T PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO ...

PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6) CASE NO. 2:17-CV-01932-RSM

TERRELL MARSHALL LAW GROUP PLLC936 North 34th Street, Suite 300 Seattle, Washington 98103-8869

TEL. 206.816.6603 • FAX 206.319.5450 www.terrellmarshall.com

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THE HONORABLE RICARDO S. MARTINEZ U.S. DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

LAWRENCE HART, CLYDE STEPHEN LEWIS, JAMES PRESTI, and MICHAEL RALLS, individually and on behalf of all others similarly situated,

Plaintiffs,

v.

CF ARCIS VII LLC d/b/a THE CLUB AT SNOQUALMIE RIDGE, d/b/a TPC AT SNOQUALMIE RIDGE, and d/b/a SNOQUALMIE RIDGE GOLF CLUB, CF ARCIS IV HOLDINGS, LLC, ARCIS EQUITY PARTNERS, LLC, BLAKE S. WALKER, individually and on behalf of the marital community of BLAKE S. WALKER and JANE DOE WALKER, and BRIGHTSTAR GOLF SNOQUALMIE, LLC,

Defendants.

NO. 2:17-CV-01932-RSM

PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(b)(6)

Case 2:17-cv-01932-RSM Document 23 Filed 06/29/18 of 33

PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - i CASE NO. 2:17-CV-01932-RSM



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TABLE OF CONTENTS

Page No.

I. INTRODUCTION .............................................................................................................1 II. STATEMENT OF FACTS ................................................................................................2 A. The Club at Snoqualmie and the Rules in place before May 2013 .......................2 B. The Arcis Defendants and Brightstar colluded to amend the rules in

May 2013 ...............................................................................................................3 C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’

liability ...................................................................................................................5 III. ARGUMENT AND AUTHORITY ..................................................................................6 A. Standard of Review ...............................................................................................6 B. Plaintiffs sufficiently plead all elements of a breach of contract claim ................6 1. Plaintiffs have properly alleged breach .....................................................6 2. Plaintiffs allege facts that support damages and equitable

remedies .....................................................................................................9 C. Plaintiffs sufficiently plead all elements of a CPA claim ....................................10 1. Plaintiffs plead sufficient facts to show Defendants engaged in

unfair acts ................................................................................................11 2. Plaintiffs plead sufficient facts to show Defendants engaged in

deceptive acts ...........................................................................................13 3. Plaintiffs plead sufficient facts to show injury to the public

interest .....................................................................................................15 a. The CPA was amended in 2009. Public interest impact

is satisfied when the alleged unfair or deceptive act “injured other persons” ................................................................15

b. Plaintiffs do not complain about a “private” dispute

between two parties .....................................................................16


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - ii CASE NO. 2:17-CV-01932-RSM



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c. Public interest impact is also satisfied under the multifactor test .............................................................................18

4. Plaintiffs plead sufficient facts to show they have been injured .............19 5. Plaintiffs plead sufficient facts to show causation ..................................20 D. Plaintiffs sufficiently plead all elements of a conversion claim ..........................21 E. Plaintiffs plead sufficient facts to support piercing the corporate veil ................23 IV. CONCLUSION ...............................................................................................................25


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iii CASE NO. 2:17-CV-01932-RSM



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TABLE OF AUTHORITIES

Page No.

FEDERAL CASES

Am. Fin. Servs. Ass’n v. Fed. Trade Comm’n, 767 F.2d 957 (D.C. Cir. 1985) .........................................................................................11

Ashcroft v. Iqbal,

556 U.S. 662 (2009) .........................................................................................................6 Barker v. Riverside Cnty. Office of Educ.,

584 F.3d 821 (9th Cir. 2009) .............................................................................................6 Davis v. HSBC Bank Nev., N.A.,

691 F.3d 1152 (9th Cir. 2012) .........................................................................................12 Eagle View Techs., Inc. v. Xactware Sols., Inc.,

No. C12-1913-RSM, 2013 WL 5945810 (W.D. Wash. Nov. 6, 2013) ...........................10 Eye Care Ctr. of Snohomish v. Chemat Tech., Inc.,

No. C12-0203-JCC, 2012 WL 12941686 (W.D. Wash. Dec. 14, 2012) .........................15 Gremp v. Ramsey,

No. C08-558RSM, 2009 WL 112674 (W.D. Wash. Jan. 14, 2009) ....................22, 23, 24 Hall v. Santa Barbara,

833 F.2d 1270 (9th Cir. 1986) ...........................................................................................6 Jet Parts Eng’g, Inc. v. Quest Aviation Supply, Inc.,

2015 WL 4523497 (W.D. Wash. July 27, 2015) .............................................................17 Segal Co. v. Amazon.com,

280 F. Supp. 2d 1229 (W.D. Wash. 2003) ......................................................................15 Skansgaard v. Bank of Am., N.A.,

896 F. Supp. 2d 944 (W.D. Wash. 2011) ........................................................................14 Veridian Credit Union v. Eddie Bauer, LLC,

295 F. Supp. 3d 1140 (W.D. Wash. 2017) ......................................................................12


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - iv CASE NO. 2:17-CV-01932-RSM



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STATE CASES

224 Westlake, LLC v. Engstrom Properties, LLC, 169 Wn. App. 700 (2012) ..................................................................................................9

Allstate Ins. Co. v. Hammonds, 72 Wn. App. 664 (1994) ....................................................................................................7 Behnke v. Ahrens,

172 Wn. App. 281 (2012) ................................................................................................17 Carlile v. Harbor Homes, Inc.,

147 Wn. App. 195 (2008) ................................................................................................12 Davenport v. Wash. Educ. Ass’n,

147 Wn. App. 704 (2008) ....................................................................................21, 22, 23 Deegan v. Windermere Real Estate/Ctr.-Isle, Inc.,

197 Wn. App. 875 (2017) ..........................................................................................20, 21

Dix v. ICT Grp., Inc., 160 Wn.2d 826 (2007) .....................................................................................................17

Edmonds v. John L. Scott Real Estate, Inc.,

87 Wn. App. 834 (1997) ..................................................................................................13 Goodyear Tire & Rubber Co. v. Whiteman Tire Inc.,

86 Wn. App. 732, (1997) .................................................................................................14 Griffith v. Centex Real Estate Corp.,

93 Wn. App. 202 (1998) ..................................................................................................11 Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co.,

105 Wn.2d 778 (1986) .............................................................................10, 13, 16, 17, 18 Hearst Comm’ns, Inc. v. Seattle Times Co.,

154 Wn.2d 493 (2005) ...................................................................................................6, 7 Holiday Resort Cmty. Ass’n v. Echo Lake Assocs., LLC,

134 Wn. App. 210 (2006) ................................................................................................13 In re Marriage of Langham and Kolde,

153 Wn.2d 553 (2005) .....................................................................................................21 Klem v. Wash. Mut. Bank,

176 Wn.2d 771 (2013) ...............................................................................................11, 16


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - v CASE NO. 2:17-CV-01932-RSM



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Larsen v. Walton Plywood Co.,

65 Wn.2d 1 (1964) .......................................................................................................9, 10 Maynard Inv. Co. v. McCann,

77 Wn.2d 616 (1970) .......................................................................................................22 Morgan v. Burks,

93 Wn.2d 580 (1980) .................................................................................................23, 24 Mutual of Enumclaw Ins. Co. v. Gregg Roofing, Inc.,

178 Wn. App. 702 (2013) ..................................................................................................9 Newsom v. Miller,

42 Wn.2d 727 (1953) .........................................................................................................7 Nishikawa v. U.S. Eagle High, LLC,

138 Wn. App. 841 (2007) ..................................................................................................7 Panag v. Farmers Ins. Co.,

166 Wn.2d 27 (2009) ...........................................................................................13, 17, 19 Paullus v. Fowler,

59 Wn.2d 204 (1961) .........................................................................................................7 Pohlman Inv. Co. v. Va. City Gold Mining Co.,

184 Wash. 273 (1935) .....................................................................................................23 Rekhter v. Dep’t of Soc. & Health Servs.,

180 Wn.2d 102, 323 P.3d 1036 (2014) ...........................................................................14 Riensche v. Cingular Wireless, LLC,

496 F. App’x 760 (9th Cir. 2012) ....................................................................................14 Schmidt v. Cornerstone Invs., Inc,

115 Wn.2d 148 (1990) .....................................................................................................12 Tanner Elec. Co-op. v. Puget Sound Power & Light Co.,

`128 Wn.2d 656 (1996) .....................................................................................................6 Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n,

133 Wn. App. 835 (2006) ................................................................................................22

STATE STATUTES

RCW 19.86.090 ...........................................................................................................................19


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - vi CASE NO. 2:17-CV-01932-RSM



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RCW 19.86.093 ...........................................................................................................................16 RCW 19.86.093(3)(a) ..................................................................................................................15

FEDERAL RULES

Fed. R. Civ. P. 8(a)(2) ...................................................................................................................6 Fed. R. Evid. 201(b) ................................................................................................................5, 18

OTHER AUTHORITIES

In re Int’l Harvester Co., 104 F.T.C. 949, 1984 WL 565290 (1984) .......................................................................11


PLAINTIFFS’ RESPONSE TO ARCIS DEFENDANTS’ MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) - 1 CASE NO. 2:17-CV-01932-RSM



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I. INTRODUCTION

Defendants are current and former owners of the Club at Snoqualmie Ridge (the

“Club”), the only Jack Nicklaus Signature Golf Course in Washington. Prior to May 2013,

members paid tens of thousands of dollars for golf memberships represented as “refundable”

(“Refundable Memberships”). Golfers who choose to sell back their Refundable Memberships

could join a waiting list for a refund (the “Waiting List”). For every third Refundable

Membership sold, Defendants are required to refund one membership on the Waiting List at

70% of the listed price. Plaintiffs Larry Hart, Steve Lewis, Jim Presti, and Mike Ralls are

current or former members of the Club, and like other Class members, paid a premium for a

golf membership that they believed the Club would refund back to them if they chose to sell.

In July 2013, the Arcis Defendants purchased the Club from Defendant Brightstar. As

part of the transaction, they were required to assume the Club’s obligations, including the

refund obligations to Club members. But prior to closing, Defendants colluded and deceptively

amended Club rules to add a non-refundable category of golf membership (“Non-Refundable

Memberships”) for half the price of Refundable Memberships. Thus, although the Club

continued to sell Refundable Memberships, new members had no incentive to purchase them.

The Defendants amended the rules without notice to Club members and without obtaining their

approval, steps required for changes that would adversely affect Club members’ refund rights.

Perhaps most egregious, Defendants did not disclose this change for two years. For two

years, Plaintiffs and other Club members did not know that Defendants had adopted Revised

Rules that introduced Non-Refundable Memberships. And they did not know they were sold for

half the price of Refundable Memberships. Moreover, the Revised Rules required Defendants

to make refunds from the sales of both Refundable and Non-Refundable Memberships, but

Defendants did not honor this requirement. Because Plaintiffs did not know about the Revised

Rules, they did not know that Defendants had conspired to eliminate their refunds. Had

Plaintiffs known that Defendants would refuse to honor their refund rights, they could have





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taken advantage of a provision in the Rules that allows Club members to resign within 60 days

of the sale of the Club and receive 100% of their Membership Fee. Now, Plaintiffs and at least

100 other persons remain on the Waiting List for refunds that will not come or will be delayed.

Plaintiffs bring this suit for damages and equitable relief on behalf of themselves and

the proposed Class. Defendants’ conduct breached contracts they had with Class members, was

unfair and deceptive in violation of the Washington Consumer Protection Act, and constitutes

conversion. The Arcis Defendants move to dismiss on several grounds but, for the reasons set

forth below, each argument fails. Accordingly, the Court should deny the motion to dismiss.

II. STATEMENT OF FACTS

A. The Club at Snoqualmie and the Rules in place before May 2013.

Plaintiffs and Class members are current and former members of the Club at

Snoqualmie Ridge, a membership-only golf and country club located in Snoqualmie,

Washington. Dkt. 18 (“Second Amended Complaint” or “SAC”) at ¶ 4.1. When Plaintiffs and

Class members joined the Club, the only golf memberships the Club advertised and sold were

refundable memberships. SAC ¶¶ 3.9, 4.5, 4.10. To use the full range of the Club’s facilities,

Plaintiffs and Class members paid a large, one-time membership fee in the tens of thousands of

dollars (“Membership Fee”). Id. ¶ 4.2. Club members remain in good standing and benefit from

their Refundable Memberships by paying monthly dues. Id. The Club, in turn, is obligated to

refund a portion of the Membership Fee to Club members who voluntarily resign. Id. ¶ 4.7.

These requirements and others are set forth in Club rules. The rules in place when

Plaintiffs joined the Club were the June 30, 2008 Membership and Operating Policies (“Rules”

or “2008 Rules”). See Dkt. 11, Exh. B. The provisions regarding Club members’ refund rights

are strict. “In the event of voluntary resignation of an Individual Golf Membership … the

former Member shall be entitled to receive 70% of the Membership Fee published at the time

Club Operator reissues the resigned or terminated membership ....” Id. ¶ 3.2(b)(i) (emphasis

added). The Club “shall maintain waiting lists … of resigned Members entitled to payments





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upon reissuance of their memberships….” Id. ¶ 3.2(c). The Club is required to pay a refund for

“every third membership” sold to those with the “highest priority on the waiting list….” Id.

Although the 2008 Rules authorize the Club to amend Club rules “to change the classes

and categories of membership offered,” the right is not unfettered. Dkt. 11, Exh. B ¶ 1.1. The

Rules prohibit the Club from making any amendment which “shall materially adversely affect

the rights of any existing Member under Section 3.2(b) unless approved by at least two-thirds

of the affected Members.” Id. ¶ 6.2. Rule amendments are effective only “when notice … is

delivered to the Members.” Id. “[A]ll notices or other communications … required to be given

or made hereunder shall be in writing and shall be delivered or mailed ….” Id. ¶ 6.1.

B. The Arcis Defendants and Brightstar colluded to amend the rules in May 2013.

Arcis “has positioned itself as a dynamic leader in the [golf] industry by consistently

providing unrivaled amenities to complement diverse playing experiences for members and

guests.” SAC ¶ 3.6. “Arcis’ principals have an established history in the ownership and

operation of high-end golf courses, country clubs and world-class destination resorts.” See

https://www.arcisgolf.com/news/arcis-completes-purchase-46-golf-properties-cnl-lifestyle-

properties (last visited June 25, 2018). One principal—Defendant Blake S. Walker, Chairman,

CEO and President of Arcis Golf, and CEO and managing partner of Arcis Equity—“has been

involved in all phases of the firm’s strategy and development since its founding.” SAC ¶ 3.8.

In July 2013, Arcis purchased the Club from Defendant Brightstar Golf Snoqualmie,

LLC (“Brightstar”), a company which had owned and operated the Club since 2008. SAC ¶ 3.9.

As part of the transaction, the Arcis Defendants expressly and impliedly assumed the Club’s

obligations under the 2008 Rules, including the obligation to pay refunds to resigned members

on the Waiting List. Id. ¶ 8.6. But prior to closing, Defendants deceptively amended Club rules

in a manner that made the contractual requirement to assume the refund obligations illusory. Id.

¶¶ 4.12, 6.7. They colluded to amend Club rules to add a non-refundable category of golf

membership (“Non-Refundable Memberships”), and to sell the Non-Refundable Memberships





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for half the price of Refundable Memberships. Id. ¶¶ 4.8, 4.10, Exh. A at p. 3 (“Non-

Refundable and Non-Transferable Membership”). Although the Club continued to sell

Refundable Memberships, they were sold for twice the price of Non-Refundable Memberships,

so prospective Club members had no incentive to purchase them.

In addition to the problems described above, the 2013 Revised Rules grouped both the

Non-Refundable and Refundable Memberships within the category of “Premier Golf

Memberships.” SAC, Exh. A ¶ 1.1(a). Under the Revised Rules, members on the Waiting List

are entitled to receive a partial refund of their Membership Fee after the sale of “every third

Premier Family Golf Membership.” Id. ¶ 3.2(c). Moreover, the Revised Rules make no

distinction between Non-Refundable and Refundable Premier Golf Memberships. Id. Arcis was

required to make refunds from the sale of both Refundable and Non-Refundable Memberships,

but Arcis failed to do so. Instead, it simply stopped paying refunds. Id. ¶ 6.7.

It is clear that the Arcis Defendants participated in amending the Rules because Arcis’

name is prominently displayed on the first line of the May 1, 2013 Amended and Restated

Membership and Operating Policies (“Revised Rules” or “2013 Revised Rules”). SAC, Exh. A.

Defendants amended the Rules without mailing or delivering notice to Club members and

without obtaining their two-thirds approval, steps that Defendants were required to follow

under ¶ 6.1 and ¶ 6.2 if they made changes to Club rules that would adversely affect the refund

rights described in ¶ 3.2(b). SAC ¶¶ 4.13-4.15; see also Dkt. 11, Exh. B, ¶¶ 3.2(b), 6.1, 6.2.

Defendants did not disclose this change for two years. SAC ¶ 4.11. Plaintiffs and other

Club members did not know that Defendants had implemented Revised Rules that introduced

Non-Refundable Memberships. Id. They did not know that the new memberships were sold for

half the price of Refundable Memberships. Id. ¶¶ 4.10, 4.11. They did not know that

Defendants had conspired to eliminate their refunds altogether by declining to make refunds

with revenue from the sale of Non-Refundable Memberships. Id. ¶¶ 4.16, 4.20. Moreover, the

2008 Rules allow members to receive 100% of their refunds (rather than 70% of the listing





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price) within 60 days of the sale of the Club if the new owner refuses to honor their

membership agreements. Dkt. 11, Exh. B ¶ 3.2(b)(iii). Defendants’ secret revision of the Rules

foreclosed Plaintiffs’ and Class members’ ability to voluntarily resign and obtain their 100%

refunds. SAC ¶ 6.9. Because of these omissions, Plaintiffs and at least 100 other persons

remain on the Waiting List for refunds that will never come or will be delayed. Id. ¶¶ 5.3, 6.7.

C. Arcis’ “20/20 Plan” and Voluntary Refund Policy do not limit Arcis’ liability.

Arcis’ collusion with Brightstar to introduce Non-Refundable Memberships finally

came to light in August 2015, but Arcis did little to address member outrage for another year.

SAC ¶ 4.11. Finally, in September 2016, Mr. Walker personally traveled to Washington from

Texas to meet with angry Club members. Id. ¶ 3.8. One month later, the Arcis Defendants

addressed this issue and others in a written “20/20 Plan” presented to members. See Declaration

of Adrienne D. McEntee (“McEntee Decl.”), Exh. 1 (“TPC SR 20/20 Plan”).1 In the Plan, the

Arcis Defendants admitted they had made just “one refund” in three years, acknowledged

frustration “with the slow pace of refunds being made to those on the resigned list and the

perception that the club has not been fully forthcoming with the information regarding

memberships sold by the club,” and promised “Full Transparency and Disclosure.” Id.

Although Arcis said it would “take steps necessary to ensure that the club remains

healthy for the benefit of all of the members,” the Plan did not offer retroactive refunds to those

who should have received refunds during the prior three years. McEntee Decl., Exh. 1. Instead,

Arcis’ Plan renamed the Non-Refundable Premier Family Golf Memberships “Ridge Family

Golf Memberships” to avoid “confusion,” and implemented a “Voluntary Refund Policy” that

purports to make refunds at a 3-1 ratio from the sale of both Refundable and Non-Refundable

Memberships. Id.; see also Dkt. 11, Exh. D. The Policy is “non-binding.” Arcis has “sole

discretion” to adhere, or not adhere, to the Policy. Dkt. 11, Exh. D.

1 Plaintiffs respectfully request that the Court take judicial notice of the 20/20 Plan, which the Arcis Defendants used to introduce the Voluntary Refund Policy that Defendants included with their motion (Dkt. 11, Exh. D). See Fed. R. Evid. 201(b) (“The court may judicially notice a fact that is not subject to reasonable dispute because it … can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned”).





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Why the Arcis Defendants chose not to make retroactive refunds is unclear. Money was

not an issue. While the Great Recession generally had an adverse impact on the golf industry,

Arcis “enabled the club to weather the economic storm relatively well and it does not face the

dire circumstances that many clubs are facing.” McEntee Decl., Exh. 1. “[I]n large part due to

prudent management,” Arcis has invested “over $3M in capital improvements” into the Club.

Id. Indeed, Arcis has been recognized for achieving “2,456% growth in revenues over a three-

year period.” See https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-

magazine%E2%80%99s-fastest-growing-private-companies (last visited June 25, 2018).

III. ARGUMENT AND AUTHORITY

A. Standard of Review.

Courts disfavor motions to dismiss, which are frequently denied. Hall v. Santa Barbara,

833 F.2d 1270, 1274 (9th Cir. 1986). The Federal Rules require a plaintiff to plead “a short and

plain statement of the claim showing that [he] is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To

survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible

“when the plaintiff pleads factual content that allows the court to draw the reasonable inference

that the defendant is liable for the conduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly,

550 U.S. at 545). In determining plausibility, the Court accepts all facts in the complaint as

true. Barker v. Riverside Cnty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009).

B. Plaintiffs sufficiently plead all elements of a breach of contract claim.

1. Plaintiffs have properly alleged breach.

“The touchstone of contract interpretation is the parties’ intent.” Tanner Elec. Co-op. v.

Puget Sound Power & Light Co., 128 Wn.2d 656, 674 (1996). Washington courts follow the

objective manifestation theory of contracts, looking for the parties’ intent as objectively

manifested rather than their unexpressed subjective intent. Hearst Comm’ns, Inc. v. Seattle





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Times Co., 154 Wn.2d 493, 503 (2005). A court considers only what the parties wrote, giving

words in a contract their ordinary, usual, and popular meaning unless the agreement as a whole

clearly demonstrates a contrary intent. Id. at 504. A contract must be read “as the average

person would read it; it should be given a ‘practical and reasonable rather than a literal

interpretation,’ and not a ‘strained or forced construction’ leading to absurd results.” Allstate

Ins. Co. v. Hammonds, 72 Wn. App. 664, 667 (1994) (citation omitted). Washington courts

favor an interpretation giving effect to all of a contract’s provisions over one that renders some

language meaningless or ineffective. See Newsom v. Miller, 42 Wn.2d 727, 731 (1953). In

order to give effect to all the contract’s provisions, courts harmonize clauses that seem to

conflict. Nishikawa v. U.S. Eagle High, LLC, 138 Wn. App. 841, 849 (2007).2

Three key provisions of the 2008 Rules bear on the issues here. Paragraph 6.2 provides:

AMENDMENT. Club Operator reserves the right, in its sole and absolute discretion, to amend these Membership and Operating Policies at any time and in any manner which it deems appropriate, except that no amendment shall materially adversely affect the rights of any existing Member under Section 3.2(b) unless approved by at least two-thirds of the affected Members. Any amendment shall become effective when notice thereof is delivered to the Members.3

Dkt. No. 11, Exh. B ¶ 6.2 (emphasis added). Paragraph 3.2(b)(i) provides, in relevant part:

REFUNDS. A resigning member shall have no right to any payment upon termination of membership except as follows:

(i) In the event of voluntary resignation of an Individual Golf Membership … the former Member shall be entitled to receive 70% of the Membership Fee published at the time Club Operator reissues the resigned or terminated membership pursuant to Section 3.2(c) … to be paid within 30 days after reissuance.

2 “An assignee of a contract stands in the shoes of his assignor.” Paullus v. Fowler, 59 Wn.2d 204, 212 (1961). The Arcis Defendants assumed Brightstar’s refund obligations. Id. ¶¶ 8.6, 8.10. Although they dispute liability for the claims alleged, the Arcis Defendants do not dispute they are valid assignees. SAC ¶ 8.6; Dkt. 20 at 22:25-23:1. 3 Defendants fail to cite the entire paragraph 6.2, leaving out the last sentence altogether. Dkt. No. 20 at 25:22-25.





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Dkt. No. 11, Exh. B ¶ 3.2(b)(i) (emphasis added). Finally, paragraph 6.1 provides in relevant part:

NOTICES. Except as otherwise specifically provided in these Membership and Operating Policies, all notices or other communications (other than regular statements of account) required to be given or made hereunder shall be in writing and shall be delivered or mailed…. Notices to a Member shall be addressed to the Member at the address specified in the Member’s Membership Agreement, unless the Member has requested that notices be given at a different address by written notice to Club Operator….

Dkt. No. 11, Exh. B ¶ 6.1. Together, these provisions impose on Defendants a duty to give

members notice of a proposed rule change to their refund rights, and an obligation to obtain the

approval of two-thirds of the membership before such change can be effective.

The Arcis Defendants disagree with Plaintiffs’ interpretation. They argue there was no

breach because Defendants claim they have the “unfettered right” under paragraph 1.1 to create

new classes of membership. Dkt. 20 at 26:18-21. But Arcis’ myopic focus on paragraph 1.1

ignores paragraph 6.1, which requires Defendants to give members hand-delivered or mailed

notice, and paragraph 6.2, which requires a vote of two-thirds of the membership for changes

that adversely affect refund rights. SAC, Exh. A. If the Court were to interpret the contract in

the manner suggested by the Arcis Defendants, the language regarding the notice and voting

requirements would be entirely superfluous. Arcis’ interpretation is untenable.

Defendants’ amendment of the Rules without notice and approval materially and

adversely affected Plaintiffs’ interests and the interests of hundreds of others who are similarly

situated to Plaintiffs. By marketing Non-Refundable Memberships at half the price of

Refundable Memberships, Defendants diverted all sales to Non-Refundable Memberships,

guaranteeing that future consumers would choose to purchase the discounted Non-Refundable

Memberships over the more expensive Refundable Memberships, and made it impossible for

members on the Waiting List to receive refunds. SAC ¶¶ 4.10, 4.12. Because the facts plausibly





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allege that Defendants breached the parties’ contract, the motion should be denied.

2. Plaintiffs allege facts that support damages and equitable remedies.

The general measure of damages for breach of contract is that the injured party is

entitled to (1) recover all damages that accrue naturally from the breach and (2) be put into as

good a pecuniary position as he would have had if the contract had been performed. 224

Westlake, LLC v. Engstrom Properties, LLC, 169 Wn. App. 700, 729 (2012) (citing Eastlake

Constr. Co. v. Hess, 102 Wn.2d 30, 39 (1984)). Damages are recoverable if they were within

the contemplation of the parties at the time the contract was made, are the proximate result of

defendant’s breach, and are proven with reasonable certainty. Westlake, LLC, 169 Wn. App. at

729 (citation omitted). “Certainty” applies to the fact of damage rather than to the amount.

Mutual of Enumclaw Ins. Co. v. Gregg Roofing, Inc., 178 Wn. App. 702, 715 (2013), rev. den.,

180 Wn.2d 1011 (2014). If a plaintiff affords “a reasonable basis for estimating his loss, he is

not to be denied a substantial recovery because the amount of the damage is incapable of exact

ascertainment.” Larsen v. Walton Plywood Co., 65 Wn.2d 1, 16 (1964) (citation omitted).

Plaintiffs plainly allege that they were damaged from Defendants’ breach. They

specifically allege that “one or more Plaintiffs would have been entitled to, and would have

received refunds, had Defendants not breached the terms of the Rules by selling Non-

Refundable Memberships without membership notice and approval.” SAC ¶ 8.8. While they

cannot know with certainty at the pleadings stage the amount of damages, they have clearly

alleged the fact that they were damaged. Far from tepid speculation, the Arcis Defendants’ own

representations support Plaintiffs’ allegations. Arcis funneled $3 million dollars back into the

Club. McEntee Decl., Exh. 1. The Court may reasonably infer that the $3 million stemmed

from revenue earned from the sale of memberships. This number does not account for the

generous profit the Arcis Defendants no doubt realized over the same period. See

https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-magazine%E2%80%99s-

fastest-growing-private-companies (last visited June 25, 2018) (Arcis achieved “2,456%





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growth in revenues over a three-year period.”). Applying the 3-1 ratio4 described in the 2008

Rules, Defendants should have refunded at least $1 million to Plaintiffs and the Class.5 This is

“a reasonable basis for estimating … loss.” Larsen, 65 Wn.2d at 16.

Class members who are not yet eligible for refunds are nonetheless entitled to equitable

relief, (see SAC ¶¶ 5.4.9, 8.13, Recitals B, E), allegations that the Arcis Defendants ignore

altogether. “There are two main equitable remedies available on a contract action: specific

performance and injunctive relief. While the two are similar, the difference is that specific

performance orders a party to comply with the terms of the contract, whereas an injunction

typically orders a party to refrain from a particular act.” Eagle View Techs., Inc. v. Xactware

Sols., Inc., No. C12-1913-RSM, 2013 WL 5945810, at *2 (W.D. Wash. Nov. 6, 2013).

Plaintiffs seek both equitable remedies here. Specifically, “Plaintiffs and member of the Class

are entitled to specific performance of the Rules” as they existed before Defendants adopted the

2013 Revised Rules and began selling Non-Refundable Memberships. SAC ¶ 8.13. Plaintiffs

also seek injunctive relief “requiring Defendants to refund the memberships of members who

join the Waiting List in the future pursuant to the terms of the pre-2013 Rules.” Id. at X(B).

Plaintiffs have alleged sufficient bases to support their request for damages and equitable relief.

C. Plaintiffs sufficiently plead all elements of a CPA claim.

To survive a motion to dismiss their CPA claims, Plaintiffs must plead plausible

allegations for the following elements: (1) an unfair or deceptive act or practice, (2) occurring

in trade or commerce, (3) a public interest impact, (4) injury to Plaintiffs’ business or property,

and (5) a causal relationship between the unfair or deceptive act and Plaintiffs’ injuries. See

Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780 (1986).

4 Defendants also argue that the Revised Rules did not change the ratio of refunds from 3-1 to 4-1, as Plaintiffs allege in SAC ¶ 4.9, because the term “3-1 ratio” remains. But they ignore language in ¶ 3.2(c) of the Revised Rules that confirms memberships “will be refunded after every third” membership is sold (Dkt. 18, Exh. A), as opposed to language in the former ¶ 3.2(c), which provides a refund with “every third membership” sold (Dkt. 11, Exh. B). Regardless, the sale of Refundable Memberships has been virtually nonexistent since May 2013. 5 Based on the $39,000 price at which Defendants offered the memberships in October 2016 (Dkt. 11, Exh. D), Defendants should have refunded at least 36 Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6).





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The Arcis Defendants challenge the allegations Plaintiffs set out in support of the first, third,

fourth, and fifth elements. For the reasons that follow, their arguments fail.

1. Plaintiffs plead sufficient facts to show Defendants engaged in unfair acts.

Conduct is unfair and violates the CPA if it “causes or is likely to cause” substantial

injuries that are not reasonably avoidable and are not outweighed by countervailing benefits.

Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787 (2013) (quoting 15 U.S.C. § 45(n)). The test for

unfairness is an objective one. See Am. Fin. Servs. Ass’n v. Fed. Trade Comm’n, 767 F.2d 957,

976-98 (D.C. Cir. 1985) (analyzing benefits of defendants’ conduct, if any, and ability of those

impacted to reasonably avoid injury). In determining whether a defendant engaged in unfair

practices, courts look at the totality of the defendant’s conduct. See In re Int’l Harvester Co.,

104 F.T.C. 949, 1984 WL 565290, at *88 (1984). This includes evidence of the defendant’s

acts before, during, and after the transactions at issue, as well as evidence regarding the impact

those actions had on consumers. See, e.g., Griffith v. Centex Real Estate Corp., 93 Wn. App.

202, 213–14 (1998) (stating the “CPA applies to activities both before and after a sale”).

In their Second Amended Complaint, Plaintiffs have pleaded plausible allegations that,

accepted as true, establish Defendants engaged in unfair practices in the management of the

Snoqualmie Golf Club. Plaintiffs allege Defendants amended the Rules in 2013 without notice

to Plaintiffs and Class members. SAC ¶ 7.4.1. Defendants amended the Rules in 2013 to

explicitly provide for the creation of Non-Refundable Memberships, while at the same time

made it impossible for those with Refundable Memberships to obtain refunds. Id. ¶ 7.4.2.

Defendants also amended the Rules in 2013 without seeking (and obtaining) approval of two-

thirds of Club members, as required by the 2008 Rules. Id. ¶ 7.4.3. Finally, Defendants

continue to sell Non-Refundable Memberships without making refunds to Class members

based on the ratio set forth in the 2008 Rules. Id. ¶ 7.4.4; McEntee Decl., Exh. 1.

The Arcis Defendants make several arguments in support of their motion to dismiss,

none of which have merit. First, they argue that they cannot be liable for their unfair conduct





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because they did not own the Club when the 2013 Revised Rules were implemented. This

argument ignores Plaintiffs’ allegation that the Arcis Defendants colluded with Brightstar in

May 2013 to unfairly implement the Revised Rules, as evidenced by Revised Rules that bear

Arcis’ name. SAC, ¶ 4.8, Exh. A. The fact that the Revised Rules were at some point revised to

substitute “Brightstar” for “Arcis” (Dkt. 11, Exh. C) does not make Plaintiffs’ allegations any

less plausible, or the Arcis Defendants’ actions less unfair. Moreover, Plaintiffs are not required

to establish privity or the existence of a contractual relationship. They are required only to

show a link between the act and the injury. Schmidt v. Cornerstone Invs., Inc, 115 Wn.2d 148,

167 (1990); see also Carlile v. Harbor Homes, Inc., 147 Wn. App. 195, 215 (2008) (concluding

subsequent homeowners stand in shoes of original purchasers as assignees under CPA).

Second, the Arcis Defendants’ claim that Plaintiffs have not shown substantial injury

because they have not shown actual monetary loss ignores Plaintiffs’ allegations that the Arcis

Defendants have “generated millions from the sale of Non- Refundable Memberships” and that

they “fail[] to provide refunds to Class members.” SAC ¶¶ 4.12, 4.20. The Arcis Defendants’

20/20 Plan, in which they acknowledged having funneled $3 million in revenue into the Club

substantiates these allegations because those funds could have, and should have, been used to

pay refunds. McEntee Decl, Exh. 1. Plaintiffs have sufficiently pled substantial injury.

Third, despite the Arcis Defendants’ claim otherwise, Plaintiffs’ injury was “not

reasonably avoidable.” An injury is not avoidable if a consumer would have no way to know of

the conduct. See Veridian Credit Union v. Eddie Bauer, LLC, 295 F. Supp. 3d 1140, 1162

(W.D. Wash. 2017) (customers had no way of knowing that defendant’s cyber-security

measures were deficient or that defendant failed to implement appropriate software updates or

other reasonable security measures). Arcis relies on Davis v. HSBC Bank Nev., N.A., 691 F.3d

1152, 1168 (9th Cir. 2012) to argue that Plaintiffs could have avoided their injury by not

entering into the contract in the first place, contending that Plaintiffs should have known that

the Arcis Defendants would someday breach the parties’ contract. But Plaintiffs did not, and





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could not, know that Defendants would implement Revised Rules which materially and

adversely affected their refund rights because Defendants adopted them in secret.

Finally, Plaintiffs have not received countervailing benefits and never admitted to

anything of the like. Rather, the Revised Rules made it impossible for Plaintiffs to receive

refunds because the Arcis Defendants’ sale of Non-Refundable Memberships at half the price

of Refundable Memberships disincentivized sales of the latter. Defendants violated the Rules,

and their conduct served no countervailing benefit. Their conduct was unfair under the CPA.

2. Plaintiffs plead sufficient facts to show Defendants engaged in deceptive acts.

A practice is deceptive and violates the CPA if it “had the capacity to deceive a

substantial portion of the public.” Hangman Ridge., 105 Wn.2d at 785 (emphasis added).

“Implicit in the definition of ‘deceptive’ under the CPA is the understanding that the

[defendant] misleads or misrepresents something of material importance.” Holiday Resort

Cmty. Ass’n v. Echo Lake Assocs., LLC, 134 Wn. App. 210, 226 (2006). Contract terms or

omissions can be the basis of a deceptive acts claim. Edmonds v. John L. Scott Real Estate,

Inc., 87 Wn. App. 834, 845 (1997). The test for deception is objective:“[d]eception exists ‘if

there is a representation, omission or practice that is likely to mislead’ a reasonable consumer.”

Panag v. Farmers Ins. Co., 166 Wn.2d 27, 50 (2009) (quotation omitted).

Defendants failed to disclose they had colluded with Brightstar to amend the Rules.

SAC, Exh. A. Amending the Rules required notice to members, but Defendants provided none.

Id. ¶ 6.4.1. Amending the Rules also required a two-thirds approval vote of the members, but

Defendants sought none. Id. ¶ 6.4.3. The Arcis Defendants also failed to disclose that the

Revised Rules implemented an entirely new class of golf membership, Non-Refundable

Memberships. Id. ¶ 6.4.2. They failed to disclose that the Non-Refundable Memberships would

be sold at half the price of Refundable Memberships. Id. 4.10. And they failed to disclose that

they would not refund Refundable Memberships with the sale of Non-Refundable

Memberships. See SAC ¶ 4.12 (alleging Club Operator “generate millions from the sale of





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Non-Refundable Memberships); McEntee Decl., Exh. 1 (admitting only one refund was made

of a Refundable Membership in three years). These omissions misled Plaintiffs and the Class.

Defendants’ argument that they cannot be held liable for allegations surrounding

Brightstar’s advertising and form contracts ignores a key allegation in ¶ 6.4.1—that the Arcis

Defendants amended the Rules in 2013 “without providing notice to members as required by

the Rules.” SAC ¶ 6.4.1. Under Washington law, “[t]here is in every contract an implied duty

of good faith and fair dealing” that “obligates the parties to cooperate with each other so that

each may obtain the full benefit of performance.” Rekhter v. Dep’t of Soc. & Health Servs., 180

Wn.2d 102, 112, 323 P.3d 1036 (2014) (quotation omitted). These duties obligated the Arcis

Defendants—at a minimum—to refrain from colluding with Brightstar to keep material

information from Plaintiffs and the Class. By failing to disclose they had amended the Rules

and failing to disclose the changes set forth in the May 1, 2013 Revised Rules, Defendants

deceived at least 100 Club persons on the Waiting List in violation of the CPA. SAC ¶ 5.3.

The Arcis Defendants next argue that their conduct did not have the capacity to deceive

substantial portions of the public because the rule amendments affect only current members of

the Club. This argument fails because courts have repeatedly concluded that defendants’

conduct toward current customers had the capacity to deceive substantial portions of the public.

See, e.g., Skansgaard v. Bank of Am., N.A., 896 F. Supp. 2d 944, 949 (W.D. Wash. 2011)

(denying motion to dismiss where allegations that defendants imposed forced insurance beyond

terms of plaintiff’s contract, and received monetary kick-backs in return, had capacity to

deceive substantial portion of the public); see also Riensche v. Cingular Wireless, LLC, 496 F.

App’x 760, 763 (9th Cir. 2012) (concluding “the presence of Cingular’s line-item surcharge on

customer bills had the capacity to deceive a substantial portion of the public…”).

Moreover, the cases Arcis relies upon are wholly distinguishable, each involving

isolated business dealings between parties on equal footing. See Goodyear Tire & Rubber Co.

v. Whiteman Tire Inc., 86 Wn. App. 732, (1997) (dismissing CPA claim where plaintiff was not





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an average consumer, but “an experienced businessman who had dealt with Goodyear for

years” and thus “not representative of bargainers vulnerable to exploitation”); Eye Care Ctr. of

Snohomish v. Chemat Tech., Inc., No. C12-0203-JCC, 2012 WL 12941686, at *1 (W.D. Wash.

Dec. 14, 2012) (dismissing CPA claim by small optical clinic alleging machine it bought from

defendant that applies anti-reflective coating to eyeglass lenses did not function as Plaintiff

expected); Segal Co. v. Amazon.com, 280 F. Supp. 2d 1229, 1233 (W.D. Wash. 2003)

(dismissing CPA claim where “the complaint in no way indicates that defendant's conduct

extended beyond the two parties to the alleged contract.”). In contrast to Goodyear, Eye Care

Ctr., and Segal, the conduct alleged is not isolated. Defendants continue to refuse to comply

with the 2008 Rules. Moreover, the parties never had a chance at equal footing because of

Defendants’ covert conduct, which affected, and continues to affect, at least 100 consumers.

Finally, the Arcis Defendants’ argument that its conduct was not deceptive because the

contractual language regarding the refund ratio remained at 3-1 after the Rules were amended

on May 1, 2013 misses the point. Once Defendants started selling Non-Refundable

Memberships, they stopped making refunds of Refundable Memberships altogether, so whether

the Revised Rules include a ratio of 3-1 is not relevant. Nor does the Voluntary Refund Policy

that the Arcis Defendants implemented three years after they bought the Club absolve

Defendants of liability. Although Arcis purports to make certain refunds under the Policy,

Arcis could decide it no longer wants to do so, in its sole discretion. Dkt. 11, Exh. D.

3. Plaintiffs plead sufficient facts to show injury to the public interest.

a. The CPA was amended in 2009. Public interest impact is satisfied when the alleged unfair or deceptive act “injured other persons.”

Since 2009, “[i]n a private action in which an unfair or deceptive act or practice is

alleged . . . a claimant may establish that the act or practice is injurious to the public interest

because it . . . [i]njured other persons.” RCW 19.86.093(3)(a). Plaintiffs allege Defendants’

unfair and deceptive conduct injured more than 100 persons on the Waiting List to receive

refunds. SAC ¶¶ 5.1, 6.7. The public interest element is met.





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The Arcis Defendants’ motion fails to reference RCW 19.86.093, instead citing to pre-

2009 authority. Until 2009, the statutory basis for the public interest impact element was the

CPA’s statement of legislative intent that it “not be construed to prohibit acts which . . . are not

injurious to the public interest.” Hangman Ridge, 105 Wn.2d at 788 (quoting RCW 19.86.920).

The Washington Supreme court established two multifactor tests for determining whether the

public interest impact element was satisfied, and the application of these tests “depend[ed]

upon the context in which the alleged acts were committed.” Id. at 789-90. The first applied

when “the transaction was essentially a consumer transaction,” and the second applied when

“the transaction was essentially a private dispute.” Id. at 790.6

In 2009, Washington’s legislature added a new section to the CPA, which specifically

addresses the public interest impact element. The statute now provides:

In a private action in which an unfair or deceptive act or practice is alleged under RCW 19.86.020, a claimant may establish that the act or practice is injurious to the public interest because it:

(1) Violates a statute that incorporates this chapter; (2) Violates a statute that contains a specific legislative declaration of public interest impact; or (3)(a) Injured other persons; (b) had the capacity to injure other persons; or (c) has the capacity to injure other persons.

RCW 19.86.093 (emphasis added). As of 2009, a private plaintiff may establish public interest

impact by showing that the challenged act or practice injured others. Klem, 176 Wn.2d at 804

(Madsen, C.J., concurring) (“The legislature has recently codified the requirement that the

unfair act or practice be injurious to the public interest and specifically set out how this element

may be satisfied.”) (emphasis added). Here, Plaintiffs allege that Defendants’ conduct “injured

other persons,” namely the more than 100 other persons on the Waiting List. SAC ¶ 5.3. They

have alleged sufficient facts to support public interest impact under RCW 19.86.093.

b. Plaintiffs do not complain about a “private” dispute between two parties.

A dispute between only two parties, such as “a breach of a private contract affecting no

6 The court also recognized that violation of a statute containing a specific legislative declaration of public interest impact satisfied the public interest impact element “per se.” Id. at 791.





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one but the parties to the contract[,] is not an act or practice affecting the public interest.” See

Hangman Ridge, 105 Wn.2d at 790. “However, it is the likelihood that additional plaintiffs

have been or will be injured in exactly the same fashion that changes a factual pattern from a

private dispute to one that affects the public interest.” Id.; see also Behnke v. Ahrens, 172 Wn.

App. 281, 293 (2012) (same). Whether the public interest element is ultimately satisfied is

“factual in nature.” Behnke, 172 Wn. App. at 293. Here, Plaintiffs allege that Arcis’s conduct

not only could injure others but did injure at least 100 other persons. SAC ¶ 5.3.

The Arcis Defendants rely on the unpublished Jet Parts Engineering decision to argue

that disputes involving private contracts cannot satisfy the public interest element. Jet Parts

Eng’g, Inc. v. Quest Aviation Supply, Inc., 2015 WL 4523497, at *4 (W.D. Wash. July 27,

2015). But Jet Parts Engineering is entirely distinguishable from this case. Unlike here, Jet

Parts Engineering involved a contract dispute between just two companies, id. at *1, and the

plaintiff there did not seek to represent others in a class action or allege that anyone else was

injured in the same way it was injured. Id. Indeed, Plaintiffs have been unable to identify a

single decision of a Washington court finding that the public interest impact element was not

satisfied in a proposed class action case. On the contrary, the Washington Supreme Court has

reasoned that the public interest requirement demonstrates class actions are an integral part of

the CPA’s private enforcement mechanism. See Dix v. ICT Grp., Inc., 160 Wn.2d 826, 837

(2007) (“a class action may be the only means that the public interest may be vindicated”).

Finally, there is nothing in either the plain language of the statute or Washington case

law to support the conclusion that hundreds of people who have joined a club are no longer

members of the “the public” whose interests may be considered under the CPA. Indeed, the

Washington Supreme Court has previously rejected attempts to avoid CPA liability by

mischaracterizing the challenged conduct as a “private dispute.” See Panag, 166 Wn.2d at 41

(rejecting defendant’s characterization of collection activity as a private dispute). Such a

narrow interpretation would preclude consumers who bought memberships in any club from





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satisfying the public interest element of a CPA claim and is contrary to the purpose of the CPA.

c. Public interest impact is also satisfied under the multifactor test.

This case does not involve an “essentially private” dispute. Even under that assumption,

the four-factor test for determining whether private disputes impact the public interest applied

is satisfied. The factors “indicating public interest” in the context of a private dispute are:

(1) Were the alleged acts committed in the course of the defendant’s business? (2) Did defendant advertise to the public in general? (3) Did defendant actively solicit this particular plaintiff, indicating potential solicitation of others? (4) Did plaintiff and defendant occupy unequal bargaining positions?

Hangman Ridge, 105 Wn.2d at 790. “[N]ot one of these factors is dispositive, nor is it

necessary that all be present.” Id. at 791. Instead, the factors “represent indicia of an effect on

public interest from which a trier of fact could reasonably find public interest impact.” Id.

Ultimately, as noted above, “it is the likelihood that additional plaintiffs have been or will be

injured in exactly the same fashion that changes a factual pattern from a private dispute to one

that affects the public interest.” Id. at 790.

The first factor is clearly met. Defendants acted in the course of their business when

they surreptitiously amended the rules to introduce Non-Refundable memberships and used

money from the sale of Non-Refundable memberships for other purposes than for the payment

of refunds. Those Club members paid substantial sums of money for memberships that

Defendants promised would be refunded when new memberships were sold. They also acted in

the course of their business when they made these changes without notice and approval.

The second factor is also met because the Club advertised7 to members of the public in

order to get them to join. Although some Class members joined when Brightstar owned the

Club, there is a reasonable inference from Plaintiffs’ allegation that more than 100 people are

on the Waiting List that others joined between May 2013, when Defendants colluded to

7 Plaintiffs respectfully request that the Court take judicial notice of the fact that the Club at Snoqualmie Ridge operates a website, https://www.clubatsnoqualmieridge.com/membership, through which it advertises its golf memberships and members of the public can obtain information about joining the club, including information about the Club’s non-refundable and refundable memberships. See Fed. R. Evid. 201(b).





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secretly amend the Rules, and August 2015, when the Revised Rules were disclosed.

There is nothing in the record regarding the third factor, which is therefore neutral.

Regarding the fourth factor, Defendants and the Class occupied unequal bargaining positions

because the Class did not know that Defendants had amended the Rules, and that the Revised

Rules introduced a new class of membership for sale at half the price of existing Memberships.

4. Plaintiffs plead sufficient facts to show they have been injured.

Plaintiffs must show injury to “business or property” to maintain a CPA claim. RCW

19.86.090. But the injury can be “minimal.” Panag, 166 Wn.2d at 58–59. Plaintiffs need not

prove monetary damages to show “injury”— “unquantifiable damages may suffice.” Id.

Plaintiffs plainly allege they have incurred monetary damage. Specifically, they allege

that the “Club Operator has [] generated millions from the sale of Non-Refundable

Memberships” but that it has refused “to apply revenues received from the sale of Non-

Refundable Memberships towards refunds for resigned members on the Waiting List.” SAC

¶¶ 4.12, 5.4.6. Arcis’ admissions to having increased its revenue by 2,456% in just three years,

and to having funneled $3 million into the Club, bolsters these allegations. See

https://www.arcisgolf.com/news/arcis-golf-recognized-among-inc-magazine%E2%80%99s-

fastest-growing-private-companies (last visited June 25, 2018); see also McEntee Decl, Exh. 1.

Per the 3-1 ratio set forth in the 2008 Rules, Defendants should have refunded at least $1

million to Plaintiffs and the Class. Dkt. 11, Exh. B.

Plaintiffs also plainly allege other injuries. For example, Plaintiffs have been injured by

the Arcis Defendants’ refusal to make refunds to those on the Waiting List, which has led to an

unreasonably delay in the time it would otherwise take for Plaintiffs and Class members to

receive refunds. SAC ¶ 6.7. Arcis alleges that Plaintiffs cannot show that the Revised Rules

will make Plaintiffs receive a refund “one day later than they otherwise would.” But Arcis’ own

documents contradict this statement. Based on the $39,000 price at which Defendants offered

the memberships in October 2016, Defendants should have already refunded at least 36





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Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6). See Dkt. 11, Exh. D.

Next, Plaintiffs allege that they would not have purchased Refundable Memberships

had they known Defendants would render their memberships valueless. SAC ¶ 6.8. The Arcis

Defendants argue that Plaintiffs were not injured because “any deception in the sale of their

memberships had to occur, if at all, many years before the Arcis Defendants bought the Club.”

Arcis’ argument fails because Plaintiffs do not allege deception related to the sale of their

memberships. They allege deception related to the sale to Arcis. Specifically, Plaintiffs allege

that deceptive and unfair acts occurred in May 1, 2013 when Arcis colluded with Brightstar to

amend the Rules just months before Arcis purchased the Club. SAC ¶¶ 4.8, 5.4.4, Exh. A.

Finally, the 2008 Rules allow members to resign within 60 days of the sale of the Club

and receive 100% of their refunds (rather than 70% of the listing price) if the new owner does

not honor its obligation to the members. Dkt. 11, Exh. B ¶ 3.2(b)(iii). But Defendants’ secret

revision of the Rules foreclosed Plaintiffs’ and the Class’ ability to take advantage of the 100%

refund provision. SAC ¶ 6.9. Defendants argue that Plaintiffs cannot rely on paragraph

3.2(b)(iii) because Plaintiffs Lewis, Presti, and Hart, joined the Waiting List prior to May 1,

2013, before Arcis purchased the Club. However, Plaintiff Ralls, who joined the Waiting List

in August 2013, and all other Class members who joined the Club after May 1, 2013, would

have been entitled to 100% refunds. SAC ¶ 3.4.8 Plaintiffs have sufficiently alleged injury.

5. Plaintiffs plead sufficient facts to show causation.

“Causation under the CPA is a factual question to be decided by the trier of fact.”

Deegan v. Windermere Real Estate/Ctr.-Isle, Inc., 197 Wn. App. 875, 885 (2017). In cases

involving affirmative misrepresentations, “[t]he plaintiff must establish that, but for the

defendant’s affirmative misrepresentation, the plaintiff would not have suffered an injury.” Id.

at 885-86. “But causation is different for omissions of material fact.” Id. at 886. In CPA cases

8 Arcis also argues that language in paragraph 3.2(b)(iii) authorizing the 100% refund does not apply where “the new owner agrees to take title subject to the rights of a Member under the Member’s existing Membership Agreement.” Dkt. 20 at 22:24-23:2. But which “rights” were in place when Arcis bought the Club, the June 30, 2008 Rules or the May 1, 2013 Revised Rules, is a factual question that cannot be decided at the pleading stage.





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involving omissions, courts apply a rebuttable presumption of reliance. Id. (citations omitted).

The presumption of reliance is important because a CPA claim based on an omission of

material fact puts the person seeking relief “in the impossible position of proving a negative;

that is, that they believed the opposite of the omitted fact….” Id. (citation omitted).

Defendants’ omissions caused Plaintiffs’ and the Class’ injuries. Plaintiffs allege that,

for two years, the Arcis Defendants failed to disclose that they had colluded with Brightstar to

amend the Rules, including that it had introduced Non-Refundable Memberships. Id. ¶ 6.4.2.

They failed to disclose that the Non-Refundable Memberships would be sold at half the price of

Refundable Memberships. Id. 4.10. And they failed to disclose that they would not refund

Refundable Memberships with the sale of Non-Refundable Memberships. Id. ¶ 4.12. Arcis’

omission of these material facts was likely to mislead, and did mislead, Plaintiffs and the Class.

By the time Plaintiffs filed suit, there were at least 100 others on the Waiting List for refunds

that would never come or would be unreasonably delayed.9

The Arcis Defendants ignore the presumption of reliance, and instead incorrectly argue

that Plaintiffs have failed to establish “but for” causation. Because the allegations in the SAC

and consistent “hypothetical facts” establish that Defendants omitted material facts, reliance

must be presumed and the CPA claim must go forward. Deegan, 197 Wn. App. at 890.

D. Plaintiffs sufficiently plead all elements of a conversion claim.

Conversion is defined as “the unjustified, willful interference with a chattel which

deprives a person entitled to the property of possession.” In re Marriage of Langham and

Kolde, 153 Wn.2d 553, 564 (2005) (quotation omitted). Money is treated as a chattel “if the

defendant wrongfully received the money or was under an obligation to return the specific

money to the party claiming it.” Davenport v. Wash. Educ. Ass’n, 147 Wn. App. 704, 722

(2008) (quotation omitted).

9 There is no basis in the record for the Arcis Defendants’ statement that there was a “backlog” of over 100 members on the Waiting List when Defendants amended the Rules on May 1, 2013. See Dkt. 20 at 21:19-21. Rather, Plaintiffs’ allegations and all reasonable inferences therefrom establish there were at least 100 members on the Waiting List at the time they filed suit on November 20, 2017.





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In the latter scenario—when a party is obliged to return money—“diverting a source of

funds to an unintended purpose can support a conversion claim.” Denman v. Zayo Grp., LLC,

2013 WL 3814375, *5 (July 22, 2013) (allegation that plaintiff approved an audit and extended

healthcare benefits without approval sufficient for conversion counterclaim to survive motion

to dismiss); see also Maynard Inv. Co. v. McCann, 77 Wn.2d 616, 624 (1970) (contractor

committed conversion when he used funds provided to pay for labor to repay creditors instead);

Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n, 133 Wn. App. 835, 851 (2006) (allegation that

bank improperly used funds held in trust sufficient for conversion claim to survive).

Here, Plaintiffs allege that Defendants were obliged to refund one Refundable

Membership for every third membership sold. Instead, they diverted the funds received from

the sale of Non-Refundable Memberships without making the required refunds, under the guise

of “prudent management.” McEntee Decl., Exh. 1. Arcis admits that this tactic made it possible

for Arcis to sink over $3 million into the Club over three short years. Id. Moreover, the funds

the Arcis Defendants diverted are identifiable. Although Plaintiffs will obtain exact numbers

through formal discovery, under the 3-1 ratio described in the 2008 Rules, Defendants should

have refunded at least $1 million to Plaintiffs and the Class. Based on the $39,000 price at

which Defendants offered the memberships in October 2016 (Dkt. 11, Exh. D), Defendants

should have refunded at least 36 Refundable Memberships ($1,000,000/(.7 x $39,000) = 36.6).

The Arcis Defendants argue that Plaintiffs’ conversion claim is based on their initial

payments of membership fees to become members of the Club. But Plaintiffs have never

suggested that Defendants (or anyone else) converted their funds at the time they became Club

members. The conversion occurred only after the Arcis Defendants unilaterally decided they

would funnel the money they received from the sales of Non-Refundable Memberships into the

Club rather than paying refunds to Plaintiffs and Class members on the Waiting List.

Finally, the Arcis Defendants’ reliance on Gremp v. Ramsey, No. C08-558RSM, 2009

WL 112674, at *9 (W.D. Wash. Jan. 14, 2009) is misplaced. Gremp was a fraudulent transfer





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case where Plaintiffs’ allegations centered on the failure of a debtor to pay on a promissory

note following an asset transfer. Unlike Arcis’ express agreement to assume Brightstar’s

obligations related to the Waiting List and Refundable Memberships, the purchasing entity in

Gremp did not assume the former entity’s liabilities. As a result, the plaintiffs could not show

that the transferred money belonged to them. In addition, the plaintiffs’ theory went too far; it

“would fundamentally alter the structure of creditor and debtor rights,” allowing creditors to

bring claims of conversion against any recipient of any transfer of a debtor’s funds, and any

subsequent transferee of that money, regardless of its source. Gremp, 2009 WL 112674, at *9.

Here, in contrast, Plaintiffs ask only that Defendants return their wrongfully diverted funds.10

Because Plaintiffs’ claim is undoubtedly supported by sufficient facts to state a claim

for conversion against Defendants, the motion should be denied.

E. Plaintiffs plead sufficient facts to support piercing the corporate veil.

“Where a private person so dominates and controls a corporation that such corporation

is his alter ego, a court is justified in piercing the veil of corporate entity and holding that the

corporation and private person are one and the same.” Pohlman Inv. Co. v. Va. City Gold

Mining Co., 184 Wash. 273, 283 (1935). “[W]hen the corporation has been intentionally used

to violate or evade a duty owed to another,” courts may disregard the corporate entity. Morgan

v. Burks, 93 Wn.2d 580, 585 (1980) (citation omitted). Plaintiffs allege that Mr. Walker

“intentionally used [the Arcis] entities to violate or evade a duty owed to the members.” SAC ¶

3.8. The limited liability form should be disregarded and liability attached to Mr. Walker and

the other Arcis Defendants. Id.

The Arcis Defendants argue that Plaintiffs’ corporate disregard theory fails because

there are no facts “suggesting Mr. Walker was a party to any contract they entered, or agreed

10 The Arcis Defendants’ reliance on First Glob. Commc’ns, Inc. v. Bond, No. C05-749P, 2006 WL 231634, at *5 (W.D. Wash. Jan. 27, 2006) is also misplaced. There, “Defendants [did] not allege that Plaintiff wrongfully received any money.” Likewise, the Arcis Defendants improperly compare Plaintiffs’ allegations to an “unsecure debt” and argue their claims are barred by Davenport v. Washington Educ. Ass’n, 147 Wn. App. 704, 722, 197 P.3d 686, 695 (2008), but fail to note that the claim in Davenport was dismissed because a statute expressly authorized the defendant to keep the money at issue. Id. Defendants make no such claim here. Nor can they.





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personally to assume any liability of any entity.” Mr. Walker’s contractual obligations, or lack

thereof, are beside the point. Relevant here are Plaintiffs’ allegations of fraud. The Arcis and

Brightstar Defendants secretly colluded to revise the Rules before Arcis purchased the Club.

SAC ¶ 4.8. Arcis’ involvement is evident from the face of the Revised Rules, which bears

Arcis’ name. SAC, Exh. A. It is reasonable to infer that Blake Walker directed this fraud

because he admits “he has been involved in all phases of the firm’s strategy and development

since its founding.” SAC ¶ 3.8. And, “in September 2016, Mr. Walker personally traveled to

Washington from Texas to meet with Club members who were angry about the changes the

Arcis Defendants made to the refund policy.” Id. In colluding with Brightstar to implement the

Revised Rules before the sale, Mr. Walker and the other Arcis Defendants evaded their duties

to Plaintiffs and the Class under the pre-May 2013 Rules. See Johnson v. Marriott Int’l Inc.,

No. C16-1875 RSM, 2017 WL 1957071, * 5 (May 11, 2017) (denying motion to dismiss alter

ego theory where plaintiff alleged defendant used its name and reputation to send customers to

subsidiary’s hotels and attempted to avoid liability).

Finally, the Arcis Defendants cite Morgan, supra in support of their argument that “CF

Arcis VII retains ample assets to satisfy any judgment” and thus disregarding the corporate

form is not “necessary and required to prevent unjustified loss.” Dkt. 20 at 30. But Plaintiffs are

not required to prove that CF Arcis VII would be unable to sustain a judgment to state a claim

for corporate disregard. See Gremp, 2009 WL 112674, at *8 (denying motion to dismiss alter

ego theory). In Gremp, defendants relied on Morgan to argue that plaintiffs’ piercing claim was

improper because the plaintiffs had “other remedies available to them.” Id. The court rejected

the argument, holding that plaintiff does not lose the ability to assert liability against an

individual under the doctrine of piercing the corporate veil simply because another similar

claim is being brought. Rather, the doctrine is invoked “ ‘to prevent unjustified loss to the

injured party.’ ” Gremp, 2009 WL 112674, at *8) (citing Morgan, 93 Wn.2d at 587). Plaintiffs’

allegations properly invoke the corporate disregard doctrine; the motion should be denied.





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IV. CONCLUSION

The Second Amended Complaint states plausible claims for relief under the CPA, for

breach of contract, and conversion. The Arcis Defendants’ efforts to resolve the claims on their

merits is improper at this stage. Plaintiffs are entitled to proceed with discovery and prove their

claims at trial. Accordingly, Plaintiffs respectfully ask the Court to deny the motion to dismiss.

RESPECTFULLY SUBMITTED AND DATED this 29th day of June, 2018.

TERRELL MARSHALL LAW GROUP PLLC By: /s/ Adrienne D. McEntee, WSBA #34061

Beth E. Terrell, WSBA #26759 Email: [email protected] Adrienne D. McEntee, WSBA #34061 Email: [email protected] 936 North 34th Street, Suite 300 Seattle, Washington 98103 Telephone: (206) 816-6603 Facsimile: (206) 319-5450

Attorneys for Plaintiffs and the Proposed Class





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CERTIFICATE OF SERVICE

I, Adrienne D. McEntee, hereby certify that on June 29, 2018, I electronically filed the

foregoing with the Clerk of the Court using the CM/ECF system which will send notification of

such filing to the following: Stephen M. Rummage, WSBA #11168 Email: [email protected] Rebecca J. Francis, WSBA #41196 Email: [email protected] DAVIS WRIGHT TREMAINE LLP 1201 Third Avenue, Suite 2200 Seattle, Washington 98101 Attorneys for Defendants

DATED this 29th day of June, 2018.

TERRELL MARSHALL LAW GROUP PLLC By: /s/ Adrienne D. McEntee, WSBA #34061`

Adrienne D. McEntee, WSBA #34061 Email: [email protected] 936 North 34th Street, Suite 300 Seattle, Washington 98103 Telephone: (206) 816-6603 Facsimile: (206) 319-5450

Attorneys for Plaintiffs


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