Unlike jury trials where a juror may learn little to nothing about a case before trial, cases tried from the bench present unique opportunities to shape the judge’s opinion of the case prior to trial.
The bench trial of Wyndham Vacation Ownership v Carlsbad Law Group (Case# 6:19-cv-1908-WWB-EJK) began Monday, October 24. The court adjourned on Thursday, October 27. Written closings by Plaintiffs and Defendants, and rebuttal by Plaintiffs, are due by December 9. In other words, it’s not over.
There are 230,000 Wyndham members who were the subject of this trial in which Wyndham accused timeshare exit company Timeshare Compliance and Carlsbad Law Group of false and misleading advertising. Wyndham members were promised an easy exit from their timeshare.
Wyndham’s witness, Ms Ramona Harrington, Vice President of Title Services, Travel & Leisure, testified that Wyndham offers five exit options for paid-in-full members:
- Limited Edition
- Limited Offer
- Tribute by Wyndham
- Outright (walk away)
Exit Companies – The cause or the symptom?
They say the devil is in the details. Ms Harrington testified that 80% of Wyndham owners are paid in full, while 20% finance their timeshare purchase. She mentioned a figure of 6% of Wyndham properties that Wyndham no longer manages.
Two of the properties in that 6% that Wyndham no longer managed were Carriage Ridge and Carriage Hills in Ontario, Canada. Wyndham acquired these properties from Shell Vacation Club. Past tense because both resorts have been sold and are no longer timeshare. These resorts denied owners an exit under any circumstances.
Of the nearly 900,000 Wyndham Vacation Ownership members, approximately 14,000 Wyndham Carriage Hills and Carriage Ridge Owners in Ontario, Canada were not allowed an exit, no matter how debilitating a medical hardship. Heirs were pursued for maintenance fees.
About half of the Carriage Resorts owners who reached out to us lost money to various exit companies. Change happened only when a group of determined volunteers forced the sale of both resorts. Increasing delinquencies helped.
Former Carriage Resort owner Sean Fowler
Sean is one of many Carriage owners still engaged in the battle against Cory Stegemann, a former Carriage Resorts sales agent whose exit company, Cornerstone Vacation Ownership and Cyria Group, promised an easy exit. Mr. Stegemann also served on the board of the Canadian trade group Canadian Vacation Ownership Association (CVOA). CVOA’s predecessor, CRDA, was the Canadian equivalent of the American timeshare industry lobby ARDA.
It is only natural for anyone with a problem to turn to the internet for help. If there is one thing we at Inside Timeshare have learned, it’s that timeshare members and owners need help when a dispute arises. Pursuing exit companies worth suing, gives rise to the real scams, smaller exit scams that often are not in business by the time a two-year money-back guarantee expires.
Several recordings were presented during the trial in which Timeshare Compliance (Pandora Marketing) representatives, identified as analysts, made statements promising an easy exit that were false and misleading. Timeshare Compliance principles, Rich Folk and William “Bo” Wilson acknowledged in their depositions that some of the statements made were indeed false.
The false and misleading statements made by analysts included:
- If I decide to take your case, you will be legally and permanently out of your timeshare forever.
- We never lost a single case.
- Once the attorney contacts Wyndham, you’re out.
- If you don’t make payments, you will get out faster. (This is true only because Wyndham forecloses in 150 to 182 days)
- Your credit will be preserved.
The prospective client was informed that there must be a direct relationship between the Wyndham member and an attorney. The attorney sends a “cease and desist” letter and a demand letter to Wyndham. Initially, that fee was $600, but later was $750.
In the early years, from 2016 to 2018, successful exits were obtained, but Wyndham stopped responding to the letters sent by the attorneys in the fall of 2018. By the end of 2019, Timeshare Compliance had to be well aware that the letters would be ignored.
Although Timeshare Compliance’s agreement listed foreclosure as among the possible outcomes, it was evident that the only possible Wyndham outcome was a foreclosure. Wyndham takes back points and they do not seek further action against the defaulting member. Timeshare Compliance relied on this as a means of exit.
Tradebloc was the entity that was to preserve credit, but in a recorded phone call played during the trial, one of the principles of Tradebloc said that the analysts should have said, “We will attempt to protect your credit.” Trade block is also used as a verb in court transcripts.
Harm v Damage
Wyndham claimed they were harmed by defaulting members. Attorney for Carlsbad Law, W. Scott Gabrielson, argued that Wyndham was not harmed by members who defaulted, because ultimately, Wyndham doubled their money. He reported that of 934 loans, covering the period of the lawsuit, 483 loans were taken back. Mr Gabrielson stated: “the total amount of loans taken back was $18 million, but $35 million was what Wyndham received.” In other words, Wyndham turned around and resold the points, doubling their money.
Wyndham’s witness, Ms Harrington, testified that loans are foreclosed in approximately 182 days (150 to 182 days). Caught in the crossfires of these lawsuits are devastated timeshare buyers caotured as pawns in a cruel game of timeshare chess. One Wyndham member, and a witness, has still not been foreclosed after suffering monthly negative credit reporting for 44 months, basically four years, when the loan should have been closed in approximately six months.
When Mr Gabrielson asked about Wyndham members thrice victimized (by Wyndham initially, next by Timeshare Compliance, and then by Wyndham again, by not foreclosing), Ms. Harrington responded that Wyndham must act in the best interest of all their members.
My interpretation is that the attitude is, if a few Wyndham buyers get thrown under the bus, their lives financially destroyed, so be it. In another looming trial against Timeshare Compliance, pertaining to a lawsuit filed by Diamond Resorts, one active duty Navy service member was sold the minimum number of points, inadequate for a family of six. They lost in arbitration, suffering a $66,000 judgment disputing a $12,000 purchase. This father of four is currently deployed. The arbitrator ordered this military family to pay over $50,000 of Diamond’s attorneys’ fees.
Timeshare Compliance and Carlsbad Law did secure several successful arbitration outcomes for other timeshare members, save the few extreme adverse rulings by arbitrators.
Harm vs Damage Courtroom Semantics
The Honorable Judge Wendy Berger, presiding, acknowledged that Wyndham may have ultimately benefited in the end, even doubling their money by reselling inventory taken back, but that had no bearing in calculating the harm Wyndham suffered by defaulting members. She explained that juries calculate damages, so since there was no jury, the fact that Wyndham doubled their money is not relevant to this lawsuit. Wyndham is seeking:
- Injunctive Relief (Carlsbad Law and Timeshare Compliance not allowed to accept Wyndham members as clients),
- Disgorgement of Profits,
- Corrective advertising
It is likely Wyndham would seek legal fees, estimated to be in the millions.
Ms Harrington later testified as to the harm Wyndham suffered. It was interesting to note that, according to Ms Harrington, Wyndham members pay maintenance fees on nine billion points and Wyndham pays maintenance fees on fifteen billion points.
Ms Harrington stated that few of the member complaints received from attorney Sean Slattery could be substantiated. That’s because of the oral representation clause buried in the fine print that states the buyer did not rely on oral representations to make their purchase. Of the 16 complaints that Wyndham initially investigated, four members were released. Beginning fall of 2018, the demand letters were ignored and complaints were not investigated. Suspicions arose when there were so many demand letters arriving from the same attorney.
How Wyndham was harmed (not including doubling the money by reselling)
As Ms Harrington testified, securitization means selling the loan to another bank. Loans are originally financed through Wyndham Consumer Finance. Three times a year loans are “pooled” in what is known as a “term deal”. If a member defaults on one of those loans, Wyndham buys back the loan. They are not contractually obligated to do so, but the points would sit in limbo if the loan was not repurchased. Wyndham must pay the full amount of the loan when buying back.
Monthly credit reports are reported to Transunion and Equifax.
It cost Wyndham $1,000 to take the loan back, plus there is a cost to generate a lead and pay the salesperson. There is also a cost associated with collection efforts.
Wyndham does not require that heirs continue to pay maintenance fees. One of the Timeshare Compliance analysts told a Wyndham member that the liability automatically passes to their heirs. The Heir Scare is one of the most common complaints reported by timeshare “owners” who were falsely told by timeshare sales agents that if they did not give up their deed and become members, by converting to points, their heirs would be responsible. This is not true, as all 50 states have laws that allow disavowing an inheritance, within a specified period of time.
Attorney Scott Gabrielson asked Ms Harrington, “Do you share the information with defaulting Wyndham members that Wyndham takes the points back?” Ms Harrington responded that the member is told that Wyndham will foreclose.
I know from the over 2,000 members and owners who have reached out to our volunteers, that the mind jumps to the Developer coming after your house, to garnish wages, and attach any asset they can find.
My Suggestion to both sides
Wyndham – If you were to tell members, if you stop paying, at about 180 days, we just take back the points. Your credit will be affected, but that’s it – then likely your members would stop contacting exit companies.
Timeshare Compliance – If you were to tell callers, well, we will have an attorney send a cease and desist letter so that you are (maybe) no longer contacted, and a demand letter, that you can take to banks to explain why you stopped making payments, but history tells us that those letters will be ignored, so your resolution will likely be a default and a foreclosure at about 180 days.
That’s called transparency.
We have to thank Irene for all the time she is putting into these articles, attending hearings, reading up on points brought up during these hearings and then putting it all together so we can have some understanding of what is going on. In a recent article “More on Semantics – Is it a Timeshare or a Vacation Club? – Wyndham’s Availability, Or Lack Of” explained why these trials are so complicated, due to different interpretations and wording, which then brings in cases from others courts and how they ruled. A very good example of these differing views on interpretation can be seen during the early legal arguments in Spain and the illegality of contracts sold after 5 January 1999. The law provided for contracts sold before this date with a “Deed of Adaptation“, they could continue as before, and the new restrictions on the length of the contract, now 50 years maximum, applied to those sold after January 1999.
Developers continued to sell the old contracts under the “Deed of Adaptation”, because according to the interpretation of their “lawyers”, as the resort was built and being sold as a timeshare before the introduction of the new laws, the “Deed of Adaptation” came into effect. It would be fifteen years before this point is resolved by the many cases taken to the Supreme Court. The law is not cut & dried, it is open to interpretation and these interpretations will differ, the same as those for translators of language, the term “Lost in Translation” comes to mind.
That is all for this week, join us again next week for Part 3 of “Exposed: The Truth Behind Silverpoint“, in this episode of our “Hollywood script”, we introduce the “Liquidator” and even more intrigue, greed and deception. Have a great weekend, Baby Dog is dreaming of another trip to the mountains as he gazes out the window.