timeshare exit firm wins fee award where plaintiff failed to show key elements of claim

Club Exploria, LLC v. Aaronson, Austin, P.A., 2022 WL 19479011, No 6:18-cv-576-JA-DCI (M.D. Fla. Nov. 4, 2022) (R&R)

“[F]ew parties are as adversarial—or as litigious—as timeshare developers and timeshare exit companies.” Plaintiffs, timeshare developers, sued defendants, a timeshare exit law firm and its named partner, alleging various claims, including claims under the Lanham Act and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). The court granted summary judgment to defendants on all counts. Plaintiffs filed a fruitless “Motion for New Trial,” essentially seeking reconsideration of the Court’s decision on the tortious interference claim. The Eleventh Circuit affirmed the Court’s rulings. Defendants sought to recover their attorneys’ fees; the magistrate recommended granting the motion in part.

The Lanham Act provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” A nonexclusive list of factors that district courts may consider includes “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.”

This was an exceptional case. To survive summary judgment on their Lanham Act claim Plaintiffs needed to produce at least some evidence satisfying five elements; that: “(1) the ... statements were false or misleading; (2) the statements deceived, or had the capacity to deceive, consumers; (3) the deception had a material effect on the consumers’ purchasing decision; (4) the misrepresented service affects interstate commerce; and (5) the plaintiff has been, or likely will be, injured as a result of the false or misleading statement.” Although there were genuine issues of material fact as to the first and second elements, there was no evidence presented as to the third element.

In response to defendants’ motion, plaintiffs stated only: “[r]egarding materiality, it is difficult to argue that [the alleged misconduct] would not influence the Club Exploria Owners’ decision to hire Defendants.” There was “no citation to legal authority and no citation to any record evidence that even arguably supports this proposition. Even without hindsight, Plaintiffs should have known that a single conclusory statement was wholly inadequate to rebut the obvious lack of evidence supporting the materiality element.” [There are arguments that literal falsity—which was all that plaintiffs argued—should be presumed material; sometimes those arguments are persuasive, as when the falsity goes to the core of the product or service.]

In other timeshare exit cases, including cases against these defendants, the plaintiffs presented evidence of materiality, including an expert report. Even if owners contacting Aaronson as a result of exposure to the allegedly false websites was evidence of materiality, there wasn’t such evidence here: almost all of the putatively affected owners were referred to defendants by outside lawyers. Only one found defendants through the website on which they hosted the allegedly false and misleading advertisements. Plaintiffs neither deposed that owner nor included them in their expert’s damages report. The result in the other case against these defendants “evinces, at least to some extent, that if Plaintiffs had diligently pursued their claims, there was a substantial likelihood that their claims would have proceeded to trial.” That was not favorable to them in the fees inquiry.

Plaintiffs argued that the presence of genuine issues of material fact regarding the first two Lanham Act elements militated against awarding attorney fees here. “However, missing one element is just as fatal to a claim as missing multiple elements. Moreover, the Court’s finding as to the first two elements had little to do with the strength of Plaintiffs’ litigation position.”

Also, the court found that plaintiffs lacked Lanham Act standing for similar reasons: they presented no evidence creating “a genuine issue of fact as to whether the nonpayment was caused by [Defendants].” Interestingly, after the sj motions were briefed, defendants made a settlement offer that would have waived all claims to attorneys’ fees, which expressed confidence that they would prevail and be entitled to such fees, which the court labeled “prescient.” Instead, despite the “obvious, fatal defect” in the Lanham Act claims, which defendants pointed out and plaintiffs devoted only a “single, conclusory sentence” to in their briefing, and despite the reasonable settlement offer, plaintiffs chose to gamble on surviving summary judgment. Thus, this case was exceptional because it “stands out from others with respect to the substantive strength of the party’s litigating position” and in “the unreasonable manner in which the case was litigated.” Zealous pursuit of a claim shouldn’t result in a fee award, “but there is no such protection for a lackadaisical pursuit.”

FDUTPA: A prevailing party in a FDUTPA action may recover reasonable costs and attorney’s fees from the nonprevailing party according to the court’s discretion, which does not require exceptionality but does require consideration of case- and party-related factors, as well as deterrence. Here, those factors weighed in favor of such recovery.

“During this litigation, the Court voiced disapproval of Plaintiffs’ litigation tactics,” including multiple motions to extend the summary judgment deadline and others. Exploria had the ability to satisfy an award of fees given its size. Deterrence was relevant because the district “has become inundated with scores of timeshare-related disputes. Many of these disputes are similar to this case …. [A]warding attorney fees here would serve to deter timeshare-related claims that are not legitimate or that will not be diligently pursued.” The court also noted that generally, the timeshare plaintiffs were substantially larger than the timeshare exit companies. “This disparity creates some risk that a timeshare developer (or multiple timeshare developers) may weaponize ultimately meritless litigation to pressure a specific timeshare exit company—which may be operating legally—out of business.” (This was not said to accuse these particular plaintiffs of malfeasance but to make a general observation about deterrence.)

As here, a claim that isn’t pursued diligently “ends up wasting the Court’s limited resources and draining the resources of the smaller defendants.” This case took three years, ending because of plaintiffs’ failure to present enough evidence. “This failure is especially egregious as to the Lanham Act claim because Plaintiffs’ failure went to materiality and causation—basic, related elements—and developing the necessary evidence may have been as simple as deposing the Affected Owner who found Defendants through Defendants’ website.”

As to the merits, “[u]ltimately, the success of a plaintiff’s FDUTPA claim is tied to the federal Lanham Act claim for false advertising.” Even though the court found FDUTPA to be inapplicable because defendants were not engaged in “trade or commerce,” had the court reached the merits it was likely that the FDUTPA claim would have also failed for the same reasons as the Lanham Act claim. “To the extent Plaintiffs believed that they could piggyback off the result in another case without putting in the requisite effort to develop the necessary evidence in their own case, that belief was unreasonable.”

Thus, even though there was insufficient evidence of bad faith, and insufficient efforts by the parties to explain whether the claim was brought to resolve a significant legal question under FDUTPA, the factors weighed in favor of a fee award.

However, defendants weren’t entitled to their appellate fees, because the appeal concerned only tortious interference.