Club Exploria, LLC v. Aaronson, Austin, P.A.

CLUB EXPLORIA, LLC and CLUB EXPLORIA MANAGEMENT, LLC, Plaintiffs, v. AARONSON, AUSTIN, P.A. and AUSTIN N. AARONSON, Defendants.

Case No: 6:18-cv-576-Orl-28DCI

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION

March 21, 2019

ORDER

Timeshare entities Club Exploria, LLC (Club Exploria) and Club Exploria Management, LLC (CEM) bring this action against law firm Aaronson, Austin, PA. (Aaronson PA.) and attorney Austin N. Aaronson (Aaronson), seeking damages in two federal claims and four claims under Florida law. Plaintiffs also bring a prayer for declaratory relief. Defendants move to dismiss all claims. (Mot., Doc. 18). The Court has considered Defendants' motion and Plaintiffs' Memorandum in Opposition (Doc. 23). As set forth below, the Court grants the motion in part and denies it in part.

I. Background¹

Club Exploria is a timeshare resort developer and owner, and CEM is an entity to which timeshare-interest owners obligate themselves to pay dues and maintenance fees when they acquire their timeshare interests from Club Exploria. (Compl., Doc. 1, ¶¶ 5-7, 16-17). Aaronson P.A. is allegedly an "exit company" that "profit[s] by convincingconsumers that they have a purportedly 'lawful' way to 'escape their [timeshare ownership] obligations, without regard to whether there is any factual or other basis" for avoiding those obligations. (Id. ¶ 8). Defendants allegedly provide "timeshare-relief 'services'" to owners of Club Exploria timeshare interests, (id. ¶ 25), and "encourage timeshare owners to pursue rescission without investigating the facts of their clients' situations," (id. ¶ 9).

According to the Complaint, "[m]ost consumers finance their timeshare interest purchases overtime, thereby incurring ongoing obligations to the timeshare developer and others such as CEM." (Id. ¶ 7). And "[a]fter months and, in some instances, years of performing their contractual obligations, Affected Owners 1, 2, 3, 4, 5, and 6 . . . hired Defendants to send Club Exploria and/or [its predecessor] Summer Bay Partnership letters that adduce purported grounds for rescinding the Affected Owners' timeshare purchase[s]." (Id.).

Defendants allegedly "us[e] aggressive and dramatic marketing tactics" on their website that "suggest that all timeshare owners have an automatic or inherent right to cancel their contractual obligations to pay—if only the consumer knows the right levers to pull." (Id. ¶ 10 (emphasis removed); see also id. ¶ 53). As a result of Defendants' marketing and advertising, "Affected Owners 1, 3, and 5 have stopped making loan payments to Club Exploria," and Affected Owners 2 and 5 "have stopped making Maintenance Fee payments to CEM." (Id. ¶ 12). Additionally, "Affected Owners 4 and 6 hired Defendants to send correspondence to Club Exploria [or its predecessor] alluding to fraud as grounds for rescinding their timeshare purchases." (Id.).

In their six-count Complaint, Plaintiffs allege that Defendants: (1) under Florida law, tortiously interfered with Plaintiffs' contractual relationships with Affected Owners 1 through6 (Count I); (2) violated the federal civil RICO statute, 18 U.S.C. § 1962(b)-(c), by engaging in a pattern of mail and wire fraud (Count II); (3) violated the Florida Deceptive and Unfair Trade Practices Act (FDUTPA)² (Count III); (4) violated the false advertising provisions of the federal Lanham Act, 15 U.S.C. § 1125(a) (Count IV); (5) engaged in misleading advertising practices in violation of section 817.41, Florida Statutes (Count V); and (6) committed trade libel in violation of Florida law (Count VI). Plaintiffs also seek declaratory relief. (See Compl. ¶¶ 102-10). Defendants now move to dismiss all claims.

II. Legal Standards

Generally, "[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "[D]etailed factual allegations" are not required, but "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570).

One caveat to Rule 8's "short and plain statement" standard is Rule 9(b)'s requirement that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). And in considering a motion to dismiss brought under Rule 12(b)(6), a court limits its "consideration to the well-pleaded factual allegations, documents central to or referenced in the complaint, and matters judicially noticed." LaGrasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir.2004).

III. Discussion

In their motion to dismiss, Defendants assert four grounds for dismissal of Plaintiffs' claims: (1) lack of standing; (2) the Noerr-Pennington doctrine; (3) Florida's litigation privilege; and (4) failure to state a claim for which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). These grounds are addressed in turn.

A. Standing

Defendants, characterizing this case as a "suit by non-clients against opposing legal counsel," first argue that "Plaintiffs lack standing to bring any claims associated with this representation" because they are not in privity with Defendants. (Doc. 18 at 3-4). Defendants maintain that "Plaintiffs do not have any legal basis to challenge [Defendants'] representation of timeshare owners, or the legal positions and arguments raised by [Defendants] on their behalf." (Id. at 4).

Defendants do not couch their standing argument in terms of Article III standing, which would affect the jurisdiction of this Court to hear this case. To the extent Defendants are asserting a deficiency in Article III standing, that argument is rejected. Plaintiffs have alleged that they suffered an injury fairly traceable to Defendants' conduct that is redressable by a favorable ruling from this Court. See, e.g., Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (describing these requirements for Article III standing). Plaintiffs thus have sufficiently pleaded a basis for Article III standing.

And to the extent that Defendants challenge standing based on "lack of privity," Plaintiffs correctly note that Defendants "mischaracterize[] the nature of Plaintiffs' case," (Doc. 23 at 2-3), which focuses on Defendants' advertising tactics rather than their representation of Plaintiffs. See, e.g., Orange Lake Country Club, Inc. v. Reed Hein &Assocs., LLC, Case No. 6:17-cv-1542-Orl-31DCI, 2018 WL 5279135, at *6 (M.D. Fla. Oct. 24, 2018). In sum, Defendants' standing argument is rejected.

B. Noerr-Pennington

Next, Defendants assert that Plaintiffs' Complaint is "barred under the Noerr-Pennington doctrine." (Doc. 18 at 5). This doctrine "derives from the First Amendment's guarantee of 'the right of the people . . . to petition the Government for a redress of grievances,'" Silverhorse Racing, LLC v. Ford Motor Co., 232 F. Supp. 3d 1206, 1211 (M.D. Fla. 2017) (alteration in original), and Defendants contend that the Affected Owners' "decisions to retain [Defendants], and the correspondence sent to Plaintiffs on their behalf, constitute 'pre-litigative' conduct, which is immunized under the First Amendment right to petition," (Doc. 18 at 5).

The Noerr-Pennington doctrine originated from the Supreme Court's decisions in two antitrust cases—Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers of America v. Pennington, 381 U.S. 657 (1965). "The essence of the doctrine is that parties who petition the government for governmental action favorable to them cannot be prosecuted under the antitrust laws even though their petitions are motivated by anticompetitive intent." Video Int'l Prod., Inc. v. Warner-Amex Cable Commc'ns, Inc., 858 F.2d 1075, 1082 (5th Cir. 1988)). The doctrine has been extended "to protect First Amendment 'petitioning of the government from claims brought under federal and state laws including . . . common law tortious interference with contractual relations.'" Silverhorse, 232 F. Supp. 3d at 1211 (alteration in original) (quoting Video Int'l, 858 F.2d at 1084).

The doctrine extends "not only to petitioning of the judicial branch, but also to acts reasonably attendant to litigation, such as demand letters." Orange Lake, 2018 WL5279135, at *6. But for immunity under the doctrine to attach, "the conduct at issue cannot fall within the [doctrine's] 'sham exception' . . . . In other words, the litigation activity must be genuine." Id. (quoting Silverhorse Racing, 232 F. Supp. 3d at 1211.

Here, like the plaintiffs in Orange Lake, Plaintiffs "have pleaded sufficient facts to suggest that [Defendants'] 'pre-litigative conduct' falls within the sham exception of the" doctrine. Id. The Complaint alleges that Defendants act in bad faith and pursue frivolous avenues of relief for the Affected Owners. (See, e.g., Compl. ¶¶ 34 & 67). "Thus, the Court cannot conclude, as a matter of law, that the [Noerr-Pennington] doctrine applies." Orange Lake, 2018 WL 5279135, at *6.

C. Litigation Privilege

Defendants also assert that Plaintiffs' state law claims are barred by Florida's litigation immunity privilege, which "affords absolute immunity for acts or statements during the course of judicial proceedings if they have some relation to the proceeding." Orange Lake Country Club, Inc. v. Reed Hein & Assocs., LLC, No. 6:17-cv-1542-Orl-31DCI, 2019 WL 645214, at *9 (M.D. Fla. Jan. 4, 2019). Defendants contend that this privilege applies here because "[p]re-litigation correspondence sent to an adverse party is a cornerstone of the legal system" and "[t]o suggest that...