Friday, May 31, 2019

Timeshare wars: no Lanham Act standing for property owner

Wyndham Vacation Ownership v. Reed Hein & Assoc., LLC, 2019 WL 2232241, No. 18-cv-02171-GAP-DCI (M.D. Fla. May 23, 2019)

Somebody seriously needs to write a story about the litigation war going on between timeshare companies and firms that sue timeshare companies. Wyndham is a timeshare company, and Reed Hein is “a timeshare exit company” directed and controlled by non-lawyer defendants, Reed, Hein, and Paranteau. Wyndham alleged that defendants ran false and misleading advertising, purporting to have “safe,” “legitimate,” or “guaranteed” means of “exiting” Wyndham owners from their timeshare contracts. “After successfully luring Wyndham Owners into paying exorbitant fees for its services, [defendant] TET instructs them to stop making payments on their timeshare contracts, which they do,” but TET doesn’t disclose the adverse consequence of breach. TET then would hire the lawyer defendants “to engage in fruitless negotiations with Wyndham for a fixed fee.” The lawyers allegedly would send boilerplate demand letters to Wyndham, demanding that it stop communicating with their client, but never work with any Wyndham entity to legitimately terminate a timeshare contract. Instead, they allegedly used “deceptive and unlawful” strategies such as having the owner execute a quitclaim on the timeshare interest without Wyndham’s knowledge or consent. Afterwards, or after the timeshare contracts are foreclosed on, TET and the lawyer defendants allegedly falsely tell their clients that they successfully cancelled or transferred their timeshare contracts.

Wyndham sued for false advertising in violation of the Lanham Act, contributory false advertising in violation of the Lanham Act, tortious interference with contractual relations, violation of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), and civil conspiracy to commit tortious interference.

Lanham Act standing: Not present.  The injury alleged came because owners stopped making payments on their timeshare contracts, but that injury didn’t flow directly from TET’s advertising. None of the ads allegedly included instructions to stop paying, and the complaint alleged that the instructions occurred after TET solicited owners. The injury was too remote. This also got rid of contributory false advertising.

Tortious interference: Defendants argued that, as counsel for Wyndham owners, they were agents with privilege to interfere, but this was an affirmative defense that didn’t clearly appear on the face of the complaint. To the contrary, the complaint alleged that defendants weren’t agents. Likewise, the complaint didn’t indicate that the owners were predisposed to commit a breach; rather, they were allegedly deceived into doing so.

FDUTPA: Same problem as the Lanham Act claim. [There was no analysis of the relevant statutory language, even though it is not limited to “commercial advertising or promotion” and otherwise is worded quite differently; FDUTPA is an FTCA-analogue rather than a Lanham Act analogue and on its face looks to cover far more commercial conduct than advertising, which affects whether the covered conduct is the cause of the harm.  Courts don’t like to do two analyses of the same basic claim, but I think they probably should in this situation.]

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