Sirmon et al v. Wyndham Vacation Resorts, Inc. et al

Filing 149

MEMORANDUM OPINION. Signed by Judge L Scott Coogler on 9/18/12. (KGE, )

FILED
2012 Sep-18 AM 09:05
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
WESTERN DIVISION
BRANNON H. SIRMON, et al.,
Plaintiffs;
vs.
WYNDHAM VACATION
RESORTS, INC., et al.,
Defendants.

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7:10-cv-2717-LSC

MEMORANDUM OF OPINION
I.

Introduction
Before the Court are two motions to dismiss filed by Defendants on December

1, 2011. (Docs. 62 & 64.) For the reasons described below, the motions are due to be
DENIED.
II.

Factual Background and Procedural History
Defendant Wyndham Vacation Resorts, Inc. (“WVR”) is a wholly-owned

subsidiary of Wyndham Vacation Ownership (“WVO”; collectively “Wyndham”),
one of the world’s largest timeshare companies. Wyndham develops, markets, and
sells vacation ownership interests, and provides consumer financing to owners.
Ownership interests are reflected by an allocation of “points” proportionate to each

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owner’s interest. These points can then be used to make reservations at various
resorts.
Plaintiffs are among Wyndham’s top point holders, and belong to the highest
level of a three-tiered VIP Program. They claim to have been enticed to the highest
levels of ownership by Wyndham’s repeated promises about the benefits that would
come with additional points. Plaintiffs complain that Wyndham has altered or
eliminated many of these expected benefits, including the promise of unlimited guest
certificates and the ability to sell or transfer points to other owners. Additionally,
Plaintiffs allege that the merger of Wyndham’s point program with Resort
Condominiums International, LLC (“RCI”), has diluted the value of Wyndham
ownership and has made it difficult or impossible to make some reservations. Plaintiffs
contend that deceptive sales practices, changes to benefits, and devaluing of
ownership are all part of a “systematic scheme”directed at Plaintiffs. (Doc. 60 at 8.)
Plaintiffs filed a complaint on October 7, 2010, against WVO, WVR, and RCI
(collectively “Defendants”). (Doc. 1.) The original complaint was superceded by an
amended complaint (the “Complaint”) that was filed on November 11, 2011. (Doc.
60.) The Complaint contained thirteen separate claims for relief: fraud; fraud in the
inducement; suppression; breach of contract; wantonness; breach of fiduciary duty;
negligence; negligent hiring, training, supervision, and retention; wanton hiring,
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training, supervision, and retention; unjust enrichment; a claim for an accounting; a
claim for injunctive relief; and a claim for civil conspiracy to commit fraud, fraudulent
inducement, and suppression. (Id.)
On December 1, 2011, Defendants moved this Court to dismiss all of these
claims. (Docs. 62 & 64.) Defendants’ motions to dismiss raised an array of reasons
why the Complaint is due to be dismissed, including an assertion that the Complaint
constituted “shotgun pleading” rendering it impossible to know which allegations of
fact were intended to support each individual claim for relief. (Docs. 63 at 19–20.) On
April 17, 2012, this Court issued an order on Defendants’ motions, denying dismissal
as to Plaintiffs’ fraud-based claims (Counts 1-3 of the Complaint) and granting
dismissal as to Plaintiffs’ claim for injunctive relief (Count 12). (Doc. 100.) The Court
deferred ruling on the remaining counts until Plaintiffs had an opportunity to file an
Addendum to the Complaint “identifying which specific factual paragraphs are being
offered in support of which specific claims.” (Id. at 14.)
In accordance with the Court’s instructions, Plaintiffs filed an Addendum on
May 29, 2012. (Doc. 110.) This Court has reviewed the Addendum, and is now
prepared to rule on the remainder of Defendants’ motions for dismissal.
III.

Standard

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A defendant may move to dismiss a complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6) if the plaintiff has failed to state a claim upon which relief may be
granted. “When considering a motion to dismiss, all facts set forth in the plaintiff’s
complaint ‘are to be accepted as true and the court limits its consideration to the
pleadings and exhibits attached thereto.’” Grossman v. Nationsbank, N.A., 225 F.3d
1228, 1231 (11th Cir. 2000) (quoting GSW, Inc. v. Long County, 999 F.2d 1508, 1510
(11th Cir. 1993)). In addition, all “reasonable inferences” are drawn in favor of the
plaintiff. St. George v. Pinellas County, 285 F.3d 1334, 1337 (11th Cir. 2002).
To survive a 12(b)(6) motion to dismiss for failure to state a claim, the
complaint “does not need detailed factual allegations;” however, the “plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do. Factual allegations must be enough to raise a right to relief above the
speculative level, on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations omitted).1 The plaintiff must plead “enough facts to state a claim
1

In Bell Atlantic Corp. v. Twombly, the U.S. Supreme Court abrogated the oft-cited standard
that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt
that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief”
set forth in Conley v. Gibson, 355 U.S. 41 (1957). Bell Atl. Corp., 550 U.S. at 560-63. The Supreme
Court stated that the “no set of facts” standard “is best forgotten as an incomplete, negative gloss
on an accepted pleading standard: once a claim has been stated adequately, it may be supported by
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that is plausible on its face.” Id. at 570. Unless a plaintiff has “nudged [his] claims
across the line from conceivable to plausible,” the complaint “must be dismissed.”
Id.
“[U]nsupported conclusions of law or of mixed fact and law have long been
recognized not to prevent a Rule 12(b)(6) dismissal.” Dalrymple v. Reno, 334 F.3d 991,
996 (11th Cir. 2003) (quoting Marsh v. Butler County, 268 F.3d 1014, 1036 n.16 (11th
Cir. 2001)). And “where the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009) (quoting Fed. R. Civ. P. 8(a)(2)). Therefore, the U.S. Supreme Court
suggested that courts adopt a “two-pronged approach” when considering motions to
dismiss: “1) eliminate any allegations in the complaint that are merely legal
conclusions; and 2) where there are well-pleaded factual allegations, ‘assume their
veracity and then determine whether they plausibly give rise to an entitlement to
relief.’” American Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010)
(quoting Iqbal, 556 U.S. at 664). Importantly, “courts may infer from the factual
allegations in the complaint ‘obvious alternative explanation[s],’ which suggest lawful

showing any set of facts consistent with the allegations in the complaint.” Id. at 563.
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conduct rather than the unlawful conduct the plaintiff would ask the court to infer.”
Id. (quoting Iqbal, 556 U.S. at 682).
IV.

Discussion
A.

Count 4: Breach of Contract

Count 4 of Plaintiffs’ Complaint asserts a breach of contract claim against
Defendants. (Doc. 60 at 18.) “The elements of a breach-of-contract claim under
Alabama law are (1) a valid contract binding the parties; (2) the plaintiffs’
performance under the contract; (3) the defendant’s nonperformance; and (4)
resulting damages.” Shaffer v. Regions Fin. Corp., 29 So. 3d 872, 880 (Ala. 2009)
(quoting Reynolds Metals Co. v. Hill, 825 So. 2d 100, 105 (Ala. 2002)).
Defendants’ motions to dismiss argue this claim was pleaded in a “shotgun
pleading” manner and that the Complaint only provided a “formulaic recitation of the
elements” of the cause of action. (Doc. 63 at 25–26.) In its last order, this Court
acknowledged that the original drafting of the Complaint was indeed deficient. (Doc.
100 at 13–14.) However, the Court allowed Plaintiffs an opportunity to file an
Addendum identifying which factual assertions in the Complaint supported the
existence of a contract, the parties to it, and how the contract was breached. (Id.)
The Complaint, when considered along with the Addendum now filed,
adequately states a claim for breach of contract. For example, the Addendum
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identifies paragraph 29 of the Complaint as one of several paragraphs providing the
factual support for this claim. (Doc. 110 at 1.) That paragraph alleges that Defendants
promised Plaintiffs unlimited free guest certificates but later repudiated that promise
and charged a fee of $99 or $129 for the same. (Doc. 60. at 6.) This paragraph,
standing alone, provides facts that could satisfy each of the elements listed in Shaffer.
Assuming, as the Court must at this stage in the proceeding, that the allegations in the
Complaint are true, Plaintiffs have alleged facts which could “plausibly give rise to an
entitlement to relief.” American Dental Ass’n, 605 F.3d at 1290 (quoting Iqbal, 556
U.S. at 664). Therefore, Defendants motions to dismiss are due to be denied as to the
breach of contract claims.
B.

Count 5: Wantonness; Count 7 Negligence; Count 8: Negligent
Hiring, Training, Supervision and Retention; and Count 9: Wanton
Hiring, Training, Supervision and Retention

The Court considers counts 5, 7, 8 and 9 of the Complaint together because
Defendants have essentially argued that these claims rise and fall as one. First,
Defendants argue that Plaintiffs’ negligence claim fails because it is based solely on
contractual duties that cannot support a tort cause of action under Alabama law. (Doc.
63 at 15–17.) Defendants, then, contend that the claims in counts 5, 8 and 9 fail
because they are derivatives of that negligence claim. (Id. at 17–20.) Specifically,
Defendants argue Plaintiffs cannot establish negligent hiring, training, supervision and
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retention because they cannot establish underlying negligence, and that they cannot
establish wantonness-based claims because wantonness is simply a higher standard of
negligence. (Id.) Given the nature of Defendants’ arguments, this Court must
determine whether Plaintiffs’ negligence claim is or is not actionable.
As an initial matter, the Federal Rules of Civil Procedure clearly permit a
plaintiff to plead alternative claims for relief based on a single set of facts. Specifically,
the rules provide that “[a] party may set out 2 or more statements of a claim or
defense alternatively or hypothetically, either in a single count or defense or in
separate ones. If a party makes alternative statements, the pleading is sufficient if any
one of them is sufficient.” Fed. R. Civ. P. 8(d)(2). Nevertheless, Defendants contend
that alternative pleading is not permissible when the alternative claims are breach of
contract and negligence.
In support of this position, Defendants cite Morgan v. South Central Bell Tel.
Co., 466 So. 2d 107, 114 (Ala. 1985). In Morgan, the Alabama Supreme Court noted
a distinction between claims for nonfeasance which do not give rise to tort liability(i.e.,
failure to perform a contract) and claims for misfeasance that do (i.e., negligent
affirmative conduct). Id. The court, however, did not suggest that tort-based
misfeasance claims cannot exist in the context of a contractual relationship. In fact,
just the opposite is true—the court found the defendants liable in tort notwithstanding
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the fact that the “relationship between plaintiffs and defendants was primarily a
contractual one.” Id. The Morgan court reasoned “there is clearly tort liability” in
contractual situations “where plaintiffs were . . . dependent on [defendants],
defendants were aware of that dependency, and . . . [defendants performed] in . . . a
negligent and slipslod manner.” Id.
Taking the allegations in the Complaint as true, as the Court must, Plaintiffs
have stated a claim for negligence under Alabama law. As in Morgan, Plaintiffs allege
that they depended on Wyndham to perform under the contract, that Wyndham was
aware of that dependency, and that the contract was performed in such a negligent
manner that Wyndham should be subject to tort liability. Furthermore, the Addendum
identifies specific factual allegations in the Complaint that support Plaintiffs’
negligence claim. Although Defendants contend Plaintiffs’ allegations are limited to
claims of nonfeasance, the Court disagrees. This Court finds no reason why Plaintiffs’
negligence claim cannot cognizably exist alongside a claim for breach of contract.
Therefore, Defendants’ motions to dismiss as to the negligence claim in count
7 are due to be denied. The Court likewise declines to dismiss counts 5, 8, and 9, since
the crux of Defendants’ argument is that these claims cannot stand without a valid
claim for negligence.
C.

Count 6: Breach of Fiduciary Duty
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Count 6 of the Complaint alleges Defendants’ breached a fiduciary duty owed
to Plaintiffs. Alabama law recognizes fiduciary relationships in a variety of contexts.
Fiduciary responsibilities are not limited to a confined set of relationships, but rather
apply “to all persons who occupy a position out of which the duty of good faith ought
in equity and good conscience to arise.” Morgan Plan Co. v. Vellianitis, 116 So. 2d 600,
603 (Ala. 1959).
Defendants have not convinced the Court that no legally cognizable fiduciary
relationship could exist in this case. Defendants cite Wilchombe v. Tee Vee Tons, Inc.,
555 F.3d 949, 959 (11th Cir. 2009), for the proposition that “[b]usiness relationships
are not ordinarily confidential relationships.” (Doc. 73.) But Wilchombe does not
advance Defendants’ position. As an initial matter, Wilchombe is discussing fiduciary
relationships as they exist under Georgia law, not Alabama law. 555 F.3d at 959.
Furthermore, Wilchombe describes exceptions to the rule that could aptly apply in this
case. For instance, the court said confidential relationships may arise in the business
setting where the parties have “a history of business dealings with each other.” Id.
Although Defendants argue that the parties always engaged each other in armslength transactions, the allegations in the Complaint, taken as true, suggest a
relationship that was more involved than your typical buyer/seller arrangement.
Plaintiffs have alleged that Wyndham representatives and salespeople acted as
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counselors and advisors over a period of several years. For example, the Complaint
states: “Defendants continued to reassure Plaintiffs that they would be able to
continue renting and that Defendants were looking out for their best interest.” (Doc. 60
¶ 35, emphasis added.) Plaintiffs’ are not required, at this stage of the proceeding, to
provide detailed factual allegations. Instead, Plaintiffs must simply provide enough
factual support “to raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555. Plaintiffs have satisfied that burden here and, therefore, Defendants’
motions to dismiss as to count 6 are due to be denied.
D.

Count 10: Unjust Enrichment

Count 10 of Plaintiffs’ Complaint asserts a claim for unjust enrichment. There
are two circumstances where Alabama recognizes unjust enrichment claims. “The
retention of a benefit is unjust if (1) the donor of the benefit . . . acted under mistake
of fact or in misreliance on a right or duty, or (2) the recipient of the benefit . . .
engaged in some unconscionable conduct, such as fraud, coercion, or abuse of a
confidential relationship.” Mantiply v. Mantiply, 951 So. 2d 638, 654–55 (Ala. 2006)
(quoting Jordan v. Mitchell, 705 So. 2d 453, 458 (Ala. Civ. App. 1997)).
The Complaint alleges that Defendants employed deceptive and fraudulent
sales practices to entice Plaintiffs to pay Wyndham substantial sums of money while
knowing they never intended to make true on their promises. Although these
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allegations are not yet proven, at this stage of the proceeding the Court must accept
their veracity. And these allegations, taken as true, are sufficient to support a claim for
relief.
Defendants contend that the unjust enrichment claim must fail because
Plaintiffs other claims are based upon the existence of an express contract. (Doc. 63.)
In Vardaman v. Bd. of Educ., the Alabama Supreme Court stated: “It has long been
recognized in Alabama that the existence of an express contract generally excludes an
implied agreement relative to the same subject matter.” 544 So. 2d 962, 965 (Ala.
1989). While it is perhaps true that both contractual and quasi-contractual relief
cannot be granted as to the same subject matter, it is presently too early in this
proceeding to determine which form of relief, if any, is appropriate.
As stated before, the Federal Rules of Civil Procedure undoubtedly allow a
plaintiff to plead alternative forms of relief, even if the two claims are inconsistent: “A
party may state as many separate claims or defenses as it has, regardless of
consistency.” Fed. R. Civ. P. 8(d)(3). Although Plaintiffs may ultimately be incapable
of recovering quasi-contractual damages on an unjust enrichment theory, this Court
will not prevent them from developing the claim through the discovery process.
Therefore, Defendants’ motions to dismiss as to count 10 are due to be denied.
E.

Count 11: For an Accounting against All Defendants
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Count 11 of the Complaint requests relief in the form of an accounting against
all Defendants. There are a variety of reasons why an Alabama court may grant an
accounting. See Ally Windsor Howell, Tilley's Alabama Equity § 24:2 Basis for
Ordering an Equitable Accounting (5th ed. 2012). Circumstances when an accounting
has been deemed appropriate include situations where there exists a fiduciary
relationship between the parities and under which the duty to keep account arises,
Leslie v. Pine Crest Homes, Inc., 388 So. 2d 178 (Ala. 1980); when the defendant has
engaged in fraud or wrongdoing sufficient to give rise to a duty to account, Tolleson v.
Henson, 93 So. 458 (1922); and when necessity for discovery of matters wholly within
the defendant’s knowledge renders an accounting an appropriate remedy, Nelson
Realty Co. v. Darling Shop of Birmingham, Inc., 101 So. 2d 78 (1957); Orkin
Exterminating Co. of North Ala. v. Krawcheck, 123 So. 2d 149 (1960). The Complaint
alleges enough facts to demonstrate an entitlement to relief under one of these
grounds. Accordingly, Defendants’ motions to dismiss are due to be denied as to
Count 11.
F.

Count 13: Civil Conspiracy to Commit Fraud, Fraudulent
Inducement and Suppression

Count 13 of the Complaint raises a claim against Defendants for civil conspiracy
to defraud. A civil conspiracy is “a combination of two or more individuals to

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accomplish an unlawful purpose or to accomplish a lawful end by unlawful means.”
McLemore v. Ford Motor Co., 628 So. 2d 548, 550 (Ala. 1993) (citing Barber v.
Stephenson, 69 So. 2d 251 (1953) and Eidson v. Olin Corp., 527 So. 2d 1283, 1285 (Ala.
1988)). A conspiracy claim, by its nature, is difficult to plead, and courts accordingly
allow greater flexibility. As noted in Eidson:
A great quantum of detail need not be required to be alleged as to the
formation of the conspiracy because of the clandestine nature of the
scheme or undertaking engaged in. The existence of the conspiracy must
often be inferentially and circumstantially derived from the character of
the acts done, the relation of the parties, and other facts and
circumstances suggestive of concerted action.
527 So. 2d at 1285 (quoting O’Dell v. State, 117 So. 2d 164, 168 (1960)).
Defendants correctly note that under Alabama law, a conspiracy “cannot exist
between a corporation and its agents or employees, since the acts of agents and
employees acting within the line and scope of their employment are considered the
acts of the corporation itself.” Phillips v. Amoco Oil Co., 614 F. Supp. 694, 702 n.10
(N.D. Ala. 1985) (citations omitted). This is known as the intracorporate conspiracy
doctrine. But this doctrine does not render a corporate entity entirely immune from
allegations of civil conspiracy. While a corporation cannot conspire with itself, it may
be found liable for conspiring, through its agents, with another corporate entity or
third party.

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Thus, insofar as the Plaintiffs seek recovery for a conspiracy between Wyndham
and its agents, employees, or salespeople, the claim is legally precluded. The Court,
however, does not read the pleadings in such a limited manner. Rather, Plaintiffs have
alleged facts that could indicate a conspiracy among the various corporate entities or
other third parties. Moreover, the Court must remain aware that at this early stage of
the proceeding Plaintiffs still require additional information to fully establish their
claim. Plaintiffs have asserted that Defendants’ company structure is “extremely
opaque,” that it includes “all sorts of agreements and cross-agreements with affiliate
companies,” and involves a corporate structure that “embodies dozens of interrelated
subsidiaries, trusts, non-profit associations, etc.” (Doc. 60 ¶ 43.) Defendants do not
seem especially eager to supply the wanting clarity, and Plaintiffs should be allowed
an opportunity use discovery to determine the scope of the corporate relationships
and to conclude whether their conspiracy claim is with or without merit. Accordingly,
Defendants’ motions to dismiss as to Count 13 are due to be denied.
G.

Failure to Join an Indispensable Party

The final basis for dismissal asserted by Defendants is that Plaintiffs failed to
join an indispensable party, namely the FairShare Vacation Plan Use Management
Trust (the “Trust”). The Court is not convinced that the Trust is a necessary party
to this litigation and sees no reason why it cannot accord complete relief among the
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current parties to the lawsuit without the inclusion of the Trust. There is no indication
the Trust played any role in the allegedly fraudulent sales practices employed by
Defendants. Furthermore, the Court finds no reason why a jury could not award
damages against the current Defendants without adversely impacting the rights of the
Trust. Accordingly, Defendants’ motions to dismiss for failure to join an
indispensable party are due to be denied.
V.

Conclusion
For the reasons described above, Defendants motions to dismiss (Docs. 62 &

64) are due to be DENIED as to the remaining counts of Plaintiffs’ Complaint not
addressed in this Court’s Order of April 17, 2012 (Doc. 100). A separate order will be
entered consistent with this opinion.
Done this 18th day of September 2012.

L. Scott Coogler
United States District Judge
[170956]

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