Hard Rock Hotel Class Action Lawsuit

Our attorneys are representing purchasers of hotel-condominium units at the Hard Rock Hotel in San Diego who allege financial losses as a result of the sellers’ failure to disclose material information. The case is titled Beaver et. al. v. Tarsadia Hotels, Inc. et. al. and is in the U.S. District Court for the Southern District of California before Judge Gonzalo Curiel.

Plaintiffs in the case agreed to purchase the hotel-condominium units two years before the hotel was constructed. According to the lawsuit, the sellers of the units violated the Interstate Land Sales Full Disclosure Act (ILSA) by not providing plaintiffs certain congressionally mandated protections in the sales contract.

As a result, plaintiffs were entitled to a right to rescind the contract for any reason within two years of signing it. Defendants were required to disclose this rescission right to purchasers of the hotel-condominiums but failed to do so. In fact, the lawsuit alleges that the sellers misleadingly told the buyers that they had an obligation to close on the units (or would lose their deposits) at the original contract price – even though the market price for condominium-hotel units had crashed, and the lending market had constricted.

Plaintiffs did close on their units and suffered financial losses. According to the lawsuit, this conduct constitutes a violation of California’s Unfair Competition Law (UCL).

$51 Million Settlement Preliminarily Approved

The parties settled the case in early 2017 for over $51 million. In May 2017, Judge Curiel preliminary approved the parties’ settlement, holding that a class would be certified for settlement purposes, and directing a settlement administrator to notify class members.

Judge Curiel set a final approval hearing for September 15, 2017, where he will make a determination as to whether the settlement shall be fully approved and whether the case will be dismissed with prejudice.

What the Hard Rock Settlement Provides

The parties’ settlement provides that the Defendants will pay $51,150,000 into a common fund, which will be distributed to all class members after accounting for attorneys’ fees, costs, and administrative expenses. Under the settlement, class members’ pro rata shares will be allocated based on a formula that considers the purchase price they paid for their unit at the Hard Rock, less either:

  • The current value of their unit if they still own it
  • The resale price if they sold, or
  • The amount of their loan that was discharged through foreclosure

Interstate Land Sales Full Disclosure Act Amended by Congress

In July 2014, the Court granted plaintiffs motion for summary judgment on plaintiffs UCL unlawful prong claim.

In September 2014, Congress amended ILSA to exempt condominiums from ILSA’s disclosure requirements. The district court ruled that this new amendment does not apply retroactively to this case, however.

The Ninth Circuit Court of Appeals allowed the defendants to appeal the summary judgment and the orders concerning whether the new Congressional amendment should apply retroactively to the case.

The appeal is fully briefed, and on January 4, 2016, the Ninth Circuit heard oral argument on this appeal. Watch the argument.

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