Bailey v. Wyndham Vacation Ownership, Inc.

Background

Forty-two plaintiffs asserted claims arising from timeshare purchases made across the country. Wyndham Vacation Ownership, Wyndham Destination Network, and RCI moved to dismiss most claims for lack of personal jurisdiction, meaning they argued that the California federal court lacked power over claims not sufficiently connected to California. The defendants also moved to dismiss for lack of subject-matter jurisdiction and for failure to plead a claim on which relief could be granted.

Personal jurisdiction

The court rejected general personal jurisdiction over the defendants in California. It stated that the defendants were subject to general jurisdiction only in Delaware and Florida because they were formed under Delaware law and had their principal places of business in Florida. The plaintiffs also did not show that the defendants were effectively based in California, and appointing an in-state agent for service of process did not establish consent to general jurisdiction.

The court also rejected specific personal jurisdiction for claims involving contracts made outside California to purchase timeshares at non-California properties. Specific personal jurisdiction requires a connection between the forum state and the conduct giving rise to the claims. The court said that connection was absent even for California residents who entered into contracts elsewhere, because the relevant conduct occurred in other states. Based on the complaint, only five contracts were connected to California, so the court stated that it had power to adjudicate only claims related to those contracts.

The plaintiffs argued that the people with out-of-state claims were necessary parties whose experiences would support the claims of plaintiffs with California-related contracts. The court disagreed, explaining that the rules concerning necessary parties do not expand a court’s power to decide claims outside its jurisdiction and that the remaining plaintiffs could receive complete relief without the others.

The court granted the motion to dismiss for lack of personal jurisdiction and allowed the plaintiffs to amend to reassert claims that satisfy the personal-jurisdiction requirements.

Subject-matter jurisdiction

The defendants argued that the complaint did not allege that any plaintiff had more than $75,000 in controversy, the amount generally required for diversity jurisdiction. The court stated that each plaintiff must establish that the plaintiff’s own claims meet that threshold unless supplemental jurisdiction applies. If the plaintiffs filed an amended complaint, the court required them to state the amount in controversy for each plaintiff more clearly and explain whether they relied on supplemental jurisdiction for any claims.

Failure to state a claim

The court held that the complaint did not adequately plead any claim on which relief could be granted. Most claims involving alleged fraud had to meet a heightened pleading standard requiring details about the alleged misconduct. The negligent-misrepresentation claims were subject to the ordinary pleading standard. The court found that the complaint fell short under either standard because much of it was incomprehensible, it did not identify the alleged wrongdoing or which entity committed it, and the fraud-based claims did not provide the required details about who, what, when, where, and how.

The court also stated that Wyndham Destination Network could not be named merely as a precaution; the plaintiffs had to allege a basis for relief against each defendant. It further explained that a timeshare is not a security if the purchaser was motivated by a desire to use or consume it. To pursue securities-law claims, the plaintiffs would need to plausibly allege that money was invested in a common enterprise with expected profits based on the work of others.

Disposition

The court dismissed the complaint in its entirety, with leave to amend. Any amended complaint had to be filed within 21 days of the order. Judge Vince Chhabria signed the order. The opinion does not separately state a final disposition of the defendants’ subject-matter-jurisdiction motion beyond the instructions concerning what an amended complaint would need to allege.