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Barton v. Rci, LLC

United States District Court, D. New Jersey

March 31, 2014

KENNETH A. BARTON, et al., Plaintiff,
v.
RCI, LLC. Defendant.

MEMORANDUM

PETER G. SHERIDAN, District Judge.

This matter comes before the Court on Plaintiff's Motion for Class Certification pursuant to FED. R. CIV. P. 23(a) and (b)(3) (ECF No. 67).

Defendant RCI, LLC ("RCI") is primarily engaged in the business of vacation exchanges. RCI offers its members both week-for-week vacation exchanges and customized vacation experiences through two exchange networks, the Weeks Program and the Points Program. The named Plaintiffs and putative class members are current or former members of RCI's Points Program.

The Points Program is a "global points-based vacation exchange system" that differs from a traditional timeshare model. In a traditional timeshare model, an owner of a timeshare deposits a timeshare interval into a pool of inventory and exchange it for a different timeshare interval of comparable value (vacation exchange). ln the RCI Points Program, a member's timeshare interval has a point value, and when the timeshare interval is deposited with RCI, the member may apply the point value toward a variety of services including airline tickets, car rentals, cruises or, in lieu of points, the usual vacation exchange. For example, the class representatives sought to use points they had acquired under the Points Program to obtain airline tickets at a discounted price to accommodate their travel needs.

From 2002 to 2008, the Blue Bay Resorts ("Blue Bay") located near Cancun, Mexico, were a chain of resorts affiliated with RCI. The "Blue Bay Family of Resorts" include (1) the Blue Bay Club, a family-oriented resort; (2) the Temptation Resort and Spa, an adults-only, clothing-optional resort; (3) the Desire Resort and Spa, Cancun, an adults-only, clothing-optional and adult-themed resort; and (4) the Desire Resort and Spa, Los Cabos, an adults-only, clothing optional and adult-themed resort. Whereas the Blue Bay Club is marketed as a family resort, promotional materials for the Desire resorts offer adult-oriented vacations featuring "swingers, " "sexy games" and "lingerie models." At each location, Blue Bay personnel sold intervals commonly referred to as a "period of nights" through programs called the Blue Bay Premier Vacation Program and the RCI Points Membership Program. Each person who bought "a period of nights" was also given the option to seek membership in the "Points Program". All of the named Plaintiffs entered into contracts through the Blue Bay Premium Vacation Club program and the RCI Points Program. A one night stay at Blue Bay could be exchanged through RCI for a number of points. An individual could purchase a package of one night stays at a Blue Bay Resort for a one-time cost. A Points Program member could exchange those nights with RCI. In turn, RCI would assign a number of points which the member could then use to either customize future vacations or acquire other services (such as airfare, car rental or cruises) through RCI's Points Program. Members were entitled to access RCI's Points system to obtain such services. For example, each member of the Points Program could allocate their vacation time to RCI, and, in return, receive comparable time at different affiliated resorts around the world. The class representatives contend that membership in the Points Program did not impose any limitation on the number of nights that could be exchanged for points and also that the points acquired could be accelerated.

In September 2008, RCI came to the realization that it was losing money on the Blue Bay Points Program. As a result, RCI communicated with each Points Program member who had joined through Blue Bay prior to February 29, 2008 to notify them that RCI was imposing a 60, 000 annual point limit cap on the Points Program Inventory Exchange (the "Cap"). This meant that a 60, 000 annual point limit Cap was being imposed on exchanges for cruises, airline tickets and car rentals. The Cap, however, did not include exchanges for vacation time at another affiliated resort. A 60, 000 annual point Cap essentially equates to the redemption value for one domestic one-way airline flight per year.

The class representatives now allege that the imposition of the Cap constituted a breach of contract, a breach of the covenant of good faith and fair dealing, and a violation of the New Jersey Consumer Fraud Act and the New Jersey Plain Language Act[1]. Plaintiff's counsel argues that all individuals who are members of the Blue Bay Premiere Vacation Club and the RCI Points Program were similarly injured. As such, the proposed class is defined as:

All persons residing in the United States who entered into a Participation Agreement with RCI at a Blue Bay resort prior to February 29, 2008, who had more than 60, 000 points as of September 1, 2008, and who have not entered into a release.

Each of the named class representatives alleges common facts related to their dispute with RCI. All of their experiences are factually similar, with a few minor differences. The facts common to each class representative, which are established in Plaintiff Barton's certification, are summarized below. The unique characteristics of the other class representatives are also discussed.

According to Barton's declaration, [2] in December 2002, he vacationed at a Blue Bay resort. He was given the opportunity to obtain free services at the hotel spa if he attended a timeshare presentation hosted by Blue Bay. At the timeshare presentation he met with an unidentified gentleman employed by Blue Bay. The gentleman explained the history of the resort, RCI's interest in forming an alliance with Blue Bay and the availability of a unique membership opportunity. Most notably, the gentleman detailed how RCI exchanged services through the RCI Points Program. The gentlemen stated that instead of using nights to stay at the resort, "a member of the Blue Bay Premier Vacation Club had the flexibility to use the nights as points in RCI's exchange system." The gentleman further explained that a member was entitled to accelerate the use of points, meaning that a member could use all of the available points at one time, if desired. The gentleman recounted anecdotes of members and sales agents using points to obtain airline tickets for their friends and family. The gentleman also compared differently priced packages of nights that could be converted to points to acquire airfare at a fixed 45, 000 point-per-domestic-ticket rate, plus the transaction fee, versus buying airfare on the open market. Barton immediately recognized the financial advantage of using points for airfare rather than purchasing airfare on the open market. As such, Barton agreed to join both programs.

Barton assumed that the gentleman had the authority to represent RCI. Once he agreed to make a purchase, Barton met with a woman who was described as a "legal representative." She and Barton reviewed the two contracts that he was required to sign. The first contract was to become a member of a Blue Bay Premier Vacation Club from which he purchased his interval of nights. The second contract was a Participation Agreement for the Points Program offered by RCI. Barton believed that the legal representative had the authority to act on behalf of RCI, so he signed both[3]. According to Barton, he made an initial purchase of nights from Blue Bay and then four supplemental purchases in December 2003, January 2005, March 2006 and September 2007. Barton indicated that he paid Blue Bay a total $51, 701.83 for those purchases. He then exchanged the nights for points for an RCI assigned value of 2, 832 points per night, acquiring a total of 15, 001, 104 RCI points. Since Barton already owned property in Cancun, the Blue Bay Premier Vacation Club Agreement held no value to him. The ability to obtain roundtrip airfare at a discount by exchanging points was the only reason he entered the agreements. In the Fall of 2008, RCI imposed the Cap which left Barton feeling "deceived and shocked."

Plaintiff Angeline Davis's description of her negotiations at Blue Bay mirrors that of Plaintiff Barton. Davis purchased a period of nights for $24, 500 which she then converted to 2, 832, 000 points. Half of the amount paid came from transferring out of an "old" Blue Bay timeshare into the Blue Bay Premiums Vacation Club membership. Less than six weeks after Davis signed the agreements, and before she had the opportunity to exchange any points, RCI imposed the Cap. At that time (February 2008), an RCI representative advised Davis that she must contact Blue Bay because the Points Program had changed, and there was a Cap on certain redemptions from the Points Program. Davis felt similarly deceived and shocked, as the Cap essentially eliminated her ability to obtain roundtrip airfare and use any of her points.

Plaintiff William S. Fishman's experience resembles that of Barton and Davis except that Fishman verified the facts presented by the gentleman during the presentation by calling an RCI representative. Wary of falling victim to a scam, Fishman called RCI from the marketing presentation. The RCI vacation guide confirmed that Fishman could exchange $30, 000.00 worth of nights for points and redeem them for multiple airline tickets. Since Fishman recognized the financial advantage of using points for airfare over purchasing airfare on the open market, he purchased $30, 000 of nights from Blue Bay and later converted the nights to 8, 496, 000 points. The following year, an RCI representative advised Fishman that RCI had imposed a Cap on the redemption of certain Point Program services. Fishman was similarly shocked.

Plaintiff Justin C. Lyon's declaration reiterated similar allegations regarding the RCI programs. According to Lyon, during his presentation, the gentleman compared differently priced packages of points to use for airfare at a fixed point-per-domestic-ticket rate, plus the transaction fee, versus buying airfare on the open market. Recognizing the financial advantage, Lyon purchased $33, 900.00 of nights from Blue Bay with the ability to convert them to 8, 496, 000 points. Lyon was provided with a booklet containing tables that listed the services provided within the Points Program and the associated points range necessary to obtain the services. The booklet showed options such as international airfare. Unlike the other named Plaintiffs, Lyon recalled that the female "legal representative" wore an RCI badge. Lyon was provided with a folder that contained copies of both agreements and instructions on how to exchange the nights for points. He made at least one purchase of airfare at a discounted price. Thereafter, during the summer of 2008, he learned that RCI imposed the Cap.

While Kenneth Marek had a similar experience at the timeshare presentation, his use of points differed from that of the other named Plaintiffs. Marek purchased nights from Blue Bay at a cost of $24, 530.00. His intent was to convert the nights to 5, 600, 000 points. In the summer of 2008, however Marek called RCI to obtain a roundtrip airline ticket to Tokyo. He was advised that there was a Cap on redemption of certain Point Program services and the flight to Tokyo exceeded the Cap.

Unlike the other Plaintiffs, RCI claims that Marek breached the Points Program agreement by selling the airline tickets to third parties for a profit. According to RCI, the resale of tickets violated Section 18(i) of the Points Partner Agreement which imposed "limitations" on members' use of points.

Stevan McCarthy states a similar story. Recognizing the financial advantage, McCarthy purchased nights from Blue Bay for $25, 935.00 with the ability to exchange them for 5, 600, 000 points.

Joseph Semifero's experience is the same except he met with a "woman" rather than a "gentleman" at the timeshare presentation. The woman allegedly showed Semifero a framed letter from another member (Barton) extolling the Program. Semifero purchased a package of nights for $10, 000 from Blue Bay with the ability to convert them to 1, 401, 840 points. In the fall of 2008 when Semifero received the letter from RCI advising him of the Cap, he complained to the company. An RCI representative then offered to extend a higher cap to Semifero for an abbreviated period of time if he signed a form releasing any potential claims against the company.

Michael Siembida had a similar experience as the other Plaintiffs. Siembida initially purchased 2, 070 nights from Blue Bay for $26, 000.00. Thereafter, he made three supplemental purchases for a total of 5, 933 nights for a price of $66, 800.00 which he intended to convert to 22, 664, 496 points. Toward the end of 2007, a Blue Bay employee advised Siembida that Blue Bay and RCI were feuding, and that Blue Bay was reviewing whether to terminate its relationship with RCI. At some point, Siembida was offered the opportunity by Blue Bay to convert his membership to an alternate program.

A summary of the nights purchased by class representatives and the points to assign upon exchange is set forth in the chart below.

[4 ...


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