Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_16-cv-00237/USCOURTS-caed-2_16-cv-00237-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

THOMAS F. REISER JR. and LINDA 

T. REISER, individually and as 

Trustees of the Tom and Linda Reiser 

Living Trust Dated June 20, 2006; 

KEITH BRIAR and BEVERLY BRIAR, 

individually and as Trustees of the 

Keith and Beverly Briar Family Trust 

Dated December 21, 2004; ANTHONY 

J. BATES, individually and as Trustee 

of the Anthony J. Bates Revocable 

Trust; AL BRENDE; SHANNON 

FRAZIER and RUSSELL FRAZIER, 

individually and as Trustees of the 

Frazier Family Revocable Trust Dated 

January 30, 2008; JASON M. 

GIRZADAS and VIRGINIA H. 

GIRZADAS; GEORGE M. HEWITT and 

ROSE A. HEWITT; BRETTON H. 

JAMESON and AMY M. JAMESON; 

BRENT JONES and DANA JONES, 

individually and as Trustees of the 

1990 Jones Living Trust; JENNIFER 

KAPLAN and ALEXANDER 

BUSANSKY; STEPHEN F. LIM; 

MICHAEL LUNDAHL and VERLYN 

LUNDAHL; MARK MARKLAND and 

TRICIA MARKLAND, individually and 

as Trustees of the Markland Family 

Trust; CRAIG MATTSON; RICHARD T. 

McGREW; SUSAN L. MOYER, 

individually and as Trustee of the 

Susan Moyer Living Trust; CURTIS W. 

OTTLEY and JENNIFER OTTLEY; 

CHARLES F. PERRELL and 

ELIZABETH A. GUILLAUMIN, 

No. 2:16-cv-00237-MCE-CKD

MEMORANDUM AND ORDER

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 1 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

individually and as Trustees of the 

Charles F. Perrell and Elizabeth A. 

Guillaumin Living Trust Dated June 26, 

1998; CORNELIUS H. TIEBOUT and 

JULIE A. TIEBOUT, individually and as 

Trustees of the Tiebout Family Trust; 

CRAIG S. TYSDAL and JANET S. 

TYSDAL, individually and as Trustees 

of the Tysdal Family Trust; ANNETTE 

WELTON and PATRICK WELTON, 

individually and as Trustees of the 

Welton Family Trust; and GREGORY 

YONKO and JANICE YONKO, 

individually and as Trustees of the 

Yonko Family Living Trust;

Plaintiffs,

v.

MARRIOTT VACATIONS 

WORLDWIDE CORPORATION, a 

Delaware corporation; MARRIOTT 

OWNERSHIP RESORTS, INC., a 

Delaware corporation d.b.a. Marriott 

Vacation Club International; RITZCARLTON DEVELOPMENT 

COMPANY, INC., a Delaware 

corporation; RITZ-CARLTON SALES 

COMPANY, INC., a Delaware 

corporation; RITZ-CARLTON 

MANAGEMENT COMPANY, LLC, a 

Delaware limited liability company; 

THE COBALT TRAVEL COMPANY, 

LLC, a Delaware limited liability

company; and DOES 1 THROUGH 50,

Defendants.

This lawsuit concerns the sale of fractional interests in the Ritz-Carlton Club, Lake 

Tahoe, located in Truckee, California (the “Lake Tahoe Ritz”). Plaintiffs purchased 

fractional interests at the Lake Tahoe Ritz from Defendant Ritz-Carlton Development 

Company, Inc. (“RCDC”). The remaining Defendants are owner-affiliates of the Lake 

Tahoe Ritz. In their First Amended Complaint (“FAC”) (ECF No. 1), Plaintiffs bring 

causes of action for (1) Rescission, (2) Breach of Contract, (3) Breach of the Implied 

Covenant of Good Faith and Fair Dealing, (4) Breach of Fiduciary Duty, (5) Violation of 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 2 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

the Unfair Competition Law, and (6) Aiding and Abetting. Presently before the Court is 

Defendants’ Motion to Dismiss all of Plaintiffs’ causes of action for failure to state a claim

pursuant to Federal Rule of Civil Procedure 12(b)(6).

1

 ECF No. 5. Plaintiffs filed an 

Opposition (ECF No. 9), and Defendants filed a Reply (ECF No. 11). For the reasons 

that follow, Defendants’ Motion is DENIED in part and GRANTED in part.2

BACKGROUND3

The Lake Tahoe Ritz consists of twenty-eight residential condominiums (“Club 

Interest Units”). Defendants fractionalized these twenty-eight Club Interest Units into

three hundred thirty-six fractional interest units. In early 2009, Defendants sold onetwelfth fractional units to Plaintiffs and approximately thirty-eight other buyers. As 

owners of fractional interests, Plaintiffs were given exclusive accessibility rights to the 

Lake Tahoe Ritz not available to non-owners of fractional interests. Among other 

benefits, Plaintiffs’ ownership entitles them to spend up to twenty-one days per year at 

the Lake Tahoe Ritz. 

Defendants’ efforts to sell fractional interests in the Lake Tahoe Ritz stalled as the 

economy deteriorated following Plaintiffs’ purchases. In November 2011, Defendants 

de-annexed seventeen of the original twenty-eight Club Interest Units and sold them as 

regular, non-fractionalized condominium units. In July 2012, Defendants announced a 

new “external exchange affiliation” between Ritz-Carlton Destination Club (“RCDC”) and 

the Marriott Vacation Club (“MVC”) that afforded MVC members many of the same 

privileges at the Lake Tahoe Ritz that Plaintiffs enjoy as fractional interest owners. MVC 

 1 All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure unless 

otherwise noted.

2 Because oral argument would not have been of material assistance, the Court ordered this 

matter submitted on the briefs. E.D. Cal. Local Rule 230(g).

3 The following recitation of facts is taken, sometimes verbatim, from Defendants’ Motion to 

Dismiss (ECF No. 5) and Plaintiffs’ Opposition thereto (ECF No. 9).

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 3 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

is a larger, less exclusive, and less expensive competing product managed, owned and 

promoted by Defendants. Through the affiliation with RCDC, MVC members can spend 

just as many days at the Lake Tahoe Ritz as Plaintiffs, and do so at a significantly

reduced cost. 

As a result of the de-annexation of Club Interest Units and the affiliation with 

MVC, the operational costs at the Lake Tahoe Ritz are spread only among the owners of 

fifty-nine fractional units rather than three hundred thirty-six fractional units that would 

exist if Defendants had sold all of the Club Interest Units as fractional interest units. 

Plaintiffs also contend that the de-annexation and MVC affiliation resulted in a significant 

increase in the annual dues that Plaintiffs must pay each year, a loss of access to the 

Lake Tahoe Ritz, and a significant reduction in the value of Plaintiffs’ one-twelfth 

fractional interests. 

Plaintiffs’ resulting lawsuit alleges six causes of action: Rescission, Breach of 

Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Breach of 

Fiduciary Duties, Violation of the Unfair Competition Law and finally Aiding and Abetting. 

ECF No. 1. In the pending Motion to Dismiss, Defendants seek to dismiss all six of 

Plaintiffs’ claims. ECF No. 5. 

STANDARD

On a motion to dismiss for failure to state a claim under Federal Rule of Civil 

Procedure 12(b)(6), all allegations of material fact must be accepted as true and 

construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. 

Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only “a short and plain 

statement of the claim showing that the pleader is entitled to relief” in order to “give the 

defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 

47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 4 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

detailed factual allegations. However, “a plaintiff’s obligation to provide the grounds of 

his entitlement to relief requires more than labels and conclusions, and a formulaic 

recitation of the elements of a cause of action will not do.” Id. (internal citations and 

quotations omitted). A court is not required to accept as true a “legal conclusion 

couched as a factual allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) 

(quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a 

right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles 

Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) 

(stating that the pleading must contain something more than “a statement of facts that 

merely creates a suspicion [of] a legally cognizable right of action.”)). 

Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket 

assertion, of entitlement to relief.” Twombly, 550 U.S. at 556 n.3 (internal citations and 

quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard 

to see how a claimant could satisfy the requirements of providing not only ‘fair notice’ of 

the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. (citing 5 Charles 

Alan Wright & Arthur R. Miller, supra, at § 1202). A pleading must contain “only enough 

facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . 

have not nudged their claims across the line from conceivable to plausible, their 

complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed 

even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a 

recovery is very remote and unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 

232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to 

grant leave to amend. Leave to amend should be “freely given” where there is no 

“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 

to the opposing party by virtue of allowance of the amendment, [or] futility of the 

amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 

Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 5 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

be considered when deciding whether to grant leave to amend). Not all of these factors 

merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 

carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 

185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 

“the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, 

Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 

1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 

1989) (“Leave need not be granted where the amendment of the complaint . . . 

constitutes an exercise in futility . . . .”)).

ANALYSIS

The Court will separately address Plaintiffs’ six causes of action to determine 

whether they have plausibly stated a claim to relief. 

A. Rescission 

Defendants argue that Plaintiffs failed to state a claim because (1) Plaintiffs did 

not promptly seek rescission, (2) the mistakes alleged were based on future not present 

events, and (3) Plaintiffs failed to offer to restore title to their fractional interests to 

Defendants. Each of these arguments is addressed in turn. 

1. Promptness

Defendants first argue that Plaintiffs’ rescission claim must be dismissed because 

Plaintiffs failed to promptly seek rescission. Although California law does require that 

contracts be rescinded “promptly on discovering the facts which entitle [the party] to 

rescind” (Cal. Civ. Code § 1691), Defendants fail to recognize that § 1691’s 

“promptness” requirement is subject to California Civil Code § 1693. “When relief based 

upon rescission is claimed in an action or proceeding, such relief shall not be denied 

because of delay in giving notice of rescission unless such delay has been substantially 

prejudicial to the other party.” Cal. Civ. Code § 1693.

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 6 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Plaintiffs argue that Defendants did not and could not demonstrate substantial 

prejudice. The Court agrees. Defendants make no attempt to show substantial 

prejudice and appear unable to do so because Defendants experienced economic gain 

by de-annexing the remaining Club Interest Units, selling them as regular condominiums 

and subsequently affiliating with MVC. As there is no conceivable prejudice to the 

Defendants from the delay in seeking rescission, lack of “promptness” is not a reason for 

dismissing Plaintiffs’ cause of action for rescission. 

2. Mistakes of Fact

California law permits a party to rescind a contract “if the consent of the party 

rescinding was given by mistake.” Cal. Civ. Code § 1689(b)(1). Plaintiffs allege that 

they entered into the contract to purchase their fractional interests in the Lake Tahoe 

Ritz on the basis of two mistakes of fact. A mistake of fact is a mistake “consisting in 

belief in the present existence of a thing material to the contract, which does not exist.” 

Cal Civ. Code § 1577.

First, Plaintiffs allege that they purchased their fractional interests in the Lake 

Tahoe Ritz mistakenly believing that Defendants would sell all of the Club Interest Units 

as fractional interest units, or at least a sufficient number to make the fractional offering 

viable. FAC, ECF No. 1 ¶ 65. Second, Plaintiffs claim that they mistakenly “understood 

that the Lake Tahoe Ritz-Carlton would be operated and maintained as an exclusive 

Ritz-Carlton Club open only to fractional owners at the Lake Tahoe Ritz-Carlton and 

other properties included in the Ritz-Carlton Membership Program.” Id. at ¶ 66. 

Defendants argue that both of these alleged mistakes are mistakes as to future 

events because both of these events occurred years after Plaintiffs purchased their 

fractional interests. Defs.’ Mot., ECF No. 5 at 8. Defendants then contend that “there is 

no authority for rescission based on a mistake regarding future events.” Id. (citing 

Paramount Petroleum Corp. v. Superior Court, 227 Cal. App. 4th 226 (2014)). 

Defendants mischaracterize Plaintiffs’ allegations. As indicated above, Plaintiffs 

allege that they mistakenly believed Defendants would continue selling fractional 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 7 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

interests of the Lake Tahoe Ritz-Carlton at the time that they entered into the contract. 

Compl., ECF No. 1 ¶ 65. Plaintiffs also allege that they mistakenly believed that the 

Lake Tahoe Ritz-Carlton would be operated and maintained as an exclusive Ritz-Carlton 

Club open only to fractional owners of the Ritz-Carlton Membership Program at the time 

that they entered into the contract. These two allegations, accepted as true and 

construed in the light most favorable to Plaintiffs, plausibly constitute present mistakes of 

fact that support a claim for rescission. 

3. Offer to Restore Title

To state a claim for rescission, Plaintiffs must also have offered to restore title to 

their fractional interests in the Lake Tahoe Ritz. See Cal. Civ. Code § 1691(b) (“to effect 

a rescission a party to the contract must ... [r]estore to the other party everything of 

value which he has received from him under the contract.”). Defendants argue Plaintiffs 

did not meet this statutory requirement. 

Defendants misread Plaintiffs’ FAC as well as California Civil Code § 1691, which 

goes on to provide that “the service of a pleading in an action or proceeding that seeks 

relief based on rescission shall be deemed to be such notice or offer or both.” Id. Thus, 

by filing a claim for rescission, Plaintiffs offered to restore title to their fractional interests 

in the Lake Tahoe Ritz to Defendants. Although the Court recognizes that under 

Plaintiffs’ alternatively pleaded Unfair Competition Law claim, they indicate that a return 

of the deeds may not be necessary, that does not mean Plaintiffs have refused to return 

their deeds if their fundamental rescission claim proves successful. 

Because all three of Defendants’ arguments concerning the validity of Plaintiffs’ 

rescission claim are without merit, Defendants motion to dismiss that claim is DENIED.

B. Breach of Contract 

To properly state a claim for breach of contract, a plaintiff must allege (1) the 

existence of a contract; (2) performance by plaintiff; (3) defendant’s breach; and (4) the 

resulting damages to plaintiff. Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 

3d 1371, 1395 (1990).

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 8 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

Plaintiffs allege all four of these prerequisites. Plaintiffs confirm and reference the 

contract in their FAC at ¶¶ 70-74. ECF No. 1. Plaintiffs allege that they performed their 

duties under the contract at ¶ 71. Id. Plaintiffs also contend that Defendants breached 

the contract throughout their FAC, and at ¶ 73 specifically point out that de-annexing 

Club Interest Units and underselling fractional interests in the Club Interest Units 

constituted a breach of the contract. Id. Finally, Plaintiffs allege they were damaged by 

the dramatic increase in their annual dues and the dramatic decrease in the value of 

their fractional interests because of Defendants’ breach. Id. Nonetheless, Defendants 

argue that Plaintiffs’ breach of contract claim should be dismissed because the contract 

permitted de-annexing Club Interest Units and did not require Defendants to sell any 

particular number of fractional interests. 

As a preliminary matter, Defendants contend that Plaintiffs’ reference to the 

contract means that the contract was “incorporated by reference” in the FAC and the 

Court may consider the contract in determining whether dismissal is proper without 

converting the motion into one for summary judgment. Defs.’ Mot., ECF No. 5 at 6. The 

Court agrees. Even though the contract was not attached to Plaintiffs’ FAC, it was 

“incorporated by reference” because Plaintiffs extensively referred to the contract in their

FAC and the contract serves as the basis for Plaintiffs’ claim. Van Buskirk v. CNN,

284 F.3d 977, 980 (9th Cir.2002). 

Although the contract does permit de-annexing, Defendants fail to mention that 

there are conditions imposed on any such activity. Specifically, according to the 

contract, any de-annexing that does occur “shall not be inconsistent or in conflict with the 

terms and provisions of this Club Interest Declaration and shall not adversely or 

materially affect the interests of Owners hereunder.” ECF No. 5-2 at 104-05 § 8.3(c). 

Plaintiffs argue that the de-annexation of the Club Interest Units and the underselling of 

fractional interests in those Club Interest Units adversely or materially affected their 

interests as Owners of fractional interests because: (1) Plaintiffs’ annual dues 

skyrocketed, (2) operational costs are shared among only fifty-nine fractional interest 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 9 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

owners rather than the three hundred thirty-six that Plaintiffs anticipated, (3) Plaintiffs

have experienced difficulty reserving their allotted twenty-one days at the Lake Tahoe 

Ritz, and (4) the value of their fractional units has dropped drastically. FAC at ¶¶ 55-62. 

Whether the contract allowed Defendants to de-annex the Club Interest Units in 

this manner and stop selling fractional interests in those Club Interest Units is not 

properly decided at this stage of the proceedings. Rather, to survive a pleading

challenge, Plaintiffs’ FAC must contain “only enough facts to state a claim to relief that is 

plausible on its face.” Twombly, 550 U.S. at 556. The Court must accept all allegations 

of material fact as true and construe them in the light most favorable to the nonmoving 

party, and Plaintiffs have included enough facts to plausibly state a claim to relief. 

Accordingly, Defendants’ motion to dismiss Plaintiffs’ Breach of Contract claim is 

DENIED. 

C. Breach of the Implied Covenant of Good Faith and Fair Dealing 

California law recognizes an implied covenant of good faith and fair dealing in 

every contract. Lennar Mare Island, LLC v. Steadfast Ins. Co., No. 

212CV02182KJMKJN, 2016 WL 829210, at *5 (E.D. Cal. Mar. 3, 2016). To state a claim 

for breach of the implied covenant of good faith and fair dealing, a plaintiff must show 

that “the conduct of the defendant, whether or not it constitutes a breach of a consensual 

contract term, ... unfairly frustrates the agreed upon purposes and disappoints the 

reasonable expectations of the other party thereby depriving that party of the benefits of 

the agreement.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 

1395 (1990).

Plaintiffs allege that by de-annexing Club Interest Units, selling them as regular 

condominium units, underselling fractional interests therein, and permitting affiliation with 

MVC (which led to an influx of MVC members at the Lake Tahoe Ritz), Defendants 

unfairly interfered with Plaintiffs rights to receive the benefits of the contract. ECF No. 1 

¶¶ 76-77. Plaintiffs also contend that these actions were inconsistent with implied 

promises that Plaintiffs reasonably understood to be included in the contract. Id. In 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 10 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

essence, Plaintiffs allege that Defendants’ actions disappointed Plaintiffs’ reasonable 

expectations under the contract and deprived Plaintiffs of the benefit of the agreement 

because 1) they now bear a disproportionate share of the costs of maintenance at the 

Lake Tahoe Ritz; 2) they have experienced a significant increase in their annual dues; 

3) the value of their fractional interests has plummeted; and 4) they have experienced 

difficulties reserving access to their allotted 21 days a year at the Lake Tahoe Ritz. At 

first glance, these allegations appear sufficient to state a claim for relief. The question is 

whether Defendants’ contentions otherwise cause the claim to fail. 

Defendants argue this claim should be dismissed because de-annexing was 

allowed by the contract, the MVC affiliation was allowed by the contract, and the contract 

did not obligate Defendants to sell any particular number of fractional interests in the 

Club Interest Units. Defendants’ contentions do not provide the Court a basis for 

dismissing Plaintiffs’ claim because an implied covenant of good faith and fair dealing 

claim does not necessitate that Defendants’ conduct constitute a breach of a contractual 

term. Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d at 1395. Rather, 

Plaintiffs’ only duty at this stage of the proceedings is to present factual allegations that 

the conduct of the Defendants unfairly frustrated the agreed upon purposes of the 

contract and disappointed Plaintiffs’ reasonable expectations. Id. By pointing to their 

loss of access to the Lake Tahoe Ritz, the sizable increase in their annual dues, their 

burden to carry a disproportionate share of the operational costs, and the loss of value of 

their fractional interests, Plaintiffs have done just that. 

Accordingly, Defendants’ motion to dismiss Plaintiffs’ Breach of the Implied 

Covenant of Good Faith and Fair Dealing Claim is DENIED. 

D. Breach of Fiduciary Duty

To properly put forth a claim for breach of fiduciary duty a Plaintiff must plead:

(1) facts plausibly showing the existence of a fiduciary relationship, (2) breach of that 

fiduciary relationship, and (3) damage proximately caused by that breach. Knox v. 

Dean, 205 Cal. App. 4th 417, 432 (2012). A fiduciary relationship arises between parties 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 11 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

to a transaction where one of the parties has assumed a duty to act with the utmost 

good faith and for the benefit of the other party. Gilman v. Dalby, 176 Cal. App. 4th 606, 

614 (2009). “Absent such a relationship, a plaintiff cannot turn an ordinary breach of 

contract into a breach of fiduciary duty based solely on the breach of the implied 

covenant of good faith and fair dealing contained in every contract.” Id.

Plaintiffs first allege that Defendants owed Plaintiffs a fiduciary duty to continue 

selling fractional interests at the Lake Tahoe Ritz until a sufficient number of fractional 

interests were sold to make the offering a viable investment to Plaintiffs. Although the 

Court is required to accept all allegations of material fact as true, the Court is not 

required to accept as true a “legal conclusion couched as a factual allegation.” 

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). Here, Plaintiffs do not present facts 

plausibly giving rise to a fiduciary relationship because they fail to offer any specific 

allegations as to how Defendants owed them a fiduciary duty. Instead, Plaintiffs make 

only a blanket assertion that Defendants assumed fiduciary duties to Plaintiffs. This is a 

legal conclusion, not a factual allegation. Moreover, Plaintiffs’ conclusion in this regard 

appears indistinguishable from the rationale provided to justify their breach of implied 

covenant of good faith and fair dealing claim. Absent a fiduciary relationship, plaintiff 

cannot use the basis alleged for a breach of the implied covenant of good faith and fair 

dealing claim as the basis for a breach of fiduciary duty claim. Gilman v. Dalby, 176 Cal. 

App. 4th 606, 614 (2009). 

Plaintiffs also allege that Defendants owed Plaintiffs a fiduciary duty by virtue of 

their decision to retain and exercise control over the Lake Tahoe Ritz Club Owners’ 

Association (“Association”). ECF No. 1 at 18 ¶ 82. Plaintiffs contend that because the 

Association managed Plaintiffs’ fractional interests in the Lake Tahoe Ritz, a principalagency relationship existed between the Association and Plaintiffs. According to 

Plaintiffs, Defendants exercised control over the Association by selecting employees, 

representatives and agents to serve on the board of the Association. Plaintiffs go on to 

contend that Defendants had a duty to act with the utmost good faith and in the best 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 12 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

interests of Plaintiffs in exerting control over the Association, and allege this duty was 

breached by the Club Owners’ Association “advancing Defendants’ interests at the 

expense of Plaintiffs’ interests, and/or by failing to act as a reasonably careful 

fiduciary/board member would have acted under the same or similar circumstances.” Id.

at ¶ 83. Finally, Plaintiffs allege that the resulting damages – loss of access, increased 

dues, increased operational costs, loss of value of their fractional interests – were 

caused by Defendants’ breach of the owed fiduciary duties. Id. ¶ 84. 

Even accepting Plaintiffs’ allegations that Defendants controlled the Association 

as true, the pleadings do not plausibly give rise to a fiduciary relationship between 

Plaintiffs and Defendants. At most, Plaintiffs have pleaded facts plausibly establishing a 

fiduciary relationship between Plaintiffs and the Association. That relationship does not, 

however, suffice to show a fiduciary bond with Defendants, who are one step removed 

from any link that Plaintiffs may have had with the Association. Plaintiffs have not 

pleaded any facts going beyond this alleged link with the Association that raises their 

right to relief above the speculative level. To do so, Plaintiffs had to plead facts plausibly 

demonstrating that Defendants assumed a duty to act with the utmost good faith and for 

the benefit of Plaintiffs. Simply pleading that Defendants controlled the Association does 

not suffice in that regard.

Additionally, Plaintiffs fail to recognize that the posture of the parties is not one in 

which a fiduciary relationship is ordinarily recognized. Defendants are developers and 

sellers of real property; Plaintiffs are buyers of real property. The “relationship of seller 

to buyer is not one ordinarily vested with fiduciary obligation.” Martinez v. Welk Grp., 

Inc., 907 F. Supp. 2d 1123, 1133 (S.D. Cal. 2012). Consistent with the usual trappings 

of that relationship and on the basis of the pleadings now before the Court, it appears 

that Defendants were looking out for and acting primarily to benefit their own economic 

interests, as opposed to those of Plaintiffs, at all times relevant to the disputed 

transaction. Plaintiffs have not pleaded facts indicating that Defendants took on “duties 

beyond those of mere fairness and honesty,” and Plaintiffs have consequently not 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 13 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

carried their burden of pleading facts extending beyond the traditional buyer/seller 

relationship that would plausibly establish a fiduciary relationship between themselves 

and Defendants. Martinez v. Welk Grp., Inc., 907 F. Supp. 2d 1123, 1133 (S.D. Cal. 

2012). 

Accordingly, Defendants’ motion to dismiss Plaintiffs’ cause of action for breach of 

fiduciary duty is GRANTED, with leave to amend. 

E. Violation of Unfair Competition Law

Under the Unfair Competition Law (“UCL”) a Court may enjoin any person or 

entity engaging in unfair competition. Cal. Bus. & Prof. Code § 17203. The UCL creates 

“three varieties of unfair competition—acts or practices which are unlawful, or unfair, or 

fraudulent.” Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). 

Plaintiffs allege Defendants violated the UCL’s “unlawful” and “unfair” prongs. 

1. Unlawful

“[A] violation of another law is a predicate for stating a cause of action under the 

UCL’s unlawful prong.” Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 

1554, (2007). Plaintiffs first allege that Defendants violated the “One-to-One Rule” of 

Business and Professions Code § 11250 (the “Time-Share Act”). The One-to-One Rule 

requires all time-share plans to maintain a one-to-one purchaser to accommodation 

ratio. Cal. Bus. & Prof. Code § 11250. Plaintiffs argue Defendants violated the One-toOne Rule because they experienced difficulty reserving their full twenty-one day

allocation for use of the Lake Tahoe Ritz facilities. 

Simply alleging difficulty in reserving their full twenty-one days of use at the Lake 

Tahoe Ritz, however, does not plausibly state a claim. Rather, to state a claim for 

violation of the Time-Share Act’s One-to-One Rule, Plaintiffs must have alleged that “the 

total number of purchasers eligible to use the accommodations of the time-share plan 

during a given calendar year [exceeded] the total number of accommodations available 

for use in the time-share plan during that year.” Cal. Bus. & Prof. Code § 11250. 

Plaintiffs therefore have to identify at least one instance where they were unable to 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 14 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

reserve an allotted unit at the Lake Tahoe Ritz to survive Defendants’ motion to dismiss, 

and they have not done so. Abramson v. Marriott Ownership Resorts, Inc., 

No. SACV150135AGJCGX, 2016 WL 105889, at *5 (C.D. Cal. Jan. 4, 2016) (motion to 

dismiss One-to-One Rule cause of action for failure to state a claim granted because 

Plaintiffs failed to identify a single instance where they tried to reserve a unit during their 

designated times but were unable to do so). Pleading difficulty in reserving a unit during 

Plaintiffs’ designated time is not in itself sufficient to state a claim. Id.

Next, Plaintiffs allege Defendants violated Business and Professions Code 

§ 11226(f). Plaintiffs do not provide any factual allegations to support this assertion. In 

any event, this provision does not appear germane to Plaintiffs’ claims. Section 11226(f) 

only applies to prospective purchasers and, at the time of the harm alleged, Plaintiffs 

were actual owners of fractional interests. Cal. Bus. & Prof. Code § 11226. 

Plaintiffs also allege that de-annexing Club Interest Units and selling them as 

regular condominium units violated Business and Professions Code § 11018.7. This 

statutory provision is also inapplicable because it does not apply to timeshare plans. 

Rather, § 11018.7 only applies to “subdivisions as defined in Sections 11000.1 and 

11004.5.” Cal. Bus. & Prof. Code § 11018.7. Section 11004.5 specifically states that 

time-share plans are not “subdivisions” for purposes of that chapter of the Code. Cal. 

Bus. & Prof. Code § 11004.5.

Finally, Plaintiffs allege a violation of Business and Professions Code § 11252 as 

a basis for their UCL claim. Section 11252 prohibits developers from materially 

encumbering the use rights of time-share purchasers without the written assent of at 

least fifty-one percent of the time-share interest owners other than the developer. Cal. 

Bus. & Prof. Code § 11252. Plaintiffs allege that the MVC merger is such an 

encumbrance because it diminished the value of Plaintiffs’ fractional interests to nothing,

or near nothing and Defendants did not obtain the written assent of at least fifty-one 

percent of the time-share interest owners other than the developer prior to the alleged 

encumbrance. FAC at ¶¶ 60-62. 

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 15 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

“Factual allegations must be enough to raise a right to relief above the speculative 

level.” Twombly, 550 U.S. at 555. The Court is not convinced by Plaintiffs’ bare 

allegation that the value of their fractional interests diminished to nothing or near 

nothing. There is no basis, beyond speculation, as to the valuation of Plaintiffs’ 

fractional interests. Plaintiffs do not contend that they attempted to sell their fractional 

interests. Nor are there any allegations that they listed their fractional interests for sale

and received no offers. Without allegations of this sort, Plaintiffs’ pleadings do not 

contain enough facts to plausibly state a claim under the UCL’s unlawful prong. 

Because Plaintiffs’ FAC as it currently stands is not sufficient to state a claim 

under the “unlawful” prong for alleging a UCL claim, the Court must next address 

whether a cognizable “unfair” claim has been presented.

2. Unfair

Plaintiffs also allege that Defendants’ practices violated the UCL’s “unfair” prong. 

A business practice is “unfair” under the UCL if: (1) the consumer injury is substantial; 

(2) the injury is not outweighed by any countervailing benefits to consumers or 

competition; and (3) the injury could not reasonably have been avoided by consumers 

themselves. Cal. Bus. & Prof. Code § 17200. 

Again, the Court is not obligated to accept as true legal conclusions that are 

couched as factual allegations. Here, Plaintiffs’ pleadings relating to the UCL’s “unfair” 

prong are devoid of any factual allegations that indicate which of Defendants’ practices 

are “unfair.” Rather, Plaintiffs make a blanket assertion that Defendants’ practices 

violated the “unfair” prong, caused Plaintiffs substantial injury, are not outweighed by any 

countervailing benefits to consumers and caused injury that Plaintiffs could not 

reasonably have avoided. Plaintiffs fail to apprise the Court of the grounds upon which 

the claim rests as there are no factual allegations asserted to support their UCL claim.

Since Plaintiffs have failed to plausibly state claims under the UCL’s “unlawful” 

and “unfair” prongs, Defendants’ motion to dismiss Plaintiffs’ UCL cause of action is 

GRANTED, with leave to amend.

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 16 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

F. Aiding and Abetting 

A cause of action for Aiding and Abetting requires a Plaintiff to establish an 

underlying tort that was “aided and abetted.” In re Mortgage Elec. Registration Sys., 

Inc., 754 F.3d 772, 786 (9th Cir. 2014) (“Aiding-and-abetting liability depends on the 

existence of an underlying tort”). In their FAC, Plaintiffs do not specify the tort on which 

their aiding and abetting claim is based. ECF No. 1 at 20. Perhaps noticing this 

shortcoming, Plaintiffs’ claim in opposition to Defendants’ Motion that the predicate 

cause of action is for aiding and abetting a breach of fiduciary duty. ECF No. 9 at 12. 

Even if the Court considers Plaintiffs’ claim as one of aiding and abetting a breach 

of fiduciary duty, as indicated above, the Court has already dismissed Plaintiffs’ breach 

of fiduciary duty claim for failing to state a viable cause of action. Plaintiffs consequently 

cannot base their aiding and abetting claim on a breach of fiduciary duty cause of action 

at this juncture. Without an underlying tort, Plaintiffs’ aiding and abetting cause of action 

necessarily fails.

Accordingly, Defendants’ motion to dismiss Plaintiffs’ cause of action for Aiding 

and Abetting is GRANTED, with leave to amend. 

CONCLUSION

Defendants’ Motion to Dismiss (ECF No. 5) is GRANTED IN PART and DENIED 

IN PART. Specifically, the motion is GRANTED to the extent it seeks dismissal of 

Plaintiffs’ Breach of Fiduciary Duty, Unfair Competition Law and Aiding and Abetting 

claims. Plaintiffs are granted an opportunity to amend each of these claims, however, 

and can file a Second Amended Complaint not later than thirty (30) days following the 

date this order is electronically filed should they choose to do so. Defendants’ Motion is 

///

///

///

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 17 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

DENIED to the extent it seeks dismissal of Plaintiffs’ Rescission, Breach of Contract and 

Implied Covenant of Good Faith and Fair Dealing claims. 

IT IS SO ORDERED. 

Dated: April 27, 2016

Case 2:16-cv-00237-MCE-CKD Document 17 Filed 04/29/16 Page 18 of 18