Timeshare owners often claim they were lied to during sales presentations. Do timeshare owners have any hope of winning lawsuits against big-budget developers?
There a handful of legal cases around the country where owners and timeshare companies are at odds over contracts, reservations, and promises made during sales presentations. Here are the details on two recent cases that are reverberating throughout the industry.
Owners Win Big, Get Their Money Back, in Wisconsin and Tennessee
Two recent legal cases, one in Wisconsin, the other in Tennessee, may give timeshare owners hope there is, indeed, a light at the end of their timeshare tunnel. As these cases show, sometimes the little guys — rank and file timeshare owners — actually win a case against big brand-name resort developers.
In the Wisconsin case, the Wyndham timeshare chain — the largest, publicly owned timeshare company in the world — agreed to pay $665,404 in restitution to 29 owners as part of a court-approved settlement announced May 29 by the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP).
In the Tennessee case, the state's appellate court upheld a trial verdict awarding $500,000 in punitive damages to a couple whom the court said were deliberately misled and lied to about their timeshare purchase at a Gatlinburg resort owned by Westgate Resorts, the largest privately owned timeshare company in the world.
In the Wisconsin settlement, Wyndham not only agreed to pay restitution to owners, but to rescind their contracts and clear their records with credit companies. The restitution payments ranged from $3,259 to $84,698. Wyndham Vacation Ownership also agreed to pay the state of Wisconsin $99,520 in fines and $62,702 in legal fees.
The settlement resolved a long-running investigation by Wisconsin regulators into consumer complaints filed by Westgate owners who bought timeshares between 2008 and 2013 — alleging unfair trade practices. Wyndham sells timeshares at Glacier Canyon Resort in the Wisconsin Dells and maintains two nearby resorts, Wyndham Tamarack and Wyndham Sundara Cottages.
According to court documents, the state outlined ten unrefuted allegations against Wyndham, most of which focus on misrepresentations by sales people and high-pressure sales tactics, such as telling buyers that gift incentives are only good for one day.
Officially, Wyndham denied any wrongdoing, but the company nonetheless agreed to settle with the owners to avoid further legal prosecution from Wisconsin regulators. In an e-mail to RedWeek following the announcement, Wyndham Vacation Ownership issued this response: "We are committed to ensuring our sales practices are compliant with all regulatory requirements while striving to meet the highest standards of fairness and transparency, and continually look for ways to make the buying process more consumer-friendly. Businesses and regulatory agencies working together is good for our industry and good for consumers, and we are pleased to have a strong record in this regard."
In New York, the Attorney General's office recently announced settlements with Wyndham and Hilton Resorts, "to protect New Yorkers from misleading timeshare practices." Wyndham agreed to stop offering reservation certificates for a timeshare resort known as Midtown 45, prior to regulatory approval of Midtown's offering plan. These certificates, according to the AG's office, "led some consumers to believe they were purchasing an interest in the Midtown 45 timeshare."
Hilton agreed to drop a clause in its timeshare contracts that denied responsibility for representations in sales pitches about reservations, hotel use rights, rentals, resales, and buybacks of timeshare interests.
But the focus here is on Wyndham, which claims to have 900,000 owner families in its vast network of multi-branded timeshare resorts. In addition to drawing attention from regulators, the company has generated 1,657 complaints from consumers to the Better Business Bureau during the past three years, including 544 in the last year. Among those complaints, 1,170 focused on advertising and sales issues while 389 involved services and products. Another 94 complained of collection practices.
Tennessee Appeals Court Upholds $500K Punitive Damage Verdict Against Westgate Resorts
Unlike the Wisconsin case, the Tennessee lawsuit actually went to court. Most timeshare lawsuits never reach a courthouse. Instead, they are settled out of court with confidential agreements between the timeshare owners and the timeshare companies. There are lawyers around the country who proudly specialize in getting owners out of their contracts — by threatening to sue over disclosure problems. Then they settle, and no one talks about the details. The Tennessee case, involving Nathan and Patricia Overton, is noteworthy because their complaints were publicly adjudicated in court.
The Overtons sued Westgate — a $1.4 billion company — to rescind a contract on grounds they were defrauded during their sales presentation and never provided adequate documentation for their $39,280 purchase in 2011. The trial court ruled in their favor and ordered Westgate to rescind the contract and repay their purchase money.
According to the appellate court's Jan. 30 ruling: "The trial court found that the defendant had violated the respective statutory provisions [of Tennessee's TimeShare Law] and was guilty of fraud and misrepresentation."
The court also awarded the Overtons $600,000 in punitive damages to "punish" Westgate for its business practices — which included a pattern, admitted by Westgate officials in court, of misleading potential buyers about their timeshares.
On appeal, Tennessee's high court unanimously affirmed the prior rulings but reduced the punitive damage award to $500,000 to comply with the state's pre-existing cap on punitive damages.
The Overtons story started simply enough. They were vacationing in Gatlinburg, July 2011, looking for a cabin for family vacations. They encountered a Westgate sales booth in Gatlinburg and, after some talk, accepted an invitation for a 90-minute presentation and tour, complete with gifts. At the trial court, the Overtons testified that they ended up enduring eight hours of a hard-sell timeshare pitch. When it was over, they paid $39,280 for Unit 458, based on assurances from the sales team that they could reserve the unit for the same December week every year, and that they could book additional unlimited nights at any Westgate resort for $49 to $69 (so-called owners' nightly rates). The sales people promised, in writing, to refund $1,500 of their sales commissions to the Overtons. They also promised to buy a foosball table for the Overtons' use during their family vacations.
The guarantees about fixed week reservations and unlimited low-cost nights, however, were not put in writing. The Overtons' contract, signed at 11 p.m. at night, specifically stated that their interval was a floating week and unit, not fixed — so they could not be assured the same week and unit annually. Along with the contract, Westgate gave the Overtons a briefcase with all their closing documents and three CD-ROM discs.
The Overtons drove home to Dickson, Tennessee, expecting a followup call from their salesman to confirm their December 2011 stay in Unit 458. It never came. When they followed up with the resort, they discovered that they had no guarantee of securing Unit 458 or the Christmas week they thought they had bought. They then found out, through a series of conversations with Westgate personnel, that they did not have unlimited owners' nights either.
At this point, the Overtons contacted an attorney who reviewed their package of CD-ROMs from Westgate. The attorney discovered that the Overtons had not been provided with a current copy of Westgate's Public Offering Statement, as required by Tennessee law. The CD-ROMs, in fact, contained an outdated POS from 2006 and other illegible documents that could only be navigated by a computer expert.
Four months later, the Overtons decided they'd had enough. On Oct. 25, they formally submitted a rescission letter to Westgate's corporate offices in Florida. Westgate said NO, so the Overtons filed suit to get out of their contract, claiming fraud.
The story got even more unfortunate once it reached the Tennessee courts. The case went to trial in June 2013. The court not only ruled in favor of the Overtons but determined that Westgate had broken the rules of fair disclosure all along the way. Worse, the court said Westgate had deliberately refused to rescind the contract "despite overwhelming evidence" that rescission was justified.
In legal terms, the court ruled that the Overtons had been offered gifts (foosball table and unlimited owners' nights) without proper disclosure; Westgate violated the Tennessee Timeshare Act and Consumer Protection Act and engaged in deceptive practices; Westgate was also guilty of common law fraud and misrepresentation; the court also found Westgate trained its salespersons to make false promises about unlimited owners nights — while knowing there was no written documentation to guarantee the promise.
In October 2013, the trial court held a follow-up hearing to consider the amount of punitive damages that should be assessed against Westgate. After reviewing Westgate's financial status, the court set the punitives at $600,000 based upon the "reprehensibility" of Westgate's conduct. The Overtons were also awarded $136,000 in legal fees.
Westgate, sticking to its legal strategy, appealed the punitive damage award. On appeal, in January 2015, Tennessee's appeals court unanimously reduced the $600,000 to $500,000 to comply with the state's cap on punitives.
The appellate court was not persuaded by Westgate's appeal. "We agree with the trial court's finding that Westgate willfully violated Tennessee Code... and clearly failed to provide the Overtons with a current and complete copy of the POS," the court said. "Mark Barton, executive director of contract processing at Westgate's corporate headquarters in Florida, testified that it was Westgate's policy at that time to provide purchasers with the outdated POS on CD-ROM plus written copies of the amendments. The Overtons, however, never received such written amendments until after this litigation was commenced, even though Mr. Barton testified that all such written amendments had been transmitted to the Gatlinburg resort."
In summary, the appeals court said: "Based on all the proof adduced at trial, the Overtons demonstrated by clear and convincing evidence that Westgate engaged in conduct... that was intentional and fraudulent, and that it willfully violated the provisions of the Tennesee Timeshare Act."
In addition to evaluating Westgate's business practices, the courts examined Westgate's ability to pay punitive damages.
"The trial court opined that, with Westgate's appreciable assets and income, it would 'take a lot of money to make them feel it.' The court noted that in 2011, Westgate generated income of $545,568,329 while owning total assets of $1,389,788,000. In support of the punitive damage award, the trial court observed, 'How are you going to deter somebody with that kind of income? It takes more than a slap on the wrist. What is a lot of money to you and me is very little money to Westgate.'"
Westgate still has a couple of legal options to pursue an additional appeal, but they're not showing their hand. Neither the company nor its attorneys agreed to talk to RedWeek about the case.
