Amended Complaint (DE-82).The Court heard argument of ...

[Pages:23]Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 1 of 23

U N IT ED STA TES DISTRIC T C O U RT SO UT H ER N D ISTR ICT O F FL O R ID A CaseNo.11-CV-61904-SEITZ/SIM O NTO N H AR RY PER RET and M ELINDA PERRET,individually, andonbehalfofa11thosesim ilarly situated, Plaintiffs,

VS.

W YNDHAM VACATION RESORTS,INC.and FAIRSHARE VACATION OW NERS ASSOCIATION ,

D efendants. /

ORDER GRANTING M OTION TO DISM ISSAND CLO SING CASE THISCAUSE isbeforetheCourtontheDefendants'M otiontoDismissSecond

AmendedComplaint(DE-82).TheCourtheardargumentofcounselatahearingheldonAugust

8,2012.Plaintiffs'SecondAmendedComplaintarisesoutofthesaleandm anagem entof tim esharevacation propertiesinFlorida.Plaintiffsassertthatthesaletransactionswere m isleadinganddeceptiveandthatthem anagementcostsassessedbyDefendantsareexcessive andunreasonable.Defendantsseekstodism issal1sixcountsoftheSecondAmendedComplaint forfailureto stateacauseofaction upon w hich reliefcan be granted. Because Plaintiffscannot stateacauseofactionuponwhichreliefcan begrantedand,based on Plaintiffs'argum entsatthe hearing,anyam endmentwouldbefm ile,Defendants'M otiontoDism issisgrantedand

Plaintiffs'SecondAmendedComplaintisdismissedwithprejudice.

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 2 of 23

1.FactsAlleged in theSecondA mended Complaint Introductiont

DefendantW yndhnm VacationRtsorts,lnc.(W yndhnm)advertises,sells,andmanages timesharepropertiesinFlorida.DefendantFairshareVacationOwnersAssociation(Fairshare) isthetrusteeforthebeneficiariesoftheW yndham Trust(Trust).TheTrustbeneficiaries

purchasedtimesharepropertiesfrom W yndham andvoluntarilyplaced som eoftheirproperty

rightsintotheTrust.PlaintiffsgenerallyallegethatDefendantsweredeceptiveandm isleading

in

theirsaleandm

anagem

ent of tim

eshare properties.

Specifically ,

Plaintiffs'Second

A

m

ended

Complaintallegessixcausesofaction:(1)equitablereliefagainstbothDefendants;(2)breachof

tsduciarydutyagainstFairshare;(3)bxeachofsduciarydutyagainstW yndham;(4)violationof

Florida'sDeceptiveandUnfairTradePracticesAct(FDUTPA)againstW yndham;(5)breachof

contractagainstbothDefendants;and(6)fraudbyW yndham.

Overthecolzrseofm orethanthreeyears,Plaintiffsenteredintoeighttransactionswith

Defendants.Thetlrsttransactionwasthepurchaseofatim esharevacationpropertyatwhatis

knownastheBonnetCreekResort,A Condominium (BonnetCreek).Thereafter,each

transaction,exceptthelast,involvedthepurchastofadditionalinterestsin BonnetCreek, therebyincreasingPlaintiffs'ownershipinterestinBonnetCreek.z W itheachtransaction,

lsomeoftheinform ationinthissectionisnotdirectlypledintheSecondAmended Complaint.However,itcanbegleaned from readingtheSecondAm endedComplaintin

conjunctionwiththetransactiondocumentsattachedtotheComplaintandsubmittedby

DefendantsinsupportofthtirM otiontoDism iss.

zplaintiffsfinalptzrchaseactually exchanged theirinterestin Borm etCreek foran interest inan out-of-stateproperty.ThattransactionisnotrelevantbecausePlaintiffs'proposedclass consistsofpurchasersofW yndham timesharepropertiesinFlorida.

2

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 3 of 23

Plaintiffsexecutedessentiallythesam edocum ents-aPurchaseand SaleAgreem entandan Assignm entAgreem ent.lntheAssignm entAgreem ent,Plaintiffstransferredtheirtduse

,

occupancyandpossessoryrightsin theProperty''totheTrust.FairshareistheTrusteeofthe TrustandasTrusteeitentered intoaM anagementAgreementwith W yndham , bywhich W yndham w asto m anagetheTrustand thtPlan setup by theTrustA greem tnt.3

ThtPlan allowedpropertyownerswhotransferredtheiruse,occupancy andpossessory interestsinto theTrustto receivepointsbased on the sizeoftheirproperty interestw hich could thenbeusedto spendtim eatotherpropertiesforwhichtheTrustheld rights.Thus,by transferringtheirpropertyinterestin BonnetCreek into the Trust,Plaintiffsreceived points. Plaintiffscouldthen usethepointsto stay atotherproperties,w hoseow nersparticipated in the Trustand Plan,instead ofatBonnetCreek. Thenature ofthePlan isattheheartofseveralofthe legalissuesinvolved in thism otion.

TheBonnetCreekpropertywasmanagedbythepropertyowners'association(POA).

TheBonnetCreekPOA enteredinto amanagementagreementw ithW yndham Vacation M anagement,lnc.N eithertheBonnetCreekPOA norW yndhnm VacationM anagem ent,Inc.are partiestothisaction.AspartoftheTnzstm anagement,W yndham ,asTrustM anager,agreedto collectthePOA fees,holdthem inescrow,andremitthem tothePOA orW yndham Vacation M anagem ent,Inc.A saresult,Plaintiffspaidallfees,theirPOA fees,anyPOA assessm ents,as wellasthePlanfeestoW yndham asmanageroftheTrustandthePlan.A chartDefendantsused

atthehearing,andnotobjectedtobyPlaintiffs,settingouttherelationshipsbetweenPlaintiffs

3ThePlaniscurrentlyknownasClubW yndham Plus.

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 4 of 23

and a1lthese entitiesisattachedto thisO rderasExhibit1.4 TheM isrepresentationsandOmissions

TheSecondAm ended Com plaintallegesthatthetwoDefendantsm ademisleading representationsandom issionspriortoandduringthesaleofthetimeshares,which m isrepresentedtheactualnature,identity,andtinancialand legalconsequencesofthesaleand therespectiverights,obligations,anddutiesofthepartiesarisingfrom thesale.Defendants characterizedthetransactionasasimplepurchaseofatim esharevacationbutthepurchaseis bundledwithin acomplexandconfusingsetoftransactionswhichrelateto tinancial, m anagem ent,m aintenance,trust,andotherlegalrelationshipsandobligationsundertakenbythe purchaserand seller.By m isrepresenting the natureofthetransactions,D efendantsinduced Plaintiffsto enterinto financiallyonerousrelationships.

Thesaletransactionactuallyinvolvesm ultipletransactions:(1)thepurchaseandsaleofa fractionalfeesimpleinterestinrealestate;(2)thevoluntarytransferofthefeesimpleinterestto theTrust;(3)anassignmentofpointstothepurchaserwhichcanbetradedforvacationtimeat certainW yndham ownedproperties;(4)anagreementbythepurchasertoengageW yndhamcontrolledpropertymanagersandtopaythem fees;(5)anagreementtopaymonthlymaintenance feestoW yndham propertymanagers;and(6)arelinquishmentorwaiverbythepurchaserofthe

righttofreely selltheirtimeshareinterestwithoutgivingW yndhsm thetirstrightofrefusalon anytransaction.Plaintiffsallegethattheseagreem entsexplicitlyimposeuponDefendants

4W hiletheCourtrecognizesthatthechartcannotbeconsidered,itisan accurate representation oftheparties'relationships,whichareestablishedbythevariousagreements amongthepartiesandwhich arebeforetheCourt.M oreimportantly,itisanextrem elyhelpful aid in understandingtherelationships.

4

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 5 of 23

variousfiduciarydutiesandobligations.PlaintiffsalsoallegethatFloridalaw imposesfiduciary

dutiesonDefendants,specifically,FloridaStatutejj721.56(4)and721.13(2)(a).

lnsupportofthefraudandFDUTPA claim s,PlaintiffsallegethatW yndham, through its

agents,m

adefraudulentrepresentationsto

Plaintiffsandfailedto

disclose m

aterial facts ,

on

and

imm ediatelypriortothedatesofexecutionofthecontractsattachedtotheSecondAmended

Com plaint,ineludingFebruary23,2007,August27,2007,M arch 15, 2008,April4,2010,and

October15,2010.Specifically,W yndham'sagentsstatedthat:(1)thetimeshareswere

profitable;(2)thevalueofthetimeshareswashigherthantheiractualvalue;(3)thepurchase

priceforthttimesharewasreasonable;(4)thattheunitswereworthmorethanW yndham was

charging;(5),thatDefendants'm anagem entandm aintenancefeeswerereasonableandwould

remainreasonable;and(6)thattheunitsweredesirableandrtadilyrented,whichwouldallow

Plaintiffstorecouptheircosts.PlaintiffsalsoallegethatW yndhnm 'sagentsfailedtoinform

Plaintiffsthatm anagem entandmaintenancefeeswereunreasonable,excessive,andoverstated;

thattheunitswerenotin greatdem andoreasilyrented;andthattheunitswerenotworthwhat

W yndham claimedtheywereworth.Plaintiffsclaim thatthesestatementsandom issionswere

madebythepeoplewhosignedthecontractsonbehalfofW yndhnm andbythefollow ing

W

yndham

agents:H am

id K abili,PaulGreen,M

ichaelA bram

ow itz,M

aria X

.Pinochet ,

Javier

Vegas,andJavierSabio.Asaresultofthesestatements,whichW yndhnm anditsagentsknew

werefalse,Plaintiffswereinducedtoenterintomultiplepurchaseand saleagreem entsoverthe

courseofseveralyears.

Afterthe closingofthetransactions,D efendantsbegin collecting thefeesand costs

associatedwiththetim eshareownership.Plaintiffsassertthatthesefeesandcostsareso

5

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 6 of 23

excessive,unreasonable,andunrelatedtoDefendants'actualcostsandexpensesastounjustly

emichDefendantsandim poseanextrem edetrimentonPlaintiffs. TheAgreem ents?

Eachtim ePlaintiffspm chasedaninterestinBonnetCreektheyexecutedaPurchaseand

SaleAgreem entbywhich Plaintiffspurchasedattfeesim plerealpropertyinterestasatenant-in-

comm onwithotherOwnersintheProperty.''Plaintiffsthenvoluntarilychosetotransfertheir

?tu

st

,

occupancy

and

possessoryrights''in

BonnetCreekto

theTrustby

executing

an

A

ssignm

ent

Agreemtnt. TheAssignmtntAgrtem entincorporatedbyreferencetheTrustAgreem ent

betweenW yndham andFairshare. TheTrustAgreement6wassetup Sttoperm ittheBtnetk iariestouseand exchangethe

UseRightsavailablethroughtheTrust.''PersonswhosubjectedtheirpropertytotheTrust

Agreem entweretobeallocatedpointsthatcouldbeusedto reserveTrustproperties.Underthe TrustAgreem ent,theTrustee,Fairshare,agreedtodeveloporcontractwithathirdpartyto

provideareservation system toenablememberstoreservetheuseofTrustproperties.Underthe

TrustAgreem entthemembersalsoagreedto allow theTrusteetocollectthePOA fees,holdthe

feesinescrow ,andremitthefeestothePOAswhenappropriate.Section 10.02oftheTrust

Agreem ent,entitled??progrnm Fee,''states'.

(a) Amount:TheamountoftheProgrnm FeeshallbedeterminedbytheTrusteeas neededtocoverthecostofoperationandadministrationofthePlan(includingthe

operation and adm inistration oftheTrustandtheA ssociation and,to theextentthatthe

sW hilePlaintiffsentered intomultipletransactionsw ithDefendants, thelanguageinthe documentsused iseitheridenticalorverysim ilar.Therefore,theCourtwillonly setoutthe relevantlanguageonce.

6A copyoftheTrustAgreementcanbefoundbeginningatDE-77-1at30 .

6

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 7 of 23

Tnlstisresponsibletherefor,theoperation ,

m

aintenance,repairand

replacem

entofthe

TrustProperties).TheTrusteemayestablishvaryingfeesnmongM embersprovided

there is a reasonable basis for such

fee structure .

The Program

Fee shallbedeterm

ined

priortoJanuary 1ofeachyearinconnectionwiththeburdgetprocessforthePlan .

(b) Use:TheProgram FeewillbeusedbytheTrusteetofundtheoperationand

administrationofthePlan(includingtheoperationandadministrationoftheTnlstandthe

A

ssociation

and,to

the

extentthatthe

Trustisresponsibletherefor ,

the

operation,

maintenance,repairandreplacem entoftheTrustProperties).

Section 10.03oftheTrustAgreement, entitled$fgP)0A Fees,''states,inpart,?s-f'heamountofthe (PIOA FeewillbedetenninedbyeachM ember'srespective(PIOA andnotbytheTrustee. The amountofthe(PIOA Feewill(be)determinedbytheboardofdirectorsorothergoverningor

managingauthorityofthe(PJOA whichgovernssuchM ember'sPropertyInterest.''Section

10.06oftheTrustAgreement,entitledStspecialAssessm ents,''setsouthow shortfallsinthe Program FeeandPOA Feewillbeassessed.

Fairshare,asTrustee,also

entered

into

a M

anagem

ent A

greem

entw

ith

W

yndham

?

.

UnderthetermsoftheM anagem entAgreem ent,FairshareretainedW yndham asthtm anagerof

theTrustandthePlan.Undersection5.3oftheM anagem entAgreem ent,themanager,subject

tothesupervision oftheTrustee,isrequiredtoprepareandsubm itabudgettotheTrusteebased

onthePOA budgets,determ ineeachmem ber'sProgram Fee,anddeterm inewhetheraspecial

assessm entisnecessary. Section 6.1oftheM anagem entA greem ent,entitled f?Fee,''states:

dtM anagershallreceiveamonthlycompensationequaltoone-twelfth(1/12th)offvepercent

(5%)oftheProgram Ftts,specialandotherassessments(otherthanthePOA Fees)collected

from M em bersinconnectionw iththeoperationofthtTrust.''Section 6.2oftheM anagem ent

7A

copy oftheM

anagem entA greem entcan befound beginning atDE-77-2 at29 .

A tthe

tim

e of that M

anagem

entA greem

ent,W

yndham

w asknow n asFairfield Com

m

unities ,

Inc.

7

Case 0:11-cv-61904-PAS Document 121 Entered on FLSD Docket 08/28/2012 Page 8 of 23

Agreement,entitledStExpenses,''setsoutthecostsandexpensesincurredbytheM anagerthatthe

Trustm ustreim burse.

In

addition

to these agreem

ents,

BonnetCreek,through

itsBoard

of D

irectors ,

entered

into anagreem entwithW

yndham

Vacation M

anagem

ent ,

lnc.to

have

W

yndham

V acation

M

anagem

ent,lnc.m

anageBorm etCreek .

SeeDE-82-10. W

yndham

V acation M

anagem

ent ,

Inc.

isaseparatelegalentityfrom W yndham andhasnotbeennam edasaDefendantinthiscase .

Plaintlffv'Claimsb

CountIoftheAmendedComplaintallegesthatPlaintiffswillsufferirreparableha.rm if

Defendantsarenotenjoinedfrom continuingtoselltimesharesusingtheircurrentmethodsandif

Defendantsarenotenjoinedfrom continuingtoimposeinflatedmanagementandmaintenance

fees.CountIalsoseeksadeclaratoryjudgmentfindingthatDefendants'salesmethodsare

fraudulent,unconscionable,and inequitable.

Count1I,againstFairshare,allegesthatFloridaStatutejj721.56(4)and721.13(2)(a)

imposefiduciaryobligationsonFairsharewhichFairsharehasbreachedby:(a)assessing

m anagementfeesfarinexcessofW yndham 'soperatingbudgetandfarinexcessoftim eshare

industry

standards w

hich

violated

com

m

on

considerationsofunconscionableness ,

adhesion,and

m utuality;(b)engagingin self-dealingbyenteringintoam anagem entagreem entwhere

W yndham actedasboththesellerandmanagerofthetimeshareproperties;(c)engagingin

self-dealingbyenteringintoamanagementagreementwhereW yndham wastherecipientof

benefitswhichwouldnotbeaffordedto anarm s-lengththirdpartym anager;(d)engagingin

'Despitepreviousinstructionsfrom

theCourtto avoid

shotgun

pleadings ,

severalcounts

ofthe

Second A

m

ended

Com

plaintincop

orate nearly

every

allegation ,

both

priorand

future,

into the count.

8

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