Friar v. Wyndham Vacation Resorts, Inc.

Background

Isiam Ray Friar sued Wyndham Vacation Resorts, Inc., Derrick Taylor, and Maria Maese. He alleged fraud and fraudulent inducement—being persuaded to enter a contract through a material misrepresentation—in connection with his purchase of a New York timeshare. He sought rescission, meaning cancellation of the timeshare contracts, and punitive damages.

According to the amended complaint, Taylor told Friar that purchasing a timeshare with 1,000,000 annual points would give his lodging requests priority and make it highly unlikely that he would have difficulty obtaining accommodations at Midtown 45. Friar alleged that he made about twenty unsuccessful attempts to reserve accommodations there between June 2014 and February 2017, including at least ten occasions when an Internet search showed rooms were available. He alleged that he paid Wyndham more than $80,000 before stopping his monthly payments.

Motions and legal standards

Each defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Because Friar alleged fraud, the court also applied Rule 9(b), which requires the circumstances of the alleged fraud to be described with particularity.

Under New York law, common-law fraud requires a material misrepresentation, falsity, fraudulent intent, reasonable reliance, and injury. Fraudulent inducement requires the same basic elements. The court accepted the complaint’s well-pleaded factual allegations as true for purposes of the motions.

Court’s analysis

The court held that Friar pleaded the alleged fraud with sufficient detail. He identified Taylor’s statements about priority and the likelihood of obtaining accommodations, identified Taylor as the speaker, stated that the statements were made on March 3, 2014, in the lobby of the Alex Hotel at 205 East 45th Street in Midtown, and explained why he claimed the statements were false.

The court also found that Friar adequately alleged each fraud element. The alleged ability to obtain accommodations was a material fact, and the failed reservation attempts supported the alleged falsity. Friar alleged that the defendants had a motive to increase timeshare sales and related fees, and that Taylor and Maese had the opportunity to carry out the alleged conduct because they were involved in selling timeshares. The court further found that Friar plausibly alleged reasonable reliance despite a contract clause stating that the parties had not relied on other oral or written representations. The court emphasized that Friar was not alleged to be a sophisticated investor and that Taylor allegedly told him he could rely on information provided by Taylor and Maese. Friar’s alleged expenditure of more than $80,000 supported an allegation of injury.

Because the court found that Friar adequately pleaded fraud, it also found that he adequately pleaded fraudulent inducement. Wyndham argued that Friar waited too long to seek rescission, but the court held that whether the delay was reasonable was a fact question that could not be resolved on a motion to dismiss.

The defendants also sought dismissal of Friar’s punitive-damages request. The court declined to dismiss it before discovery, while taking no position on whether punitive damages would ultimately be warranted.

Disposition

The court denied Wyndham’s, Taylor’s, and Maese’s motions to dismiss. The court also denied Friar’s motion for an extension of time as moot, directed the defendants to answer by April 9, 2021, and directed the clerk to close the listed motions.