The class action lawsuit was filed in the Northern District of Illinois, on behalf of all persons who purchased club memberships in "Distinctive Retreats by Abercrombie & Kent, Inc." during the period of time Abercrombie & Kent, Inc. licensed its name to Tanner & Haley, seeking to pursue remedies for violation of common law causes of action, causes of action arising from violations of applicable consumer fraud legislative protections and under the Securities Exchange Act of 1934 (the "Exchange Act"). The action was originally filed on November 3, 2006 in the United States District Court for the District of New Jersey, transferred to the Northern District of Illinois and docketed on April 30, 2007, and an amended complaint was filed on May 11, 2007, pursuant to court order.
The action, Case No. 07-2284, is pending in the United States District Court for the Northern District of Illinois against several defendants for violation of common law fraud, negligent misrepresentation, consumer fraud and breach of guarantee. In addition to common law causes of action and causes of action arising from violations of applicable consumer fraud legislative protections, this is a federal Class action brought under the Securities Exchange Act of 1934 on behalf of persons who purchased securities, that is bonds, representing membership in a luxury destination club for which, upon information and belief, they each paid $390,000 or more and the amount paid was less than the face value of the bonds. The Complaint further alleges that said bonds were purchased in reliance upon a mix of material non-disclosures of facts and materially false and misleading statements which caused plaintiff and the plaintiff Class to erroneously believe that defendant Abercrombie & Kent, Inc. was the owner and operator of the club, and the issuer and backer of both the bonds and of the guarantee that the face value of the bonds, also known as the "membership deposit" amount, would be one hundred percent refundable.
The Complaint further alleges that Abercrombie & Kent, Inc., after enticing hundreds of people to become members in the club, announced that it was no longer permitting its name to be used for the project, notwithstanding the aggressive marketing campaign that had featured Abercrombie & Kent's hallmark name front and center on all approved marketing materials, offering documents and the membership agreement. The fact that it was simply lending or licensing its name, if true, was not disclosed in any of the materials given to the prospective club members.
Ultimately, Tanner & Haley disclosed that it was the owner of the club, and stated that Abercrombie & Kent, Inc. would no longer license its name to Tanner & Haley. On July 24, 2006, Tanner & Haley filed for protection under Chapter 11 of the United States Bankruptcy Code. The bonds are thus illiquid and non-refundable by Tanner & Haley at present and the Class members are general unsecured creditors of Tanner & Haley in that bankruptcy. Given, inter alia, the unauthorized change in the debt to equity ratio and other matters disclosed to date in the pending bankruptcy proceedings, the Class stands to lose most, if not all, of the value of their securities. In fact, the assets of the Club have been sold, pursuant to an order of the bankruptcy court approving same but for an amount leaving very little if anything to pay the claims of the unsecured creditors.
On May 11, 2007, the plaintiffs filed a Second Amended Complaint. On July 20, 2007, Judge George W. Lindberg approved lead plaintiffs, approved plaintiffs' selection of counsel and consolidated related actions. The defendants filed several motions to dismiss the Second Amended Complaint.
According to an article dated November 15, 2007, on October 23, 2007, the U.S. District Court for the Northern District of Illinois denied defendants' motion to dismiss fraud and securities fraud claims against them by persons who paid money for memberships to a club that constituted bonds, finding that the plaintiffs adequately pled their claims with particularity. … The district court found that the plaintiffs adequately alleged the who, when, what and where required to satisfy the particularity requirements under the Private Securities Litigation Reform Act and Rule 9(b). The district court denied the defendants' motion to dismiss the fraud claims, but granted the motion dismiss the negligent misrepresentation and consumer protection claims.
On November 6, 2007, the plaintiffs filed a Third Amended Class Action Complaint. A Fourth Amended Complaint was then filed on July 16, 2008. Defendants again filed motions to dismiss on July 30, 2008. On August 27, 2008, the plaintiffs filed a motion to certify the class. On September 23, 2008, the judge granted the motion in part, dismissing claims V & VI of the complaint but requiring defendants file answer to the remaining claims. On November 10, 2008, the Honorable George W. Lindberg signed the Memorandum Opinion and Order denying the plaintiffs' motion for class certification.
On December 5, 2008, certain defendants filed motions for summary judgment. On March 24, 2009, the Honorable George W. Lindberg signed the Memorandum Opinion and Order granting the defendants’ pending motions for summary judgment. On April 17, 2009, the remaining defendants filed a motion for summary judgment.
On September 22, 2009, the Court entered the Memorandum Opinion and Order signed by Honorable George W. Lindberg. Defendants A&K's and Kent's joint amended motion for summary judgment is granted as to Count I, plaintiffs' claim that A&K and Kent violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. On the present factual record, the Court finds that plaintiffs did not purchase securities governed by the Exchange Act. The Court declines to exercise its pendent jurisdiction over the remaining state law claims and the remaining state law claims are dismissed.
On October 21, 2009, the plaintiffs filed a Notice of Appeal in the Seventh Circuit Court of Appeals. On November 1, 2010, the Court entered the Mandate from the Seventh Circuit, dismissing the appeal.