Westgate Resorts, Ltd. v. Sussman

• Decision Date: 31 May 2019
• Docket Number: Case No. 6:17-cv-1467-Orl-37DCI
• Citation: 387 F.Supp.3d 1318
• Parties: WESTGATE RESORTS, LTD.; et al., Plaintiffs, v. Mitchell Reed SUSSMAN ; and Mitchell Reed Sussman & Associates, Defendants.
• Court: U.S. District Court — Middle District of Florida

387 F.Supp.3d 1318

WESTGATE RESORTS, LTD.; et al., Plaintiffs,

v.Mitchell Reed SUSSMAN ; and Mitchell Reed Sussman & Associates, Defendants.

Case No. 6:17-cv-1467-Orl-37DCI

United States District Court, M.D. Florida, Orlando Division.

Signed May 31, 2019

Jeffrey Aaron Backman, Richard W. Epstein, Benjamin Eliot New, Greenspoon Marder, PA, Ft. Lauderdale, FL, Michael E. Marder, Thu Pham, Greenspoon Marder, PA, Orlando, FL, for Plaintiffs.

Clay Holden Coward, Krista Nicole Cammack, Richards H. Ford, Brian Christopher Guppenberger, Wicker, Smith, O'Hara, McCoy & Ford, PA, Orlando, FL, Joshua S. Smith, St. Augustine Law Group, PA, Longboat Key, FL, Michael John McGirney, Cory Lee Chandler, Spector, Gadon & Rosen, PC, St. Petersburg, FL, George M. Vinci, Jr., Spector Gadon & Rosen, P.C., Philadelphia, PA, for Defendants.

ORDER

ROY B. DALTON JR., United States District Judge

There is a vague popular belief that lawyers are necessarily dishonest. I say vague, because when we consider to what extent confidence and honors are reposed in and conferred upon lawyers by the people, it appears improbable that their impression of dishonesty is very distinct and vivid. Yet the impression is common, almost universal. Let no young man choosing the law for a calling for a moment yield to the popular belief – resolve to be honest at all events; and if in your own judgment you cannot resolve to be an honest lawyer, resolve to be honest without being a lawyer. Choose some other occupation, rather than one in the choosing of which you do, in advance, consent to be a knave.¹

This case is about whether a lawyer's practices are necessarily dishonest. Defendant Mitchell Reed Sussman is a California-based real estate attorney who claims a specialty in ridding timeshare owners of their timeshare obligations. He does this by directing timeshare owners to stop all payments to their timeshare, sending demand letters to the timeshare company, and recording another owner on the property deed— all for a fee, of course. At the end of the day, he tells the timeshare owners they got off scot-free thanks to his skillful negotiation tactics and ability to drive a hard bargain. But, alas, it's not so. Rather, from the timeshare company's perspective—Plaintiffs Westgate Resorts, Ltd., et al. (collectively "Westgate ")—and contractually, the owners' obligations are undiminished. Despite this inconvenient truth, Mr. Sussman kept on.

Now, burned too many times, Westgate sues Mr. Sussman and his law firm (collectively, ("Mr. Sussman ")) to permanently enjoin these practices and to recoup the money it lost from unpaid fees. As it stands, Westgate brings two claims against Sussman: (1) tortious interference with existing contracts; and (2) violating Florida's Deceptive and Unfair Trade Practices Act ("FDUTPA "). (Doc. 7, ¶¶ 90–100, 112–118.) To describe the litigation as "red in tooth and claw" would understate its contentious nature. Following discovery wars that resulted in sanctions deeming certain facts admitted (Doc. 128), the parties filed cross-motions for summary judgment (Docs. 184, 185). This Order follows.

I. BACKGROUND

Faced with a rat's nest of a record, the Court plunges in to deliver this (regrettably lengthy) summation of the facts at issue.² The Court focuses on the three key players: Westgate (The Trapper), Mr. Sussman (The Weasel), and Westgate owners (The Prey).

A. Westgate (The Allegorical Trapper)

Westgate is in the business of selling timeshares. (Doc. 123-1, p. 10:7–8.) With resorts in many states, Westgate's primary product is one week of usage rights in a specific type of unit—a deed-based system, not points-based like other timeshare companies. (Id. at 10:9–20.)

Buying a timeshare is an involved process. Generally speaking, it starts with prospective buyers attending timeshare presentations and hearing a sales pitch by a Westgate salesperson. (Id. at 19:8–21:20.) Attendees are given a tour, asked questions about themselves and their vacation habits, and told about the benefits of owning a Westgate timeshare. (See id. ) If they agree to purchase, a proposal is prepared by the sales staff that includes information about the terms of ownership. (Id. at 21:22–22:4.) Buyers sign a contract for purchase and sale and a Declaration of covenants, conditions, and restrictions for the resort, which outlines their rights and obligations as owners. (Id. at 32:22–37:3, 51:17–24; Doc. 185-8.)

To purchase a unit, buyers can pay outright or finance via mortgage, usually procured through Westgate to be paid in monthly installments. (Doc. 123-1, pp. 9:21–10:6, 23:10–16, 29:14–24.) A warranty deed is then prepared to transfer the timeshare interest from Westgate to the owner at the time it's recorded. (Id. at 24:2–23.) Once transferred, owners must make annual payments to their resort's homeowners association ("HOA ")—"common expenses" such as maintenance fees, real estate taxes, and utility charges. (Id. at 66:22–68:1; Doc. 185-8, pp. 23–24.) Each year's amount varies, as it's set by the HOA's Board of Directors. (Docs. 123-1, pp. 111:9–10, 112:5–12; 185-8, pp. 19–21). Failure to pay can result in various penalties and fines levied against the owner, including additional assessments, a lien placed on the account, forfeiture of the unit, and litigation to recover owed amounts. (Doc. 185-8, pp. 19–23.) Liability for these common expenses extends to successors in interest. (Id. at 20–21.)

Divesting timeshare ownership from Westgate, as with any self-respecting snare, is complicated, as an owner's options are limited. Under the Declaration, an owner may sell or transfer his unit. (Id. at 38–39.) But before doing so, the owner must honor Westgate's Right of First Refusal , whereby Westgate has "the option to purchase said Timeshare Interest, upon the same conditions as are offered by the Owner to a third person." (Id. at 38.) The process kicks in once an owner finds a buyer for his timeshare. (Doc. 123-1, pp. 51:17–52:15.) Before selling or transferring the timeshare, the owner must notify Westgate and provide documents related to the transaction. (Id. ) Westgate can request additional documents and "tell that buyer that they have [Westgate's] authority to proceed with the transfer or the sale, or [it] can offer ... to buy that timeshare week" for the same price. (Id. at 52:2–11.) Whether Westgate chooses to exercise its Right of First Refusal "all depends on the price of the inventory and what the demand of the inventory is." (Id. at 53:11–19.) And the provision is airtight: "Any attempt to sell [a] Timeshare Interest without waiver of the right of first refusal by the Developer shall be wholly null and void, and shall confer no title or interest whatsoever upon any purchaser." (Doc. 185-8, p. 38.)

Those are the two exit options contemplated by Westgate's Declaration, but an owner can sometimes get rid of her timeshare by negotiating with Westgate. (Doc. 123-1, pp. 138:23–139:3.) Westgate "negotiate[s] with owners on a case-by-case basis," usually if the owner raises of "some type of hardship." (Id. at 139:7–10.) Westgate "has a hardship application and process that [it] asks owners to go through," where the owner provides "documentation of the hardship" to show "their financial situation has changed and they no longer want or no longer can afford the product." (Id. at 139:7–19.)

If the claimed hardship is acceptable to Westgate, it "will negotiate a settlement with the customer which will typically involve some type of a fee, and then [Westgate] would accept a warranty deed in lieu of foreclosure." (Id. ) In short, sometimes begging plus payment will open the trap. Or Westgate refuses to negotiate. (Id. at 139:4–6.) If the owner cannot find a buyer and Westgate is unwilling to take back the timeshare, the owner is left with two options: "continue to make payments or [ ] default." (Id. at 140:24– 141:24.) With default comes "the possibility of a foreclosure and judgment." (Id. at 141:24– 142:1.)

Foreclosure can be judicial or non-judicial. (Id. at 63:20–64:6.) With judicial foreclosure, Westgate sues the defaulting owner. (Id. at 61:11–69:16.) After Westgate obtains judicial foreclosure, it receives the timeshare back to be marketed and sold through "normal sales channels." (Id. at 69:25–71:23.) It prices the timeshare "at the same level regardless of whether it came back through foreclosure or any other means." (Id. at 123:9–14.) And as for the defaulting owner who still owes money on the mortgage, Westgate decides whether to continue pursuing the mortgage and note. (Id. at 142:12–17.)

B. Mr. Sussman (The Allegorical Weasel)

On estimate, thirty-five percent of Westgate's owners default over the life of their loan. (Id. at 128:12–19.) Enter Mr. Sussman. Mr. Sussman is a California-based lawyer who has been practicing real estate law for 41 years. (Doc. 185-2, pp. 12:11–15, 21:16–18.) A solo practitioner, he runs his practice out of three offices in Southern California. (Id. at 10:7–23, 19:20–21.) Instead of having full-time employees, he uses 1099 independent contractors who "do a variety of things for [his wife] and [him]," including legal-related work—between six and twenty contractors in a given period. (Id. at 16:24–21:18.) Some are lawyers; most aren't. (Id. at 18:10–22:17.)

About ten years ago, Mr. Sussman's real estate practice evolved to represent timeshare owners. (Id. at 32:3–33:2; Doc. 50, ¶ 4.) He started "suing developers" and was able to "get[ ] people out." (Doc. 185-2, pp. 67:12–68:16.) For a small fee, he'll open the trap and spring the prey. Apparently he made quite the name for himself, as he was approached by a listing company called Timeshare Exit Team ("TET ") in 2013 after he'd "already been in the business for about five years." (Id. ) As a listing company, TET had been focusing on the secondary market for timeshares, listing "for sale a timeshare from an owner who didn't want to own it." (Id. at 68:7–9.) That approach was a dud—the value...