Plaintiffs Diamond Resorts International, Inc., Diamond Resorts U.S. Collection Development, LLC, Diamond Resorts Hawaii Collection Development, LLC, and Diamond Resorts Management, Inc. (collectively, "Diamond ") sued Defendants Austin N. Aaronson ("Mr. Aaronson ") and Aaronson, Austin, PA ("Aaronson Law Firm ") (collectively, "Defendants ") for claims arising from advertisements on the Aaronson Law Firm website ("Firm Website ") and Mr. Aaronson's representation of clients who are or were Diamond members ("Diamond Clients "). (See Docs. 1, 47.) Defendants moved for summary judgment on all claims (Doc. 115 ("Motion ") ), and Diamond opposed (Doc. 133). The Motion is due to be denied.
I. BACKGROUND
Diamond consists of Las Vegas-based timeshare developers managing over 420 membership resorts worldwide. (Doc. 47, ¶¶ 1, 17-24.) Defendants are an Orlando-based attorney and his law firm focused on
A. The Subject Advertisements
The Subject Advertisements that Diamond claims are false and misleading all appear or have appeared on the Firm Website in text on webpages, articles, blogs, and videos. (See, e.g. , Doc. 133-5.) One advertisement touting Defendants' approach to timeshare cancellation appeared on the Firm Website's homepage ("Homepage ") from August 2015 until August 2016:
Timeshare ownership often feels like entrapment. How do we know this? Because people tell us. Their stories are remarkably consistent.
....
But reciting this disturbing series of events is not going to help legally. Why? Because it's your word against there's [sic]. Plus, there are a thousand disclaimers and waivers in those closing documents, enough to absolve the developer of almost anything.
But that's not to say that you don't have any leverage, any cards to play. At the Aaronson Firm, we focus on other ways to release your obligation. One in particular: Maintenance. Your developer has a fiduciary duty to manage the resorts in your best interest. Chances are, they're in breach of that duty, in ways that are very obvious and easy to prove.
This is where the developer is most vulnerable. This is where your leverage is. And you owe it to yourself to hire experienced, competent counsel. At the Aaronson Firm, we have over forty years of combined legal experience. And we are willing to sue, if necessary, in the interest of getting you released.
So call us free of charge to discuss your situation, please. Your legal problems are not insurmountable.
(Doc. 133-5, pp. 1, 4; see also Doc. 133-4, pp. 65-66.) This language changed later in 2016:
But the chances are good that your timeshare developer is exposed legally in ways that are relatively straightforward and provable. And you owe it to yourself to hire experienced, competent counsel. At the Aaronson Firm, we have over forty years of combined legal experience. And we are willing to sue, if necessary, in the interest of getting you released.
So call us free of charge to discuss your situation, please. Your legal problems are not insurmountable. If you are looking to cancel your timeshare Aaronson Law Group can help.
(Doc. 133-5, pp. 1, 5.) In 2017 and 2018, the language changed again:
But chances are good that your timeshare developer is exposed legally in ways that are relatively straightforward and provable. You owe it to yourself to hire experienced, competent counsel. At the Aaronson Law Firm, we have over 80 years of combined legal experience. And we are willing to sue, if necessary,in the interest of getting your timeshare cancelled.
So please contact us using one of our three convenient methods to receive a free consultation to discuss your situation. You can:
1. Call us free of charge,
2. Use our Contact Form above, or
3. Live Chat with a person ready to assist you.
YOUR LEGAL PROBLEMS ARE NOT INSURMOUNTABLE!
If you need to cancel your timeshare, the Attorneys of the Aaronson Law Firm stand ready and able to help you!
(Id. at 2, 6-7.)
Another advertisement appeared on the Firm Website's "How It Works" page. In early 2016, that page read:
Quite often, one's signature on a timeshare contract is obtained by fraud. And the debt that it creates generally outweighs any benefit to the owner. But to address it properly, it is imperative that you retain a licensed attorney.
....
But experienced, competent counsel will know how to exploit other points of vulnerability. For example, the developer may well be perpetrating an ongoing conflict of interest. Improper handling of trust funds are [sic] also a major issue.
This is where the developer is most vulnerable. This is where your leverage is. And by far the best way to leverage this is through a licensed attorney, who will have subpoena power over books and records.
So call us free of charge to discuss your situation, please. Your problems are not insurmountable.
(Id. at 2, 8.) The "How It Works" page updated later to include a diagram of the Aaronson Law Firm's process of getting individuals out of their Timeshare Contracts. (Id. at 2, 9.) The language from the Homepage and "How It Works" page also appears in videos on the Firm Website in which a man wearing a gray suit recites the same information. (Doc. 132, ¶ 4 (video available from August 2015 to August 2016); id. ¶ 5 (current video).)
These advertisements generally espouse Defendants' view of common practices of the timeshare industry as a whole. (See Doc. 133-5.) But other advertisements on the Firm Website discuss Diamond specifically. (See Docs. 133-23, 133-24.) An example is the "article" entitled "Timeshare Traps" dated May 5, 2015:
Diamond Resorts International, Inc., is an incredibly profitable company. They are also publicly traded, so that one can gain a certain amount of insight into how they operate. And they appear willing to stop at nothing to maintain this profitability.
Diamond's modus operandi recently has not been about building new resort facilities. Rather, it is inclined to acquire existing facilities from previous developers, many of which were set up on the deed system. In some cases, these resorts were substantially sold out to deeded owners. Undeterred, Diamond has then endeavored to 'revoke' the deeds, a unilateral act utterly without legal authority, and impose a 'points' system conferring greater access based upon amount of points purchased.
In this fashion, Diamond can accomplish several things that it could not do otherwise: 1. It can again commence the sale of new timeshare interests without having to build new facilities; 2. It can do so without recording deeds in public records, which was a public disclosure substantially impeding it from overbooking resorts. This practice is incredibly unfairto owners of existing interests in these resorts, deeded or otherwise.
So don't be too surprised if, next time you try to book your vacation, you are told that you have insufficient points to access any of the accommodations, and that you'll have to buy more.
If you are disappointed with your Diamond timeshare, please don't hesitate to call us concerning your legal options, including rescission of the contract, free of charge.
(Doc. 133-23.) Another targeted advertisement appeared on the "Diamond Resorts Timeshare Cancellation" page:
Rescinding your Diamond Resorts International Timeshare Contract
Unlike some other timeshare developers, Diamond Resorts International has never been a 'hotelier' per se.
Why are timeshares often more profitable than hotels? Simply that selling you space in their facilities is more profitable than renting them to you, for several reasons:
1. It creates a more predictable cash flow
2. They can still rent the same facilities as a hotel if they're not fully booked
3. On the 'points' system, they can overbook, and deny you access on the basis that you don't have enough of them. (No one said that any of this is necessarily lawful)
4. They can just plain charge you more money. (See our blog on the 'true cost of a timeshare').
If you've been hoodwinked into 'purchasing' your vacation, please feel free to contact us.
(Doc. 133-24.)
Last, this blog post titled "Timeshare Conflict of Interest":
Simply put, a conflict of interest exists when one's duty to act in your best interest is compromised by some other factor, typically money. In the case of Diamond Resorts International, such a conflict is evident in every aspect of what they do, particularly in the management of their resorts.
Here's what we mean: You, as an owner of a timeshare, have certain rights, particularly voting rights, in association with the election of condominium association board members, which in turn make decisions concerning the management of the timeshare. Of these decisions, the most significant is the appointment of a professional 'management' company to maintain the facilities.
....
But with DRI, that's not exactly how it works. Rather, Diamond will invariably install itself as the management company running its resorts, even though it lacks a majority ownership interest in any given resort that would legally qualify it to do so. How can this be, you ask? If they don't own most of the units, they can't even control the vote. By what legal authority can they do anything at all to control the management of the resort?
Here is their rationale, taken from language contained in [the] most recent annual report ... filed with the S.E.C.:
HOAs. Each of the Diamond Resorts managed resorts, other than certain resorts in the European Collection, is typically operated through an HOA, which is administered by a board of directors. Directors are elected by the owners of intervals at the resort (which may include one or more of the Collections) and may also include representatives appointed by the Company as the developer of the resort. As a result, the Company is entitled to voting rights with respectto directors of a given HOA by virtue of (i) its ownership of intervals at the related resort, (ii) its control of the Collections that hold intervals at the resort and/or (iii) its status as the developer of the resort. The board of directors of each HOA hires a management company to provide the services described above, which in the case of all Diamond Resorts managed resorts, is the Company. The Company functions as an HOA for two resorts in St. Maarten, collects maintenance fees, earns management fees and incurs operating expenses at these two resorts.
Almost every statement in the foregoing 'rationale' is a non-sequitur. The disclosure makes a statement that the directors are elected by interval owners, which is an accurate statement of how things are supposed to work. But it then goes on to say that "As a result, the Company (Diamond) is entitled to voting rights with respect to directors of a given HOA ..." Stop right there. The fact that the owners elect directors does not entitle Diamond to 'voting rights' except to the limited extent to which it actually has title to intervals in the resort. On information and belief, in no case does Diamond actually own a majority of intervals in any resort that they manage. But it get[s] better: In trying to explain the legal basis for its control of the resorts, the disclosure goes on to say that it's "... [because] i. its ownership of intervals at the related resort" (duly noted and refuted) ... [and] ii. its control of the Collections that hold intervals at the resort and/or ... (so it's [sic] control of the management company gives it the right to control the board of directors - not vice versa ? ? ? ? ? ... [and] iii. its status as the developer of the resort". So the developer , not the owners , of a resort now has status to forever control the board of directors. Maybe they can cite some legal authority for that one.
In practice, what happens is this: Diamond will endeavor to circulate a number of 'proxy' proposals binding your vote as an owner to elect one of their insiders to the board. This they can do, even with ownership of a single interval. Invariably Diamond's stooges will then appoint Diamond's "U.S. Collections" arm to manage the resort.
Unlike Diamond, you the owner of a resort interval are 'out of the loop'. You don't have a roster of other owners, and thus no way to communicate with them. Thus, there is no[ ] way to galvanize opposition to the status quo. And the cycle repeats itself year after year.
If any of this resonates with you, please call free of charge. We will discuss your legal options.
(Doc. 132-2.) This post has been on the Firm Website since 2015. (Doc. 132, ¶ 3.)
From January 1, 2013 to August 22, 2018, the Homepage had 69,027 visits, the "How It Works" page 12,923 visits, and the "Diamond Resorts Timeshare Cancellation" page 3,330 visits. (See Doc. 133-7.)
B. Defendants' Representation of Diamond Clients
About 258 Diamond timeshare owners have retained Defendants to cancel their Timeshare Contracts. (Doc. 133, ¶ 19; Doc. 133-1; Doc. 115-2, p. 8.) Diamond members find Defendants in various ways, including through internet searches, the Firm Website, online forums, and referrals from other individuals. (Doc. 115-5, pp. 34-40.) For about eighty of Defendants' client matters involving Diamond members, the Diamond members became clients through the Firm Website. (See Doc. 133-9.) And almost half of Defendants' Diamond Clients have delinquent
In representing Diamond Clients, Defendants have started over thirty arbitrations against Diamond asserting claims for breach of fiduciary duty, conflicts of interest, and mishandling and misappropriation of maintenance fees-consistent with the allegations in the Subject Advertisements. (See Doc. 133-13.) Yet no arbitrations provided relief in Defendants' clients' favor on those asserted claims.
1. The Hardistys
First, the Court addresses the experience of Ms. Hardisty, who purchased Diamond timeshare points for the first time in July 2015. (Doc. 115-19, pp. 11, 16, 29, 143.) After purchasing additional points in November 2015, she had second thoughts because she could not afford the payments and felt she had been lied to by Diamond. (Id. at 53-56, 61-64, 79, 100-01). This led her to conduct an internet search on how, if at all, she could get out of the Timeshare Contract. (Id. ) There, she came across Mr. Aaronson's name. (Id. ) She clicked on the Firm Website and watched the video "talking about maintenance fees, how [Mr. Aaronson] can get you out of your timeshare, that kind of thing." (Id. at 56.) The information in the video was the same as that in the Subject Advertisements. (Id. at 85-86.) While on the Firm Website, she submitted information about her situation and live chatted someone from the Aaronson Law Firm who gave her information about the process. (Id. at 56, 64, 100.) Following this online exchange, the Hardistys retained Mr. Aaronson. (Id. at 64-65.)
During his representation of the Hardistys, Mr. Aaronson sent a demand letter to Diamond and began arbitration proceedings against Diamond. (See id. at 116-25.) But according to Ms. Hardisty, the claims Mr. Aaronson filed did not reflect her perception of Diamond's wrongdoing. (Id. at 116-25, 129-43.) The claims in the letter and the statement of claim included claims for breach of fiduciary duty, violation of Nevada statutes, fraud in the inducement, conversion, quantum meruit, and rescission and an allegation that Diamond had misappropriated funds. (See Doc. 133-13, pp. 1-24.) Yet Ms. Hardisty found some facts asserted to be untrue, and she didn't even know what some claims meant. (Doc. 115-19, pp. 116-25, 129-43.) Plus, none of the asserted claims seemed "obvious" or "easy to prove" as marketed by Defendants. (Id. at 128, 150.) And when Ms. Hardisty asked Mr. Aaronson
ii. The Feldmans
Second are the Feldmans. They bought Diamond timeshare points for the first time in 2014. (Doc. 115-20, p. 40.) After Diamond increased their maintenance fees following their purchase of additional points in May 2015, they wanted to terminate their Timeshare Contract. (Id. at 45-51.) So Mr. Feldman looked for attorneys. (Id. at 52, 55.) He found Mr. Aaronson online and watched "a video [on his website] that seemed okay." (Id. at 52, 55, 91-92.) He then reviewed the Firm Website and looked into whether Mr. Aaronson had any malpractice or disciplinary issues from the Florida Bar. (Id. at 52-56.) Finding none, Mr. Feldman called Mr. Aaronson because he was the only attorney he could find. (Id. ) Mr. Feldman found Mr. Aaronson to be "positive about being able to help," so Mr. Feldman retained him. (Id. at 57-58, 93.) And although Mr. Aaronson made no guarantee about the outcome, according to Mr. Feldman, "[h]e was pretty certain" he could deliver. (Id. at 76-77.)
Near the beginning of the representation, Mr. Feldman expressed that he did not want to keep paying Diamond. (Id. at 115.) Mr. Aaronson responded by telling him that "it would not be to [his] benefit to make any more payments." (Id. at 115, 123.) Mr. Feldman said they "were instructed to stop payment on the promissory note"-"[Mr. Aaronson] agreed that we shouldn't continue the note payment." (Id. at 115-16, 124-25.) Mr. Aaronson later sent a demand letter to Diamond and filed a statement of claim on behalf of the Feldmans. (Id. at 98-115.) The claims Mr. Aaronson asserted were almost identical to the claims he asserted for the Hardistys. (See Doc. 133-13, pp. 141-47.) According to Mr. Feldman, the statement contained information he did not understand and other information he did not find accurate or know about. (Doc. 115-20, pp. 98-115.) Mr. Aaronson then represented the Feldmans during an arbitration hearing against Diamond, where Mr. Feldman testified about the misrepresentations made by the Diamond salespeople. (Id. at 77-79.) Ultimately, the Feldmans did not prevail. (Id. at 81-82, 102.) Diamond counter-sued for their unpaid contract. (Id. ) Mr. Feldman felt that the claims raised by Mr. Aaronson-based on maintenance fees, breaches of fiduciary duty, and conflicts of interest-were not obvious and easy to prove. (Id. at 121.) They retained a different lawyer to settle the outstanding amounts owed to Diamond. (Id. at 83, 113.)
C. The Instant Action
Based on the Subject Advertisements and Defendants' representation of Diamond Clients-both of which Diamond contends caused harm to Diamond's reputation and sales-Diamond sued. (See Doc. 1.) Following the Court's ruling on Defendants' motion to dismiss (see Doc. 43), Diamond amended its complaint to allege: Count I , false advertising in violation of the Lanham Act; Count II , tortious interference with contractual relations; Count III , trade libel; and Count IV , violations of Florida's Deceptive and Unfair Trade Practices Act ("FDUTPA "). (See Doc. 47.) Now Defendants move for summary judgment, contending that neither the Subject Advertisements nor Mr. Aaronson's conduct during representation of Diamond Clients is unlawful. (Doc. 115.) Briefing complete (see Docs. 133, 138), the matter is ripe.
Summary judgment is appropriate only if the movant shows there is "no genuine dispute as to any material fact and that [it] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett ,
On issues for which the nonmovant would bear the burden of proof the movant has two options: (1) it may simply point out a lack of evidence to support the nonmoving party's case; or (2) it may provide "affirmative evidence demonstrating that the nonmoving party will be unable to prove its case at trial." Four Parcels ,
"A factual dispute is genuine 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.' " Four Parcels ,
III. ANALYSIS
Defendants seek summary judgment on all four Counts. (See Doc. 115.) As for Count I, Defendants argue: (1) Diamond lacks what they call "statutory standing" to bring a claim under the Lanham Act; and (2) even if it had standing, Diamond cannot prove a false advertising claim.
A. Count I: Lanham Act
In addressing Diamond's Lanham Act claim, Defendants first assert that Diamond does not have "statutory standing" to pursue this claim. (Doc. 115, pp. 5-9.) Defendants then argue that even if Diamond had "statutory standing," Diamond has failed to show that (1) the Subject Advertisements are false or misleading; (2) the Subject Advertisements deceived anyone in the target audience; and (3) the Subject Advertisements had any material effect on consumers' purchasing decisions. (Id. at 9-17.) But viewing the evidence and all reasonable inferences from the evidence in the light most favorable to Diamond, the Court finds that genuine issues of material fact exist on the Lanham Act claim so that summary judgment must be denied.
Under the Lanham Act:
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--
...
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
the plaintiff must show: "(1) the ... statements were false or misleading; (2) the statements deceived, or had the capacity to deceive, consumers; (3) the deception had a material effect on the consumer's purchasing decision; (4) the misrepresented service affects interstate commerce; and (5) [the plaintiff] has been, or likely will be, injured as a result of the false or misleading statement."
Duty Free Americas, Inc. v. Estee Lauder Cos., Inc. ,
1. Zone of Interests
The first question for the Court is whether Diamond's asserted injuries-reputational harm and damages from lost sales (see Doc. 47, ¶¶ 58-64)-fall within the Lanham Act's "zone of interests." Section 1125(a)"authorizes suit by 'any person who believes that he or she is likely to be damaged' by a defendant's false advertising.' " Lexmark Int'l ,
Defendants first contend that because Diamond is no longer seeking damages for reputational harm, that asserted harm cannot be a way for Diamond to come within the "zone of interests." (Doc. 115, pp. 5-7.) But Diamond maintains that false accusations in the Subject Advertisements alleging Diamond's engagement in conflicts of interest and other unlawful activities show that Diamond has suffered reputational harm-even if Diamond isn't seeking monetary damages for this harm. (Doc. 133, pp. 9-10.) Given the Subject Advertisements, particularly those targeted at Diamond, the Court finds that a reasonable jury could find that any false accusations in the Subject Advertisements have harmed Diamond's reputation. Cf. Lexmark Int'l ,
Defendants next argue, without support, that Diamond's claimed monetary losses-unpaid promissory notes and maintenance fee obligations-aren't covered by the Lanham Act as they represent an interest in "accounts receivables," not lost sales. (Doc. 115, pp. 6-7.) Yet Diamond contends that it has suffered monetary damages from unpaid obligations Diamond members contracted to pay Diamond in exchange for points, which also constitutes a loss of customers associated with these delinquent timeshare accounts. (Doc. 133, pp. 9-11.) As support, Diamond submitted a report from a damages expert, who opined these monetary losses from these delinquent payments amount to over $ 4.5 million. (See Doc. 115-15, pp. 15, 47-65.) Defendants make the unsupported contention these monetary losses aren't covered by the Lanham Act as they represent only an interest in "accounts receivables." (See Doc. 115, pp. 6-7). Absent authority to the contrary, the Court finds these unpaid obligations, coupled with the lost customers associated with these unpaid obligations, constitute "lost sales" that are a sufficient harm to maintain this false advertising claim.
The Court finds that Diamond's claimed injuries from damage to its business reputation and lost sales in the form of unpaid promissory notes and other fees-and the evidence it has presented to support those injuries at this stage (see Doc. 115-15)-place Diamond within the Lanham Act's § 1125(a) zone of interests. See Lexmark Int'l ,
2. False or Misleading Statements
Next, the Court turns to the enumerated elements of the false advertising claim itself. "The first element of a false advertising claim is 'satisfied if the challenged advertisement is literally false, or if the challenged advertisement is literally true, but misleading.' " Osmose, Inc. v. Viance, LLC ,
The Subject Advertisements appear or have appeared on the Firm Website: the text on the Homepage, the statements in the videos embedded on the Homepage, the text on the "How It Works" page, articles, and blogs. See supra Section II.A. Starting with the Homepage, the text first stated:
But that's not to say that you don't have any leverage, any cards to play. At the Aaronson Firm, we focus on other ways to release your obligation. One in particular: Maintenance. Your developer has a fiduciary duty to manage the resorts in your best interest. Chances are, they're in breach of that duty, in ways that are very obvious and easy to prove.
(Doc. 133-5, p. 4.) It was modified later to say: "chances are good that your timeshare developer is exposed legally in ways that are relatively straightforward and provable." (Doc. 133-5, pp. 6-7.) Defendants' "How It Works" page also identified Defendants' approach to other vulnerabilities of timeshare developers: "But experienced, competent counsel will know how to exploit other points of vulnerability. For example, the developer may well be perpetrating an ongoing conflict of interest. Improper handling of trust funds are [sic] also a major issue. This is where the developer is most vulnerable. This is where your leverage is." (Doc. 133-5, p. 8.) Upon review, the Court finds that each advertisement claims that timeshare developers are vulnerable and exposed legally, such as by breaching fiduciary duties in handling maintenance of timeshare properties and perpetuating conflicts of interest. They also communicate that, as a result, there are obvious and provable ways for individuals to get out of their Timeshare Contracts.
The Subject Advertisements also attack Diamond specifically. "Timeshare Traps"
Defendants seek to sidestep Diamond's claim that the Subject Advertisements are false and misleading by claiming that some advertisements are accurate and by labeling the others as merely "opinion." (Doc. 115, pp. 10-13.) The Court is unpersuaded. As it stands, genuine issues of material fact exist about whether the Subject Advertisements are "literally false" or "literally true but misleading." This is in part because the record belies Defendants' claimed messages that vulnerabilities in the Timeshare Contracts exist that are obvious and easy to prove due to timeshare developers' practices. For example, the record reveals that Defendants asserted the specific "easily provable" claims identified in the Subject Advertisements against Diamond in over thirty cases-but lost on those claims every time. (See Docs. 115-5, 115-6, 133-13, 133-14; see also Doc. 133-5, pp. 4-9.
Beyond this, Defendants' claim that select phrases and statements are opinion, and not actionable, fails when the Court, as it must, views each Subject Advertisement in its full context. Although Defendants use equivocal phrases about timeshare developers' potential unlawful conduct such as "chances are" and "may well be," the Subject Advertisements also contain more direct, unequivocal statements about the same conduct-even calling on readers to respond. (See, e.g. , Doc. 133-5 (stating "[t]his is where the developer is most vulnerable," "[t]his is where your leverage is," "experienced, competent counsel will know how to exploit other points of vulnerability," and "you owe it to yourself to hire experienced, competent counsel").) The Subject Advertisements also directly challenge
With this, the Court simply cannot agree with Defendants that a reasonable jury would find that the Subject Advertisements are mere assertions of opinion or suggestion. Let's not forget these advertisements are authored by a lawyer and appear on his law firm's website-a firm dedicated to timeshare cancellation. (See, e.g. , Doc. 133-5.) They also directly accuse Diamond and other timeshare developers of committing fraud, perpetuating conflicts of interests, breaching fiduciary duties, and other unlawful activity. (See id. at 4-8; see also Docs. 133-23, 133-24.) In them, Defendants represent themselves as "experienced, competent counsel" and contend there are "obvious" and "easy to prove" claims that can be raised against timeshare developers. (See Doc. 133-5, pp. 4-6.) And finally, the Subject Advertisements call on readers to contact Defendants immediately for a free consultation, with an assurance that their legal problems are not insurmountable. (See, e.g. , id. ) Against this backdrop, the Court cannot find that no genuine issues of material fact exist on the false and misleading nature of the Subject Advertisements.
3. Level of Deception
Next, the Court tackles the second enumerated element: that the statements are deceptive. To have relief on a false advertising claim, the plaintiff must show that "the statements deceived, or had the capacity to deceive, consumers." Sovereign Military Hospitaller Order ,
The evidence Diamond proffered as evidence of deception is the report by Dr. Stewart, a consumer behavior expert, about his surveys to analyze the effect of the Subject Advertisements on viewers who are or were timeshare owners. (See Doc. 115-13 ("Stewart Survey Report ").) In synthesizing the results of the surveys, Dr. Stewart concluded:
The surveys ... produce[ ] a pattern of responses that provides compelling evidence that the Aaronson websites communicate misleading information about the services provided by Aaronson and disparaging content about time share management companies. Across multiple items there are statistically significantdifferences between the responses offered by survey participants who saw one of the Aaronson websites and a control letter. In addition ... the differences exceed levels that have been used by Courts in actions under the Lanham Act.
The results of the surveys make clear that the Aaronson Web pages communicate to a substantial number of consumers that Aaronson can assist them with cancellation of their timeshare property contract. In addition, the Aaronson Web site pages have the effect of diminishing the perception of timeshare companies among a substantial number of consumers and suggest to a substantial number of consumers that many timeshare property companies are engaged in unlawful practices. Finally, the Aaronson Web site pages say or suggest to a substantial number of consumers that they can get out of their timeshare property contract for any reason. Because the results regarding what the material communicated among respondents who saw the Aaronson [Web site pages] differ from the results obtained from respondents who saw a control letter, the results cannot be explained by respondents' pre-existing beliefs. Rather, the Aaronson Web site pages are the cause of the beliefs expressed by a substantial number of respondents.
....
Finally, three items examined in the survey make clear that many respondents, and the consumers they represent, are likely to act on information that suggests they can stop making or withhold payments on their time share properties and that they would be likely to retain the law firm if there was a high probability that their timeshare developer was exposed legally in ways that are relatively straight-forward and provable.
Taken as a whole, the results reported here provide strong evidence that the Aaronson Web site pages mislead a substantial number of consumers regarding the services offered by Aaronson, communicate disparaging information to a substantial number of consumers, and will cause a substantial number of consumers to take action based on such misleading and disparaging information.
(Id. at 30-32.)
Defendants challenge the design and results of the Stewart Survey Report to support their argument that Diamond cannot prove this element.
Second, Defendants challenge the Stewart Survey Report's conclusions about deception because none of the deception rates for relevant questions exceeded Defendants' 20% threshold for deception. (Doc. 115, pp. 14-17.) In support, Defendants pick out the questions they find relevant and assert that the deception rates evinced by the results from those questions are 11%, 14%, 6%, 8%, 4%, 1%, 12%, and 0%-"after netting out the 'noise.' "
First, while Defendants cite several non-binding cases for the proposition that 20% is the threshold deception rate sufficient to show deception (see id. at 13-15), Defendants ignore many cases finding percentages less than 20% sufficient, significant, and meaningful. See, e.g. , Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co. ,
Ultimately, while Defendants' challenges may be fodder for attacking Dr. Stewart's calculations or his conclusions about the significance of the results, the Court finds
4. Material Effect
Next up is the third enumerated element: that the advertisements had a material effect on consumers' purchasing decisions. "To succeed on a claim of false advertising, the plaintiff must establish that 'the defendant's deception is likely to influence the purchasing decision.' " Johnson & Johnson ,
Defendants contend that the lack of direct evidence showing that any of Defendants' Diamond Clients stopped making payments to Diamond or initiated arbitrations against Diamond based solely on the Subject Advertisements precludes Diamond from establishing this element. (Doc. 115, pp. 17-19.) But this assertion overlooks the circumstantial evidence in the record that could show that the Subject Advertisements influenced the "purchasing decisions" of people exposed to them-so this element survives summary judgment. For example, Diamond's damages expert's report shows a breakdown of the temporal correlation between when Diamond members retained Defendants and when they stopped making payments owed under their Timeshare Contracts. (See Doc. 115-15, pp. 15, 48-65.) There is also evidence that many of Defendants' Diamond Clients found Defendants through the Firm Website-where the Subject Advertisements were found. (See Doc. 133-9.) So a reasonable jury could find that something in the Subject Advertisements influenced the decision to stop making payments or to pursue arbitration.
Evidence also exists that the Subject Advertisements misrepresented the quality of Diamond and other timeshare developers' services and the legality of their conduct in performing those services. There are genuine issues of material fact on the literal falsity or misleading nature of the Subject Advertisements as they relate to these representations (and Defendants' ability to assist timeshare owners in cancelling their contracts). See supra Subsection III.A.2. The Stewart Survey Report also suggests that the Subject Advertisements "mislead a substantial number of consumers regarding the services offered by Aaronson, communicate disparaging information to a substantial number of consumers, and will cause a substantial number of consumers to take action based on such misleading and disparaging information." (Doc. 115-13, p. 32.) And to the extent a reasonable jury finds that the Subject Advertisements misrepresented the quality of Diamond's timeshares and business practices, they could find the materiality requirement satisfied. See Johnson & Johnson ,
The Court finds that genuine issues of material fact exist so a reasonable jury could find that the Subject Advertisements deceived or are likely to deceive viewers of the Subject Advertisements and this deception influenced or is likely to influence their timeshare purchasing decisions. So Defendants' argument for this materiality requirement does not warrant summary judgment.
5. Causation
Last for the Lanham Act claim, the Court tackles whether the Subject Advertisements proximately caused Diamond's claimed damages. To establish that the defendant's misrepresentations caused the injury:
the plaintiff must show: "(1) the ... statements were false or misleading; (2) the statements deceived, or had the capacity to deceive, consumers; (3) the deception had a material effect on the consumer's purchasing decision; (4) the misrepresented service affects interstate commerce; and (5) [the plaintiff] has been, or likely will be, injured as a result of the false or misleading statement."
Duty Free Americas ,
For starters, because genuine issues of material fact exist over whether the Subject Advertisements are false or misleading, deceived or can deceive, and had any material effect on consumer's purchasing decision-in other words, whether a Lanham Act violation has occurred-it follows that the Court cannot decide at this stage whether a Lanham Act violation caused any of Diamond's claimed damages. Summary judgment is unwarranted on that basis alone.
Moreover, Defendants' contentions that none of the Subject Advertisements expressly direct viewers to stop making payments to Diamond or to initiate legal action and that no direct evidence exists that Defendants' Diamond Clients stopped payments or began arbitration proceedings based solely on the Subject Advertisements miss the mark on causation.
First, the Subject Advertisements appear or have appeared on the Firm Website, and there is testimony from some of Defendants' Diamond Clients that they viewed the Firm Website and that, in at least two instances, they watched the videos. (See Doc. 115-19, pp. 56, 85-86; Doc. 115-20, pp. 52-55, 91-94; see also, e.g. , Doc. 115-22, pp. 12-13.) Second, Google Analytics of the Firm Website show that the Subject Advertisements were viewed thousands of times, revealing the widespread exposure to the Subject Advertisements. (See Doc. 133-7.) Third, for the near eighty client matters associated with Defendants' Diamond Clients who retained Defendants through the Firm Website (and were exposed to the Subject Advertisements), those Diamond Clients ceased paying Diamond within a thirty-day period before retaining Defendants for eleven matters and after retaining Defendants in another twenty matters.
Beyond this, Defendants cite no authority to support their contention that false advertisements must expressly tell viewers to withhold trade from a plaintiff or that the false advertising must be the only reason behind a consumer's actions for a plaintiff to prevail on a false advertising claim. (See Doc. 115.) Courts have found that causation just requires that the false advertising proximately cause the claimed injury-it need not be the only cause or even the predominant cause of the injury. See J & M Turner, Inc. v. Applied Bolting Tech. Prods., Inc. , No. CIV.A. 96-5819,
B. Counts II-IV: Florida Law Claims
Having found that the Lanham Act claim survives summary judgment, the Court turns to Diamond's three Florida law claims. Defendants seek summary judgment on two grounds: (1) Florida's litigation privilege; and (2) Diamond's lack of evidence to satisfy each claim. (Doc. 115, pp. 19-24.) The Court addresses these.
1. Florida's Litigation Privilege
First is Defendants' claim of Florida's litigation privilege. Florida's litigation
From that, Florida courts have curbed extension of the litigation privilege to conduct " 'in the course of judicial proceedings' so long as the conduct has 'some relation to or connection with the subject of inquiry' " and "to conduct that is 'necessarily preliminary' to judicial proceedings." AGM Invs., LLC v. Bus. Law Grp., PA ,
Defendants assert that Florida's litigation privilege bars Diamond's reliance on any statements or acts during earlier arbitration proceedings as support for Diamond's Florida law claims. (Doc. 115, pp. 19-20.) Although Defendants identified no specific acts or statements to which the privilege applies in their Motion, Defendants assert in their reply that the privilege applies to:
Doc. 133-12 (Sandy Royce testimonial statements in a deposition attendant to an arbitration proceeding); Doc. 133-13 (Statement of Claim filed in arbitration proceedings); Doc. 133-14 (numerous arbitration awards); Doc. 133-16 (Diamond's Answer and Counter-Statement of Claim in Hardisty arbitration proceeding); Doc. 133-17 (Motion for Leave to Withdraw as Counsel in Hardisty arbitration proceeding); Doc. 133-18 (Sorenson arbitration award); Doc. 133-20 (transcript for Kay Gutierrez arbitration hearing); Doc. 133-21 (transcript for Nancy Johnson arbitration hearing); Doc. 115-19 (deposition testimony in this lawsuit of Ms. Hardisty concerning statement[s] that are relevant to her representation by Mr. Aaronson and that were made in connection with her arbitration proceeding, specifically statements relating to instructions regarding whether to continue payments to Diamond); Doc. 115-20 (deposition testimonyin this lawsuit of Dr. Feldman concerning statement[s] that are relevant to his representation by Mr. Aaronson and that were made in connection with his arbitration proceeding, specifically statements relating to instructions regarding whether to continue payments to Diamond); and any and all other statements or acts that were made or committed in the course of, or necessarily preliminary to, any prior Diamond arbitration proceeding and were connected with, or relevant or material to, the cause in hand or subject of inquiry.
(Doc. 138, pp. 10-11 (footnotes omitted).) On review, the Court finds that Defendants have not met their burden of establishing that the litigation privilege applies to all the acts and statements listed.
Defendants' assertion of the litigation privilege faces two problems at this stage of the proceedings. The first is a procedural error. Defendants' Motion was silent on the statements or acts they claim are protected by the litigation privilege (see Doc. 115, pp. 19-20), so Defendants tried to supply that information for first time in their reply (see Doc. 138, pp. 10-11).
Second, had Defendants provided the list of statements and acts in their Motion, it is not clear that all the statements listed fall under the litigation privilege. While Defendants' statements made during arbitration proceedings and in documents filed as part of those arbitration proceedings fit within the privilege, there is a factual dispute on when Mr. Aaronson made statements to his clients about continuing payments to Diamond and whether those statements were necessarily preliminary to or sufficiently related to any arbitration proceedings. See AGM Invs., LLC ,
2. Count II: Tortious Interference with Contractual Relationship
Addressing the merits of the Florida law claims, the Court starts with Diamond's tortious interference claim. To establish a tortious interference claim under Florida law, a plaintiff must show that (1) a contract exists; (2) the defendant knew about the contract; (3) the defendant intentionally procured a breach of the contract; (4) there is no justification or privilege for the breach; and (5) the plaintiff suffered damages from the breach. Johnson Enters. of Jacksonville, Inc. v. FPL Grp., Inc. ,
"However, an agent's 'privilege to interfere' with the contracts of its principal is not absolute." Westgate Resorts, Ltd. v. Castle Law Grp, P.C. , No. 6:17-cv-1063-Orl-31DCI,
Diamond's tortious interference claim starts with the Subject Advertisements. (See Doc. 47, ¶ 72.) Defendants attack this by asserting that "[t]he advertising itself did not cause anyone to discontinue payments to Diamond." (Doc. 115, p. 21.) But, as discussed above, there are genuine issues of material fact about whether the Subject Advertisements caused Diamond members to stop paying Diamond. See supra Section III.A. Thus, the Court cannot grant summary judgment on the tortious interference claim to the extent that it turns on the Subject Advertisements.
Diamond also bases this claim on Mr. Aaronson's advice and instructions to his Diamond Clients to stop making payments to Diamond. (See Doc. 47, ¶ 73.) Mr. Aaronson admits that he advised at least one of his Diamond Clients to discontinue payments to Diamond: Ms. Hardisty. (Doc. 115, p. 21.) But there is also evidence that Mr. Aaronson advised at least one other couple to stop making payments: the Feldmans. (See Doc. 115-20, pp. 115-16, 124.) So the question that remains for the Court is whether this advice is privileged.
For the Hardistys, Defendants assert Mr. Aaronson was privileged to give this advice because: (1) he was acting as
The Court finds that genuine issues of fact exist about Mr. Aaronson's motivation to advise his Diamond Clients to cease paying Diamond. As his privilege claim hinges on these disputed facts, summary judgment cannot be granted on Diamond's tortious interference claim based on Mr. Aaronson's advice. See McCurdy ,
3. Count III: Trade Libel
Next, the Court addresses Diamond's trade libel claim. To establish a trade libel claim under Florida law, a plaintiff must show: (1) a falsehood; (2) that has been published or communicated to a third person; (3) when a defendant-publisher knows or reasonably should know that it will likely result in inducing others not to deal with plaintiff; (4) the falsehood plays a material and substantial part in inducing others not to deal with plaintiff; and (5) special damages proximately resulting from the published falsehood. See Border Collie Rescue, Inc. v. Ryan ,
Defendants challenge Diamond's trade libel claim based on a lack of evidence that the Subject Advertisements proximately caused Diamond's arbitration costs and fees and the unpaid timeshare promissory notes and other fees under the Timeshare Contracts. (Doc. 115, pp. 22-23.) Defendants contend that Mr. Aaronson's Diamond Clients had their own reasons for stopping payments and that too many intervening steps stand between the Subject Advertisements and the arbitrations to show that the Subject Advertisements proximately caused Diamond's damages. (Id. ) Summary judgment on this claim is denied.
As Defendants' attack on Diamond's trade libel claim stands on the same evidence and argument about proximate causation that Defendants raised against Diamond's Lanham Act claim, it fails for the same reason. See supra Section III.A. Because
4. Count IV: FDUTPA
Finally, the Court addresses Diamond's FDUTPA claim. FDUTPA declares unlawful "unfair or deceptive acts or practices" committed "in the conduct of any trade or commerce."
Defendants attack the FDUTPA claim by arguing that Diamond has suffered no "actual damages" and that causation is lacking. (Doc. 115, pp. 23-24.) But the Court finds that Diamond's FDUTPA claim survives. As for actual damages, Diamond has claimed damages based on the unpaid promissory notes, maintenance fees, and other timeshare fees that Defendants' Diamond Clients contracted to pay in exchange for timeshare ownership.
Ultimately, "[t]he success of [a plaintiff's] ... FDUTPA claim[ ] is tied to the federal Lanham Act claim[ ] for ... false advertising." See Sovereign Military Hospitaller Order ,
Accordingly, it is ORDERED AND ADJUDGED :
1. Defendants' Motion for Summary Judgment (Doc. 115) is DENIED.
2. This matter will go to trial on all Counts.
DONE AND ORDERED in Chambers in Orlando, Florida, on March 5, 2019.
Notes
The facts recited here may not be the "actual" facts of the case. See Davis v. Williams ,
These Diamond accounts became delinquent at various times relative to retaining Defendants-some before and some after. (See Doc. 115-5, pp. 1-15.)
But that is not to say Defendants never prevailed on behalf of their Diamond Clients based on other claims, including fraud in the inducement and misrepresentations made by Diamond. (See, e.g. , Doc. 115-3; Doc. 115-6, pp. 1-10, 136-37; Doc. 115-4.)
Defendants' "statutory standing" label does not apply. As the Supreme Court said in Lexmark , which Defendants rely on to support their argument, "We have on occasion referred to this inquiry as 'statutory standing' and treated it as effectively jurisdictional. That label is an improvement over the language of 'prudential standing,' since it correctly places the focus on the statute. But it, too, is misleading, since 'the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction ...." Lexmark Int'l, Inc. v. Static Control Components, Inc. ,
Defendants first assert a "statutory standing" argument as to the Lanham Act claim-whether Diamond falls within the "zone of interests" and whether the Subject Advertisements proximately caused Diamond's alleged injuries. (Doc. 115, pp. 5-19.) This arrangement puts the cart before the horse. As part of this "statutory standing" analysis requires determining whether the false or misleading advertisements proximately caused the plaintiff's injury, the Court starts with whether the advertisements are false or misleading before analyzing the proximate causation prong of "statutory standing." See Lexmark Int'l ,
Defendants don't argue causation by way of these five enumerated elements of a false advertising claim. (See Doc. 115.) Rather, they argue causation before addressing any of these elements. (See
Defendants also argue that "Diamond has abandoned any claim to lost sales and market share by refusing to allow discovery of any information that would allow Defendants an opportunity to quantify or dispute such claims." (Doc. 115, p. 6.) Diamond counters that it did produce financial and other necessary documents. (Doc. 133, p. 9.) As a result, the Court finds Diamond has not abandoned its claim to lost sales-particularly given the evidence from Diamond's damages expert. (See Doc. 115-15.)
Although Defendants submitted arbitration awards as exhibits to their Motion (see Docs. 115-4, 115-6), Defendants argued in their reply that all arbitration awards are inadmissible hearsay (see Doc. 138, p. 10 n.7). The Court disagrees with such a blanket assertion of hearsay. For example, to the extent Diamond offers these arbitration awards to show not the content of the awards but to prove Mr. Aaronson's understanding of his asserted claims as easy, obvious, and provable, the arbitration awards would not be hearsay. As records generated in a quasi-judicial proceeding, they may be exempt under Fed. R. Evid. 803(6) or 803(8). And finally, the Court finds these records would be admissible under the Residual Exception. See Fed. R. Evid. 807.
Defendants' Diamond Clients also had no idea how Mr. Aaronson intended to prove these claims or any evidence he had to support them. (See Doc. 133-22, pp. 73-79; see also Doc. 115-19, pp. 128, 150; Doc. 115-20, pp. 98-115, 121.)
Defendants did not file a Daubert motion to exclude the Stewart Survey Report, despite that they now contend that issues with it warrant the Court disregarding it. They also have not introduced their own consumer behavior expert.
The only support proffered by Defendants for this assertion is that "Mr. Aaronson certainly does not cater to people in the market looking to buy more timeshares." (Doc. 115, p. 14.) But neither the Subject Advertisements, the Firm Website, nor Defendants' intake questionnaire screen for purposes of future intent about timeshare purchasing. (See Doc. 135-1.)
Dr. Stewart also asserts that "the population definition employed in the survey is consistent with the definition that would necessarily be used for media scheduling purposes by an advertiser." (Doc. 133-19, ¶ 8.) Defendants have offered nothing to counter this basis for the relevant population Dr. Stewart used for his surveys.
By "netting out the noise," Defendants mean that their deception rates were calculated by subtracting the control group percentages from the test group percentages. (See Doc. 115, p. 14 n.10.) But according to Dr. Stewart, this is only appropriate for certain questions. (Doc. 133, p. 24; Doc. 113-19, ¶¶ 9-11.)
Defendants raise two other attacks on the Stewart Survey Report in their Motion: (1) Diamond failed to produce the respondents' own words to the open-ended questions, so Defendants cannot verify Dr. Stewart's results; and (2) Questions 5 is leading, which "taint[s] the probative value of [Question] 5a." (Doc. 115, pp. 16-17.) But Diamond says that it produced the raw data to the open-ended questions on September 30, 2018, and that Question 5 is not leading. (Doc. 133, pp. 24-25; see also Doc. 133-19, ¶ 12 (Dr. Stewart's declaration stating that Question 5 is not leading).) So the Court finds that these challenges also fail to change the Court's view that the Stewart Survey Report suffices to preclude summary judgment.
Moreover, because evidence of deception is only required when the statements at issue are literally true but misleading, see Osmose ,
Defendants' argument on proximate causation also fails to address Diamond's assertions about reputational harm. To the extent the jury finds that the accusations in the Subject Advertisements harmed Diamond's reputation, there is no question about proximate causation. See Lexmark Int'l ,
Diamond asserts that these percentages reveal that "nearly 40% of Defendants' Diamond clients generated by the website stopped paying Diamond just before or after hiring them." (Doc. 133, p. 27.)
Lumped in with Defendants' causation argument is an assertion that Diamond must show that Diamond and Defendants are marketplace competitors under the commercial speech test espoused in Tobinick v. Novella ,
Because advertising is not required by or even related to any arbitration proceedings, Florida's litigation privilege could only apply to Diamond's Florida law claims to the extent that they are based on Defendants' conduct while representing Diamond Clients. (See Doc. 43, pp. 15-16.)
While unpublished opinions are not binding precedent, they may be considered persuasive authority. See 11th Cir. R. 36-2 ; see also United States v. Almedina ,
Florida's litigation privilege is an affirmative defense. Jackson v. BellSouth Telecomms. ,
This goes against the purpose of a reply brief. See Tardif v. People for the Ethical Treatment of Animals , No. 2:09-cv-537-FtM-29SPC,
As discussed above, Defendants object to the arbitration awards as inadmissible hearsay. (See Doc. 138, p. 10 n.7.) But the Court disagrees. See supra note 8.
Florida courts consider the privilege to interfere as an affirmative defense for claims of tortious interference with contractual relationships. See Special Purpose Accounts Receivable Co-op Corp. v. Prime One Capital Co. ,
Diamond also asserts that it seeks injunctive relief for this FDUTPA claim. (Doc. 133, p. 30.)
Defendants' also asserted the following new arguments for the first time in their reply: (1) the Single Publication/Single Action Rule, which Defendants use to argue that "to the extent that any one of Diamond's Florida law claims fail, they all fail" (see Doc. 138, p. 11); and (2) "Mr. Aaronson is entitled to summary judgment on all the damages that have allegedly arisen from those individuals as to which Diamond has introduced no such evidence" (see id. at 15). But the Court has not considered these arguments as they are not properly before the Court. See Grasso v. Grasso ,