The following is the text from the gross consumer fraud class action lawsuit that was filed against ILX Resorts, Inc. And their Officers and Directors. I got a copy of this complaint from the clerk of the Coconino county Superior Court in Flagstaff, Arizona. A copy was mailed to the FBI with a request that they start an criminal investigation regarding the consumer crimes that are contained in the class action lawsuit. I was contacted and the FBI informed me that they have started their investigation and to keep an eye out for it in the results in the newspapers.
As an owner of an ILX timeshare, I hope these people are convicted of their crimes and are ordered to refund all the monies they have received from unsuspecting retired folks like myself.
Class action lawsuit
bonnett, fairbourn, friedman
& balint, p.C.
Andrew S. Friedman
2901 N. Central Avenue
Phoenix, Arizona 85012
(602) 274-1100
MILBERG WEISS BERSHAD HYNES
& LERACH LLP
Janine L. Pollack
Daniel Altman
One Pennsylvania Plaza
New York, New York 10119-0165
(212) 594-5300
VAUGHN LEDBETTER PLLC
James E. Ledbetter
315 South Willard Street
Cottonwood, Arizona 86326-4611
(928) 649-8777
Attorneys for Plaintiffs
IN THE SUPERIOR COURT OF THE STATE OF ARIZONA
IN AND FOR THE COUNTY OF COCONINO
x
KENNETH G. REED and GEORGE CATES, On
Behalf of Themselves and All Others Similarly
Situated,
Plaintiffs,
-vs.-
ILX RESORTS INCORPORATED; SEDONA
VACATION CLUB; PREMIER VACATION CLUB;
and JOHN DOES 1 THROUGH 10,
Defendants.
Case No. Filed in Coconino County, Arizona
Complaint
and
jury demand
(Class Action)
(Tort Non-Motor Vehicle)
x
Plaintiffs, by their attorneys, make the following allegations and claims as their Complaint. These allegations are made upon information and belief based upon the investigation conducted by and under the supervision of Plaintiffs counsel, except as to the allegations specifically pertaining to the Plaintiffs and their counsel, which are based upon knowledge.
Plaintiffs believe that further and particular information relating to Defendants misconduct is
within the exclusive possession and control of Defendants and is not publicly available, thus
preventing Plaintiffs from alleging further details about Defendants misconduct. Plaintiffs
believe that further substantial evidentiary support will exist for their claims after a reasonable
opportunity for discovery.
Nature of the action
1. This is a class action brought on behalf of purchasers of vacation ownership interests in certain timeshare resorts (these ownership interests are referred to herein as the "Timeshares"), in particular those at the Los Abrigados Resort & Spa ("Los Abrigados"), also known as the Sedona Vacation Club, operated by Defendant ILX Resorts Incorporated ("ILX"),
and certain interests in the Premiere Vacation Club also operated by ILX.
2. This case is about a pattern of deception whereby Defendants sold Timeshares and interests in the Premiere Vacation Club to consumers even though the resort had already been oversold and no further units should have been offered for sale. Additionally, Defendants
charged those consumers annual maintenance fees which were represented to be used for the general upkeep of the timeshare resort, but were instead siphoned as profits to the Defendants.
Furthermore, Defendants enticed potential purchasers to buy Timeshares and interests in the Premiere Vacation Club by showing them model rooms that were much larger and more comfortable than the actual rooms they would get once they made their investment.
3. ILX acquires, develops and operates various timeshare resorts in the Western United States, including Los Abrigados. ILX receives revenue from the financing and sale of ownership interests by its subsidiaries and from the rental of unused or unsold inventory units.
In addition, ILX receives revenues from the sale of food, beverages and other services at its resorts. Sedona Vacation Club is the entity that operates and sells the Timeshares at Los Abrigados. Premiere Vacation Club is an entity that sells points that can be redeemed for accommodations at various ILX resorts.
4. Defendants induced purchasers of the Timeshares to buy ownership rights, on either an annual or bi-annual basis, which would allegedly grant the purchasers the right to stay in a fully furnished unit at Los Abrigados on a one-week basis. Los Abrigados is a resort located
in Sedona, Arizona, and purports to have many amenities for its guests.
5. ILX, or its subsidiaries, entered into a Purchaser's Purchase Contract (the "Purchase Contract") with Plaintiffs and the ownership rights thereunder were purportedly evidenced in certain deeds, including a Warranty Deed. Defendants also sold the Timeshares
and interests in the Premiere Vacation Club by transferring a purportedly deeded property
interest to the Plaintiffs and the class. However, these deeded interests were illusory in that they
neither guaranteed the recipient lodgings at Los Abrigados nor did these deeded interests refer to
a particular piece of property.
Further, the Purchase Cont ract incorporated by reference a Membership Plan which outlined the specific rights and duties of both the purchasers and Sedona
Vacation Club or the Premiere Vacation Club.
6. Similarly, Defendants induced purchasers of interests in the Premiere Vacation Club to buy the right, on an annual basis, to stay at one of ILX's resorts for one week. This right included, but was not limited to, stays at the Los Abrigados resort.
7. Notwithstanding their representations in their documents, such as the Membership Plan (a document outlining the duties and responsibilities of the purchasers and sellers of the Timeshares and interests in the Premiere Vacation Club) advertisements and their website, ilxresorts.com, Defendants oversold the Timeshares and Plaintiffs and the class "deeded"
ownership rights have lost value and cannot be resold except at a very large loss.
8. Purchasers of interests in the Premiere Vacation Club were similarly informed that there would be availability at the ILX resorts for them; however, due to the overselling of the Timeshares, there were not sufficient accommodations for purchasers of the Premiere
Vacation Club interests. As a result of the conduct complained of herein, owners of interests in
the Premiere Vacation Club have also lost value on their interests.
9. As a consequence, Defendants have failed to maintain the required purchaser-toaccommodation ratio required by law, and the number of purchasers eligible to use the resort at Los Abrigados exceeds the total number of accommodations available for use at Los Abrigados.
Therefore, Plaintiffs and the class are frequently told that there are no accommodations available
for them and they therefore forfeit the right to stay at Los Abrigados in a given year. Since the use of the Timeshares and/or interests in the Premiere Vacation Club is on a "use it or lose it" basis, members of the class are frequently unable to exercise their Timeshare rights.
10. On information and belief, Defendants also exceed their allocated number of room nights to be used as incentives for potential buyers of Timeshares, further contributing to the unavailability of rooms for Plaintiffs and class members.
11. These practices constitute deceptive and abusive practices in violation of the laws governing deceptive trade practices, false advertising, consumer deception, and related laws of this state.in particular, Defendants deceptive sales practices violate the Arizona Consumer Fraud Act, A.R.S. 44-1521 et seq., the Arizona Real Estate Timeshare Act, A.R.S. 32-2197
et seq., and related principles of state common law and equity.
12. Plaintiffs and the other members of the class have suffered, and continue to suffer, economic injuries as a result of paying for ownership interests and assorted fees associated with the ownership of the Timeshares and interests in the Premiere Vacation Club that they would not have agreed to pay if Defendants had made full and fair disclosure in their advertisement and sale of the Timeshares and the ownership interests. Plaintiffs are among those who have been deceived and abused by Defendants misconduct. Plaintiffs, on behalf of themselves and the class, seek damages and restitution, including return of the purchase prices paid for the
Timeshares and interests in the Premiere Vacation Club. Plaintiffs and the class also seek the return of the maintenance fees that they have paid. Plaintiffs and the class additionally seek injunctive relief prohibiting Defendants from continuing to engage in their deceptive practices.
Jurisdiction and venue
13. This Court has jurisdiction over the subject matter of the claims made in this complaint. Each of the purchasers of the Timeshares and interests in the Premiere Vacation Club is given a deeded interest that is recorded in the County Recorder's office in Coconino County.
Additionally, the sale of timeshares is generally regulated in this state by A.R.S. 32-2197 et
seq., and Los Abrigados is registered with the Arizona Department of Real Estate.
14. This Court has jurisdiction over Defendants. Each Defendant is either an Arizona corporation or resident and may be found in Arizona. Defendants also conduct sufficient business in Arizona, have sufficient contacts in Arizona, or otherwise intentionally avail
themselves of the markets within Arizona, so as to render the exercise of jurisdiction by this
Court proper under traditional notions of fair play and substantial justice.
15. Venue is proper in this Court under A.R.S. 12-401 because Defendants maintain offices in Sedona, Arizona. Additionally, this action relates to purportedly deeded interests that are registered in Coconino County.
16. This forum is a suitable place for trial. Arizona has a strong public interest in having this lawsuit conducted in its courts. The illegal conduct in this lawsuit affected residents of Arizona and individuals that own deeded interests in Arizona. A class action lawsuit of this type serves the interest of judicial efficiency and eliminates the possibility of duplicative
litigation. Sources of proof in this case are readily accessible, and process is available to obtain
unwilling witnesses, if necessary.
17. Neither Plaintiffs nor any member of the class have suffered damages in excess of $75,000.
Parties
Plaintiffs
18. Plaintiff Kenneth Reed currently resides in Calgary, Alberta and is a citizen of both the United States and Canada. Mr. Reed purchased a Timeshare interest from the Sedona Vacation Club in 1994.
19. Plaintiff George A. Cates is a resident of Oro Valley, Arizona. Mr. Cates purchased an interest in the Premiere Vacation Club in April.
Defendants
20. ILX is a corporation domiciled and registered in the State of Arizona and it maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. According to the
company's website, its core businesses are the sales of vacation ownership interests and the financing of those interests. Supportive of these primary businesses, ILX also acquires and/or develops and operates vacation ownership resorts. ILX employs approximately 850 people and has sold its timeshare units to over 18,000 purchasers. According to ILX's 2002 Form 10-K,
ILX had, at the end of a total inventory of 29,336 weeks, which includes both sold and unsold interests.
21. Defendant Sedona Vacation Club, a subsidiary of ILX, is a corporation domiciled and registered in the State of Arizona and also maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. Sedona Vacation Clubs sole business is the operation, and sales, of
interests in the Los Abrigados resort.
22. Defendant Premiere Vacation Club, a subsidiary of ILX, is a corporation domiciled and registered in the State of Arizona and also maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. Premiere Vacation Clubs sole business is the operation,
and sales, of interests in the Premiere Vacation Club.
23. Defendants John Does 1 through 10 are key employees, officers and directors of ILX or its subsidiaries who participated in the wrongs alleged herein.
THE ILX TIMESHARE BUSINESS
24. ILX has been in the business of selling timeshares for over 15 years. ILX began with one resort in Colorado and now sells timeshares at resorts throughout the western United States and in Mexico. ILX has recently begun expanding from resorts to its Varsity Clubs,
which are hotels and timeshare accommodations near universities. ILX currently has two "Varsity Clubs, " one near the University of Notre Dame and one in Tucson, near the University of Arizona.
25. ILX markets its products as a full-service resort experience, unlike much of the rest of the timeshare industry which typically provides residential-type facilities that emphasize in-room cooking in a home - like setting with relatively limited service and amenities. ILX markets its properties through on-site visits, brochures and literature, as well as through its
website, ilxresorts.com.
26. ILX provides financing options to purchasers of the Timeshares and interests in the Premiere Vacation Club. ILX requires at least a 10% down-payment, which allows ILX, under accounting rules, to recognize the entire purchase price as revenue at the time of sale. ILX
then provides financing for seven years at rates of interest between 15.9% and 17.9% per annum.
27. ILX began by selling timeshares at individual resorts. Plaintiff Reed and those
members of the class who did not purchase interests in the Premiere Vacation Club acquired the
right to stay at Los Abrigados for one week, on either an annual or bi-annual basis. Although
most deeds arising out of timeshare purchases at other resorts specify a fractional fee simple
interest in a specific unit of a condominium and the stated time period that has been acquired, the
deeds prepared by Defendants do not specify either a particular unit or a stated time period for
which the purchaser has acquired the rights. On information and belief, many title companies
will not grant title insurance for the timeshares sold by Defendants, due to the scant information
provided by Defendants and the lack of specificity of Defendants information in the deed, which
makes it difficult for the title insurance companies to insure the deeded properties. Although
Defendants give purchasers a copy of their "deed, " Defendants do not inform the purchasers that
the deeded interests do not reference a specific unit interest nor a specific time period to use a
particular unit or a comparable unit in the project.
28. Most timeshare resorts sell their respective timeshares on a fixed week basis.
That is, referring to the interval calendar, the purchase of a fixed week property assures the
owners that they will always have the same week each year, e.G., week 26. Alternatively, at
other timeshare resorts an owner of a floating week may choose another week within his or her
time interval or may elect to upgrade or downgrade to another time interval to meet his or her
annual vacation schedule. Upgrading to a longer time interval usually incurs an additional cost.
Most, if not all, of ILXs sales to Plaintiffs and the class were on a floating week basis as well as
an indeterminate unit basis.
29. According to the Membership Plan for Los Abrigados, ILX reserves the right to
set aside a number of units at Los Abrigados as incentives to potential buyers of a Timeshare or
membership in the Premiere Vacation Club. Additionally, ILX has the right to rent out unused
rooms at Los Abrigados in a manner similar to that of a traditional hotel.
ILX Changes Its Business Model
30.in 1998, ILX introduced its Premiere Vacation Club. ILX Premiere Vacation
Club members purchase the right to seven nights accommodations annually or bi-annually.
These accommodation days can be broken into increments as small as two nights, allowing
purchasers to visit numerous ILX resorts. Purchasers of interests in the ILX Premiere Vacation
Club are not limited to accommodations at any one particular resort, but rather have the option of
choosing from among ILXs different resorts, including Los Abrigados.
31. On December 31, the Premiere Vacation Club included a total of 19,100
Vacation Ownership Interests in the Club, with units set aside at each of ILXs resorts for use by
members of the Premiere Vacation Club. These Premiere Vacation Club units are counted apart
and segregated from the units sold to other ILX customers, whose accommodations are limited to
one particular resort.
32. ILX purported to set aside a number of available units at each of its resorts for use
by those purchasing interests in the Premiere Vacation Club. According to ILXs recent 10-K,
Los Abrigados contained 9,100 Vacation Ownership Interests potentially available for sale to the
public, of which 2,381 were owned by Premiere Vacation Club. As detailed herein, ILX has sold
more Vacation Ownership Interests than were represented as available to the public.
The Lack of Availability at Los Abrigados
33. On information and belief, ILX began selling interests in the Premiere Vacation
Club after Los Abrigados sold all of the 9,100 units out to individual owners. ILX sold interests
in the Premiere Vacation Club even though it did not have the ability to set aside any units at Los
Abrigados for the use of customers of the Premiere Vacation Club.
34. According to an analysis of the records of Coconino County, both the Premiere
Vacation Club and Los Abrigados have sold more than their allotted number of units. Due to
this overselling, Defendants cannot maintain the one-to-one purchaser-to-accommodation ratio
as required by Arizona law, A.R.S. 32-2197 et seq.
35. Defendants have also exercised the right to rent unspoken-for units to the general
public, which, according to the Membership Plan, was supposed to be limited to instances when
there were available units for a particular time period not being used by owners of the
Timeshares or by holders of interests in the Premiere Vacation Club and would therefore not
impinge on the rights of the Timeshare owners or owners of interests in the Premiere Vacation
Club. The rental income earned from these units goes directly to Defendants. On information
and belief, Defendants rent out units to the general public before satisfying the accommodation
interests for a particular time period of owners of the Timeshares or interests in the Premiere
Vacation Club. For this reason, Plaintiffs and members of the class are often told that there is no
availability at Los Abrigados, despite Defendants duty to maintain a one-to-one ratio of
accommodations to owners. Although ILX reserved the right to rent out unused rooms, it did not
have the right to rent these rooms out at the expense, and to the detriment, of owners of the
Timeshares and interests in the Premiere Vacation Club.
36. According to ILXs 2002 Form 10-K filed with the Securities and Exchange
Commission, during the year ILX received $10.8 million in revenue from the rental of its
purportedly unused or unsold inventory at the ILX resorts.
37. Additionally, if an owner called up ILX to check on availability and there was
none, ILX made no efforts to contact the Timeshare owners if there was a cancellation or some
other opening. Rather, Defendants took that opportunity to rent out the room on a hotel basis.
38. Similarly, ILX did not give Plaintiffs or other class members an opportunity to
move their usage of the resorts to another year. Therefore, if the owners of the Timeshares did
not make a reservation in a particular year or could not make a reservation because Los
Abrigados was entirely booked, they lost their Timeshare rights for that year and were not given
any make-up time or other compensation. ILX referred to this phenomenon as "spoilage."
Spoilage increased ILXs inventory of available rental rooms for hotel type guests and, thus,
revenue to Defendants. At a minimum, even if Defendants did not rent out the unused room,
they saved money on maid service, because the room did not need to be cleaned.in short, the
resort was on a "use it or lose it" basis and Defendants did nothing to prevent spoilage, since
spoilage accrued to Defendants economic benefit.
39.in addition to the units reserved for purchasers of the Timeshares and interests in
the Premiere Vacation Club, ILX reserves units for use as an incentive to attract potential
purchasers of the Timeshares or interests in the Premiere Vacation Club. On information and
belief, ILX uses more than the proper number of units at a given time for prospective purchasers.
40. Prospective customers are attracted to listen to the ILX sales pitch by means of
the promise of a free stay at the Los Abrigados resort in one of many complimentary rooms.
These rooms have not been excluded from the one-to-one accommodations to owners ratio that
Defendants are required to maintain. Therefore, Plaintiffs and the class have fewer opportunities
to exercise their right to stay at Los Abrigados.
41. Defendants continue to sell both the Timeshares and interests in the Premiere
Vacation Club, despite the lack of availability at the Los Abrigados resort. Owners of the
Timeshares and interests in the Premiere Vacation Club, including Plaintiffs, often cannot make
reservations at Los Abrigados because it is oversold or Defendants have rented out these rooms
to the general public on a hotel-type basis.
ILXs Improper Sales Techniques
42. When potential purchasers arrived at ILX to inspect the premises to determine
whether or not to purchase one of Defendants Timeshares or Premiere Vacation Club interests,
they were shown a model room on their tour of the resort. However, this room was much nicer,
larger and more decorative than the rooms given to guests after they purchased the interests and
checked in for the first time. The rooms actually given to owners upon checking in to the resort
were much smaller, in a state of disrepair and bore little resemblance to the clean and upgraded
room shown to potential purchasers on the tour of the project.
43. When purchasers of interests in the Premiere Vacation Club were shown the
model room, they were not told the dimensions of the rooms for which they were eligible at the
various ILX resorts based upon their level of membership. Nor were the purchasers of interests
in the Premiere Vacation Club shown floor plans for the units available to them. Rather they
were simply shown a model room.
44. Upon purchasing one of the Timeshare interests, Plaintiff Reed was provided with
a document entitled Sedona Vacation Club Owners Understanding and Acknowledgment.
Paragraph 16 of this document states, "I understand that the model I was sho wn is a general
representation of how the Sedona Vacation Club Suites will be furnished in the future. I further
understand that until all Sedona Vacation Suites have been upgraded, the Suites I will occupy as
a Member may or may not be similarly furnished."
45. This document implies that the furnishings in all of the suites at Los Abrigados
would be upgraded to approximate equality of style at Defendants expense. However, to date,
Defendants have not upgraded all the suites.instead, Defendants have allowed the suites to
deteriorate over time and the suites are dated in appearance and shoddy.
46. The ILX Yahoo Message Board, located at:
[http://messages. Yahoo.com/? Action =q&board=ILX, ] also contains similar complaints about
the quality of the accommodations at Los Abrigados.
47. Similarly, when prospective purchasers were given a free night at the resort to
induce them to purchase a Timeshare interest, these individuals stayed in much nicer rooms than
they were ultimately given when they checked in as owners.
ILX Improperly Utilizes Maintenance Fees.
48. Owners of the Timeshares and interests in the Premiere Vacation Club are
charged an annual maintenance fee. These fees are over and above the purchase price for one of
the Timeshares or the interests in the Premiere Vacation Club. According to Defendants, these
fees are paid annually purportedly to cover the costs of maintaining the grounds, units, and
facilities of the resort. The maintenance fees vary based on the type of interest purchased.
49. According to the Membership Plan for the Sedona Vacation Club, which is part of
the contract between Defendants and Plaintiff Reed and members of the class, no more than 10%
of the maintenance fees were to be allocated for certain "Excepted Areas." The Excepted Areas
are defined in the Membership Plan as certain areas, including dining facilities, health spa,
lounge facilities and other areas whose common characteristic is that they generate profits for
Defendants.
50.in addition to the maintenance fees, each owner of a Timeshare or interest in the
Premiere Vacation Club must pay management fees. According to the Membership Plan, these
fees, paid annually by each owner, cover the costs of running the resort on a day-to-day basis.
These management fees are separate and apart from the maintenance fees paid.
51. Defendants maintained the right to increase the maintenance or management fees,
and certain owners of the Timeshares and purchasers of interests in the Premiere Vacation Club
have been charged with additional assessments.
52.in the maintenance fees on Plaintiff Reeds two-bedroom suite were over
$550. Thus, each owner of a one-week interest would have to pay that amount in maintenance
fees for the suite. Since there were 52 owners for each particular suite, and each paid more than
$550 in maintenance fees, Defendants took in over $28,600 in maintenance fees for each twobedroom
suite. Since there are 175 units at Los Abrigados, and the maintenance fees on a onebedroom
suite are almost the same as the fees on a two-bedroom suite, ILX received
approximately $4.5 million in revenue as maintenance fees in 2002 alone. Additionally, since
Los Abrigados was oversold, Defendants received an even greater amount of maintenance fees
than it would otherwise have received had Defendants maintained a proper purchaser to
accommodation ratio. The suites at Los Abrigados were rundown and ILX could not have been
spending the maintenance fees on the upkeep of the units. Yet, the Defendants have increased
the maintenance fees at Los Abrigados every year.
53. Defendants, who had the sole discretion as to the use of Plaintiffs and the class
maintenance fees, did not use these fees for the beautification, repairs and routine maintenance of
Los Abrigados. Rather, Defendants used and continue to use these fees, inter alia, to cover the
costs of certain of the Excepted Areas in excess of the amount permitted under the Membership
Plan, such as the restaurants or other dining facilities and conference rooms. The profits of such
Excepted Areas inure solely to Defendants. Thus, Defendants are using Plaintiffs and the class
funds to subsidize their for-profit operation of the Excepted Areas.
54. Plaintiffs and the class do not have the ability to audit Defendants use of the
maintenance fees. For example, on information and belief, the electricity used for the Excepted
Areas is not separately metered and there is no way to determine whether Plaintiffs and the
class maintenance fees are paying for the electricity in the Excepted Areas. Moreover, unlike
most homeowners associations and other timeshares, upon information and belief, Plaintiffs and
the class have no access to the books and records showing how Defendants use the maintenance
fees or whether they are in compliance with their contractual and other duties under the law in
their use of these fees.
55. Defendants also charged numerous other fees that were not disclosed in advance.
For instance, members of the class were charged certain fees to search Defendants computers
for available vacation weeks yet were never told that such fees would be charged.
56. Plaintiffs and the class purchases of the Timeshares and the interests in the
Premiere Vacation Club were based upon the representations of Defendants, including those
found in the Membership Plan. Amongst the representations made in the Membership Plans for
both Los Abrigados and the Premiere Vacation Club were that the Timeshares would be operated
pursuant to Arizona law, which requires that all timeshare plans maintain a one-to-one
purchaser-to-accommodation ratio. A.R.S. 32-2197.01. Defendants also represented that
"maintenance and repair expenses, taxes or utility expenses allocated to the Excepted Areas"
would not exceed 10% of the total maintenance and repair expenses, taxes and utility expenses
incurred at the resort. As explained above, these representations made by Defendants were
materially false and misleading.
Class action allegations
57. This action is brought by Plaintiffs individually and on behalf of a class
pursuant to Rule 23 of the Arizona Rules of Civil Procedure. The class consists of:
All persons who purchased a Timeshare vacation ownership interest in the
Los Abrigados resort or purchased any interest in the Premiere Vacation
Club. Excluded from the class are officers, directors, employees and
agents of the Defendants.
58. This action is properly maintainable as a class action for the following reasons:
a. The class is so numerous that joinder of all members is impracticable.
While the exact number of class members is unknown to Plaintiffs at this
time, the number of persons who purchased the Timeshares and interests
in the Premiere Vacation Club is believed to number in the thousands, and
are dispersed geographically throughout the western portion of the United
States and beyond. Class members may be identified from the records
maintained by Defendants, and class members may be notified of the
pendency of this action by mail using a form of notice similar to that
customarily used in other class actions.
B. There is a well-defined community of interest among class members in the
questions of law or fact affecting the class which predominate over
questions affecting only individual members. Those common questions
include:
i. Whether Defendants engaged in a deceptive common course of
conduct, which included the deceptive acts and practices identified
herein in the marketing and sales of Timeshare units and interests
in the Premiere Vacation Club;
ii. Whether Defendants knowingly, intentionally, recklessly, or
negligently engaged in a deceptive course of conduct in order to
induce the purchase of the Timeshare units and interests in the
Premiere Vacation Club;
iii. Whether Plaintiffs and class members have sustained damages, and
the proper measure of compensatory damages;
iv. Whether punitive damages should be awarded; and
v. Whether Plaintiffs and class members are entitled to the injunctive
and declaratory relief requested herein.
C. The claims asserted by Plaintiffs are typical of the claims of class
members.
D. Plaintiffs will fairly and adequately protect the interests of the class in that
they have no interests antagonistic to those of the other class members,
and Plaintiffs have retained as counsel attorneys who are knowledgeable
and experienced in consumer fraud litigation, as well as class and complex
litigation.
E. A class action is superior to other available methods for the fair and
efficient adjudication of this controversy for at least the following reasons:
i. Class members could not afford to seek legal redress individually
for the wrongs the Defendants committed against them;
ii. When Defendants liability has been adjudicated, claims of all
class members can be determined by the Court;
iii. This action will cause an orderly and expeditious administration of
the class claims and foster economies of time, effort and expense
and ensure uniformity of decisions;
iv. Without a class action, many class members would continue to
suffer damages, and Defendants violations of law will be without
redress while Defendants continue to reap and retain the
substantial proceeds of their wrongful conduct; and
v. This action does not present any undue difficulties that would
impede its management by the Court as a class action.
The concealment of material facts
59. Because the Timeshare interests are sold on a floating basis and do not refer to a
particular week, when an individual is told that a particular week at Los Abrigados is not
available, that alone is not an indication that the entire resort is oversold. When Plaintiff Reed
attempted to reserve a particular week and was told that the requested week was unavailable, that
alone did not give him notice of the overselling alleged here. At no point was Plaintiff Reed or
any member of the class told that the resort was oversold; rather, they were simply told that there
was no availability for the requested time period.
60. Similarly, the poor state of the rooms at Los Abrigados facility did not occur
overnight. Rather, the facilities deteriorated over time and it was only recently that Plaintiff
Reed surmised that the maintenance fees were not being used for the proper purposes. However,
there was no notice from Defendants, or any other particular indication at a particular point in
time, that maintenance funds were improperly used by Defendants.
61. For example, Plaintiff Reed did not try to exercise his rights to stay at Los
Abrigados every year. Therefore, in the years during which he did not stay at the resort, he did
not notice the deterioration of the rooms. Additionally, because Defendants discouraged use of
the resort by curtailing availability, it was difficult for individuals to learn of the deteriorating
conditions.
62. Plaintiff Reed most recently contacted Defendants in late 2002 about staying at
the resort in early 2003. At that time, he was told that there was no availability in January or
February. Soon thereafter Plaintiff Reed spoke to someone knowledgeable about the
timeshare business in Arizona who indicated some of the problems at Los Abrigados.
63. On February 10, the Sedona Vacation Club sent a letter to owners of the
Timeshares asking them to "bank" their room for Los Abrigados for 2003 and in return they
would receive the right to stay for two weeks at an RCI resort, a vacation exchange company
with which ILX is affiliated.in other words, the Sedona Vacation Club expressly asked owners
of the Timeshares to forego their right to stay at Los Abrigados during 2003.By asking owners
of the Timeshares to bank their rooms for Defendants sought to conceal the oversold status
of Los Abrigados by persuading the Timeshare owners not to exercise their rights to stay at Los
Abrigados.
64. Similarly, after ILX formed the Premiere Vacation Club, it offered owners of the
Timeshares an opportunity to join the Premiere Vacation Club for an additional fee.By offering
owners of the Timeshares a chance to purchase an interest in the Premiere Vacation Club, ILX
hoped to reduce the number of people seeking to reserve a room at Los Abrigados, and thereby
decrease the chance that a Timeshare owner would realize that Los Abrigados was oversold.
65. Plaintiff Cates exercised his right to stay at the Los Abrigados resort in August of
2002. While he was there, he was given a much smaller room than the model he had been shown
when he first purchased his membership in the Premiere Vacation Club.
66.in June Mr. Cates exercised his right to stay at Kohls Ranch, another ILX
resort. While at Kohls Ranch, Mr. Cates complained to the ILX representative at Kohls Ranch
about the small size of his room during his previous stay at Los Abrigados. During this
conversation Mr. Cates was shown floor plans for the rooms to which he was entitled based upon
his type of membership in the Premiere Vacation Club. Although ILX had floor plans for the
various rooms available to members of the Premiere Vacation Club, it was only in June of
after complaining to the ILX staff, that Mr. Cates was shown floor plans for the rooms to which
he was entitled.By withholding the floor plans, Defendants were able to conceal the size of the
rooms at the ILX resorts. Therefore, even tho ugh Mr. Cates was shown a model room upon
purchase of his Premiere Vacation Club interest, he had no way of knowing that the rooms
available were much smaller than the model room shown to him.
67.in July of Mr. Cates used his membership in the Premiere Vacation Club to
stay at the Golden Eagle ILX resort, located in Colorado. Again Mr. Cates was given a much
smaller room than he had been shown on his model tour.
Count one
Violation of the arizona consumer fraud act
(against all defendants)
68. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as
if fully set forth herein.
69. A.R.S. 44-1521, et seq., prohibits acts of unfair competition, including any
"deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or
concealment, suppression or omission of any material fact with intent that others rely upon such
concealment, suppression or omission, in connection with the sale or advertisement of any
merchandise whether or not any person has in fact been misled, deceived, or damaged thereby."
70. The acts, practices and misrepresentations and omissions of material facts by
Defendants, as alleged above, constitute deceptive acts and practices within the meaning of
A.R.S. 44-1521, et seq. Defendants acts were committed with the intent that Plaintiffs and the
members of the class would rely on Defendants deceptive acts, practices, misrepresentations and
omissions.
71. Defendants misconduct alleged in this cause of action is ongoing and continues
to present a threat to class members and the general public.
72. Defendants fraudulently concealed the wrongs complained of herein in a manner
designed to prevent Plaintiffs or the class from learning of Defendants conduct.
73. As a direct and proximate result of the complained-of actions of the Defendants,
the Plaintiffs and the members of the class have been damaged.
74. As a result of Defendants misconduct, Defendants have been and will be unjustly
enriched at the expense of Plaintiffs and class members. Specifically, Defendants have been
unjustly enriched by their receipt of millions of dollars from sales of Timeshare units and
interests in the Premiere Vacation Club deceptively sold to Plaintiffs and class members, whose
interests have lost value due to Defe ndants deceptions as described above.
75. Plaintiffs and class members seek an order of this Court ordering Defendants to
immediately cease such acts and additionally request an order that Defendants disgorge their illgotten
gains and award to Plaintiffs and class members full restitution of all monies wrongfully
acquired with interest and attorneys fees.
76. The actions of Defendants were willful, wanton, intentional and done with an evil
mind so as to justify the imposition of punitive damages.
77. Violations of the Arizona Consumer Fraud Act must be brought within one year
of discovery of the misrepresentations made by Defendants.in December Plaintiff Reed
attempted to reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told
that there was no availability at the resort. Plaintiff Reeds claims have only recently been
discovered, in or about January after Plaintiff Reed had a conversation with someone
knowledgeable about the Arizona timeshare industry. So too, Plaintiff Cates only recently
learned in July that Defendants misled him and withheld information from him
concerning the types of room for which he was eligible based upon his membership in the
Premiere Vacation Club. Therefore, this claim is timely brought.
Count two
violation of the arizona real estate timeshare act
(against all defendants)
78. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as
if fully set forth herein.
79. Defendants sell accommodations as part of a timeshare plan, as defined in A.R.S.
32-2197.
80.in violation of 32-2197.01, Defendants have failed to maintain a one-to-one
purchaser-to-accommodation ratio as defined in that section. Defendants have engaged in a
pattern and practice of selling their Timeshares and Premiere Vacation Club interests without
maintaining the requisite ratio.
81.in violation of 32-2197.17, Defendants membership plans contain untrue
statements of material facts concerning the issues outlined previously in this complaint.
82.By reason of Defendants unlawful actions, misrepresentations and omissions,
Plaintiffs and the members of the class have been irreparably harmed and damaged in an amount
to be determined at the trial of this action.
83. The actions of Defendants were willful, wanton, intentional and done with an evil
mind so as to justify the imposition of punitive damages.
84. Violations of the Arizona code relating to timeshares must be brought within one
year of discovery of the misrepresentations made by Defendants.in December Plaintiff
Reed attempted to reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was
told that there was no availability at the resort. Plaintiff Reeds claims have only recently been
discovered, in or about January after Plaintiff Reed had a conversation with someone
knowledgeable about the Arizona timeshare industry. So too, Plaintiff Cates only recently
learned in July that Defendants misled him and withheld information from him
concerning the types of room for which he was eligible based upon his membership in the
Premiere Vacation Club. Therefore, this claim is timely brought.
Count three
unjust enrichment and imposition of constructive trust
(against all defendants)
85. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as
if fully set forth herein.
86. Defendants received from Plaintiffs and class members purchase monies,
maintenance fees and other expenses and fees that, but for the material misrepresentations and
omissions alleged herein, would not have been paid by Plaintiffs and the class.
87. As a result, Defendants will be unjustly enriched if they are allowed to retain such
funds. Plaintiffs and class members are entitled to restitution of all monies wrongfully obtained
by Defendants.
88. Such monies are traceable to Defendants, who are the current possessors of such
funds. Plaintiffs and class members have no adequate remedy at law if these monies are
dissipated. As a result of the relationships between the parties and the facts as stated above, a
constructive trust should be established over the monies paid by Plaintiffs and members of the
class, including management and maintenance fees and other expenses and fees charged by
Defendants.
89. Claims for unjust enrichment must be brought within four years of discovery of
the misrepresentations made by Defendants.in December Plaintiff Reed attempted to
reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told that there was
no availability at the resort. Plaintiff Reeds claims have only recently been discovered, in or
about January after Plaintiff Reed had a conversation with someone knowledgeable about
the Arizona timeshare industry. So too, Plaintiff Cates only recently learned in July that
Defendants misled him and withheld information from him concerning the types of room for
which he was eligible based upon his membership in the Premiere Vacation Club. Therefore,
this claim is timely brought.
Count four
declaratory and injunctive relief
(against all defendants)
90. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as
if fully set forth herein.
91. On each cause of action stated above, Plaintiffs and class members will be
irreparably injured in the future by Defendants misconduct to the extent that Defendants
continue to charge maintenance fees and to the extent that Plaintiffs and other class members are
still paying for the Timeshares and interests in the Premiere Vacation Club.
92. Plaintiffs, on behalf of themselves and the class, seek a judgment declaring that
Defendants must cease charging unauthorized maintenance fees.
93. Plaintiffs, for themselves and on behalf of the class, also seek injunctive relief
enjoining Defendants from the deceptive solicitation or sale of Timeshares and interests in the
Premiere Vacation Club, and the assessment or collection of fees resulting from any such sales
based upon the scheme described herein.
94. Plaintiffs and class members do not have a plain, adequate, speedy, or complete
remedy at law to address the wrongs alleged in this complaint, and will suffer irreparable injury
as a result of Defendants misconduct unless injunctive and declaratory relief is granted.
95.By reason of the foregoing, Plaintiffs and class members are entitled to
declaratory and injunctive relief as set forth above.
96. These claims must be brought within three years of discovery of the
misrepresentations made by Defendants.in December Plaintiff Reed attempted to reserve
a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told that there was no
availability at the resort. Plaintiff Reeds claims have only recently been discovered, in or about
January after Plaintiff Reed had a conversation with someone knowledgeable about the
Arizona timeshare industry. So too, Plaintiff Cates only recently learned in July that
Defendants misled him and withheld information from him concerning the types of room for
which he was eligible based upon his membership in the Premiere Vacation Club. Therefore,
this claim is timely brought.
Count five
breach of express and implied contract
(against defendants ilx, sedona vacation club
and premiere vacation club)
97. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as
if fully set forth herein.
98. All contracts in Arizona contain an implied covenant of good faith and fair
dealing. As alleged herein, Defendants failed to deal in good faith or fairly with Plaintiffs or the
class.
99. Plaintiffs and members of the class entered into agreements with the subsid iaries
of ILX, the Sedona Vacation Club and/or the Premiere Vacation Club. These agreements
included the Purchase Contract which incorporated by reference the Membership Plan, which
outlined the rights of ownership of the Timeshares or interests in the Premiere Vacation Club.
100. As alleged herein, Defendants represented in the Membership Plan that the
Timeshares and interests in the Premiere Vacation Club were being sold in accordance with
Arizona law. Therefore, Defendants breached the terms of the Membership Plan by failing to
maintain a proper accommodation to purchaser ratio.
101. The Membership Plan for the Timeshares also informed Plaintiff Reed and the
class that their maintenance fees would only be used for common areas and that no more than
10% of the fees collected from purchasers of the Timeshares would be used for the Excepted
Areas. Despite these representations, Defendants spent more than 10% of the collected
maintenance fees on the Excepted Areas and other non-common areas.
102. As alleged herein, the interests purchased by Plaintiffs and class members entitled
them to the use of certain facilities at Los Abrigados and other resorts on either an annual or biannual
basis. Defendants ILX, Premiere Vacation Club and Sedona Vacation Club breached the
Membership Plan and Purchase Contract by not providing adequate use of the accommodations
to Plaintiffs and the class. Additionally, the Purchase Contract was breached through the
improper usage of the maintenance fees, as alleged herein.
103. Plaintiffs and the class have been damaged by Defendants actions because their
Timeshares or interests in the Premiere Vacation Club have lost value and can only be sold at a
significant loss.
104. As a result of the foregoing, Plaintiffs and class members are entitled to rescission
of the contracts, or other damages.
105. Claims for breach of contract must be brought within six years of accrual of the
claim.in December Plaintiff Reed attempted to reserve a suite at Los Abrigados for early
2003. However, Plaintiff Reed was told that there was no availability at the resort. Plaintiff
Reeds claims have only recently been discovered, in or about January after Plaintiff Reed
had a conversation with someone knowledgeable about the Arizona timeshare industry. So too,
Plaintiff Cates only recently learned in July that Defendants misled him and withheld
information from him concerning the types of room for which he was eligible based upon his
membership in the Premiere Vacation Club. Therefore, this claim is timely brought.
106. This claim arises out of contract, and Plaintiffs are both eligible for and entitled to
an award of their attorneys fees pursuant to A.R.S. 12-341.01.
Requests for relief
WHEREFORE, Plaintiffs, on behalf of themselves and class members, request
judgment and relief as follows:
1. An order certifying that the action may be maintained as a class action pursuant to
Rule 23 of the Arizona Rules of Civil Procedure.
2. Compensatory damages in an amount to be proven at trial, including any damages
as may be provided for by statute.
3. An order requiring disgorgement of, imposing a constructive trust upon, or
impounding Defendants ill - gotten monies and profits, or freezing Defendants assets, and
requiring Defendants to pay restitution to Plaintiffs and all class members, including return of
purchase prices and fees that Plaintiffs and class members would not have paid if they had not
been improperly induced to purchase the Timeshares or interests in the Premiere Vacation Club,
and/or restoring all funds acquired by means of any act or practice declared by this Court to be
an unlawful, fraudulent, or unfair business act or practice.
4. An award of pre-judgment and post-judgment interest.
5. An order providing for declaratory and injunctive relief, including the following:
A) an order enjoining Defendants from soliciting sales of or selling
Timeshares or interests in the Premiere Vacation Club using the deceptive
sales practices identified above;
b) an order declaring that Defendants maintenance fees charged or assessed
were used for improper purposes; and
c) other equitable relief that the Court may deem proper.
6. An award of punitive damages against Defendants for their intentional, malicious
and wanton misconduct.
7. An award of attorneys fees and the costs and expenses of this litigation, including
experts fees.
8. Any other or further relief that this Court deems just and equitable.
JURY DEMAND
Plaintiffs hereby demand a trial by jury.
DATED: September 23.
Bonnett, fairbourn, friedman &
balint, p.C.
Andrew S. Friedman
2901 N. Central Avenue, Suite 1000
Phoenix, Arizona 85012
(602) 274-1100
MILBERG WEISS BERSHAD HYNES &
LERACH LLP
Janine L. Pollack
Daniel Altman
One Pennsylvania Plaza
New York, New York 10119-0165
(212) 594-5300
VAUGHN LEDBETTER PLLC
James E. Ledbetter
315 South Willard Street
Cottonwood, Arizona 86326-4611
(928) 649-8777
Attorneys for Plaintiffs
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