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Sartin v. Chula Vista Inc.

United States District Court, E.D. Wisconsin

July 1, 2019

JOSEPH SARTIN, et al., Plaintiffs,
CHULA VISTA, INC., et al., Defendants.



         Plaintiffs Tony Edwards, Kenneth Riche, Joseph Sartin, Robert Silberman, and Scott Willock all own condominiums at Chula Vista Resort and Waterpark in the Wisconsin Dells, which they rented to vacationers. They filed a proposed class action complaint against defendants Chula Vista, Inc., CVR Management, LLC, and Michael Kaminski (because it is not crucial for present purposes which defendant allegedly did what, the court will refer to these defendants collectively as simply Chula Vista), as well as attorney Nancy Haggerty and her law firm, Michael Best & Friedrich. The complaint spans more than 100 pages and over 600 separately numbered paragraphs, and asserts 30 causes of action. It alleges that Chula Vista operates the Chula Vista Resort and oversees rental of the condominium units, and that the defendants “are engaged in a scheme to take financial advantage of condominium unit owners at the Chula Vista Resort & Waterpark.” Among other things, the complaint alleges that Chula Vista sells “Club” memberships to the public, which allows Club members to receive massive rental discounts on plaintiffs' condominium units, to Chula Vista's benefit and to the detriment of the plaintiffs. Haggerty and Michael Best are defendants, in part, because they counseled Chula Vista on the alleged scheme.

         Chula Vista has moved for judgment on the pleadings as to Counts 4-6 (Theft by Fraud), 7-9 (Constructive Fraud), 12-14 (Breach of Fiduciary Duty), 15-17 (Negligent Misrepresentation), 19-21 (Intentional Misrepresentation), and 25-27 (Wisconsin Deceptive Trade Practices Act) on the ground that each is barred by the statute of limitations. (ECF No. 41.) They also contend that the claims under the Wisconsin Deceptive Trade Practices Act (DTPA) should be dismissed because the complaint does not set forth facts plausibly suggesting a violation of the Act.

         Haggerty and Michael Best move for judgment on the pleadings as to Counts 10-11 (Constructive Fraud), 18 (Negligent Misrepresentation against Michael Best), 22 (Aiding and Abetting Conversion against Michael Best), 23 (Aiding and Abetting Breach of Fiduciary Duty against Michael Best), another Count 23 (Aiding and Abetting Conversion against Haggerty), and 24 (Aiding and Abetting Breach of Fiduciary Duty against Haggerty) on the same ground as Chula Vista-that they are barred by the applicable statute of limitations-and on Counts 28 and 29 (Legal Malpractice) on the ground that the plaintiffs lack standing to pursue such claims. The motions have been fully briefed and are ready for resolution. The Clerk of Court has advised the court that all parties have consented to the full jurisdiction of a magistrate judge. The court has jurisdiction over the plaintiffs' claims under 28 U.S.C. § 1332(d)(2)(A) and 28 U.S.C. § 1367.


         The following facts are taken from the complaint.

         Defendant Chula Vista, Inc. operates the Chula Vista Resort & Waterpark, located in the Wisconsin Dells. (ECF No. 1, ¶ 14.) The resort consists of a hotel, outdoor pool, golf course, indoor and outdoor waterparks, and condominium units. (Id., ¶¶ 25-26.) Defendant CVR Management, LLC oversees the rental and day-to-day operations of the condominium units. (Id., ¶ 16.) Defendant Kaminski is Chula Vista Inc.'s Chief Operating Officer and owner. (Id., ¶ 15.) Plaintiffs each own a condominium unit at the resort. (Id., ¶¶ 9-13.)

         In or about 2005 Chula Vista, Inc. and Kaminski began to solicit investors like the plaintiffs to purchase yet-to-be-built condominium units. (ECF No. 1, ¶ 28.) As an incentive to invest in the condominiums, Chula Vista, Inc. marketed to prospective owners, including the plaintiffs, the opportunity to earn income by renting their condominium units to the public. (Id., ¶ 29.) Chula Vista, Inc. presented plaintiffs with rental forecasts of anticipated future annual revenues for the rental of the condominiums and proposed that the income derived from the rental of the units would be split, 60 percent to the condominium owner and 40 percent to CVR. (Id., ¶¶ 30, 32.) Based on their belief that Chula Vista and its management would manage the condominium in a reputable and profitable manner, plaintiffs executed purchase agreements for condominiums. (Id., ¶ 33.) As condominium owners, plaintiffs became members of the Chula Vista Condominium Unit Owners Association (Association). (Id., ¶ 34.)

         In connection with their condominium purchases, all plaintiffs were encouraged to, and did, enter into a Rental Management Agreement with CVR and the Association, which set out the revenue sharing proposal previously touted by Chula Vista, Inc. (ECF No. 1, ¶ 36.) The Rental Management Agreement is attached to the complaint as Exhibit A. The plaintiffs granted to CVR the right to rent their units according to the terms of the Rental Management Agreement. (Id., ¶ 37.)

         In around 2009 Chula Vista, Inc. and Kaminski formed a program called The Club at Chula Vista Resort and sold memberships to the general public. (ECF No. 1, ¶ 42.) The Club charged members an up-front initiation fee of approximately $10, 000, in addition to annual dues. (Id., ¶ 43.) In exchange, the Club provided members steep rental discounts (as much as 80 percent) on condominiums owned by, among others, the plaintiffs. (Id., ¶ 44.) All Club membership fees and dues were kept by Chula Vista and the Club. (Id., ¶ 45.) The condominium owners were not consulted about the formation or operation of the Club. (Id., ¶ 50.)

         Over the years Chula Vista has steadily and substantially increased various amenity fees and assessments, which do not benefit the plaintiffs. (ECF No. 1, ¶ 65.) For example, in 2017-18 they increased the total “Indoor Water Park Amenity Fee” by $460, 000, a 31 percent hike over the previous year. (Id.) In addition, over time the assessments have continued to rise. (Id., ¶ 66.) The assessed fees helped fund other Kaminski-owned enterprises, including the indoor water park, golf course, restaurant, and others. (Id., ¶ 70.)

         In addition to the rental management program, Chula Vista oversees and operates a maintenance program. (ECF No. 1, ¶ 74.) As part of the maintenance program, Chula Vista replaces fixtures, furniture and the like, and performs service and maintenance on the condominium units. (Id., ¶ 75.) When purchases are made, there is a clear markup on the items. (Id., ¶ 77.)

         Haggerty provided legal services to Chula Vista regarding the execution of the Rental Management Agreement and the formation and running of the Club and the maintenance program. (ECF No. 1, ¶ 107.) She also served as legal counsel for the Association, presiding over Association meetings and giving legal advice to condominium unit owners. (Id., ¶ 110.) As counsel for both the Association and Chula Vista, Haggerty helped push through approval of the improper assessment fees. (Id., ¶ 71.)

         RULE 12(C) MOTION FOR ...

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