Antitrust Law Daily Wrap Up, RICO—M.D. Tenn.: Claims against vacation groups for targeting Wyndham timeshare owners withstand motion to dismiss, (May 15, 2014)

By Jody Coultas, J.D.

Wyndham Vacation Resorts, Inc. (WVR) stated Racketeer Influenced and Corrupt Organizations Act (RICO) and Tennessee Consumer Protection Act claims against companies that allegedly targeted Wyndham’s timeshare owners with false promises, the federal district court in Nashville has held (Wyndham Vacation Resorts, Inc. v. Consultant Group, May 14, 2014, Trauger, A.).

WVR alleged that The Consultant Group and its owner/operators engaged in a conspiracy that targeted Wyndham timeshare owners and defrauded both those owners and certain Wyndham entities.

RICO Section 1962(c) makes it unlawful “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” Section 1962(d) requires a plaintiff to allege all the elements of a RICO violation, as well as the existence of an illicit agreement to violate the substantive RICO provision.

The court held that WVR stated RICO claims against The Consultant Group. The Consultant Group allegedly quoted certain individuals $3,000 for a “lawyer” to handle their outstanding payment obligations, with knowledge that no lawyer would actually be involved, represented that Superior Vacations, Inc. would facilitate a transaction with a legitimate third party purchaser, despite knowing that no bona fide third-party purchaser was in place, and made misleading representations to WVR owners about the nature of the a vacation club package and how it compared to the owners’ existing WVR package. The facts presented by WVR fell within one or more of the enumerated categories of “improper means” of competition, including fraud, misrepresentation, deceit, and unethical conduct. Whether the allegations were sufficient to establish that The Consultant Group meant to harm timeshares owners generally, rather than WVR specifically, was not addressed at this early stage in the proceedings.

Tennessee Consumer Protection Act claims. WVR’s allegations were sufficient to state Tennessee Consumer Protection Act claims against Smokey Mountain Getaways (SMG) and its owner/operator at this early stage, according to the court. WVR alleged that SMG procured payments for an “attorney” with knowledge that no attorney was involved, executed contracts with WVR owners on behalf of Superior, and forwarded those contracts to Superior with the understanding and intention that Superior would process a fraudulent transaction that might be legally void or voidable with respect to the transferor. The allegations were sufficient. At a later stage, the court would revisit whether the facts could support the TCPA claims.

The case is No. 2:12-cv-00096.

Attorneys: Andrew W. Coffman (King & Ballow) for Wyndham Vacation Resorts, Inc. and Wyndham Vacation Management. Gregory H. Oakley (OakleyRieger PLLC) for Consulting Group, Inc. and Superior Vacations, Inc.

Companies: Wyndham Vacation Resorts, Inc.; The Consultant Group; Superior Vacations, Inc.

Cases: RICO StateUnfairTradePractices TennesseeNews