would adversely affect Club members’ refund rights.
Perhaps most egregious, Defendants did not disclose this change for two years. For two
years, Plaintiffs and other Club members did not know that Defendants had adopted Revised
Rules that introduced Non-Refundable Memberships. And they did not know they were sold for
half the price of Refundable Memberships. Moreover, the Revised Rules required Defendants
to make refunds from the sales of both Refundable and Non-Refundable Memberships, but
Defendants did not honor this requirement. Because Plaintiffs did not know about the Revised
Rules, they did not know that Defendants had conspired to eliminate their refunds. Had
Plaintiffs known that Defendants would refuse to honor their refund rights, they could have
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 8 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 2 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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taken advantage of a provision in the Rules that allows Club members to resign within 60 days
of the sale of the Club and receive 100% of their Membership Fee. Now, Plaintiffs and at least
100 other persons remain on the Waiting List for refunds that will not come or will be delayed.
Plaintiffs bring this suit for damages and equitable relief on behalf of themselves and
the proposed Class. Defendants’ conduct breached contracts they had with Class members, was
unfair and deceptive in violation of the Washington Consumer Protection Act, and constitutes
conversion. The Arcis Defendants move to dismiss on several grounds but, for the reasons set
forth below, each argument fails. Accordingly, the Court should deny the motion to dismiss.
II. STATEMENT OF FACTS
A. The Club at Snoqualmie and the Rules in place before May 2013.
Plaintiffs and Class members are current and former members of the Club at
Snoqualmie Ridge, a membership-only golf and country club located in Snoqualmie,
Washington. Dkt. 18 (“Second Amended Complaint” or “SAC”) at ¶ 4.1. When Plaintiffs and
Class members joined the Club, the only golf memberships the Club advertised and sold were
refundable memberships. SAC ¶¶ 3.9, 4.5, 4.10. To use the full range of the Club’s facilities,
Plaintiffs and Class members paid a large, one-time membership fee in the tens of thousands of
dollars (“Membership Fee”). Id. ¶ 4.2. Club members remain in good standing and benefit from
their Refundable Memberships by paying monthly dues. Id. The Club, in turn, is obligated to
refund a portion of the Membership Fee to Club members who voluntarily resign. Id. ¶ 4.7.
These requirements and others are set forth in Club rules. The rules in place when
Plaintiffs joined the Club were the June 30, 2008 Membership and Operating Policies (“Rules”
or “2008 Rules”). See Dkt. 11, Exh. B. The provisions regarding Club members’ refund rights
are strict. “In the event of voluntary resignation of an Individual Golf Membership … the
former Member shall be entitled to receive 70% of the Membership Fee published at the time
Club Operator reissues the resigned or terminated membership ....” Id. ¶ 3.2(b)(i) (emphasis
added). The Club “shall maintain waiting lists … of resigned Members entitled to payments
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 9 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 3 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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upon reissuance of their memberships….” Id. ¶ 3.2(c). The Club is required to pay a refund for
“every third membership” sold to those with the “highest priority on the waiting list….” Id.
Although the 2008 Rules authorize the Club to amend Club rules “to change the classes
and categories of membership offered,” the right is not unfettered. Dkt. 11, Exh. B ¶ 1.1. The
Rules prohibit the Club from making any amendment which “shall materially adversely affect
the rights of any existing Member under Section 3.2(b) unless approved by at least two-thirds
of the affected Members.” Id. ¶ 6.2. Rule amendments are effective only “when notice … is
delivered to the Members.” Id. “[A]ll notices or other communications … required to be given
or made hereunder shall be in writing and shall be delivered or mailed ….” Id. ¶ 6.1.
B. The Arcis Defendants and Brightstar colluded to amend the rules in May 2013.
Arcis “has positioned itself as a dynamic leader in the [golf] industry by consistently
providing unrivaled amenities to complement diverse playing experiences for members and
guests.” SAC ¶ 3.6. “Arcis’ principals have an established history in the ownership and
operation of high-end golf courses, country clubs and world-class destination resorts.” See
https://www.arcisgolf.com/news/arcis-completes-purchase-46-golf-properties-cnl-lifestyle-
properties (last visited June 25, 2018). One principal—Defendant Blake S. Walker, Chairman,
CEO and President of Arcis Golf, and CEO and managing partner of Arcis Equity—“has been
involved in all phases of the firm’s strategy and development since its founding.” SAC ¶ 3.8.
In July 2013, Arcis purchased the Club from Defendant Brightstar Golf Snoqualmie,
LLC (“Brightstar”), a company which had owned and operated the Club since 2008. SAC ¶ 3.9.
As part of the transaction, the Arcis Defendants expressly and impliedly assumed the Club’s
obligations under the 2008 Rules, including the obligation to pay refunds to resigned members
on the Waiting List. Id. ¶ 8.6. But prior to closing, Defendants deceptively amended Club rules
in a manner that made the contractual requirement to assume the refund obligations illusory. Id.
¶¶ 4.12, 6.7. They colluded to amend Club rules to add a non-refundable category of golf
membership (“Non-Refundable Memberships”), and to sell the Non-Refundable Memberships
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 10 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 4 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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for half the price of Refundable Memberships. Id. ¶¶ 4.8, 4.10, Exh. A at p. 3 (“Non-
Refundable and Non-Transferable Membership”). Although the Club continued to sell
Refundable Memberships, they were sold for twice the price of Non-Refundable Memberships,
so prospective Club members had no incentive to purchase them.
In addition to the problems described above, the 2013 Revised Rules grouped both the
Non-Refundable and Refundable Memberships within the category of “Premier Golf
Memberships.” SAC, Exh. A ¶ 1.1(a). Under the Revised Rules, members on the Waiting List
are entitled to receive a partial refund of their Membership Fee after the sale of “every third
Premier Family Golf Membership.” Id. ¶ 3.2(c). Moreover, the Revised Rules make no
distinction between Non-Refundable and Refundable Premier Golf Memberships. Id. Arcis was
required to make refunds from the sale of both Refundable and Non-Refundable Memberships,
but Arcis failed to do so. Instead, it simply stopped paying refunds. Id. ¶ 6.7.
It is clear that the Arcis Defendants participated in amending the Rules because Arcis’
name is prominently displayed on the first line of the May 1, 2013 Amended and Restated
Membership and Operating Policies (“Revised Rules” or “2013 Revised Rules”). SAC, Exh. A.
Defendants amended the Rules without mailing or delivering notice to Club members and
without obtaining their two-thirds approval, steps that Defendants were required to follow
under ¶ 6.1 and ¶ 6.2 if they made changes to Club rules that would adversely affect the refund
rights described in ¶ 3.2(b). SAC ¶¶ 4.13-4.15; see also Dkt. 11, Exh. B, ¶¶ 3.2(b), 6.1, 6.2.
Defendants did not disclose this change for two years. SAC ¶ 4.11. Plaintiffs and other
Club members did not know that Defendants had implemented Revised Rules that introduced
Non-Refundable Memberships. Id. They did not know that the new memberships were sold for
half the price of Refundable Memberships. Id. ¶¶ 4.10, 4.11. They did not know that
Defendants had conspired to eliminate their refunds altogether by declining to make refunds
with revenue from the sale of Non-Refundable Memberships. Id. ¶¶ 4.16, 4.20. Moreover, the
2008 Rules allow members to receive 100% of their refunds (rather than 70% of the listing
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 5 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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price) within 60 days of the sale of the Club if the new owner refuses to honor their
membership agreements. Dkt. 11, Exh. B ¶ 3.2(b)(iii). Defendants’ secret revision of the Rules
foreclosed Plaintiffs’ and Class members’ ability to voluntarily resign and obtain their 100%
refunds. SAC ¶ 6.9. Because of these omissions, Plaintiffs and at least 100 other persons
remain on the Waiting List for refunds that will never come or will be delayed. Id. ¶¶ 5.3, 6.7.
C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’ liability.
Arcis’ collusion with Brightstar to introduce Non-Refundable Memberships finally
came to light in August 2015, but Arcis did little to address member outrage for another year.
SAC ¶ 4.11. Finally, in September 2016, Mr. Walker personally traveled to Washington from
Texas to meet with angry Club members. Id. ¶ 3.8. One month later, the Arcis Defendants
addressed this issue and others in a written “20/20 Plan” presented to members. See Declaration
of Adrienne D. McEntee (“McEntee Decl.”), Exh. 1 (“TPC SR 20/20 Plan”).1 In the Plan, the
Arcis Defendants admitted they had made just “one refund” in three years, acknowledged
frustration “with the slow pace of refunds being made to those on the resigned list and the
perception that the club has not been fully forthcoming with the information regarding
memberships sold by the club,” and promised “Full Transparency and Disclosure.” Id.
Although Arcis said it would “take steps necessary to ensure that the club remains
healthy for the benefit of all of the members,” the Plan did not offer retroactive refunds to those
who should have received refunds during the prior three years. McEntee Decl., Exh. 1. Instead,
Arcis’ Plan renamed the Non-Refundable Premier Family Golf Memberships “Ridge Family
Golf Memberships” to avoid “confusion,” and implemented a “Voluntary Refund Policy” that
purports to make refunds at a 3-1 ratio from the sale of both Refundable and Non-Refundable
Memberships. Id.; see also Dkt. 11, Exh. D. The Policy is “non-binding.” Arcis has “sole
discretion” to adhere, or not adhere, to the Policy. Dkt. 11, Exh. D.
1 Plaintiffs respectfully request that the Court take judicial notice of the 20/20 Plan, which the Arcis Defendants used to introduce the Voluntary Refund Policy that Defendants included with their motion (Dkt. 11, Exh. D). See Fed. R. Evid. 201(b) (“The court may judicially notice a fact that is not subject to reasonable dispute because it … can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned”).
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 6 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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Why the Arcis Defendants chose not to make retroactive refunds is unclear. Money was
not an issue. While the Great Recession generally had an adverse impact on the golf industry,
Arcis “enabled the club to weather the economic storm relatively well and it does not face the
dire circumstances that many clubs are facing.” McEntee Decl., Exh. 1. “[I]n large part due to
prudent management,” Arcis has invested “over $3M in capital improvements” into the Club.
Id. Indeed, Arcis has been recognized for achieving “2,456% growth in revenues over a three-
year period.” See https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-
magazine%E2%80%99s-fastest-growing-private-companies (last visited June 25, 2018).
III. ARGUMENT AND AUTHORITY
A. Standard of Review.
Courts disfavor motions to dismiss, which are frequently denied. Hall v. Santa Barbara,
833 F.2d 1270, 1274 (9th Cir. 1986). The Federal Rules require a plaintiff to plead “a short and
plain statement of the claim showing that [he] is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To
survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible
“when the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the conduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly,
550 U.S. at 545). In determining plausibility, the Court accepts all facts in the complaint as
true. Barker v. Riverside Cnty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009).
B. Plaintiffs sufficiently plead all elements of a breach of contract claim.
1. Plaintiffs have properly alleged breach.
“The touchstone of contract interpretation is the parties’ intent.” Tanner Elec. Co-op. v.
Puget Sound Power & Light Co., 128 Wn.2d 656, 674 (1996). Washington courts follow the
objective manifestation theory of contracts, looking for the parties’ intent as objectively
manifested rather than their unexpressed subjective intent. Hearst Comm’ns, Inc. v. Seattle
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Times Co., 154 Wn.2d 493, 503 (2005). A court considers only what the parties wrote, giving
words in a contract their ordinary, usual, and popular meaning unless the agreement as a whole
clearly demonstrates a contrary intent. Id. at 504. A contract must be read “as the average
person would read it; it should be given a ‘practical and reasonable rather than a literal
interpretation,’ and not a ‘strained or forced construction’ leading to absurd results.” Allstate
Ins. Co. v. Hammonds, 72 Wn. App. 664, 667 (1994) (citation omitted). Washington courts
favor an interpretation giving effect to all of a contract’s provisions over one that renders some
language meaningless or ineffective. See Newsom v. Miller, 42 Wn.2d 727, 731 (1953). In
order to give effect to all the contract’s provisions, courts harmonize clauses that seem to
conflict. Nishikawa v. U.S. Eagle High, LLC, 138 Wn. App. 841, 849 (2007).2
Three key provisions of the 2008 Rules bear on the issues here. Paragraph 6.2 provides:
AMENDMENT. Club Operator reserves the right, in its sole and absolute discretion, to amend these Membership and Operating Policies at any time and in any manner which it deems appropriate, except that no amendment shall materially adversely affect the rights of any existing Member under Section 3.2(b) unless approved by at least two-thirds of the affected Members. Any amendment shall become effective when notice thereof is delivered to the Members.3
Dkt. No. 11, Exh. B ¶ 6.2 (emphasis added). Paragraph 3.2(b)(i) provides, in relevant part:
REFUNDS. A resigning member shall have no right to any payment upon termination of membership except as follows:
(i) In the event of voluntary resignation of an Individual Golf Membership … the former Member shall be entitled to receive 70% of the Membership Fee published at the time Club Operator reissues the resigned or terminated membership pursuant to Section 3.2(c) … to be paid within 30 days after reissuance.
2 “An assignee of a contract stands in the shoes of his assignor.” Paullus v. Fowler, 59 Wn.2d 204, 212 (1961). The Arcis Defendants assumed Brightstar’s refund obligations. Id. ¶¶ 8.6, 8.10. Although they dispute liability for the claims alleged, the Arcis Defendants do not dispute they are valid assignees. SAC ¶ 8.6; Dkt. 20 at 22:25-23:1. 3 Defendants fail to cite the entire paragraph 6.2, leaving out the last sentence altogether. Dkt. No. 20 at 25:22-25.
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Dkt. No. 11, Exh. B ¶ 3.2(b)(i) (emphasis added). Finally, paragraph 6.1 provides in relevant part:
NOTICES. Except as otherwise specifically provided in these Membership and Operating Policies, all notices or other communications (other than regular statements of account) required to be given or made hereunder shall be in writing and shall be delivered or mailed…. Notices to a Member shall be addressed to the Member at the address specified in the Member’s Membership Agreement, unless the Member has requested that notices be given at a different address by written notice to Club Operator….
Dkt. No. 11, Exh. B ¶ 6.1. Together, these provisions impose on Defendants a duty to give
members notice of a proposed rule change to their refund rights, and an obligation to obtain the
approval of two-thirds of the membership before such change can be effective.
The Arcis Defendants disagree with Plaintiffs’ interpretation. They argue there was no
breach because Defendants claim they have the “unfettered right” under paragraph 1.1 to create
new classes of membership. Dkt. 20 at 26:18-21. But Arcis’ myopic focus on paragraph 1.1
ignores paragraph 6.1, which requires Defendants to give members hand-delivered or mailed
notice, and paragraph 6.2, which requires a vote of two-thirds of the membership for changes
that adversely affect refund rights. SAC, Exh. A. If the Court were to interpret the contract in
the manner suggested by the Arcis Defendants, the language regarding the notice and voting
requirements would be entirely superfluous. Arcis’ interpretation is untenable.
Defendants’ amendment of the Rules without notice and approval materially and
adversely affected Plaintiffs’ interests and the interests of hundreds of others who are similarly
situated to Plaintiffs. By marketing Non-Refundable Memberships at half the price of
Refundable Memberships, Defendants diverted all sales to Non-Refundable Memberships,
guaranteeing that future consumers would choose to purchase the discounted Non-Refundable
Memberships over the more expensive Refundable Memberships, and made it impossible for
members on the Waiting List to receive refunds. SAC ¶¶ 4.10, 4.12. Because the facts plausibly
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allege that Defendants breached the parties’ contract, the motion should be denied.
2. Plaintiffs allege facts that support damages and equitable remedies.
The general measure of damages for breach of contract is that the injured party is
entitled to (1) recover all damages that accrue naturally from the breach and (2) be put into as
good a pecuniary position as he would have had if the contract had been performed. 224
Westlake, LLC v. Engstrom Properties, LLC, 169 Wn. App. 700, 729 (2012) (citing Eastlake
Constr. Co. v. Hess, 102 Wn.2d 30, 39 (1984)). Damages are recoverable if they were within
the contemplation of the parties at the time the contract was made, are the proximate result of
defendant’s breach, and are proven with reasonable certainty. Westlake, LLC, 169 Wn. App. at
729 (citation omitted). “Certainty” applies to the fact of damage rather than to the amount.
Mutual of Enumclaw Ins. Co. v. Gregg Roofing, Inc., 178 Wn. App. 702, 715 (2013), rev. den.,
180 Wn.2d 1011 (2014). If a plaintiff affords “a reasonable basis for estimating his loss, he is
not to be denied a substantial recovery because the amount of the damage is incapable of exact
ascertainment.” Larsen v. Walton Plywood Co., 65 Wn.2d 1, 16 (1964) (citation omitted).
Plaintiffs plainly allege that they were damaged from Defendants’ breach. They
specifically allege that “one or more Plaintiffs would have been entitled to, and would have
received refunds, had Defendants not breached the terms of the Rules by selling Non-
Refundable Memberships without membership notice and approval.” SAC ¶ 8.8. While they
cannot know with certainty at the pleadings stage the amount of damages, they have clearly
alleged the fact that they were damaged. Far from tepid speculation, the Arcis Defendants’ own
representations support Plaintiffs’ allegations. Arcis funneled $3 million dollars back into the
Club. McEntee Decl., Exh. 1. The Court may reasonably infer that the $3 million stemmed
from revenue earned from the sale of memberships. This number does not account for the
generous profit the Arcis Defendants no doubt realized over the same period. See
https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-magazine%E2%80%99s-
fastest-growing-private-companies (last visited June 25, 2018) (Arcis achieved “2,456%
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growth in revenues over a three-year period.”). Applying the 3-1 ratio4 described in the 2008
Rules, Defendants should have refunded at least $1 million to Plaintiffs and the Class.5 This is
“a reasonable basis for estimating … loss.” Larsen, 65 Wn.2d at 16.
Class members who are not yet eligible for refunds are nonetheless entitled to equitable
relief, (see SAC ¶¶ 5.4.9, 8.13, Recitals B, E), allegations that the Arcis Defendants ignore
altogether. “There are two main equitable remedies available on a contract action: specific
performance and injunctive relief. While the two are similar, the difference is that specific
performance orders a party to comply with the terms of the contract, whereas an injunction
typically orders a party to refrain from a particular act.” Eagle View Techs., Inc. v. Xactware
Sols., Inc., No. C12-1913-RSM, 2013 WL 5945810, at *2 (W.D. Wash. Nov. 6, 2013).
Plaintiffs seek both equitable remedies here. Specifically, “Plaintiffs and member of the Class
are entitled to specific performance of the Rules” as they existed before Defendants adopted the
2013 Revised Rules and began selling Non-Refundable Memberships. SAC ¶ 8.13. Plaintiffs
also seek injunctive relief “requiring Defendants to refund the memberships of members who
join the Waiting List in the future pursuant to the terms of the pre-2013 Rules.” Id. at X(B).
Plaintiffs have alleged sufficient bases to support their request for damages and equitable relief.
C. Plaintiffs sufficiently plead all elements of a CPA claim.
To survive a motion to dismiss their CPA claims, Plaintiffs must plead plausible
allegations for the following elements: (1) an unfair or deceptive act or practice, (2) occurring
in trade or commerce, (3) a public interest impact, (4) injury to Plaintiffs’ business or property,
and (5) a causal relationship between the unfair or deceptive act and Plaintiffs’ injuries. See
Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780 (1986).
4 Defendants also argue that the Revised Rules did not change the ratio of refunds from 3-1 to 4-1, as Plaintiffs allege in SAC ¶ 4.9, because the term “3-1 ratio” remains. But they ignore language in ¶ 3.2(c) of the Revised Rules that confirms memberships “will be refunded after every third” membership is sold (Dkt. 18, Exh. A), as opposed to language in the former ¶ 3.2(c), which provides a refund with “every third membership” sold (Dkt. 11, Exh. B). Regardless, the sale of Refundable Memberships has been virtually nonexistent since May 2013. 5 Based on the $39,000 price at which Defendants offered the memberships in October 2016 (Dkt. 11, Exh. D), Defendants should have refunded at least 36 Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6).
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The Arcis Defendants challenge the allegations Plaintiffs set out in support of the first, third,
fourth, and fifth elements. For the reasons that follow, their arguments fail.
1. Plaintiffs plead sufficient facts to show Defendants engaged in unfair acts.
Conduct is unfair and violates the CPA if it “causes or is likely to cause” substantial
injuries that are not reasonably avoidable and are not outweighed by countervailing benefits.
Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787 (2013) (quoting 15 U.S.C. § 45(n)). The test for
unfairness is an objective one. See Am. Fin. Servs. Ass’n v. Fed. Trade Comm’n, 767 F.2d 957,
976-98 (D.C. Cir. 1985) (analyzing benefits of defendants’ conduct, if any, and ability of those
impacted to reasonably avoid injury). In determining whether a defendant engaged in unfair
practices, courts look at the totality of the defendant’s conduct. See In re Int’l Harvester Co.,
104 F.T.C. 949, 1984 WL 565290, at *88 (1984). This includes evidence of the defendant’s
acts before, during, and after the transactions at issue, as well as evidence regarding the impact
those actions had on consumers. See, e.g., Griffith v. Centex Real Estate Corp., 93 Wn. App.
202, 213–14 (1998) (stating the “CPA applies to activities both before and after a sale”).
In their Second Amended Complaint, Plaintiffs have pleaded plausible allegations that,
accepted as true, establish Defendants engaged in unfair practices in the management of the
Snoqualmie Golf Club. Plaintiffs allege Defendants amended the Rules in 2013 without notice
to Plaintiffs and Class members. SAC ¶ 7.4.1. Defendants amended the Rules in 2013 to
explicitly provide for the creation of Non-Refundable Memberships, while at the same time
made it impossible for those with Refundable Memberships to obtain refunds. Id. ¶ 7.4.2.
Defendants also amended the Rules in 2013 without seeking (and obtaining) approval of two-
thirds of Club members, as required by the 2008 Rules. Id. ¶ 7.4.3. Finally, Defendants
continue to sell Non-Refundable Memberships without making refunds to Class members
based on the ratio set forth in the 2008 Rules. Id. ¶ 7.4.4; McEntee Decl., Exh. 1.
The Arcis Defendants make several arguments in support of their motion to dismiss,
none of which have merit. First, they argue that they cannot be liable for their unfair conduct
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because they did not own the Club when the 2013 Revised Rules were implemented. This
argument ignores Plaintiffs’ allegation that the Arcis Defendants colluded with Brightstar in
May 2013 to unfairly implement the Revised Rules, as evidenced by Revised Rules that bear
Arcis’ name. SAC, ¶ 4.8, Exh. A. The fact that the Revised Rules were at some point revised to
substitute “Brightstar” for “Arcis” (Dkt. 11, Exh. C) does not make Plaintiffs’ allegations any
less plausible, or the Arcis Defendants’ actions less unfair. Moreover, Plaintiffs are not required
to establish privity or the existence of a contractual relationship. They are required only to
show a link between the act and the injury. Schmidt v. Cornerstone Invs., Inc, 115 Wn.2d 148,
167 (1990); see also Carlile v. Harbor Homes, Inc., 147 Wn. App. 195, 215 (2008) (concluding
subsequent homeowners stand in shoes of original purchasers as assignees under CPA).
Second, the Arcis Defendants’ claim that Plaintiffs have not shown substantial injury
because they have not shown actual monetary loss ignores Plaintiffs’ allegations that the Arcis
Defendants have “generated millions from the sale of Non- Refundable Memberships” and that
they “fail[] to provide refunds to Class members.” SAC ¶¶ 4.12, 4.20. The Arcis Defendants’
20/20 Plan, in which they acknowledged having funneled $3 million in revenue into the Club
substantiates these allegations because those funds could have, and should have, been used to
pay refunds. McEntee Decl, Exh. 1. Plaintiffs have sufficiently pled substantial injury.
Third, despite the Arcis Defendants’ claim otherwise, Plaintiffs’ injury was “not
reasonably avoidable.” An injury is not avoidable if a consumer would have no way to know of
the conduct. See Veridian Credit Union v. Eddie Bauer, LLC, 295 F. Supp. 3d 1140, 1162
(W.D. Wash. 2017) (customers had no way of knowing that defendant’s cyber-security
measures were deficient or that defendant failed to implement appropriate software updates or
other reasonable security measures). Arcis relies on Davis v. HSBC Bank Nev., N.A., 691 F.3d
1152, 1168 (9th Cir. 2012) to argue that Plaintiffs could have avoided their injury by not
entering into the contract in the first place, contending that Plaintiffs should have known that
the Arcis Defendants would someday breach the parties’ contract. But Plaintiffs did not, and
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could not, know that Defendants would implement Revised Rules which materially and
adversely affected their refund rights because Defendants adopted them in secret.
Finally, Plaintiffs have not received countervailing benefits and never admitted to
anything of the like. Rather, the Revised Rules made it impossible for Plaintiffs to receive
refunds because the Arcis Defendants’ sale of Non-Refundable Memberships at half the price
of Refundable Memberships disincentivized sales of the latter. Defendants violated the Rules,
and their conduct served no countervailing benefit. Their conduct was unfair under the CPA.
2. Plaintiffs plead sufficient facts to show Defendants engaged in deceptive acts.
A practice is deceptive and violates the CPA if it “had the capacity to deceive a
substantial portion of the public.” Hangman Ridge., 105 Wn.2d at 785 (emphasis added).
“Implicit in the definition of ‘deceptive’ under the CPA is the understanding that the
[defendant] misleads or misrepresents something of material importance.” Holiday Resort
Cmty. Ass’n v. Echo Lake Assocs., LLC, 134 Wn. App. 210, 226 (2006). Contract terms or
omissions can be the basis of a deceptive acts claim. Edmonds v. John L. Scott Real Estate,
Inc., 87 Wn. App. 834, 845 (1997). The test for deception is objective:“[d]eception exists ‘if
there is a representation, omission or practice that is likely to mislead’ a reasonable consumer.”
Panag v. Farmers Ins. Co., 166 Wn.2d 27, 50 (2009) (quotation omitted).
Defendants failed to disclose they had colluded with Brightstar to amend the Rules.
SAC, Exh. A. Amending the Rules required notice to members, but Defendants provided none.
Id. ¶ 6.4.1. Amending the Rules also required a two-thirds approval vote of the members, but
Defendants sought none. Id. ¶ 6.4.3. The Arcis Defendants also failed to disclose that the
Revised Rules implemented an entirely new class of golf membership, Non-Refundable
Memberships. Id. ¶ 6.4.2. They failed to disclose that the Non-Refundable Memberships would
be sold at half the price of Refundable Memberships. Id. 4.10. And they failed to disclose that
they would not refund Refundable Memberships with the sale of Non-Refundable
Memberships. See SAC ¶ 4.12 (alleging Club Operator “generate millions from the sale of
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Non-Refundable Memberships); McEntee Decl., Exh. 1 (admitting only one refund was made
of a Refundable Membership in three years). These omissions misled Plaintiffs and the Class.
Defendants’ argument that they cannot be held liable for allegations surrounding
Brightstar’s advertising and form contracts ignores a key allegation in ¶ 6.4.1—that the Arcis
Defendants amended the Rules in 2013 “without providing notice to members as required by
the Rules.” SAC ¶ 6.4.1. Under Washington law, “[t]here is in every contract an implied duty
of good faith and fair dealing” that “obligates the parties to cooperate with each other so that
each may obtain the full benefit of performance.” Rekhter v. Dep’t of Soc. & Health Servs., 180
Wn.2d 102, 112, 323 P.3d 1036 (2014) (quotation omitted). These duties obligated the Arcis
Defendants—at a minimum—to refrain from colluding with Brightstar to keep material
information from Plaintiffs and the Class. By failing to disclose they had amended the Rules
and failing to disclose the changes set forth in the May 1, 2013 Revised Rules, Defendants
deceived at least 100 Club persons on the Waiting List in violation of the CPA. SAC ¶ 5.3.
The Arcis Defendants next argue that their conduct did not have the capacity to deceive
substantial portions of the public because the rule amendments affect only current members of
the Club. This argument fails because courts have repeatedly concluded that defendants’
conduct toward current customers had the capacity to deceive substantial portions of the public.
See, e.g., Skansgaard v. Bank of Am., N.A., 896 F. Supp. 2d 944, 949 (W.D. Wash. 2011)
(denying motion to dismiss where allegations that defendants imposed forced insurance beyond
terms of plaintiff’s contract, and received monetary kick-backs in return, had capacity to
deceive substantial portion of the public); see also Riensche v. Cingular Wireless, LLC, 496 F.
App’x 760, 763 (9th Cir. 2012) (concluding “the presence of Cingular’s line-item surcharge on
customer bills had the capacity to deceive a substantial portion of the public…”).
Moreover, the cases Arcis relies upon are wholly distinguishable, each involving
isolated business dealings between parties on equal footing. See Goodyear Tire & Rubber Co.
v. Whiteman Tire Inc., 86 Wn. App. 732, (1997) (dismissing CPA claim where plaintiff was not
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an average consumer, but “an experienced businessman who had dealt with Goodyear for
years” and thus “not representative of bargainers vulnerable to exploitation”); Eye Care Ctr. of
Snohomish v. Chemat Tech., Inc., No. C12-0203-JCC, 2012 WL 12941686, at *1 (W.D. Wash.
Dec. 14, 2012) (dismissing CPA claim by small optical clinic alleging machine it bought from
defendant that applies anti-reflective coating to eyeglass lenses did not function as Plaintiff
expected); Segal Co. v. Amazon.com, 280 F. Supp. 2d 1229, 1233 (W.D. Wash. 2003)
(dismissing CPA claim where “the complaint in no way indicates that defendant's conduct
extended beyond the two parties to the alleged contract.”). In contrast to Goodyear, Eye Care
Ctr., and Segal, the conduct alleged is not isolated. Defendants continue to refuse to comply
with the 2008 Rules. Moreover, the parties never had a chance at equal footing because of
Defendants’ covert conduct, which affected, and continues to affect, at least 100 consumers.
Finally, the Arcis Defendants’ argument that its conduct was not deceptive because the
contractual language regarding the refund ratio remained at 3-1 after the Rules were amended
on May 1, 2013 misses the point. Once Defendants started selling Non-Refundable
Memberships, they stopped making refunds of Refundable Memberships altogether, so whether
the Revised Rules include a ratio of 3-1 is not relevant. Nor does the Voluntary Refund Policy
that the Arcis Defendants implemented three years after they bought the Club absolve
Defendants of liability. Although Arcis purports to make certain refunds under the Policy,
Arcis could decide it no longer wants to do so, in its sole discretion. Dkt. 11, Exh. D.
3. Plaintiffs plead sufficient facts to show injury to the public interest.
a. The CPA was amended in 2009. Public interest impact is satisfied when the alleged unfair or deceptive act “injured other persons.”
Since 2009, “[i]n a private action in which an unfair or deceptive act or practice is
alleged . . . a claimant may establish that the act or practice is injurious to the public interest
because it . . . [i]njured other persons.” RCW 19.86.093(3)(a). Plaintiffs allege Defendants’
unfair and deceptive conduct injured more than 100 persons on the Waiting List to receive
refunds. SAC ¶¶ 5.1, 6.7. The public interest element is met.
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 16 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
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The Arcis Defendants’ motion fails to reference RCW 19.86.093, instead citing to pre-
2009 authority. Until 2009, the statutory basis for the public interest impact element was the
CPA’s statement of legislative intent that it “not be construed to prohibit acts which . . . are not
injurious to the public interest.” Hangman Ridge, 105 Wn.2d at 788 (quoting RCW 19.86.920).
The Washington Supreme court established two multifactor tests for determining whether the
public interest impact element was satisfied, and the application of these tests “depend[ed]
upon the context in which the alleged acts were committed.” Id. at 789-90. The first applied
when “the transaction was essentially a consumer transaction,” and the second applied when
“the transaction was essentially a private dispute.” Id. at 790.6
In 2009, Washington’s legislature added a new section to the CPA, which specifically
addresses the public interest impact element. The statute now provides:
In a private action in which an unfair or deceptive act or practice is alleged under RCW 19.86.020, a claimant may establish that the act or practice is injurious to the public interest because it:
(1) Violates a statute that incorporates this chapter; (2) Violates a statute that contains a specific legislative declaration of public interest impact; or (3)(a) Injured other persons; (b) had the capacity to injure other persons; or (c) has the capacity to injure other persons.
RCW 19.86.093 (emphasis added). As of 2009, a private plaintiff may establish public interest
impact by showing that the challenged act or practice injured others. Klem, 176 Wn.2d at 804
(Madsen, C.J., concurring) (“The legislature has recently codified the requirement that the
unfair act or practice be injurious to the public interest and specifically set out how this element
may be satisfied.”) (emphasis added). Here, Plaintiffs allege that Defendants’ conduct “injured
other persons,” namely the more than 100 other persons on the Waiting List. SAC ¶ 5.3. They
have alleged sufficient facts to support public interest impact under RCW 19.86.093.
b. Plaintiffs do not complain about a “private” dispute between two parties.
A dispute between only two parties, such as “a breach of a private contract affecting no
6 The court also recognized that violation of a statute containing a specific legislative declaration of public interest impact satisfied the public interest impact element “per se.” Id. at 791.
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 17 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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one but the parties to the contract[,] is not an act or practice affecting the public interest.” See
Hangman Ridge, 105 Wn.2d at 790. “However, it is the likelihood that additional plaintiffs
have been or will be injured in exactly the same fashion that changes a factual pattern from a
private dispute to one that affects the public interest.” Id.; see also Behnke v. Ahrens, 172 Wn.
App. 281, 293 (2012) (same). Whether the public interest element is ultimately satisfied is
“factual in nature.” Behnke, 172 Wn. App. at 293. Here, Plaintiffs allege that Arcis’s conduct
not only could injure others but did injure at least 100 other persons. SAC ¶ 5.3.
The Arcis Defendants rely on the unpublished Jet Parts Engineering decision to argue
that disputes involving private contracts cannot satisfy the public interest element. Jet Parts
Eng’g, Inc. v. Quest Aviation Supply, Inc., 2015 WL 4523497, at *4 (W.D. Wash. July 27,
2015). But Jet Parts Engineering is entirely distinguishable from this case. Unlike here, Jet
Parts Engineering involved a contract dispute between just two companies, id. at *1, and the
plaintiff there did not seek to represent others in a class action or allege that anyone else was
injured in the same way it was injured. Id. Indeed, Plaintiffs have been unable to identify a
single decision of a Washington court finding that the public interest impact element was not
satisfied in a proposed class action case. On the contrary, the Washington Supreme Court has
reasoned that the public interest requirement demonstrates class actions are an integral part of
the CPA’s private enforcement mechanism. See Dix v. ICT Grp., Inc., 160 Wn.2d 826, 837
(2007) (“a class action may be the only means that the public interest may be vindicated”).
Finally, there is nothing in either the plain language of the statute or Washington case
law to support the conclusion that hundreds of people who have joined a club are no longer
members of the “the public” whose interests may be considered under the CPA. Indeed, the
Washington Supreme Court has previously rejected attempts to avoid CPA liability by
mischaracterizing the challenged conduct as a “private dispute.” See Panag, 166 Wn.2d at 41
(rejecting defendant’s characterization of collection activity as a private dispute). Such a
narrow interpretation would preclude consumers who bought memberships in any club from
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 18 CASE NO. 2:17-CV-01932-RSM
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satisfying the public interest element of a CPA claim and is contrary to the purpose of the CPA.
c. Public interest impact is also satisfied under the multifactor test.
This case does not involve an “essentially private” dispute. Even under that assumption,
the four-factor test for determining whether private disputes impact the public interest applied
is satisfied. The factors “indicating public interest” in the context of a private dispute are:
(1) Were the alleged acts committed in the course of the defendant’s business? (2) Did defendant advertise to the public in general? (3) Did defendant actively solicit this particular plaintiff, indicating potential solicitation of others? (4) Did plaintiff and defendant occupy unequal bargaining positions?
Hangman Ridge, 105 Wn.2d at 790. “[N]ot one of these factors is dispositive, nor is it
necessary that all be present.” Id. at 791. Instead, the factors “represent indicia of an effect on
public interest from which a trier of fact could reasonably find public interest impact.” Id.
Ultimately, as noted above, “it is the likelihood that additional plaintiffs have been or will be
injured in exactly the same fashion that changes a factual pattern from a private dispute to one
that affects the public interest.” Id. at 790.
The first factor is clearly met. Defendants acted in the course of their business when
they surreptitiously amended the rules to introduce Non-Refundable memberships and used
money from the sale of Non-Refundable memberships for other purposes than for the payment
of refunds. Those Club members paid substantial sums of money for memberships that
Defendants promised would be refunded when new memberships were sold. They also acted in
the course of their business when they made these changes without notice and approval.
The second factor is also met because the Club advertised7 to members of the public in
order to get them to join. Although some Class members joined when Brightstar owned the
Club, there is a reasonable inference from Plaintiffs’ allegation that more than 100 people are
on the Waiting List that others joined between May 2013, when Defendants colluded to
7 Plaintiffs respectfully request that the Court take judicial notice of the fact that the Club at Snoqualmie Ridge operates a website, https://www.clubatsnoqualmieridge.com/membership, through which it advertises its golf memberships and members of the public can obtain information about joining the club, including information about the Club’s non-refundable and refundable memberships. See Fed. R. Evid. 201(b).
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 19 CASE NO. 2:17-CV-01932-RSM
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secretly amend the Rules, and August 2015, when the Revised Rules were disclosed.
There is nothing in the record regarding the third factor, which is therefore neutral.
Regarding the fourth factor, Defendants and the Class occupied unequal bargaining positions
because the Class did not know that Defendants had amended the Rules, and that the Revised
Rules introduced a new class of membership for sale at half the price of existing Memberships.
4. Plaintiffs plead sufficient facts to show they have been injured.
Plaintiffs must show injury to “business or property” to maintain a CPA claim. RCW
19.86.090. But the injury can be “minimal.” Panag, 166 Wn.2d at 58–59. Plaintiffs need not
prove monetary damages to show “injury”— “unquantifiable damages may suffice.” Id.
Plaintiffs plainly allege they have incurred monetary damage. Specifically, they allege
that the “Club Operator has [] generated millions from the sale of Non-Refundable
Memberships” but that it has refused “to apply revenues received from the sale of Non-
Refundable Memberships towards refunds for resigned members on the Waiting List.” SAC
¶¶ 4.12, 5.4.6. Arcis’ admissions to having increased its revenue by 2,456% in just three years,
and to having funneled $3 million into the Club, bolsters these allegations. See
https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-magazine%E2%80%99s-
fastest-growing-private-companies (last visited June 25, 2018); see also McEntee Decl, Exh. 1.
Per the 3-1 ratio set forth in the 2008 Rules, Defendants should have refunded at least $1
million to Plaintiffs and the Class. Dkt. 11, Exh. B.
Plaintiffs also plainly allege other injuries. For example, Plaintiffs have been injured by
the Arcis Defendants’ refusal to make refunds to those on the Waiting List, which has led to an
unreasonably delay in the time it would otherwise take for Plaintiffs and Class members to
receive refunds. SAC ¶ 6.7. Arcis alleges that Plaintiffs cannot show that the Revised Rules
will make Plaintiffs receive a refund “one day later than they otherwise would.” But Arcis’ own
documents contradict this statement. Based on the $39,000 price at which Defendants offered
the memberships in October 2016, Defendants should have already refunded at least 36
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 26 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 20 CASE NO. 2:17-CV-01932-RSM
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Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6). See Dkt. 11, Exh. D.
Next, Plaintiffs allege that they would not have purchased Refundable Memberships
had they known Defendants would render their memberships valueless. SAC ¶ 6.8. The Arcis
Defendants argue that Plaintiffs were not injured because “any deception in the sale of their
memberships had to occur, if at all, many years before the Arcis Defendants bought the Club.”
Arcis’ argument fails because Plaintiffs do not allege deception related to the sale of their
memberships. They allege deception related to the sale to Arcis. Specifically, Plaintiffs allege
that deceptive and unfair acts occurred in May 1, 2013 when Arcis colluded with Brightstar to
amend the Rules just months before Arcis purchased the Club. SAC ¶¶ 4.8, 5.4.4, Exh. A.
Finally, the 2008 Rules allow members to resign within 60 days of the sale of the Club
and receive 100% of their refunds (rather than 70% of the listing price) if the new owner does
not honor its obligation to the members. Dkt. 11, Exh. B ¶ 3.2(b)(iii). But Defendants’ secret
revision of the Rules foreclosed Plaintiffs’ and the Class’ ability to take advantage of the 100%
refund provision. SAC ¶ 6.9. Defendants argue that Plaintiffs cannot rely on paragraph
3.2(b)(iii) because Plaintiffs Lewis, Presti, and Hart, joined the Waiting List prior to May 1,
2013, before Arcis purchased the Club. However, Plaintiff Ralls, who joined the Waiting List
in August 2013, and all other Class members who joined the Club after May 1, 2013, would
have been entitled to 100% refunds. SAC ¶ 3.4.8 Plaintiffs have sufficiently alleged injury.
5. Plaintiffs plead sufficient facts to show causation.
“Causation under the CPA is a factual question to be decided by the trier of fact.”
Deegan v. Windermere Real Estate/Ctr.-Isle, Inc., 197 Wn. App. 875, 885 (2017). In cases
involving affirmative misrepresentations, “[t]he plaintiff must establish that, but for the
defendant’s affirmative misrepresentation, the plaintiff would not have suffered an injury.” Id.
at 885-86. “But causation is different for omissions of material fact.” Id. at 886. In CPA cases
8 Arcis also argues that language in paragraph 3.2(b)(iii) authorizing the 100% refund does not apply where “the new owner agrees to take title subject to the rights of a Member under the Member’s existing Membership Agreement.” Dkt. 20 at 22:24-23:2. But which “rights” were in place when Arcis bought the Club, the June 30, 2008 Rules or the May 1, 2013 Revised Rules, is a factual question that cannot be decided at the pleading stage.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 27 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 21 CASE NO. 2:17-CV-01932-RSM
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involving omissions, courts apply a rebuttable presumption of reliance. Id. (citations omitted).
The presumption of reliance is important because a CPA claim based on an omission of
material fact puts the person seeking relief “in the impossible position of proving a negative;
that is, that they believed the opposite of the omitted fact….” Id. (citation omitted).
Defendants’ omissions caused Plaintiffs’ and the Class’ injuries. Plaintiffs allege that,
for two years, the Arcis Defendants failed to disclose that they had colluded with Brightstar to
amend the Rules, including that it had introduced Non-Refundable Memberships. Id. ¶ 6.4.2.
They failed to disclose that the Non-Refundable Memberships would be sold at half the price of
Refundable Memberships. Id. 4.10. And they failed to disclose that they would not refund
Refundable Memberships with the sale of Non-Refundable Memberships. Id. ¶ 4.12. Arcis’
omission of these material facts was likely to mislead, and did mislead, Plaintiffs and the Class.
By the time Plaintiffs filed suit, there were at least 100 others on the Waiting List for refunds
that would never come or would be unreasonably delayed.9
The Arcis Defendants ignore the presumption of reliance, and instead incorrectly argue
that Plaintiffs have failed to establish “but for” causation. Because the allegations in the SAC
and consistent “hypothetical facts” establish that Defendants omitted material facts, reliance
must be presumed and the CPA claim must go forward. Deegan, 197 Wn. App. at 890.
D. Plaintiffs sufficiently plead all elements of a conversion claim.
Conversion is defined as “the unjustified, willful interference with a chattel which
deprives a person entitled to the property of possession.” In re Marriage of Langham and
Kolde, 153 Wn.2d 553, 564 (2005) (quotation omitted). Money is treated as a chattel “if the
defendant wrongfully received the money or was under an obligation to return the specific
money to the party claiming it.” Davenport v. Wash. Educ. Ass’n, 147 Wn. App. 704, 722
(2008) (quotation omitted).
9 There is no basis in the record for the Arcis Defendants’ statement that there was a “backlog” of over 100 members on the Waiting List when Defendants amended the Rules on May 1, 2013. See Dkt. 20 at 21:19-21. Rather, Plaintiffs’ allegations and all reasonable inferences therefrom establish there were at least 100 members on the Waiting List at the time they filed suit on November 20, 2017.
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 28 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 22 CASE NO. 2:17-CV-01932-RSM
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In the latter scenario—when a party is obliged to return money—“diverting a source of
funds to an unintended purpose can support a conversion claim.” Denman v. Zayo Grp., LLC,
2013 WL 3814375, *5 (July 22, 2013) (allegation that plaintiff approved an audit and extended
healthcare benefits without approval sufficient for conversion counterclaim to survive motion
to dismiss); see also Maynard Inv. Co. v. McCann, 77 Wn.2d 616, 624 (1970) (contractor
committed conversion when he used funds provided to pay for labor to repay creditors instead);
Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n, 133 Wn. App. 835, 851 (2006) (allegation that
bank improperly used funds held in trust sufficient for conversion claim to survive).
Here, Plaintiffs allege that Defendants were obliged to refund one Refundable
Membership for every third membership sold. Instead, they diverted the funds received from
the sale of Non-Refundable Memberships without making the required refunds, under the guise
of “prudent management.” McEntee Decl., Exh. 1. Arcis admits that this tactic made it possible
for Arcis to sink over $3 million into the Club over three short years. Id. Moreover, the funds
the Arcis Defendants diverted are identifiable. Although Plaintiffs will obtain exact numbers
through formal discovery, under the 3-1 ratio described in the 2008 Rules, Defendants should
have refunded at least $1 million to Plaintiffs and the Class. Based on the $39,000 price at
which Defendants offered the memberships in October 2016 (Dkt. 11, Exh. D), Defendants
should have refunded at least 36 Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6).
The Arcis Defendants argue that Plaintiffs’ conversion claim is based on their initial
payments of membership fees to become members of the Club. But Plaintiffs have never
suggested that Defendants (or anyone else) converted their funds at the time they became Club
members. The conversion occurred only after the Arcis Defendants unilaterally decided they
would funnel the money they received from the sales of Non-Refundable Memberships into the
Club rather than paying refunds to Plaintiffs and Class members on the Waiting List.
Finally, the Arcis Defendants’ reliance on Gremp v. Ramsey, No. C08-558RSM, 2009
WL 112674, at *9 (W.D. Wash. Jan. 14, 2009) is misplaced. Gremp was a fraudulent transfer
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 23 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
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case where Plaintiffs’ allegations centered on the failure of a debtor to pay on a promissory
note following an asset transfer. Unlike Arcis’ express agreement to assume Brightstar’s
obligations related to the Waiting List and Refundable Memberships, the purchasing entity in
Gremp did not assume the former entity’s liabilities. As a result, the plaintiffs could not show
that the transferred money belonged to them. In addition, the plaintiffs’ theory went too far; it
“would fundamentally alter the structure of creditor and debtor rights,” allowing creditors to
bring claims of conversion against any recipient of any transfer of a debtor’s funds, and any
subsequent transferee of that money, regardless of its source. Gremp, 2009 WL 112674, at *9.
Here, in contrast, Plaintiffs ask only that Defendants return their wrongfully diverted funds.10
Because Plaintiffs’ claim is undoubtedly supported by sufficient facts to state a claim
for conversion against Defendants, the motion should be denied.
E. Plaintiffs plead sufficient facts to support piercing the corporate veil.
“Where a private person so dominates and controls a corporation that such corporation
is his alter ego, a court is justified in piercing the veil of corporate entity and holding that the
corporation and private person are one and the same.” Pohlman Inv. Co. v. Va. City Gold
Mining Co., 184 Wash. 273, 283 (1935). “[W]hen the corporation has been intentionally used
to violate or evade a duty owed to another,” courts may disregard the corporate entity. Morgan
v. Burks, 93 Wn.2d 580, 585 (1980) (citation omitted). Plaintiffs allege that Mr. Walker
“intentionally used [the Arcis] entities to violate or evade a duty owed to the members.” SAC ¶
3.8. The limited liability form should be disregarded and liability attached to Mr. Walker and
the other Arcis Defendants. Id.
The Arcis Defendants argue that Plaintiffs’ corporate disregard theory fails because
there are no facts “suggesting Mr. Walker was a party to any contract they entered, or agreed
10 The Arcis Defendants’ reliance on First Glob. Commc’ns, Inc. v. Bond, No. C05-749P, 2006 WL 231634, at *5 (W.D. Wash. Jan. 27, 2006) is also misplaced. There, “Defendants [did] not allege that Plaintiff wrongfully received any money.” Likewise, the Arcis Defendants improperly compare Plaintiffs’ allegations to an “unsecure debt” and argue their claims are barred by Davenport v. Washington Educ. Ass’n, 147 Wn. App. 704, 722, 197 P.3d 686, 695 (2008), but fail to note that the claim in Davenport was dismissed because a statute expressly authorized the defendant to keep the money at issue. Id. Defendants make no such claim here. Nor can they.
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 24 CASE NO. 2:17-CV-01932-RSM
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personally to assume any liability of any entity.” Mr. Walker’s contractual obligations, or lack
thereof, are beside the point. Relevant here are Plaintiffs’ allegations of fraud. The Arcis and
Brightstar Defendants secretly colluded to revise the Rules before Arcis purchased the Club.
SAC ¶ 4.8. Arcis’ involvement is evident from the face of the Revised Rules, which bears
Arcis’ name. SAC, Exh. A. It is reasonable to infer that Blake Walker directed this fraud
because he admits “he has been involved in all phases of the firm’s strategy and development
since its founding.” SAC ¶ 3.8. And, “in September 2016, Mr. Walker personally traveled to
Washington from Texas to meet with Club members who were angry about the changes the
Arcis Defendants made to the refund policy.” Id. In colluding with Brightstar to implement the
Revised Rules before the sale, Mr. Walker and the other Arcis Defendants evaded their duties
to Plaintiffs and the Class under the pre-May 2013 Rules. See Johnson v. Marriott Int’l Inc.,
No. C16-1875 RSM, 2017 WL 1957071, * 5 (May 11, 2017) (denying motion to dismiss alter
ego theory where plaintiff alleged defendant used its name and reputation to send customers to
subsidiary’s hotels and attempted to avoid liability).
Finally, the Arcis Defendants cite Morgan, supra in support of their argument that “CF
Arcis VII retains ample assets to satisfy any judgment” and thus disregarding the corporate
form is not “necessary and required to prevent unjustified loss.” Dkt. 20 at 30. But Plaintiffs are
not required to prove that CF Arcis VII would be unable to sustain a judgment to state a claim
for corporate disregard. See Gremp, 2009 WL 112674, at *8 (denying motion to dismiss alter
ego theory). In Gremp, defendants relied on Morgan to argue that plaintiffs’ piercing claim was
improper because the plaintiffs had “other remedies available to them.” Id. The court rejected
the argument, holding that plaintiff does not lose the ability to assert liability against an
individual under the doctrine of piercing the corporate veil simply because another similar
claim is being brought. Rather, the doctrine is invoked “ ‘to prevent unjustified loss to the
injured party.’ ” Gremp, 2009 WL 112674, at *8) (citing Morgan, 93 Wn.2d at 587). Plaintiffs’
allegations properly invoke the corporate disregard doctrine; the motion should be denied.
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PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 25 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
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IV. CONCLUSION
The Second Amended Complaint states plausible claims for relief under the CPA, for
breach of contract, and conversion. The Arcis Defendants’ efforts to resolve the claims on their
merits is improper at this stage. Plaintiffs are entitled to proceed with discovery and prove their
claims at trial. Accordingly, Plaintiffs respectfully ask the Court to deny the motion to dismiss.
RESPECTFULLY SUBMITTED AND DATED this 29th day of June, 2018.
TERRELL MARSHALL LAW GROUP PLLC By: /s/ Adrienne D. McEntee, WSBA #34061
Beth E. Terrell, WSBA #26759 Email: [email protected] Adrienne D. McEntee, WSBA #34061 Email: [email protected] 936 North 34th Street, Suite 300 Seattle, Washington 98103 Telephone: (206) 816-6603 Facsimile: (206) 319-5450
Attorneys for Plaintiffs and the Proposed Class
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 32 of 33
PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 26 CASE NO. 2:17-CV-01932-RSM
TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869
TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com
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CERTIFICATE OF SERVICE
I, Adrienne D. McEntee, hereby certify that on June 29, 2018, I electronically filed the
foregoing with the Clerk of the Court using the CM/ECF system which will send notification of
such filing to the following: Stephen M. Rummage, WSBA #11168 Email: [email protected] Rebecca J. Francis, WSBA #41196 Email: [email protected] DAVIS WRIGHT TREMAINE LLP 1201 Third Avenue, Suite 2200 Seattle, Washington 98101 Attorneys for Defendants
DATED this 29th day of June, 2018.
TERRELL MARSHALL LAW GROUP PLLC By: /s/ Adrienne D. McEntee, WSBA #34061`
Adrienne D. McEntee, WSBA #34061 Email: [email protected] 936 North 34th Street, Suite 300 Seattle, Washington 98103 Telephone: (206) 816-6603 Facsimile: (206) 319-5450
Attorneys for Plaintiffs
Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 Page 33 of 33