Sirmon et al v. Wyndham Vacation Resorts, Inc. et al
Filing
179
MEMORANDUM OPINION. Signed by Judge L Scott Coogler on 2/4/13. (KGE, )
FILED
2013 Feb-04 AM 08:49
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 Opinion
I.
Introduction
Before the Court are three motions for summary judgment filed by Defendants
on August 10, 2012. (Docs. 124, 127, & 130.) The first seeks summary judgment on
claims asserted by Plaintiffs Brannon and Spencer Sirmon. (Doc. 124.) Plaintiffs do
not oppose this motion (Doc. 160 at 1 n.1), and therefore, it is due to be GRANTED.
The second motion seeks summary judgment as to all claims asserted directly against
Defendant Resort Condominiums International, LLC (“RCI”). (Doc. 127.) This
motion is also unopposed (Doc. 160 at 1), and thus due to be GRANTED. The
remaining motion (Doc. 130), which challenges the claims asserted by Plaintiffs
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Richard and Cynthia Sirmon, has been fully briefed and is ripe for decision. For the
reasons described below, this Motion for Summary Judgment (Doc. 130) is due to be
GRANTED in part and DENIED in part.
II.
Facts1
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.2 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
owner’s interest. These points can then be used to make reservations at various
resorts.
Plaintiffs Richard and Cynthia Sirmon are among Wyndham’s top point
holders, presently owning approximately 23,000,000 points. Plaintiffs accumulated
their points through direct purchases from Wyndham and also by purchasing points
1
The facts set out in this opinion are gleaned from the parties’ submissions of facts claimed
to be undisputed, their respective responses to those submissions, and the Court’s own examination
of the evidentiary record. All reasonable doubts about the facts have been resolved in favor of the
nonmoving party. See Info. Sys. & Networks Corp. v. City of Atlanta, 281 F.3d 1220, 1224 (11th Cir.
2002). These are the “facts” for summary judgment purposes only. They may not be the actual
facts. See Cox v. Adm’r U.S. Steel & Carnegie Pension Fund, 17 F.3d 1386, 1400 (11th Cir. 1994).
2
Wyndham was formerly known as Fairfield Resorts, Inc. However, for purposes of
continuity the Court will always refer to the timeshare company as Wyndham.
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from third party owners. Plaintiffs first purchased timeshare interests from Wyndham
in August 1999. Over the next eight and a half years, Plaintiffs repeatedly purchased
additional timeshare interests. Plaintiffs’ last purchase from Wyndham occurred on
or about April 26, 2008.
Wyndham has an internal sales compliance manual that establishes standards
for sales presentations. That manual explicitly describes a variety of prohibited sales
practices. One sales tactic explicitly prohibited is promoting rental of points as a
reason for purchasing additional timeshare units. Specifically, the manual provides:
•
•
•
•
Discussing the likelihood of an owner being able to rent the
product or the amount an owner could expect to receive for the
rental of the product is prohibited.
Providing examples, third party experiences, and opinions
regarding the amount an owner could expect to receive, or
indicating that owners typically receive a certain amount of money
when renting their timeshare is prohibited.
Suggesting that an owner can rent their timeshare to cover their
maintenance fees or that an owner can pay for their purchase by
renting out their timeshare is prohibited.
Recommending or endorsing a particular rental company is
prohibited.
(Doc. 146-6 at 33.)
Plaintiffs allege that, notwithstanding these prohibitions, Wyndham sales
representatives regularly promoted rental when encouraging them to make additional
3
Unless otherwise noted, pinpoint citations refer to CM/ECF document stamp pagination.
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purchases. Plaintiffs’ allegation is supported by the testimony of several former
Wyndham employees, who testified that, with encouragement from management,
sales representatives would discuss: (1) specific amounts owners could expect to
receive from renting (Martin Depo., Doc. 146-7 at 222); (2) the likelihood of being
able to rent (Bonds Depo., Doc. 146-11 at 31); (3) third-party experiences about
amounts owners could expect to receive from renting (id. at 53); and (4) that the
owner can cover expenses and maintenance fees from revenue generated by renting.
(Id. at 33.) Former Wyndham employee Paul Bonds4 testified that the “rental pitch”
was used the entire time he was employed by Wyndham. (Bonds Depo., Doc. 146-11
at 32.) Further, when asked who at Wyndham was aware the rental pitch was being
used, Bonds stated: “Everybody, all staff, salespeople, managers, director of sales,
vice presidents, that’s as far as I know, as high up as that.” (Id. at 40.) Similarly,
former Wyndham employee Tom Martin5 testified that “sales representatives were
instructed by their managers to promise rental income to owners, sometimes in the
thousands of dollars.” (Martin Depo., Doc. 146-7 at 222.)
As Plaintiffs accumulated more and more points, they became eligible for
4
Paul Bonds worked for Wyndham between 2003 and 2010, serving in various positions,
including in-house sales representative, frontline manager, and focus manager.
5
Tom Martin worked for Wyndham during 2007 and 2008 as a front line salesman and senior
exit takeover salesman.
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membership in the FairSharePlus VIP Program (“VIP Program”). The VIP Program
had three levels—VIP, VIP Gold, and VIP Platinum—with each membership level
offering benefits not available at the level below. Plaintiffs assert that Wyndham
promised them a variety of benefits associated with their VIP Program status
including, but not limited to, VIP benefits for guests, unlimited free guest certificates,
favorable cancellation policies, free room upgrades, and the ability to transfer points
to other owners. Furthermore, Plaintiffs allege they were repeatedly assured that the
promised benefits would always be available, and that any change to the benefits would
be for the better. This allegation is supported by the testimony of former Wyndham
employees, including the testimony of Paul Bonds, who admitted that he told Plaintiffs
they would be grandfathered in to all benefits available at the time of their purchase.
(Bonds Depo., Doc. 146-11 at 202; see also Martin Depo., Doc. 146-7 at 161–62;
Santore Depo., Doc 146-10 at 105–06.) VIP benefits were particularly advantageous
to owners, like Plaintiffs, who were using their points to operate vacation rental
businesses, and Plaintiffs contend that the prospect of obtaining these benefits heavily
influenced their decision to continue accumulating points.
Every year Wyndham publishes a member’s directory, which details program
benefits available to Wyndham owners and the rules for membership in Club
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Wyndham. Plaintiffs acknowledged receipt of the then current directory in 2001,
2005, 2007, and 2008. The member directories are voluminous publications that range
between 250 and 400 pages in length, depending on the year. Included within each
directory is a one-page table outlining the VIP Program benefits available to VIP
owners. In 2003, Wyndham placed a small-print disclaimer at the bottom of the VIP
Program benefits table which provided: “[b]enefits are subject to change without
notice.”6 (Doc. 132-14 at 29.) In 2006, Wyndham modified the disclaimer to state:
“[b]enefits are subject to change or elimination without notice.” (Doc. 132-44 at 18,
emphasis added.)
The evidence submitted demonstrates that Wyndham was aware that Plaintiffs,
who owned more than 20 million points, were using their points to operate a for-profit
rental business. Indeed, sales representatives admitted describing Plaintiffs’ rental
success when using the rental pitch to convince other owners to purchase additional
points. (See Bonds Depo., Doc. 146-11 at 53.) However, despite Wyndham’s
knowledge that Plaintiffs’ were making investment-oriented purchases, Wyndham
drafted documents for Plaintiffs to sign which asserted that the purchases were made
6
Plaintiffs assert that the “subject to change” provision was not included in directories
published prior to 2003. (Doc. 145 at 47.) The Court, however, has not been provided any directories
published before 2003, and therefore cannot determine when this provision was first included.
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for non-investment purposes.7 For example, on at least three occasions, the first of
which in August 2001, Plaintiffs signed an affidavit stating:
We acknowledge that the purchase of the Property interest dedicated to
the Trust Agreement was NOT made for investment purposes but to use
for pleasure and vacations.
(Doc. 132-2 at 3 ¶ 5; Doc. 132-2 at 41 ¶ 5; Doc 132-5 at 17 ¶ 5.)
There is evidence that also indicates that Wyndham was aware that Plaintiffs
were making purchasing decisions, at least in part, based on promises and
representations made by Wyndham sales representatives. Indeed, when asked whether
customers relied on the rental pitch when making purchases, Paul Bonds stated:
“They totally relied on it 100 percent.” (Bonds Depo., Doc. 146-11 at 31; see also
Santore Depo., Doc 146-10 at 106.) Nonetheless, the contract documents provided
that such oral representations were not considered part of the purchase agreements.
On ten separate occasions, the first of which was in August 2001, Plaintiffs made the
following attestation contemporaneous with a purchase from Wyndham:
We . . . acknowledge that prior to signing the contract or agreement we
were provided [various] documents . . . and understand that we should
not rely on any representations other than those contained in said
7
A considerable number of contract documents are included within the evidentiary
submissions in this case. While much of the contractual language is repeated from one transaction
to another, there does not appear to have been a standard form agreement that was used for every
sale.
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documents.
(See Doc. 133 n.2.)
Additionally, many of the contract documents contained merger clauses stating
that oral promises were unenforceable. The following merger clauses are exemplary
of clauses found throughout the timeshare contracts:
This agreement supersedes any and all understandings and agreements
between You and Us, and You and We mutually agree that this
Agreement represents the entire Agreement between You and Us, and
any representation or inducement which is not set forth in this
Agreement shall be of no force and/or effect. This Agreement may only
be amended or modified by an instrument in writing between the parties.
(Doc. 132-7 at 50 ¶ 17.)
The Contract constitutes the entire agreement between Seller and Buyer,
and each represents and warrants that no representation, written or oral,
has been made by either of them to the other, except as expressly set
forth herein. No presentation, warranty, undertaking or promise,
whether oral, implied or otherwise, has been made by Seller or by its
agents, employees or brokers or salesmen, or by Buyer to anyone except
as expressly set forth in a written agreement signed by both parties.
(Doc. 132-8 at 13 ¶ 13.)
As early as 2005, Wyndham began identifying problems associated with
allowing large point owners, known as “Megarenters,”8 to operate for-profit rental
8
Wyndham employees periodically used the term “Megarenter” to describe high-volume
owners, like Plaintiffs, who used their points to operate rental businesses. The origination of the term
and the scope of its use are unclear. The Court uses the term in this opinion as a matter of
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businesses with their points. A Wyndham internal presentation, dated November 11,
2005, noted that the company “currently supports owners running rental businesses.”
(Doc. 146-26 at 3.) However, because of the negative effect Megarenters were having
on Wyndham’s business, the presentation recommended “limit[ing] [rental]
transactions” and “tighten[ing] rules” that allowed renting to persist. (Doc. 146-29
at 5.)
In March 2006, a Wyndham employee delivered another presentation related
to the Megarenter issue. This presentation, titled “Rental Abuse Recovery Strategy,”
focused more directly on the rules that would need to be changed to alleviate the
problems created by Megarenters. (Doc. 146-23.) Specifically, the presentation
recommended altering many of the VIP Program benefits available to Megarenters,
including limiting the number of free guest confirmations available to VIP owners,
changing the liberal VIP cancellation policy, and limiting the ability of VIP owners to
upgrade their rooms.
Many of the VIP benefit changes discussed in the March 2006 presentation
took effect on July 15, 2006. (See Doc. 132-48.) One rule revision impacted the ability
of VIP owners to upgrade their units prior to check-in. Before the rule change, VIP
convenience, not for any legal significance.
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owners could upgrade their reserved units multiple times to the largest possible unit
available. The revised rule only allowed for one upgrade to “the next larger unit
available.” (Doc. 132-48 at WVR/WVO 05665.) Another change related to the
complimentary guest confirmations. Prior to the 2006 modification, VIP members had
unlimited free guest confirmations. The new rule, however, added a caveat that the
complimentary guest confirmation only applied if the guest was traveling with a VIP
member. (Id.)
Plaintiffs apparently learned about these changes before they ever took effect.
On May 29, 2006, Plaintiffs sent an email to Fran Santore,9 expressing displeasure
with the upcoming changes. Plaintiffs stated that Wyndham was performing a “bait
and switch” by rescinding benefits that Plaintiffs had spent more than $500,000 to
acquire. (Doc. 132-49 at 20.) In a follow up email, Plaintiffs stated that Wyndham was
“making it pretty clear that they don’t want owners like me and that they think they
can change the VIP rules anytime they want to.” (Id. at 18.)
The extent to which these benefit changes were actually enforced is unclear. In
his deposition, Plaintiff Richard Sirmon stated that “Wyndham went back and
9
Fran Santore is a former Wydham employee who held various positions in the sales
department. When Santore left Wyndham in 2009 or 2010, he was the Vice President of Sales. It is
not exactly clear what Santore’s position was in 2006, but the indication from his deposition is that
he was an in-house salesman.
Page 10 of 64
[reversed the guest confirmation change] after there was an uproar.” (Sirmon Depo.,
Vol. 1, Doc 132-50 at 64.) Such a reversal would be consistent with other instances
where Plaintiffs claim that they were able to have benefits restored after complaining
that Wyndham was taking an action that appeared contradictory to promises made by
the company. For example, on October 5, 2007, Mr. Sirmon wrote an email to
complain about Platinum VIP benefits being inappropriately withheld from many of
his points. In the email, Mr. Sirmon wrote that there had been a “long string of
deletions of one VIP benefit after another being taken away from what [he] bought into
that Wyndham was selling.” (Doc. 132-49 at SIRMON 12221.) The Wyndham
representative responded the same day, and stated: “Wyndham Vacation Resorts is
committed to member satisfaction and truly values its VIP owners. Therefore, I have
made a decision to reinstate your VIP Platinum status . . . .” (Id. at 12220.)
However, even if the 2006 changes were not entirely undone, Plaintiffs contend
that Wyndham representatives continually assured them that everything would work
out. Indeed, in response to Plaintiffs’ email regarding the 2006 changes, Santore
stated “I know [Wyndham] is looking at another level of ownership called Diamond
(2 million points). Maybe this level of ownership will allow us to do what we need and
we can re-arrange things. If not, I will find a way around this.” (Doc. 132-49 at 18.)
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Paul Bonds testified that he also made representations to Plaintiffs regarding Diamond
level ownership.10 (See Bonds Depo., Doc 146-11 at 201–02.) Bonds admitted that
Diamond level ownership was completely made up by Wyndham as a sales pitch to sell
more units to previously existing owners. (Id. at 131.) Furthermore, Bonds
acknowledged in his deposition that he knew his representations about Diamond level
ownership were false at the time they were made. (Id. at 202.) Mr. Sirmon testified
that he believed Santore and Bonds were telling the truth, and that the benefit changes
would not stand, or at the least, Diamond level ownership would create a work-around
for the new modifications. (See Sirmon Depo., Doc. 146-60 at 103.)
The VIP rule changes adopted in 2006 were not the only alterations which
impacted owners’ rental operations. In 2007, Wyndham implemented additional
changes which had the effect of restricting rental activity. For example, Wyndham
announced that it was removing the unlimited free guest certificates previously given
to VIP owners and replacing this benefit with a tiered system where VIP owners
received 5 free guest confirmations per year, VIP Gold owners received 10 free guest
confirmations per year, and VIP Platinum owners received 15 free guest confirmations
10
It does not appear Plaintiffs were ever provided specific information about how Diamond
level ownership would work to remedy their issues. Rather they were just loosely informed that it
was coming and that this level of ownership would ensure Plaintiffs were grandfathered in to all
benefits.
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per year for every million points owned. As with the earlier changes, Plaintiffs contend
they were again assured by Wyndham’s representatives that the changes would not
remain in force with respect to their accounts.
Then, in a letter dated October 7, 2008, Wyndham informed Plaintiffs that
further changes were being made to the VIP Program benefits. The primary
modification was a dramatic increase in the guest confirmation fee for all
confirmations in excess of the limited annual complimentary allotment. These changes
became effective October 15, 2008, and, unlike prior modifications, it appears these
changes were fully enforced. In a “Mega Renter Project” meeting held on January 26,
2009, Wyndham noted that these rules and regulations were “put in place to impact
Megarenters,” and to “thwart the impact of the Megarenters on their business.”
(Doc. 146-38 at 2, 3.) In an internal email, a Wyndham employee, Amy Minton, noted
these changes were “implemented to impact the profitability of the Megarenter’s
rental activity.” (Doc. 146-39 at 3.)
In October 2009, Plaintiffs sent Wyndham a demand letter, wherein they set out
their issues with Wyndham’s actions and threatened legal action against the company.
Senior Vice President Deanne Gabel responded to Plaintiffs’ demand letter by email
on November 3, 2009:
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Mr. Sirmon,
We have collectively had an opportunity to go through your
communication and have agreed to address each of these issues
independently. As is our protocol, only those issues related to an
Attorney General’s office or other legal representation will be addressed
by our legal department, and all others we are going to divide on [sic]
conquer. We will be responding to you however in a complete
collaborative response, however this will take some time as there is a
substantial amount of research that needs to occur.
(Doc. 146-62 at 2.) After Plaintiffs responded that they would “await a report” (id.),
Ms. Gabel reported to her team that she had “bought . . . some time with Mr.
Sirmon.” (Id. at 4.) Plaintiffs assert they never received a meaningful response to their
demand letter. Plaintiffs filed this suit on October 7, 2010. (Doc. 1.)
III.
Standard.
Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a).11 The party moving for summary judgment “always bears
the initial responsibility of informing the district court of the basis for its motion, and
identifying those portions of [the evidence] which it believes demonstrate the absence
of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
11
Although Fed. R. Civ. P. 56 was amended on December 1, 2010, “the standard for granting
summary judgment remains unchanged.” Fed. R. Civ. P. 56 advisory committee’s note (2010
Amendments).
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The movant can meet this burden by presenting evidence showing that there is no
genuine dispute of material fact, or by showing that the nonmoving party has failed to
present evidence in support of some element of its case on which it bears the ultimate
burden of proof. Id. at 322-23. In evaluating the arguments of the movant, the court
must view the evidence in the light most favorable to the nonmoving party. Mize v.
Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996).
Once the moving party has met his burden, Rule 56 “requires the nonmoving
party to go beyond the pleadings and by [his] own affidavits, or by the depositions,
answers to interrogatories, and admissions on file, designate specific facts showing
that there is a genuine issue for trial.” Celotex, 477 U.S. at 324 (internal quotations
omitted); see also Fed. R. Civ. P. 56(c). “A factual dispute is genuine only if a
‘reasonable jury could return a verdict for the nonmoving party.’” Info. Sys. &
Networks Corp., 281 F.3d at 1224 (quoting United States v. Four Parcels of Real Property,
941 F.2d 1428, 1437 (11th Cir. 1991)).
IV.
Analysis
Defendants assert that summary judgment is due to be granted on each of
Plaintiffs’ claims because they are legally barred for various procedural or substantive
reasons. Each of Plaintiffs’ claims for relief will be addressed in turn below.
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A.
Fraud and Fraudulent Inducement
Although Plaintiffs’ amended complaint sets out twenty six separately
identifiable fraud allegations, it appears, at this stage, that Plaintiffs have conceded all
but two of those claims. Defendants individually addressed each of Plaintiffs’ fraud
allegations in their Memorandum in Support of Summary Judgment, attempting to
establish why they are entitled to judgment as a matter of law as to each one. Plaintiffs,
however, only responded to two of those claims, stating that their “fraud claims boil
down to two representations: (1) that Plaintiffs could rent their points to run a rental
business with the support of Wyndham’s systems, benefits and facilities and (2) that
Plaintiffs’ benefits would not change except for the better.” (Doc. 145 at 41.) As a
matter of convenience, the Court will refer to these two fraud claims as the “Rental
Fraud” and the “Benefits Fraud.”
The Eleventh Circuit has stated that a plaintiff’s failure to support a claim
constitutes abandonment of that claim. See Coal. for the Abolition of Marijuana
Prohibition v. City of Atlanta, 219 F.3d 1301, 1326 (11th Cir. 2000) (“[F]ailure to brief
and argue [an] issue during the proceedings before the district court is grounds for
finding that the issue has been abandoned.”); Wilkerson v. Grinnell Corp., 270 F.3d
1314, 1322 (11th Cir. 2001) (claim that was included in complaint but not again raised
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until the plaintiff’s supplemental reply brief is abandoned). Thus Plaintiffs have
forfeited all fraud claims set out in their amended complaint other than the Rental
Fraud and the Benefits Fraud.12
i.
Statute of Limitations
Defendants assert that Plaintiffs’ two fraud claims are barred by the statute of
limitations.13 Alabama’s statute of limitations for claims based upon fraud or
fraudulent inducement is two years. See Ala. Code § 6-2-38(l); Liberty Nat’l Life Ins.
Co. v. Parker, 703 So. 2d 307, 308 (Ala. 1997) (citing Ala. Code § 6-2-38(l)) (“The
statute of limitations for fraud actions generally allows two years for filing a claim.”).
The two-year limitations period begins to run when a plaintiff is privy to facts which
would “provoke inquiry in the mind of a [person] of reasonable prudence, and which,
if followed up, would have led to the discovery of the fraud.” Auto-Owners Ins. Co. v.
12
These two fraud claims are not entirely independent of one another. For example, Plaintiffs
claim that their rental business was achievable in large part because of the availability of VIP Program
benefits. Thus, Wyndham’s promise to provide and maintain VIP Program benefits could also be
deemed a promise to help facilitate Plaintiffs’ rental business. Likewise, Plaintiffs’ knowledge that
VIP Program benefits were being removed could have also put them on notice that Wyndham was
repudiating its promise to help Plaintiffs run a rental business. Nevertheless, to the extent possible,
the Court will treat these as two distinct fraud claims.
13
Defendants also argue that Plaintiffs’ suppression claim is barred by the statute of
limitations: “Plaintiffs’ suppression claim is based on the same underlying facts [as the fraud claims],
and as such, it is also time barred.” Because Defendants did not make any individualized statute of
limitations arguments with respect to Plaintiffs’ claim for fraudulent suppression, the analysis in this
section applies equally to that claim. Defendants’ substantive challenges to Plaintiffs’ suppression
claim are addressed in Section IV.C., infra.
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Abston, 822 So. 2d 1187, 1195 (Ala. 2001) (quoting Willcutt v. Union Oil Co., 432 So.
2d 1217, 1219 (Ala. 1983)). Plaintiffs filed this action on October 7, 2010. Thus,
Plaintiffs’ claims are time barred if the statute of limitations began to accrue on
Plaintiffs’ claims more than two years before that date.
“[T]he question of when a party discovered or should have discovered the
fraud is generally one for the jury.” Gilmore v. M & B Realty Co., L.L.C., 895 So. 2d
200, 210 (Ala. 2004) (quoting Parker, 703 So.2d at 308). However, the question of
when a plaintiff discovered or should have discovered the fraud may be “‘removed
from the purview of the jury’ and decided as a matter of law in cases where the
plaintiff had actual knowledge of facts that would have put a reasonable person on
notice of the fraud.” Cork v. Marriott Int’l, Inc., 426 F. Supp. 2d 1234, 1239 (N.D. Ala.
2006).
Defendants initially assert the statute of limitations clock started when Plaintiffs
received their contract documents because the documents contradict the oral
representations and thus should have put Plaintiffs on notice of the fraud. (Doc. 133
at 7–12.) In Foremost Ins. Co. v. Parham, 693 So. 2d 409, 421 (Ala. 1997), the Alabama
Supreme Court returned to an objective standard for evaluating fraud claims and
imposed a “general duty on the part of a person to read the documents received in
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connection with a particular transaction.” Thus, under Foremost, the question of when
a plaintiff should have discovered the fraud may be removed from the purview of the
jury and decided as a matter of law when the plaintiff received documents in
connection with the transaction that should have alerted him to the possibility of
fraud.14 See, e.g., Auto-Owners Ins. Co. v. Abston, 822 So. 2d 1187, 1195–96 (Ala. 2001);
Owens v. Life Ins. Co. of Georgia, 289 F. Supp. 2d 1319, 1325–26 (M.D. Ala. 2003).
The Court is not convinced that the contract documents received by Plaintiffs
were sufficient to put Plaintiffs on notice of the fraud such that the statute of
limitations clock then started to run. Defendants identify several contractual
provisions, each of which fail the Foremost objective test for one reason or another.
The first contractual provision cited by Defendants is a signed purchaser’s
affidavit containing a merger clause. The clause provides that Plaintiffs “should not
rely on any representations other than those contained in [the contract] documents.”
(Doc. 133 at 9.) Merger clauses may bar evidence of oral representations offered in
support of a contract claim. However, commonplace merger clauses are insufficient
14
There is considerable overlap between Defendants’ argument that Plaintiffs’ possession
of certain documents should have activated the statute of limitations and Defendants’ argument,
discussed in the next section of this opinion, that possession of the documents precludes Plaintiffs
from demonstrating reasonable reliance upon the oral representations. Although the Alabama
Supreme Court discusses “reasonable reliance” in both contexts, the inquiry with regard to the
statute of limitations is whether the documents would have put the plaintiff on notice that previously
relied upon oral representations were false.
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to put a party on notice of fraud because they generally do not directly contradict any
representations that were made. Cf. Envtl. Sys., Inc. v. Rexham Corp., 624 So. 2d 1379,
1383 (Ala. 1993) (noting that while merger clauses may be used to invoke the parol
evidence rule for contract claims, they may not be exercised “to exclude evidence
relating to a fraud claim”). Rather than contradicting representations that were made,
merger clauses usually provide that no representations were made in the first place or
that any representations that were made are not part of the contract. This is true of
each of the merger clauses identified by the Defendants, and thus they are not
sufficient to commence the running of the statute of limitations.
Defendants next point to two different documents that they contend put
Plaintiffs on notice of the Benefits Fraud: (1) an Assignment Agreement and Use
Restriction and (2) the membership directories. The Assignment Agreement and Use
Restriction, signed by Plaintiffs in 2004, provides that Wyndham “in its sole
discretion, with or without prior notice, may unilaterally expand or limit the point
eligibility criteria for the VIP Program.” The Court is not persuaded that a document
announcing Wyndham’s authority to establish VIP Program “eligibility criteria”
should have, as a matter of law, put Plaintiffs on notice that Wyndham’s alleged
promise not change benefits except in Plaintiffs’ favor was fraudulent. Plaintiffs do not
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maintain that Wyndham did not have the authority to change VIP benefits. Rather,
Plaintiffs assert that Wyndham promised it would not exercise that authority to
remove the benefits available when Plaintiffs made their purchases. This provision
does not directly contradict Wyndham’s alleged representation that benefits would
not change adversely, and accordingly, does not provide the type of notice necessary
for this Court to determine, as a matter of law, that the statute of limitations began to
run at the time the Assignment Agreement and Use Restriction was signed.
The Court is likewise unpersuaded by Defendants’ argument that the
membership directories should have put Plaintiffs on notice that the promises they
contend Wyndham made about VIP Program benefits were fraudulent. Defendants
have identified a small-print disclaimer appearing at the bottom of a one-page table
contained in the yearly membership directories published after 2003. When the
disclaimer was first included, it provided that benefits were “subject to change
without notice.” A subsequent publication provided that benefits were subject to
change “or elimination.”
Plaintiffs initially argue that the disclaimer should be discredited because it is
inconspicuously buried within the membership directories. The disclaimer was
perhaps not as openly visible as written statements that other courts have found
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sufficiently clear to trigger the statute of limitations. For example, in Foremost, the
plaintiffs had been “provided with various sales documents . . . all of which” were
contrary to the alleged misrepresentation. 693 So. 2d at 414. The Court noted that if
the plaintiffs had “read or even briefly skimmed” the documents, they would have
known the veracity of the representations. Id. at 422. See also Traylor v. Bell, 518 So.
2d 719, 720–21 (Ala. 1987) (finding that fraud would have been “easily discovered by
even a casual reference . . . to . . . the sales document which [the plaintiff ] signed”).
However, while the disclaimer in the membership directories was arguably more
discrete than written statements discussed in other cases, the Court is unconvinced
that this fact alone renders it invalid.
Nonetheless, it was insufficient to put Plaintiffs on notice that the oral
representations were fraudulent because the disclaimer did not clearly contradict the
alleged representations related to VIP benefits. The alleged fraudulent representation
was that Plaintiffs’ VIP Program benefits would “not change for the worse.” A
disclaimer that the benefits are “subject to change” does not necessarily notify
Plaintiffs that the changes, if made, would be disagreeable. Furthermore, modifying
the disclaimer to include “or elimination” does not change the result. Indeed, given
the alleged representation, Plaintiffs might assume that any benefit eliminated would
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be paired with a more advantageous replacement. Additionally, there were a host of
VIP Program benefits that were never utilized by Plaintiffs and would not have been
problematic to eliminate. Thus, because the disclaimer did not clearly contradict the
alleged representation, it was not sufficient to commence the running of the statute
of limitations.
Defendants have also identified two different documents in Plaintiffs’
possession which they argue should have put Plaintiffs on notice about the Rental
Fraud. The first is a Statement of Understanding, which was signed in connection
with a purchase from Wyndham in 2005. One clause of that document provides that
Plaintiffs “have received no advice, nor had any discussion concerning any financial
or monetary advantage such as rental income, price appreciation through resale, or tax
advantage.” The second document is an affidavit, signed in connection with several
transactions, stating that Plaintiffs “acknowledge that the purchase . . . was NOT
made for investment purposes but to use for pleasure and vacations.”
The language from the Statement of Understanding is analogous to the
disclaimer clause discussed above because it merely provides that rental income was
not discussed. It does not, however, directly contradict the alleged oral representation
that Plaintiffs could use their points to operate a rental business with the support of
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Wyndham’s systems. Accordingly, it would not put Plaintiffs on notice that those
representations, if made, were fraudulent. The provision contained in the signed
affidavit likewise fails to put Plaintiffs on notice because it simply declares that the
purchases were not made for investment purposes. The affidavit, however, does not
clearly contradict Wyndham’s promises to operate in a manner beneficial to Plaintiffs
rental business. In sum, neither of these clauses are sufficient for this Court to
conclude, as a matter of law, that Plaintiffs had notice of the alleged Rental Fraud such
to begin the running of the applicable statute of limitations.
Defendants next argue that Plaintiffs’ claims should be barred by the statute of
limitations because the evidence demonstrates that Plaintiffs had actual knowledge of
facts that should have alerted them to the falsity of Wyndham’s representations. The
statute of limitations question may be “decided as a matter of law in cases where the
plaintiff had actual knowledge of facts that would have put a reasonable person on
notice of the fraud.” Cork, 426 F. Supp. 2d at 1239. See also Abston, 822 So. 2d at 1195
(stating that the statute of limitations begins to run when a plaintiff is privy to facts
which would “provoke inquiry in the mind of a [person] of reasonable prudence, and
which, if followed up, would have led to the discovery of the fraud”).
The Court agrees that the evidence demonstrates that Plaintiffs had knowledge
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of facts that should have alerted them to the Benefits Fraud as early as 2006.15 In mid
2006, Wyndham apparently announced an intention to alter many of the VIP Program
benefits regularly utilized by Megarenters. Plaintiffs’ knowledge of these changes is
revealed by an email they sent to Wyndham shortly before these new changes were set
to take effect, wherein Plaintiffs expressed displeasure with the upcoming changes. In
the email, Plaintiffs stated that Wyndham was performing a “bait and switch” by
rescinding promised benefits (Doc. 132-49 at 20), and by virtue of their actions,
Wyndham was “making it pretty clear that they don’t want owners like [Plaintiffs]
and that they think they can change the VIP rules anytime they want to.” (Id. at 18.)
Plaintiffs also had knowledge of facts which should have put them on notice
about the Rental Fraud more than two years before this suit was filed. There is an
identifiable link between VIP Program benefits and Plaintiffs’ rental business. For
example, Plaintiffs’ rental business was achievable in large part because of the
availability of VIP Program benefits. Thus, Plaintiffs’ knowledge that VIP Program
benefits were being removed also put them on notice that Wyndham was repudiating
its promise to help Plaintiffs run a rental business. This is evidenced by Plaintiffs own
15
VIP Program benefits had been changed from time to time prior to 2006, and it is possible
that Plaintiffs knew about these changes. However, it appears the changes occurring prior to 2006
did not have an adverse impact on Plaintiffs’ business, and therefore may not have been noticed by
Plaintiffs.
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testimony. In his deposition, Mr. Sirmon acknowledged that the Wyndham’s 2006
changes to VIP Program benefits appeared to “single[] out” owners running rental
businesses. (Sirmon Depo., Vol. 1, Doc 132-50 at 225–26.) He also testified that he
recognized Wyndham’s removal of unlimited free guest confirmations in 2007 was “a
huge change made to put [him] out of business.” (Sirmon Depo., Vol. 1, Doc 132-50
at 66.)
Because Plaintiffs were aware as early as 2006 that Wyndham was engaging in
conduct directly contradicting the company’s alleged representations, the Court finds
that the statute of limitations, unless tolled, would have had expired as to Plaintiffs’
fraud claims prior to October 7, 2010, the date this lawsuit was filed. Plaintiffs,
however, assert that Wyndham should be equitably estopped from asserting the
statute of limitations as a defense.16 Plaintiffs base their estoppel argument on their
allegations that Wyndham constantly assured them that changes to VIP Program
benefits would not be effective against their accounts, and that Wyndham’s agent
requested that Plaintiffs allow time for an internal review of their complaints.17
16
The appropriate time to address Plaintiffs’ estoppel argument is after the Court has
determined that the statute of limitations was expired at the time the lawsuit was filed. See City of
Birmingham v. Cochrane Roofing & Metal Co., 547 So.2d 1159 (Ala.1989) (addressing the plaintiff’s
estoppel claim after determining the statute of limitations had expired).
17
The Court rejects Wyndham’s argument that Plaintiffs’ estoppel argument should be
barred because it was not properly pled. Estoppel must be specially pleaded when it forms the basis
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In City of Birmingham v. Cochrane Roofing & Metal Co., the Alabama Supreme
Court summarized the law applicable in situations where one party asserts equitable
estoppel as a bar to another party’s statute of limitations defense:
In Mason v. Mobile County, 410 So. 2d 19 (Ala.1982), this Court held that
if a defendant either fraudulently or innocently represents to the plaintiff
that he will remedy a problem, and relying on these representations the
plaintiff is induced not to file a lawsuit or take any action, the defendant
may be estopped from raising the statute of limitations as a defense.
Additionally, in Arkel Land Co. v. Cagle, 445 So. 2d 858 (Ala.1983), we
held that if a defendant represents that a lawsuit is unnecessary because
he intends to take care of the problem he is likewise estopped from
raising the statute of limitations as a defense.
547 So.2d at 1167.
In Mason, the defendant county altered a drainage ditch on the border of the
plaintiffs’ property which caused the plaintiffs’ home to flood when it rained. Id. at
20. The plaintiffs immediately contacted the county to complain about the flooding.
Although the county assured the plaintiffs the problem would be corrected, no repairs
were ever made. The plaintiffs continued to complain over the next year and a half,
and each time were informed that a work crew or an engineer would come out to make
the necessary repairs. When the plaintiffs finally filed suit more than 3 years later, the
of a plaintiff’s claim or when it is being asserted as an affirmative defense. Plaintiffs, however, raise
their estoppel argument merely to rebut Wyndham’s statute of limitations defense. Wyndham has
failed to present authority demonstrating that estoppel must be specially pleaded when asserted to
preclude a defendant’s reliance on the statute of limitations. Accordingly, the Court refuses to bar
Plaintiffs’ estoppel claim because it was not included in the pleadings.
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county asserted the statute of limitations as a defense. The Alabama Supreme Court,
however, held that the county was estopped from asserting the statute of limitations
because it represented that it would attempt to correct the problem, and plaintiffs
relied on those representations in electing not to file their lawsuit. Id. at 21.
Similar to Mason, Plaintiffs complained to Wyndham in May 2006, immediately
upon learning about the proposed adverse changes to VIP Program benefits. A
Wyndham representative responded to Plaintiffs’ complaint via email: “I know
[Wyndham] is looking at another level of ownership called Diamond (2 million
points). Maybe this level of ownership will allow us to do what we need and we can
re-arrange things. If not, I will find a way around this.” (Doc. 132-49 at 18.) In his
deposition, Mr. Sirmon testified that Wyndham repeatedly assured him that the
changes would not be effective against his account. Moreover, he testified that
“Wyndham went back and [reversed the 2006 VIP Program benefit changes] after
there was an uproar.” (Sirmon Depo., Vol. 1, Doc 132-50 at 64.) Mr. Sirmon offered
the same testimony with respect to the 2007 changes, stating “I was being told it was
not going to stand and some of the other things they had changed were undone, so I
had every reason to believe this would not be a real change either.” (Id. at 67.)
Wyndham argues that under Moore v. Nat’l Sec. Ins. Co.,477 So. 2d 346, 348
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(Ala. 1985), the statements by its representatives “were nothing more than vague
assurances” and are insufficient to support an estoppel argument. Moore, however, is
distinguishable because in that case the only statements ever made by the defendant’s
representatives were that they were “checking into the problem.” Id. As the court
pointed out, the defendant never assured the plaintiffs they would be satisfied with the
outcome or that they would “receive all they believed they were entitled to receive.”
Id. In contrast, Plaintiffs here allege they were assured that they would continue to be
afforded the full scope of VIP Program benefits available at the time they made their
initial timeshare purchases. Plaintiffs contend that based on the promises of
Wyndham’s representatives, they remained confident the company would take the
steps necessary to return all promised benefits. Although the manner in which the
benefits would be restored was never completely defined, the alleged promise to
restore benefits was certain. Thus, Wyndham’s promises, as alleged by Plaintiffs, were
more than mere “vague assurances.”
Wyndham additionally argues that Plaintiffs’ estoppel argument must fail
because they “did not receive any specific promises in exchange for a promise not to
sue.” (Doc. 169 at 22.) In Mason, the Alabama Supreme Court rejected the argument
that estoppel can only be utilized if the defendant “actively mislead the plaintiff and
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urge[d] him not to file a lawsuit.” Mason, 410 So. 2d at 21 (citation omitted). The
plaintiffs in Mason never indicated that they intended to file a lawsuit, nor did the
evidence suggest the county gave assurances in exchange for the plaintiffs’ promise
not to pursue litigation. Nevertheless, the court in Mason applied equitable estoppel
to preclude the defendants’ statute of limitations defense. Id. In light of Mason, it is
apparent that a promise not to pursue litigation is not always an essential prerequisite
when raising estoppel to avoid the statute of limitations.
The Alabama Supreme Court has held that “application of the doctrine of
equitable estoppel must be tempered by applying ‘a standard of reasonable reliance.’”
McCormack v. AmSouth Bank, N.A., 759 So. 2d 538, 543 (Ala. 1999) (quoting Cochrane
Roofing, 547 So. at 1167). The “reasonable reliance” standard may place greater
emphasis on promises not to sue in certain contexts. Specifically, the Alabama
Supreme Court has emphasized promises not to sue in cases where plaintiffs raised
estoppel to avoid the statute of limitations in construction cases. See, e.g., Cochrane
Roofing, 547 So. 2d at 1167 (noting that “none of the defendants’ statements or letters
can be construed as a promise to make repairs in return for a promise not to sue”);
Jim Walter Homes, Inc. v. Kendrick, 810 So. 2d 645, 651 (Ala. 2001) (noting that “the
record contains no evidence indicating that [the defendant] made, or that [the
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plaintiff ] relied upon, a promise to repair in return for a promise not to sue”).
Cochrane Roofing and Kendrick are both distinguishable from the present case.
In both of those cases, the Alabama Supreme Court recognized that special public
policy concerns govern the estoppel analysis in the construction context:
[I]n the construction industry it is conceivable that an owner and an
architect could continue some form of working relationship for ten or
more years after a building was certified to be complete. If estoppel
prevented the assertion of the statute of limitations as a defense, then the
owner could file suit many years after the contract was completed,
claiming that he was unsatisfied with the initial design or construction,
but that he had been “induced” not to file suit during the years that the
architect was either consulting with him or making repairs. Clearly,
estoppel was not meant to defeat the statute of limitations defense in
every case where a defendant attempts to remedy problems that might
otherwise lead to a lawsuit.
. . . It makes good business sense to maintain a client’s goodwill by
assisting him in any way possible, even after the formal contractual
relationship has ended. If the statute of limitations defense was defeated
as to claims regarding the initial design or construction every time an
architect or contractor assisted a client after its performance pursuant to
the contract was completed, then the architect or contractor would have
no incentive to assist the owner with any subsequent business problems;
to do so would only extend its liability.
Cochrane Roofing, 547 So. 2d at 1167–68. See also Kendrick, 810 So. 2d at 651.
The type of policy concerns expressed in Cochrane Roofing and Kendrick are
simply not present in this case. Wyndham’s promises to restore VIP Program benefits
are not comparable to a builder making a good faith effort to maintain a client’s
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goodwill by undertaking repairs not required by contract. Instead, Plaintiffs insist that
Wyndham’s assurance that VIP Program benefits would be restored were nothing
more than empty promises intended to placate Plaintiffs while the company continued
to implement its strategy to stifle their rental business. Indeed, Wyndham’s
representative Paul Bonds testified that he knowingly lied to Plaintiffs when he
informed them that Diamond level ownership would revive their VIP Program
benefits. (See Bonds Depo., Doc 146-11 at 201–02.)
Plaintiffs’ position is further supported by a review of the exchange of
communications between the parties in late 2009. In October 2009, Plaintiffs sent a
demand letter to Wyndham threatening legal action. A Wyndham representative
responded to Plaintiffs’ demand letter, stating that “a substantial amount of research
. . . needs to occur,” but that the company would respond in a “complete collaborative
response.” Then, after Plaintiffs agreed to “await a report,” the Wyndham
representative reported to her team that she had “bought . . . some time with Mr.
Sirmon.” (Doc. 146-62 at 4.) The response to the 2009 demand letter, standing alone,
is perhaps insufficient to support Plaintiffs’ estoppel argument. However, the
statement by Wyndham’s representative that she had “bought some time with Mr.
Sirmon,” when coupled with the company’s repeated promises to restore Plaintiffs’
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VIP Program benefits, provides evidence of Wyndham’s motive to lull Plaintiffs into
inaction.
In evaluating Plaintiffs’ estoppel argument, the Court “must balance the
purpose of the statute of limitations with the injustice that would result from allowing
the defendants to claim it as a defense.” Cochrane Roofing, 547 So. 2d at 1167. In light
of facts and circumstances of this case, the Court finds that injustice would result from
refusing to allow a jury to consider whether Defendants should be estopped from
asserting the statute of limitations as a defense. Accordingly, Plaintiffs are entitled to
have a jury consider their estoppel claim when determining whether the statute of
limitations expired prior to the instigation of this lawsuit. As such, Defendants’
Motion for Summary Judgment on the grounds of the statute of limitations is due to
be denied with respect to Plaintiffs’ fraud, fraudulent inducement, and suppression
claims.
ii.
Reasonable Reliance
The Court next addresses Defendants’ argument that Plaintiffs’ reliance upon
the alleged representations was unreasonable as a matter of law. Under Alabama law,
there are four basic elements to a fraud claim: (1) there must be a false representation;
(2) the false representation must concern a material existing fact; (3) the plaintiff must
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rely upon the false representation; and (4) the plaintiff must be damaged as a
proximate result. Cowen v. M.S. Enterprises, Inc., 642 So. 2d 453, 456–57 (Ala. 1994)
(citing Ala. Code § 6-5-101). With respect to the third element, “a plaintiff must prove
that he or she reasonably relied on the defendant’s misrepresentation in order to
recover damages for fraud.” AmerUs Life Ins. Co. v. Smith, 5 So. 3d 1200, 1207 (Ala.
2008) (emphasis added).
As an initial matter, the Court points out that the analysis with respect to
“reasonable reliance” in this section is distinct from the analysis conducted with
respect to the statute of limitations. Although the term “reasonable reliance” is used
by Alabama courts in both contexts, the inquiry is not entirely the same. At this point
in the discussion, the Court is evaluating whether documents received at or prior to
the time of the sale were so clear that the plaintiffs could not be said to have
“reasonably relied” upon the allegedly false representation in the first instance.
The reasonable reliance standard was reestablished as the appropriate standard
for evaluating fraud allegations in Foremost. There, the Alabama Supreme Court
stated:
The “reasonable reliance” standard is, in our view, a more practicable
standard that will allow the factfinder greater flexibility in determining
the issue of reliance based on all of the circumstances surrounding a
transaction, including the mental capacity, educational background,
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relative sophistication, and bargaining power of the parties. In addition,
a return to the “reasonable reliance” standard will once again provide a
mechanism . . . whereby the trial court can enter a judgment as a matter
of law in a fraud case where the undisputed evidence indicates that the
party or parties claiming fraud in a particular transaction were fully
capable of reading and understanding their documents, but nonetheless
made a deliberate decision to ignore written contract terms.
Foremost, 693 So. 2d at 421.
Under Foremost, a plaintiff’s reliance can be declared unreasonable, as a matter
of law, when the undisputed evidence indicates that the plaintiff “made a deliberate
decision to ignore written contract terms that clearly contradicted the alleged
misrepresentations.” Massey Automotive, Inc. v. Norris, 895 So. 2d 215, 220 (Ala.
2004) (emphasis added) (discussing Foremost, 693 So. 2d at 421). Importantly,
however, a court cannot decide a claim as a matter of law simply because there is a
written agreement remotely on point. Rather, Alabama case law demonstrates that
courts only remove the fraud question from the purview of the jury when the written
documents are undeniably inconsistent with the representations made by the
defendant. See, e.g., Foremost, 693 So. 2d at 421–22; Smith, 5 So. 3d at 1208; Alfa Life
Insurance Corp. v. Green, 881 So. 2d 987, 988–89 (Ala. 2003).
In Foremost, the defendant represented to the plaintiffs that their first year of
insurance coverage would not require the payment of a premium. 693 So. 2d at 414.
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Notwithstanding this representation, the plaintiffs signed and were provided with
various sales documents, all of which clearly indicated that premiums were charged
for the first year’s coverage. Id. The court noted that if the plaintiffs had “read or even
briefly skimmed” the documents, they would have recognized the inconsistency. Id.
at 422. Accordingly, the court stated that the plaintiffs’ claim failed to satisfy the
objective reasonable reliance standard. Id.
In Smith, the plaintiff claimed that his insurance agent orally represented that
his life insurance premiums would remain level and the policies would remain in force
for 42 years, or until the plaintiff was age 95. Smith, 5 So. 3d at 1202. However, the
annual statements for the policies reflected that if only the planned premiums were
paid, the policies would terminate after 26 years. Id. at 1203. Additionally, each policy
contained a disclaimer providing that coverage may end before the insured reached
age 95. Id. Given that the documents clearly indicated that the plaintiff’s insurance
coverage would expire before he reached age 95, the court held “no reasonable person
could read the policies . . . and not be put on inquiry as to the existence of
inconsistencies., thereby making reliance on [the defendant’s] representations
unreasonable as a matter of law.” Id. at 1216.
In Green, the plaintiffs alleged that an insurance agent had represented to them
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that they would be required to make only nine annual premium payments for a lifeinsurance policy. 881 So. 2d at 988–89. However, the insurance company presented
evidence that the plaintiffs had received a two-column premium schedule, one column
showing the number of premiums they would have to pay if the interest rates remained
the same, and one showing that premiums would be required for more than nine years
if interest rates changed. Id. at 989. The court held that the insurance company was
entitled to judgment as a matter of law because, given the unambiguous premium
schedule, the plaintiffs could not show they reasonably relied on the alleged oral
representations. Id. at 992–93.
In each of these cases, the documents in the plaintiffs’ possession were
undeniably inconsistent with the alleged misrepresentations. See also Cook’s Pest
Control, Inc. v. Rebar, 28 So. 3d 716, 727 (Ala. 2009) (holding that plaintiffs did not
demonstrate reasonable reliance where the “written terms clearly contradicted the
alleged representation); Traylor v. Bell, 518 So. 2d 719, 720–21 (Ala. 1987) (finding
that fraud would have been “easily discovered by even a casual reference by [the
plaintiff ] to . . . the sales document which he signed”). In essence, these are situations
where the defendant said “east” and the document said “west.” However, without
a document presenting such a direct contradiction, the reasonable reliance question
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should be resolved by the jury at trial.
The Court now turns to the case sub judice. Defendants have not presented
evidence that Plaintiffs possessed documents at or prior to the time of the individual
transactions that contained the type of unmistakable contradiction necessary for the
Court to decide reasonable reliance as a matter of law. Defendants first argue that the
disclaimers in the membership directories stating that benefits were “subject to
change” should defeat Plaintiffs’ assertion that they reasonably relied upon the oral
representations. The disclaimers, however, were not included in the membership
directories until the 2003 publication. Accordingly, the disclaimers would certainly
not defeat reasonable reliance upon representations made in connection with
purchases before 2003.
Furthermore, the disclaimers are also insufficient to defeat reasonable reliance
with respect to transactions occurring after 2003 because they did not necessarily
contradict Wyndham’s alleged promise to not make adverse changes to VIP Program
benefits. As discussed above, the disclaimers simply announced Wyndham’s authority
to make changes. Wyndham, however, never stated that it did not have the authority
to change VIP benefits. Rather, the alleged representation was that Wyndham would
not exercise its authority to make changes detrimental to Plaintiffs. Since the
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disclaimer does not directly contradict that representation, it was not unreasonable for
Plaintiffs to ignore the disclaimer when relying on Wyndham’s alleged promise that
it would not adversely change Plaintiffs’ VIP benefits.
Defendants next argue that Plaintiffs cannot establish reasonable reliance upon
any representations related to Plaintiffs’ rental operations because Plaintiffs signed
affidavits and other contract documents providing that the purchases were made
without expectation of financial benefit. These documents, however, are similarly
insufficient to remove the reasonable reliance inquiry from the jury. The affidavits and
other documents referred to by Defendants do not directly contradict the alleged
promises that Plaintiffs could use their points to operate a rental business with the
support of Wyndham’s systems. Rather, these documents simply announce that the
Plaintiffs’ purpose was to purchase points for pleasure and not investment. Since
these documents do not clearly contradict the alleged misrepresentation, Plaintiffs
have not failed, as a matter of law, to establish reasonable reliance. Accordingly, a jury
will determine the issue.
iii.
Merger Clauses
Defendants next argue that merger clauses within the timeshare contracts
should defeat Plaintiffs’ fraud claims as a matter of law. Defendants, however, have
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failed to present binding authority directly supporting this argument. The two primary
cases cited by Defendants were rendered by courts applying the law of states other
than Alabama. And one of those decisions, Korff v. Hilton Resorts Corp., 797 F. Supp.
2d 875 (N.D. Ohio 2011), was recently reversed by the Sixth Circuit in an opinion
released shortly after briefing for this matter concluded. See Korff v. Hilton Resorts
Corp., 2012 WL 5951480 (6th Cir. Nov. 28, 2012) (reversing the district court’s
decision that a merger clause barred the plaintiff’s fraud claim).
The Alabama Supreme Court has specifically addressed this issue. In Downs v.
Wallace, the court stated:
[T]his Court has never held that an integration clause such as the one
contained in the [plaintiff’s] purchase agreement renders a party’s
reliance on oral representations unjustifiable, or unreasonable, as a
matter of law. To the contrary, this Court has consistently held that
although a written contract stipulates that there were no oral
understandings not incorporated therein, such a stipulation does not
foreclose a party, as a matter of law, from establishing his reliance on
fraudulent representations that induced him to enter the contract. This
holding ensues from the rule that when an agreement has been induced
by deliberate fraud, the written document reciting that agreement is void
and is “of no more binding efficacy . . . than if it had no existence, or
were a piece of waste paper.”
622 So. 2d 337, 341 (Ala. 1993) (internal citations omitted) (quoting Drinkard v.
Embalmers Supply Co., 14 So. 2d 585, 587 (Ala. 1943)). “Therefore, the existence of
a general [merger] clause in the purchase agreement does not, as a matter of law,
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preclude [a plaintiff ] from justifiably relying on alleged oral representations that were
not contained in the contract.” Envtl. Sys., Inc. v. Rexham Corp., 624 So. 2d 1379, 1385
(Ala. 1993) (discussing Downs).
Nonetheless, Defendants argue that the “fraud in the inducement exception”
discussed in Downs and Environmental Systems is no longer applicable because
Alabama has abandoned the fraud-in-the-inducement exception to the statute of
frauds. See Bruce v. Cole, 854 So. 2d 47 (Ala. 2003); Nix v. Wick, 66 So. 3d 209, 218
(Ala. 2010). Alabama’s statute of frauds provides:
In the following cases, every agreement is void unless such agreement or
some note or memorandum thereof expressing the consideration is in
writing and subscribed by the party to be charged therewith or some
other person by him thereunto lawfully authorized in writing:
(5) Every contract for the sale of lands, tenements or hereditaments, or
of any interest therein, except leases for a term not longer than one year,
unless the purchase money, or a portion thereof is paid and the purchaser
is put in possession of the land by the seller.
Ala. Code § 8-9-2.
The Court is not persuaded that the statute of frauds applies to the
representations underlying Plaintiffs’ fraud allegations. As an initial matter, the Court
notes that Defendants failed to assert their statute of frauds argument until their reply
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brief.18 As such, their statute of frauds argument is waived. See Wilkerson v. Grinnell
Corp., 270 F.3d 1314, 1322 (11th Cir. 2001) (stating that a claim that was included in
pleadings but not again raised until the plaintiff’s supplemental reply brief is
abandoned). However, even if properly asserted, Defendants’ statute of frauds
argument is without merit because the statute of frauds is inapplicable to the
representations forming the basis of Plaintiffs’ fraud claims.
The Alabama Supreme Court has held that claims alleging oral
misrepresentations concerning benefits associated with the purchase of a timeshare
are not governed by the statute of frauds. See Alpine Bay Resorts, Inc. v. Wyatt, 539 So.
2d 160 (Ala. 1988). In Alpine Bay, the plaintiff purchased a “fixed week” timeshare
interest. The plaintiff alleged that Alpine represented that the unit would be available
during a specified week each year and that they would receive a charter golf
membership entitling them to reduced fees at the resort golf course. The plaintiff later
filed suit when these representations proved false. Alpine argued that the
representations were void by the statute of frauds because they concerned or related
to the conveyance of an interest in land. The Alabama Supreme Court rejected this
18
Although Defendants’ included the statute of frauds as a defense in their answer (Doc. 7
at 15), they did not again assert the statute of frauds until their reply brief in support of their Motion
for Summary Judgment.
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argument, holding that the promise to have the unit available for a certain week “was
not and cannot be characterized as an oral contract for the sale of land within the
meaning of Code 1975, § 8–9–2(5).” Alpine Bay, 539 So. 2d at 164.
While it may be true that Alabama has abandoned the fraud in the inducement
exception to the statute of frauds, the representations underlying Plaintiffs’ fraud
claims are not governed by the statue of frauds. As in Alpine Bay, Plaintiffs’ fraud
allegations relate to benefits tangentially associated with their timeshare interest. The
representations did not directly relate to any conveyance of realty and were not for the
“sale of land.” Under Alpine Bay, it is clear these representations are not covered by
the statute of frauds. And because the representations are not covered by the statute
of frauds, the rule announced in Bruce and its progeny is not applicable to this dispute.
Second, this transaction falls within an exception expressly set out in the
statute. The statute of frauds does not apply if “the purchase money, or a portion
thereof is paid and the purchaser is put in possession of the land by the seller.” Ala.
Code § 8-9-2(5). In this case, Plaintiffs paid the full purchase money for their
timeshare points, and were “put in possession” by both receiving the points and using
the properties associated with those points. Although Defendants assert this exception
does not apply, they have failed to cite any authority explaining their reasoning.
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Accordingly, the Court concludes the “purchase money” exception would remove
this transaction from the statute of frauds.
Since the statute of frauds does not apply to this action, the rule announced in
Downs and Environmental Systems controls the Court’s analysis of the merger clauses.
These two cases clearly provide that, under Alabama law, the merger clauses in the
timeshare contracts do not defeat Plaintiffs’ fraud claims. Accordingly, summary
judgment is due to be denied as to Defendants’ argument with respect to the merger
clauses and the statute of frauds.
B.
Fiduciary Duty
Count VI of Plaintiffs’ complaint asserts a claim for breach of fiduciary duties.
Defendants contend that Plaintiffs cannot establish the type of close confidential
relationship with Wyndham and its agents necessary to support a claim for breach of
fiduciary duties.
The Alabama Supreme Court has held that fiduciary relationships are “not
restricted to such confined relations as trustee and beneficiary, partners, principal and
agent, guardian and ward, managing directors and corporation, etc.” Line v. Ventura,
38 So. 3d 1, 12 (Ala. 2009) (internal citations omitted). Rather, the responsibilities of
a fiduciary flow to “all persons who occupy a position out of which the duty of good
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faith ought in equity and good conscience to arise. It is the nature of the relation which
is to be regarded, and not the designation of the one filling the relation.” Id. at 12–13.
A fiduciary relationship is one in which:
one person occupies toward another such a position of adviser or
counselor as reasonably to inspire confidence that he will act in good
faith for the other’s interests, or when one person has gained the
confidence of another and purports to act or advise with the other’s
interest in mind; where trust and confidence are reposed by one person
in another who, as a result, gains an influence or superiority over the
other; and it appears when the circumstances make it certain the parties
do not deal on equal terms, but, on the one side, there is an
overmastering influence, or, on the other, weakness, dependence, or
trust, justifiably reposed; in both an unfair advantage is possible. It arises
in cases in which confidence is reposed and accepted, or influence
acquired, and in all the variety of relations in which dominion may be
exercised by one person over another.
Id. at 13 (quoting Bank of Red Bay v. King, 482 So. 2d 274, 284 (Ala. 1985)).
After due consideration, the Court concludes that there is insufficient evidence
to justify the imposition of a fiduciary duty owed to Plaintiffs by Wyndham and its
agents. Although a fiduciary relationship may exist outside the traditional contexts,
i.e., principal-agent, attorney-client, etc., the Court does not believe the present case
presents such a situation.
The Alabama Supreme Court’s recent decision in Maloof v. John Hancock Life
Ins. Co., 60 So. 3d 263 (Ala. 2010), is instructive on Plaintiffs’ fiduciary duty claim.
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In Maloof, the plaintiffs argued that a fiduciary relationship existed with their
insurance agent because “for many years, [the plaintiffs] entrusted their financial
affairs and estate planning needs to [the agent].” Id. at 273. The court, however, found
the plaintiffs’ contention that they had a trusting and confidential relationship was
belied by their own testimony indicating that they understood the transactions to be
at arms-length and that they recognized the agent was simply a salesman selling a
product. The court concluded that the plaintiffs “did not view their relationship with
[defendant], though cordial and long-standing, as anything special or outside the
typical salesperson-customer relationship.” Id. at 274. As such, there could be no
fiduciary relationship.
There is no question that Plaintiffs maintained a long-standing and active
relationship with Wyndham and its representatives. However, as in Maloof, the
relationship between Wyndham and Plaintiffs, at its core, was merely one between a
seller and a buyer. Plaintiffs purchased timeshare interests from Wyndham after
meeting with sales representatives, sitting through sales presentations, and engaging
in arms-length negotiations. There is no reason to believe Plaintiffs failed to
understand Wyndham was selling its product, and not necessarily looking out for their
best interest.
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Moreover, like the plaintiffs in Maloof, Plaintiffs repeatedly made comments
suggesting that they did not view Wyndham in a fiduciary capacity. In 2007, Plaintiffs
wrote an email stating “I don’t trust Wyndham’s top decision makers as far as I can
throw them[.] . . . [They] seem intent on taking away one thing after another after they
advertise and sell them a different way up front.” (Doc. 139-42 at 6.) In a later email,
Plaintiffs stated they were “very contemptuous as to how the people at the top of the
company do business.” (Doc. 132-49 at 10.) These distrusting and critical comments
about the defendant companies indicate that Plaintiffs did not view Wyndham and its
agents as fiduciaries.
Plaintiffs argue that they placed genuine trust in Wyndham’s representatives,
which was “developed over the course of many years and countless conversations.”
(Doc. 145 at 54.) However, it is not enough to simply assert that a trusting relationship
existed. “‘[M]ere subjective trust’ . . . is insufficient to establish [a fiduciary]
relationship.” Hopkins v. Hopkins, 983 So. 2d 382, 391 (Ala. Civ. App. 2007 (quoting
Roy Ryden Anderson, The Wolf at the Campfire: Understanding Confidential
Relationships, 53 SMU L. Rev. 315 (2000)). Rather, “the claimant must show not just
that he trusted the other party, but that he trusted him to act as a fiduciary.” Id.
“Further, reposing that level of trust must have been reasonable under the
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circumstances. It is the lack of this reasonableness that has caused so many courts to
refuse to find in favor of a confidential relationship.” Id.
Even accepting that Plaintiffs placed “subjective trust” in Wyndham and its
representatives, they still have not demonstrated the type of objective and reasonable
trust necessary to establish a fiduciary relationship. There is no evidence suggesting
that Wyndham possessed an “overmastering influence” over Plaintiffs, such as
holding unique information about their financial affairs. Line, 38 So. 3d at 13. There
is also no indication that Plaintiffs acted in a state of “weakness, dependence, or trust,
justifiably reposed,” such that they would make purchasing decisions without
thoughtfully considering the implications. Line, 38 So. 3d at 13. To the contrary, there
is a general understanding that the motivations of sellers and buyers are not perfectly
aligned and that sellers are acting in their own self-interest. Accordingly, it would not
have been reasonable for an individual in Plaintiffs’ position to assume that a
developer selling its own product was acting in a fiduciary capacity.
Plaintiffs attempt to bolster their breach of fiduciary duty claim by arguing that
Wyndham garnered influence through “specific and targeted marketing.” (Doc. 145
at 55.) They further argue that their purchases were only made after “repeated
suggestions by Wyndham salespersons.” Id. But specific and targeted marketing is
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characteristic of all prudent sellers. The mere fact that a seller obtains information
about and specifically targets a specific customer base does not prevent a transaction
from being at arms length. Although salesmen do not have license to engage in fraud,
they are not held to the high standard of a fiduciary. Because Plaintiffs have failed to
establish the existence of a fiduciary relationship, summary judgment is due to be
granted in favor of Defendants on Plaintiffs’ breach of fiduciary duty claims.
C.
Fraudulent Suppression
In Count III of their complaint, Plaintiffs allege that Defendants fraudulently
suppressed the fact that they were developing and implementing a strategy to prevent
owners from operating rental businesses with their points. Under Alabama law, there
are four elements to a claim for fraudulent suppression. “[T]he plaintiff must show
1) that the defendant had a duty to disclose material facts, 2) that the defendant
concealed or failed to disclose those facts, 3) that the concealment or failure to
disclose induced the plaintiff to act; and 4) that the defendant’s action resulted in
harm to the plaintiff.” Lawson v. Harris Culinary Enterprises, LLC, 83 So. 3d 483, 492
(Ala. 2011) (internal citation omitted). Defendants contend that Plaintiffs’
suppression claim fails for the same reasons as their breach of fiduciary duty claim.
Specifically, Defendants argue that without a fiduciary relationship there cannot be
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a duty to disclose. Thus, Defendants argue that Plaintiffs cannot satisfy the first
element of their cause of action.
As an initial matter, Defendants’ assertion that a duty to disclose only exists
when there is a fiduciary relationship is incorrect. Alabama’s codification of the tort
of fraudulent suppression provides that “[t]he obligation to communicate may arise
from the confidential relations of the parties or from the particular circumstances of the
case.” Ala. Code § 6-5-102 (emphasis added). Thus, the statute “creates a way of
finding a duty outside the narrower ‘confidential relations’ approach, by allowing the
court to broaden its analysis into the facts surrounding the transaction.” State Farm
Fire & Cas. Co. v. Owen, 729 So. 2d 834, 839 (Ala. 1998).
“The question whether a party had a duty to disclose is a question of law to be
determined by the trial court.” Barnett v. Funding Plus of Am., Inc., 740 So. 2d 1069,
1074 (Ala. 1999). The Court must consider and apply the following factors in
determining whether, under the particular circumstances, a duty to disclose exists: (1)
the relationship of the parties; (2) the relative knowledge of the parties; (3) the value
of the particular fact; and (4) the plaintiffs’ opportunity to ascertain the fact.19 Owen,
19
The court in Owen also listed “customs of the trade” and “other relevant circumstances”
as factors to be considered. 729 So.2d at 843. However, because these factors are inapplicable in the
context of this case, they are excluded from the Court’s analysis.
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729 So.2d at 842–43; Davis v. Sterne, Agee & Leach, Inc., 965 So. 2d 1076, 1091 (Ala.
2007) (“A duty to speak depends on the relation of the parties, the value of the
particular fact, the relative knowledge of the parties, and other circumstances.”).
The analysis begins with an evaluation of the relationship of the parties.
Although the interactions between Wyndham and Plaintiffs did not rise to the level
of a fiduciary relationship, that does not mean the relationship was entirely
insignificant. The relationship between Wyndham and Plaintiffs developed over the
course of many years. Plaintiffs regularly spoke and transacted with the same
Wyndham employees, many of which held high-ranking positions of leadership within
the company. According to Plaintiffs, Wyndham’s agents regularly encouraged them
to purchase additional points and use those points to operate a for-profit rental
business. And in response to those suggestions, Plaintiffs contend that they expended
hundreds of thousands of dollars purchasing timeshare points. Over time, Plaintiffs
accumulated enough points to become some of Wyndham’s largest owners worldwide.
This evidence indicates a long-standing and active relationship which was more
consequential than the typical buyer-seller relationship.
The Court next considers the relative knowledge of the parties. Plaintiffs
contend that Wyndham, and only Wyndham, had information about the alleged
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strategy to eliminate Megarenters. Plaintiffs have submitted enough evidence for a
reasonable jury to accept their contention. Although Plaintiffs recognized policy
changes which negatively impacted their rental operations, a jury could determine that
Plaintiffs were not aware that these changes were part of a comprehensive plan to
restrict Megarenters’ operations. Plaintiffs allege that even while Wyndham was
developing a strategy to eliminate Megarenters, it was continuing to encourage
Plaintiffs to purchase more points for use in their rental business. If true, this would
indicate that Wyndham was still supportive of Plaintiffs’ rental operations.
Furthermore, Plaintiffs allege that Wyndham’s representatives assured them that the
negative policy changes would not remain in effect. If a jury accepts Plaintiffs’
allegations, it could well conclude that Wyndham had exclusive knowledge about the
alleged strategy to eliminate Megarenters, a fact which would weigh in favor of a duty
to disclose.
Third, the court considers the value of the facts allegedly suppressed. In this
case, the value of the information about Wyndham’s plan, if true, is considerable.
Plaintiffs already possessed significantly more timeshare points than any single
individual or family could ever personally use. Thus, without the ability to continue
operating a profitable rental business, the points Plaintiffs were purchasing were
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arguably far less valuable.
Finally, the Court considers Plaintiffs’ opportunity to ascertain the allegedly
suppressed facts. Plaintiffs could not ascertain the allegedly suppressed information
on their own because, if Wyndham actually developed a plan to eliminate
Megarenters, such information would have been in the exclusive control of the
timeshare company. This situation is not comparable to that of a used car seller
withholding information which could be detected through an independent inspection.
Nor was the information allegedly suppressed the type of information which could be
obtained through diligent online research. Rather, information about Wyndham’s
alleged plan was only available to those within the company’s employ. As discussed
above, while Plaintiffs were aware of individual policy changes, it does not follow that
they should have recognized that the changes were part of a more comprehensive
scheme. Furthermore, Plaintiffs submitted evidence that whenever they inquired
about the negative policy changes, Wyndham would dismiss their fears and assure
them everything would work out in the end. This evidence supports Plaintiffs’
position that they did not have an adequate opportunity to learn exactly what
Wyndham intended.
Evaluating these factors and considering the applicable law, the Court
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concludes that Plaintiffs have submitted enough evidence that a reasonable jury could
find a duty to disclose. If a jury concludes that Wyndham (1) was in fact developing
and implementing a plan to stop owners from renting their points and (2) continued
to employ the rental pitch when selling points to Plaintiffs, then Wyndham would have
had a duty to disclose information about its plan at the time it was making the sales.
Regardless, Plaintiffs’ suppression claim will be limited to transactions
occurring after Wyndham made the decision to put the Megarenter Strategy into
effect. Plaintiffs made numerous purchases from Wyndham over a period spanning
nearly a decade, beginning in 1999, and continuing through April 2008. However, if
the alleged Megarenter Strategy actually existed, it was likely not formulated until
2005. Because Plaintiffs’ suppression claim is based upon Wyndham’s failure to
disclose information about the alleged Megarenter Strategy, it cannot be asserted with
regard to transactions that occurred before the date whereupon the jury determines
the Megarenter Strategy came into existence.
D.
Civil Conspiracy to Commit Fraud, Fraudulent Inducement, and
Suppression
Count XIII of Plaintiffs’ complaint asserts a claim for civil conspiracy to commit
fraud, fraudulent inducement, and suppression. Defendants argue that this claim
should be dismissed pursuant to the two year statute of limitations. Defendants are
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correct that the statute of limitations on the conspiracy claims expired before the filing
of this lawsuit. Indeed, the same facts that put Plaintiffs on notice of the fraud also put
them on notice of any conspiracy to commit fraud. However, notwithstanding the
expiration of the statute of limitations, the Court has already concluded that Plaintiffs
may present evidence to the jury that Defendants should be estopped from raising the
statute of limitations as a defense with respect to their fraud-based claims. Plaintiffs’
estoppel argument on their fraud claims applies equally to their claims for civil
conspiracy to commit fraud. Accordingly, summary judgement is due to be denied on
Plaintiffs’ conspiracy claims.
E.
Breach of Contract
Count IV of Plaintiffs’ complaint asserts a claim for breach of contract. “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.” Reynolds Metals Co. v. Hill,
825 So. 2d 100, 105 (Ala. 2002). Defendants argue that Plaintiffs’ breach of contract
claim should be dismissed because they have failed to make out a prima facie case.
Specifically, Defendants contend that summary judgment is due to be granted because
Plaintiffs have failed to identify any actual contractual provision that was breached.
Page 55 of 64
It appears that Plaintiffs’ breach of contract claim is based upon the same oral
representations that form the basis of their fraud claims. Defendants assert that
application of the parole evidence rule precludes these representations from being
considered by the Court. In First Commercial Bank v. Spivey, the Alabama Supreme
Court explained the purpose behind the parole evidence rule:
The applicability of the parol evidence rule necessarily rests upon the
existence of a valid written instrument that completely and accurately
expresses the obligations assumed by or imposed upon the parties. The
very purpose of the parol evidence rule is to protect the verity of such an
instrument.
694 So. 2d 1316, 1326 (Ala. 1997). “[T]he parol evidence rule does not apply to every
contract of which there exists written evidence; it applies, instead, only when the
parties to an agreement reduce it to writing, and agree or intend that the writing shall
be their complete agreement.” Spivey, 694 So. 2d at 1326-27. When the parole
evidence rule applies, oral representations must be excluded when considering a claim
for breach of contract.
Here, the parties not only reduced their agreements to writing, they also
explicitly agreed that the writings would be the complete agreement and that oral
representations would not have any contractual effect. The following provision is
exemplary of the type of merger clauses included throughout the contract documents:
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This agreement supersedes any and all understandings and agreements
between You and Us, and You and We mutually agree that this
Agreement represents the entire Agreement between You and Us, and
any representation or inducement which is not set forth in this
Agreement shall be of no force and/or effect. This Agreement may only
be amended or modified by an instrument in writing between the parties.
(Doc. 132-7 at 50 ¶ 17.)
This and other similar provisions clearly provide that oral representations will
not be honored. These merger clauses trigger application of the parol evidence rule
to preclude oral representations from being considered in a claim for breach of
contract. See Envtl. Sys., Inc. v. Rexham Corp., 624 So. 2d 1379 (Ala. 1993) (noting that
while merger clauses may not be exercised to exclude evidence relating to a fraud
claim, they may be used to invoke the parol evidence rule for contract claims). Thus,
the Court will be restricted to the written agreements when evaluating Plaintiffs’
breach of contract claim.
Because the oral representations are excluded by the parole evidence rule,
Plaintiffs must identify a written contract term that has been violated. S. Exposition
Mgmt. Co. v. Univ. Auto Sales, Inc., 740 So. 2d 992, 994 (Ala. 1998) (“To support a
breach-of-contract claim, a plaintiff must show the existence of a contract, the
defendant’s breach of a specific term of that contract, and damage resulting from that
breach. A plaintiff may not support his claim with evidence that is barred by the parol
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evidence rule.”). The Court agrees with Defendants that Plaintiffs have failed to
identify any written contractual term that has been violated. Indeed, Plaintiffs have not
identified any specific contractual provision in their pleadings or in their brief with
respect to this motion for summary judgment. Thus, Plaintiffs have failed to make out
a prima facie case for breach of contract, and summary judgment is due to be granted
on their breach of contract claim.
F.
Remaining Claims: Negligence; Wantonness; Negligent and Wanton
Hiring, Training, and Supervision; and Unjust Enrichment
Defendants assert that Plaintiffs’ remaining claims—i.e., negligence (Count
VII); wantonness (Count V); negligent and wanton hiring, training, and supervision
(Counts VIII and IX); and unjust enrichment (Count X)—should each be dismissed
pursuant to the two year statute of limitations. Alabama provides a two year statue of
limitations for each of these claims. See Ala. Code § 6-2-38. Thus, Plaintiffs’ claims
are barred by the statute of limitations if their injuries accrued more than two years
before the filing of this lawsuit.
The Court begins by addressing Plaintiffs’ negligence claim. Plaintiffs’ assert
in their complaint that Wyndham was negligent in its performance of its contractual
responsibilities. Specifically, Plaintiffs argue that Wyndham operated a reservation
system that was incapable of handling the volume of bookings being made and that
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Wyndham’s departments responsible for fixed week conversions could not handle the
volume of purchases made by Plaintiffs. (Doc. 60 at ¶¶ 75–81.)
The Court agrees that Plaintiffs’ negligence claim is barred by the statute of
limitations. Indeed, the face of Plaintiffs’ complaint demonstrates that the 2-year
statute of limitations had elapsed. The complaint explicitly provides that “Wyndham
is two to four years behind on Plaintiffs’ fixed week conversions.” (Doc. 60 at ¶ 78.)
Furthermore, the evidence submitted by the parties indicates that the problems
identified in Plaintiffs’ complaint existed well before October 7, 2008. Plaintiffs sent
a litany of email complaints to Wyndham detailing the problems with the reservation
system. In December 2005, Plaintiffs complained that “[t]he online system is virtually
worthless.” (Doc. 132-49 at 104.) Plaintiffs complained again one month later: “I
would list a couple of dozen reasons why the [Wyndham] online system is one of the
most excruciatingly slow and frustrating things a person can deal with in their lifetime
but I have been doing that over the last year with no discernable improvements.” (Id.
at 114.) In May 2006, Plaintiffs stated that “[t]he system is unstable, unreasonably
slow, and gets maybe a 2 out of 10 for being functionally effective on a consistent
basis.” (Id. at 78.) And in January 2008, Plaintiffs wrote: “It doesn’t look like
Wyndham is ever going to get their computer system into the 21st Century.” (Id. at
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117.) These are just a small sample of the complaints Plaintiffs made before October
7, 2008, and are enough for the Court to determine the statute of limitations expired
on Plaintiffs’ negligence claim before this lawsuit was filed.
Plaintiffs argue that “for the same reasons given [for the fraud claims],”
Defendants should be equitably estopped from raising the statute of limitations as a
defense to their negligence claim. (Doc. 145 at 64.) However, unlike with the fraud
claims, Plaintiffs have not submitted evidence to support their estoppel theory. As
acknowledged by Plaintiffs’ complaints, there is no indication that Wyndham’s online
reservation system ever demonstrated improvement. In January 2006, Plaintiffs stated
“I have been [complaining about the system] over the last year with no discernable
improvements.” (Doc. 132-49 at 114.) Similarly, on May 10, 2006, Plaintiffs stated
“[n]othing has really happened over the last two years of reporting [these problems]
but here goes again anyways.” (Doc. 132-49 at 78.) With respect to the fraud claims,
Plaintiffs put forth evidence that Wyndham backtracked on many of its changes to the
VIP benefits, providing hope that things would all work out as they were promised.
The same cannot be said about the problems with the reservation system.
Further, unlike with the fraud claim, the evidence does not demonstrate that
Wyndham strung Plaintiffs along with hopes that everything would soon improve.
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While at times Wyndham suggested it was exploring the issues, it never promised that
the system would soon be able to accommodate Plaintiffs’ activity. In fact, Wyndham
bluntly stated the opposite. On May 16, 2006, a member of Wyndham’s internet team
wrote to Plaintiffs:
I am going to give it to you straight. You will not be able to use this
account online until the next system wide memory purge. There simply
is not enough memory on your account, and we cannot just purge your
history. This means that you will be dependant on the phone counselors
for the short term. I wish I had better news, but the online system was
not designed to handle the number of reservations booked on your
account.
(Doc. 132-49 at 134.) Thus, at least as early as May 2006, Plaintiffs were put on notice
that the system was not built for their level of activity and that they should not expect
the system to function as they hoped.
The Court finds that the statute of limitations expired on Plaintiffs’ negligence
claims before the filing of this lawsuit. Additionally, the Court finds that Plaintiffs
failed to adequately support their argument that Defendants should be equitably
estopped from asserting the statute of limitations as a defense. Accordingly, summary
judgment is due to be granted on Plaintiffs’ negligence claim.
The analysis with respect to Plaintiffs’ negligence claim applies equally to
Plaintiffs’ claims for wantonness, negligent and wanton hiring, training and
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supervision, and unjust enrichment. Because each of these claims are based on
injuries which accrued more than two years prior to the filing of this action, the statute
of limitations has expired as to each one. Further, Plaintiffs have not submitted
evidence necessary to support their argument that Defendants should be estopped
from raising the statute of limitations as a defense. Plaintiffs bear the burden of
presenting enough evidence to support their estoppel argument. Although Plaintiffs
presented evidence that Defendants should be estopped from raising the statute of
limitations with respect to their fraud claims, they have not presented similar evidence
with respect to their claims for wantonness, negligent and wanton hiring, training and
supervision, and unjust enrichment. Despite Plaintiffs’ assertion to the contrary, the
evidence required for each of these claims is not identical. Because Plaintiffs have
failed to adequately support their estoppel argument with respect to their claims for
wantonness, negligent and wanton hiring, training and supervision, and unjust
enrichment, summary judgement is due to be granted as to each of these claims.
V.
Conclusion
For the reasons described above, Defendants’ motions for summary judgment
(Docs. 124 and 127) are due to be GRANTED, and Defendants’ motion for summary
judgment (Doc. 130) is due to be GRANTED in part and DENIED in part.
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The following Alabama state law claims are due to be DISMISSED with
prejudice:
(1)
All claims asserted by Plaintiffs Brannon and Spencer Sirmon;
(2)
All claims asserted against Defendant RCI, LLC;
(3)
Plaintiffs Richard and Cynthia Sirmon’s claim for breach of contract
(Count IV);
(4)
Plaintiffs Richard and Cynthia Sirmon’s claim for wantonness (Count
V);
(5)
Plaintiffs Richard and Cynthia Sirmon’s claim for breach of fiduciary
duty (Count VI);
(6)
Plaintiffs Richard and Cynthia Sirmon’s claim for negligence (Count
VII);
(7)
Plaintiffs Richard and Cynthia Sirmon’s claim for negligent hiring,
training, and supervision (Count VIII);
(8)
Plaintiffs Richard and Cynthia Sirmon’s claim for wanton hiring,
training, and supervision (Count IX);
(9)
Plaintiffs Richard and Cynthia Sirmon’s claim for unjust enrichment
(Count X).
The following claims will proceed at this time:
(1)
Plaintiffs Richard and Cynthia Sirmon’s claim for fraud (Count I);
(2)
Plaintiffs Richard and Cynthia Sirmon’s claim for fraudulent inducement
(Count II)
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(3)
Plaintiffs Richard and Cynthia Sirmon’s claim for fraudulent suppression
(Count III);
(4)
Plaintiffs Richard and Cynthia Sirmon’s claim for civil conspiracy to
commit fraud, fraudulent inducement, and fraudulent suppression
(Count XIII).
A separate order will be entered consistent with this opinion.
Done this 4th day of February 2013.
L. Scott Coogler
United States District Judge
[170956]
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