Owners at The Point at Poipu, a Kauai timeshare, have filed a lengthy class action Complaint against Diamond Resorts International, the CEO of Diamond Resorts, Stephen Cloobeck and several of the Board of Directors. The filing is in response to a special assessment in excess of $5,000 per week of ownership for reconstruction to correct water intrusion damage to the buildings.
Within the 52 page Complaint, the plaintiffs have detailed allegations of intimidation and other methods to gain control of the Board of Directors by installing Diamond Resorts employees on the Board. According to the Complaint, once Diamond Resorts was in control of the Board, the directors increased the management fee paid to Diamond Resorts to more than ten times the prior levels and imposed the special assessment in violation of the Point at Poipu governing documents.
Among the allegations is a claim that Diamond Resorts knew about the water intrusion damage prior to acquiring the resort from Sunterra and that Diamond Resorts delayed taking any action until after they gained control over the Board of Directors. In addition, Diamond Resorts is alleged to have sold “points” in its Collection of Hawaii resorts without disclosing the water intrusion damage and the impending special assessment to potential buyers.
The Complaint further points out that the $65 million total special assessment averages out to be more than $300,000 per unit and goes on to charge that much of the $300,000 will be used for renovations that are not related to the water intrusion problem.
The Plaintiffs allege that not only did the directors commit breaches of their fiduciary duty in assisting CEO Stephen Cloobeck to gain control of the board, they were also voting on issues where they had a clear conflict of interest and were authorizing the water intrusion assessment while knowing it was invalid under the governing documents. Stephen Cloobeck and Diamond Resorts are alleged to have committed consumer fraud and deceptive trade practices in seeking to collect the invalid assessment.
The Plaintiffs are seeking to have the water intrusion assessment declared invalid, all payments already collected to be refunded along with incurred damages.
We will continue to keep you updated on the developments in this Kauai timeshare lawsuit and news on other Hawaii timeshare resorts around the islands.
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