Korff v. Hilton Resorts Corp.

• Decision Date: 24 June 2011
• Docket Number: Case No. 4:10–CV–02662.
• Citation: 797 F.Supp.2d 875
• Parties: Joseph J. KORFF, Plaintiff, v. HILTON RESORTS CORPORATION d/b/a Hilton Grand Vacations, Defendant.
• Court: U.S. District Court — Northern District of Ohio

797 F.Supp.2d 875

Joseph J. KORFF, Plaintiff,

v.HILTON RESORTS CORPORATION d/b/a Hilton Grand Vacations, Defendant.

Case No. 4:10–CV–02662.

United States District Court,N.D. Ohio,Eastern Division.

June 24, 2011.

Geoffrey D. Korff, Salem, OH, for Plaintiff.

Michael J. Matasich, David L. Drechsler, Buckingham, Doolittle & Burroughs, Cleveland, OH, for Defendant.

MEMORANDUM OPINION

DAVID D. DOWD, JR., District Judge.

Before the Court is Defendant Hilton Resorts Corporation D/B/A Hilton Grand Vacations' motion to dismiss Plaintiff Joseph J. Korff's complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b)(6). ECF No. 5. For the reasons that follow, Defendant Hilton Resorts Corporation D/B/A Hilton Grand Vacations' motion is Granted.

I. The Facts Alleged in Plaintiff Korff's Complaint

This dispute arose out of the sale of one of Defendant's timeshare plan to Plaintiff Joseph J. Korff (“Korff”). Korff alleges the plan does not work as was represented to him by the salesperson.

Korff sat through a timeshare presentation while on a trip to New York City in January 2010. Korff is a business owner who allegedly did not want a timeshare for his own personal use, but rather to allow his employee salespeople to stay cheaply in higher-end hotels.

The Plaintiff alleges that Hilton sales representative Stephanie Abrams (“Abrams”) answered Korff's questions regarding the timeshare. Abrams allegedly told Korff the timeshare's point system would allow him to book hotels at around $100 per night and each point would be worth about one dollar. Abrams also allegedly told Korff she would be his sole point of contact for booking hotel rooms and that Korff's assistant would also be able to arrange hotel stays. Korff further alleges Abrams claimed ownership in the same program she was selling and the program worked for her in the same manner she described to Korff. Korff signed up for the 57th Street Vacation Suites Program because he intended to use the program as a vehicle for earning points. The purchase price under the contract was $99,900.00 with a down payment of $13,133.00 plus a closing cost of $3,143.00.

After completing the purchase of the timeshare, Korff allegedly instructed his assistant Judy Walton (“Walton”) to book a stay using his club points. Allegedly, Abrams told Walton a three day stay would cost several thousand points. This information conflicted with Abrams's alleged statements that the points would be worth a dollar each and a stay would cost about a hundred dollars a night. After a second attempt to book a room on a different occasion, a Hilton employee allegedly told Walton that a three day stay would cost 3,000 points and that it would be better to simply pay for the hotel room. Walton continued to contact Hilton in an effort to understand the program, but was never given answers that satisfied Korff. Eventually a Hilton employee allegedly told Walton that she could not book hotel stays on Korff's behalf. Allegedly, the same employee later suggested that Walton book the stays as “Mrs. Korff” to which Walton refused. After some attempts at negotiation, Hilton offered to sell Korff additional vacation packages. Korff contends that he was misled into the program that he describes as “lacking in any redeemable aspects.” ECF No. 1 at ¶ 37.

Korff filed his complaint on November 23, 2010, asserting four counts of fraud in the inducement. Specifically, Korff alleges that Abrams made four misrepresentations that induced him to enter into the contract: (1) that Abrams was an owner in the program; (2) that Korff would save a significant amount of money on hotel rooms when compared to market rates; (3) that Abrams would be the single point of contact for Korff in the program; and (4) that Korff's assistant would be able to immediately book hotel stays for Korff and his employees.

Hilton filed its motion to dismiss pursuant to Rule 12(b)(6) on February 3, 2011, to which Korff opposed and Hilton replied in support. ECF Nos. 5, 6 & 9, respectively. Thus, the matter is fully briefed and the Court rules as follows.

II. Motion to Dismiss Standard

Federal Rule of Civil Procedure 8(a)(2) contains a minimum requirement of a “short and plain statement” showing entitlement to relief. Rule 12(b)(6) allows a party to dismiss a complaint against that party if the complaint fails “to state a claim upon which relief can be granted.” In reviewing a Rule 12(b)(6) motion to dismiss, “[f]actual allegations must be enough to raise a right of relief above the speculative level ... on the assumption that all the allegations are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plaintiff's factual allegations are taken as true and the complaint is viewed in the light most favorable to the plaintiffs.

A claim survives a motion to dismiss under Rule 12(b)(6) if it “contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). According to Twombly, to survive a Rule 12 motion to dismiss for failure to state a claim, the “ ‘grounds' of [plaintiff's] ‘entitle[ment] to relief,’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955; see also Iqbal, 129 S.Ct. at 1950; Fed.R.Civ.P. 12(b)(6). However, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 129 S.Ct. at 1950.

III. Centrality of the Contract Documents

While the Court is generally limited to the allegations of the complaint and attached exhibits in deciding a Rule 12(b)(6) motion, where the plaintiff has referenced documents in the complaint which are central to his claims, the documents are treated as part of the pleadings and may be considered even if the documents are not physically attached to the complaint. Teagardener v. Republic–Franklin, Inc. Pension Plan, 909 F.2d 947, 949 (6th Cir.1990). The Teagardener court relied in part on the nonmovant's extensive quoting from the document. Id. In the instant case, Korff has made reference to the contract in his complaint (ECF No. 1 at ¶ 22), and repeatedly makes reference to the program embodied in the contract. ECF No. 1 at ¶ 14–21.

Korff maintains that the contract is not central to his claims because he has not quoted extensively from it and that his claim sounds in tort. If Korff is correct, then the Court cannot look to the terms of the contract in deciding this motion. Hilton counters that without the contract, there is no claim. Further, Korff seeks relief from the terms of the contract itself. Hilton is correct. It would make little sense to decide this motion without looking to the contract that not only gave rise to the claim, but also forms the basis for the relief Korff seeks. The contract is central to Korff's claims because it is a necessary part of the complaint Korff brought before the court. Accordingly, and pursuant to Teagardener, the Court will consider the contract in deciding Hilton's motion to dismiss.

IV. Applicable Law

There is a dispute as to whether New York or Ohio law applies. The contract contains a choice of law clause making New York law applicable in the event of a dispute. It provides that the contract “shall be governed under and interpreted and enforced in accordance with the laws of the State of New York.” ECF No. 5–1 at 7. Hilton has briefed New York and Ohio law, while Korff has only briefed Ohio law.

In a diversity case, the federal court applies the law of the forum state, including choice of law provisions. Davis v. Sears, Roebuck & Co., 873 F.2d 888, 892 (6th Cir.1989). Therefore, the Court applies Ohio choice of law rules. The Ohio Supreme Court has adopted the Restatement (Second) of Conflict of Laws, which provides:

The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

Tele–Save Merch. Co. v. Consumers Distrib. Co., Ltd., 814 F.2d 1120, 1122 (6th Cir.1987) (quoting Schulke Radio Prods., Ltd. v. Midwestern Broad. Co., 6 Ohio St.3d 436, 453 N.E.2d 683 (1983)). Upon review, the Court finds that New York has a substantial relationship to the transaction pursuant to section (a) of the above-quoted Restatement because the 57th Street property is located in New York. Further, the Court's attention has not been drawn to a fundamental policy of the state of Ohio that would preclude application of the choice of law clause pursuant to section (b).

In Moses v. Business Card Exp., Inc., the Sixth Circuit found the language that the contract and “the [interpretation] thereof shall be governed by the laws of the State of Michigan” was sufficient to cover claims of fraud and misrepresentation. 929 F.2d 1131, 1139 (6th Cir.1991). The Sixth Circuit reasoned that the language included more than just interpretation, stating “[plaintiffs] put the validity of the contract in issue, and such a claim would appear to be encompassed by the language ....” Id. at 1140. A Sixth Circuit panel in Banek Inc. v. Yogurt Ventures...