Dean Beaver v. Tarsadia Hotels
2016 U.S. App. LEXIS 4466
| 9th Cir. | 2016Background
- Plaintiffs purchased non-residential condominium units at the Hard Rock Project in San Diego in 2006; closing occurred in late 2007. Plaintiffs claim they lacked required ILSA disclosures and would have rescinded if informed of their ILSA rescission right.
- Defendants are the developer and related entities/individuals; they concede failing to provide ILSA disclosures but raise affirmative defenses about ILSA’s applicability and timeliness.
- Plaintiffs sued under California’s Unfair Competition Law (UCL), alleging an "unlawful" practice based on ILSA disclosure violations; the district court granted partial summary judgment for Plaintiffs on the certified issues.
- Certified interlocutory issues on appeal: (1) whether UCL’s 4-year limitations period (and accrual) governs rather than ILSA’s 3-year period and whether federal law preempts the state period; (2) whether the purchased condominium units are ILSA "lots" under the agency definition of "exclusive repeated use"; (3) whether the Improved Lot Exemption applies given a pre-sale contingency; and (4) whether the 2014 congressional amendment exempting condo sales from ILSA applies retroactively.
- The Ninth Circuit affirmed: UCL’s four-year limitations period and state accrual rules apply and are not preempted; condominium units qualify as ILSA "lots"; the Improved Lot Exemption did not apply because the presale contingency was not limited to 180 days; and the 2014 amendment does not apply retroactively.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable statute of limitations for UCL claim based on ILSA violations | UCL governs so four-year limitations and state accrual rules apply; claim accrued at closing (injury in fact) | ILSA’s 3-year limitations controls and bars the claim | Court: UCL’s 4-year period and state accrual rules apply; claim not time-barred |
| Federal preemption of state limitations | State law not preempted; Congress did not clearly displace state consumer-protection remedies | ILSA’s 3-year period is effectively a repose and conflicts with longer state period | Court: No conflict preemption; strong presumption against preemption; ILSA does not displace UCL timing |
| Whether condominium units are "lots" subject to ILSA disclosures ("exclusive use") | Units gave purchasers exclusive repeated use on a recurring, defined basis (rights to eject during that period) so ILSA applies | Use restrictions (28-day occupancy cap, hotel management, ROFR, RMAs) mean owners lacked "exclusive" use; analogous to Becherer | Court: Agency definitions (Chevron/Skidmore deference) persuasive; purchasers had exclusive repeated use; units are "lots" |
| Improved Lot Exemption applicability (obligation to build within 2 years) | Plaintiffs: pre-sale contingency in contracts permitted rescission beyond 180 days, so exemption fails | Defendants: estimated completion dates within two years and practical facts mean exemption applies | Court: Contracts contained a pre-sale contingency not limited to 180 days per HUD regulation, so exemption does not apply |
| Retroactivity of 2014 ILSA amendment exempting condo sales | Plaintiffs: amendment substantive and not retroactive; cannot extinguish pre-existing claim | Defendants: amendment clarifies original statute and should apply to extinguish liability | Court: Amendment is a substantive change, would have retroactive effect, and Congress showed no clear intent to apply it retroactively; amendment does not extinguish liability |
Key Cases Cited
- Cel–Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527 (Cal. 1999) (UCL borrows violations of other laws as “unlawful” practices)
- Cortez v. Purolator Air Filtration Prods. Co., 999 P.2d 706 (Cal. 2000) (UCL limitations period governs even when underlying law has its own limitations)
- Aryeh v. Canon Bus. Solutions, Inc., 292 P.3d 871 (Cal. 2013) (UCL accrual follows common law accrual rules)
- Winter v. Hollingsworth Props., Inc., 777 F.2d 1444 (11th Cir. 1985) (ILSA may apply to condominiums; agency interpretation of “lot” reasonable)
- Berlin v. Renaissance Rental Partners, LLC, 723 F.3d 119 (2d Cir. 2013) (construing ILSA to cover condominium interests)
- Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 127 F.3d 478 (6th Cir. 1997) (commercial condo units with severely curtailed owner use may fall outside ILSA)
- Landgraf v. USI Film Prods., 511 U.S. 244 (1994) (framework for assessing retroactivity of statutes)
- CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014) (presumption against preemption; caution when federal law touches traditional state fields)
- Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008) (field preemption under HOLA; discussed in preemption context)
- Rivers v. Roadway Express, Inc., 511 U.S. 298 (1994) (Congress may legislatively overrule earlier statutory interpretations)
- Scott v. Boos, 215 F.3d 940 (9th Cir. 2000) (retroactive statute that deprives plaintiffs of existing causes of action implicates Landgraf analysis)