In re:

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE
Chapter 11
Cordillera Golf Club, LLC, Case No.: 12-11893 (CSS)
dba The Club at Cordillera.
Debtor.
Related Docket No.8, 51
Hearing Date: July 27, 2012 at 1 p.m. ET
Objection Deadline: July 13, 2012
OBJECTION OF CORDILLERA METROPOLITAN DISTRICT AND CORDILLERA
PROPERTY OWNERS ASSOCIATION, INC. TO DEBTOR'S MOTION FOR AN
ORDER PURSUANT TO 105 AND 363 OF THE BANKRUPTCY CODE AND
BANKRUPTCY RULE 6003, AUTHORIZING AND APPROVING (I) THE DEBTOR'S
DESIGNATION OF ALFRED H. SIEGEL AS CHIEF RESTRUCTURING OFFICER,
AND (II) RETENTION AND EMPLOYMENT OF CROWE HORWATH, LLC, NUNC
PRO TUNC TO THE PETITION DATE
Cordillera Metropolitan District (the "District") and Cordillera Property Owners
Association, Inc. (the "CPOA"), by their attorneys, Sherman & Howard L.L.C. and Ashby &
Geddes, object (the "Objection") to the Debtor's Motion for an Order Pursuant to 105 and
363 of the Bankruptcy Code and Bankruptcy Rule 6003, Authorizing and Approving (I) the
Debtor's Designation of Alfred H. Siegel as Chief Restructuring Officer, and (II) Retention and
Employment of Crowe Horwath, LLC, nunc pro tunc to the Petition Date (the "CRO Motion").
In support of their objection, the District and the CPOA respectfully state:
SUMMARY
1. Appointing a ChiefRestructuring Officer ("CRO") is an unnecessary expense
because the Debtor already has an unusually large number of advisors, particularly for a case
such as this.
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2. This CRO will not be able to perform the essential duty proposed for him by
Debtor - acting as a mediator and neutral party - because the terms of the proposed engagement
give the Debtor's principal total control over this CRO.
3. The contempt hearing scheduled for July 20, 2012 in the State Court class action
in Colorado is likely to provide important findings relating to the extent to which this Court
should defer to Debtor's business judgment.
4. Misconduct by Debtor's management, which will likely be among the subjects
addressed by the Court at the July 20, 2012, State Court contempt hearing, may form part of the
basis for appointment of a chapter 11 trustee. Appointment of a trustee would render the CRO
redundant.
DEBTOR HAS TOO MANY EXPERT ADVISORS AND THIS ONE WILL NOT BE
ABLE TO PERFORM THE PROPOSED TASK
5. Debtor has a Chief Executive Officer, a Chief Financial Officer and seeks to
retain "an experienced real estate consultant with significant experience in the golf and
hospitality industries" (Declaration of Daniel L. Fitchett, Jr. In Support of Chapter 11 Petitions
and First Day Relief, Dkt 2, ,-r,-r 1, 20 and 43). There is no need for an additional outside expert in
this case, and the expense is unjustified.
6. In addition, Debtor has disabled its proposed CRO from performing the single
"critical" task Debtor has identified for the CRO. Debtor's professed reason for having a CRO is
to provide "independent direction and oversight to this Debtor, generally, and to the proposed
sale of all or substantially all of the Debtor's assets specifically." (CRO Motion, ,-r 6) The CRO
Motion goes on to describe the proposed CRO's qualifications, including independence and
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disinterestedness. This "independent direction and oversight" is, however, an illusion; this is a
pattern the Club Members have come to expect from this Debtor.
7. The June 22, 2012 Engagement Letter attached to the CRO Motion as Exhibit B
states that the CRO "shall serve at the direction of and report to [Debtor's] sole managing
member," who is David Wilhelm. The Engagement Letter goes on to state that "with respect to
CGC, however, the CRO and Crowe Partners and Representatives working on this engagement
will operate under and pursuant to the direction of CGC's Manager." As discussed below, Mr.
Wilhelm is among the parties to the litigation pending in Colorado State Court, which will
consider whether Mr. Wilhelm violated a temporary restraining order that prohibits him from
diverting funds of the Debtor into his pocket. It is apparent that the "independent" CRO is
nothing of the sort.
8. Few of the unhappy members of the Cordillera Golf Club, LLC, will accept the
CRO as independent but will, instead, view his professed "independent direction and oversight"
as yet another subterfuge of this Debtor.
THE COURT SHOULD NOT DEFER TO THIS DEBTOR'S BUSINESS JUDGMENT
9. The CRO Motion argues that Debtor's request to hire a CRO is entitled to
deference as an exercise of the Debtor's "business judgment." This is not a case where such
deference is appropriate.
10. The district court judge for the Eagle County, Colorado District Court has now
been dealing with the parties in this case for more than a year. That Court entered, on January
20, 2012, the Order For Issuance of Contempt Citation attached as Exhibit A (the "Contempt
Order") to determine whether Debtor and its management, specifically including David Wilhelm,
{00650864;vl }3
violated a State Court Temporary Restraining Order prohibiting use of Debtor funds for anything
other than "necessary maintenance and operation[ s ]", by instead diverting funds to pay
themselves management fees, severance payments, and interest, and to pay legal fees for cases
they brought against Club members.
11. A hearing on that Contempt Order is now set for July 20, 2012.
1
The results of
that hearing could cast significant doubt on the extent to which the management of this Debtor is
entitled to deference for showing "good business judgment."
12. Instances of misconduct by management of this Debtor that are now set for trial
on July 20, 2012 in Eagle county, Colorado District Court may also be part of the justification
for appointment of a chapter 11 trustee pursuant to 11 U.S.C. 1104. If a chapter 11 trustee is
appointed, a CRO would be superfluous and expenditures to inform that CRO about the Debtor
would be unnecessary and of no benefit to the bankruptcy estate.
CONCLUSION
13. The CRO Motion should be denied.
WHEREFORE, the District and the CPOA request the court to deny approval of the CRO
Motion and enter such other and further relief as may be appropriate.
1
The contempt hearing was originally set for April 11, 2012, but had to be vacated when the Defendants, twenty
days after entry of the Contempt Order, removed the case to the United States District Court for the District of
Colorado. The Federal District Judge to whom the case was assigned sua sponte issued his Order to Show Cause As
to Why the Court Should Not Decline to Exercise Jurisdiction Over this Matter and then, after briefing, his April 5,
2011 Order Making Order to Show Cause Absolute, Declining Jurisdiction Over This Action and Remanding to
Eagle County District Court, attached as Exhibit B. Five days later in a telephone status conference the Eagle
County District Court reset the Contempt Hearing for July 20, 2012 and approved issuance of alias contempt
citations.
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July 13, 2012
iliialllP.J30Wd
Ricardo Palacio (#3765)
500 Delaware A venue, 8th Floor
P.O. Box 1150
Wilmington, DE 19899
Phone: 302-654-1888
Fax: 302-654-2067
E-Mail : Wbowden@ashby-geddes.com
rpalacio@ashby-geddes.com
and
SHERMAN & HOWARD L.L.C.
Peter A. Cal
Mark L. Fulford
633 17th Street, Suite 3000
Denver, CO 80202
Phone: 303-297-2900
Fax: 303-298-0940
E-Mail: pcal@shermanhoward.com
mfulford@shermanhoward.com
ATTORNEYS FOR CORDILLERA
PROPERTY OWNERS ASSOCIATION,
INC. AND CORDILLERA
METROPOLITAN DISTRICT
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EXHIBIT A
{00138624;vl }
GRANTED
The DlCJY:Ine party f1 hereby ORDERED
to provide a copy of thi1 Order to any pl:'o
1e pardel who have enten=d an
appearance .Ill W action wJthJillO days
rrom me date ofthtt order.
District Court, Eagle County, Colorado
P. 0. Box597, Eagle, Colorado 81631
PJ.amti:ffs:
CHERYL M. FOLEY, THOMAS WILNER. JANE WILNER,
CHARLES JACKSON, MARY JACKSON and KEVIN B.
ALLEN individually and on behalf of all others similarly
situated,
Defendants:
CORDILLERA GOLF CLUB, LLC, a Delaware limited
liability company; WFP CORDILLERA, LLC, a Delaware
limited liability company; DAVID A. WILHELM,
individually; and PATRICK WILHELM, individually
v.
Intervenor-Defendant/Counterclaimant and
Cross-Claimant:
ALPINE BANK
Attorney for Plaintiffs
Brett Steven Heckman
HECKMAN & O'CONNOR, P.C.
P.O. Box726
Edwards, Colorado 81632
Tel.: (970) 926-5991
Fax: (970) 926-S99S
.Re . No. 15330
Frederick W. Gannett
District Court Judge
-...D."'-U<JCJJ<.nR It IN IC'.ATEDON A1TACHMENT
t
COURT USE ONLY
Case Number: 2011CVSS2
Div./Ctrm.:
ORDER FOR ISSUANCE OF CONTEMPT CITATION
IT IS SATISFACTORU.,Y APPEARING TO THE COURT that sufficient grounds
exist for an Order to issue to defendants David A. Wilhelm, Cordillera Golf Club, LLC and
Wilhelm Family Partnership, LLC directing them to appear before this Court and show cause
why they should not be fmed and/or imprisoned for contempt of Col.llt for violating the
Amended Temporary Restraining Order entered by the Court on June 24, 2011 by making
certain prohlbited payments.
IT IS SO ORDERED by the Court that the Clerk of the Eagle County District Court shall
issue Citations directed to David A. Willlelm, Cordillera Golf Club, LLC and Wilhelm Family
LLC on the grounds alleged to this Court, to appear before this Court on
\\ , 2012 at the hourofq o.m., and show cause why they or any of them
shoUld not be punished for the contempt and neglect in refusing to com-ply with the Order of this
Court entered on June 24, 2011.
IT IS FURTHER ORDERED that the Contempt Citation may be served by the Sheriff
or a private process server and that whomever serves the Citation will .file a return of service
with this Court.
DONE AND ENTERED THIS
DAYOF _______ ,2011.
BYTHECOURT
District Court Judge
EXHIBITB
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..
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martinez
Civil Action No. 12-cv-0351-WJM-KMT
CHERYL M. FOLEY,
THOMAS WILNER,
JANE WILNER,
CHARLES JACKSON,
MARY JACKSON, and
KEVIN B. ALLEN, on behalf of themselves and all others similarly situated,
Plaintiffs,
v.
CORDILLERA GOLF CLUB, LLC, a Delaware limited liability company,
CORDILLERA GOLF HOLDINGS, LLC, a Delaware limited liability company
CORDILLERA F&B, LLC, a Delaware limited liability company,
CGH MANGER, LLC, a Delaware limited liability company,
DAVID A. WILHELM, and
PATRICK WILHELM,
Defendants.
v.
ALPINE BANK, a/n/a Counterclaimant and Cross-Claimant,
Intervenor Defendant
ORDER MAKING ORDER TO SHOW CAUSE ABSOLUTE,
DECLINING JURISDICTION OVER THIS ACTION AND
REMANDING TO EAGLE COUNTY DISTRICT COURT
On February 9, 2012, Defendants filed a Notice of Removal alleging that this
Court has jurisdiction over the action under the Class Action Fairness
Act ("CAFA"), 28 U.S.C. 1332(d) & 1453. (ECF No. 1 .) Exercising its duty to
EXHIBITS
Case Document 61 Filed 04/05/12 USDC Colorado Page 2 of 15
independently monitor its subject matter jurisdiction, see Daigle v. Shell Oil Co., 972
F.22d 1527, 1539 (10th Cir. 1992) (court has duty to ensure "even sua sponte that we
have subject matter jurisdiction before considering a case"), the Court issued an Order
to Show Cause on February 16, 2012. (ECF No. 10.) The Court ordered the parties to
show cause as to why it should not decline jurisdiction over this matter pursuant to 28
U.S. C. 1332(d)(3) or (4). (/d. at 2.)
Before the Court are the parties' responses to the Order to Show Cause. (ECF
Nos. 43, 47, 54, 55, & 58.) For the reasons set forth below, the Court makes the Order
to Show Cause absolute, declines to exercise jurisdiction over this matter, and remands
this case to Eagle County District Court.
I. LEGAL STANDARD
A party invoking the jurisdiction of the federal court has the initial burden of
establishing that the Court has original jurisdiction over the matter. See Merida
Delgado v. Gonzales, 428 F.3d 916, 919 (10th Cir. 2005) ("Because the jurisdiction of
federal courts is limited, there is a presumption against our jurisdiction, and the party
invoking federal jurisdiction bears the burden of proof."). Once original jurisdiction is
established, the party seeking in to invoke one of CAFA's exceptions bears the burden
of showing that such exception applies. Coffey v. Freeport McMoran Copper & Gofd,
581 F.3d 1240, 1243 (10th Cir. 2009); see also Serrano v. 180 Connect, Inc., 478 F.3d
1018, 1022 (9th Cir. 2007) (noting that the "party seeking remand bears the burden to
prove an exception to CAFA's jurisdiction"); Evans v. Walter Industries, fnc., 49 F.3d
2
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1159, 1164 (11th Cir. 2006) ("[W]hen a party seeks to avail itself of an express statutory
exception to federal jurisdiction granted under CAFA, as in this case, we hold that the
party seeking remand bears the burden of proof with regard to that exception."); Seat v.
Farmers Group, Inc., No. CIV-06-0309-F, 2006 WL 1285084, at *2 (W.D. Okla. May 5,
2006) ("[U]nder [Section 1332( d)(3) or Section 1332( d)(4 )] plaintiff has the burden to
demonstrate that the criteria of those statutes are met before either of those exceptions
to the court's exercise of federal jurisdiction can apply.").
II. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are members of The Club at Cordillera ("Club"), a property located in
Eagle County, Colorado comprised of four golf courses, tennis courts, restaurants, and
other related amenities. (Third Amended Complaint (ECF No. 3).) Approximately 160
of the Plaintiffs paid an additional deposit to become Premier Members of the Club. (/d.
~ 24.) Defendants are entities and individuals that have various ownership interests in
and/or management responsibilities for the Club. (/d.)
In early 2011, Defendants informed the Club members that all facilities would be
open and operating for the 2011 season. (/d. ft 25-32.) After these representations
were made, Plaintiffs paid membership dues for 2011 which totaled in excess of
$8,000,000. Defendants then informed the Club members that only one golf course
would be open and other amenities would be significantly curtailed in an effort to save
money. ( / d . ~ 35.}
3
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In June 2011, Plaintiffs filed the instant action In Eagle County District Court
alleging that Defendants breached their membership agreements, fraudulently induced
Plaintiffs Into paying 2011 dues, and misused the funds that were intended to operate
the Club. (ld. at 2-8.) The Eagle County District Court was actively managing this
litigation and other related cases. (ECF No. 1.) It had certified the following class
("Class"}: "All members of the Club at Cordillera ('the Club') who paid membership
deposits upon joining the Club and who also paid their 2011 annual dues. The Class
includes a Sub-Class, defined as follows: All members of the Club at Cordillera who
paid a $30,000 deposit to convert their membership to 'Premier' membership." (ECF
No. 47-4.) The parties were in the process of exchanging information so that the Class
could be notified of this action when it was removed by Defendants on February 9,
2012. (ECF No. 47.)
The Court ordered the parties to show cause as to why it should not decline to
exercise jurisdiction over this matter pursuant to the exceptions outlined in CAFA. {ECF
No. 10.) The parties filed simultaneous briefs on March 8, 2012. (ECF Nos. 43 & 47.)
Because it was clear that the parties did not analyze the statistical data with respect to
the residency of the Class Members in the same way, the Court ordered the parties to
provide the raw data upon which their analysis was based. (ECF No. 45.) The parties'
response briefs were filed on March 22, 2012, along with this raw data. (ECF Nos. 54 &
55.) Both parties also submitted electronic spreadsheets to the Court. Plaintiffs were
granted to leave to file supplemental data on March 29, 2012. (ECF No. 58.) In making
4
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the specific factual findings set forth below, the Court has carefully examined and
analyzed all of the data submitted by all of the parties.
Ill. ANALYSIS
Enacted in 2005, the Class Action Fairness Act ("CAFA") was intended to
"restore the intent of the framers of the United States Constitution by providing for
Federal court consideration of interstate cases of national importance under diversity
jurisdiction." Pub.L. 109-2, 2, 119 Stat. 4, 5 (2005). CAFA authorizes a federal court
to entertain a class action with 100 or more class members, minimal diversity between
the parties, and an amount in controversy of at least $5,000,000. 28 U.S.C. 1332(d).
However, ''the diversity jurisdiction authorized in these new provisions is not absolute,"
and there are two important exceptions written into the statute. 7 A Wright, Miller &
Kane, Federal Practice and Procedure 1756.2 (2009). The circumstances under
which a district court must decline jurisdiction under CAFA-the so-called "mandatory
exceptlon"-are outlined in 1332(d)(4). Wright & Miller summarizes that analysis as
follows:
/d.
[T]he court must decline jurisdiction over a class action when
greater than two-thirds of the plaintiff class members are
citizens of the state where the action was originally filed,
when at least one defendant from whom significant relief is
sought and whose conduct forms a significant basis for the
class claims is a citizen of the filing state and the principal
injuries or any related conduct of each defendant occurred in
the original filing state, and when no other similar class
action against any of the defendants has been filed during
the 3-year period prior to the instant class action.
5
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The "discretionary exception" is set forth in 1332(d)(3), which states that a
"district court may, in the interests of justice, and looking at the totality of the
circumstances, decline to exercise jurisdiction under (CAFA] in which greater than
one-third but less than two-thirds of the members of all proposed plaintiff classes in the
aggregate and the primary defendants are citizens of the State in which the action was
originally filed." 28 U.S. C. 1332{d){3).
A. Prerequisites for CAFA Jurisdiction
In making a determination of its subject matter jurisdiction over a matter brought
pursuant to CAFA, the Court must first "assess the three prerequisites for CAFA
jurisdiction." Blockbuster, Inc. v. Galeno, 472 F.3d 53,57 (2d Cir. 2006). The three
prerequisites are: (1) minimal diversity between plaintiffs and defendants; (2) at least
100 plaintiffs in the class; and (3) an amount in controversy that exceeds $5,000,000.
28 U.S.C. 1332(d).
Removal statutes are to be construed narrowly. See Martin v. Franklin Capital
Corp., 251 F.3d 1284, 1289 (1Oth Cir. 2001 ). The party invoking jurisdiction of the
federal court has the burden of establishing such jurisdiction. Laughlin v. Kmart Corp.,
50 F.3d 871,873 (10th Cir. 1995). The facts necessary to show jurisdiction must
appear in the notice of removal or the complaint.
1
ld.
, Plaintiffs allege that the Court cannot look outside of the Notice of Removal to
determine if jurisdiction has been established. (ECF No. 47 at 10-11.) However, this argument
is contrary to Tenth Circuit precedent. Sse Laughlin, 50 F.3d at873 (looking at notice of
removal and allegations in complaint to determine if the amount in controversy was sufficient to
invoke federal jurisdiction).
6
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In this case, it is undisputed that the Notice of Removal did not specify that there
were more than 100 Plaintiffs in the Class. However, the Third Amended Complaint
states that the case is brought on behalf of Members that paid their 2011 dues and that
"approximately 586 other Club Members paid their 2011 annual dues." (ECF No. 3 ~
32.) Additionally, the Third Amended Complaint states that it is brought on behalf of the
Premier Members and that there are "approximately 160 Premier Members." ( / d . ~ 24.)
The Notice of Removal plainly alleges that there is minimal diversity between the
parties and that the amount in controversy exceeds $5,000,000. (ECF No. 1 at 2.) The
Third Amended Complaint contains sufficient allegations to satisfy Defendants' burden
of showing that there are more than 100 Plaintiffs in the Class. (ECF No.3 mf 24 & 32.)
Therefore, Defendants have met their burden of showing that the Court has original
jurisdiction over this matter. See 28 U.S.C. 1332(d).
B. Percentage of Putative Class that are Domiciled in Colorado
Whether the mandatory or discretionary provisions of CAFA apply depends on
the percentage of members of the Class that are residents of the state where the action
was originally filed-in this case, Colorado. See 28 U.S.C. 1332(d)(3) & (4). The
parties here agree that less than two-thirds of the Class are residents of Colorado.
Therefore, the mandatory exception set forth in 1332(d}(4) does not apply.
The parties disagree with respect to whether more than one-third of the Class
members are residents of Colorado so as to invoke the discretionary exception of
1332(d)(3). Defendants conclude that approximately 28-29% of the class resides in
7
Case Document 61 Filed 04/05/12 USDC Colorado Page 8 of 15
Colorado while Plaintiffs conclude that nearly 36% of the class resides in Colorado.
(ECF Nos. 54 & 55.) The basis for the disagreement between the parties arises from
two differences in their analysis: (1) which Club Members should be counted in the
Class; and (2) the residency of certain Class Members.
Which Club members constitute the Class is governed by the definition of the
Class certified by the Eagle County District Court. See 28 U .S.C. 1332(d)(1 )(D)
(defining "class members" for purposes of CAFA as those persons "who fall within the
definition of the proposed or certified class."). Before this action was removed, the
state court conditionally certified the following classes:
a. Class: "All members of the Club at Cordillera ('Club') who paid membership
deposits upon joining the Club and who also paid their 2011 annual dues."
b. Subclass: "All members of the Club at Cordillera who paid a $30,000 deposit to
convert their membership to 'Premier' membership."
(ECF No. 47-4.) Based on this class definition, the Court does not count the following
as members of the Class: (1) members who did not pay a deposit upon joining the
Club; (2) members who did not pay 2011 annual dues because they were waived or
otherwise; (3) employees of the club who have no dues obligation; and (4) honorary
members who do not have an obligation to pay annual dues. The Court does include
those members who paid their 2011 annual dues and then obtained a chargeback or
8
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other refund.
2
With these parameters, the Court finds that the Class contains 621 Club
members.
3
The parties also dispute the citizenship of many of the Class members.
Generally, a natural person is a citizen of the state in which he or she is domiciled, not
merely where he or she resides. See Smith v. Cummings, 445 F.3d 1254, 1259 (10th
Cir.2006). "To establish domicile in a particular state, a person must be physically
present In the state and intend to remain there." /d. at 1260. Courts often consult
various factors when ascertaining a party's domicile including: "the party's current
residence; voter registration and voting practices; situs of personal and real property;
location of brokerage and bank accounts; membership in unions, fraternal
organizations, churches, clubs, and other associations; place of employment or
business; driver's license and automobile registration; payment of taxes; as well as
several other aspects of human life and activity." 13E Charles Wright, Arthur Miller &
Edward Cooper, Federal Practice and Procedure 3612 (2009).
At the Court's request, Defendants provided the raw data upon which It based its
residency findings. (ECF No. 55, ex. 1.) Defendants' Exhibit I primarily consists of
information sheets and correspondence from the Members' files. (/d.} Because there
2
In determining each member's pay status, the Court relied solely on Defendants'
representations as to whether dues were paid by a member. Plaintiffs offered no evidence
rebutting Defendants' categorization of the pay status of each member.
3
The Court counts each membership as one Class member. Memberships that list
more than one individual as authorized users of the membership were not counted more than
once.
9
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has been limited discovery thus far in the case, Plaintiffs state that their categorization
of each Members' residency is based on the information provided by Defendants. (ECF
No. 54-2, 6; 58 at 2.) However, Plaintiffs have also presented verified voter
registration data showing that a number of the Members that Defendants identified as
living outside of Colorado were registered to vote in Eagle County, Colorado. (ECF
Nos. 544 & 58-2.) The materials contained in Defendants' Exhibit I and the voter
registration records provided by Plaintiffs are the only evidence regarding the Members'
domicile in the record at this time.
The relevant time for determining the domicile of each Class member is at the
time of removal. Howery v. Allstate Ins. Co., 243 F.3d 912, 915 (5th Cir. 2001 );
Kanzelberger v. Kanzelberger, 782 F.2d 774, 776 (7th Cir. 1986). Much of the
information contained in Defendants' Exhibit I is undated or many years old. The voter
registration records filed by Plaintiffs are from approximately one month after the Notice
of Removal was filed. Because the voter registration records are significantly closer to
the relevant time for determining domicile, the Court credits the voter registration
records over the residency data contained in Exhibit I. Therefore, the Court finds that
the Class members on the voter registration lists are domiciled in Colorado.
There are a number of memberships that are held by entities rather than
individuals. Plaintiffs categorize these memberships as domiciled in the state in which
the holding entity is incorporated or otherwise based. (ECF No. 54-1.) Defendants
categorize these memberships by the state in which the individuals that are named on
10
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the membership accounts are domiciled. (ECF No. 55-29.) Plaintiffs' claims in this
case are essentially contract claims. (See ECF No.3.) If these memberships are held
by entities, the contracts at issue here are between Defendants and those entities.
Therefore, the Court finds that the memberships held by entities should be counted as
domiciled in the state in which the entity is domiciled, regardless of the residency of the
authorized users on that membership.
Section 1332(d)(3) is invoked if more than 207 of the 621 Class members are
Colorado citizens. With the parameters set forth above, the Court finds that more than
215 of the Class members are citizens of Colorado. Therefore. CAFA's discretionary
exception applies here and the Court must consider the remaining factors outlined in
Section 1332(d)(3).
C. Whether to Exercise Section 1332(d)(3)'s Discretionary Jurisdiction.
In deciding whether to exercise its discretionary jurisdiction pursuant to 28 U.S.C.
1332(d)(3), the Court must consider the following factors:
(A) whether the claims asserted involve matters of
national or interstate interest;
(B) whether the claims asserted will be govemed by laws
of the State in Which the action was originally filed or
by the laws of other States;
(C) whether the class action has been pleaded in a
manner that seeks to avoid Federal jurisdiction;
(D) whether the action was brought in a forum with a
distinct nexus with the class members, the alleged
harm, or the defendants;
(E) whether the number of citizens of the State in which
the action was originally filed in all proposed plaintiff
classes in the aggregate is substantially larger than
the number of citizens from any other State, and the
11
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citizenship of the other members of the proposed
class is dispersed among a substantial number of
States; and
(F) whether, during the 3-year period preceding the filing
of that class action, 1 or more other class actions
asserting the same or similar claims on behalf of the
same or other persons have been filed.
The Court will discuss each of these factors in turn below.
4
This case involves the operation of recreational facilities that are located in Eagle
County, Colorado. (ECF No.3.) The claims at issue here are essentially contract
claims and nothing suggests that they implicate federal or interstate concems. This
weighs in favor of declining to exercise jurisdiction over this case.
The Third Amended Complaint brings no federal claims; all claims alleged will be
governed by state law. (ECF No.3.} Because the recreational facilities at issue here
are located in Colorado and the contracts were most likely executed in Colorado,
Colorado would likely be the state with the most significant relationship to the contracts.
See Wood Bros. Homes, Inc. v. Walker Adjustment Bureau, 601 P.2d 1369, 1372
(Colo. 1979) {citing Restatement 2nd of Contracts 188(2}). Therefore, Colorado law
would likely govern Plaintiffs' claims. See id. at 1372 (courts should apply the law of the
state that has the "most significant relationship" to the issue when determining contract
claims). Additionally, the contract related to the Premier Members-who make up the
subclass-explicitly provides that Colorado law shall apply to any dispute. (ECF No.
4
The Court notes that Defendants appear to concede that, if more than one-third of
the putative class is domiciled in Colorado, the Section 1332(d}(3) factors weigh in favor of
declining to exercise jurisdiction. (ECF No. 55 at 5 (declining to address factors based on their
contention that less than one-third of the class is domidled in Colorado).)
12
Case 1:12-cv-00351-WJM-KMT Document 61 Filed 04/05/12 USDC Colorado Page 13 of 15
47-5 at 12.) Thus, this factor also weighs in favor of this federal court declining to
exercise jurisdiction over this matter.
The Court does not find that Plaintiffs pled their case in a manner that seeks to
avoid federal jurisdiction. (ECF No. 3.) Plaintiffs allege that there are over 100
members in the putative class, that there is minimal diversity between the parties, and
that the amount in controversy exceeds $5,000,000. {/d.) The Court finds that this
weighs in favor of exercising its jurisdiction over this case.
This action was originally filed in Eagle County District Court, the jurisdiction
where the property at issue here is located and where Defendants have their principal
place of business. Most, if not all, Plaintiffs own or owned property in Eagle County
near the Club's recreational facilities. (ECF No. 55-1-55-28.) Thus, there is a clear
nexus between Plaintiffs' chosen forum and the parties and events at issue here. This
factor weighs heavily in favor of declining to exercise jurisdiction over this matter.
The Plaintiffs are citizens in thirty-seven states and a number of foreign
countries. (ECF No. 55-30.) However, as discussed above, more than 215 of the
Class members are Colorado residents. The state with the next highest number of
Class members-Texas-has only about half as many as Colorado. Thus, this factor
also weighs in favor of the Court dedining to exercise jurisdiction over this matter.
Finally, Defendants filed a Notice of Case Association showing that a number of
individuals have levied substantially similar lawsuits against them. But nothing in the
record suggests that any of these cases are class actions. These other individual
13
Case 1:12-cv-00351-WJM-KMT Document 61 Filed 04/05/12 USDC Colorado Page 14 of 15
cases were all filed in the Eagle County courts. (ECF No. 8-1.) The fact that related
litigation is also pending in the same jurisdiction in which this action was originally filed
weighs in favor of the Court declining to exercise jurisdiction.
In sum, the Court finds that five ofthe six factors outlined in Section 1332(d)(3)
weigh against the Court exercising jurisdiction over this matter. Beyond these factors,
the Court notes this case was filed in June 2011 and the parties were actively litigating
it for eight months in the Eagle County court before Defendants filed their Notice of
Removal. The Eagle County District Court had issued a temporary restraining order
against Defendants, conditionally certified the Class and Subclass, and scheduled a
show cause hearing on a contempt citation for Apri111, 2012. (ECF No. 47 at 2.) In
comparison, this Court has not made any substantive rulings in this case, and the case
in this Court is only In its infancy.
Having considered all of the above, the Court finds that the interests of justice
weigh against exercising its discretionary jurisdiction over this class action. See 28
U.S.C. 1332(d}(3}.
IV. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1. The Court's February 16, 2012 Order to Show Cause is MADE ABSOLUTE;
2. The Court DECLINES to exercise its discretionary jurisdiction over this matter
pursuant to 28 U.S.C. 1332(d)(3): and
3. This case is REMANDED to the District Court of Eagle County, Colorado. The
14
Case 1:12-cv-00351-WJM-KMT Document 61 Filed 04/05112 USDC Colorado Page 15 of 15
Clerk shall transmit the record.
Dated this 51f1 day of April, 2012.
William J. artf z
United States District Judge
15
CERTIFICATE OF SERVICE
I, William P. Bowden, hereby certify that, on July 13, 2012, I caused one copy of the
foregoing to be served upon the persons on the attached service list via U.S. Mail, postage prepaid,
unless otherwise indicated.
Is/ William P. Bowden
William P. Bowden (#2553)
{00074510;vl }
Cordillera 2002 Service List
Christopher Celentino, Esq
Erika Moribita, Esq.
Mikel Bistrow, Esq.
Foley & Lardner LLP
402 W. Broadway Suite 2100
San Diego, CA 92101
(Counsel to the Debtor)
HAND DELIVERY
Matthew P. Ward, Esq.
Ericka F. Johnson, Esq.
Womble Carlyle Sandridge & Rice, PLLC
222 Delaware Avenue, Suite 1501
Wilmington, DE 19801
(Northlight Fiancial, LLC)
Harlan W. Robins, Esq.
Dickinson Wright PLLC
15 N. 4th Street
Columbus, OH 43215
(Northlight Financial LLC)
Melissa Maxman, Esq
Ronald Wick, Esq.
Cozen & O'Connor PC
1627 I Street, NW, Suite 1100
Washington, DC 20006
(Cordillera Transition Corporation)
Carl A. Eklund, Esq
Ballard Spahr LLP
1225 17th Street, Suite 2300
Denver, CO 80202
(Alpine Bank)
Kristi A. Katsma, Esq.
Dickinson Wright PLLC
500 Woodward Avenue, Suite 4000
Detroit, Ml 48226
(Northlight Financial LLC)
)064775I;v2}
HAND DELIVERY
Michael R. Nestor, Joseph M. Barry
Donald J. Bowman, Kenneth J. Enos
Young Conaway Stargatt & Taylor LLP
1000 N. King Street, Rodney Square
Wilmington, DE 19801
(Counsel to the Debtor)
HAND DELIVERY
MarkS. Kenney, Esq.
Office ofthe United States Trustee
844 N. King Street, Suite 2207
LockBox35
Wilmington, DE 19801
HAND DELIVERY
Damien Tancredi, Esq.
Cozen & O'Connor, PC
1201 N. Market Street, Suite 1400
Wilmington, DE 19801
(Cordillera Transition Corporation)
Vincent M. Marriott, III, Esq.
Sarah Schindler-Williams, Esq.
Ballard Spahr LLP
1735 Market Street, 51st Floor
Philadelphia, PA 191 03
(Alpine Bank)
David L. Lenyo, Esq
Garfield & Hecht, P.C.
60 I East Hyman A venue
Aspen, CO 81611
(Alpine Bank)
Brad W. Breslau, Esq.
Cozen & O'Connor PC
707 17th Street, Suite 3100
Denver, CO 80202
(Cordillera Transition Corporation)
Arthur J. Abramowitz, Esq.
Cozen & O'Connor PC
Liberty View, Suite 300
457 Haddonfield Road
Cherry Hill, NJ 08002
(Cordillera Transition Corporation)
HAND DELIVERY
Tobey M. Daluz, Esq.
Joshua E. Zugerman, Esq ..
Ballard Spahr LLP
919 Market Street, II th Floor
Wilmington, DE 19801
(Alpine Bank)
James J. Holman, Esq
Duane Morris LLP
30 South 17th Street
Philadelphia, PA 19103-4196
(David A. Wilhelm)
Colorado Department of Revenue
Attn: Bankruptcy Unit
1375 Sherman Street, Room 1375
Denver, CO 80261-0001
Colorado Dept. of Labor & Unemployment
Attn: Bankruptcy Division
P.O. Box 956
Denver, CO 80201-956
Delaware Division of Revenue
Attn: Randy R. Weller, MS NO 25
820 French Street, 8th Floor
Wilmington, DE 19801
Internal Revenue Service
Insolvency Section
2970 Market Street
PO Box 7346
Philadelphia, P A 19101-7346
Secretary of State
Division of Corporations
Franchise Tax Division
40 I Federal Street- Suite 4
P.O. Box 898
Dover, DE 19903
)064775l;v2 }
Alpine Bank
A Colorado Banking Corporation
Attn: President, Officer of Managing Agent
141 E. Meadow Drive, Suite 210
Vail, CO 81657
Colorado Dept. of Labor & Employmen
Attn: Bankruptcy Unit
251 East 12th A venue
Denver, CO 80203-2202
Cordillera Golf Club LLC
Attn: Dan White
97 Main Street
Suite E202
Edwards, CO 81632
Department of Treasury
Internal Revenue Service
Ogden, UT 84201-0030
Secretary of Treasury
Attn: Officer, Managing Agent or General Agent
820 Silverlakd Blvd., Suite 100
Dover, DE 19904
Securities & Exchange Commission
SEC Headquarters
Attn: Office of the General Counsel (Bankruptcy)
100 F Street, NE
Washington, DC 20549
HAND DELIVERY
Ellen W. Slights, Esq.
Assistant United States Attorney
United States Dept. of Justice
I 007 Orange Street, Suite 700
POBox2046
Wilmington, DE 19899
Securities & Exchange Commission
Attn: Office of the General Counsel (Bankruptcy)
Centeral Regional Office
1801 California Street, Suite 1500
Denver, CO 80202-2656
Securities & Exchange Commission
New York Regional Office
Attn: George S. Canellos, Regional Director
3 World Financial Center, Suite 400
New York, NY 10281-1022
U.S. Secretary of Treasury
Attn: Office of the General Counsel (Bankruptcy)
1500 Pennsylvania A venue, NW
Washington, DC 20220
HAND DELIVERY
Mark D. Collins
Zachary I. Shapiro
Richards Layton & Finger P A
One Rodney Square
920 North King Street
Wilmington, DE 19801
(Members of Certified Class)
Garry R. Appel
Appel & Lucas, PC
1660 17th Street, Suite 200
Denver, CO 80202
(Members of Certified Class)
HAND DELIVERY
MarkMinuti
Saul Ewing LLP
222 Delaware Avenue, Suite 1200
P.O. Box 1266
Wilmington, DE 19899
(Counsel to the Official Committee of Unsecured Creditors)
)064775l;v2}
US Bank
Attn: President, Officer of Managing Agent
34353 Highway 6
Side c-101
Edwards, CO 81632
David Wilhelm
97 Main Street
Suite E202
Edwards, CO 81632
Michaels S. Kogan
Kogan Law Firm, APC
1901 Avenue ofthe Stars, Suite 1050
Los Angeles, CA 90067
(Counsel to Certain Homeowners)
Joseph J. Wielebiniski, Russell L. Munsch
Jay H. Ong, Zachary Z. Annable
Munsch Hardt Kopf & Harr PC
3800 Lincoln Plaza
500 N. Akard Street
Dallas, TX 75201-6659
(Counsel to the Official Committee of Unsecured Creditors)
HAND DELIVERY
Richard W. Riley
Duane Morris LLP
222 Delaware Avenue, Suite 1600
Wilmington, DE 19801
(Counsel to David A. Wilhelm)
James M. Holman
Duane Morris LLP
30 South 17th Street
Philadelphia, PA 19103-4196
(Counsel to David A. Wilhelm)