Fla district court rejects argument that “completely unsubstantiated advertising” is literally false on sj

Diamond Resorts U.S. Collection Development, LLC v. US Consumer
Attorneys, P.A., 2020 WL 5514158, No. 18-80311-CIV-REINHART (S.D. Fla. Jul. 31,
2020)

Another timeshare case. (Student note topic alert!)

Defendant Newton Group Transfers sent a mailer to Samuel
Street in West Chester, Pennsylvania, believing him to be the owner of a
timeshare. The mailer said (in relevant part): “We are attempting to contact
you because our records suggest that you are an owner who may be affected by
new Timeshare Laws allowing developers to raise maintenance fees with no
restriction.” Diamond argued that this statement was literally false as to Mr.
Street, whose timeshare is in Florida, which allegedly has no such laws. The
court disagreed. (There’s an interesting, unexplored “targeted v. untargeted”
issue here—to the extent that this was an individualized pitch, I think literal
falsity should be an option, just as a salesperson who represents that a
mortgage is the right choice for a particular individual should be held to a
higher standard than a general ad touting “the right mortgage for you!” which,
in an ad directed to the world at large, is puffery.)

Anyway, literal falsity requires assessment in context. “As
the meaning of a statement becomes less clear … and it becomes susceptible to
multiple meanings, the statement is more likely to be merely misleading.”

Diamond moved for partial summary judgment on falsity,
arguing that, under Florida law and Diamond’s timeshare contracts, (1) no
timeshare managing entity can raise maintenance fees without restriction and
(alternatively) (2) even if some managing entity can do it, a developer cannot.

Housekeeping: no partial summary judgment was available for
the other defendants because the evidence didn’t establish their legal
responsibility for the mailer.

Merits: “[T]he parties agreed that the threshold question of
literal falsity depends only on the text of the Mailer.” The mailer didn’t say
that Street actually owned a timeshare, where that was located, or reference
Florida/Florida law. The mailer therefore—implicitly treating this as
nontargeted advertising, which seems appropriate on this record—couldn’t be
literally false unless “at least, in or about the fall of 2017 when the Mailer
was sent, there were no new timeshare laws anywhere in the United States that
allowed a timeshare developer to increase maintenance fees without restriction.”
There was no such evidence in the record.

Diamond attempted to rely on the testimony of the corporate
representative for Newton Group Exit, LLC, that the mailer’s mention of “new
Timeshare Laws” was referring to amendments to Florida law, but Diamond didn’t
show why that was binding on Newton Group Transfers, LLC, a separate entity,
and regardless that’s not what the mailer said. Nor did Diamond cite evidence
that Street’s timeshare fell under the terms of the contracts in the record,
even assuming that those contracts could render the mailer literally false.

Finally, Diamond tried to get the court to adopt the rule of
Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm.
Co., 290 F.3d 578 (3d Cir. 2002), that “completely unsubstantiated advertising”
 is literally false, but the court declined.
Among other things, Novartis was an appeal from a grant of a preliminary
injunction; even though the movant had the burden of persuasion, a factfinder can
draw an adverse inference from the respondent’s failure to provide affirmative
evidence to refute the movant’s claim; that wouldn’t be appropriate here. I’m not sure I see the civil procedure distinction here–if anything accepting this inference for a PI seems like a bigger deal, but ok.

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