BILL ANALYSIS                                                                                                                                                                                                    Ó





                             SENATE JUDICIARY COMMITTEE
                         Senator Hannah-Beth Jackson, Chair
                             2015-2016  Regular Session


          AB 634 (Calderon)
          Version: April 28, 2015
          Hearing Date: June 28, 2016
          Fiscal: No
          Urgency: No
          TH   


                                        SUBJECT
                                           
                   Vacation Ownership and Time-Shares: Owners List

                                      DESCRIPTION 

          This bill would amend the Vacation Ownership and Time-Share Act  
          of 2004 to prohibit a time-share owner's association from  
          publishing its list of owners or providing a copy of the list to  
          any time-share interest owner or to any third party, or from  
          using or selling the list for commercial purposes, except to  
          accomplish legitimate association business, as defined.

                                      BACKGROUND  

          Time-shares, or vacation ownerships, are terms that generally  
          describe a system where owners occupy a property for short  
          periods of time each year while on vacation.  This contrasts  
          with more traditional common interest developments, like  
          condominiums and residential subdivisions, which are usually  
          occupied year-round.  The regulation of timeshares began in  
          earnest in 1981 when the industry was widely perceived as being  
          prone to high-pressure sales tactics and rampant consumer fraud  
          (an era now half-jokingly referred to as the "crime-share"  
          days).  Stringent state regulations for time-shares were built  
          into the Subdivided Lands Law that regulated common interest  
          developments.  Although time-share regulations and references  
          are now found throughout state law, they are principally located  
          in the Vacation Ownership and Time-share Act of 2004 (VOTA).   
          (Bus. & Prof. Code Sec. 11210 et seq.)

          Under current law, both VOTA and related provisions in the  








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          Corporations Code governing nonprofit mutual benefit  
          corporations grant members of time-share plans the right to  
          inspect the plan's business records, including membership lists,  
          contact information, and allocations of voting rights, for  
          specified purposes.  Recently, the Court of Appeal for the Third  
          Appellate District reviewed this grant of access to time-share  
          plan records in WorldMark, The Club v. Wyndham Resort  
          Development Corp. (Cal. App. 3d Dist. 2010) 187 Cal.App.4th  
          1017.  In that case, the owner of an interest in a vacation  
          time-share requested access to time-share resort owner  
          WorldMark's membership records, including the e-mail addresses  
          of its members, so the owner could circulate a petition  
          proposing amendments to the corporation's bylaws.  The petition  
          at issue "expressed a concern over the domination of WorldMark's  
          board of directors by current or former Wyndham executives, the  
          failure to conduct meetings at which member motions could be  
          raised and voted upon, the absence of any independent owners on  
          the board, and the lack of meaningful member representation in  
          the governance of WorldMark."  (Id. at 1023.)  According to the  
          court, the proposed amendments, if adopted would have revised  
          WorldMark's bylaws to address these concerns.  (Id.)  WorldMark  
          denied the owner's request, and instead offered to mail copies  
          of the petition at the owner's expense to all other owners at a  
          cost in excess of $260,000.  WorldMark's correspondence to the  
          owner denying his request cited "privacy concerns," the  
          membership record's "tremendous commercial value," as well as  
          WorldMark's "serious concerns about the detrimental effect the  
          petition measures would have on the Club if implemented."  (Id.  
          at 1025.)  Rejecting WorldMark's contention that existing law  
          did not require it to produce the e-mail addresses of its  
          members, the court held that Section 8330 of the Corporations  
          Code required the disclosure to allow the owner of a time-share  
          interest to communicate with other members about the  
          corporation's business.

          This bill, sponsored by the American Resort Development  
          Association, would amend VOTA to, among other things, prohibit a  
          time-share owner's association from providing a copy of its list  
          of owners to any time-share interest owner except as required to  
          accomplish legitimate association business.  This bill would  
          define "legitimate association business" to include a proxy  
          solicitation for any purpose, including, but not limited to, the  
          recall of one or more of the board members elected by the  
          owners, the discharge of a manager or management entity, or  
          disposition of time-share interests acquired by the association.  







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           This bill would also expressly state that Section 8330 of the  
          Corporations Code shall not apply to time-share associations  
          governed under VOTA.

                                CHANGES TO EXISTING LAW
           
           Existing law  states, subject to specified restrictions, that a  
          member of a nonprofit mutual benefit corporation may do either  
          of the following:
           inspect and copy the record of all the members' names,  
            addresses and voting rights, at reasonable times, upon five  
            business days' prior written demand upon the corporation which  
            demand shall state the purpose for which the inspection rights  
            are requested; or
           obtain from the secretary of the corporation, upon written  
            demand stating the purpose for which the list is requested and  
            tender of a reasonable charge, a list of the names, addresses  
            and voting rights of those members entitled to vote for the  
            election of directors, as of the most recent record date for  
            which it has been compiled or as of a date specified by the  
            member subsequent to the date of demand.  (Corp. Code Sec.  
            8330(a).)
           Existing law  specifies that the rights set forth in the above  
          provision may be exercised by any member, for a purpose  
          reasonably related to such person's interest as a member.   
          Existing law specifies that where the corporation reasonably  
          believes that the information will be used for another purpose,  
          it may deny the member access to the list. (Corp. Code Sec.  
          8330(b).)

           Existing law  permits the corporation to deliver to the person or  
          persons making the demand a written offer of an alternative  
          method of achieving the purpose identified in said demand  
          without providing access to or a copy of the membership list,  
          provided the alternative method reasonably and in a timely  
          manner accomplishes the proper purpose set forth in the demand.   
          (Corp. Code Sec. 8330(c).)

          Existing law  , the Vacation Ownership and Time-share Act of 2004,  
          regulates the creation and sale of time-share interests in a  
          time-share plan, and the creation and operation of exchange  
          programs that facilitate the voluntary exchange of time-share  
          interests.  (Bus. & Prof. Code Sec. 11210 et seq.)

           Existing law  states that the books of account, minutes of  







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          members and governing body meetings, and all other records of  
          the time-share plan maintained by the association or the  
          managing entity shall be made available for inspection and  
          copying by any member, or by his or her duly appointed  
          representative, at any reasonable time for a purpose reasonably  
          related to membership in the association.  (Bus. & Prof. Code  
          Sec. 11273(a).)

           Existing law  specifies that the records shall be made available  
          for inspection at the office where the records are maintained.   
          Upon receipt of an authenticated written request from a member  
          along with the fee prescribed by the governing body to defray  
          the costs of reproduction, existing law directs the managing  
          entity or other custodian of records of the association or the  
          time-share plan to prepare and transmit to the member a copy of  
          any and all records requested.  (Bus. & Prof. Code Sec.  
          11273(b).)

           Existing law  provides that every governing body member shall  
          have the absolute right at any time to inspect all books,  
          records, and documents of the association and all real and  
          personal properties owned and controlled by the association.   
          (Bus. & Prof. Code Sec. 11273(d).)

           Existing law  requires the association to maintain among its  
          records a complete list of the names and addresses of all owners  
          of time-share interests in a time-share plan.  Existing law  
          provides that the association shall update this list no less  
          frequently than every six months, and that unless otherwise  
          provided in the time-share instruments, the association may not  
          publish this owner's list or provide a copy of it to any  
          time-share interest owner or to any third party or use or sell  
          the list for commercial purposes.  (Bus. & Prof. Code Sec.  
          11273(e).)

           This bill  directs a time share owner's association not to  
          publish the list of owners or provide a copy of it to any  
          time-share interest owner or to any third party, or use or sell  
          the list for commercial purposes, except as required to  
          accomplish legitimate association business.

           This bill  states that if an owner of a time-share interest in  
          the time-share plan makes a request to the owner's association  
          to communicate by mail with the membership of the association,  
          the board of administration of the owners' association or the  







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          managing entity shall do the following:
           determine whether the requested mailing pertains to legitimate  
            association business.
           if the requested mailing pertains to legitimate association  
            business, the requested mailing shall be made within 30 days  
            after receipt of the request and payment by the owner of  
            actual costs.
           if the requested mailing will not advance legitimate  
            association business, the board or the managing entity shall,  
            within 30 days after receipt of the request, notify the  
            requesting owner in writing and shall indicate the reasons for  
            the rejection.

           This bill  states that the owner who requests the mailing shall  
          pay the association in advance for the association's actual  
          costs in performing the mailing, and that the association shall  
          make a good faith effort to minimize the costs of the mailing,  
          including by use of a less expensive delivery method with  
          respect to those owners who have previously consented to the  
          less expensive delivery method.

           This bill  provides that if the requested mailing is a proxy  
          solicitation to recall one or more board members elected by the  
          owners or to discharge the manager or managing entity, and the  
          board of administration or managing entity does not complete the  
          requested mailing within 30 days after receipt of a request from  
          an owner and payment of actual costs, the superior court in the  
          county where the time-share plan is located may, upon  
          application from the requesting owner, summarily order the  
          requested mailing.

           This bill  provides that in the event the court orders the  
          mailing, it may order the board or managing entity to pay the  
          owner's costs, including attorney's fees reasonably incurred to  
          enforce the owner's rights, unless the board or the managing  
          entity can prove it refused to distribute the materials in good  
          faith because of reasonable doubt about whether the requested  
          mailing pertained to legitimate association business.

           This bill  states that it is unlawful for the board of  
          administration of the association or managing entity to refuse  
          to distribute a communication requested by an owner if the  
          requested mailing would address legitimate association business.

           This bill  defines "legitimate association business" to include a  







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          proxy solicitation for any purpose, including, but not limited  
          to, the recall of one or more of the board members elected by  
          the owners, the discharge of a manager or management entity, or  
          the disposition of time-share interests acquired by the  
          association.

           This bill  specifies that Section 8330 of the Corporations Code  
          shall not apply to time-share associations.

           This bill  makes other technical and conforming changes, and  
          related legislative findings and declarations.
          
                                        COMMENT
           
           1.Stated need for the bill
           
          The author states:

            Section 11273(e) of the Business and Professions Code, which  
            is part of the time-share law, was written to protect the  
            privacy of the names and addresses of the owners of time-share  
            interests within time-share plans, such that the owner's  
            association of a time-share plan could not be required to  
            publish or provide a copy of the list of owners to any  
            time-share interest owner or third party or use or sell the  
            list for commercial purposes.  
           
            In 2010, the Court of Appeals of the State of California,  
            Third Appellate District, held that California Corporations  
            Code Section 8330 - not the time-share law -- applies to those  
            time-share associations that are organized as non-profit  
            corporations.  Since many of the time-share associations are  
            organized as non-profit corporations, the court decision meant  
            that those time-share owners lost the privacy rights that had  
            been accorded them under the time-share law.  Section 8330 . .  
            . grants members of a nonprofit mutual benefit corporation the  
            right to inspect and copy, or obtain for a reasonable charge,  
            the record of names, addresses, and voting rights of the  
            members of the corporation upon 10 days written notice,  
            provided it is for a purpose [reasonably] related to the  
            person's interest as a member.    
           
            As a result of the ruling any time-share owner (belonging to  
            an association organized as a nonprofit mutual benefit  
            corporation) can easily get their association's lists and sell  







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            those lists to any third party.  The fact is, time-share  
            associations frequently have a membership list that can easily  
            be in excess of ten thousand members.  Such a list on the open  
            market would easily be of substantial value, particularly to  
            unscrupulous parties who prey upon time-share owners.   
            Specifically, these lists end up in the hands of companies  
            that claim they can sell time-share units.  Typically they  
            demand an up-front fee and then usually fail to sell the  
            time-share.  In addition, dissemination of such a list can  
            expose personally identifiable information of owners to third  
            parties, which information might not otherwise be publically  
            available (keeping in mind that a timeshare is not an owner's  
            primary residence, and the information provided in many cases  
            is not public information).

           2.Maintaining Owner Privacy
           
          The right to privacy is a fundamental right protected by Article  
          I, section 1 of the California Constitution.  The Legislature  
          has expressly declared that "all individuals have a right of  
          privacy in information pertaining to them," and has found that  
          "[t]he right to privacy is being threatened by the  
          indiscriminate collection, maintenance, and dissemination of  
          personal information and the lack of effective laws and legal  
          remedies."  (Civ. Code Sec. 1798.1.)  This bill seeks to build  
          upon the fundamental right to privacy by setting strict limits  
          on the ability of time-share owners to obtain the names and  
          addresses of other owners in a time-share plan.  This bill would  
          limit the release of a time-share plan's membership list only  
          for those requests involving legitimate association business,  
          which would include such things as proxy solicitations for the  
          recall of one or more of the board members elected by the  
          owners, the discharge of a manager or management entity, or the  
          disposition of time-share interests acquired by the association.  
           This bill would also prohibit any party from selling the  
          membership list or using it for commercial purposes.

          Recent news stories indicate that fraudulent time-share buyback  
          and remarketing firms acquire time-share plan membership lists  
          in order to find potential clients, and then use high pressure  
          sales tactics to convince time-share owners that their firm  
          could sell the owner's time-share interest at a profit.   
          According to one news report:

            [One such company] would tell timeshare owners that the  







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            company had a buyer ready and waiting to purchase their  
            timeshare, they just had to pay a small closing fee that would  
            be returned to them with the payment for the timeshare within  
            60 to 90 days.  The closing fee ranged from $1,500 to $3,000  
            depending on how desperate the timeshare owner was to sell.   
            According to [a federal prosecutor], "the sole objective . . .  
            was to get your credit card number."

            [The company would then] stall customers past the time they  
            could challenge the deal paid with their credit card, . . .  
            [and] employees [would] read from a script and [keep] a "log  
            of lies" in a spreadsheet in order to keep track of which part  
            of the script had already been told.  An employee told  
            investigators in a videotaped statement that, "they kept the  
            lie going by stating that the buyer had backed out, they got a  
            new offer on the property.  It's going to take at least  
            another 30 to 60 days."  (Andrea Day and Valerie Patriarca,  
            Dream Vacations Turned Timeshare Nightmares  
             [as of Jun. 17, 2015].)

          By restricting the ability of time-share interest owners to  
          obtain a copy of their time-share plan's membership list, this  
          bill could help prevent unscrupulous firms from obtaining these  
          lists and using them for marketing purposes.
           3.Preserving the Ability to Communicate
           
          While this bill would help protect the privacy of time-share  
          plan members and could potentially shield them from unwanted  
          marketing, it would also remove the ability for members to  
          identify and communicate with each other except in very narrow  
          circumstances.  As currently drafted, this bill would prohibit a  
          time-share management association from disclosing its membership  
          list to any party except for requests involving legitimate  
          association business, which, as described in Comment 2 above, is  
          limited to certain types of proxy solicitations.  In effect,  
          this bill may leave owners with no practical alternative for  
          communicating with each other about issues of common concern,  
          such as discussing the need to amend their time-share plan's  
          bylaws, as was the case in WorldMark v. Wyndham Resort  
          Development Corp.

          In WorldMark, the court noted, "[a] danger exists in allowing  
          too free an access to membership lists; however, the potential  
          for abuse must be balanced against a member's legitimate needs  
          and rights to utilize lists in election contests and for  







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          purposes reasonably related to a member's interest."  (187  
          Cal.App.4th at 1030.)  The challenge is to "draw a proper  
          balance between a member's need for adequate access to  
          membership lists and the need of a corporation to protect itself  
          from wrongful exploitation of an important asset."  (Id. at  
          1031.)

          The policy question raised by this bill is how to find the  
          appropriate balance between maintaining an owner's privacy,  
          protecting a valuable corporate asset, and preserving the  
          ability for owners to effectively communicate with one another.   
          As drafted, this bill arguably favors the interests of the  
          management of a time-share plan and of a time-share plan  
          association too heavily.  With this bill, management or an  
          association may be able to effectively prevent the delivery of  
          messages it does not agree with by denying owners - who likely  
          will never meet each other - the resources they need to contact  
          each other.

          To re-balance the preservation of privacy against the legitimate  
          need for owners to communicate with one another, the Committee  
          may wish to consider amendments that would permit a time-share  
          association to share its membership list with an owner only for  
          a purpose reasonably related to their interest as an owner, and  
          that would authorize the association to withhold the list if it  
          reasonably believed the recipient would use the list for a  
          different purpose or disclose its contents to another party.

           4.Owner Mailing Addresses
           
          One of the changes to the Vacation Ownership and Time-share Act  
          proposed in this bill is to insert the word "mailing" before  
          "addresses" in a provision that requires an association to  
          maintain among its records a complete list of the names and  
          addresses of all owners of time-share interests in a time-share  
          plan.  (See Bus. & Prof. Code Sec. 11273(e).)  As the court  
          explained in the WorldMark case, some associations have  
          attempted to use similar statutory language to limit the  
          disclosure of time-share plan owners' e-mail addresses in an  
          effort to frustrate inexpensive and swift communication among  
          owners about matters of common concern.

          In WorldMark v. Wyndham Resort Development Corp., WorldMark  
          argued, among other things, that Section 8330 of the  
          Corporations Code, which requires nonprofit mutual benefit  







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          corporations to allow members to "[i]nspect and copy the record  
          of all the members' names, addresses and voting rights," did not  
          require WorldMark to grant time-share owners access to other  
          owners' e-mail addresses because the word "address," as used in  
          Section 8330, was not sufficiently broad enough to include  
          electronic mail addresses.  (See WorldMark, 187 Cal. App. 4th at  
          1034.)  Rejecting WorldMark's argument, the court interpreted  
          the phrase "address" as encompassing such things as e-mail  
          addresses, and ruled that WorldMark's proposed alternative to  
          contact other owners using postal mail at a cost to the  
          requestor in excess of $260,000 was an unreasonable effort to  
          frustrate owner communication.  (See Id., at 1030-37.)  The  
          court held that "WorldMark may not thwart a member's legitimate  
          attempt to communicate via e-mail" through narrow  
          interpretations of the word "address."  (See Id. at 1037.)

          Since the scope of the word "address" has been a previous source  
          of confusion, it is important to note that the addition of the  
          word "mailing" before "address," as proposed in this bill, would  
          not change the fact that member or owner e-mail addresses are  
          part of a time-share plan's records for the purposes of the  
          Vacation Ownership and Time-share Act, and would be subject to  
          disclosure to other owners under the provisions of that Act.  To  
          the extent time-share plan managers and administrators collect  
                  e-mail addresses from owners or members as part of their regular  
          business practices, these addresses would either constitute  
          "mailing addresses" subject to disclosure as a record of an  
          owner's address, or "other records of the time-share plan  
          maintained by the association or the managing entity" that must  
          be "made available for inspection and copying by any member."   
          (See Bus. & Prof. Code Sec 11273(a).)  Further, since one of the  
          functions of the Act is to facilitate relevant communication  
          among time-share interest owners, a time-share association would  
          have to consider the use of e-mail addresses and similar forms  
          of electronic delivery when carrying out its obligation under  
          this bill to mail communications on behalf of an owner using a  
          less expensive delivery method than postal mail where feasible.


           Support  :  American Resort Development Association -- Resort  
          Owner's Coalition

           Opposition  :  Two Individuals

                                        HISTORY







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           Source  :  American Resort Development Association
           Related Pending Legislation  :  None Known

           Prior Legislation  :

          AB 905 (Gaines, Ch. 88, Stats. 2015) amended the Vacation  
          Ownership and Time-share Act of 2004 to provide that required  
          copies of public reports pertaining to time-share interests and  
          required copies of disclosures pertaining to exchange programs  
          may be provided in a digital format at the discretion of the  
          purchaser.  This bill also exempted licensed real estate brokers  
          or salespersons from the duty to conduct a reasonably competent  
          and diligent visual inspection of a time-share property and to  
          disclose all facts materially affecting the value or  
          desirability of the property to a prospective purchaser when, as  
          a condition of transfer, the prospective purchaser would receive  
          a copy of the public report, provided the property has not been  
          previously occupied.

          AB 126 (Hall, 2013) would have required a time-share association  
          to obtain a time-share plan member's consent before sharing  
          their contact information with another owner, and would have  
          provided an alternate method for owners to communicate with  
          other members in the time-share plan.  This bill died in the  
          Assembly Judiciary Committee.

          AB 2290 (Hill, 2012) would have prohibited a time-share  
          association from publishing a list of owners or providing a copy  
          of the list to time-share interest owners.  This bill would have  
          established a protocol for an owner of a time-share interest to  
          communicate with the membership of a time-share association  
          about legitimate association business without providing access  
          to, or a copy of, the association membership list to the  
          requesting owner.  This bill died in the Assembly Judiciary  
          Committee.

          AB 2518 (Hall, 2012) was gutted and amended to be substantially  
          similar to AB 2290.  This bill died in the Senate Rules  
          Committee. 

          AB 2252 (Montanez, Ch. 697, Stats. 2004) consolidated and  
          revised the body of time-share vacation property law,  
          streamlined the regulatory approval process of time-share plans,  
          and added new consumer protections and disclosures to create the  







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          Vacation Ownership and Time-share Act of 2004.

           Prior Vote :

          Assembly Floor (Ayes 79, Noes 0)
          Assembly Privacy and Consumer Protection Committee (Ayes 11,  
          Noes 0)

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