New Lawsuit Against Marriott Vacation Club

[MouseOfCards]

Just saw this strange lawsuit:

http://www.orlandosentinel.com/busi...s-marriott-timeshare-rico-20160524-story.html

 

[Dean]

I don't see any legs to this. The allegations center around items that are spelled out as not guaranteed including exchange options. Generally class action lawsuits are more about the lawyers than the plaintiffs but we'll see. I'd expect it to be thrown out fairly early if the news reports are a fair summary of the complaint itself.

 

[JimMIA]

That's a great illustration of how clueless some timeshare purchasers are.

 

[supersnoop]

I don't see any legs to this. The allegations center around items that are spelled out as not guaranteed including exchange options. Generally class action lawsuits are more about the lawyers than the plaintiffs but we'll see. I'd expect it to be thrown out fairly early if the news reports are a fair summary of the complaint itself.

That's not how I read it at all. It looks like Marriott put the properties into a REIT, and then sold portions of that trust to individuals, leading them to believe they were buying deeded real estate. They seem to lack consistency when adding properties to the trust and setting the points. It will be interesting.

 

[suebeelin]

Interesting. I used to do some anti trust law (only a few months as s summer associate). It would be cost prohibitive if they lost, given the triple damages, and they may settle out of court (usually the purpose of a class action).

Whether this could be applied to Dvc is another question- likely not given that each dvc contract is tied to a real estate interest, and converted into points. But a really good lawyer can come up with anything using legal theory that will hold some credence in the courts.

 

[21stamps]

I was in the timeshare business for 13 years, if you choose to purchase a time share without understanding what it actually is- then the fault is on the buyer. Yes, the salesperson explains it, but so many people buy on impulse without really comprehending what they are getting.

I think this happens with any vacation ownership company. Not just Mariott.

 

[supersnoop]

I was in the timeshare business for 13 years, if you choose to purchase a time share without understanding what it actually is- then the fault is on the buyer. Yes, the salesperson explains it, but so many people buy on impulse without really comprehending what they are getting.

I think this happens with any vacation ownership company. Not just Mariott.

Maybe I'm a little too sympathetic, but it sounds like Marriott was filing "deeds" that weren't really deeds. It seems like they were intentionally misleading people about what they were buying.

 

[drusba]

I do not know the Marriot timeshare points system or anything about representations made at time of sale so I cannot say anything as to the potential of the suit.

However, I do know generally about the type of claim being made. Many have a misconception when they hear there is a "racketeering" claim believing you are talking about something limited to organized crime. The federal Racketer Influenced and Corrupt Organizations Act (RICO) was originally passed with that organized crime purpose in mind but its terms are broad and today you see far more civil actions under RICO brought against otherwise legitimate defendants, which claims have nothing to do with organized crime. Basically all you need to state a claim and label someone as a "racketeer" is a defendant or defendants who are using an organization (including any company or just a loose knit group that has some appearance of being organized to commit acts) to conduct a pattern of racketerring activity, a broad term defined to mean little more than committing two or more similar fraudulent acts that amount to a violation of a federal criminal statute punishable as a felony, the most alleged ones being mail or wire fraud which generally just require mail, telephone or internet comunications that cross state lines which contain fraudulent representations. In other words, if in the action you have two or more claimants or class action members who were provided like alleged misrepresentations in promotional or other materials related to the sale, you have the potential for a clever plaintiff's attorney to create a RICO claim that might get beyond a motion to dismiss.

I assume the claimants' have also asserted state law claims including fraud but they need the federal RICO claim to keep the case in a federal court. The early battles will most likely be the defendants attempt to rid of the RICO claim on a motion to dismiss which, if granted, would result in any state law claims being dismissed for lack of federal jurisdiction. Barring a dismissal, the early battle will likely be over class action certification.

 

[21stamps]

Maybe I'm a little too sympathetic, but it sounds like Marriott was filing "deeds" that weren't really deeds. It seems like they were intentionally misleading people about what they were buying.

I'm not advocating that at all, and am curious to see what happens. I just find it hard to believe that they were intentionally misleading. What they are charged with would be a lot to risk to make a bit of profit.

 

[Dean]

That's not how I read it at all. It looks like Marriott put the properties into a REIT, and then sold portions of that trust to individuals, leading them to believe they were buying deeded real estate. They seem to lack consistency when adding properties to the trust and setting the points. It will be interesting.

It doesn't look like the owners in question own in the REIT (Marriott Trust points). When you boil it down it looks like they're concerned about the lost exchange inventory. Thus the basis for my assertion. But that's why I qualified that if the reports were accurate.

 

[supersnoop]

It doesn't look like the owners in question own in the REIT (Marriott Trust points). When you boil it down it looks like they're concerned about the lost exchange inventory. Thus the basis for my assertion. But that's why I qualified that if the reports were accurate.

That particular claim was the basis for a suit filed in 2014 and dismissed. That doesn't seem to be the actual topic of the article; just two paragraphs at the end.

 

[Dean]

That particular claim was the basis for a suit filed in 2014 and dismissed. That doesn't seem to be the actual topic of the article; just two paragraphs at the end.

This article http://therealdeal.com/miami/2016/0...-illegal-timeshare-scheme-seeks-class-action/ suggests that the plaintiffs own two weeks are crystal shores and it doesn't appear they own in the trust from the article.

 

[supersnoop]

This article http://therealdeal.com/miami/2016/0...-illegal-timeshare-scheme-seeks-class-action/ suggests that the plaintiffs own two weeks are crystal shores and it doesn't appear they own in the trust from the article.

Seems strange. I wonder if they converted to points. Otherwise they wouldn't really have standing in the case. They say they're seeking class action status, but if they don't actually own a "property" in the trust, then this would have to be an FCA case.

 

[Dean]

Seems strange. I wonder if they converted to points. Otherwise they wouldn't really have standing in the case. They say they're seeking class action status, but if they don't actually own a "property" in the trust, then this would have to be an FCA case.

It doesn't say they did and the paperwork for the destination program is worded as an exchange program. They might have also bought trust points but I didn't get that in the articles. It may be the info as presented isn't represented or it may be that a law firm was looking at a member to hang this on. Regardless I doubt it'll go far. I think most likely it'll be thrown out or at most, settled as a nuisance case but we'll see. their biggest problem is they bought 2 weeks at Crystal shores where Marriott priced it for weeks like DVC has for the bungalows. IIRC some weeks in the 3 BR were 6 figures per week.

 

[supersnoop]

It doesn't say they did and the paperwork for the destination program is worded as an exchange program. They might have also bought trust points but I didn't get that in the articles. It may be the info as presented isn't represented or it may be that a law firm was looking at a member to hang this on. Regardless I doubt it'll go far. I think most likely it'll be thrown out or at most, settled as a nuisance case but we'll see. their biggest problem is they bought 2 weeks at Crystal shores where Marriott priced it for weeks like DVC has for the bungalows. IIRC some weeks in the 3 BR were 6 figures per week.

I think they have a case for misrepresentation based on the "fake deeds." But it might get thrown out for lack of standing.

 

[Dean]

I think they have a case for misrepresentation based on the "fake deeds." But it might get thrown out for lack of standing.

It isn't much different than how DVC does this. They simply do a deed and recording for clarification and I'm sure they wish they'd done it as a trust. And it isn't at all different than how Bluegreen runs theirs where it's all in a trust (several actually). There's no home resort priority with Marriott or BG. The only functional difference with Bluegreen is you can reserve the week your points are based on but other than that exact week/unit or if you miss the deadline, everyone can reserve everything. I own Marriott Trust points (few) but bought them resale. I also enrolled my Marriott weeks into the destinations programs so I can reserve the inventory from the trust side.

Marriott is essentially 2 timeshare systems that coexist and interact not that much different than DVC's BVTC. Weeks owners can only reserve the week(s) they own at their resort and Trust owners can only reserve Trust Inventory. Each will sit empty and not be available to the other unless there is some other event causing them to cross over. For weeks to be available to Trust owners, a weeks owner who is enrolled must take points on their week and at that moment the week is available to anyone to reserve using points (destination or trust points). For Trust inventory to be available to weeks, a trust owner much reserve something that's come over from the weeks side as described above then then the weeks owners must be enrolled and take the points giving up their week. This puts the trust owner in the superior position crossing over.

 

[TiggerBouncy]

Whether this could be applied to Dvc is another question- likely not given that each dvc contract is tied to a real estate interest, and converted into points. But a really good lawyer can come up with anything using legal theory that will hold some credence in the courts.

I don't see how this particular case could be applied to DVC. Sure you could come up with something to try to apply to DVC, but in this case the issue is over charging closing costs and real estate taxes when you don't actually own anything. DVC is structured differently where you actually are tied to ownership / deeded property.

Or did I misread the complaint?

 

[drusba]

For the actual complaint go here http://www.nfllp.com/documents/Marriott_Lennen-Complaint.pdf. Have only glanced at it thus far but note the named claimants own both a legacy timeshare and one under the points system. They do not allege a federal RICO claim as implied by the article but allege only state law claims including Florida's RICO statute and base federal jurisdiction only on diversity (plaintiffs are citizens of a different state than any of the defendants).
* * *
After a quick read, this is not really a case that Marriott can defend by claiming it provided accurate information and that claimants cannot assert it was misrepresented. The main basis of the case is to actually challenge whether the Marriott points timeshare system, even as fully and accurately explained, is itself legal under Florida law. The case does not apply per se to the DVC system which uses an actual transfer of real property and has the owned resort priority period. However, it does appear to raise one issue that possibly relates to DVC and has not been determined by a court. Whether it is proper to have a system where the developer controls most aspects of the timeshare and its association after the property is sold rather than having the actual owners control. Disney does it via an agreement under which the purchasers appoint Disney as their designee for voting purposes. The complaint appears to allege that agreements, rules, or bylaws like that are not valid under Florida's statute.

Two separate classes are asserted, the legacy owners and points system owners, thus allowing a court to possibly dismiss one but keep the other if it believes the legacy owners lack standing. Marriott has an interesting decision to make. If it believes its point system meets all statutory requirements, it may actually want the case to proceed as a class action to bind the class of owners to a ruling on the legality of its system so it cannot be pursued again by others. That would be a risky move but likely one on the table when they discuss internally what to do.

 

[NotAMouse]

Interesting difference in the deeds. The Lennen/Marriott deed (available on the OC Comptroler site) purports to convey:

"the following described property:​

A timeshare estate as defined by section 721.05, Florida Statutes, more fully described as:​

4 Interests (numbered for administrative purposes: HO4815 & HO4816 & HO4817 & HO4818) in the MVC Trust ("Trust") evidenced for administrative, assessment and ownership purposes by 1000 Points (250 Points for each Interest), which Trust was created pursuant to and further described in that certain MVC Trust Agreement dated March 11, 2010, executed by and among First American Trust, FSB, a Federal savings bank, solely as trustee of Land Trust No. 1082-0300-00,(a.k.a. MVC Trust), Marriott Ownership Resorts, Inc., a Delaware corporation, and MVC Trust Owners Association, Inc., a Florida corporation not-for-profit, as such agreement may be amended and supplemented from time to time ("Trust Agreement"),a memorandum of which is recorded in Official Records Book 10015,Page 4176, Public Records of Orange County, Florida ("Trust Memorandum"). The Interests shall have a Use Year Commencement Date of January 01,2016 (subject to Section 3.5 of the Trust Agreement)"​

while a DVC deed conveys:

"the interest in real property (the "Ownership Interest" as that interest in real property is defined in the Declaration of Condominium described below), more fully described as follows:

An undivided [percentage]% interest in Unit [number] of [DVC resort], a leasehold condominium (the "Condominium"), according to the Declaration of Condominium thereof as recorded in Official Records Book [number], Page [number], Public Records of Orange County, Florida, and all amendments thereto (the "Declaration"); and subject to that certain Ground Lease by and between Disney Vacation Development, Inc., a Florida corporation ("DVD") and Walt Disney Parks and Resorts U.S., Inc. a, Florida corporation, effective [date], and any amendments thereto, a short form of which is recorded in the Public Records of Orange County, Florida, and any amendments thereto the "Ground Lease"); and subject to that certain Master Declaration of Covenants, Conditions and Restrictions recorded in the Public Records of Orange County, Florida, and all amendments thereto, and subject to easements and restrictions of record.​

The Use Year for this Unit begins on the first day of [month].

Grantee's Ownership Interest shall be symbolized as [number] Home Resort Vacation Points for purposes of administrative convenience only and for no other purpose. Home Resort Vacation Points are merely reflective of Grantee's Ownership Interest and Home Resort Vacation Points may not be hypothecated, bought, sold, exchanged, rented or otherwise transferred separate and apart from Grantee's ownership Interest."​

The Marriott deed purports to convey trust interests evidenced by points, while the DVC deed conveys percentage interests in condominiums that are symbolized as points for administrative purposes only. They sure look different even if they function similarly.