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Glazer v. Abercrombie & Kent

September 22, 2009

DONALD W. GLAZER, KEVIN R. MCCLELLAN, DANIEL L. MOSLEY, AND EVAN A. STEIN PLAINTIFFS,
v.
ABERCROMBIE & KENT, INC., GEOFFREY KENT, ANDREW W. HARPER, ANDREW HARPER TRAVEL, INC., AND JOHN DOE, A/K/A ANDREW HARPER, DEFENDANTS.



The opinion of the court was delivered by: George W. Lindberg Senior U.S. District Judge

Hon. George W. Lindberg

MEMORANDUM OPINION AND ORDER

Before the Court is defendants Abercrombie & Kent, Inc.'s ("A&K") and Geoffrey Kent's ("Kent") (collectively "Kent defendants") joint amended motion for summary judgment. A&K and Kent are the only remaining defendants in the case. The Court granted defendants Andrew Harper's and Andrew Harper Travel Inc.'s joint motion for summary judgment on March 24, 2009. At that time, the Court struck the Kent defendant's joint motion for summary judgment and gave them leave to file an amended motion.

The Kent defendants seek the entry of summary judgment in their favor and against the four individual plaintiffs, Donald Glazer ("Glazer"), Kevin McClellan ("McClellan"), Daniel Mosley ("Mosley"), and Evan Stein ("Stein") (collectively "plaintiffs"), as to all the remaining claims in the Fourth Amended Complaint ("complaint"). Plaintiffs' six remaining claims include Count I (violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as to A&K and Kent); Count II (common law fraud as to A&K); Count III (common law fraud as to Kent); Count V (negligent misrepresentation as to A&K and Kent); Count VII (violation of the Consumer Protection Acts of the plaintiffs' respective states as to A&K and Kent); and Count VIII (breach of guaranty as to A&K). For the reasons set forth more fully below, the amended motion for summary judgment is granted as to Count I, the only claim involving federal law. Plaintiff McClellan is a citizen of Illinois and defendant A&K is an Illinois corporation. Therefore, the Court does not have independent diversity jurisdiction over the remaining state law claims. See 28 U.S.C. § 1332. The Court declines to exercise its pendent jurisdiction over the remaining state law claims and those claims are dismissed.

I. Plaintiffs' Response to Defendants' Local Rule 56.1 Statement of Facts

Before the Court turns to the factual and legal analysis relevant to the pending motion, it must address plaintiffs' response to defendants' Rule 56.1 statement of undisputed facts. In its March 24, 2009 order striking the parties' prior filings, the Court admonished the parties that all subsequent filings "must strictly comply with all applicable federal and local rules." Local Rule 56.1(b)(3) requires the party opposing summary judgment to support any disagreements it may have with the moving party's statement of undisputed material facts with "specific references to the affidavits, parts of the record, and other supporting materials relied upon." Plaintiffs denied a number of defendants' facts, but failed to provide citations to the record to support those denials. Local Rule 56.1(b)(3)(B) requires that "in the case of any disagreement" with one of the movants' proposed statements of fact, the opposing party must provide "specific references to affidavits, parts of the record, and other supporting materials" to support their alleged disagreement. Cracco v. Vitran Express, Inc., 559 F.3d 625, 632 (7th Cir. 2009). "When a responding party's statement fails to dispute the facts set forth in the moving party's statement in the manner dictated by the rule, those facts are deemed admitted for purposes of the motion." Cracco, 559 F.3d at 632. Therefore, the following facts are deemed admitted. See Defs. Facts ¶¶ 6, 8, 9, 10, 11, 15, 16, 18, 19, 32, 33, 35, 50, 51, 57, 59, 66, 77, 78, 81, 82.

II. Plaintiffs' Affidavits

A plaintiff cannot "create an issue of material fact by submitting an affidavit that contradicts an earlier deposition." Pourghoraishi v. Flying J, Inc., 449 F.3d 751, 759 (7th Cir. 2006). "When a conflict arises between a plaintiff's sworn testimony and a later affidavit or declaration, the 'affidavit is to be disregarded unless it is demonstrable that the statement in the deposition was mistaken, perhaps because the question was phrased in a confusing manner or because a lapse of memory is in the circumstances a plausible explanation for the discrepancy.'" Pourghoraishi, 449 F.3d at 759 (quoting Piscione v. Ernst & Young, L.L.P., 171 F.3d 527, 532 (7th Cir. 1999)). Plaintiffs have not asserted confusion or a lapse in memory as a basis for filing the supplemental affidavits. Therefore, to the extent those affidavits contradict plaintiffs' deposition testimony, the Court will not consider them. Purghoraishi, 449 F.3d at 759.

III. Relevant Undisputed Facts

The following facts are undisputed unless specifically noted below. This case stems from each plaintiff's decision to join a luxury travel club -- Distinctive Retreats by Abercrombie & Kent, later known as Andrew Harper's Distinctive Retreats, A Destination Club by Abercrombie & Kent (the "Club" or "Distinctive Retreats"). Each of the four individual plaintiffs followed a similar fact pattern in deciding to purchase memberships in the Club. McClellan and Mosley were the first plaintiffs to join the Club in February 2004, followed by Glazer in February 2005, and Stein in April 2005. Each plaintiff received five primary documents from the Club including: (1) a Membership Agreement, (2) an Addendum to the Membership Agreement, (3) a Confidential Founding Membership Offering, (4) the Club's Rules and Regulations, and (5) a Member Bond. Plaintiffs received the first four documents (collectively "membership documents") prior to joining the Club. Each of the membership documents and the Member Bond state that Distinctive Retreats LLC is the owner and operator of the Club.

To join the Club, each plaintiff signed the Membership Agreement and Addendum and mailed them to the Club with the remaining balance due on their membership payments ($392,000 for McClellan; $392,000 for Mosley; $425,000 for Glazer; and $450,000 for Stein). After the Club received the payment and signed contract documents, they sent plaintiffs their individual Member Bonds. The Membership Agreement that each plaintiff signed specifically stated "[t]he Member acknowledges that the Membership was acquired solely for the purpose of using the facilities of the Club and that it does not give the Member a vested or prescriptive right or easement to use the Club nor does the Membership provide the Member with an equity or ownership interest in any property owned by the Club." "The Member acknowledges that he or she will not be entitled to share in any of the income generated by the Club, nor will the Club pay dividends to the Member. The Member hereby agrees that the Membership is not being viewed as an investment and does not expect to derive economic profits from the acquisition."

Club membership allowed plaintiffs to use the Club's luxury residences in various cities around the world. Those destinations included, among others, London, Paris, New York City, Vail, Tuscany, Maui, Cabo San Lucas, British Virgin Islands, and Telluride. Prior to joining the Club, McClellan had a membership in a different club, the Private Retreats Club. McClellan traded in his membership to that club for a membership in Distinctive Retreats because Distinctive Retreats had larger residences in better locations. McClellan bought his Club membership largely to use the Club's facilities for recreational purposes. The fact that McClellan could possibly make some money off his Club membership was a small reason that he joined the Club. After McClellan purchased his Club membership, he did not learn anything about whether the membership was increasing in value because he was not considering redeeming the membership. He was traveling and using the Club's residences. Prior to filing for bankruptcy, the Club was delivering what McClellan expected - luxury travel facilities that were larger than the residences in his previous club.

McClellan received the Club's Rules and Regulations, Membership Offering, Membership Agreement, and Addendum before he joined. McClellan only relied on the statements in those documents when he purchased his Club membership. He agreed that his Club membership was for recreational use and that he largely bought the membership to use the Club's facilities. Mosley joined the Club at approximately the same time as McClellan and received similar membership documents. Mosley read and signed the appropriate documents.

McClellan and Mosley both paid a $392,000 "deposit" for their club memberships and received a document entitled a "Member Bond." The document provided that the Club would return the $392,000 deposit to the person holding the "bond" on December 31, 2034 if that person did not choose to renew the bond, at no additional charge, for an additional 30 years. The bond was not redeemable within 18 months from the date of issuance and specifically stated that the holder was not entitled to any interest payments. The Club membership and bond were non-transferable except through the Club or inheritance. According to the terms of their membership, if McClellan or Mosley chose to resign from the Club prior to December 2034, their $392,000 deposits would be refunded within 30 days of when the membership was resold to a new Club member, or within one year of written notice of the member's intent to resign his membership. If the membership had increased in value at the time it was reissued, McClellan and Mosley would be entitled to 40% of the difference between the reissuance amount and the original $392,000 membership deposit. In order words, if McClellan resigned his membership and it was reissued to a new member for $400,000, McClellan would be entitled to $3,200 (40% of the $8,000 increase in the value of the membership). If Mosley relinquished his membership and a different prospective member offered $410,000 for Mosley's membership, he would be entitled to $7,200 (40% of the ...


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