COURNOYER v. RCI, LLC

Filing 15

MEMORANDUM AND ORDER denying 10 Defendant's Motion to Dismiss. Signed by Judge Peter G. Sheridan on 4/11/2016. (eaj)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

BETH COURNOYER,

Civil Action No.: I 5-cv-8397 (PGS)(LHG)

Plaint ff
v.
RCT, LLC,
Defendant.

JERRY NOWLUST,

Civil Action No.: 15-cv-7997 (PGS)(LHG)

Plaintiff
V.

RCI, LLC,
Defendant.

ERIC BOYENGER,

Civil Action No.: 1 5-cv-7789 (PGS)(LHG)

Plaint ff
V.

RCI, LLC,
Defendant.

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Civil Action No.: I 5-cv-8396 (PGS)(LHG)

GEORGE TUHOWSKI and ARTHUR
SCHUELER,
Plaintiffs,

v.

MEMORANDUM

RCI, LLC,

AND
Defendant.

ORDER

SHERIDAN, District Judge.
Facts and Procedural History:

The facts for all four cases are essentially identical. All four were members of a putative
class lawsuit filed on July 20, 2010 in this Court, named Barton et al. v. RCI, LLC, No. 10-3657,
2011 WL 3022238. In that case, RCI’s motion to dismiss was denied, 2011 WL 3022238 (D.N.J.
July 22, 2011) [ECF No. 32]. Then in March 2014, Plaintiff Barton’s motion for class
certification was denied [ECF No. 142].’ Plaintiffs now assert claims individually against RCT.
Defendant, a limited liability company that maintains its principal place of business in
New Jersey, operates a vacation exchange business. (Cournoyer Compi.

¶ 3). Defendant offers

its members the ability to exchange timeshare intervals for “points” (the “Points Program”).
Pursuant to the Points Program, members can then exchange these point values for a variety of
services (“Partner Inventory”), including car rentals and airline tickets. (Id.

¶ 8).

Plaintiffs maintain that the ability to exchange points for international and domestic
airfare was a particularly attractive aspect of the pitch because the upfront and total cost of

1

It should also be noted that at oral argument for this matter, the attorneys, some of whom are the same attorneys
from the Barton matter, agreed not to use discovery obtained in the Barton case on these cases. The Court has not
reviewed the propriety of this arrangement.
2

acquiring plenty of points to acquire airfare over many years was less than the out-of-pocket
costs one would have to pay on the open market for such airline tickets. (Id.

¶

12).

Plaintiffs attended a sales pitch to join Defendant’s Points Program at a Blue Bay Resort.
Plaintiffs were handed portfolios containing information about the Points Program, and sales
associates—whom Plaintiffs believed to be authorized representatives of Defendant’s Points
Program—provided a presentation. (Id.

¶J 8,

15). According to Plaintiffs, the sales associates

reinforced the idea of using the Points Program to create customized vacations. (Id.

¶

11, 13).

After Plaintiffs purchased nights at a Blue Bay Resort, the sales associates gave Plaintiffs two
separate contracts to sign-one contract from Blue Bay Resorts (the “Blue Bay Contracts”) and
one contract from RCI (the “Rd Contracts”). (Id. ¶16).
Plaintiffs contend that prior to June 2008, Defendant complied with all obligations under
the Points Program. In the summer of 2008, however, Defendant began to deny Plaintiffs’
attempts to exchange accumulated point values for Partner Inventory. In September 2008,
Defendant mailed to all members who joined the Points Program through a Blue Bay Resort
prior to February 29, 2008 a letter notifying all such members that Defendant was unilaterally
imposing a 60,000 annual point value limit cap on Partner Inventory redemptions (the “Points
Limit Cap Letter”). Plaintiffs claim that the 60,000 annual point limit is insufficient to obtain the
international and domestic airfare that was promoted. Defendant stated in the Points Limit Cap
Letter that Defendant was imposing the cap for several reasons, including “to preserve the
integrity of the RCI network.” (Id.

¶ 24-25).

Beth Cournoyer (“Cournoyer”) is from Massachusetts. (Id.

¶ 2).

She vacationed at the

Blue Bay resort in Mexico in February 2008. She decided to purchase 2,472 nights for
approximately $27,200. This equates to 7,000,704 RCI Points. (Id. ¶14). She signed a contract

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for a 25 year membership with the Blue Bay Premier Club allowing her to stay at the resort a
certain number of weeks a year without using any of her purchased nights. (Id.
Points Program was for an initial term of three years. (Id.

¶ 21).

¶

16). The RCI

A few months after joining the

RCI Points Program, she called RCI in July of 2009 to use points. RCI’s “vacation guide” told
her that there was a new cap of 60,000 points on the exchange of Points for Partner benefits. RCI
mailed her a letter a few months later formally telling her that RCI was imposing the 60,000
annual point limit. (Id.

¶J 23-24).

Cournoyer brings one count for violation of the New Jersey

Consumer Fraud Act (“CFA”).
Jerry Nowlin (“Nowlin”) is from Alabama. (Nowlin Compi. ¶2). He vacationed at the
Blue Bay resort in Mexico in November 2007. (Id.

¶ 7). He decided to purchase 2,684 nights for

approximately $30,000. This equates to about 7,600,000 RCI Points. (Id.

14). He also signed a

¶

membership for the Blue Bay Premier Club for 25 years, and the Blue Bay Points Program had
an initial term of three years. (Id.

¶J

16, 21). In January 2008, he exchanged points to reserve

airline tickets. A few months later, he called RCI to exchange more Points. RCI’s “vacation
guide” told him that a new 60,000 annual cap had been imposed on the Points for Partners
Inventory. He received the formal notification letter a few months later. (Id

¶ 23-25). Nowlin

also brings one count for violation of the CFA.
Eric Boyenger (“Boyenger”) is from California. (Boyenger Compl.
the Blue Bay resort in Mexico in April of 2006. (Id.

¶ 2).

He vacationed at

¶ 7). He decided to purchase 3,571

approximately $40,750. This equates to about 10,000,000 RCI Points. (Id.
a membership for the Blue Bay Premier Club for 25 years. (Id.

¶

¶

nights for

14). He also signed

16). In May 2006, he bought

additional nights and merged his initial contract with the new one, giving him about 22,000,000
RCI Points. (Id.

¶ 22).

Tn August 2007, he vacationed again at Blue Bay and spoke with a senior

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member of the Blue Bay sales team; he bought another 3,575 nights for about $25,000 equating
to 10,124,000 RCI Points. Mr. Bert Hurstfield, listed as “President” in the August 2007 Blue Bay
contract, met with Plaintiff and signed several addenda to that contract. Boyenger called RCI to
exchange more points in the summer of 2007, but RCI’s “vacation guide” told him that a new
60,000 annual cap had been imposed on the Points for Partners Inventory. He received the
formal notification letter a few months later. (Id.

¶J 24-27). Boyenger brings five counts:

violation of the N.J. CFA; breach of the implied covenant of good faith and fair dealing; punitive
damages; breach of contract; and violation of the Plain Language Act. The motion to dismiss
against Boyenger is only for count 1, the CFA count.
George Tuohowski (“Tuohowski”) and Arthur Schueler (“Schueler”) are from Illinois.
(Tuohowski Compi.
(Id.

¶ 2).

In January 2008, Plaintiffs vacationed at Blue Bay resort in Mexico.

¶ 8). Each Plaintiff purchased 2,066 nights for $24,000, which equates to 5,850,912 RCI

Points. (Id.

¶

15). They signed a membership at the Blue Bay Premier Club for 25 years, and the

memberships in the RCI Points Program were for an initial term of three years. (Id.

¶J

17, 22). A

few months after joining, Schueler called RCI to exchange points, and was told that a 60,000
annual cap had been imposed on the exchange of Points for Partners Inventory. Tuohowski also
called RCI and was told the same. They received a formal later a few months later on the cap.
(Id. ¶J24-26). They bring one count for violation of the CFA.
Legal Standard:
On a motion to dismiss for failure to state a claim pursuant to Rule 1 2(b)(6), the Court is
required to accept as true all allegations in the complaint, and all reasonable inferences that can
be drawn therefrom, and to view them in a light most favorable to the non-moving party. Oshiver
v. Levin, 38 F.3d 1380, 1384 (3d. Cir. 1994). To survive a motion to dismiss a complaint must

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contain sufficient factual matter, accepted as true to ‘state a claim to relief that is plausible on its
face.” Ashcrofl v. Iqbal, 556 U.S. 662, 678 (2009); see also, Bell Atlantic v. Twombly, 550 U.S.
544, 570 (2007). In order to survive a motion to dismiss, the complaint must allege facts that
give rise to a plausible claim, and raise the right to relief above the speculative level. Ashcroft,
556 U.S. 662, 664; and Twombly, 550 U.S. 544, at 555. The question is whether the claimant can
prove any set of facts consistent with his or her allegations that will entitle him or her to relief,
not whether that person will ultimately prevail. Semerenko v. Cendant, Corp., 223 F.3d 165, 177
(cert. denied 531 U.S. 1149, 2001).
Analysis:
I. Fraud under CFA

Plaintiff (all Plaintiffs will be referred to as “Plaintiff’ throughout, and the Court will use
Coumoyer’s Complaint as the representative example, since all of the complaints are practically
identical for the purposes of this motion) alleges a CFA violation against RCI. Such a violation
must meet the heightened pleading standard of Rule 9(b). See F.D.LC. v. Bathgate, 27 F.3d 850,
876 (3d Cir. 1994). “Tn other words, the Rule ‘requires plaintiffs to plead the who, what, when,
where, and how: the first paragraph of any newspaper story.” MZL Capital Holdings v. TD
Bank, 2015 WE 4914695, at *5 (quoting In re Advanta Corp. Sec. Litig., 180 F.3d 535, 534 (3d
Cir. 1999). “The plaintiff must also allege who made the purported misrepresentations and what
specific misrepresentations were made.” Wiatt v. Winston & Strawn, LLP, 838 F. Supp. 2d 296,
316 (D.N.J. 2012) (internal quotations omitted).
Under the CFA, the Plaintiff must establish: “(1) unlawful conduct by the defendants; (2)
an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the
defendant’s unlawful conduct and the Plaintiffs’ ascertainable loss.” Mladenov v. Wegmans Food

6

Mkts., Inc., 2015 WL 5023484, at *8 (D.N.J. Aug. 26, 2015). Three different types of unlawful
conduct are covered under the CFA: (1) affirmative representations; (2) knowing omissions; and
(3) regulation violations. Id. To make a claim based on actionable omissions, a plaintiff must
establish that defendant acted with knowledge. Cox v. Sears Roebuck & Co., 138 N.J. 2, 18
(1994). “Knowledge and intent are exempt from Rule 9(b)’s particularity requirement, so long as
the circumstances surrounding such general allegations of knowledge suffice to infer what
defendant is alleged to have known and when.” Peruto v. Timbertech Ltd., 2015 WL 8664276, at
*4 (D.N.J. Dec. 10, 2015).
RCI argues that the Complaint lacks any misrepresentations. According to RCI, there is
no indication that anyone at Blue Bay ever said that RCI would not place any limitations on the
Points Partner benefits or that the benefits would stay the same during the 25-year agreement.
Also, the contract had a term of three years. The Complaint says nothing about the date or
location of the sales pitch, or who the sales person/legal representative was, according to
Defendant. Moreover, RCI claims that the Complaint does not plead scienter with particularity,
other than conclusory allegations that RCI “regretted the bargain it struck.” (Compl.

¶ 25).

In response, Plaintiff states that the date and parties involved are clear. The Complaint
says that the sales pitch occurred in February 2008 at a Blue Bay resort in Mexico. (Compl.

¶ 7).

The Court agrees that the allegations here are specific enough with regard to date and time. It is
also clear who was responsible for the alleged misrepresentations, so as to inject “some precision
or some measure of substantiation into the allegations,” and to “place the defendant on notice of
the precise misconduct...” Carrier v. Bank ofAmerica, 2014 WL 356219, at *3 (internal
quotations omitted). Plaintiff says there were misrepresentations because she was told about a
program involving future points, no mention was made of a cap, and this later changed.

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Also, Plaintiff claims that she has met the omission standard here. “A plaintiff who
asserts a fraud claim based on omission must ‘allege what the omissions were, the person
responsible for failing to disclose the information, the context of the omission, and the manner in
which it misled plaintiff and what the defendant obtained through fraud.” Henderson v. Volvo
Cars ofN Am., 2010 WL 2925913, *5..6 (D.N.J. July 21, 2010). In Volvo, the court found that
Volvo knew about a design defect causing transmission problems, but failed to disclose it, and
that was enough for a CFA claim. Id. at * 5. Plaintiff argues that the short period of time between
the purchase and the start of the cap policy could plausibly create an inference of intentional
concealment. Such a policy had to be in preparation for several months, and there should have
been some disclosure, according to Plaintiff. Also, Plaintiff only found out about the cap when
she called RCI, and only later did she receive a written notice.
However, RCI explains that under the CFA, “statements as to future or contingent events,
to expectations or probabilities, or as to what will or will not be done in the future, do not
constitute misrepresentations, even though they may turn out to be wrong.” Campmor, Inc. v,
Brulant, LLC, 2011 WL 2745922, at *12 (D.N.J. July 12, 2011). “[A] promise may constitute a
misrepresentation only if the promiser knew at the time the promise was made that it could not or
would not be fulfilled.. .The mere non-performance of a promise is not fraud.” Bubbles N’ Bows,
LLC v. Fey Pub. Co., 2007 WL 2406980, at *9 (D.N.J. Aug. 20, 2007). Similarly, in Alexander

v. CIGNA Corp., 991 F. Supp. 427, 430, 433-36 (D.N.J. 1998), the court dismissed a fraud claim
on summary judgment where plaintiff alleged that insurance agents had indicated that an
underwriting program could continue in “perpetuity” and was a “lifetime commitment” because
“predictions of the future, which were believed when made, cannot serve as a basis for a fraud
claim just because they subsequently turn out not to be true.” 991 F. Supp. at 430, aff’d 172 F.3d

8

859 (3d Cir. 1998). Moreover, according to RCI, there are no allegations that anything was false
or misleading about the RCI written materials, since the Program still exists and Plaintiff can
exchange 45,000 points for airfares.
Plaintiffs omission argument also fails, according to RCI, because, “[p]leading of
scienter sufficient to satisfy Rule 9(b) may not rest on a bare inference that a defendant ‘must
have had’ knowledge of the facts or ‘must have known’ of the fraud given his or her position in
the company.” In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 282 (3d Cir. 2006). RCI
claims that the Volvo case is distinguishable because there were specific allegations of
“widespread” complaints before the sale of the vehicle in that case, and defendant issued
bulletins to address the “known problem,” which was enough to infer scienter. 2010 WL
2925913, at *1 (D.N.J. July 21, 2010). Here, there are no specific allegations that RCI knew it
was going to impose a cap more than eight months later and intentionally withheld that.
RCI argues that the alleged misrepresentation was true when made. See Helena Chern.
Co. v. Nelson, 2000 WL 963911, at *8 (D.N.J. June 22, 2000) (dismissing NJCFA claim because
“there is no evidence of record that [defendant’s] statements were false at the time he made
them”); affd, 28 F. App’x 120 (3d Cir. 2002). When the timeshare was purchased, her ability to
exchange her timeshare was not restricted, according to Rd. The Participation Agreement had
provisions stating that the points program could change, such as saying that membership should
“not to be based on the anticipated benefits of the network” (Lambert DecI, Ex. A, at

§

19(d)(v)),

and “The Network Administrator shall not be required to make Partner Inventory available, but
may do so in its discretion” (Id. at

§

16). The Agreement also said that the Partner Inventory

“may be changed, eliminated or added to without prior notice to Members.” (Id. at

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§ 22).

Plaintiff, in response, asserts that the Participation Agreement does not refute the
misleading information, because nothing in the Agreement reveals that RCI would cap the point
exchanges at 60,000 for Partner Inventory. In the Barton opinion, this Court stated: “A review of
the RCI Contracts demonstrate that the RCI Contracts do not specifically provide for
Defendant’s unilateral right to place a cap on the Points Program.” Barton, 2011 WL 3022238, at
*6. There is one part of the contract that speaks to the possibility of “RCI restricting Members’
ability to access Partner Inventory.” (Id. at

¶ 25). However, in its entirety, that clause states that

restrictions can only be made to “ensure the continuing integrity of the Network,” according to
Plaintiff. (Id). Plaintiff claims that RCI was not seeking to protect the integrity of the Network,
but attempting to make a better deal for itself. At the most, this clause is ambiguous and should
not be decisive at this stage in the proceedings.
Another clause states that, “The Network Administrator anticipates the offering of
Partner Inventory. The Network Administrator shall not be required to make Partner Inventory
available, but may do so in its discretion.” (Id. at ¶ 16). Plaintiff claims that this clause does not
use any words indicating a right to cap. Section 6(e) says: “All Reservations are contingent upon
the Member requesting the Reservation and having sufficient RCI Points to obtain the desired
Vacation Time or Partner Inventory.” (Id. at ¶6(e)).
Defendant asserts that Urbino v. Ambit Energy Holdings, LLC, 2015 WL 4510201, at *3
(D.N.J. July 24, 2015) is analogous. In Urbino, the plaintiff allegedly switched service providers
based on the representations that a company’s rates were “low” and consistent.” 2015 WL
4510201, at *1. However, the plaintiff’s electric bill increased after enrolling. The court
dismissed the CFA claim because the written contract permitted the defendant to change its
prices, undercutting the misrepresentation and omission allegations. Id. at *45• Similarly, here,

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the Terms and Conditions state that RCI reserved its right to change the Partner Inventory and
that RCI, “shall not be required to make Partner Inventory available, but may do so in its
discretion.” Also, the Inventory “may be changed, eliminated or added to without prior notice to
Members.” (Lambert Deci, Ex. A, at

§

16, 22, 25).

Plaintiff also asserts that the sales pitch had the capacity to mislead her, even if the
statements were technically true when made. See Cox v. Sears Roebuck & Co., 138 N.J. 2, 17
(“The capacity to mislead is the prime ingredient of all types of consumer fraud.”). Also, the
purpose of the program was for Plaintiff to prepay for “future” vacations.
The facts here are not much different from those in Barton. As stated in Barton, the
contract does not state that there is a unilateral right to cap the Points Program. In regard to the
provision that, “the Network Administrator shall have the right to take such actions.. .to ensure
the continuing integrity of the Network,” this Court found it unlikely that plaintiffs understood
what “network integrity” meant. Moreover, according to the Complaint, “The sales person
explained that Plaintiff would be able to accelerate his Point usage, meaning that he could use all
of his Points at one time or spread them out over the term of his membership.” (Compi.

¶

12).

The CFA is meant to address “sharp practices and dealings in the marketing of
merchandise.. .whereby the consumer could be victimized by being lured into a purchase through
fraudulent, deceptive, or other similar kind of selling or advertising practices.” Daaleman v.
Elizabethtown Gas Co., 77 N.J. 267, 271 (1978). These statements may be deceptive. Also,
Urbino is distinguishable because energy prices, by their nature, fluctuate. At the motion to
dismiss stage, the Court finds that Plaintiff has made a plausible CFA claim.
II. Agency

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RCI asserts that Plaintiff cannot establish that Blue Bay was RCI’s agent. See Woods v.

Maytag Co., 807 F. Supp. 2d 112, 121 (E.D.N.Y. 2011) (“[W]here, as here, the agency
relationship is an integral element of an alleged fraud, courts have required the facts establishing
agency to be pled with Rule 9(b) particularity.”). Furthermore, “A necessary element of an
agency relationship is the right of the principal to control the conduct of the agent.” Kernan v.
One Washington Park Urban Renewal Assocs., 154 N.J. 437, 453 (1998).
RCI argues that the Complaint does not plead reasonable reliance. “[W]here a third party
has reason to know authority does not exist, or once having existed has now been revoked, the
agent’s acts are ineffective and they do not bind the principal.” D & G Equip. Co. v. First Nat ‘1
Bank, 764 F.2d 950, 955 (3d Cir. 1985) (internal citation omitted). RCI explains that the Terms
and Conditions reveal that Blue Bay and RCI are “separate and distinct entities” offering
“separate and distinct” services, and they are not engaged in a ‘joint venture, partnership or
agency relationship.” (Lambert Deci., Ex. A, at

§ 1 9(d)(i-iii)). The documents also stated that

Blue Bay was not authorized to make representations about the Points Program and that RCI
would “not be responsible for the acts or omissions and/or representatives (whether oral or
written)” of Blue Bay. (Id. at §17(c), 19(d)(i), 22, 29(e)(i), 29(e)(ii)). See Hassler v. Sovereign
Bank, 644 F. Supp. 2d 509, 514 (D.N.J. 2009) (“Where a CFA claim is based upon an allegedly
incomplete or misleading disclosure, and where the parties’ agreement ‘contains the very
information that Plaintiffs allege was misrepresented, suppressed, or concealed,’ dismissal for
failure to state a claim is appropriate.”)
A finder of fact must consider the totality of the circumstances to determine an agency
relationship. Such a relationship exists when one party agrees to have another act on its behalf,
with the agent acting at the direction and control of the principal. Sears Mortg. Corp. v. Rose,

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134 N.J. 326, 337 (1993). Plaintiff believed that the sales representative had the authority to
enroll her in RCI’s program and was acting as RCI’s agent. (Compl.

¶ 15). Also, Plaintiff claims

that the sales agent gave her RCI materials, including a Points pamphlet and RCI catalogue; and
the agent told her stories of other members who use the Program, indicating a familiarity with
how the program functions after sale. (Id.

¶J 9-13). Moreover, someone introduced themselves as

the “legal representative” and gave her the RCI Network Participation Agreement, and then the
staff signed the contract on RCI’s behalf. As this Court explained in the Barton opinion, the
printed materials had the name RCI on them, and they mentioned the RCI Points Program.
Plaintiff claims that she believed that the sales person represented RCI, and the Court finds that
under all of these circumstances, it is reasonable for Plaintiff to have had this belief.

ORDER

This matter having come before the Court on Motions to Dismiss by Defendant RCI, Inc.,
and the Court having considered the submissions of the parties, having heard oral argument, for
the reasons set forth on the record, and for good cause shown,
It is, on this

f(

day of April, 2016, hereby

ORDERED that the Motions to Dismiss for 15-cv-8397 [ECF No. 10], 15-cv-7997 [ECF
No. 7], 1 5-cv-7789 [ECF No. 7], and 1 5-cv-8396 [ECF No. 7] are DENIED.

PE ER G. SHERIDAN, U.S.D.J.

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