Complaint Review: ILX RESORTS Inc. - PREMIERE VACATION CLUB -VARSITY CLUBS OF AMERICA - Phoenix Nationwide

The following is the text from the gross consumer fraud class action lawsuit that was filed against ILX Resorts, Inc. and their Officers and Directors. I got a copy of this complaint from the clerk of the Coconino county Superior Court in Flagstaff, Arizona. A copy was mailed to the FBI with a request that they start an criminal investigation regarding the consumer crimes that are contained in the class action lawsuit. I was contacted and the FBI informed me that they have started their investigation and to keep an eye out for it in the results in the newspapers.

As an owner of an ILX timeshare, I hope these people are convicted of their crimes and are ordered to refund all the monies they have received from unsuspecting retired folks like myself.

CLASS ACTION LAWSUIT

BONNETT, FAIRBOURN, FRIEDMAN

& BALINT, P.C.

Andrew S. Friedman

2901 N. Central Avenue

Phoenix, Arizona 85012

(602) 274-1100

MILBERG WEISS BERSHAD HYNES

& LERACH LLP

Janine L. Pollack

Daniel Altman

One Pennsylvania Plaza

New York, New York 10119-0165

(212) 594-5300

VAUGHN LEDBETTER PLLC

James E. Ledbetter

315 South Willard Street

Cottonwood, Arizona 86326-4611

(928) 649-8777

Attorneys for Plaintiffs

IN THE SUPERIOR COURT OF THE STATE OF ARIZONA

IN AND FOR THE COUNTY OF COCONINO

x

KENNETH G. REED and GEORGE CATES, On

Behalf of Themselves and All Others Similarly

Situated,

Plaintiffs,

-vs.-

ILX RESORTS INCORPORATED; SEDONA

VACATION CLUB; PREMIER VACATION CLUB;

and JOHN DOES 1 THROUGH 10,

Defendants.

Case No. Filed in Coconino County, Arizona

COMPLAINT

AND

JURY DEMAND

(Class Action)

(Tort Non-Motor Vehicle)

x

Plaintiffs, by their attorneys, make the following allegations and claims as their Complaint. These allegations are made upon information and belief based upon the investigation conducted by and under the supervision of Plaintiffs counsel, except as to the allegations specifically pertaining to the Plaintiffs and their counsel, which are based upon knowledge.

Plaintiffs believe that further and particular information relating to Defendants misconduct is

within the exclusive possession and control of Defendants and is not publicly available, thus

preventing Plaintiffs from alleging further details about Defendants misconduct. Plaintiffs

believe that further substantial evidentiary support will exist for their claims after a reasonable

opportunity for discovery.

NATURE OF THE ACTION

1. This is a class action brought on behalf of purchasers of vacation ownership interests in certain timeshare resorts (these ownership interests are referred to herein as the "Timeshares"), in particular those at the Los Abrigados Resort & Spa ("Los Abrigados"), also known as the Sedona Vacation Club, operated by Defendant ILX Resorts Incorporated ("ILX"),

and certain interests in the Premiere Vacation Club also operated by ILX.

2. This case is about a pattern of deception whereby Defendants sold Timeshares and interests in the Premiere Vacation Club to consumers even though the resort had already been oversold and no further units should have been offered for sale. Additionally, Defendants

charged those consumers annual maintenance fees which were represented to be used for the general upkeep of the timeshare resort, but were instead siphoned as profits to the Defendants.

Furthermore, Defendants enticed potential purchasers to buy Timeshares and interests in the Premiere Vacation Club by showing them model rooms that were much larger and more comfortable than the actual rooms they would get once they made their investment.

3. ILX acquires, develops and operates various timeshare resorts in the Western United States, including Los Abrigados. ILX receives revenue from the financing and sale of ownership interests by its subsidiaries and from the rental of unused or unsold inventory units.

In addition, ILX receives revenues from the sale of food, beverages and other services at its resorts. Sedona Vacation Club is the entity that operates and sells the Timeshares at Los Abrigados. Premiere Vacation Club is an entity that sells points that can be redeemed for accommodations at various ILX resorts.

4. Defendants induced purchasers of the Timeshares to buy ownership rights, on either an annual or bi-annual basis, which would allegedly grant the purchasers the right to stay in a fully furnished unit at Los Abrigados on a one-week basis. Los Abrigados is a resort located

in Sedona, Arizona, and purports to have many amenities for its guests.

5. ILX, or its subsidiaries, entered into a Purchaser's Purchase Contract (the "Purchase Contract") with Plaintiffs and the ownership rights thereunder were purportedly evidenced in certain deeds, including a Warranty Deed. Defendants also sold the Timeshares

and interests in the Premiere Vacation Club by transferring a purportedly deeded property

interest to the Plaintiffs and the class. However, these deeded interests were illusory in that they

neither guaranteed the recipient lodgings at Los Abrigados nor did these deeded interests refer to

a particular piece of property.

Further, the Purchase Cont ract incorporated by reference a Membership Plan which outlined the specific rights and duties of both the purchasers and Sedona

Vacation Club or the Premiere Vacation Club.

6. Similarly, Defendants induced purchasers of interests in the Premiere Vacation Club to buy the right, on an annual basis, to stay at one of ILX's resorts for one week. This right included, but was not limited to, stays at the Los Abrigados resort.

7. Notwithstanding their representations in their documents, such as the Membership Plan (a document outlining the duties and responsibilities of the purchasers and sellers of the Timeshares and interests in the Premiere Vacation Club) advertisements and their website, ilxresorts.com, Defendants oversold the Timeshares and Plaintiffs and the class "deeded"

ownership rights have lost value and cannot be resold except at a very large loss.

8. Purchasers of interests in the Premiere Vacation Club were similarly informed that there would be availability at the ILX resorts for them; however, due to the overselling of the Timeshares, there were not sufficient accommodations for purchasers of the Premiere

Vacation Club interests. As a result of the conduct complained of herein, owners of interests in

the Premiere Vacation Club have also lost value on their interests.

9. As a consequence, Defendants have failed to maintain the required purchaser-toaccommodation ratio required by law, and the number of purchasers eligible to use the resort at Los Abrigados exceeds the total number of accommodations available for use at Los Abrigados.

Therefore, Plaintiffs and the class are frequently told that there are no accommodations available

for them and they therefore forfeit the right to stay at Los Abrigados in a given year. Since the use of the Timeshares and/or interests in the Premiere Vacation Club is on a "use it or lose it" basis, members of the class are frequently unable to exercise their Timeshare rights.

10. On information and belief, Defendants also exceed their allocated number of room nights to be used as incentives for potential buyers of Timeshares, further contributing to the unavailability of rooms for Plaintiffs and class members.

11. These practices constitute deceptive and abusive practices in violation of the laws governing deceptive trade practices, false advertising, consumer deception, and related laws of this state. In particular, Defendants deceptive sales practices violate the Arizona Consumer Fraud Act, A.R.S. 44-1521 et seq., the Arizona Real Estate Timeshare Act, A.R.S. 32-2197

et seq., and related principles of state common law and equity.

12. Plaintiffs and the other members of the class have suffered, and continue to suffer, economic injuries as a result of paying for ownership interests and assorted fees associated with the ownership of the Timeshares and interests in the Premiere Vacation Club that they would not have agreed to pay if Defendants had made full and fair disclosure in their advertisement and sale of the Timeshares and the ownership interests. Plaintiffs are among those who have been deceived and abused by Defendants misconduct. Plaintiffs, on behalf of themselves and the class, seek damages and restitution, including return of the purchase prices paid for the

Timeshares and interests in the Premiere Vacation Club. Plaintiffs and the class also seek the return of the maintenance fees that they have paid. Plaintiffs and the class additionally seek injunctive relief prohibiting Defendants from continuing to engage in their deceptive practices.

JURISDICTION AND VENUE

13. This Court has jurisdiction over the subject matter of the claims made in this complaint. Each of the purchasers of the Timeshares and interests in the Premiere Vacation Club is given a deeded interest that is recorded in the County Recorder's office in Coconino County.

Additionally, the sale of timeshares is generally regulated in this state by A.R.S. 32-2197 et

seq., and Los Abrigados is registered with the Arizona Department of Real Estate.

14. This Court has jurisdiction over Defendants. Each Defendant is either an Arizona corporation or resident and may be found in Arizona. Defendants also conduct sufficient business in Arizona, have sufficient contacts in Arizona, or otherwise intentionally avail

themselves of the markets within Arizona, so as to render the exercise of jurisdiction by this

Court proper under traditional notions of fair play and substantial justice.

15. Venue is proper in this Court under A.R.S. 12-401 because Defendants maintain offices in Sedona, Arizona. Additionally, this action relates to purportedly deeded interests that are registered in Coconino County.

16. This forum is a suitable place for trial. Arizona has a strong public interest in having this lawsuit conducted in its courts. The illegal conduct in this lawsuit affected residents of Arizona and individuals that own deeded interests in Arizona. A class action lawsuit of this type serves the interest of judicial efficiency and eliminates the possibility of duplicative

litigation. Sources of proof in this case are readily accessible, and process is available to obtain

unwilling witnesses, if necessary.

17. Neither Plaintiffs nor any member of the class have suffered damages in excess of $75,000.

PARTIES

Plaintiffs

18. Plaintiff Kenneth Reed currently resides in Calgary, Alberta and is a citizen of both the United States and Canada. Mr. Reed purchased a Timeshare interest from the Sedona Vacation Club in 1994.

19. Plaintiff George A. Cates is a resident of Oro Valley, Arizona. Mr. Cates purchased an interest in the Premiere Vacation Club in April of 2002.

Defendants

20. ILX is a corporation domiciled and registered in the State of Arizona and it maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. According to the

company's website, its core businesses are the sales of vacation ownership interests and the financing of those interests. Supportive of these primary businesses, ILX also acquires and/or develops and operates vacation ownership resorts. ILX employs approximately 850 people and has sold its timeshare units to over 18,000 purchasers. According to ILX's 2002 Form 10-K,

ILX had, at the end of 2002, a total inventory of 29,336 weeks, which includes both sold and unsold interests.

21. Defendant Sedona Vacation Club, a subsidiary of ILX, is a corporation domiciled and registered in the State of Arizona and also maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. Sedona Vacation Clubs sole business is the operation, and sales, of

interests in the Los Abrigados resort.

22. Defendant Premiere Vacation Club, a subsidiary of ILX, is a corporation domiciled and registered in the State of Arizona and also maintains its home office at 2111 East Highland Avenue, Phoenix, Arizona. Premiere Vacation Clubs sole business is the operation,

and sales, of interests in the Premiere Vacation Club.

23. Defendants John Does 1 through 10 are key employees, officers and directors of ILX or its subsidiaries who participated in the wrongs alleged herein.

THE ILX TIMESHARE BUSINESS

24. ILX has been in the business of selling timeshares for over 15 years. ILX began with one resort in Colorado and now sells timeshares at resorts throughout the western United States and in Mexico. ILX has recently begun expanding from resorts to its Varsity Clubs,

which are hotels and timeshare accommodations near universities. ILX currently has two "Varsity Clubs," one near the University of Notre Dame and one in Tucson, near the University of Arizona.

25. ILX markets its products as a full-service resort experience, unlike much of the rest of the timeshare industry which typically provides residential-type facilities that emphasize in-room cooking in a home- like setting with relatively limited service and amenities. ILX markets its properties through on-site visits, brochures and literature, as well as through its

website, ilxresorts.com.

26. ILX provides financing options to purchasers of the Timeshares and interests in the Premiere Vacation Club. ILX requires at least a 10% down-payment, which allows ILX, under accounting rules, to recognize the entire purchase price as revenue at the time of sale. ILX

then provides financing for seven years at rates of interest between 15.9% and 17.9% per annum.

27. ILX began by selling timeshares at individual resorts. Plaintiff Reed and those

members of the class who did not purchase interests in the Premiere Vacation Club acquired the

right to stay at Los Abrigados for one week, on either an annual or bi-annual basis. Although

most deeds arising out of timeshare purchases at other resorts specify a fractional fee simple

interest in a specific unit of a condominium and the stated time period that has been acquired, the

deeds prepared by Defendants do not specify either a particular unit or a stated time period for

which the purchaser has acquired the rights. On information and belief, many title companies

will not grant title insurance for the timeshares sold by Defendants, due to the scant information

provided by Defendants and the lack of specificity of Defendants information in the deed, which

makes it difficult for the title insurance companies to insure the deeded properties. Although

Defendants give purchasers a copy of their "deed," Defendants do not inform the purchasers that

the deeded interests do not reference a specific unit interest nor a specific time period to use a

particular unit or a comparable unit in the project.

28. Most timeshare resorts sell their respective timeshares on a fixed week basis.

That is, referring to the interval calendar, the purchase of a fixed week property assures the

owners that they will always have the same week each year, e.g., week 26. Alternatively, at

other timeshare resorts an owner of a floating week may choose another week within his or her

time interval or may elect to upgrade or downgrade to another time interval to meet his or her

annual vacation schedule. Upgrading to a longer time interval usually incurs an additional cost.

Most, if not all, of ILXs sales to Plaintiffs and the class were on a floating week basis as well as

an indeterminate unit basis.

29. According to the Membership Plan for Los Abrigados, ILX reserves the right to

set aside a number of units at Los Abrigados as incentives to potential buyers of a Timeshare or

membership in the Premiere Vacation Club. Additionally, ILX has the right to rent out unused

rooms at Los Abrigados in a manner similar to that of a traditional hotel.

ILX Changes Its Business Model

30. In 1998, ILX introduced its Premiere Vacation Club. ILX Premiere Vacation

Club members purchase the right to seven nights accommodations annually or bi-annually.

These accommodation days can be broken into increments as small as two nights, allowing

purchasers to visit numerous ILX resorts. Purchasers of interests in the ILX Premiere Vacation

Club are not limited to accommodations at any one particular resort, but rather have the option of

choosing from among ILXs different resorts, including Los Abrigados.

31. On December 31, 2002, the Premiere Vacation Club included a total of 19,100

Vacation Ownership Interests in the Club, with units set aside at each of ILXs resorts for use by

members of the Premiere Vacation Club. These Premiere Vacation Club units are counted apart

and segregated from the units sold to other ILX customers, whose accommodations are limited to

one particular resort.

32. ILX purported to set aside a number of available units at each of its resorts for use

by those purchasing interests in the Premiere Vacation Club. According to ILXs recent 10-K,

Los Abrigados contained 9,100 Vacation Ownership Interests potentially available for sale to the

public, of which 2,381 were owned by Premiere Vacation Club. As detailed herein, ILX has sold

more Vacation Ownership Interests than were represented as available to the public.

The Lack of Availability at Los Abrigados

33. On information and belief, ILX began selling interests in the Premiere Vacation

Club after Los Abrigados sold all of the 9,100 units out to individual owners. ILX sold interests

in the Premiere Vacation Club even though it did not have the ability to set aside any units at Los

Abrigados for the use of customers of the Premiere Vacation Club.

34. According to an analysis of the records of Coconino County, both the Premiere

Vacation Club and Los Abrigados have sold more than their allotted number of units. Due to

this overselling, Defendants cannot maintain the one-to-one purchaser-to-accommodation ratio

as required by Arizona law, A.R.S. 32-2197 et seq.

35. Defendants have also exercised the right to rent unspoken-for units to the general

public, which, according to the Membership Plan, was supposed to be limited to instances when

there were available units for a particular time period not being used by owners of the

Timeshares or by holders of interests in the Premiere Vacation Club and would therefore not

impinge on the rights of the Timeshare owners or owners of interests in the Premiere Vacation

Club. The rental income earned from these units goes directly to Defendants. On information

and belief, Defendants rent out units to the general public before satisfying the accommodation

interests for a particular time period of owners of the Timeshares or interests in the Premiere

Vacation Club. For this reason, Plaintiffs and members of the class are often told that there is no

availability at Los Abrigados, despite Defendants duty to maintain a one-to-one ratio of

accommodations to owners. Although ILX reserved the right to rent out unused rooms, it did not

have the right to rent these rooms out at the expense, and to the detriment, of owners of the

Timeshares and interests in the Premiere Vacation Club.

36. According to ILXs 2002 Form 10-K filed with the Securities and Exchange

Commission, during the year 2002, ILX received $10.8 million in revenue from the rental of its

purportedly unused or unsold inventory at the ILX resorts.

37. Additionally, if an owner called up ILX to check on availability and there was

none, ILX made no efforts to contact the Timeshare owners if there was a cancellation or some

other opening. Rather, Defendants took that opportunity to rent out the room on a hotel basis.

38. Similarly, ILX did not give Plaintiffs or other class members an opportunity to

move their usage of the resorts to another year. Therefore, if the owners of the Timeshares did

not make a reservation in a particular year or could not make a reservation because Los

Abrigados was entirely booked, they lost their Timeshare rights for that year and were not given

any make-up time or other compensation. ILX referred to this phenomenon as "spoilage."

Spoilage increased ILXs inventory of available rental rooms for hotel type guests and, thus,

revenue to Defendants. At a minimum, even if Defendants did not rent out the unused room,

they saved money on maid service, because the room did not need to be cleaned. In short, the

resort was on a "use it or lose it" basis and Defendants did nothing to prevent spoilage, since

spoilage accrued to Defendants economic benefit.

39. In addition to the units reserved for purchasers of the Timeshares and interests in

the Premiere Vacation Club, ILX reserves units for use as an incentive to attract potential

purchasers of the Timeshares or interests in the Premiere Vacation Club. On information and

belief, ILX uses more than the proper number of units at a given time for prospective purchasers.

40. Prospective customers are attracted to listen to the ILX sales pitch by means of

the promise of a free stay at the Los Abrigados resort in one of many complimentary rooms.

These rooms have not been excluded from the one-to-one accommodations to owners ratio that

Defendants are required to maintain. Therefore, Plaintiffs and the class have fewer opportunities

to exercise their right to stay at Los Abrigados.

41. Defendants continue to sell both the Timeshares and interests in the Premiere

Vacation Club, despite the lack of availability at the Los Abrigados resort. Owners of the

Timeshares and interests in the Premiere Vacation Club, including Plaintiffs, often cannot make

reservations at Los Abrigados because it is oversold or Defendants have rented out these rooms

to the general public on a hotel-type basis.

ILXs Improper Sales Techniques

42. When potential purchasers arrived at ILX to inspect the premises to determine

whether or not to purchase one of Defendants Timeshares or Premiere Vacation Club interests,

they were shown a model room on their tour of the resort. However, this room was much nicer,

larger and more decorative than the rooms given to guests after they purchased the interests and

checked in for the first time. The rooms actually given to owners upon checking in to the resort

were much smaller, in a state of disrepair and bore little resemblance to the clean and upgraded

room shown to potential purchasers on the tour of the project.

43. When purchasers of interests in the Premiere Vacation Club were shown the

model room, they were not told the dimensions of the rooms for which they were eligible at the

various ILX resorts based upon their level of membership. Nor were the purchasers of interests

in the Premiere Vacation Club shown floor plans for the units available to them. Rather they

were simply shown a model room.

44. Upon purchasing one of the Timeshare interests, Plaintiff Reed was provided with

a document entitled Sedona Vacation Club Owners Understanding and Acknowledgment.

Paragraph 16 of this document states, "I understand that the model I was sho wn is a general

representation of how the Sedona Vacation Club Suites will be furnished in the future. I further

understand that until all Sedona Vacation Suites have been upgraded, the Suites I will occupy as

a Member may or may not be similarly furnished."

45. This document implies that the furnishings in all of the suites at Los Abrigados

would be upgraded to approximate equality of style at Defendants expense. However, to date,

Defendants have not upgraded all the suites. Instead, Defendants have allowed the suites to

deteriorate over time and the suites are dated in appearance and shoddy.

46. The ILX Yahoo Message Board, located at:

[http://messages.yahoo.com/?action =q&board=ILX,] also contains similar complaints about

the quality of the accommodations at Los Abrigados.

47. Similarly, when prospective purchasers were given a free night at the resort to

induce them to purchase a Timeshare interest, these individuals stayed in much nicer rooms than

they were ultimately given when they checked in as owners.

ILX Improperly Utilizes Maintenance Fees.

48. Owners of the Timeshares and interests in the Premiere Vacation Club are

charged an annual maintenance fee. These fees are over and above the purchase price for one of

the Timeshares or the interests in the Premiere Vacation Club. According to Defendants, these

fees are paid annually purportedly to cover the costs of maintaining the grounds, units, and

facilities of the resort. The maintenance fees vary based on the type of interest purchased.

49. According to the Membership Plan for the Sedona Vacation Club, which is part of

the contract between Defendants and Plaintiff Reed and members of the class, no more than 10%

of the maintenance fees were to be allocated for certain "Excepted Areas." The Excepted Areas

are defined in the Membership Plan as certain areas, including dining facilities, health spa,

lounge facilities and other areas whose common characteristic is that they generate profits for

Defendants.

50. In addition to the maintenance fees, each owner of a Timeshare or interest in the

Premiere Vacation Club must pay management fees. According to the Membership Plan, these

fees, paid annually by each owner, cover the costs of running the resort on a day-to-day basis.

These management fees are separate and apart from the maintenance fees paid.

51. Defendants maintained the right to increase the maintenance or management fees,

and certain owners of the Timeshares and purchasers of interests in the Premiere Vacation Club

have been charged with additional assessments.

52. In 2002, the maintenance fees on Plaintiff Reeds two-bedroom suite were over

$550. Thus, each owner of a one-week interest would have to pay that amount in maintenance

fees for the suite. Since there were 52 owners for each particular suite, and each paid more than

$550 in maintenance fees, Defendants took in over $28,600 in maintenance fees for each twobedroom

suite. Since there are 175 units at Los Abrigados, and the maintenance fees on a onebedroom

suite are almost the same as the fees on a two-bedroom suite, ILX received

approximately $4.5 million in revenue as maintenance fees in 2002 alone. Additionally, since

Los Abrigados was oversold, Defendants received an even greater amount of maintenance fees

than it would otherwise have received had Defendants maintained a proper purchaser to

accommodation ratio. The suites at Los Abrigados were rundown and ILX could not have been

spending the maintenance fees on the upkeep of the units. Yet, the Defendants have increased

the maintenance fees at Los Abrigados every year.

53. Defendants, who had the sole discretion as to the use of Plaintiffs and the class

maintenance fees, did not use these fees for the beautification, repairs and routine maintenance of

Los Abrigados. Rather, Defendants used and continue to use these fees, inter alia, to cover the

costs of certain of the Excepted Areas in excess of the amount permitted under the Membership

Plan, such as the restaurants or other dining facilities and conference rooms. The profits of such

Excepted Areas inure solely to Defendants. Thus, Defendants are using Plaintiffs and the class

funds to subsidize their for-profit operation of the Excepted Areas.

54. Plaintiffs and the class do not have the ability to audit Defendants use of the

maintenance fees. For example, on information and belief, the electricity used for the Excepted

Areas is not separately metered and there is no way to determine whether Plaintiffs and the

class maintenance fees are paying for the electricity in the Excepted Areas. Moreover, unlike

most homeowners associations and other timeshares, upon information and belief, Plaintiffs and

the class have no access to the books and records showing how Defendants use the maintenance

fees or whether they are in compliance with their contractual and other duties under the law in

their use of these fees.

55. Defendants also charged numerous other fees that were not disclosed in advance.

For instance, members of the class were charged certain fees to search Defendants computers

for available vacation weeks yet were never told that such fees would be charged.

56. Plaintiffs and the class purchases of the Timeshares and the interests in the

Premiere Vacation Club were based upon the representations of Defendants, including those

found in the Membership Plan. Amongst the representations made in the Membership Plans for

both Los Abrigados and the Premiere Vacation Club were that the Timeshares would be operated

pursuant to Arizona law, which requires that all timeshare plans maintain a one-to-one

purchaser-to-accommodation ratio. A.R.S. 32-2197.01. Defendants also represented that

"maintenance and repair expenses, taxes or utility expenses allocated to the Excepted Areas"

would not exceed 10% of the total maintenance and repair expenses, taxes and utility expenses

incurred at the resort. As explained above, these representations made by Defendants were

materially false and misleading.

CLASS ACTION ALLEGATIONS

57. This action is brought by Plaintiffs individually and on behalf of a class

pursuant to Rule 23 of the Arizona Rules of Civil Procedure. The class consists of:

All persons who purchased a Timeshare vacation ownership interest in the

Los Abrigados resort or purchased any interest in the Premiere Vacation

Club. Excluded from the class are officers, directors, employees and

agents of the Defendants.

58. This action is properly maintainable as a class action for the following reasons:

a. The class is so numerous that joinder of all members is impracticable.

While the exact number of class members is unknown to Plaintiffs at this

time, the number of persons who purchased the Timeshares and interests

in the Premiere Vacation Club is believed to number in the thousands, and

are dispersed geographically throughout the western portion of the United

States and beyond. Class members may be identified from the records

maintained by Defendants, and class members may be notified of the

pendency of this action by mail using a form of notice similar to that

customarily used in other class actions.

b. There is a well-defined community of interest among class members in the

questions of law or fact affecting the class which predominate over

questions affecting only individual members. Those common questions

include:

i. Whether Defendants engaged in a deceptive common course of

conduct, which included the deceptive acts and practices identified

herein in the marketing and sales of Timeshare units and interests

in the Premiere Vacation Club;

ii. Whether Defendants knowingly, intentionally, recklessly, or

negligently engaged in a deceptive course of conduct in order to

induce the purchase of the Timeshare units and interests in the

Premiere Vacation Club;

iii. Whether Plaintiffs and class members have sustained damages, and

the proper measure of compensatory damages;

iv. Whether punitive damages should be awarded; and

v. Whether Plaintiffs and class members are entitled to the injunctive

and declaratory relief requested herein.

c. The claims asserted by Plaintiffs are typical of the claims of class

members.

d. Plaintiffs will fairly and adequately protect the interests of the class in that

they have no interests antagonistic to those of the other class members,

and Plaintiffs have retained as counsel attorneys who are knowledgeable

and experienced in consumer fraud litigation, as well as class and complex

litigation.

e. A class action is superior to other available methods for the fair and

efficient adjudication of this controversy for at least the following reasons:

i. Class members could not afford to seek legal redress individually

for the wrongs the Defendants committed against them;

ii. When Defendants liability has been adjudicated, claims of all

class members can be determined by the Court;

iii. This action will cause an orderly and expeditious administration of

the class claims and foster economies of time, effort and expense

and ensure uniformity of decisions;

iv. Without a class action, many class members would continue to

suffer damages, and Defendants violations of law will be without

redress while Defendants continue to reap and retain the

substantial proceeds of their wrongful conduct; and

v. This action does not present any undue difficulties that would

impede its management by the Court as a class action.

THE CONCEALMENT OF MATERIAL FACTS

59. Because the Timeshare interests are sold on a floating basis and do not refer to a

particular week, when an individual is told that a particular week at Los Abrigados is not

available, that alone is not an indication that the entire resort is oversold. When Plaintiff Reed

attempted to reserve a particular week and was told that the requested week was unavailable, that

alone did not give him notice of the overselling alleged here. At no point was Plaintiff Reed or

any member of the class told that the resort was oversold; rather, they were simply told that there

was no availability for the requested time period.

60. Similarly, the poor state of the rooms at Los Abrigados facility did not occur

overnight. Rather, the facilities deteriorated over time and it was only recently that Plaintiff

Reed surmised that the maintenance fees were not being used for the proper purposes. However,

there was no notice from Defendants, or any other particular indication at a particular point in

time, that maintenance funds were improperly used by Defendants.

61. For example, Plaintiff Reed did not try to exercise his rights to stay at Los

Abrigados every year. Therefore, in the years during which he did not stay at the resort, he did

not notice the deterioration of the rooms. Additionally, because Defendants discouraged use of

the resort by curtailing availability, it was difficult for individuals to learn of the deteriorating

conditions.

62. Plaintiff Reed most recently contacted Defendants in late 2002 about staying at

the resort in early 2003. At that time, he was told that there was no availability in January or

February 2003. Soon thereafter Plaintiff Reed spoke to someone knowledgeable about the

timeshare business in Arizona who indicated some of the problems at Los Abrigados.

63. On February 10, 2003, the Sedona Vacation Club sent a letter to owners of the

Timeshares asking them to "bank" their room for Los Abrigados for 2003 and in return they

would receive the right to stay for two weeks at an RCI resort, a vacation exchange company

with which ILX is affiliated. In other words, the Sedona Vacation Club expressly asked owners

of the Timeshares to forego their right to stay at Los Abrigados during 2003. By asking owners

of the Timeshares to bank their rooms for 2003, Defendants sought to conceal the oversold status

of Los Abrigados by persuading the Timeshare owners not to exercise their rights to stay at Los

Abrigados.

64. Similarly, after ILX formed the Premiere Vacation Club, it offered owners of the

Timeshares an opportunity to join the Premiere Vacation Club for an additional fee. By offering

owners of the Timeshares a chance to purchase an interest in the Premiere Vacation Club, ILX

hoped to reduce the number of people seeking to reserve a room at Los Abrigados, and thereby

decrease the chance that a Timeshare owner would realize that Los Abrigados was oversold.

65. Plaintiff Cates exercised his right to stay at the Los Abrigados resort in August of

2002. While he was there, he was given a much smaller room than the model he had been shown

when he first purchased his membership in the Premiere Vacation Club.

66. In June 2003, Mr. Cates exercised his right to stay at Kohls Ranch, another ILX

resort. While at Kohls Ranch, Mr. Cates complained to the ILX representative at Kohls Ranch

about the small size of his room during his previous stay at Los Abrigados. During this

conversation Mr. Cates was shown floor plans for the rooms to which he was entitled based upon

his type of membership in the Premiere Vacation Club. Although ILX had floor plans for the

various rooms available to members of the Premiere Vacation Club, it was only in June of 2003,

after complaining to the ILX staff, that Mr. Cates was shown floor plans for the rooms to which

he was entitled. By withholding the floor plans, Defendants were able to conceal the size of the

rooms at the ILX resorts. Therefore, even tho ugh Mr. Cates was shown a model room upon

purchase of his Premiere Vacation Club interest, he had no way of knowing that the rooms

available were much smaller than the model room shown to him.

67. In July of 2003, Mr. Cates used his membership in the Premiere Vacation Club to

stay at the Golden Eagle ILX resort, located in Colorado. Again Mr. Cates was given a much

smaller room than he had been shown on his model tour.

COUNT ONE

VIOLATION OF THE ARIZONA CONSUMER FRAUD ACT

(AGAINST ALL DEFENDANTS)

68. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as

if fully set forth herein.

69. A.R.S. 44-1521, et seq., prohibits acts of unfair competition, including any

"deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or

concealment, suppression or omission of any material fact with intent that others rely upon such

concealment, suppression or omission, in connection with the sale or advertisement of any

merchandise whether or not any person has in fact been misled, deceived, or damaged thereby."

70. The acts, practices and misrepresentations and omissions of material facts by

Defendants, as alleged above, constitute deceptive acts and practices within the meaning of

A.R.S. 44-1521, et seq. Defendants acts were committed with the intent that Plaintiffs and the

members of the class would rely on Defendants deceptive acts, practices, misrepresentations and

omissions.

71. Defendants misconduct alleged in this cause of action is ongoing and continues

to present a threat to class members and the general public.

72. Defendants fraudulently concealed the wrongs complained of herein in a manner

designed to prevent Plaintiffs or the class from learning of Defendants conduct.

73. As a direct and proximate result of the complained-of actions of the Defendants,

the Plaintiffs and the members of the class have been damaged.

74. As a result of Defendants misconduct, Defendants have been and will be unjustly

enriched at the expense of Plaintiffs and class members. Specifically, Defendants have been

unjustly enriched by their receipt of millions of dollars from sales of Timeshare units and

interests in the Premiere Vacation Club deceptively sold to Plaintiffs and class members, whose

interests have lost value due to Defe ndants deceptions as described above.

75. Plaintiffs and class members seek an order of this Court ordering Defendants to

immediately cease such acts and additionally request an order that Defendants disgorge their illgotten

gains and award to Plaintiffs and class members full restitution of all monies wrongfully

acquired with interest and attorneys fees.

76. The actions of Defendants were willful, wanton, intentional and done with an evil

mind so as to justify the imposition of punitive damages.

77. Violations of the Arizona Consumer Fraud Act must be brought within one year

of discovery of the misrepresentations made by Defendants. In December 2002, Plaintiff Reed

attempted to reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told

that there was no availability at the resort. Plaintiff Reeds claims have only recently been

discovered, in or about January 2003, after Plaintiff Reed had a conversation with someone

knowledgeable about the Arizona timeshare industry. So too, Plaintiff Cates only recently

learned in July of 2003 that Defendants misled him and withheld information from him

concerning the types of room for which he was eligible based upon his membership in the

Premiere Vacation Club. Therefore, this claim is timely brought.

COUNT TWO

VIOLATION OF THE ARIZONA REAL ESTATE TIMESHARE ACT

(AGAINST ALL DEFENDANTS)

78. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as

if fully set forth herein.

79. Defendants sell accommodations as part of a timeshare plan, as defined in A.R.S.

32-2197.

80. In violation of 32-2197.01, Defendants have failed to maintain a one-to-one

purchaser-to-accommodation ratio as defined in that section. Defendants have engaged in a

pattern and practice of selling their Timeshares and Premiere Vacation Club interests without

maintaining the requisite ratio.

81. In violation of 32-2197.17, Defendants membership plans contain untrue

statements of material facts concerning the issues outlined previously in this complaint.

82. By reason of Defendants unlawful actions, misrepresentations and omissions,

Plaintiffs and the members of the class have been irreparably harmed and damaged in an amount

to be determined at the trial of this action.

83. The actions of Defendants were willful, wanton, intentional and done with an evil

mind so as to justify the imposition of punitive damages.

84. Violations of the Arizona code relating to timeshares must be brought within one

year of discovery of the misrepresentations made by Defendants. In December 2002, Plaintiff

Reed attempted to reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was

told that there was no availability at the resort. Plaintiff Reeds claims have only recently been

discovered, in or about January 2003, after Plaintiff Reed had a conversation with someone

knowledgeable about the Arizona timeshare industry. So too, Plaintiff Cates only recently

learned in July of 2003 that Defendants misled him and withheld information from him

concerning the types of room for which he was eligible based upon his membership in the

Premiere Vacation Club. Therefore, this claim is timely brought.

COUNT THREE

UNJUST ENRICHMENT AND IMPOSITION OF CONSTRUCTIVE TRUST

(AGAINST ALL DEFENDANTS)

85. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as

if fully set forth herein.

86. Defendants received from Plaintiffs and class members purchase monies,

maintenance fees and other expenses and fees that, but for the material misrepresentations and

omissions alleged herein, would not have been paid by Plaintiffs and the class.

87. As a result, Defendants will be unjustly enriched if they are allowed to retain such

funds. Plaintiffs and class members are entitled to restitution of all monies wrongfully obtained

by Defendants.

88. Such monies are traceable to Defendants, who are the current possessors of such

funds. Plaintiffs and class members have no adequate remedy at law if these monies are

dissipated. As a result of the relationships between the parties and the facts as stated above, a

constructive trust should be established over the monies paid by Plaintiffs and members of the

class, including management and maintenance fees and other expenses and fees charged by

Defendants.

89. Claims for unjust enrichment must be brought within four years of discovery of

the misrepresentations made by Defendants. In December 2002, Plaintiff Reed attempted to

reserve a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told that there was

no availability at the resort. Plaintiff Reeds claims have only recently been discovered, in or

about January 2003, after Plaintiff Reed had a conversation with someone knowledgeable about

the Arizona timeshare industry. So too, Plaintiff Cates only recently learned in July of 2003 that

Defendants misled him and withheld information from him concerning the types of room for

which he was eligible based upon his membership in the Premiere Vacation Club. Therefore,

this claim is timely brought.

COUNT FOUR

DECLARATORY AND INJUNCTIVE RELIEF

(AGAINST ALL DEFENDANTS)

90. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as

if fully set forth herein.

91. On each cause of action stated above, Plaintiffs and class members will be

irreparably injured in the future by Defendants misconduct to the extent that Defendants

continue to charge maintenance fees and to the extent that Plaintiffs and other class members are

still paying for the Timeshares and interests in the Premiere Vacation Club.

92. Plaintiffs, on behalf of themselves and the class, seek a judgment declaring that

Defendants must cease charging unauthorized maintenance fees.

93. Plaintiffs, for themselves and on behalf of the class, also seek injunctive relief

enjoining Defendants from the deceptive solicitation or sale of Timeshares and interests in the

Premiere Vacation Club, and the assessment or collection of fees resulting from any such sales

based upon the scheme described herein.

94. Plaintiffs and class members do not have a plain, adequate, speedy, or complete

remedy at law to address the wrongs alleged in this complaint, and will suffer irreparable injury

as a result of Defendants misconduct unless injunctive and declaratory relief is granted.

95. By reason of the foregoing, Plaintiffs and class members are entitled to

declaratory and injunctive relief as set forth above.

96. These claims must be brought within three years of discovery of the

misrepresentations made by Defendants. In December 2002, Plaintiff Reed attempted to reserve

a suite at Los Abrigados for early 2003. However, Plaintiff Reed was told that there was no

availability at the resort. Plaintiff Reeds claims have only recently been discovered, in or about

January 2003, after Plaintiff Reed had a conversation with someone knowledgeable about the

Arizona timeshare industry. So too, Plaintiff Cates only recently learned in July of 2003 that

Defendants misled him and withheld information from him concerning the types of room for

which he was eligible based upon his membership in the Premiere Vacation Club. Therefore,

this claim is timely brought.

COUNT FIVE

BREACH OF EXPRESS AND IMPLIED CONTRACT

(AGAINST DEFENDANTS ILX, SEDONA VACATION CLUB

AND PREMIERE VACATION CLUB)

97. Plaintiffs repeat and reallege the allegations contained in the paragraphs above as

if fully set forth herein.

98. All contracts in Arizona contain an implied covenant of good faith and fair

dealing. As alleged herein, Defendants failed to deal in good faith or fairly with Plaintiffs or the

class.

99. Plaintiffs and members of the class entered into agreements with the subsid iaries

of ILX, the Sedona Vacation Club and/or the Premiere Vacation Club. These agreements

included the Purchase Contract which incorporated by reference the Membership Plan, which

outlined the rights of ownership of the Timeshares or interests in the Premiere Vacation Club.

100. As alleged herein, Defendants represented in the Membership Plan that the

Timeshares and interests in the Premiere Vacation Club were being sold in accordance with

Arizona law. Therefore, Defendants breached the terms of the Membership Plan by failing to

maintain a proper accommodation to purchaser ratio.

101. The Membership Plan for the Timeshares also informed Plaintiff Reed and the

class that their maintenance fees would only be used for common areas and that no more than

10% of the fees collected from purchasers of the Timeshares would be used for the Excepted

Areas. Despite these representations, Defendants spent more than 10% of the collected

maintenance fees on the Excepted Areas and other non-common areas.

102. As alleged herein, the interests purchased by Plaintiffs and class members entitled

them to the use of certain facilities at Los Abrigados and other resorts on either an annual or biannual

basis. Defendants ILX, Premiere Vacation Club and Sedona Vacation Club breached the

Membership Plan and Purchase Contract by not providing adequate use of the accommodations

to Plaintiffs and the class. Additionally, the Purchase Contract was breached through the

improper usage of the maintenance fees, as alleged herein.

103. Plaintiffs and the class have been damaged by Defendants actions because their

Timeshares or interests in the Premiere Vacation Club have lost value and can only be sold at a

significant loss.

104. As a result of the foregoing, Plaintiffs and class members are entitled to rescission

of the contracts, or other damages.

105. Claims for breach of contract must be brought within six years of accrual of the

claim. In December 2002, Plaintiff Reed attempted to reserve a suite at Los Abrigados for early

2003. However, Plaintiff Reed was told that there was no availability at the resort. Plaintiff

Reeds claims have only recently been discovered, in or about January 2003, after Plaintiff Reed

had a conversation with someone knowledgeable about the Arizona timeshare industry. So too,

Plaintiff Cates only recently learned in July of 2003 that Defendants misled him and withheld

information from him concerning the types of room for which he was eligible based upon his

membership in the Premiere Vacation Club. Therefore, this claim is timely brought.

106. This claim arises out of contract, and Plaintiffs are both eligible for and entitled to

an award of their attorneys fees pursuant to A.R.S. 12-341.01.

REQUESTS FOR RELIEF

WHEREFORE, Plaintiffs, on behalf of themselves and class members, request

judgment and relief as follows:

1. An order certifying that the action may be maintained as a class action pursuant to

Rule 23 of the Arizona Rules of Civil Procedure.

2. Compensatory damages in an amount to be proven at trial, including any damages

as may be provided for by statute.

3. An order requiring disgorgement of, imposing a constructive trust upon, or

impounding Defendants ill- gotten monies and profits, or freezing Defendants assets, and

requiring Defendants to pay restitution to Plaintiffs and all class members, including return of

purchase prices and fees that Plaintiffs and class members would not have paid if they had not

been improperly induced to purchase the Timeshares or interests in the Premiere Vacation Club,

and/or restoring all funds acquired by means of any act or practice declared by this Court to be

an unlawful, fraudulent, or unfair business act or practice.

4. An award of pre-judgment and post-judgment interest.

5. An order providing for declaratory and injunctive relief, including the following:

a) an order enjoining Defendants from soliciting sales of or selling

Timeshares or interests in the Premiere Vacation Club using the deceptive

sales practices identified above;

b) an order declaring that Defendants maintenance fees charged or assessed

were used for improper purposes; and

c) other equitable relief that the Court may deem proper.

6. An award of punitive damages against Defendants for their intentional, malicious

and wanton misconduct.

7. An award of attorneys fees and the costs and expenses of this litigation, including

experts fees.

8. Any other or further relief that this Court deems just and equitable.

JURY DEMAND

Plaintiffs hereby demand a trial by jury.

DATED: September 23, 2003.

BONNETT, FAIRBOURN, FRIEDMAN &

BALINT, P.C.

__________________________________

Andrew S. Friedman

2901 N. Central Avenue, Suite 1000

Phoenix, Arizona 85012

(602) 274-1100

MILBERG WEISS BERSHAD HYNES &

LERACH LLP

Janine L. Pollack

Daniel Altman

One Pennsylvania Plaza

New York, New York 10119-0165

(212) 594-5300

VAUGHN LEDBETTER PLLC

James E. Ledbetter

315 South Willard Street

Cottonwood, Arizona 86326-4611

(928) 649-8777

Attorneys for Plaintiffs

Patrick

Tucson, Arizona

U.S.A.