A man purchased an interest in a timeshare. Later, a corporation acquired a substantial portion of the timeshare interests and the annual membership assessments nearly tripled. The man asked to inspect the books and records of the association as permitted under the Timeshare Owner’s Association and Management Act (“Timeshare Act”). The association provided some files but the man sued to obtain more. The trial court ordered more documents be produced and later allowed the documents to be used in filing a class action. Finally, the trial court ordered that under the notice provision of the Timeshare Act, the association was required to forward a message to all owners providing information about the records request and providing contact information for the lawyer filing the class action.
The Court of Appeals affirmed the order to produce more records. The Timeshare Act authorizes good faith records requests that are made for a proper purpose. The Court held that the man’s intent to inspect the records to determine the reasons for the increase in assessments and to pursue a lawsuit was a proper purpose. The Court applied the “proper purpose” standard used in the related context of a shareholder’s request to review corporate records. Under that standard, the request must enable the owner to “derive any information that will enable him to protect his interest.” Tucson Gas & Elec. Co. v. Schantz, 5 Ariz. App. 511, 513 (App. 1967).
The Court of Appeals reversed the trial court’s order requiring the association to circulate a notice to all owners regarding the records request and including the contact information of the attorney preparing the class action suit. The Timeshare Act requires the association to mail the owners any materials provided by an owner “if the purpose of the mailing is to advance legitimate association business.” A.R.S. § 33-2210. The Court held that the requested notice benefited the owner and his attorney in their attempts to start a class action but that it did not advance “legitimate association business.”
Judge Orozco authored the opinion; Presiding Judge Jones and Judge Thompson concurred.
Posted by: Brian K. Mosley