Diamond Resorts U.S. Collection Dev., LLC v. Pandora Mktg., LLC, CV 20-5486 DSF (ADSx)

• Decision Date: 13 November 2020
• Docket Number: CV 20-5486 DSF (ADSx)
• Citation: 500 F.Supp.3d 1104
• Parties: DIAMOND RESORTS U.S. COLLECTION DEVELOPMENT, LLC, et al., Plaintiffs, v. PANDORA MARKETING, LLC d/b/a Timeshare Compliance, et al., Defendants.
• Court: U.S. District Court — Central District of California

500 F.Supp.3d 1104

DIAMOND RESORTS U.S. COLLECTION DEVELOPMENT, LLC, et al., Plaintiffs,

v.PANDORA MARKETING, LLC d/b/a Timeshare Compliance, et al., Defendants.

CV 20-5486 DSF (ADSx)

United States District Court, C.D. California.

Signed November 13, 2020

Lindy Kathryn Keown, Pro Hac Vice, Brandon T. Crossland, Pro Hac Vice, Baker and Hostetler LLP, Orlando, FL, Albert G. Lin, Pro Hac Vice, Douglas A. Vonderhaar, Pro Hac Vice, Marissa A. Peirsol, Pro Hac Vice, Baker and Hostetler LLP, Columbus, OH, Caroline Dettmer Slye, Pro Hac Vice, Baker and Hostetler LLP, Cincinnati, OH, Elizabeth M. Treckler, Teresa C. Chow, Baker and Hostetler LLP, Los Angeles, CA, Emily B. Thomas, Pro Hac Vice, Baker and Hostetler LLP, Houston, TX, for Plaintiff.

Jonathan Steven Parrott, Andrew D. Stolper, Frank Sims and Stolper LLP, Andrew D. Stolper, Frank Sims and Stolper LLP, Cathleen Mulligan Golden, David E. Outwater, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, Amy Leigh Baker, Amy Leigh Baker, John Y. Benford, Pro Hac Vice, Wilson Elser Moskowitz Edelman and Dicker, Orlando, FL, Jacob Brian Post, Smgq Law, Miami, FL, Johnny Lee Antwiler, II, Samuel Y Edgerton, III, O'Hagan Meyer LLC, Newport Beach, CA, for Defendants.

Order DENYING Defendants' Motions to Strike (Dkts. 190, 195)

Dale S. Fischer, United States District Judge Defendants Miranda McCroskey, McCroskey Legal, and Unlock Legal (collectively, McCrosky Defendants) and Defendants Slattery Sobel & Decamp, LLP; Del Mar Law Group, LLP; Carlsbad Law Group, LLP; and JL "Sean" Slattery (collectively, Slattery Defendants, and, all collectively, Lawyer Defendants) move, pursuant to California's anti-SLAPP statute, to strike the Second Amended Complaint's (SAC) eighth claim for tortious interference, tenth claim for civil conspiracy, and twelfth claim for unfair competition as to them. Dkt. 190 (Slattery Mot.), 195 (McCroskey Mot.). Defendant Pandora Marketing, LLC (Pandora) joins the McCroskey Defendants' motion to strike to the extent Plaintiffs Diamond Resorts U.S. Collection Development, LLC and Diamond Resorts Hawaii Collection Development, LLC (collectively, Diamond) seek to hold Pandora vicariously liable for the conduct of the Lawyer Defendants, for aiding and assisting the Lawyer Defendants, and for conspiring with the Lawyer Defendants. Dkt. 198. Diamond opposes. Dkt. 228-1 (Opp'n).¹ The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78 ; Local Rule 7-15. The hearing scheduled for November 9, 2020 is removed from the Court's calendar. For the reasons stated below, the motions to strike are DENIED.

I. BACKGROUND

Diamond owns, operates, and manages timeshare resorts. Dkt. 184 (SAC) ¶ 57. Diamond offers its owners and members the ability to reserve and use vacation interests at different resorts with multi-site timeshare plans called "Collections." Id. ¶ 58. To become a member of a "Collection," individuals enter a contract to purchase and finance the membership (Timeshare Contracts). Id. ¶ 59. The purchaser (Diamond Owner or Owner) can either pay in full at the time of purchase or make an upfront payment and finance the remaining amount. Id. Diamond Owners are also required to pay annual maintenance fees. Id. Once a statutory rescission period expires, Timeshare Contracts cannot be rescinded by only one party. Id.

Defendants are part of the "timeshare exit industry" and advertise their services helping timeshare owners cancel or terminate their timeshare contracts. Id. ¶¶ 65-66, 68. Pandora and Defendant Intermarketing Media, LLC, dba Resort Advisory Group (RAG and, collectively, Exit Defendants) state on their websites that they help those who engage their services to remove all liability from their timeshare contracts so owners "will no longer be responsible for maintenance fees, assessment fees, or payments on debts." Id. ¶ 68. Pandora finds Diamond Owners by obtaining property records and then using research databases to identify contact information for the Owners. Id. ¶ 73. Pandora analysts then call the Diamond Owners in an attempt to solicit information on the size of the Timeshare Contract and loan balance. Id. The analysts suggest that the Owner has been tricked or defrauded by the timeshare developer. Id. Sometimes, the analysts obtain information under the guise of a third party conducting an independent timeshare satisfaction survey. Id.

Pandora also uses "false, misleading, and disparaging advertising to lure consumers," including claiming it has a legal method to cancel timeshare obligations, timeshare developers frequently cancel timeshare contracts, results are guaranteed, heirs of timeshare owners will be financially obligated to continue paying on timeshare interests, and timeshare developers use high-pressure sales tactics and dishonest agents. Id. ¶ 79. However, there is no legal method for a third party to "cancel" the timeshare interest of an owner and Pandora has no program or proven method to terminate the contracts. Id. ¶ 81. Furthermore, heirs of Owners are not financially obligated to take on timeshare interests. Id. RAG uses the same or similar advertising tactics. Id. ¶¶ 84-91.

Pandora charges the Diamond Owners money to "exit" their timeshare. Id. ¶ 77. Pandora uses information about how much the Owner is currently paying for the timeshare to determine how much to charge for the "exit." Id. Once engaged, Pandora and RAG refer Diamond Owners to the Lawyer Defendants. Id. ¶ 15. The Lawyer Defendants instruct the Owners to refrain from paying anything owed under their Timeshare Contracts, and to change their address on file with Diamond to the address of a Lawyer Defendant. Id. ¶¶ 99-100. However, though the Lawyer Defendants "purport to be able to eliminate the owners' contractual obligations to Plaintiffs[,] ... there is no legal or viable method to assist the Diamond Owners in exiting the Timeshare Contracts." Id. ¶ 112. In exchange for a flat fee from the Exit Defendants, the Lawyer Defendants send "exit letters" demanding that Diamond cease and desist from communicating with the timeshare owner. Id. ¶¶ 116-117. As a result, the Owners do not receive billing statements, late payment notices, default notices, and other correspondence. Id. ¶ 119. The Owners do not know when their accounts are headed for default. Id. The Lawyer Defendants also send letters demanding that Diamond cancel accounts. Id. ¶ 120. Some letters include an explanation of why cancellation is appropriate; others do not. Id. ¶¶ 121-122. The Lawyer Defendants do not take further action, nor do they tell their clients that ceasing to pay will result in an unlawful breach of the Timeshare Contracts. Id. ¶¶ 123, 125. The McCroskey Defendants have yet to appear in any arbitration or case on behalf of a Diamond Owner. Id. ¶ 135. The Slattery Defendants have represented twelve Diamond Owners in arbitration. Id. ¶ 134.

II. DISCUSSION

A. Choice of Law

Diamond argues that Florida – rather than California – law should apply to this dispute because Diamond has more contacts in Florida than in California. Opp'n at 15. Because Florida does not have the same anti-SLAPP statute as California, Lawyer Defendants' motions to strike would be moot should Florida law apply.

The "choice of law inquiry has two levels": "First, [the court] must determine whose choice of law rules govern. Second, applying those rules, [the court] determine[s] whose law applies." Sarver v. Chartier, 813 F.3d 891, 897 (9th Cir. 2016) (quoting Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 782 (9th Cir. 1991) ). "[A]fter a transfer under 28 U.S.C. § 1404, the choice-of-law rules of the transferor court apply." Id. Because this case was transferred from the Southern District of Florida, Florida choice of law rules govern.

"Florida resolves conflict-of-laws questions according to the ‘most significant relationship’ test outlined in the Restatement (Second) of Conflict of Laws." Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d 1233, 1240 (11th Cir. 2007). Under this test, a court considers four "contacts": (1) "the place where the injury occurred;" (2) "the place where the conduct causing the injury occurred;" (3) "the domicil, residence, nationality, place of incorporation and place of business of the parties;" and (4) "the place where the relationship, if any, between the parties is centered." Id.

Diamond argues Florida law should apply because it "operates a regional corporate office and five sales centers in Florida" while it only "maintains limited corporate operations in California." Opp'n at 15. Because of this, it asserts that "Defendants' conduct alleged in the SAC caused more significant harm to Plaintiffs in Florida than in California." Id. But both Diamond entities are organized in Delaware with their principal place of business in Nevada. SAC ¶¶ 35-36. Plaintiffs do not explain how or why the harm impacts them at their sales centers or "regional corporate office" as opposed to their principal place of business. And any injury clearly was not specific to Florida.

On the other hand, Defendants Pandora and RAG are organized in Wyoming with their principal place of business in California. Id. ¶¶ 37-38. The Slattery Defendants and McCroskey Defendants are all either individual citizens of California or organized under the laws of California and headquartered in the state. Id. ¶¶ 39-45. The alleged conduct all presumably took place at the Defendants' principal places of business in California.

The Court finds that, as to these tort claims, the " ‘principal location of the defendant's conduct’ is the single most important contact." See Grupo Televisa, 485 F.3d at 1241 ; see also Restatement (Second) of Conflict of Laws § 145(2) cmt. f (Am. Law Inst. 1971). None of the other three factors suggests that it is more appropriate to apply Florida law. The Court therefore finds that under the Florida choice-of-law test, California law...