HEISMAN et al v. WYNDHAM VACATION RESORTS, INC.

Case Number: 2:20-cv-11480

Last Updated: May 20, 2021

Status

Pending Wyndham’s response after motion to compel arbitration denied.

Location

Superior Court of Morris County, NJ, MRS L 001532 20

Presiding Judge

Judge James B. Clark

Date Filed

08/26/2020

Highlights

The court called “chutzpah” on Wyndham and denied Wyndham’s motion to compel arbitration, because Wyn ”failed to comply with the AAA’s policies.”

Case Posture

Claims:

Timeshare owners allege causes of action against Wyndham for breach of contract; breach of implied covenant of good faith and fair dealing; declaratory relief; violation of Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”); and fraud in the inducement. [1-1]

Posture:

The Court denied Wyndham’s Motion to Compel Arbitration because Wyndham failed to comply with AAA’s arbitration policies.

Summary:

In their Complaint, the timeshare owners alleged that in May 2019, they were on vacation at a Wyndham resort in West Palm Beach, Florida when Wyndham’s sales staff “befriended” the 61 and 78 year old couple and offered them incentives to attend a timeshare presentation.

“The salesperson that was assigned to Plaintiffs was so nice and friendly and said she would help whenever assistance was needed, however despite repeated calls, she never responded. Finally in response to a text message explaining the buyers’ frustration and issues, she did nothing but respond with a frowning emoji”.

As to the breach of contract claim, the timeshare owners claim Wyndham:

Wyndham agreed to reasonably provide Club Accommodations to the timeshare wonders however the accommodations are not available and advanced booking times are excessive;
Wyndham failed to reasonably provide club accommodations in breach of the Security Agreement;
Wyndham charged the timeshare owners excessive maintenance and booking fees;
Wyndham refused to arbitrate the matter before the American Arbitration Association (“AAA”) in breach of the Security Agreement.

In support of the breach of the implied covenant of good faith and fair dealing claim, the timeshare owners allege Wyndham:

Wyndham was required to refrain from unreasonable conduct that would prevent the timeshare owners from receiving the benefits of their bargain; and
Wyndham breached the covenant of good faith and fair dealing by frustrating the purpose of the Security Agreement entered into with the timeshare owners.

In the declaratory relief cause of action, the timeshare owners allege and seek the following declaratory relief from the Court:

Rescission of the Security Agreement;
Declare the Security Agreement to be void ab initio for being vague and ambiguous as to the property right being sold and purchased and unconscionable nature of the Security Agreement;
Declare the Security Agreement to be void ab initio for its failure to contain all required material terms sufficiently and in plain language.

In the Complaint, the timeshare owners claim Wydham violated the FDUTFA by unfair methods of competition, unconscionable acts or practices and unfair or deceptive acts or practices such as:

Not being made aware of any notice requirements to use points and book vacations;
That the timeshare owners could book vacations anywhere in the world;
The timeshare owners would be assigned their own travel specialist to plan trips;
The timeshare owners would be contacted by a Wyndham representative to help them set up an iPad to book vacations;
The timeshare owners could not contact anyone on the phone at Wyndham to plan a trip;
The original timeshare sales presentation lasted eight (8) hours when Wyndham promised it would only take ninety (90) minutes;
Wyndham failed to disclose the nature of escalating maintenance fees;
There is a large fee to carry over points from year to year;
If the timeshare owners sought an attorney to review the Wydham documents prior to signature, any offers made by Wyndham would be revoked;
Wyndham promised the timeshare owners a two-week vacation anywhere in the world for joining Wyndham but Wyndham made it impossible for the timeshare owners to take advantage of the offer;
Wyndham did not disclose there is a fee if points are transferred/deposited with RCI;
Wyndham claimed points can be redeemed for cash, which is false;
Wyndham falsely claimed the timeshare contract could be passed on to the timeshare owners’ heirs like a traditional timeshare;
No disclosure of how many points equate to a hotel stay or the cost of airfare;
Falsely asserting Wyndham points could be banked for years but instead, expire after one (1) year; and
Wyndham falsely claimed a Barclays’ credit card was required to pay for the deposit to be offered at zero percent interest.

In the sixth cause of action against Wyndham, the timeshare owners allege Wyndham fraudulently induced them to enter into timeshare contract in the following manner:

Wyndham’s agents knew or should have known the falsity of the misrepresentations and omissions when they were made;
Wyndham’s agents intended that the timeshare owners be induced to act based on the misrepresentations and omissions made by Wyndham’s agents; and
Wyndham’s actions were willful, wanton and malicious, allowing the timeshare owners to recover punitive damages.

The timeshare owners prayed for the Court to declare the Security Agreement void ab initio; to rescind the Security Agreement; for restitution of all monies the timeshare owners paid to Wyndham; for compensatory and punitive damages; and for compensation for their attorneys’ fees.

Selected Events:

3/22/2021- ORDER DENYING WYDHAM’S MOTION TO COMPEL ARBITRATION [8]:

The timeshare owners initially brought a claim in arbitration against Wyndham before the American Arbitration Association (“AAA”) as required by the timeshare agreement with Wyndham. AAA denied to hear the claim because Wyndham did not cooperate with their procedures. AAA advised the timeshare owners that they could sue in state court. When the timeshare owners filed this claim, Wyndham removed the action to the United States District Court for the District of New Jersey and now requests the USDC compel the timeshare owners to participate in arbitration. As artfully stated by the Court:

“[C]hutzpah alert- now [Wyndham] moves to compel arbitration.”

“Wyndham is not the first defendant to bobble an arbitral forum, only to later seek to compel arbitration when the other party sued.” Courts review this issue of compelling the timeshare owners to participate in arbitration based on the text of the Federal Arbitration Act (“FAA”),and waiver and material breach by the compelling party. The Court analyzed the issue using all three doctrinal lenses but came to the same conclusion under each: Wyndham cannot compel the timeshare owners to arbitrate.

Sections 3 and 4 of the FAA:

The FAA provides two ways to enforce arbitration agreements: the Court should stay an arbitrable case “until such arbitration has been had in accordance with the terms of the agreement. . . “ pursuant to Section 3 or [a] party aggrieved by the alleged failure, neglect, or rusual of another to arbitrate…may petition any United States district court. .. for an order directing that such arbitration proceed in the manner provided for in such agreement.” (Section 4).

The Court denied Wyndham’s motion pursuant to Sections 3 and 4 because:

The timeshare owners did not fail, neglect or refuse to arbitrate with Wyndham. The timeshare owners complied with the rules of arbitration as set forth in the agreement with Wyndham;
The arbitration “has been had” as far as was possible as the timeshare owners complied with the arbitration procedure and AAA directed the timeshare owners to file their claims in court. Additionally, Wyndham was in default by failing to comply with AAA rules therefore Wyndham cannot enforce arbitration now.

Wyndham waived right to arbitration:

Wyndham failed to follow the arbitration rules which amounted to a waiver of the right to compel arbitration by acting inconsistently with the right to arbitrate.

It is not equitable to allow Wyndham to give the timeshare owners “the runaround, then reinvoke the arbitral forum Plaintiffs were seeking in the first place.” In addition, Wyndham failed to:

Comply with AAA’s rules regarding consumer claims. As a result, AAA declined to arbitrate the claims involving Wyndham;
Cooperate with Wyndham’s chosen forum of AAA and thereby waived its right to arbitrate.

The timeshare owners have shown prejudice by:

Wyndham’s circumnavigation “from the AAA, to state court, to this Court, and if Wyndham has its way, back to AAA.” If Wyndham were to prevail on this motion, the time and money spent by the timeshare owners would have been a waste.
The timeshare owners did not choose to litigate and tried to arbitrate pursuant to the agreement drafted by Wyndham. Wyndham prevented the timeshare owners from arbitrating, the AAA declined to hear the case. As such, the timeshare owners had no choice but litigated in court. “[T]he costs and wasted time represent cognizable prejudice to” the timeshare owners.

Wyndham materially breached the arbitration agreement and the Court will not enforce it because:

Wyndham failed to adhere to the AAA requirements by failing to pay fees. This failure deprived the timeshare owners the benefit of the arbitration agreement. Such failure also represents a “lack of good faith and fair dealing.”

Wyndham additionally requested the court appoint an arbitrator under section 5 of the FAA. However, the Court declined to do so because:

The timeshare owners initiated the arbitration correctly and Wyndham did not follow the rules of the AAA;
AAA was also available to act as an arbitrator in this case if Wyndham complied with its rules;
Wyndham selected AAA as the arbitrator in its contracts, which would hear the dispute “but for Wyndham’s failure to maintain its status with AAA, or dispute with the AAA.”

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Transcripts

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Parties

Plaintiffs: BRADLEY B. HEISMAN, JULIA MATONTI

Plaintiffs’ counsel: WOLFGANG HEIMERL, HEIMERL LAW FIRM

Defendants: WYNDHAM VACATION RESORTS, INC.

Defendants’ counsel: CAITLIN CAMERON CONKLIN, DANIEL M. ELIADES of K&L Gates LLP