Facts

A class action was filed against Tarsadia Hotels, which managed San Diego's Hard Rock Hotel, seeking damages of millions of dollars in losses claimed by the purchasers of units at the hotel.

PLAINTIFFS' CONTENTIONS:
Plaintiffs claimed that the purchasers of one or more of the 420 condominium-style studios and suites, priced from $350,000 to more than $2 million bought the units with the understanding that the rental of units would be sufficient to cover monthly payments. In addition, some of the purchasers were being foreclosed upon by the lenders.

Plaintiffs alleged that what the defendants sold was a security under both state and federal law and was not registered as such. Further it was alleged that the purchasers had been defrauded.

DEFENDANTS' CONTENTIONS:
Tarsadia denied that the sale of units was a security and suggested that the real culprit was the economy and its devastating effect of both the real estate market and tourism.

Result

U.S. District Judge Dana Sabraw dismissed the case. The judge concluded that plaintiffs failed to allege facts which to establish that the sale of units amounted to a security and failed to make a showing that they expected profits as an inducement to purchase.