Lawsuit filed against Diamond Resorts

[Kauai Kid]

A lawsuit was filed against Diamond Resorts Friday April 6th in Federal District Court in Hawaii.

I don't have any more details.


Sterling

 

[singlemalt_18]

Just another day at the office for the folks at DRI... :zzz: :zzz:

...meanwhile the waves keep on crashing while the breezes keep blowin' along the shore at Poipu. :zzz: :zzz:

And you can set your watch to the sunrise and sunset... :zzz: :zzz:

(Not even a link?)

 

[wilma]

(Not even a link?)

In another thread:

http://www.poipuowners.org/uploads/Lawsuit.pdf

 

[Beefnot]

Starting with point 53, these are some heavy allegations. If true, DRI is a slimy operation.

 

[dougp26364]

Starting with point 53, these are some heavy allegations. If true, DRI is a slimy operation.

Would you trust something done by a company that went bankrupt or, would you want your own people to look at the problem and tell you what needed to be done?

Sunterra cut corners even when there were no corners to cut. In the end, they failed miserably and are no longer a timeshare developer manager. I'm not sure I'd trust anything they said or had done previously.

In the end, the necessary repair work is likely to be delayed, costs are likely to increase with the delays, owners aren't likely to see the promised renovations completed by the date originally set forth and all owners will see increases in MF's to cover the expenses of the lawsuit.

Much like the great RCI class action lawsuit, this one will enrich the attorny's and empoverish the owners. That's my prediction. We'll see how it turns out.

 

[LisaRex]

Much like the great RCI class action lawsuit, this one will enrich the attorneys and impoverish the owners. That's my prediction. We'll see how it turns out.

I definitely see your point, but just ponying up and shutting up sends a really bad message to all timeshare management companies. If this causes DRI, and other management companies, to actually clean up their house a bit, then it may be worth all the pain.

 

[Poobah]

DRI Lawsuit

I read through the class action this morning, the defendants are DRI, affiliates, and DRI employees that served on the Boards of the VOA and AOAO. The VOA and the AOAO are not part of the lawsuit.

There are some really suprising allegations. It is amazing that DRI would not have read the by-laws of the VOA and AOAO before embarking on the Water Intrusion Assessment. Someone at DRI really dropped the ball on this one.

I am going to sit down and read the suit more closely, but it really hits the conflict of interest of the DRI employees on the Boards of the VOA and AOAO point pretty hard.

The allegations in the suit summarize what I have been saying all along: DRI has an attitude problem.

Rule 1: DRI is always right
Rule 2: If DRI is wrong, see Rule 1.

All of this could have been so easily avoided. I don't understand why DRI would take this risk of having such bad press on the street. They had to know this was going to happen.

There is a Chinese Proverb that says "May you live in interesting times." I think we are there.

Cheers,

Paul

 

[dougp26364]

I definitely see your point, but just ponying up and shutting up sends a really bad message to all timeshare management companies. If this causes DRI, and other management companies, to actually clean up their house a bit, then it may be worth all the pain.

IMHO, it was the owners not putting up a fight when Sunterra was undercollecting funds to maintain the resort. But it's easy to not complain when you MF's are cheaper than everyone elses. In fact, I recall a few TUGGERS bragging about owning Sunterra resorts, with their uberlow MF's, and trade into Marriott. I had a few think I was a fool for owning Marriott vs something like Sunterra and use the cheap resort to exchange into the expensive resorts. Thus, no one said a word to Sunterra, who is now bankrupt and bullet proof from lawsuits.

Well, the fat lady finally sang and the true cost of underfunding cash reserves is coming to light.

The old advice from many on TUG was buy cheap and trade expensive. My advice has been to own where you want to go the most. It's now modified to own in the system that gives you the best choices from where you want to go.

The risk of buying cheap is that you must be ready to jump ship when the tides change. Those who do not, risk getting caught. P@P is a beautiful resort but it was mismanaged by Sunterra. The lawsuit, IMHO, should be against Sunterra but, Sunterra is now bulletproof. DRI is the company left holding the bag. Do nothing and risk judgement for disregarding fiduciary responsibility when the resort begins to crumble. Do what's necessary and risk angering owners and getting some bad press. It was, IMHO, a no win situation for DRI.

The only thing I believe DRI could have done better was communication. Better communication with a good explanation might have prevented the owner backlash.

It will be interesting to watch this lawsuit progress. It would not surprise me to see it get tossed out of court early in the proceedings. If not, it's likely to drag on, costing the owners thousands more, delaying the necessary repair work and resulting in very little net gain for owners.

Now would be a good time to bail from P@P in my opinion. Not because of DRI but because I fear this lawsuit will only succeed in increasing costs to owners. It's like dumping salt into an open wound.

 

[Beefnot]

But reading the lawsuit, the only fault you see with DRI is communication? From what's described, this could damn near be considered a RICO criminal case. Not disputing your Sunterra points at all, but seriously, DRI appears to be very shady, VERY shady at how they handled Poipu.

 

[LisaRex]

The only thing I believe DRI could have done better was communication.

What about their due diligence in making sure that the property didn't have structural issues prior to buying it from Sunterra? I don't know if this is routine in the timeshare business, but I'm surprised the bank that financed the transaction didn't demand it.

 

[dougp26364]

What about their due diligence in making sure that the property didn't have structural issues prior to buying it from Sunterra? I don't know if this is routine in the timeshare business, but I'm surprised the bank that financed the transaction didn't demand it.

When you purchase a company as large as Sunterra, it's pretty tough to check out every last resort.

It is possible they understood there was a problem at P@P and underestimated the problem. It could be they had any original estimates of damage by Sunterra but, didn't trust their work (hx of taking shortcuts) and wanted their own study.

Sunterra had mult. issues. It's a wonder it didn't bankrupt DRI and take them under as well when DRI bought them.

 

[pedro47]

When you purchase a company as large as Sunterra, it's pretty tough to check out every last resort.

It is possible they understood there was a problem at P@P and underestimated the problem. It could be they had any original estimates of damage by Sunterra but, didn't trust their work (hx of taking shortcuts) and wanted their own study.

Sunterra had mult. issues. It's a wonder it didn't bankrupt DRI and take them under as well when DRI bought them.

Doug, you are correct in the above statement about DRI purchasing all of Sunterra resorts; some resorts were in excellent shape; while some other resorts needed a whole lots of improvements.

Low MF was only one of the major problem with Sunterra .

 

[dougp26364]

But reading the lawsuit, the only fault you see with DRI is communication? From what's described, this could damn near be considered a RICO criminal case. Not disputing your Sunterra points at all, but seriously, DRI appears to be very shady, VERY shady at how they handled Poipu.

Sorry I missed this post.

The problem with owning any timeshare is people typicially don't read the materials given them. Especially the materials that line out who is in control. Instead, they believe the salesmen when the salesmen tell them the resort is both run and owned by owners.

All an "owner" owns is the right to use time. They don't own any real property or the rights to that property. They own a deeded right to use. In other words, DRI owns P@P and the owners pay for the right to use......and maintain.......that property.

Lawyers can have a way of making things look grand on paper. Maybe they'll make some headway but, my bet is they're looking for a settlement and there will be no real changes. There will be no real changes because of the way to orignal owners documents are drawn up. It's a legal contract and as such, RICO won't come into play.

The easy thing to do is to read and understand what you're buying before you buy. What you're seeing at P@P is to the extreme end of the example of what can go wrong when you have a bad management company such as Suntera.

Right now, I'm interested to see if a judge allows the lawsuit to go forward or if it gets tossed out of court. I'll be following this one as I feel it will have an affect not only on DRI owners but on all timeshare management companies.

On the one hand, the management company is charged with maintaining the resort for owners. On the other, they can't just take money without a good reason. So, is DRI taking money without a good reason or are they upholding their responsiblity to maintain the resort for the owners?

FWIW, this case highlights the biggest reason I'm not a fan of timeshare trust ownership. "Owners" have no real control. The control rests with the trust, which votes the largest block of votes. It literally gives complete control to whomever controls the trust. No one saw this as not being such a good thing for owners until now.

 

[Beefnot]

When you purchase a company as large as Sunterra, it's pretty tough to check out every last resort.

It is possible they understood there was a problem at P@P and underestimated the problem. It could be they had any original estimates of damage by Sunterra but, didn't trust their work (hx of taking shortcuts) and wanted their own study.

Sunterra had mult. issues. It's a wonder it didn't bankrupt DRI and take them under as well when DRI bought them.

How would Sunterra's issues have taken down DRI, when DRI's approach is to make sure the owners pay for the sins of the past? That lawsuit has some very damning allegations that are very difficult to morally defend if true.

 

[dougp26364]

How would Sunterra's issues have taken down DRI, when DRI's approach is to make sure the owners pay for the sins of the past? That lawsuit has some very damning allegations that are very difficult to morally defend if true.

IMHO, Suntera had woefully underfunded cash reserves and had created a culture of irresponsibly low MF's, which always makes owners happy. But, Suntera went bankrupt and was taken over. Whomever the new management company was going to be, they were going to be unpopular or, they'd suffer the same fate as Suntera. They were going to have to increase MF's at an accelerated pace and, they were going to have to make some major and costly repairs at some of the resorts. There was also a culture within the employee's that would need to be turned around.

When you increase MF's and/or hit owners with SA's, there can be a revolt. You're likely to see high deliquencies with MF's and you're going to take some major hits with PR. There's also the cost factor involved in making necessary repairs when there's not enough cash reserves available.

Poor PR, deliquint payments and high costs are a perfect storm to take down any company. Why do you think DRI was the only suiter for Suntera? Suntera was no plum waiting to be picked. No one else appears to have wanted to take them over from a timeshare management standpoint. If you ask me, management is where the money is in the timeshare industry. When no one wants to take over a large management contract such as Suntera, that should shout volumes about how bad things really were.

Unfortunately, DRI is more or less the messenger. The contracts set up by Suntera gave Suntera all control and now gives DRI all control. Maybe I'm wrong but, much like the RCI class action law suit, I think we'll see the same thing here. Contracts are legal and there will be little to no satisfaction for the owners.

BTW, everyone does realize that ALL other timeshares are set up essentially the same way right? It's NOT just DRI that could be accused of the same things as in this class action. You could say the same for Marriott, HGVC, DVC, Starwood et......Should this class action succeed, there could be a lot of things change, including making it so that no major management company wants anything to do with timeshares. It could spell the end of timesharing as we know it. Whether that's a good or bad thing is a matter of opinion. In my mind, it's probably not a good thing as owners typically show very little interest in running their timeshare other than, "why's my MF so high?"

 

[Beefnot]

Fair points, But have you read the allegations in the lawsuit, starting with 53 or so? DRI was more than simple a messenger. And when evaluated in concert with what has happened with MFs at virtually all DRI resorts post-acquisition, this is likely their modus operandi. If the allegations are true, DRI is a corrupt operation. If the other chains are the same way, then a successful lawsuit could pave the way for changes in corrupt practices or, like you said, force them out altogether. That may indeed change but not necessarily end timesharing as we know it.

And I would bet my bottom dollar that when reconstruction begins in Poipu, there will exist some fishy relationship between the construction co. and DRI. I just hope there is a criminal investigation if these allegations are valid, and someone affiliated with DRI gets their kneecaps broken, like in that businessweek article.

 

[bebod]

"All an "owner" owns is the right to use time. They don't own any real property or the rights to that property. They own a deeded right to use. In other words, DRI owns P@P and the owners pay for the right to use......and maintain.......that property."


All the P@P deeded owners, including DRI (3%) and the HI Trust (36%) own (fee simple) the resort real estate. DRI is the contracted management co. The deeds in the trust are owned by individuals but controlled by DRI. If the owner defaults then those deeds eventually go to DRI.

 

[timeos2]

Sorry I missed this post.

The problem with owning any timeshare is people typicially don't read the materials given them. Especially the materials that line out who is in control. Instead, they believe the salesmen when the salesmen tell them the resort is both run and owned by owners.

All an "owner" owns is the right to use time. They don't own any real property or the rights to that property. They own a deeded right to use. In other words, DRI owns P@P and the owners pay for the right to use......and maintain.......that property.

Virtually every timeshare has documents that had the intent to have the developer leave after building & selling the inventory - and then have the individual owners take over. Far too many seemed to hang on with questionable contracts to the management of resorts they should have had to compete for management of & then the idea of clubs or trusts -where deeded weeks suddenly became under the control of the developer and all the buyer got was basically a type of RTU (and no direct voting rights).

The now older resorts from the 90's & very early 2000's may still have documents written with the strong intent to turn over control &, if pushed by the true individual owners, the control can in fact go to them. Then they are free to find the best management,how they want the resort maintained & operated, set the fees, etc. But those that were created under the "new world" of trusts & clubs & point systems are virtually trapped by the Developer/operator and it would take a mircale to make them truly owner controlled & the management / operation opened to the most competitive qualified company rather than the money machine that the captive group can & do demand.

Many years ago we realized that ownership in non-owner controlled resorts was ultimately giving up far too much control to those that saw it as a cash cow not our vacation ownership. We have pared our holdings down to two owner controlled resorts & are very happy with the results. We know where the money goes, who gets it & who runs the show. In both cases it is us & our fellow owners the way it was designed to be. We don't want or need the heavy hand of developer control dictating what we have to pay to enjoy the resorts we enjoy enough to own.

Those that fail to fully research what developer control will likely lead to basically tend to end up as unhappy timeshare owners sooner or later.

 

[T_R_Oglodyte]

How would Sunterra's issues have taken down DRI, when DRI's approach is to make sure the owners pay for the sins of the past? That lawsuit has some very damning allegations that are very difficult to morally defend if true.

I hope you do realize that when making preliminary filings in a suit such as this, absolutely no proof of anything is required??? In fact the name of the game at this stage is to concoct anything that you can come up with and make it sound as pernicious as possible.

For example, I could file suit against you alleging that you have been conducting a vendetta against me for years, you have harassed me by attempting to call me at all hours of day and night, you have interfered with my business relations with my clients, you deliberately introduced my school-age children to drugs with the purpose of making them drug addicts, hired other kids to bully them on the playground, etc., etc.

Then someone else could write that my lawsuit against you has some very damning allegations that are very difficult to morally defend if true.

*******

The way this game is played by firms like Gerard Gibbs is simply to find allegations that require a lot of work by the defendant to rebut. Whether or not the allegation is valid is irrelevant. The goal is to make the defendant run up huge defense costs to produce information while they do as little as possible on their side. They rely on the defendant getting to a point where the client makes a business decisions that regardless of outcome it's cheaper to payoff the plaintiffs to get them to go away than it is to continue defending the case.

Get it out of your mind that outfits like Gerard Gibbs do this to create justice. They do it because it is a formula to create and generate billings. It's simply a business model.

That's why almost all of the class action cases settle sometime before trial, and sometimes even before discovery (like the RCI case). The attorneys steer the client to a settlement and they get ready to settle the case at the point where they receive the maximum payout for the work that they have expended.

 

[T_R_Oglodyte]

All an "owner" owns is the right to use time. They don't own any real property or the rights to that property. They own a deeded right to use. In other words, DRI owns P@P and the owners pay for the right to use......and maintain.......that property."

You say that "DRI owns P@P"? Would you care to elaborate on that? What precisely do they "own"? Like virtually every condo. the resort consists of individually owned condominiums and common property. The common property is owned by the condominium association of owners. So I'm not clear exactly what it is you have in mind that DRI "owns".

The deeds in the trust are owned by individuals but controlled by DRI. If the owner defaults then those deeds eventually go to DRI.

This statement is not true. The deeds in the trust are owned by the trust, not by individuals. If a deeded owner joins the Trust, they must surrender their deed to the trust - they no longer own the deed.

The members of the trust hold a undivided interest in the trust. If a member of the trust defaults, they default on their UDI and ultimately the UDI reverts to the trust.

 

[Beefnot]

I hope you do realize that when making preliminary filings in a suit such as this, absolutely no proof of anything is required??? In fact the name of the game at this stage is to concoct anything that you can come up with and make it sound as pernicious as possible.

For example, I could file suit against you alleging that you have been conducting a vendetta against me for years, you have harassed me by attempting to call me at all hours of day and night, you have interfered with my business relations with my clients, you deliberately introduced my school-age children to drugs with the purpose of making them drug addicts, hired other kids to bully them on the playground, etc., etc.

Then someone else could write that my lawsuit against you has some very damning allegations that are very difficult to morally defend if true.

*******

The way this game is played by firms like Gerard Gibbs is simply to find allegations that require a lot of work by the defendant to rebut. Whether or not the allegation is valid is irrelevant. The goal is to make the defendant run up huge defense costs to produce information while they do as little as possible on their side. They rely on the defendant getting to a point where the client makes a business decisions that regardless of outcome it's cheaper to payoff the plaintiffs to get them to go away than it is to continue defending the case.

Get it out of your mind that outfits like Gerard Gibbs do this to create justice. They do it because it is a formula to create and generate billings. It's simply a business model.

That's why almost all of the class action cases settle sometime before trial, and sometimes even before discovery (like the RCI case). The attorneys steer the client to a settlement and they get ready to settle the case at the point where they receive the maximum payout for the work that they have expended.

Of course I understand there is currently no proof per se, which is why I always add "if true" to my comments. The motives of Gerald Gibbs, or most attorneys for that matter, Is to generate billings. The issue is secondary. The motives of those behind the class action, the plaintiffs, is often more genuine. Based on what I have read in several threads about this issue on TUG, and from reading the lawsuit, my preliminary opinion is that DRI is a rotten organization that is guilty of more than simply being a "messenger".

Many are very happy with DRI, and many find them to be the scourge of the earth. The truth is somewhere in between, but I believe skewed toward the latter.

 

[bogey21]

Sunterra had mult. issues. It's a wonder it didn't bankrupt DRI and take them under as well when DRI bought them.

Maybe they should have checked out what they were buying before they bought because once they signed on the dotted line they became the owner and responsible for the properties.

Many years ago I worked for a major NY Stock Exchange listed corporation. You can't imagine the amount of due diligence we did before we acquired another company.

George

 

[dougp26364]

You say that "DRI owns P@P"? Would you care to elaborate on that? What precisely do they "own"? Like virtually every condo. the resort consists of individually owned condominiums and common property. The common property is owned by the condominium association of owners. So I'm not clear exactly what it is you have in mind that DRI "owns".




This statement is not true. The deeds in the trust are owned by the trust, not by individuals. If a deeded owner joins the Trust, they must surrender their deed to the trust - they no longer own the deed.

The members of the trust hold a undivided interest in the trust. If a member of the trust defaults, they default on their UDI and ultimately the UDI reverts to the trust.

I believe bebod was quoting a statement I had made (about ownership) but didn't get the quote copied and pasted appropriately.

From what I understand, which could be wrong and is always up for debate, owners of a timeshare own no real property. They own the space between the walls. Essentially, they own a deeded right to use time at a resort. They do not "own a piece of the strip" as the salesmen tell it in Las Vegas.

But like I said, I've been wrong before. Timeshare is a more complicated deeded ownership than simply owning real property IMHO.

 

[Kauai Kid]

Just another day at the office for the folks at DRI... :zzz: :zzz:

...meanwhile the waves keep on crashing while the breezes keep blowin' along the shore at Poipu. :zzz: :zzz:

And you can set your watch to the sunrise and sunset... :zzz: :zzz:

(Not even a link?)

Links only for members. :hysterical:

 

[Kauai Kid]

John: What two owner controlled resorts do you own at?

We own at the Maui Schooner, an owner controlled resort, and are most pleased with the management.

Mahalo,

Sterling