Landmark decision finds timeshare exit companies engaged in false advertising
Diamond Resorts (Diamond), which was acquired by Hilton Grand Vacations Inc. (NYSE:HGV) in 2021, recently won a landmark ruling in federal district court in its lawsuit against third-party exit companies. This judgement is a significant step forward in HGV’s ongoing efforts to protect timeshare owners and consumers from fraud and false advertising.
Diamond filed this lawsuit to prevent the defendants from targeting their owners with false statements and causing them financial harm. In the lawsuit, Diamond alleges that third-party exit companies and their lawyers lure timeshare owners into paying large upfront fees – sometimes exceeding $100,000 – by advertising supposed timeshare "exit" services. In reality, these nationwide consumer scams have no relationship to timeshare companies, fail to deliver any legitimate service and mislead timeshare owners into breaching their timeshare contracts. As a result, any “exit” or cancellation is only obtained through default and/or foreclosure, leading to a negative impact on the owners' credit history. While this lawsuit is directed at these defendants, many other organizations engage in the same or similar conduct and consumers should be aware of their real practices.
The suit filed by Diamond alleges that Pandora Marketing (d/b/a Timeshare Compliance) and Intermarketing Media (d/b/a Resort Advisory Group) and their attorneys, JL Sean Slattery, Carlsbad Law Group, Del Mar Law Group and Slattery, Sobel and Decamp engaged in false advertising, tortious interference with contract, California unfair business practices and civil conspiracy.
The court found:
The unambiguous factual message that the defendants are communicating to the timeshare owners is that they are selling a service in which they and their lawyers legally cancel the owners’ timeshare contracts based on improprieties by Diamond. The defendants are not providing that service and they know it. The timeshare contracts are being cancelled because the owners follow the defendants’ advice and stop making payments on the contracts, which triggers foreclosure by Diamond based on default. There are no lawsuits to speak of. There are no cancellations based on threats of litigation. The terminations are not the result of anything that Diamond did or said in the marketing and sales of the timeshares. Instead, they are based on common, run-of-the-mill defaults.
This process is not “legal” as that term is generally understood within and without the legal profession and, therefore, the defendants’ repeated assertion that they accomplish cancellation by legal means is false. The owners are breaching their contracts based on defendants’ advice to stop paying Diamond and they in fact suffer negative consequences of breaching, including negative credit reporting and tax liability.
The court also determined that both Timeshare Compliance and Resort Advisory Group violated the Lanham Act by falsely advertising their “exit” services. While the parties will still need to go to trial on the issues of causation and damages, what is clear is that the defendants have been violating the law and harming consumers.
“For far too long, the timeshare exit companies have gone unchallenged,” said Charles Corbin, chief legal officer & general counsel of Hilton Grand Vacations. “This ruling holds them accountable for their false claims and illegitimate services. We hope this ruling will educate the public and alert more regulators to these ongoing scams, which are detrimental to consumers looking for options to exit their contract. While the vast majority of our owners love their vacation ownership, we understand that life circumstances can change, and HGV is committed to helping owners find the right solution for their needs. We will continue to use all legal means to protect our owners from fraud.”
Diamond is represented by a team of lawyers at BakerHostetler led by Albert Lin, and including Brandon Crossland, Marissa Peirsol, Carrie Dettmer Slye, and Doug Vonderhaar.
About Hilton Grand Vacations Inc.
Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a leading global timeshare company. With headquarters in Orlando, Florida, Hilton Grand Vacations develops, markets and operates a system of brand-name, high-quality vacation ownership resorts in select vacation destinations. As one of Hilton’s 19 premier brands, Hilton Grand Vacations has a reputation for delivering a consistently exceptional standard of service, and unforgettable vacation experiences for guests and more than 725,000 owners. Membership with the Company provides best-in-class programs, exclusive services and maximum flexibility for our Members around the world. For more information, visit www.corporate.hgv.com.