preyed on twice over: timeshare and timeshare exit lawyer squabble with consumers as collateral damage

Westgate Resorts,
Ltd. v. Sussman, No. 6:17-cv-1467-Orl-37DCI (M.D. Fla. May 31, 2019)
OK, this fact
shocked me: about 35% of Westgate’s timeshare buyers default some time during
their loan periods, according to the decision here in this battle in the
timeshare wars.  That is an appalling
number, indicating to me a need for greater regulatory action to protect
consumers from a purchase that seems unlikely to work out well, especially
given individual Americans’ distaste for strategic default. [My in-laws bought
timeshares from a different company and it seems like something that satisfies
them, though from the outside it looks like fighting with the management is
half of the fun for them.  Sounds
nightmarish to me.]
The court here seems
pretty unimpressed by both sides: Westgate (which the court calls The Trapper)
sells timeshares via warranty deed, with the aforementioned default rates, and
has a right of first refusal that seems to make it pretty hard to resell the interest,
not that there is a very deep market for such sales.  It will sometimes accept deeds in lieu of
foreclosure from owners who want out and can demonstrate financial hardship, typically
seeking an additional payment therefor, though apparently this doesn’t always
work and default is the only option for unwilling owners.  (Even if you don’t have a mortgage, ongoing
HOA fees continue to be required, so owners can’t just abandon the property.)
Meanwhile, defendant
Sussman (The Weasel)
is a California-based real estate attorney who claims a specialty in
ridding timeshare owners of their timeshare obligations. He does this by
directing timeshare owners to stop all payments to their timeshare, sending
demand letters to the timeshare company, and recording another owner on the
property  deed—all for a fee, of course.
At the end of the day, he tells the timeshare owners they got off scot-free
thanks to his skillful negotiation tactics and ability to drive a hard bargain.
But, alas, it’s not so. Rather, from the timeshare company’s perspective … and
contractually, the owners’ obligations are undiminished. Despite this
inconvenient truth, Mr. Sussman kept on.
(The third group
here is owners: The Prey.) Westgate sued Sussman for tortious interference with
existing contracts and violation of Florida’s  Deceptive and Unfair Trade Practices Act. The
court here grants partial summary judgment to Westgate, leaving
causation/damages issues for trial.
There were various
tactics at issue here, and sometimes Sussman worked through middlemen—exit
companies—but the court found that Sussman directed owners to stop all payments
to Westgate as part of the cancellation process.  Westgate categorically rejected Sussman’s
methods, but Sussman nonetheless told owners they’d successfully exited their
timeshares. “Should trouble follow—such as an owner being told they still owe
money to Westgate, Westgate seeking foreclosure, or Westgate suing the
owner—Mr. Sussman is long gone. As his retainer ‘clearly’ states, he ‘will not
represent them if there is a lawsuit.’” When there is a foreclosure, Sussman
would send a congratulatory letter—not mentioning the word “foreclosure”
because, to Sussman, “[owners] don’t even understand the nature of these
things. [They] are laypeople.” He phrased it as the developer “agree[ing] to
take back their time share”—he sees agreement “by virtue of their conduct”
foreclosing.  [I feel that the California
bar might also want to take an interest.]
On tortious
interference, the court found that Westgate had mostly proven its case as to
Sussman’s instructions to stop paying all obligations. “In Florida, the
elements of tortious inference with contractual relations are: (1) the
existence of a contract; (2) the defendant’s knowledge of the contract; (3) the
defendant’s intentional procurement of the contract’s breach; (4) absence of
any justification or privilege; and (5) damages resulting from the breach.” The
sole hitch was damages, as it was with Sussman’s practice of sending “deeds
back” to Westgate, which led owners to believe that they had no further
obligations.  “As if that weren’t enough,
with these congratulatory letters he instructed the owners that any further
attempt to collect would be invalid.” 
Similarly, Sussman’s practice of sending “resignation” letters and deeds
to third parties (without offering a right of refusal to Westgate) also
intentionally interfered with Westgate’s approved exit process. However, there
was no evidence in the record that any owners stopped payments because of these
practices.  For example, “[w]hile it is
tempting to infer that a congratulatory letter following ‘resignation’ would
induce future non-payment, there is no evidence of that fact.”  A jury would have to resolve the issue as to
both causation and damages. Likewise, the supposed deeds to third parties were
“intentional, unjustified, and non-privileged interference with these owners’
Right of First Refusal obligation.”  But
there wasn’t a showing that Sussman’s interference actually led to further
damages to Westgate—a jury would have to decide.
As for damages,
Westgate claimed over $3.8 million, but the court wasn’t prepared to find that
Sussman’s intentional interference proximately caused all the damages from
delinquent accounts for which it had a letter of representation from
Sussman.  It wasn’t clear that all the
unpaid amounts were proximately connected to Sussman’s conduct, or what methods
he used for each of the claimed owners. While payments stopped at the beginning
of Sussman’s or an exit company’s representation “could perhaps logically be
attributed to an initial direction to stop payments,” that wasn’t necessarily
so for continued nonpayment at the back end.
FDUTPA: FDUTPA prohibits
“unfair or deceptive acts or practices” committed “in the conduct of any trade
or commerce.” As I’ve noted previously, it’s broader than the Lanham Act in
scope and requires: “(1) a deceptive act or unfair practice; (2) causation; and
(3) actual damages.” “To satisfy the first element, the plaintiff must show
that ‘the alleged practice was likely to deceive a consumer acting reasonably
in the same circumstances.’” This is an objective test that doesn’t require
actual reliance.
The court found that
Sussman’s business practice and exit methods were deceptive. Directly or via an
exit company, he “prey[ed] on owners helplessly ensnared by the Sisyphean
obligations of their timeshare trap…. Each method Mr. Sussman employs is likely
to mislead reasonable Westgate owners to believe they are no longer
contractually obligated on their timeshares.” Although the court didn’t find
that his website/ads misled consumers—making my point that FDUTPA is broader
than the Lanham Act’s false advertising coverage of “commercial advertising or
promotion”—his initial setup of telling Westgate owners that his methods could
relieve them of their contractual obligations was deceptive. So were his
letters telling timeshare owners they successfully exited, regardless of method.  Causation, however, remained an issue for the
jury.
In sum, the court
ended with a poem: “The Weasel reneged on his promise. The Prey remains trapped
in the snare. The Trapper is looking for bounty, we’ll see if the jury gets
there.”

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