Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02065/USCOURTS-azd-2_06-cv-02065-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

The Conlon Group Arizona, L.L.C., 

Plaintiff, 

vs.

CNL Resort Biltmore Real Estate, Inc., et

al., 

Defendants. 

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No. CV-06-2065-PHX-FJM

ORDER

The court has before it The Conlon Group Arizona, L.L.C.'s ("Conlon") motion for

summary judgment on the issue of documents to be produced to plaintiff (doc. 8), defendants'

response and Rule 56(f) motion for continuance (doc. 12), and Conlon's reply (doc. 16). 

Conlon owns six units located in the Arizona Biltmore Hotel Villas Condominiums

("Villas"). Defendant KSL Biltmore Resort, Inc. ("Hotel") entered into a Rental Pool

Agreement (the "Agreement") with Conlon and other owners of Villas ("Owners"), whereby

the Hotel agreed to act as manager for the rental pool. The Hotel's rights and responsibilities

under the Agreement were subsequently assigned to CNL Resort Biltmore Real Estate, Inc.

("CNL") (Hotel and CNL are collectively referred to as "defendants"). 

Pursuant to the terms of the Agreement, the net revenue from the rental of all units in

the rental pool is pooled and allocated pro rata to each unit in the rental pool. Mark Finney

Case 2:06-cv-02065-FJM Document 28 Filed 05/22/07 Page 1 of 4
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Decl., exhibit A at § 8. Owners are responsible for all costs relating to ownership of each

unit, including real estate taxes, association and master association assessments, and utility

charges. Id. § 7. Owners are also responsible for a pro rata share of financial transaction

charges such as travel agent commissions and credit card charges related to the revenue

received on all units in the rental pool. Id.

Pursuant to § 11 of the Agreement, the Owners have the right to inspect the books and

records maintained by the defendants for the rental pool. Section 11 provides:

Rental Pool Accounting and Allocations. The Manager shall maintain

financial books and records for the Rental Pool. The books and records

maintained by the Manager for the Rental Pool will be available for inspection

by any Owner, upon written request received from such Owner, at the

principal place of business of the Manager in Phoenix, Arizona at all

reasonable business hours. 

Id. at § 11.

A dispute has arisen between the parties over the proper allocation of expenses and

revenue under the Agreement. Accordingly, Conlon sought to inspect the books and records

maintained by defendants in order to conduct an audit. It made several written inspection

requests between 2004 and 2006, but defendants refused to comply in full, supplying some,

but not all, of the requested information. Specifically, defendants refused to provide

information they considered proprietary, such as information related to the financial

performance of the Hotel, and confidential records related to Villa units not owned by

Conlon. Response at 4. Conlon contends that the withheld information is vital to complete

an audit of the rental pool. 

The documents sought by Conlon and refused by defendants include, but are not

limited to, (1) complete bank statements and documentation to provide an accounting for the

rental pool for the years 2000 to 2005; (2) documentation to support rental pool credit card

fees; (3) documents to support rental pool travel agent fees; (4) documents related to

complimentary room nights awarded by defendants; and (5) rental pool trust account

statements. Motion at 3. Conlon's Complaint and present motion for summary judgment

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broadly seek an order requiring defendants to produce "all books and records called for under

the Rental Pool Agreement." Motion at 1; Complaint at 2. 

Defendants contend that there is an issue of fact as to whether Conlon is entitled to

inspect certain records under the Agreement. They claim that because neither Conlon nor

defendants were parties to the original agreement an issue of fact exists as to the intent of the

original contracting parties. Therefore, defendants move for additional time, pursuant to

Rule 56(f), Fed. R. Civ. P., to retain experts regarding industry custom and practice and to

depose the original parties to the Agreement. We deny this motion outright. The intent of

the original contracting parties and the industry's custom and practice regarding disclosure

of financial documents are not relevant to the interpretation of section 11 of the Agreement.

The plain language of the Agreement broadly requires the Manager to "maintain

financial books and records for the Rental Pool." Mark Finney Decl., exhibit A at § 11. The

provision is clear and unambiguous and is subject to only one reasonable interpretation–the

Owners are entitled to inspect documents and records containing information that is integral

to the calculation of their rental pool distributions. Defendants do not argue otherwise.

Instead they attempt to circumvent their broad record-keeping obligation based on arguments

that certain records are proprietary or confidential. By way of example, Conlon alleges that

the defendants' allocation of credit card charges to the Owners is derived from a percentage

of the total credit card charges incurred on all Hotel and rental pool revenue. Reply at 4.

Defendants have refused Conlon's request to examine Hotel records supporting this expense

allocation. To the extent the Hotel has commingled its financial records with those of the

rental pool, it has waived its argument that such records are proprietary, and therefore not

available to the Owners. 

Defendants have also refused to provide what it considers confidential records

containing information relating to other Owners' distributions under the Agreement.

However, given that the Owners equally share expenses and income derived from the rental

pool, it is difficult to understand how rental pool records relating to individual Owners could

be confidential. To the extent any particular document sought contains trade secrets or

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confidential information, appropriate remedies are available under Rule 26(c), Fed. R. Civ.

P.

Based on the foregoing, we conclude that Conlon is entitled to inspect any book or

record maintained by the Manager that is integral to the calculation of rental pool

distributions, including but not limited to documents containing Hotel and other Owner's

information that is a component of the rental pool calculation. 

IT IS ORDERED GRANTING Conlon's motion for summary judgment on the issue

of documents to be produced to plaintiff (doc. 8). IT IS FURTHER ORDERED

DENYING defendant's motion for Rule 56(f) continuance (doc. 12). 

DATED this 21st day of May, 2007.

Case 2:06-cv-02065-FJM Document 28 Filed 05/22/07 Page 4 of 4