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

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

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.

from Blogger http://tushnet.blogspot.com/2023/04/timeshare-exit-firm-wins-fee-award.html

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