Diamond Resorts $1 billion law suit allegations

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Offline Tanveer Karn

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« Last Edit: September 25, 2018, 15:32:55 by Tanveer Karn »

Offline Tanveer Karn

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Re: Diamond Resorts $1 billion law suit allegations
« Reply #1 on: September 24, 2018, 18:07:19 »
n Friday, February 9, 2018, the Las Vegas-based law firm of Albright, Stoddard, Warnick & Albright filed in the U.S. District Court Of Nevada a proposed class action lawsuit against Diamond Resorts International, Inc.* and other Defendants alleging that by selling points-based timeshare memberships in the way that they are presented to the Plaintiffs, Diamond is essentially selling investments that are not, as required by law, registered as securities.

The complaint was filed on behalf of plaintiffs Joseph M. Dropp, Mary E. Dropp, Robert Levine, Susan Levine, and Kaarina Pakka, all of whom own various numbers of “points” they purchased from Diamond.

According to the complaint the issue is that the manner in which the points are sold by Diamond representatives causes them to be considered unregistered securities and by law the sale of unregistered securities is in violation of Section 5(a), 5(c), 12(a)(1) and 15(a) of the Securities Act of 1933, which requires that any securities sold within the United States be registered with the United States Securities and Exchange Commission.

To back up that claim, the plaintiffs’ attorneys assert that Diamond salespeople – under Diamond’s leadership and training – sold the points as more than just a way of vacationing but as an investment that would appreciate in value due to continuing improvements made by the company in the quality and number of its resorts and hotel properties, the general appreciation of real estate in the future and the managerial skill with which Diamond operates the properties it holds in its Collections.

Diamond salespeople allegedly tell their sales guests that by purchasing points “now,” the purchasers will receive a discounted purchase price that is only available on the day of the sales presentation; that they are investing in their future; that their points will increase in value; that they can use their points to pay annual maintenance fees; and that they can sell their points – at a profit – at any time. Thus, these “points”, as alleged in the complaint, are actually investment contracts, and therefore securities, under the United States securities laws.

Additionally, the complaint asserts those sales representations regarding the investment value of the points are false; that DRI points do not increase in value, there is no viable secondary market for them and DRI severely restricts the resale of points.

Says the complaint:

Defendants are selling purchaser investment contracts, and hence securities, even if they are not explicitly described as such and even though the written contracts contradict in part the promises of the sales pitches. Defendants have not followed the registration requirements under the securities laws and SEC regulations, and thus, they have violated and are in continuing violation of the Securities Act of 1933.

DRI purports to be in the vacation business, but in reality, it is in the investment business – specifically, the business of selling unregistered, illiquid securities in the form of exchange pools of “points”, using high-pressure sales techniques. DRI sells its “points”as an “investment,” when, in reality, all the “points” provide (other than an opportunity to try to book rooms at resorts and hotels, which can be done without purchasing points) is a source of debt for DRI’s investor-members, who must pay onerous maintenance fees and/or borrow money from a DRI affiliate in order to own and continue to own those points.

The plaintiffs are asking for compensatory damages, including interest; reasonable costs and expenses, including counsel fees and expert fees; injunctive relief prohibiting defendants from continuing to market and sell unregistered securities, the right to rescind their purchases of points/memberships in order to get their money back and any other relief the court may deem appropriate.

Dropp et al v. Diamond Resorts International, Inc. et al
Filed: February 9, 2018
Case Number: 2:2018cv00247

*The full cast of Defendants in this lawsuit include Diamond Resorts Intl., Inc; Diamond Resorts Holdings, LLC; Diamond Resorts Corporation; The Club Operating Company; Diamond Resorts U.S. Collection Development, LLC; Diamond Resorts U.S. Collection Members Association; Diamond Resorts Hawaii Collection Development LLC; and Diamond Resorts Hawaii Collection Members Association (collectively “Diamond” or “DRI”, Apollo Management VII L.P> and Apollo Global Management, LLC (collectively, “Apollo”, and Michael Flaskey and Kenneth Siegel (collectively “Individual Defendants”).

Offline Tanveer Karn

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Re: Diamond Resorts $1 billion law suit allegations
« Reply #2 on: September 24, 2018, 18:11:41 »
Another class action law suit

NEW YORK, July 25, 2018 (GLOBE NEWSWIRE) -- Labaton Sucharow LLP (“Labaton Sucharow”) announces that on July 23, 2018, it filed a securities class action lawsuit on behalf of its client Local 705 International Brotherhood of Teamsters Pension Fund (“Local 705”) against Diamond Resorts International, Inc. (“Diamond” or the “Company”) (NYSE:DRII), and certain of its senior executives (collectively, “Defendants”).  The action, which is captioned Local 705 International Brotherhood of Teamsters Pension Fund v. Diamond Resorts International Inc., No. 18-cv-01355 (D. Nev.), asserts claims under Sections 14(e) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) on behalf of all shareholders who held, sold, or tendered Diamond common stock, or derivative securities convertible into, exercisable for, or exchangeable against Diamond common stock, from the period beginning on July 14, 2016 through September 1, 2016.

The Company owns a network of international vacation destinations and sells vacation ownership “points,” which entitles the owner to reserve rooms in one of Diamond’s resort or hotel properties.  On July 14, 2016, Dakota Merger Sub, Inc., a wholly-owned subsidiary of private equity firm Apollo Global Management LLC (“Apollo”), commenced a cash tender offer to acquire Diamond at a purchase price of $30.25 per share (the “Tender Offer”).

The Complaint alleges that Diamond issued a materially incomplete and misleading Schedule 14D-9 Solicitation/Recommendation Statement (the “Recommendation Statement”) related to the Tender Offer.  Among other things, Defendants omitted the critical fact that the Stephen J. Cloobeck (“Cloobeck”), Diamond’s founder, Chairman, and largest stockholder, had abstained from voting on the sale of Diamond for reasons that directly contradicted the Board’s recommendation to the stockholder. Further, the Complaint alleges that Apollo offered consulting agreements or co-investment opportunities to Cloobeck, Diamond’s Vice Chairman Lowell Kraff, and Diamond’s President and Chief Executive Officer David Palmer to support the sale of Diamond to Apollo, additional consideration not provided to any other stockholder in the Company.

If you held, sold, or tendered Diamond common stock, or derivative securities convertible into, exercisable for, or exchangeable against Diamond common stock, from the period beginning on July 14, 2016, through September 1, 2016, you are a member of the “Class” and may be able to seek appointment as Lead Plaintiff.  Lead Plaintiff motion papers must be filed with the U.S. District Court for the District of Nevada no later than September 24, 2018.  The Lead Plaintiff is a court-appointed representative for absent members of the Class.  You do not need to seek appointment as Lead Plaintiff to share in any Class recovery in this action.  If you are a Class member and there is a recovery for the Class, you can share in that recovery as an absent Class member.  You may retain counsel of your choice to represent you in this action.

If you would like to consider serving as Lead Plaintiff or have any questions about this lawsuit, you may contact Francis P. McConville, Esq. of Labaton Sucharow, at (800) 321-0476, or via email at fmcconville@labaton.com [nofollow]. You can view a copy of the complaint here.

Local 705 is represented by Labaton Sucharow, which represents many of the largest pension funds in the United States and internationally with combined assets under management of more than $2 trillion.  Labaton Sucharow’s litigation reputation is built on its half-century of securities litigation experience, more than 60 full-time attorneys, and in-house team of investigators, financial analysts, and forensic accountants.  Labaton Sucharow has been recognized for its excellence by the courts and peers, and it is consistently ranked in leading industry publications.  Offices are located in New York, NY, Wilmington, DE, and Washington, D.C.  More information about Labaton Sucharow is available at www.labaton.com [nofollow].