Monday, April 02, 2018

Timeshare company can sue anti-timeshare law firm under Florida unfair competition law

Orange Lake Country Club, Inc. v. Castle Law Group, P.C., No: 17-cv-1044-Orl-31DCI, 2018 WL 1535719 (M.D. Fla. Mar. 29, 2018)

Plaintiffs are entities involved in selling timeshares; defendants promise to help timeshare owners get out of their contracts. Defendants allegedly use misleading advertising to solicit Orange Lake owners, claiming a high likelihood of success, when in reality they are rarely successful. Further, Castle Law allegedly advises its clients to breach their contracts with Orange Lake as a way of increasing the chance that Orange Lake will agree to let them out of their contracts.

Plaintiffs alleged false or misleading communications from Castle Law in which it “guaranteed timeshare owners it would relieve them of their timeshare obligations within one year to eighteen months.” Castle Law didn’t dispute having made this statement or others, but referred to its standard contract, which states that “Client understands and agrees that there is no guaranteed result of the Firm’s services or that Client will recover money or other property as a result of the Firm’s engagement. Client understands and agrees that there is no way to determine the time frame in which the Client’s case will be resolved and that there is no guarantee regarding the time required to resolve your Claims.”  But “a truthful disclosure is not necessarily sufficient to overcome the net impression caused by a misleading communication. Even if every Castle Law customer signed an engagement letter with the quoted language – something that cannot be determined at this stage of the proceedings – it would not necessarily require dismissal.”

On Florida Deceptive & Unfair Trade Practices Act claims, the plaintiffs alleged that defendants violated FDUTPA by soliciting the Orange Lake owners misrepresenting to the Orange Lake owners that Castle Law could legally represent them in Florida courts and falsely informing clients who were Orange Lake owners that their timeshare matters had been resolved. These allegations failed to state a claim because these alleged violations would have [directly] harmed the Orange Lake owners, not the plaintiffs. In addition, though, plaintiffs alleged that defendants’ advertising falsely induced timeshare owners to stop making payments even though they were contractually required to do so. Further, the advertising allegedly falsely portrayed timeshare developers and associations, generally, and plaintiffs specifically, as systematically engaging in fraudulent and deceptive conduct, tarnishing their business reputations.  FDUTPA isn’t limited to consumers, and competitors need not be the only parties aside from consumers that can bring FDUTPA claims.  Though the Lanham Act claims failed here (see below), the FDUTPA claims survived because of the allegation about lost contractual payments.

Lanham Act false advertising: The allegedly false advertising consisted of a website guarantee that Castle law would relieve timeshare owners of their timeshare obligations within 12-18 months from the date they sign up with Castle Law; a claim to have saved “6000+” customers “millions of dollars” defending against timeshare developers with express mention of one plaintiff; “[n]o matter your reason for wanting to get rid of your timeshare, Castle Law Group can help”; Resort Relief guarantees relief, promising “a 100 percent money back guarantee certificate for an added sense of security”; a claim of 93% success at cancellation, and again with an express mention of one plaintiff as a developer against whom it has achieved success. But the alleged injury to plaintiffs’ reputation caused by false claims that they were engaged in unlawful or illegal conduct couldn’t have happened as a result of these allegedly false statements.  “Misleading potential clients about Castle Law’s success rate in getting timeshare owners out of their contracts does not harm the reputation of timeshare developers or lenders.”  The implication is that lost contractual payments would solve the Lanham Act hurdle as well if otherwise properly alleged.

Section 817.41, Florida Statutes also makes misleading ads unlawful. But plaintiffs weren’t consumers and couldn’t allege that they relied on any of the advertising. Some courts have held that “when the party alleging misleading advertising is a competitor of the defendant in selling the goods and services to which the misleading advertisement relates, an allegation of competition is permitted to ‘stand-in’ for the element of direct reliance that a consumer is obligated to plead.”  But here, the parties didn’t compete; the plaintiffs “are in the business of getting people into timeshares, while the Defendants are in the business of getting them out. Though their target audiences necessarily overlap, the Plaintiffs and Defendants are selling entirely different services. They are adversaries, not competitors.”

No comments: