Embree v. Wyndham Worldwide Corporation et al
ORDER granting in part 77 78 Defendants' Motions to Dismiss; denying as moot 103 Plaintiff's Motion for Class Certification. The 76 Amended Complaint is DISMISSED WITHOUT PREJUDICE. Plaintiff has until and including February 26, 2018, to file a Second Amended Complaint consistent with this Order. Signed by Judge Paul G. Byron on 2/12/2018. (JRJ)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TOMMY J. EMBREE,
Case No: 6:16-cv-928-Orl-40GJK
WYNDHAM VACATION OWNERSHIP,
OWNERS ASSOCIATION, RCI LLC,
TERRI DOST, PETER HERNANDEZ
and ROB HEBELER,
This cause comes before the Court without oral argument on the following:
1. Defendant, Wyndham Worldwide Corporation’s Motion to Dismiss
Amended Complaint (Doc. 77), filed April 18, 2017;
2. Motion to Dismiss Amended Complaint by Defendants Wyndham Vacation
Resorts, Inc., Fairshare Vacation Owners Association, RCI, LLC, Wyndham
Vacation Ownership, Inc., Terri Dost, Peter Hernandez, and Rob Hebeler
(Doc. 78), filed April 18, 2017;
3. Plaintiff’s Consolidated Omnibus Response in Opposition to Defendants’
Motion to Dismiss (Doc. 84), filed May 18, 2017;
4. Defendants’ Reply in Support of Motion to Dismiss (Doc. 88), filed June 9,
5. Plaintiff’s Sur-Reply to Defendants’ Motions to Dismiss (Doc. 99), filed July
The parties have completed their briefing and the Court is otherwise fully advised
on the premises. Upon consideration, the Amended Complaint is due to be dismissed
without prejudice as a shotgun pleading.
Wyndham operates a global conglomerate of hotels and timeshares. This putative
class action involves claims for violations of the Arkansas Trust Code arising out of
Wyndham’s timeshare business, and impugns Wyndham’s timeshare business as rife
with self-dealing and profiteering. Plaintiff brings suit against multiple distinct entities in
the Wyndham family, in addition to three individuals. 2 When a consumer purchases a
timeshare ownership interest from Wyndham, “WVR and [Worldwide] require the
consumer to place the entire timeshare interest into a trust created by and fully managed
by WVR,” the FairShare Vacation Plan Use Management Trust (“Trust”). Plaintiff
generally alleges that Defendants engaged in self-dealing, ignored conflicts of interests,
and otherwise used their position of trust to enrich themselves at the expense of the
putative class. Specifically, the Amended Complaint presses six Counts: (1) violations of
the Arkansas Trust Code against all Defendants; (2) breach of fiduciary duty against
This account of the facts is taken from Plaintiff’s First Amended Complaint (Doc. 76).
They are: Wyndham Worldwide Corporation (“Worldwide”), Wyndham Vacation
Resorts, Inc. (“WVR”), Wyndham Vacation Ownership, Inc. (“WVO”), FairShare
Vacation Owners Association (“FairShare”), RCI, LLC (“RCI”) (collectively, “Company
Defendants”), and Terri Dost, Peter Hernandez, and Rob Hebeler (collectively,
FVOA, WVR, and the Individual Defendants; (3) negligence against FVOA, WVR, and the
Individual Defendants; (4) breach of implied duty of good faith and fair dealing against
FVOA and WVR; (5) unjust enrichment against Worldwide, WVR, WVO, and RCI; and (6)
civil conspiracy against Worldwide, WVR, WVO, RCI, and the Individual Defendants.
The Trust consists of all property interests and use rights purchased by timeshare
consumers. It is governed by a document called the “FairShare Vacation Plan Use
Management Trust Agreement” (the “Trust Agreement”). FairShare (the “Trustee”) is an
Arkansas corporation owned and controlled by Worldwide and WVR. The Individual
Defendants are officers and directors of FairShare. Plaintiff alleges that the Individual
Defendants control the Trust vis-à-vis their positions at FairShare “at the direction and
control of Worldwide and WVR.” The beneficiaries of the Trust include individual
timeshare owners and WVR.
On March 12, 2012, Plaintiff, Tommy J. Embree, and her late husband purchased
a timeshare interest from WVR for $149,206. The purchase was paid through a trade-in
of timeshare points, a credit card down payment, and a loan from WVR. On June 2, 2013,
after being convinced to upgrade, the Embrees purchased a new timeshare interest from
WVR for $224,555. This purchase was paid through a trade-in of existing timeshare
points, a credit card payment, and a loan from WVR. In connection with the upgrade,
WVR extended the Embrees a $116,485.12 loan with a 10-year repayment term and
11.49% interest rate. WVR required the Embrees to assign their entire timeshare interest
to “Club Wyndham Plus”, resulting in the timeshare interest being subject to the Trust.
Claim-Supporting Background Facts
The Amended Complaint alleges Defendants took part in improper self-dealing and
misfeasance. The Amended Complaint assails four categories of conduct (or, as Plaintiff
puts it, “schemes”) on the part of Defendants giving rise to Plaintiff’s claims: (1) WVR’s
financing of timeshare purchase; (2) Worldwide and WVR’s operation of the RCI
timeshare exchange program; (3) WVR’s FairShare Plus Assessment; and (4) WVR’s
Guest Certificate Fee.
WVR, a Worldwide subsidiary, finances roughly 50% of the timeshare interests it
sells. Because WVR requires timeshare consumers to assign their interest to the Trust,
Worldwide (through its control of FairShare, the Trustee) owes the Trust beneficiaries
(timeshare owners) a duty of loyalty. Worldwide, WVR, and FairShare use the financing
of Trust property to generate profits at the expense of Trust beneficiaries, thus breaching
this duty of loyalty. Defendants’ own long-term debt is financed at interest rates between
2.95% and 7.375%, while Plaintiff was charged interest rates of 11.49% and 16.99%.
Moreover, Worldwide’s 2014 10-K filing 3 provides that Worldwide’s financing operations
“generate substantial incremental revenues and profits.”
Worldwide, WVR, and FairShare pool consumers’ security agreements and sell
them to investors. Defendants then use revenues from the securitization of Trust assets
to purchase property for Worldwide and to “cash flow other operations.” The profits
derived from Worldwide’s financing and securitization of consumer debt place
The federal securities laws require public companies to disclose certain information
annually in Form 10-K filings.
Defendants’ interest in conflict with Plaintiffs because Worldwide has a perverse incentive
to convince Trust beneficiaries to finance timeshares at high interest rates.
RCI Exchange Program
The Amended Complaint also brings claims arising out of RCI, the timeshare
exchange program operated by WVR and Worldwide. Defendants, RCI, WVR, and
FairShare, market memberships in RCI to Trust beneficiaries. Consumers who enroll in
the RCI program may exchange timeshare intervals with other timeshare intervals
enrolled in the program. Through RCI, Defendants charge timeshare consumers a fee for
each exchange, which generates profits to Worldwide, WVR, RCI, and FairShare. These
fees are not shared with consumer Trust beneficiaries. Plaintiff alleges that Worldwide’s
operation of the RCI program violates its duty of loyalty to Plaintiff and other Trust
FairShare Plus Assessment
FairShare, in its Trustee capacity, charges Plaintiff and Trust beneficiaries a
package of fees (collectively, the “FairShare Plus Assessment”). The FairShare Plus
Assessment is comprised of a Program Fee and Ownership Association Fee (“OA fee”).
FairShare has sole discretion over the amount of the fees. Plaintiff alleges that WVR and
FairShare charge “unfair and biased” fees to Trust beneficiaries to drive Worldwide
profits. Meanwhile, “WVR, the largest beneficiary of the Trust, is exempt from paying the
FairShare Plus Assessment.”
Guest Certificate Fee
The final category of bad conduct Plaintiff addresses is the assessment of “Guest
Certificate Fees” by Worldwide. In October 2008, Worldwide, WVR, and FVOA increased
the Guest Certificate Fee from $25 to (i) $99 for consumers requesting the Certificate
online, and (ii) $125 for consumers requesting the Certificate over the phone. Plaintiff
alleges that the fee increase was designed to increase Worldwide’s and WVR’s revenue
and profit, as the cost to provide the underlying service had not changed. Plaintiff
contends that the fee change constitutes self-dealing and a violation of the duty of good
faith and loyalty that WVR and FairShare owe Plaintiff and the Trust beneficiaries.
Count I of the Amended Complaint, against all Defendants, alleges that Arkansas
Code §§ 28-73-802(c)(4) and 28-73-1003(a) impose duties of good faith and loyalty which
Defendants violated by: (a) financing timeshare purchases; (b) profiting from the RCI
exchange program; (c) charging improper FairShare Plus Assessments; and (d) wrongly
increasing Guest Certificate fees.
Count II, against FairShare, WVR, and the Individual Defendants, alleges
violations of fiduciary duty arising from Defendants’ acts of self-dealing, duty of loyalty
violations, and conflict-of-interest transactions. Moreover, Count II asserts that
Defendants “consciously or deliberately engaged in oppression, fraud, wantonness, or
malice with regard to Plaintiff and members of the proposed class in breach of their
fiduciary duties . . . .”
Count III, against FairShare, WVR, and the Individual Defendants, alleges
negligence from Defendants’ conduct in operating the Trust. Count IV avers that the Trust
and related agreements imposed an implied duty of good faith and fair dealing on the
trust administrators, which WVR and FairShare breached by “evading the spirit of the
transaction” by (a) charging Plaintiffs and Trust beneficiaries excessive fees, and (b) by
engaging in the misleading and deceptive practices supporting Count I.
Count V brings a claim for unjust enrichment against Worldwide, WVR, WVO, and
RCI, apparently as an alternative theory of recovery. (Doc. 84, pp. 26–27). Count VI
alleges that all named Defendants conspired to violate the Arkansas Trust Code and
breach duties owed to Trust beneficiaries.
As with her initial complaint, Plaintiff’s Amended Complaint is a shotgun pleading,
and repleader is necessary. Faced with a shotgun pleading, district courts possess the
inherent authority to order repleader sua sponte. Fikes v. City of Daphne, 79 F.3d 1079,
1083 n.6 (11th Cir. 1996).
In Weiland v. Palm Beach Cty. Sheriff’s Office, 792 F.3d 1313 (11th Cir. 2015), the
Eleventh Circuit outlined four types of shotgun complaints:
The most common type—by a long shot—is a complaint containing multiple
counts where each count adopts the allegations of all preceding counts,
causing each successive count to carry all that came before and the last
count to be a combination of the entire complaint. The next most common
type . . . is a complaint . . . replete with conclusory, vague, and immaterial
facts not obviously connected to any particular cause of action. The third
type of shotgun pleading is one that commits the sin of not separating into
a different count each cause of action or claim for relief. Fourth, and finally,
there is the relatively rare sin of asserting multiple claims against multiple
defendants without specifying which of the defendants are responsible for
which acts or omissions, or which of the defendants the claim is brought
Id. at 1321–23 (footnotes omitted). All four categories of shotgun complaints are
deficient because “they fail . . . to give the defendants adequate notice of the claims
against them and the grounds upon which each claim rests.” Id. at 1323; see also
Anderson v. Dist. Bd. of Trs. of Cent. Fla. Cmty. Coll., 77 F.3d 364, 366 (11th Cir. 1996).
The bases for dismissing shotgun pleadings arise from the pleadings’ violation of Federal
Rules of Civil Procedure 8(a)(2) and 10(b). Weiland, 792 F.3d at 1320.
Plaintiff’s Amended Complaint falls within the third category of shotgun pleadings
identified by the Eleventh Circuit in Weiland. (Doc. 76). For instance, Count I
indiscriminately asserts claims for violation of two alternative Arkansas Code sections
against seven defendants arising from four separate courses of conduct. See Bickerstaff
Clay Prods. Co. v. Harris Cnty., 89 F.3d 1481, 1485 n.4 (11th Cir. 1996) (“The complaint
is a typical shotgun pleading, in that some of the of the counts present more than one
discrete claim for relief.”). The Complaint fails to separate into counts the various claims
asserted, depriving Defendants of “adequate notice of the claims” asserted and the
grounds supporting each claim. See Weiland, 792 F.3d at 1323. In re-pleading, Plaintiff
shall separate each claim to relief based on a discrete theory and/or series of facts into
Accordingly, it is hereby ORDERED AND ADJUDGED:
1. Defendants’ Motions to Dismiss (Doc. 77, 78) are GRANTED.
2. The Amended Complaint (Doc. 76) is DISMISSED without prejudice.
3. Plaintiff’s Motion for Class Certification (Doc. 103) is DENIED AS MOOT
because there is no operative complaint.
4. On or before February 26, 2018, Plaintiff may file a Second Amended
Complaint consistent with the directives in this Order.
5. Failure to timely file a Second Amended Complaint in accordance with this
requirement will result in closure of this action without further notice.
6. Should Plaintiff file a Second Amended Complaint, at the close of pleadings,
the parties are directed to meet and confer telephonically and submit an
amended Case Management Report. This case will be converted to a Track
DONE AND ORDERED in Orlando, Florida on February 12, 2018.
Copies furnished to:
Counsel of Record
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