Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.704 Page 1 of 78 1 2 3 4 5 6 7 8 GODES & PREIS, LLP James N. Godes (State Bar No. 132183) jgodes@gaplegal.com Michael L. Kibbe (State Bar No. 302137) mkibbe@gaplegal.com 300 Spectrum Center Drive, Suite 1420 Irvine, CA 92618 Telephone: (949) 468-0051 Facsimile: (949) 872-2281 Attorneys for Plaintiffs WELK RESORT GROUP, INC. and WELK RESORTS PLATINUM OWNERS ASSOCIATION 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 15 16 WELK RESORT GROUP, INC., a California corporation; and WELK RESORTS PLATINUM OWNERS ASSOCIATION, a California non-profit corporation, Plaintiffs, 17 18 19 20 21 22 23 24 25 26 v. REED HEIN & ASSOCIATES, LLC, dba TIMESHARE EXIT TEAM, a Washington limited liability company; SCHROETER GOLDMARK & BENDER, P.S., a Washington professional corporation; and KEN B. PRIVETT, PLC, an Oklahoma limited liability company, Defendants. Case No.: 3:17-cv-01499-L-AGS SECOND AMENDED COMPLAINT FOR: 1. Intentional Interference with Contractual Relations 2. Violation of 18 U.S.C. 1961, et seq. 3. Civil Conspiracy 4. Violation of the California Unfair Competition Law, Business & Professions Code Sections 17200, et seq. 5. Violation of the California Vacation Ownership and Time-Share Act, Business & Professions Code Sections 11245, et seq. 6. Violation of the California False Advertising Law, Business & Professions Code Sections 17500, et seq. 7. False Advertising in Violation of the Lanham Act, 15 U.S.C. 1125 DEMAND FOR JURY TRIAL (to all claims where available) 27 28 -1SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.705 Page 2 of 78 1 By way of this Complaint, Plaintiffs Welk Resort Group, Inc., and the Welk 2 Resorts Platinum Owners Association (collectively, “Welk”), aver against Defendants 3 Reed Hein & Associates, LLC (doing business as Timeshare Exit Team), Schroeter 4 Goldmark & Bender, P.S., and Ken B. Privett, PLC, (collectively, “Defendants”), as 5 follows: 6 7 INTRODUCTION 1. The Vacation ownership industry (commonly known as “timeshare”) has 8 grown into a nearly $60 billion dollar a year industry. In the last decade, a cottage 9 industry has sprung up where unscrupulous organizations called “timeshare exit 10 companies” target and victimize legitimate vacation ownership companies, like Welk, 11 and their owners. Timeshare exit companies utilize false and misleading advertising and 12 promises, to entice timeshare owners into paying large sums of money, up front, to the 13 exit company. The exit company instructs the timeshare owners to stop making the 14 required payments under their contracts to the vacation ownership companies and the 15 vacation owners associations. These exit companies then utilize a portion of their ill- 16 gotten gains to pay attorneys to step in between the vacation ownership companies and 17 the timeshare owners and stop the flow of communication between them. Vacation 18 ownership companies are then forced to pursue their legal remedies, such as recovering 19 the timeshare ownership through foreclosure. At the same time, the exit company takes 20 credit for getting the timeshare owner out of their timeshare contract without 21 consequence, when, in fact, they simply used a fraudulent scheme to shield the timeshare 22 owner from discovering that, among other harm, their credit has been damaged for 23 defaulting on their contractual financial obligations. 24 2. Even more disturbing is the use of attorneys to perpetuate this fraudulent 25 scheme, which has caused tens of millions of dollars in damages to vacation ownership 26 companies and vacation owners associations. In exchange for large amounts of money 27 from the exit companies, the attorneys violate their ethical and legal duties to further 28 victimize timeshare owners. To be sure, the exit companies pay the attorneys directly and -2SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.706 Page 3 of 78 1 instruct the attorneys not to communicate with the timeshare owners. The attorneys then 2 follow the exit company’s instructions to write form letters to the vacation ownership 3 company, sometimes falsely alleging the company committed some wrongdoing, and 4 stating that they now “represent” the timeshare owner. The law firms then demand that 5 all further communications to the timeshare owner by the vacation ownership company 6 must stop and instead be made only to the attorney. Many times, the timeshare owner is 7 not even aware that they are represented by an attorney; the attorney has not spoken to 8 the timeshare owner and the attorney conducts no investigation into the facts before 9 sending letters. By stopping the flow of information to the timeshare owner (among other 10 things), in exchange for a share of the ill-gotten gains, the attorneys perpetuate the 11 fraudulent scheme and make it possible for the exit companies to interfere with vacation 12 ownership companies’ contracts at the expense of timeshare owners. The victimization of 13 the vacation ownership companies and the timeshare owners by the exit companies and 14 the attorneys must stop, and as stated in more detail below, Welk is petitioning this court 15 for help. 16 Background to the Vacation Ownership Industry 17 18 3. Vacation ownership provides owners with a shared right to use designated 19 resorts or properties and has been a key component of the vacation industry since the 20 1970s. Each year in the U.S., the vacation ownership industry contributes billions of 21 dollars towards the hospitality and leisure economy and enables millions of families to 22 enjoy vacation accommodations without the burdens associated with buying a second 23 home or vacation property. Last year alone, this industry generated more than $10.6 24 billion in annual sales of new units, with over 180,000 vacation owner units in operation 25 across the country, collectively producing jobs, supporting local economies, and 26 contributing to tax revenues. Per the American Resort Development Association 27 (“ARDA”), the industry’s trade association, 9.2 million households in the U.S. were 28 vacation owners in 2016. -3SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.707 Page 4 of 78 1 4. The economic impact of this industry spans across the globe. In 2015, the 2 industry produced over $57 billion in direct economic output, nearly $17 billion in taxes, 3 and supported 1.3 million jobs. As an expansive, global industry with properties in over 4 120 countries, vacation ownerships provide a truly diverse experience. 5 5. Vacation ownership also impacts the California economy. Eight percent of 6 all U.S. vacation ownership units are located in California, along with a growing base of 7 new and expanding resorts. In 2015, the industry provided more than 24,000 jobs and 8 $1.3 billion in salaries and wages, and an estimated $3.6 billion in consumer and business 9 spending to local economies, including $267 million in local and state tax revenues for 10 California. In all, California’s tourism industry saw $10.3 billion in tax revenue in 2016, 11 proving that “California is a very popular destination, both nationally and 12 internationally. 1” Welk Resorts 13 6. 14 Welk was founded in 1964 by famed band leader and entertainer, Lawrence 15 Welk, in Northern San Diego County, and grew from a hotel, golf course, and restaurant 16 on a few hundred acres into one of the leaders in the vacation ownership industry. 17 Headquartered in the San Diego, California area, Welk is unique from many of its 18 Florida-based competitors. 7. 19 Welk now develops and operates multiple resorts in the U.S. and Mexico. 20 Most of Welk’s resorts are in California, located in the San Diego, Palm Springs, and 21 Lake Tahoe areas. Welk also has resorts in the Branson, Missouri, and Cabo San Lucas, 22 Mexico areas. Welk’s resorts have earned top marks and awards in the industry and are 23 consistently recognized for their high quality. Welk is a family and employee-owned 24 company, and has won numerous industry awards, including Employer of the Year, 25 Project of the Year, and Most Innovative Company. 8. 26 Welk employs approximately 1,400 people in California. It paid over $71 27 28 1 http://www.latimes.com/business/la-fi-ca-economic-impact-20170504-story.html -4SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.708 Page 5 of 78 1 million in salaries and wages to California residents in 2016 and provides an estimated 2 economic impact of over $114 million to the state. Welk has over 56,000 owners in its 3 vacation ownership program and sees tens of thousands of guests and families visit its 4 resorts each year. In 2016, Welk saw approximately 65,000 guests check in for their 5 vacations at its California resorts. 6 7 Timeshare Exit Team 9. Over the past several years, a cottage industry has sprung up to target 8 vacation ownership companies like Welk and disrupt the valid legal contracts between 9 resorts and their owners. Known as “timeshare exit companies,” these schemes falsely 10 promise and advertise that they have the ability get vacation owners released from their 11 existing financial obligations to their resorts without consequences. Although they call 12 themselves “consumer protection firms,” they are nothing of the sort. Their strategy 13 involves telling owners not to pay their bills so that their ownership is lost to foreclosure. 14 Because these companies demand that the vacation ownership company send all 15 correspondence to them, or the attorneys with whom they divide the spoils, the owners 16 are typically unaware of what happened until they discover their credit is significantly 17 hurt. Timeshare exit companies charge consumers thousands of dollars in upfront fees for 18 this alleged “service.” 19 10. Reed Hein & Associates, LLC (operating as “Timeshare Exit Team” or 20 “TET”) and its co-conspirators have utilized illegal and unethical business practices to 21 defraud thousands of vacation owners. Defendants’ scheme to disrupt Welk’s contractual 22 relationships with its vacation owners involves using fraudulent advertising, and making 23 false statements and unrealistic promises to unsuspecting owners, in order to extract 24 exorbitant, unwarranted fees. Defendants’ fraudulent scheme interferes with Welk’s 25 business by impeding Welk’s ability to communicate with its owners, and by misleading 26 Welk’s owners into defaulting on their financial obligations to both the resort developer, 27 Welk Resort Group, Inc., and the vacation owners association, Welk Resorts Platinum 28 Owners Association (the “Association”), by falsely guaranteeing that there will be no -5SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.709 Page 6 of 78 1 consequences to the vacation owner’s credit scores if they default. Their illegal scheme 2 has caused severe consequences for unsuspecting Welk vacation owners and for the Welk 3 business. Their schemes have caused financial and reputational damage to Welk, which 4 has enjoyed more than 50 years of providing high-quality vacation ownership 5 opportunities and resort stays to millions of people. 6 11. Reed Hein & Associates, LLC, in concert with its co-conspirators and as 7 part of a wide-ranging scheme, has intentionally interfered in Welk contracts by leading 8 Welk’s owners to believe that TET has a relationship with Welk and works with Welk to 9 “dissolve” owners’ contracts and repair negative credit reporting information. In reality, 10 Reed Hein & Associates, LLC (which is not a law firm) is systematically and 11 intentionally soliciting Welk vacation owners under the trade name “Timeshare Exit 12 Team,” in a fraudulent scheme designed to induce Welk owners to breach their contracts 13 with and payment obligations to Welk—all while steering them to instead pay $5,000, or 14 more, to TET, which TET then illegally splits with its lawyer co-defendants. As a result 15 of this wide-ranging, fraudulent racketeering scheme, Welk Resort Group and Welk 16 Resorts Platinum Owners Association have no other option but to seek justice for 17 themselves and injunctive relief to prevent the Defendants from further damaging their 18 vacation owners, vacation owners for other companies in the industry, and other vacation 19 ownership companies and associations who could become the next victims of this 20 unscrupulous web of bad actors. NATURE OF ACTION 21 22 23 24 12. This lawsuit seeks to hold Defendants accountable for interfering with Welk’s contracts with its owners and violating various state and federal laws. 13. When customers agree to purchase Welk’s vacation ownership program, 25 they enter into valid, enforceable contracts with both Welk Resort Group, Inc., the 26 company that develops and manages Welk’s resorts, and Welk Resorts Platinum Owners 27 Association, the primary association that governs the interests of Welk’s program and its 28 members. All Welk owners automatically become a member of the Association. The -6SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.710 Page 7 of 78 1 financial responsibilities of an Association member are similar to those faced by 2 members in a homeowners’ association for a condominium or home – non-payment of 3 fees by one member becomes the shared responsibility of the other members. 4 14. One of the contracts between new owners and Welk is the Purchase and 5 Sales Agreement. Following this agreement, buyers who have requested financing from 6 Welk execute a separate Promissory Note. Both of these contracts obligate the owner to 7 make payments to Welk for: (1) the purchase of a Welk ownership, which provides the 8 owner a right to reserve and stay at Welk’s various resorts using a means of exchange 9 called Points; and (2) recurring fee obligations to the Association. The fees paid to the 10 Association benefit all owners because they are used to maintain and upgrade the resort 11 properties, and cover joint costs that help preserve and improve the quality and character 12 of the resorts, such as furnishings, landscaping, utility payments, and housekeeping 13 services. 14 15. Despite being well-aware of the contractual relationships between Welk 15 Resort Group, the Association, and their vacation owners, TET markets itself to Welk 16 owners through radio and internet advertisements—and in person at events such as the 17 San Diego County Fair—claiming to be a “Consumer Protection Firm” offering a “100% 18 guarantee” that Timeshare Exit Team will “dissolve [their] timeshare contract … Safely. 19 Legally. Forever.” See Exhibit A. TET’s misleading marketing efforts are designed to 20 induce Welk owners and Association members to breach their contracts and obligations 21 with Welk, and instead to enter into a contract with TET. 22 16. After Welk owners are lured into retaining TET, TET representatives 23 instruct Welk owners to stop making their required payments to both Welk Resort Group 24 and the Association, and specifically advise that there will be no consequence to the 25 owners for failing to meet their contractual payment obligations. TET’s representatives 26 know that by giving owners this advice, owners will breach their valid and enforceable 27 agreements with Welk. Identifiable owners of Welk vacation ownership interests have 28 followed this advice from TET’s representatives and Welk has been damaged as a result. -7SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.711 Page 8 of 78 1 17. The instructions from TET’s representatives are then furthered by the 2 attorneys that TET retains. These law firms, including Ken B. Privett, PLC (“Privett”) 3 and Schroeter Goldmark & Bender, P.S. (“SGB”), do not represent the Welk owners 4 who paid TET. On information and belief, these firms do not meet with or speak to the 5 Welk owners. Their agreement with TET prohibits them from representing Welk owners 6 and in fact explicitly states that these law firms “represents [TET] only and not its 7 customers [i.e. Welk owners who have retained TET].” See Exhibit C. 8 18. TET and their cadre of attorneys then conspire to send generic, one-page 9 form letters to Welk. In these letters, the attorneys falsely claim to represent the owners. 10 See Exhibit B. The letters simply request that Welk release the owner from his or her 11 contractual obligations; they do not identify any disputes or any legal basis for voiding 12 the owners’ contracts. Id. These attorneys fail to provide specific information about the 13 nature of the owners’ purported (and in many cases, non-existing) disputes—despite 14 multiple requests by Welk for any details whatsoever. Welk is informed and believes that 15 the owners are often not even aware that they are “represented” by these law firms, and 16 that they are not even aware of, much less consent to, the trivial, one-size-fits-all letters 17 being sent. 18 19. The attorneys’ letters also instruct Welk not to communicate with the 19 owners, and to communicate only with the attorneys purportedly representing the owners. 20 This prevents Welk from communicating with the owner to help resolve his or her 21 concerns, and also prevents the owner from receiving collection notices and 22 correspondence from Welk about the delinquency and foreclosure of the vacation 23 ownership. As a result, owners “represented” by TET are under the false impression that 24 they have been “released” from their contractual obligations to Welk, when in fact what 25 really happened was that they fell delinquent and were foreclosed upon. This, of course, 26 subjects Welk owners to potential legal action to collect their outstanding debts, and 27 negatively impacts their credit, contrary to Defendants’ patent misrepresentations that the 28 owners will suffer no consequence from not paying Welk. -8SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.712 Page 9 of 78 1 20. On information and belief, TET uses its fraudulent marketing scheme to 2 develop leads that it then sells to attorneys and law firms such as Privett and SGB, in 3 violation of California laws prohibiting non-attorneys from obtaining business for law 4 firms in exchange for compensation, and without registering as a Lawyer Referral 5 Service with the California Bar (which is required by Business & Professions Code § 6 6155 and California Rules of Professional Conduct, Rule 1-320 (Financial Arrangements 7 with Non-Lawyers)). 8 21. These law firms, including Privett and SGB, conduct little to no 9 investigation of any Welk owner’s purported dispute; they have little to no direct contact 10 with most of the Welk owners that they purport to represent; and instead they are simply 11 acting at TET’s direction in return for a slice of the fee that TET has wrongfully and 12 illegally diverted to themselves. 13 22. TET and its co-conspirators have developed and executed this illegal fee- 14 splitting scheme in order to collect and profit from fees that they obtain from Welk’s 15 owners—fees that otherwise would have been used to pay Welk for amounts properly 16 owed to Welk Resort Group and the Association. 17 23. Defendants’ fraudulent scheme has caused Welk owners to breach their 18 vacation purchase contracts and become delinquent in their payment obligations to Welk, 19 and has wrongfully routed hundreds of thousands of dollars into Defendants’ coffers that 20 would otherwise have been used to pay down financing debts and association fees 21 rightfully owed to Welk and the Association. For example, on January 20, 2016, two 22 Welk owners contacted Welk via letter, stating that they had “spoken to … Timeshare 23 Exit Team (855) 577-0626 … [who] assured me that the case … justifies the cancellation 24 of our timeshare with your resort.” On April 16, 2016, a Welk owner contacted a Welk 25 employee via email, and stated, “We have contacted Timeshare Exit Team and they have 26 assigned [a law firm] to file civil suit. They have advised the process will take 6-8 27 months to obtain the Mutual Release.” Welk never received a lawsuit filed on behalf of 28 the owner. -9SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.713 Page 10 of 78 1 24. On April 27, 2016, two Welk owners duped by TET into believing that TET 2 has some type of direct business relationship with Welk filed a civil lawsuit in the 3 Superior Court of California, County of San Diego, naming Welk and TET as co- 4 defendants. The owners complained that “… Defendant [TET], has a particularly cozy 5 (yet purportedly arms-length) relationship with the other defendants in that an exit 6 agreement between [TET] and [the owners] is built into the timeshare purchase 7 transaction whereby [the owners] purportedly agree to sell their timeshare interest to 8 [TET] (instead of back to the [Welk] directly) for a set price). However, this set price 9 ($5795 for [the owners]) is unconscionably high … the relationship between [TET] and 10 [Welk] is not an arms-length relationship, that [TET] is not a third party with respect to 11 [Welk] and that [Welk has] a material interest in either this purported exit agreement or 12 in the purported exit fee associated with invoking the exit agreement.” These allegations 13 were false. Welk was damaged by this insofar as it had to settle the owners’ lawsuit under 14 confidential terms and expended legal fees defending the case, and suffered harm to its 15 reputation from being associated with Defendants’ illegal scheme. 16 25. As a further illustration of how Defendants’ illegal scheme works, on or 17 about July 3, 2017, a Welk employee attended the San Diego County Fair at the Del Mar 18 Fairgrounds. The employee stopped at a TET booth present at the fairgrounds’ exhibitor 19 area. See Exhibit D. Defendants’ representative (Angie Poole) made numerous false 20 promises to the individual in order to secure business in an attempt to interfere with 21 Welk’s operations. Specifically, Defendants represented: 22 23 24 25 a. That the individual could “stop paying on the timeshare” in order to afford TET’s services; b. That TET works with experienced attorneys who “guarantee” they will get people out of their contracts; 26 c. That TET “does business with Welk”; 27 d. That TET instructs owners to “stop paying” on their ownerships and that 28 this activity “won’t negatively affect” their credit; and -10SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.714 Page 11 of 78 1 e. That exit from an ownership is “guaranteed” and all credit repair is also 2 3 4 5 “guaranteed” if credit has been negatively affected. 26. Ms. Poole also stated that the cost of service from TET would be approximately “$2,000 to 5,000” up front. 27. As a result of Defendants’ wrongful conduct, Welk has suffered monetary 6 and non-monetary damages, and seek redress for Defendants’ illegal acts, as well as 7 declaratory and injunctive relief to end Defendants’ illegal practices and prevent further 8 losses to Welk Resort Group and the Association. 9 PARTIES 10 28. Welk Resort Group is a corporation organized and existing under the laws 11 of the State of California, with its principal place of business in San Marcos, California. It 12 develops and manages high-quality resort properties in California, Missouri, and Mexico. 13 As part of its operations, Welk, through an affiliate, offers vacation ownerships for sale at 14 its resort locations. 15 29. The Association is a non-profit corporation organized and existing under the 16 laws of the State of California, with its principal place of business in San Marcos, 17 California. Customers who make vacation ownership purchases with Welk become 18 members of the Association. 19 30. Plaintiffs are informed and believe, and on that basis aver, that Defendant 20 Reed Hein & Associates, LLC (also known as “ReedHein & Associates,” or “ReedHein”) 21 is a limited liability company, organized and existing under the laws of the State of 22 Washington, with a corporate office in Lynnwood, Washington, of which Brandon Reed 23 (“Reed”) and Trevor Hein (“Hein”) are the sole members. 24 domiciled in King County, Washington, and is a citizen of the State of Washington. 25 Hein is an individual domiciled in Surrey, British Columbia, Canada, and is a citizen of 26 the country of Canada. 27 28 31. Reed is an individual Plaintiffs are informed and believe that Defendant Timeshare Exit Team (“TET”), is an alter-ego dba of ReedHein, operating out of ReedHein’s corporate office -11SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.715 Page 12 of 78 1 located in Lynnwood, Washington, and having the same principal place of business as 2 ReedHein. 3 32. Plaintiffs are informed and believe that at all times herein mentioned, 4 Defendants ReedHein and TET were the alter egos, agents, servants, accomplices, and/or 5 employees of each other, acting within the course and scope of said relationships, and 6 whose acts or omissions averred herein were authorized, adopted, approved or ratified by 7 each other. 8 9 10 11 33. Plaintiffs are informed and believe that Defendant SGB is a professional corporation, organized and existing under the laws of the State of Washington, with its principal place of business in Seattle, Washington. 34. Plaintiffs are informed and believe that Defendant Privett is a limited 12 liability company, organized and existing under the laws of the State of Oklahoma, with 13 its principal place of business and corporate office in Pawnee, Oklahoma, of which Ken 14 B. Privett is the sole member. Ken B. Privett is an individual domiciled in Pawnee 15 County, Oklahoma, and is a citizen of the State of Oklahoma. JURISDICTION 16 17 35. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 18 because a federal question is presented under both the Civil RICO Act, 18 U.S.C. § 1961, 19 and the Lanham Act, 15 U.S.C. § 1125(a). 20 jurisdiction pursuant to 28 U.S.C. § 1367 over all other state law claims that are so 21 related that they form a part of the same case or controversy. 22 36. Finally, this Court has supplemental This Court may exercise personal jurisdiction over all Defendants because 23 this action arises out of and is related to Defendants’ purposeful contacts with the State of 24 California. TET 25 26 37. TET (i) solicits owners of vacation ownership interests, many of whom 27 reside in California and/or whose vacation ownership interests are located in California, 28 through the use of false, misleading and deceptive advertising, and (ii) intentionally -12SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.716 Page 13 of 78 1 interferes with the contracts between Welk, a California corporation, and owners of Welk 2 vacation ownership interests, as well as the Association and its members 3 38. TET’s internet-based operations subject them to personal jurisdiction in the 4 state of California. 5 through the use of false, misleading, and deceptive advertising it contains on its website, 6 http://www.timeshareexitteam.com. This website is not a passive advertising website. 7 TET solicits and receives the contact information of owners of California vacation 8 ownership interests through the website, which involves the repeated transmission of 9 computer files over the internet and allows owners of California vacation ownership 10 interests to exchange their contact information with a host computer. See e.g. Exhibit G. 11 39. TET solicits owners of California vacation ownership interests TET commits tortious acts in the state of California, specifically, tortious 12 interference with contractual relationships between Welk Resort Group, the Association, 13 and owners of Welk vacation ownership interests, as well as the Association and its 14 members. TET instructs owners of Welk vacation ownership interests to cease making 15 valid payments of maintenance fees, promissory notes and loan payments to Welk, which 16 damages Welk. 17 40. TET also executes agreements with owners of Welk vacation ownership 18 interests, some of whom own vacation ownership interests in California. TET is to 19 perform these agreements, in whole or in part, in California, in that TET is to negotiate 20 with Welk to secure the release of any future obligations the owners of Welk vacation 21 ownership interests owe to Welk, together with the cancellation of the owners’ contracts 22 with Welk. To effect the cancellation, TET instructs its retained attorneys, SGB and 23 Privett, to mail letters addressed to Welk in California. Privett 24 25 41. Privett commits tortious acts in furtherance of the scheme in the state of 26 California, specifically, tortious interference with contractual relationships between Welk 27 and owners of Welk vacation ownership interests. 28 42. Many of the owners of Welk vacation ownership interests, who are -13SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.717 Page 14 of 78 1 purportedly represented by Privett, reside in California and/or own a vacation ownership 2 interest located in California. 3 43. TET retains Privett on behalf of TET’s clients in order to effectuate the 4 promised “exit.” After TET representatives instruct owners of Welk vacation ownership 5 interests to stop making any payments to Welk and the Association, TET instructs Privett 6 to contact Welk in California in writing, by phone, and by e-mail on behalf of TET in the 7 name of the owners of Welk vacation ownership interests in order to negotiate settlement 8 and cancellation of the Welk vacation ownership agreements. 9 44. These communications are directed to Welk in California and serve further 10 the interference between the contractual relationships between Welk and owners of Welk 11 vacation ownership interests. SGB 12 13 45. SGB commits tortious acts in furtherance of the scheme in the state of 14 California, specifically, tortious interference with contractual relationships between Welk 15 and owners of Welk vacation ownership interests. 16 46. Many of the owners of Welk vacation ownership interests, who are 17 purportedly represented by SGB, reside in California and or own a vacation ownership 18 interest located in California. 19 47. TET retains SGB on behalf of TET’s clients in order to effectuate the 20 promised “exit.” After TET representatives instruct owners of Welk vacation ownership 21 interests to stop making any payments to Welk and the Association, TET instructs SGB 22 to contact Welk in California in writing, by phone, and by e-mail on behalf of TET in the 23 name of the owners of Welk vacation ownership interests in order to negotiate settlement 24 and cancellation of the Welk vacation ownership agreements. 25 48. These communications are directed to Welk in California and serve further 26 the interference between the contractual relationships between Welk and owners of Welk 27 vacation ownership interests. 28 49. This Court also has subject matter jurisdiction pursuant to 28 U.S.C. §1332 -14SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.718 Page 15 of 78 1 (diversity jurisdiction). This Court has diversity jurisdiction over the subject matter of 2 this action because the amount in controversy exceeds the sum or value of $75,000, and 3 is between citizens of different states. 4 50. Together, Welk’s monetary damages and the injunctive relief sought, which 5 would preserve the value of Welk’s contracts with current owners and members and 6 allow for cost savings obtained by the cessation of Defendants’ tortious conduct, is 7 valued at well over $75,000. 8 9 VENUE AND FORUM 51. Venue and forum are proper in the Southern District of California, pursuant 10 to Title 28, U.S.C. § 1391(b), because a substantial part of the events or omissions on 11 which Plaintiffs’ claims are based occurred in this District, including the wrongful 12 actions of the Defendants. GENERAL AVERMENTS 13 14 52. At the time a purchaser buys a Welk vacation ownership, each customer 15 executes a written purchase and sale agreement (“Purchase Agreement”). In addition, 16 and pursuant to the Purchase Agreement, Welk vacation ownership owners also become 17 members of the Association, and agree to pay maintenance fees, also known as Vacation 18 Owner Association Dues (“VOA Dues”), to the Association, which enables the 19 Association and Welk to maintain their high service standards and resort quality. 20 53. If a purchaser requests financing, he or she may execute and deliver a 21 promissory note (“Promissory Note”) in connection with the vacation ownership 22 purchase. 23 54. Welk uses the revenue from the purchase of vacation ownership interests 24 and VOA Dues to invest in the development and perpetual improvement of its resorts and 25 services for the benefit of all owners and guests. They continually add new and improved 26 services for their members and constantly otherwise improve their member experience. 27 28 55. Welk also actively and aggressively protects its proprietary business practices and processes and its brand. Welk has devoted substantial resources to -15SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.719 Page 16 of 78 1 advertising and other marketing promotions to increase the visibility and recognition of 2 its products and to maintain and enhance the value of its brand. Welk competes directly 3 with other developers and marketers of vacation services who target similar customers. 4 The goodwill associated with Welk’s brand and its products is essential to Welk’s ability 5 to effectively compete in a highly competitive marketplace. 6 56. On information and belief, Defendants are co-conspirators, acting in concert, 7 and have been engaging in a scheme designed to disrupt Welk’s contractual relationships 8 with its vacation owners and association members. 9 57. In order to lure vacation owners to hire TET, TET makes false and 10 misleading statements, including guarantees on its websites and procures celebrity 11 endorsements to sell its services to vacation owners, including Welk owners. TET’s 12 scheme consists of obtaining vacation ownership clients via digital marketing, radio 13 advertisements, in-person solicitation, and, on information and belief, direct mail 14 advertisements, within and outside of the State of California. 15 16 17 58. On its website, TET advertises it will utilize its “process” to “get rid of” owners’ vacation ownership contracts “Safely. Legitimately. Forever.” 59. TET misrepresents to owners that any of its advertised reasons are legally 18 sufficient reasons to terminate a vacation ownership contract when, in fact, none of these 19 are legal bases for a vacation owner to cease making his or her payments under their 20 legally-binding contracts with a vacation ownership company, and to cease making his or 21 her payments to their Association. 22 60. TET also assigns leads to TET representatives who use these same false and 23 misleading claims to lure owners, including Welk owners to breach their contractual 24 obligations. For example, on May 27, 2016, two former TET employees filed suit against 25 TET, alleging in their complaint that the company “assists timeshare owners in dissolving 26 their timeshare contracts” and would assign them “leads” and provide them “scripts” to 27 use with timeshare owners. See Anderson et al v. Reed Hein & Associates LLC. Docket 28 2:16-cv-00785-RSL W.D.Wash. (May 27, 2016). -16SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.720 Page 17 of 78 1 61. It is at this point in TET’s advertised “unique strategy” that TET instructs 2 vacation owners who have signed up with them and paid them thousands of dollars in an 3 upfront sign-up fee –sometimes upwards of $5,000 – to cease paying any money to Welk 4 or the Association on their vacation ownership obligations, such as owners’ Promissory 5 Notes as well as the maintenance fees due pursuant to the Purchase Agreement. 6 62. By doing so, TET misrepresents to the owners, including Welk owners, that 7 vacation ownership companies will be more willing to allow the owners to “exit” their 8 vacation ownership. TET further: 9 a. Misrepresents to Welk owners that TET has a preexisting agreement with 10 Welk or otherwise does business with Welk to guarantee termination of 11 any purchase contracts; 12 b. Misrepresents to Welk owners that TET can guarantee that there will not 13 be any negative credit reporting by Welk or that any prior negative credit 14 reporting by Welk can be eliminated; 15 c. Misrepresents to Welk owners that stopping payment on a Welk contract 16 or on Association dues will not affect their credit or constitute a breach of 17 their contracts with Welk; 18 d. Sends unsolicited and/or knowingly fraudulent and misleading 19 correspondence to Welk owners regarding their contractual obligations; 20 e. Deceptively represents to Welk owners, among other things, that TET 21 “guarantees” to permanently eliminate their contractual obligations; and 22 f. Solicits Welk owners to pay TET in lieu of paying on their contractual obligations to Welk and the Association. 23 24 63. TET’s actions are unlawful, as they impermissibly interfere with the 25 contractual relationship between Welk and Welk owners and members through false and 26 deceptive means. 27 64. 28 On information and belief, after obtaining a lead through this marketing scheme, TET passes the lead to a rotating band of attorneys and/or law firms such as -17SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.721 Page 18 of 78 1 SGB and Privett, while sharing a flat fee in exchange for the referral. (For example, on 2 July 6, 2016, TET’s CEO Brandon Reed told USAToday.com that “his company uses 3 lawyers ‘to get the resort to take the timeshare back.’” See Exhibit E.) TET collects a 4 flat fee from owners, including Welk owners, totaling $5,000 or more, depending on the 5 amount of their outstanding vacation ownership debt to Welk, which they split among 6 and between TET and the law firms it retains, including SGB and Privett. 7 65. Pursuant to master fee agreements between TET and these law firms, 8 including Privett and SGB, TET is prohibited from representing to TET customers that 9 the attorneys hired by TET are the TET customer’s attorney. See Exhibit C. 10 Nonetheless, TET representatives have stated to identifiable Welk owners that the 11 attorneys working on the Welk owners’ alleged negotiations were “their” attorneys – a 12 completely misleading and false statement. 13 66. As one of the final steps to convince owners to retain them, TET provides a 14 chart outline the cost of paying the owner’s vacation ownership company as compared to 15 paying TET for its services. On information and belief, TET provided an identifiable 16 Welk owner a chart similar to the one contained within Exhibit F, which calculated the 17 cost of paying annual maintenance fees plus special assessments in the amount of 18 $20,122.00 for the next 15 years, together with total future loan payments in the amount 19 of $24,086.00, for a total of $44,208.00 versus paying $6,995.00. Printed over the final 20 comparison figures, TET asks a simple question: “Which of these would you rather 21 pay?” Of course, the chart leaves out the fact that paying Welk gets the owner high- 22 quality resort vacations, while paying TET leaves the owner with a foreclosure and 23 destroyed credit. 24 67. TET seeks out vacation owners, including Welk owners, to pay money to 25 them instead of to the owners’ vacation ownership companies. Specifically, TET seeks 26 to divert money that Welk owners owe to Welk, from Welk to TET instead. 27 28 68. According to TET’s website, after signing TET’s retainer documents, owners are then assigned an “Account Coordinator who [becomes their] main point of -18SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.722 Page 19 of 78 1 contact during [the owner’s] entire process. No general 800 phone numbers or endless 2 automated phone systems while trying to reach Customer Service. 3 Coordinator will explain how the process works and will provide [the owner] with status 4 updates throughout the exit process.” 5 owners have received are scant, non-specific, and designed to string along Welk owners 6 into believing that actual work is being done on their behalf. 7 69. [The] Account In fact, however, the e-mail updates that Welk Thereafter, TET begins what it misleadingly refers to as its “negotiation 8 process” with the owners’ vacation ownership companies, including Welk. 9 website, TET states that the “specifics of the process will depend on your ownership 10 situation and how the resort responds to our requests,” but, notwithstanding the fact that 11 TET has “a skilled in-house team,” TET “will retain an attorney on your behalf if 12 needed.” TET promises “exit” or it will refund the entirety of the fee to the owners. 13 70. On its TET’s representation that it negotiates on behalf of owners is false. In fact, 14 TET’s “skilled in-house team” is not doing any work to negotiate anything at all. 15 Instead, TET “retains” its co-conspirator law firms and attorneys, including Privett and 16 SGB, to communicate with the vacation ownership companies. TET’s relationship with 17 its attorneys is pursuant to master fee agreements by which TET agrees to pay these law 18 firms a cut of the fee TET obtains at sign-up—$1,200.00 per owner. TET also promises 19 to send law firms at least 800 files a month, meaning that firms such as Privett and SGB 20 make at least $960,000.00 per month on this scheme. See Exhibit C. Of course, since 21 the firms receive only a flat fee of $1,200.00 per file and their client is TET, not the 22 owners, they have no incentive to spend time investigating any particular owner’s issues, 23 no incentive to assist owners with real disputes, and no incentive to engage in owner- 24 specific negotiations. 25 71. Once a “file” is referred to TET’s co-conspirator law firms and attorneys, 26 including Privett and SGB, these law firms then contact Welk in order to “negotiate” an 27 exit of the vacation ownership contract. 28 72. Indeed, Privett in Oklahoma sends boilerplate representation letters to Welk -19SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.723 Page 20 of 78 1 simply stating that “we want to terminate the above referenced owners’ obligations with 2 your timeshare company.” However, no factual information is provided to Welk about 3 the purported dispute, other than the fact that the vacation owners are interested in exiting 4 their ownership. For example, the attorneys make no specific claims on their “clients’” 5 behalves, and instead demand that Welk no longer contact the vacation owners directly, 6 as they are represented by counsel in this unidentified dispute. On information and 7 belief, many owners are never contacted by their “attorney” or law firm after they are 8 solicited by TET to breach their Welk contracts; they are not aware what outside attorney 9 is acting and communicating on their behalf; and they have no direct relationship or 10 contact with “their attorney.” 11 correspondence, telephone calls, and e-mails, which also instruct Welk not to contact the 12 Welk owner Privett purportedly “represents,” serve to further TET’s interference with the 13 contractual relationships between Welk and the Welk owners. 14 73. These letters, together with any subsequent SGB in Washington is also retained by TET and sends letters to Welk on an 15 entirely non-legal basis of “on behalf” of Welk owners who have also never met any of 16 the lawyers at SGB. SGB’s letters to Welk simply state that their purported clients “are 17 interested in terminating their time share memberships. With the lone exception of 18 forwarding routine billings to the client via mail, you are hereby notified not to contact 19 our clients in any format.” The letters are “one size fits all” correspondence whose 20 purpose is merely to forbid Welk from communicating with Welk owners. These letters, 21 together with any subsequent correspondence, telephone calls, and e-mails, serve to 22 further TET’s interference with the contractual relationship between Welk and Welk 23 owners. 24 74. Because the vacation owners are purportedly represented by counsel, 25 vacation ownership companies, including Welk, are forbidden from communicating with 26 the owners. Accordingly, these owners are completely unaware – until they learn that 27 their default has been reported on the owner’s credit report – that TET, Privett, and SGB 28 are accomplishing absolutely nothing for them except for interference with the contracts -20SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.724 Page 21 of 78 1 2 they hold with Welk. 75. Meanwhile, as Welk waits for TET’s co-conspirators to provide factual 3 support for any kind of valid dispute as to the ownership (which almost never arrives), it 4 receives no payments on the affected owners’ Purchase Agreements per the advice given 5 to the owners by Defendants, and the Association receives no payment for outstanding 6 dues. These breaches inevitably result in negative reporting to credit agencies against the 7 owners, contrary to TET’s advertising and express representations to the owners. In 8 addition, the lack of Association payments encumber other owners with increasing fees in 9 order to maintain improvements and quality of the resorts. 10 76. On information and belief, TET pays fees to Privett and SGB for their 11 services in furtherance of TET’s scheme pursuant to master fee agreements by which 12 Privett and SGB are paid a portion of the TET upfront fee and promised a volume of 13 hundreds of files every month. See Exhibit C. 14 77. To date, TET’s false, deceptive, and misleading advertising has caused 15 identifiable Welk owners to retain TET and, at TET’s instructions, (1) to stop making 16 payments on their Promissory Notes they signed when they purchased their vacation 17 ownership interest, and (2) to stop paying maintenance and other fees to the Association 18 they contractually committed to pay. Privett and SGB further TET’s scheme to damage 19 Welk by sending representation letters rife with false or non-existent legal grounds for 20 termination (and in some case no reasons at all) and by forbidding Welk to communicate 21 with Welk owners. These Defendants engaged in this arrangement together for their 22 collective pecuniary benefit. 23 78. Altogether, Defendants intentionally and unjustifiably interfered with 24 Welk’s contractual business relationships with Welk owners by luring them with false, 25 deceptive, and misleading advertising, and through direct promises, and advising them to 26 breach their contractual relationships without any valid grounds, in exchange for a fee 27 and the false assurance that there will be no harm to their credit scores and that they will 28 be “exited” from their ownership “Safely. Legally. Forever.” -21SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.725 Page 22 of 78 1 79. As a direct and proximate result of Defendants’ intentional and unjustified 2 interference with Welk’s contractual relationships with Welk owners – and in furtherance 3 of their fraudulent scheme – Welk has been damaged. To be sure, Defendants’ scheme 4 has cost Welk approximately $5.68 million worth of loan balances that it would have 5 otherwise received through Welk’s contractual relationship with its owners. 6 Additionally, Defendants’ scheme has caused in excess of $256,000.00 worth of yearly 7 VOA Dues owed to the Association by Welk owners, pursuant to the Purchase 8 Agreements, to go into default as of today. 9 Defendants’ intentional interference and fraudulent scheme, through the loss of 10 The long-term damage caused by contractually obligated VOA Dues, is approximately $9.8 million. 11 FIRST CLAIM FOR RELIEF 12 INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS 13 Against All Defendants 14 15 16 17 18 80. Plaintiffs incorporate averments set forth in paragraphs 1-79 above, as if set forth in full herein. 81. As averred herein, Plaintiffs have valid and enforceable contracts with Welk owners. 82. Defendants had knowledge of the existence of those contracts between 19 Plaintiffs and Welk owners. 20 Plaintiffs is the basis under which Defendants sought to establish a relationship with 21 Welk owners. 22 83. The very fact that Welk owners have contracts with Defendants sought to capitalize on Plaintiffs’ contractual relationships with 23 Welk owners by soliciting them through TET’s false and misleading advertising and 24 promises, fraudulently inducing them to pay large upfront fees to TET, and fraudulently 25 inducing them to stop making payments to Plaintiffs notwithstanding Welk owners’ 26 legally enforceable contracts with Plaintiffs. Indeed, TET’s advertises on its website that 27 it is dedicated to assisting owners to get out of their contracts, and states boldly that “our 28 personal GUARANTEE to you is that our team of consumer advocates will get your out -22SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.726 Page 23 of 78 1 of your timeshare, period.” See Exhibit G. In some instances, TET describes itself as a 2 “Consumer Protection Firm,” while in others it states that it is not a law firm. TET has 3 also advised vacation owners that they can easily terminate or void their contracts, such 4 that the owners can walk away from any contractual obligation with no consequence 5 whatsoever. 6 84. TET intended to disrupt the contracts between Welk and Welk owners, as 7 they sent targeted correspondence directly to Welk owners advising them that TET could 8 assist them in canceling or avoiding their vacation ownership obligations. In those 9 marketing materials, among other false promises, TET advised that their services are 10 11 “GUARANTEED.” 85. TET’s willful and fraudulent actions to induce parties with whom Plaintiffs 12 have valid contractual agreements to breach their agreements constitute intentional 13 interference with an existing contractual relationship. 14 86. Furthermore, TET has intentionally, and without justification or privilege, 15 interfered with Plaintiffs’ existing contracts by inducing Welk owners to immediately 16 stop making any further payments under their contracts without any legal basis. Privett 17 and SGB advance and contribute to TET’s interference by sending representation letters 18 to Plaintiffs, providing no basis for termination of Welk owners’ contracts. Nonetheless, 19 TET conspires with SGB and Privett (among many other law firms) to send generic form 20 letters to Welk, wherein a law firm claims to represent the owners that TET has induced 21 to breach their contract. However, their attorneys never provide specific information 22 about the nature of the owners’ dispute—despite multiple requests by Welk for any 23 details whatsoever. Worse, Privett and SGB’s “representation” letters are fraudulent 24 because, despite their written representations to the contrary, neither Privett nor SGB 25 actually represents any Welk owner. To be sure, this is specifically prohibited by TET’s 26 master fee agreement it enters with Privett and SGB. 27 representation is unknown to Plaintiffs, in order to comply with the law and other ethical 28 obligations, when Privett and SGB instruct Welk not to communicate with the owners While this false claim of -23SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.727 Page 24 of 78 1 further, and to communicate only to the attorneys purportedly representing the owners, 2 Welk complies – all to Plaintiffs’ detriment. 3 87. Defendants’ intent is to harm Welk along with the owners, including 4 disruption to and diminishment of Welk’s business, contractual relationships, and 5 reputation. Collectively, Defendants’ actions were not made in good faith, but rather 6 were made with purely mercenary reasons so as to earn and retain the large pre-paid 7 retainer fee without actually providing any meaningful services to Welk owners and were 8 done with the knowledge and purpose of injuring Plaintiffs or with knowledge that 9 disruption of performance by Welk owners was certain or substantially certain to occur. 10 88. Defendants’ conduct has disrupted Plaintiffs’ contracts with Welk owners, 11 threatens to continue to disrupt Plaintiffs’ contracts with Welk owners, and has made the 12 performance of Plaintiffs’ contracts with Welk owners more expensive and/or difficult. 13 89. As a direct and proximate result of Defendants’ collective intentional 14 misconduct, Welk owners have terminated, or have sought to terminate, their contractual 15 relationship with Plaintiffs before the expiration of the terms of those contracts. 16 17 18 90. Defendants did not have any justification or privilege in procuring the breach of such contracts. 91. As a direct and proximate result of Defendants’ intentional and unjustified 19 interference with Welk’s contractual relationships with Welk owners – and in furtherance 20 of their fraudulent scheme – Plaintiffs have suffered damages. To be sure, Defendants’ 21 scheme has cost Welk $5.68 million worth of loan balances that it would have otherwise 22 received through Welk’s contractual relationship with its owners. 23 Defendants’ scheme has caused $256,000.00 worth of yearly VOA Dues owed to the 24 Association by Welk owners, pursuant to the Purchase Agreements, to go into default as 25 of today. The long-term damage caused by Defendants’ intentional interference and 26 fraudulent scheme, through the loss of contractually obligated VOA Dues, is 27 approximately $9.8 million. 28 92. Additionally, Welk has also had to expend money, time, and energy in the form of hiring -24SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.728 Page 25 of 78 1 additional staff to manage the substantial volume of “exit” attorney letters coming from 2 TET’s co-conspirator law firms, including Privett and SGB. Welk has also had to expend 3 money, time, and energy maintaining its established contractual relationships with Welk 4 owners. Furthermore, Welk has suffered reputational damage as a result of Defendants’ 5 conduct. 6 93. Defendants’ conduct was a substantial factor in causing Welk’s harm. 7 Because of Defendants’ conduct, Welk is entitled to relief, including monetary damages 8 and attorneys’ fees and costs. 9 94. Further, Defendants’ conduct was done maliciously, oppressively, and with 10 the intent to interfere with Welk’s existing contracts, all for Defendants’ illicit benefit at 11 Welk’s expense. Accordingly, Welk is entitled to punitive and exemplary damages from 12 Defendants, pursuant to California Civil Code section 3294 et seq., in an amount 13 sufficient to punish them for the tortious conduct averred herein and to dissuade them and 14 others similarly situated from engaging in such conduct in the future. 15 SECOND CLAIM FOR RELIEF 16 VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT 17 ORGANIZATIONS ACT 18 Against Defendant Reed Hein & Associates, LLC 19 20 21 95. Plaintiffs incorporate averments set forth in paragraphs 1-94 above, as if set forth in full herein. 96. This claim arises under 18 U.S.C. § 1962(c), which provides in part: “it shall 22 be unlawful for any person employed by or associated with an enterprise engaged in, or 23 the activities of which affect, interstate or foreign commerce, to conduct or participate, 24 directly or indirectly, in the conduct of such enterprises’ affairs through a pattern of 25 racketeering activity.” 26 97. TET, SGB and Privett are enterprises within the meaning of 18 U.S.C. 27 1961(4) that engaged in activities averred herein that affect or impact the state of 28 California, to wit: TET, SGB and Privett conspired to unlawfully disrupt the contracts -25SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.729 Page 26 of 78 1 between Welk and Welk owners, when TET targeted Welk owners who own vacation 2 ownership interests in California; advised them that they could assist them in canceling or 3 avoiding their vacation ownership obligations and contracts; and then sold those owners 4 as leads to SGB and/or Privett (or engaged in a fee-splitting arrangement with them). 5 98. Defendants acted in concert, and participated in the enterprise’s affairs 6 through a pattern of racketeering activity, consisting of numerous and repeated uses of 7 mail and wire communications, in order to execute a scheme to defraud Welk, the 8 Association, and Welk owners. 9 99. On information and belief, TET sent or caused to be sent, materials by wire 10 for the purpose of executing the scheme. These activities amount to a material scheme to 11 defraud and obtain money on false pretenses, misrepresentations, promises, and/or 12 omissions. The materials include, but are not limited to, interstate website and digital 13 advertisements, phone calls, emails, and interstate credit card transactions. 14 100. On information and belief, TET sent or caused to be sent, materials via U.S. 15 mail or commercial interstate carriers for the purpose of executing the scheme. These 16 activities amount to a material scheme to defraud and obtain money on false pretenses, 17 misrepresentations, promises, and/or omissions. On information and belief, the materials 18 include, but are not limited to direct mail pieces, contracts, and letters promoting the 19 scheme. 20 21 101. The predicate acts which constitute this pattern of racketeering activity include: 22 a. Beginning at least on or about July 1, 2017, and continuing today, TET 23 caused the fraudulent use of interstate wires through TET’s Internet 24 website, which states that “our personal GUARANTEE to you is that our 25 team of consumer advocates will get you out of your timeshare, period.” 26 This activity fraudulently induces Welk owners to breach their contract 27 with Welk, in violation of 18 U.S.C. section 1343. See Exhibit G. 28 Despite TET’s “guarantee,” TET actually does nothing to accomplish an -26SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.730 Page 27 of 78 1 exit for Welk owners and instead advises them to cease all contractually 2 obligated payments owed to Plaintiffs, while advising them that their 3 failure to comply with their contractual obligations will have no impact 4 on them legally or otherwise. 5 b. Beginning at least on or about November 30, 2016, and continuing today, 6 TET caused the fraudulent use of interstate mail to fraudulently induce 7 Welk owners to breach their contracts by offering and mailing loan 8 agreements to pay for any settlement with Welk, including credit card 9 transaction information, in violation of 18 U.S.C. section 1341. See 10 11 12 13 14 Exhibit H. 102. These acts of racketeering, occurring within five years of one another, constitute a pattern of racketeering activity within the meaning of 18 U.S.C. § 1961(5). 103. The enterprise was created and/or used as a tool to carry out the pattern of racketeering activity. 15 104. TET has committed directly, or aided and abetted the commission of the 16 racketeering activities, and the acts pose a threat of continued racketeering activity, and 17 therefore constitute pattern as such. 18 105. TET knowingly and intentionally made these misrepresentations, acts of 19 concealment and failures to disclose. TET obtained money, and transferred money 20 between it and TET’s co-conspirators, as a result of these violations. 21 106. As set forth above, TET devised a scheme to defraud Welk owners in order 22 to obtain money by means of false or fraudulent representations or promises by 23 transmitting (through a pattern of racketeering activity – in interstate commerce) writings, 24 pictures, and other electronic media for the purpose of executing the scheme. 25 107. As the matters alleged in the preceding paragraphs show, TET committed 26 violations of 18 U.S.C. § 1962(c) by conducting the enterprise (in ways that affect 27 interstate commerce) through a pattern of racketeering activity, e.g., communicating its 28 campaign of false or fraudulent representations or promises to obtain money by using the -27SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.731 Page 28 of 78 1 mail and wires. 2 108. A specific threat of repetition of the conduct exists since the conduct is 3 TET’s regular way of conducting business and it continues to presently employ this 4 solicitation and communication scheme. 5 109. As a direct and proximate result of TET’s unlawful racketeering activity, 6 Welk has been substantially harmed by Defendants’ actions and has suffered damages in 7 an amount to be proven at trial. This includes, but is not limited to, a loss of $5.68 8 million worth of loan balances, a $256,000.00 loss of VOA Dues owed to the Association 9 by Welk owners, pursuant to the Purchase Agreements, which have gone into default, and 10 a $9.8 million loss of future VOA Dues – all money that Plaintiffs would have received 11 through Welk’s contractual relationship with its owners, but for TET’s racketeering 12 activity. 13 110. Under the provisions of 18 U.S.C. §1964(c), TET is liable to Welk for three 14 times the damages that Welk suffered, plus costs of brining the suit, and reasonable 15 attorney’s fees in connection herewith. 16 THIRD CLAIM FOR RELIEF 17 CIVIL CONSPIRACY 18 Against All Defendants 19 20 111. Plaintiffs incorporate averments set forth in paragraphs 1-110 above, as if set forth in full herein. 21 112. Defendants are parties to a civil conspiracy. 22 113. Defendants conspired to do an unlawful act. 23 114. Defendants conspired to interfere with Welk’s contractual relationships with 24 25 26 27 28 Welk owners. 115. Defendants each performed one or more overt actions in furtherance of their conspiracy, including without limitation: a. TET uses misleading advertising and promises to lure Welk owners to obtain TET’s services; -28SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.732 Page 29 of 78 1 b. Once retained, TET encourages Welk owners to breach their contracts 2 with Welk even though they have no legal basis to do so; 3 c. At TET’s direction, Privett sends representation letters purporting to 4 represent Welk owners which state false legal bases to Welk in 5 furtherance of TET’s interference between Welk and Welk owners, and 6 TET pays a portion of vacation owners’ fees to Privett for this; and 7 d. At TET’s direction, SGB sends representation letters purporting to 8 represent Welk owners, which state false legal bases to Welk in 9 furtherance of TET’s interference between Welk, and Welk owners, and 10 11 12 13 14 TET pays a portion of vacation owners’ fees to SGB for this. 116. Additionally, as set forth above, Defendants agreed and conspired to violate 18 U.S.C. § 1962(c). 117. The predicate acts which constitute this pattern of racketeering activity include: 15 a. Beginning at least on or about July 1, 2017, and continuing today, TET 16 caused the fraudulent use of interstate wires through TET’s Internet 17 website, which states that “our personal GUARANTEE to you is that our 18 team of consumer advocates will get you out of your timeshare, period.” 19 This activity fraudulently induces Welk owners to breach their contract 20 with Welk, in violation of 18 U.S.C. section 1343. See Exhibit G. 21 Despite TET’s “guarantee,” TET actually does nothing to accomplish an 22 exit for Welk owners and instead advises them to cease all contractually 23 obligated payments owed to Plaintiffs, while advising them that their 24 failure to comply with their contractual obligations will have no impact 25 on them legally or otherwise. 26 b. Beginning at least on or about November 30, 2016, and continuing today, 27 TET caused the fraudulent use of interstate mail to fraudulently induce 28 Welk owners to breach their contracts by offering and mailing loan -29SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.733 Page 30 of 78 1 agreements to pay for any settlement with Welk, including credit card 2 transaction information, in violation of 18 U.S.C. section 1341. See 3 Exhibit H. 4 5 118. Defendants Privett and SGB each performed one or more overt actions in furtherance of the conspiracy, including without limitation: 6 a. Beginning at least on or about January 12, 2017, Defendant Privett 7 conspired with other Defendants to cause the fraudulent use of interstate 8 mail in furtherance of Defendants’ scheme to fraudulently induce Welk’s 9 owners and members to breach their contracts with Welk, by sending a 10 bare-bones, generic form letter to Welk, wherein the attorney claims to 11 represent the owners that TET has induced to breach their contract, in 12 violation of 18 U.S.C. section 1341. See Exhibit B. Welk is further 13 informed and believes that the owners are often not even aware that they 14 are “represented” by Defendant Privett, and that they are not even aware 15 of, much less consent to, the trivial, one-size-fits-all letters being sent by 16 Privett’s firm. TET’s lawyers instruct Welk not to communicate with the 17 owners further, and to communicate only to the attorneys purportedly 18 representing the owners. Accordingly, Welk can never inform those 19 owners of the consequences of non-compliance with their obligations – 20 all in furtherance of Defendants’ fraudulent racketeering scheme. 21 b. Beginning at least on or about March 1, 2017, Defendant SGB conspired 22 with other Defendants to cause the fraudulent use of interstate mail in 23 furtherance of Defendants’ scheme to fraudulently induce Welk’s owners 24 and members to breach their contracts with Welk, by sending a bare- 25 bones, generic, one-page form letter to Welk, wherein the attorney claims 26 to represent the owners that TET has induced to breach their contract, in 27 violation of 18 U.S.C. section 1341. See Exhibit B. Welk is further 28 informed and believes that the owners are often not even aware that they -30SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.734 Page 31 of 78 1 are “represented” by Defendant SGB, and that they are not even aware 2 of, much less consent to, the trivial, one-size-fits-all letters being sent by 3 SGB’s firm. TET’s lawyers instruct Welk not to communicate with the 4 owners further, and to communicate only to the attorneys purportedly 5 representing the owners. Accordingly, Welk can never inform those 6 owners of the consequences of non-compliance with their obligations – 7 all in furtherance of Defendants’ fraudulent racketeering scheme. 8 119. Defendants intentionally conspired and agreed to directly and indirectly use 9 income that was derived from a pattern of racketeering activity in their interstate 10 enterprise, acquired or maintained interest in the enterprise through a pattern of 11 racketeering activity, and conducted and participated in the conduct of the affairs of the 12 enterprise through this pattern. 13 120. Defendants knew that their predicate acts were part of a pattern of 14 racketeering activity and agreed to the commission of those acts to further the schemes 15 described herein. That conduct constitutes a conspiracy in violation of 18 U.S.C. § 1962. 16 121. As a direct and proximate result of Defendants conspiracy, the overt acts 17 taken in furtherance of that conspiracy, including the violation of 18 U.S.C. § 1962, 18 Plaintiffs have been injured in their business and property in that Plaintiffs have lost 19 $5.68 million worth of loan balances, $256,000.00 worth of VOA Dues owed to the 20 Association by Welk owners, pursuant to the Purchase Agreements, which have gone into 21 default, and $9.8 million of future VOA Dues – all money that Plaintiffs would have 22 received through Welk’s contractual relationship with its owners, but for Defendants’ 23 conspiracy. 24 122. An injunction is also a viable form of relief for a cause of action for civil 25 conspiracy and, as a direct and proximate result of Defendants unlawful conduct, as 26 alleged herein, Plaintiffs are being irreparably harmed and are entitled to have 27 Defendants’ conduct enjoined and restrained. 28 -31SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.735 Page 32 of 78 1 FOURTH CLAIM FOR RELIEF 2 VIOLATION OF THE CALIFORNIA UNFAIR COMPETITION LAW 3 Against All Defendants 4 5 123. Plaintiffs incorporate averments set forth in paragraphs 1-122 above, as if set forth in full herein. 6 124. Section 17200 of the California Business & Professions Code (“Unfair 7 Competition Law” or “UCL”) prohibits any “unlawful,” “unfair” and “fraudulent” 8 business practice. 9 10 125. Defendants’ acts and practices, as averred herein, constitute unlawful, unfair and fraudulent business practices, in violation of the UCL. 11 126. California Business and Professions Code section 17204 allows a person, 12 which includes a corporation, injured by unfair business acts or practices to prosecute a 13 civil action for violation of the UCL. 14 127. Defendants’ acts and practices, as averred herein, constitute unlawful 15 practices in that they are tortious, and, in particular, intentionally interfere with 16 contractual relations between Plaintiffs and their vacation owners and members, and 17 violate 18 U.S.C. § 1962(c) (Civil RICO) and 15 U.S.C. § 1125 (Lanham Act); and 18 Business and Professions Code sections 6150, et seq. (California’s Runners and Cappers 19 Act), 6155 (California’s Lawyer Referral law), 11245, et seq. (California’s Vacation 20 Ownership and Time-Share Act), and 17500, et seq. (California’s False Advertising Act). 21 128. Defendants have violated Business and Professions Code sections 6151 and 22 6152 by engaging in “Running and Capping,” the practice of non-attorney agents 23 obtaining business for an attorney or law firm for compensation, or soliciting other to 24 engage in running in capping. Defendants have also violated Business and Professions 25 Code sections 6155 and Article 1, Rule 3.700 of Title 3, Division 5, of the Rules of the 26 State Bar of California, by operating for the direct or indirect purpose, in whole or in part, 27 of referring potential clients to attorneys, and accepting such referrals, without complying 28 with the registration and other requirements of Business & Professions Code section -32SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.736 Page 33 of 78 1 6155. 2 129. On information and belief, Defendant TET actively solicits Welk’s owners 3 and members through the unfair and misleading practices described above. TET then 4 contracts with Welk owners for a flat fee, determined by the amount the owners still owe 5 to Welk. TET has preexisting agreements with outside attorneys (SGB and Privett) to 6 write letters on the owners’ behalf, for a portion of the original flat fee, but explicitly 7 precludes these firms from representing the owners directly. Although the outside 8 attorneys write to Welk with the claim that they represent the owners, on information and 9 belief, the attorneys do not represent their “clients, do not know the particulars of their 10 “clients’” cases, and instead attempt to negotiate a quick exit, without having to invest 11 time or money researching their position. 12 130. Any contract for professional services secured by any attorney at law or law 13 firm in California through the services of a runner or capper is void. Plaintiffs have been 14 substantially harmed by Defendants’ violations of Running and Capping laws, and are 15 entitled to relief, including injunctive relief, restitution for costs incurred associated with 16 Defendants’ actions, and disgorgement of all profits accruing to Defendants because of 17 their actions. 18 131. Additionally, any contract for professional services secured by any attorney 19 at law or law firm in California through the services in violation of Business and 20 Professions Code section 6155 is void. Plaintiffs have been substantially harmed by 21 Defendants’ violations, and are entitled to relief, including injunctive relief enjoining 22 Defendants from soliciting Plaintiffs’ vacation owners and members in violation of 23 California Referral Service laws, restitution for costs incurred associated with 24 Defendants’ actions, and disgorgement of all profits accruing to Defendants because of 25 their actions. 26 132. Defendants’ business practices, as detailed herein, are also unfair, as they are 27 unethical, oppressive, and unscrupulous, and they violate fundamental policies of this 28 State. Further, any justification for Defendants’ wrongful conduct is outweighed by the -33SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.737 Page 34 of 78 1 adverse effects of such conduct. Plaintiffs and vacation owners could not reasonably 2 avoid the harm caused by Defendants’ wrongful practices. Furthermore, Defendants’ acts 3 and practices constitute unfair business practices in that they misled consumers by 4 making misrepresentations and untrue statements about their relationship and contractual 5 obligations with Welk, their ability to guarantee an exit from their vacation ownership, 6 and that Welk’s vacation owners and members would incur no consequences if they 7 stopped paying on their contractual obligations. 8 133. Assuming, arguendo, that Defendants’ practices are not express violations of 9 the laws, those practices fall within the penumbra of such laws and a finding of 10 unfairness can properly be tethered to public policy. Thus, Defendants engaged in unfair 11 business practices prohibited by Business & Professions Code sections 17200, et seq. 12 134. Defendants’ business practices, as detailed herein, are also fraudulent, as 13 they misled consumers by making misrepresentations and untrue statements about their 14 relationship and contractual obligations with Welk, their ability to guarantee an exit from 15 their vacation ownership, and that Welk’s vacation owners and members would incur no 16 consequences if they stopped paying on their contractual obligations. On information and 17 belief, reasonable members of the public are likely to be deceived by Defendants’ 18 misrepresentations and untrue statements. 19 135. As a direct and proximate result of Defendants’ unlawful, unfair, and 20 fraudulent business practices averred herein, Plaintiffs have suffered injury in fact. To be 21 sure, Welk has suffered significant damage, including $5.68 million worth of loan 22 balances that it would have otherwise received through Welk’s contractual relationship 23 with its owners, $256,000.00 worth of yearly VOA Dues owed to the Association by 24 Welk owners, pursuant to the Purchase Agreements, and $9.8 million worth of future 25 losses in VOA Dues contractually owed to Welk. 26 136. Plaintiffs have been injured in that they have had to expend money, time, 27 and energy in the form of hiring additional staff to manage the substantial volume of 28 “exit” letters coming from TET’s co-conspirator law firms, including Privett and SGB. -34SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.738 Page 35 of 78 1 Welk has also had to expend money, time, and energy maintaining its established 2 contractual relationships with Welk owners. 3 137. Welk has also suffered injury as a result of Defendants’ actions for which 4 there is no adequate remedy at law. Welk is informed and believes and thereon avers that 5 unless restrained by order of this Court, Defendants will continue the acts averred above, 6 or similar acts. 7 138. Because of Defendants’ unfair, unlawful and fraudulent business practices, 8 Welk is entitled to relief, including restitution for costs incurred associated with 9 Defendants’ solicitations and disgorgement of all profits accruing to Defendants because 10 of their unlawful and unfair business practices, injunctive relief, and attorneys’ fees and 11 costs pursuant to Code of Civil Procedure section 1021.5. 12 FIFTH CLAIM FOR RELIEF 13 VIOLATION OF THE CALIFORNIA VACATION OWNERSHIP AND 14 TIME-SHARE ACT 15 Against Defendant Reed Hein & Associates, LLC 16 17 139. Plaintiffs incorporate averments set forth in paragraphs 1-138 above, as if set forth in full herein. 18 140. In California, the offering of time-share plans is regulated under the 19 Vacation Ownership and Time-Share Act of 2004 (“Time-Share Act”). See Cal. Bus. & 20 Prof. Code §§ 11210, et seq. The Time-Share Act has broad application to all time-share 21 plans with an accommodation or component site in California, and to such plans without 22 an accommodation or component site in California, if the plans are sold or offered to be 23 sold to any individual located within California. Cal. Bus. & Prof. Code §11211. 24 141. TET is an entity subject to the Time-Share Act as TET attempts to either 25 void Welk owners’ contracts and/or transfer the ownership to a third party, all in 26 exchange for Welk owners’ money. 27 28 142. TET’s acts and practices, as averred herein, constitute false and misleading advertisements in connection with timeshares, in violation of the Time-Share Act, -35SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.739 Page 36 of 78 1 California Business and Professions Code section 11245, et seq. 2 143. California Business and Professions Code sections 11245 and 11285 allows 3 a person, which includes a corporation, to prosecute an action for an injunction, damages, 4 and/or declaratory relief, in connection with a timeshare, for any material 5 misrepresentation that is false or misleading in connection with the timeshare, or for any 6 material misrepresentation of an incidental benefit. 7 144. TET has been sending and providing knowingly false and misleading 8 information to Welk owners, advising them, among other things, that they are 9 “guaranteed” to permanently eliminate all of their vacation ownership obligations, that 10 they have preexisting relationships with Welk, and that they would incur no damage to 11 their credit reports if they stop payments. 12 145. Moreover, as another example of TET’s wrongful practices, on or about July 13 3, 2017, a Welk employee attended the San Diego County Fair at the Del Mar 14 Fairgrounds. The employee stopped at a Timeshare Exit Team booth present at the 15 fairgrounds’ exhibitor area. See Exhibit D. The representative (Angie Poole) made 16 several false promises to the individual in order to secure business in an attempt to 17 interfere with Welk’s operations, including: 18 19 20 21 22 23 a. That the cost of service from TET would be approximately “$2,000 to $5,000” up front; b. That the individual could “stop paying on the timeshare” in order to afford TET’s services; c. That TET works with experienced attorneys who “guarantee” they will get people out of their contracts; 24 d. That TET “does business with Welk”; 25 e. That TET instructs owners to “stop paying” on their ownerships and that 26 27 28 this activity “won’t negatively affect” their credit; and f. That exit from an ownership is “guaranteed” and all credit repair is also “guaranteed” if credit has been negatively affected. -36SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.740 Page 37 of 78 1 2 146. Each of these representations made by TET, and its associates, was false and misleading, and in violation of California Business and Professions Code section 11245. 3 147. As a direct and proximate result of TET’s knowingly false and misleading 4 correspondence, as averred herein, Welk has suffered significant damage, including $5.68 5 million worth of loan balances that it would have otherwise received through Welk’s 6 contractual relationship with its owners, $256,000.00 worth of yearly VOA Dues owed to 7 the Association by Welk owners, pursuant to the Purchase Agreements, and $9.8 million 8 worth of future losses in VOA Dues contractually owed to Welk. 9 148. Additionally, Welk has also had to expend money, time, and energy in the 10 form of hiring additional staff to manage the substantial volume of “exit” letters coming 11 from TET’s co-conspirator law firms, including Privett and SGB. Welk has also had to 12 expend money, time, and energy maintaining its established contractual relationships 13 with Welk owners. Furthermore, Welk has suffered reputational damage as a result of 14 TET’s violation of the Time-Share Act. 149. These damages are all a direct result of TET’s conduct, which was done to 15 16 mislead a reasonable vacation owner, including Welk owners. 17 150. Welk has also suffered injury as a result of TET’s actions for which there is 18 no adequate remedy at law. Welk is informed and believes and thereon avers that unless 19 restrained by order of this Court, TET will continue the acts averred above, or similar 20 acts. 21 22 151. Because of TET’s knowingly false and misleading scheme, Welk is entitled to relief, including monetary damages, injunctive relief, and attorneys’ fees and costs. 23 SIXTH CLAIM FOR RELIEF 24 VIOLATION OF THE CALIFORNIA FALSE ADVERTISING LAW 25 Against Defendant Reed Hein & Associates, LLC 26 27 28 152. Plaintiffs incorporate averments set forth in paragraphs 1-151 above, as if set forth in full herein. 153. Pursuant to California Business and Professions Code 17500, et. seq., it is -37SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.741 Page 38 of 78 1 unlawful to engage in advertising “which is untrue or misleading, and which is known, or 2 which by the exercise of reasonable care should be known, to be untrue or misleading.” 3 154. Moreover, as another example of TET’s fraudulent and illegal advertising, 4 on or about July 3, 2017, a Welk employee attended the San Diego County Fair at the Del 5 Mar Fairgrounds. The employee stopped at a TET booth present at the fairgrounds’ 6 exhibitor area. See Exhibit D. The representative (Angie Poole) made several false 7 promises to the individual in order to secure business in an attempt to interfere with 8 Welk’s operations, including: 9 a. That the cost of service from TET would be approximately “$2,000 to 10 $5,000” up front; b. That the individual could “stop paying on the timeshare” in order to 11 afford TET’s services; 12 c. That TET works with experienced attorneys who “guarantee” they will 13 get people out of their contracts; 14 15 d. That TET “does business with Welk”; 16 e. That TET instructs owners to “stop paying” on their ownerships and that this activity “won’t negatively affect” their credit; and 17 f. That exit from an ownership is “guaranteed” and all credit repair is also 18 “guaranteed” if credit has been negatively affected. 19 20 155. TET misled consumers by making misrepresentations and untrue statements 21 about their relationship and contractual obligations with Plaintiffs, their ability to 22 guarantee an exit from their vacation ownership, and that Plaintiffs’ vacation owners and 23 members would incur no consequences if they stopped paying on their contractual 24 obligations. 25 26 156. As a direct and proximate result of TET’s false advertising practices averred herein, Plaintiffs have suffered injury in fact. 27 157. Welk has suffered significant damage, including $5.68 million worth of loan 28 balances that it would have otherwise received through Welk’s contractual relationship -38SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.742 Page 39 of 78 1 with its owners, $256,000.00 worth of yearly VOA Dues owed to the Association by 2 Welk owners, pursuant to the Purchase Agreements, and $9.8 million worth of future 3 losses in VOA Dues contractually owed to Welk. 4 158. Additionally, Welk has also had to expend money, time, and energy in the 5 form of hiring additional staff to manage the substantial volume of “exit” letters coming 6 from TET’s co-conspirator law firms, including Privett and SGB. Welk has also had to 7 expend money, time, and energy maintaining its established contractual relationships 8 with Welk owners. Furthermore, Plaintiffs have suffered reputational damage as a result 9 of TET’s conduct. TET’s conduct is such that it would also mislead a reasonable 10 vacation owner. Moreover, TET is profiting from its wrongful conduct in the form of fees 11 charged.. 12 159. The misleading and false advertising described herein presents a continuing 13 threat to Plaintiffs in that TET persists and continues to engage in these practices, and 14 will not cease doing so unless and until forced to do so by a binding decision-maker. 15 Plaintiffs are entitled to preliminary and permanent injunctive relief ordering TET to 16 cease its false advertising. 17 160. Because of TET’s false advertising practices, Plaintiffs are entitled to relief, 18 including restitution for costs incurred associated with TET’s solicitations and 19 disgorgement of all profits accruing to TET because of its unlawful and unfair business 20 practices, injunctive relief, and attorneys’ fees and costs pursuant to Code of Civil 21 Procedure section 1021.5. 22 SEVENTH CLAIM FOR RELIEF 23 FALSE ADVERTISING IN VIOLATION OF THE LANHAM ACT, 24 15 U.S.C. § 1125(a) 25 Against Defendant Reed Hein & Associates, LLC 26 27 28 161. Plaintiffs incorporate averments set forth in paragraphs 1-160 above, as if set forth in full herein. 162. This is a cause of action for false advertising under the Lanham Act, 15 -39SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.743 Page 40 of 78 1 U.S.C. § 1125(a), and is within this Court’s jurisdiction. 2 163. TET’s advertised “timeshare exit” services travel in interstate commerce. 3 164. TET misleadingly advertises on the Internet and radio, on its website and 4 through celebrity endorsements, that it guarantees it will relieve vacation owners of their 5 obligations if TET is retained. 6 165. TET is in direct competition with Plaintiffs for the payments Welk owners 7 owe to Plaintiffs. TET specifically seeks out Welk owners to make payments to TET 8 instead of Plaintiffs. 9 10 11 12 13 14 166. TET’s statements that it guarantees it will relieve vacation owners of their obligations if TET is retained are false or misleading or made in bad faith. 167. TET deceived, or had the capacity to deceive, consumers, thereby having a material effect on consumer purchasing decisions and resulting in damages to Plaintiffs. 168. As a direct and proximate result of TET’s false advertising practices averred herein, Plaintiffs have suffered injury in fact. 15 169. Welk has suffered significant damage, including $5.68 million worth of loan 16 balances that it would have otherwise received through Welk’s contractual relationship 17 with its owners, $256,000.00 worth of yearly VOA Dues owed to the Association by 18 Welk owners, pursuant to the Purchase Agreements, and $9.8 million worth of future 19 losses in VOA Dues contractually owed to Welk. 20 170. Additionally, Welk has also had to expend money, time, and energy in the 21 form of hiring additional staff to manage the substantial volume of “exit” letters coming 22 from TET’s co-conspirator law firms, including Privett and SGB. Welk has also had to 23 expend money, time, and energy maintaining its established contractual relationships 24 with Welk owners. Furthermore, Plaintiffs have suffered reputational damage as a result 25 of TET’s conduct. TET’s conduct is such that it would also mislead a reasonable 26 vacation owner. Moreover, TET is profiting from its wrongful conduct in the form of fees 27 charged.. 28 171. Additionally, an injunction is warranted here, and is a viable form of relief -40SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.744 Page 41 of 78 1 for violation of the Lanham Act. TET’s misleading and false advertising described 2 herein presents a continuing threat to Plaintiffs as TET persists and continues to engage 3 in these practices, and will not cease doing so unless and until forced to do so by a 4 binding decision-maker. Plaintiffs are entitled to preliminary and permanent injunctive 5 relief ordering TET to cease its false advertising. 6 7 PRAYER Wherefore, Plaintiffs pray for judgment as follows: 8 9 10 AS TO THE FIRST CLAIM FOR RELIEF 1. For general and special damages proximately caused by Defendants’ tortious conduct, as averred herein. 11 2. For punitive damages. 12 3. For attorneys’ fees. AS TO THE SECOND CLAIM FOR RELIEF 13 14 1. For injunctive relief enjoining Defendants from soliciting Welk owners, 15 from false and misleading advertising, and from encouraging and/or offering to assist 16 them in breaching their vacation ownership obligations. 17 18 2. For compensatory damages, in an amount to be proven at trial, which are in excess of the jurisdictional minimum of this Court, including interest as permitted by law; 19 3. For treble damages under the 18 U.S.C. 1964(c); 20 4. For attorneys’ fees. AS TO THE THIRD CLAIM FOR RELIEF 21 22 1. For injunctive relief enjoining Defendants from soliciting Welk owners, 23 from false and misleading advertising, and from encouraging and/or offering to assist 24 them in breaching their vacation ownership obligations. 25 2. For compensatory damages, in an amount to be proven at trial, which are in 26 excess of the jurisdictional minimum of this Court, including interest as permitted by law; 27 AS TO THE FOURTH CLAIM FOR RELIEF 28 1. For injunctive relief enjoining Defendants from soliciting Welk owners, -41SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.745 Page 42 of 78 1 from false and misleading advertising, and from encouraging and/or offering to assist 2 them in breaching their vacation ownership obligations. 3 2. For restitution. 4 3. For disgorgement of profits. 5 4. For attorneys’ fees pursuant to California Code of Civil Procedure section 6 1021.5. 7 8 AS TO THE FIFTH CLAIM FOR RELIEF 1. For injunctive relief enjoining Defendants from soliciting Plaintiffs’ 9 vacation owners and members, from false and misleading advertising, and from 10 encouraging and/or offering to assist them in breaching their vacation ownership 11 obligations. 12 13 14 2. conduct, as averred herein. 3. For attorneys’ fees. AS TO THE SIXTH CLAIM FOR RELIEF 15 16 For general and special damages proximately caused by Defendants’ 1. For injunctive relief enjoining Defendants from soliciting Plaintiffs’ 17 vacation owners and members, from false and misleading advertising, and from 18 encouraging and/or offering to assist them in breaching their vacation ownership 19 obligations. 20 2. For restitution. 21 3. For disgorgement of profits. 22 4. For attorneys’ fees pursuant to California Code of Civil Procedure section 23 1021.5. AS TO THE SEVENTH CLAIM FOR RELIEF 24 25 1. For injunctive relief enjoining Defendants from soliciting Plaintiffs’ 26 vacation owners and members, from false and misleading advertising, and from 27 encouraging and/or offering to assist them in breaching their vacation ownership 28 obligations. -42SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.746 Page 43 of 78 1 2. For restitution. 2 3. For attorneys’ fees. 3 4 AS TO ALL CLAIMS FOR RELIEF 5 1. For costs of suit herein. 6 2. For such other and further relief as this Court may deem just and proper. 7 8 Date: October 6, 2017 GODES & PREIS, LLP 9 10 11 12 13 14 By: /s/ Michael L. Kibbe James N. Godes Michael L. Kibbe Attorneys for Plaintiffs WELK RESORT GROUP, INC. and WELK RESORTS PLATINUM OWNERS ASSOCIATION 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -43SECOND AMENDED COMPLAINT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.747 Page 44 of 78 EXHIBIT A EXHIBIT A 1 We are NOT a listing company. Our Consumer Protection Firm is ready to help you dissolve your timeshare contract. Safely. Legally. Forever. What makes us different: . Free Consultation - Local Offices - Nationally Endorsed and Accredited - 100% Money Back Guarantee Testimonials They did exactly what they said they'd and the people were so kind and willing to answer any questions. - Marcia The team was professional, honest, and I am now timeshare free. I am very pleased with the experience. - Sue Wally Endorsed by DAVE RAMSEY "0 newts: - - Clrem Adwsor? Tiffany V. nwood Hire-.- 154? cument 25 10/06/17 PageID.748 Pa 1-855-733-3434 mama: DITCH YOUR TIMESHARE we can help you EXITYOUR TIMESHARE 100% GUARANTEED Schedule our free consultation today. . 9w ?s/i o~ Nationally Endotsedby timeshareeXItteamxom 5m 6 A 0 E855-733-3434 - r?Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.750 Page 47 of 78 EXHIBIT B EXHIBIT B 4 Case Document 25 Filed 10/06/17 PageID.751 Page 48 of 78 KEN B. PRIVETT, PLC ATTORNEY AT LAW P.O. Box 97, 524 51h Street Pawnee, Oklahoma74058 Qf?gc: (9l8) 762-2705 or(877) 377-8699 A member olthe bar In the stats of Oklahoma Colorado [at 8) 513-7779 January 12, 2017 Welk Resorts 8860 Lawrence Welk Dr. Escondido. CA 92026 RE: Accoum Rl-zson'r: VILLAS AT THE WELK Dear Sir/Madame: Please be advised that we want to terminate the above referenced owners' obligation with your timeshare company, including the mortgage and promissory note, if applicable. We world entertain a small transfer fee. Please grant us this request. Thank you. Sincerely yours, Q: Ken B. Privett Manager, PLC labk?l?l 5 Case Document 25 Filed 10/06/17 PageID.752 Page 49 of 78 Ii SBHROETER GULUMARK March 1, 2017 BENDER Attn: Member Services Welk Resorts mamas: I965 300 Rancheros Drive, Suite 450 San Marcos, CA 92069 Dear Sir/Madam: We are writing to advise you that this law ?rm represents the below referenced owners with regard to their timeshare memberships with your organization. Our Clients/Your Purchasers: Contract/Member Nos.: Our clients are interested in terminating their time share memberships. With the lone exception of forwarding routine billings to the clients via mail, you are hereby noti?ed not to contact our clients in any format. Please direct all further correspondence and communications regarding the proposed termination and anything related to it, to our of?ce. Also, please con?rm within 30 days that this letter has arrived at the correct department, and let us know where to send future correspondence. You may also con?rm receipt by emailing us at If you have any questions or would like to discuss these matters ?mher, please do not hesitate to contact our of?ce. Together with local counsel, we look forward to working with you to resolve these matters. We thank you in advance for your good consideration. Sincerely, JAMES HAILEY THOM BREEN Attornev at Law Attorney at Law BlUlhtdAvenue 19500 PHENE 2066218000 sgb-law.ccm - EXHIBIT Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.753 Page 50 of 78 EXHIBIT C EXHIBIT C 7 Case Document 25 Filed 10/06/17 PageID.754 Page 51 of 78 EE AGREEMENT l. Parties: Reed-Haiti and Associates hereinafter) located at 3400 183* St. SW, Suite 300, WA 98037, wishes to utilize the services of Ken B. Privett, PLC, an Oklahoma Praisesional LLC, hereinafter), whose postal address and physical address is located at PO. Box 97, 524 Fifth St. Pawnee, OK 76053, to provide timeshare cancellation services to REA. The Parties agree that it will be impractical to enter into a separate agreement for services eacir time FHA desires to engage KBP. In order to expedite the use of KBP services each time it is needed, the parties agree to enter into and compl}r with this Master Fee Agreement prior to an}' actual services being performed. it is the intent of the parties that these terms and conditions apply to an}I provision of services by KBP regardless of whether these terms?and conditions are referenced in anyr e-mail, or subsequent memofcorrespondence during the term of this agreement. This agreement will take effect, and KBP will provide services upon M?s return of a signed cop].r of the agreement and payment for each new file. KBP is in association with John Mortimer, Attorney at Law, of Temecula, CA. 2. Scope of KBP Services: RHA agrees to pay KBP to provide the following services for A. Review case ?les as provided for herein in order to determine what legal remedies are available. No Court ?lings are to be undertaken or contemplated by the parties, unless mutually agreed by the parties. B. KBP will contact the timeshare resort in writing and by phone ?and email on behalf of ERA in the name of the timeshare owners, who are R?h's customers. The language used shall be at the discretion KBP. C. As agreed, direct RHA to obtain information andior documentation from customers to determine what legal remedies are available. D. Negotiate settlement and cancellation of timeshare deeds and contracts, and surrender of ownership on behalt?of RHA for its customers The maximum term of agreement between the parties shall be for 13 months. KBP retains in its discretion, exclusive control over the manner as to :how it performs its services. RHA is not paying for KEP to represent RHA or its customers in court or in a trial. The services provided by KBP cousin of letters, phone calls, and emails. It is understood that KBP does not work for RHA as an employee or partner and does not share fees with REA or represent customers directly. RHA agrees that may hire paralegals, independent contractors and employees to work on RI-IA customer tiles. KBP may not contact RHA's customers, unless mutually agreed by, the parties. represents RHA only' and not its customers. KBP does not guarantee a result for the customers of RHA therein. llPage . . . -- A- Case Document 25 Filed 10/06/17 PageID.755 Page 52 of 78 3. Duties of RHA: RHA agrees to provide REP with current address and phone number on an ongoing basis and to timely respond to any requests ?'om KBP for documents or information. will never guarantee any particular result or outcome to RHA's clients. RHA will never represent that KBP recommends or request customers stop paying their timeshare obligations. RHA shall request from its customers in their agreement that the customer shall pay the transfer fee if requested by the time share companion the seller of timeshares. RHA will not represent ti: its customers that is the customer?s attorney. and RHA shall mutually approve all scripts of RHA before work commences. 4. Additional Duties of RHA: For each ?le provided to KBP by ill-IA,- RHA will provide the following documents, if available, except for .1 below, which is mandatory, to?wit: Purchase Agreementicoutract Loan Documents or mortgage if antr Good Faith Estimate HUD 1 closing Document Signed Disclosure from FHA and signed by RHA customer. Deed and any other recorded documents Any correspondence or emails ?'om RHA or its customers to the timeshare resort Any other documents, or contracts relating to the timeshare. Current maintenance bill andfor mortgage statement A power of attorneyJ from customer to RHA giving RHA the power to putatte a time share cancellation, including a surrender of ownership, and the delegation of said power to KBP from REA, couched as a third party delegation by RNA, in the power of attorney. roseseoona 5. Chargeback's: If a timeshare relief contract does not close and terminate the timeshare for a customer, then the fees paid to KBP for that customer shall be credited back to RHA, after 13 months. The fees shall he applied to other files sent to by RHA, at the option of RHA. 6. Demise of KEP: should become disabled or pass on, all paid up accounts shall continue in full force and effect. The current and ongoing work shall not cease. John Mortimer shall take over the duties, liabilities and responsibilities of in this case. Fee Payment by: REA to For each customer tile for a single timeshare, RIM agrees to pay the sum of $1,200.00. The fee is deemed earned on receipt by KBP, and not held in trust. 8. Disclaimer of Guarantee: KBP cannot make any guarantee as the outcome of a particular file. There is the potential for customers to incur; negative credit reporting, foreclosure, or legal actions against the customer. ZlPage EXHIBIT 9 Case Document 25 Filed 10/06/17 PagelD.756 Page 53 of 78 Exclusivity and ?lens of Armament: REA agrees to encinsivcly use the services of for two (2) years from the date that both parties have signed the agreement for timeshare cancellation services, for current business or new business obtained by RHA The agreement will autotnaticaiiy renew for subsequent on year terms unless either parts cancels the agreement in writing 30 days p1 ior to the end of the two year term it}. Modi?cation eanrcenient; This agreement may be modi?ed by bothgparties in uniting. ii. i2. at .- to. i6. Severahilig: If any part of this agreement is fouad to he or invalid, the entrance of the agreement remain in fut! force and effect. indemnification: Parties agree to indemnify one another For the acts omission, fraud; oegiigence or crimes committed by the respective parties? agents employees or assigns which may arise out of the performance of this agreement .Sianature in (Senate ?Parts and Original Contract: This agreement. and any other agreements between the parties, may be signed in counte1??part,? and the separate partsr?signamres shalt constitute a fully executed agreement. A true and correct of the agreement and the signatures shalt be deemed to be an original? agreement and used for any purpose that an original agreement may be used for. Urnisted Contact information: Parties agree to provide each other with current information regarding their respective addresses, email addresses, piione numbers, and contact information within five husincss days of any changes. Confidentialiy: Parties agree that a mntnai clause Eis benet?iciai and essential and will apply to the terms of this agreement, and the relationship of the parties. No third party disclosure shall occur without the written permission of the other party. .ttrisdiciio?n Venue: This contract wili be deemed by the parties to be entered into in Pawnee County, Oklahoma and Oklahoma state law shalt appiy. Any: disputes between the parties subject to this agreement shati. he heard in the District ?oor: of Pas-mes County, Oklahoma. name: '3 a? I ominous-t REED 1L ND ASSUCLS FES {Lt-?1123: ,1 i tees: a. Pervert, menses eatenCase Document 25 Filed 10/06/17 PageID.757 Page 54 of 78 MEMORANDUM OF UNDERSTANDING AMENDMENT OF AGREEMENT 1. Pursuant to the July 7, 2015 contract between and (the ?Contract?) the parties agree to the following prospective modi?cation of said contract, e??ective March 17, 2016 as follows: 2. Clients. Tinteshare owner will appoint RHA attorney-ht-fact to retain a lawyer on his or her behalf. KBP will serve as the attorney for the timeshare owner (timeshare owner is client) upon payment of the fee by RHA (on behalf of timeshare owners) as provided herein. KBP will provide RHA the Instructions Disclosure For the Release Authorization Form and the Release Authorization Form, and RHA will submit these documents to the timeshare owners for signatures. Once the Disclosure Form and the Release 3.: Authorization Form are executed by the client, and the signed copiesare returned to KBP, then KBP will commence work on the respective ?les therein. No guarantees are made as to ?le outcomes by KBP, PLC, or REA 3. Payment of Fees. On or before the 5th day a?er billing, RHA shall pay KBP a fee per ?le of $650.00 for each and all ?les transmitted to KBP by RHA. RHA agrees to send a minimum of 300 ?les per month to KBP, unless RHA takes-in less than 800 ?les and will in such case, inform KBP of the shortfall. The fee is deemed earned upon receipt, and not held in trust. RHA will provide KBP with a signed and notarized copy, or if necessary the original, of the REF Disclosure and the Release and Authorization form from the client(s), when requested by KBP. The parties agree that Sections 7 and 9 of the Contract herein is hereby replaced prospectively, with this new provision, effective March 2016, except the term of the agreement shall remain as stated in Paragraph 9, Le. two (2) years ?'om July 7, 2015 and the agreement shall renew for one (1) year periods therea?er, unless either party cancels the agreement in writing 30 days prior to the end of the two (2) year term. 4. Compliance with Laws. Both parties agree to comply in all material respects and at all titties with all federal, state and local laws and regulations governing their performance of the Contract. 5. Errors and Omissions. KBP will increase the coverage of its error and omissions (malpractice) policy to an amount of at least $2 million. 6. Successful Timeshare Cancellation. An exit shall be considered a Successful Timeshare Cancellation when KBP receives a writing (including email) from the resort canceling the timeshare owner?s interest in the timeshare. llPage EXHIBIT 11 .Gase Document 25 Filed 10/06/17 PageID.758 Page 55 of 78 7. Sales Force. The parties will work together to implement the Sales Force Platform and to enter milestones which will allow both parties to ascertain the status of cases through the platform. The parties agree to work together to monitor case progress and ensure that cases are becoming Successful Timeshare Cancellations in a timelyr manner. 8. Full Force. Except as amended herein the Contract remains unchanged and in full force and effect. DATED this 17'? day of March, 2016. KEN B. PRJVETT, PLC REED HE ASSOCIATES LLC Knivb BY Ken B. Privett, Manager Brandon Reed, President 21 a 6 EXHIBIT 12 Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.759 Page 56 of 78 EXHIBIT D EXHIBIT D 13 -.4 A38 DOcument 25 Filed 10/06/?xv timeshareemtteamxom ?3 ?Wm qsalun No MORE AINTENANEE FEES. NO MORE SPECIAL ASSESSMENT FEES TIMESHARE OBLIGATIONS. ?xane - 2' If Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.761 Page 58 of 78 EXHIBIT E EXHIBIT E 15 Case Document 25 Filed 10/06/17 PagelD.762 Page 59 of 78 Got timeshare regret? What to do about it Nicholas Clements, Special for USA TODAY 7:30 am. 6, 2016 Did you buy that dream timeshare, only to wake up with buyer's remorse? If you are regretting your purchase. you do have options. First. the bad news. Timeshares are not investments. Their value declines rapidly over time, and the maintenance fees can and likely will increase. If you feel stuck, here are four options that could help: . Re?nance the timeshare mortgage. ?show, isrockphoro) . Sell or give away your timeshare. . Try to give it back to the resort. . Work with a company to help you negotiate an exit. Refinance your timeshare loan If you like your timeshare. but you don?t like the high interest rate on your loan, you can re?nance. Ligh1?trgam 5.99% and there is no origination fee or prepayment penalty. According to Todd Nelson of ?Financing is most commonly and conveniently offered by developers when buyers purchase their timeshare. As a result. owners may think they have no other option and. in fact, may wind up with higher rates than they may need to pay.? You need good credit to qualify. Home equity loans personal loans and even 0% balance-transfer offers from credit card companies can often provide lower interest rates than developer loans. You can shop online for - - . I . - - - to ?nd the best rates Re?nancing provides one additional bene?t: You will have greater ?exibility to negotiate an exit or give away your timeshare because you will no longer have a mortgage attached to it. Sell it or give it away Timeshares rapidly lose value, so you should not be surprised to receive only a fraction of your original purchase price. Sometimes you can?t even give them away. Be cautious of any company that promises an amazing resale price but asks for money upfront. According to the Eager alT rage miI?? 9n - - . ?If you want to sell your deeded timeshare, and a company approaches you offering to resell your timeshare go into skeptic mode." .com/sto /mone l' . . l' As a starting point. try to determine the market value of your timeshare by visiting or the .You can try to sell your timeshare online at these sites. EBay and Craigslist are also popular options. You might have to cover closing costs and some maintenance fees to get a sale. DevelopmentAssociation, believes you have better chances if your resort has an active sales office because it "has the ability to recycle inventory quickly.? Give it back to the resort EXHIBIT 16 ii 9%u%%i$be Bagqg Qigylyugtgnes logg'zgg resEriaig ?ngeg rgfoZ%ation to work with you. they might. According to Michael Brown, the COO of Hilton_?3_rap_d Yacatjons. ?Should owners need to exit due to life changes. we offer a resale department that can discuss with them their options, including buy-back consideration.? If your timeshare is not operated by a big brand. make sure you reach out to the right people. Brian Rogers, - the owner of Timeshare Users Group. recommends contacting your homeowners association in writing. He encourages people to ?be perfectly honest" to get the best result. Baton putting your timeshare on the market. check to see If your resort has a sales office. (Photo: Getty Images) Engage with a timeshare exit company If the resort is not willing to take it back and you cannot sell it, you might want to hire an exit company. These businesses are controversial and expensive. costing $5,000 or more to help you exit your timeshare. Do the math. but offering several years maintenance fees to a potential buyer could be a cheaper option. At worst, you will pay a timeshare exit company to do something you could easily do yourself. But if all else fails, you might want to consider a company like CEO Brandon Reed explains that his company uses lawyers "to get the resort to take the timeshare back.? Reed claims that his lawyers will play hardball and they get results. His company otters a guarantee: If they are not successful. you get your money back. When deciding which company to choose. Rogers warns against using any company that requires an up-front payment. He believes that ?if it was that much of a guarantee, there is no reason to charge until the end.? Some people just stop paying on their timeshares. If you do walk away. don?t be surprised to see a big hit to your credit score and to start getting regular calls from collection agencies. You might regret your purchase. but you did sign a legally binding contract. Nick Clements is the co-founder of a ?nancial education and price comparison website. Read or Share this story: EXHIBIT 17 Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.764 Page 61 of 78 EXHIBIT F EXHIBIT F 18 Case Document 25 Filed 10/06/17 PagelD.765 Page 62 of 78 . trmeshareexrtteam Date: 5 REED ASSOCIATES LLC 3400 188th ST SW Suite 300 nwood, WA 98037 1-855?7336434 TIMESHARE OWNER EXIT AGREEMENT Omrnerls): ?__[lnclude All Owners]; is/are referred to herein as the the "you" or ?your?. Timeshare Exit Team: REED HEIN ASSOCIATES LLC, a Washington limited liability company, is referred to herein as or OWNER desires to transfer his/her ?Timeshare? ownership, Le. transfer title and/or membership along with all associated financial obligations (collectively, the "Timeshare Ownership") with the following resort, vacation or timeshare club: (the ?Resort"). REED provides their clients with a safe and secure transfer strategy for their Timeshare Ownership, and guarantee as set forth herein. REED desires to secure your ultimate objective to end your Timeshare Ownership and all the associated ?nanciai obligations. For and in consideration of their mutual and/or respective bene?ts, obligations and covenants as set forth herein, for which the bargaining for, the receipt of and the suf?ciency of which are hereby acknowledged, the undersigned parties agree as follows: FEE AMOUNT a REED HEIN's "Fee Amount? for this Agreement is 5 Q6 ?154 d? The Fee Amount is payable in full upon the signing of this Agreement, unless a ?nancing document for delayed payment is simultaneously signed, in which case such financing document is herein incorporated by this reference. The Fee Amount, and any part thereof, becomes immediately non- refundable except as may be set forth herein regarding the Guarantee. Under this Agreement there are absolutely no extra service fees or closing costs to he owed or paid by the CLIENT to REED HEIN. However, some resorts may require a cancellation fee or similar fee to end or exit an ownership, and such fee(s) may be required in your case. These fees will be no greater than the Page 1 Inltial(s- Date ?'13 3% EXHIBIT 19 Case Document 25 Filed 10/06/17 PagelD.766 Page 63 of 78 amount of this current year?s maintenance fee. If so, the CLIENT will be required to pay that fee to the Resort for a successful exit. In addition, some resorts require all past maintenance fees to be paid upon the completion of an exit. if required, these past maintenance fees will be paid by the CLIENT. Whether accepted by OWNER or not, an exit agreement obtained by REED from the Resort shall meet REED Guarantee even though the Resort may require the payment by OWNER of an exit fee. DUTIES A. Please remember that you own your Timeshare until the dosing of the exit is ?nalized, thereby relieving you of ownership; and you remain responsible for all ?nancial obligations associated with your Timeshare until the exit is completed. The closing of an exit transaction usually takes 3 to 9 months, but in some cases longer due to Resort delays or restrictions. B. Finally, the CLIENT must sign (and notarize, as requested: typically deeded properties) and send within Fourteen {14) days of receiving them, any of the transfer documents required by the Resort and/or REED HEIN. REED Every remaining duty in this Agreement is for REED to perform in order for you to successfully exit your Timeshare Ownership. If REED HEIN cannot ?nalize your Timeshare Ownership for any reason whatsoever, you will be entitled to a full refund of the Fee Amount. BUT BE ADVISED: REED fully pia ns on successfully completing your exit process, so please anticipate and expect a successful closing to secure the objective: To get you out of your Timeshare Ownership and all associated ?nancial obligations. THIS IS NOT A LIST ING This is a 100% certain solution Timeshare Ownership Exit Agreement. This is p_o_t a listing agreement where a timeshare ownership fasting may sit unworked for months. Our Fee Agreement is GUARANTEED for complete performance (total Timeshare Ownership exit including all associated ?nancial obligations). BINDING AQREEMENT OWNER is fully satis?ed with the binding terms of this Agreement- By signing below the OWNER acknowledges that he/she has had the opportunity to obtain his/her own independent legal and/or tax advice. OWNER now wants to engage REED HEIN. Ail terms of this Agreement become binding upon signing, and no Fee Amounts will be refunded except as speci?cally set forth herein. if there is any dispute under our Agreement, the laws of the state of Washington shall apply with jurisdiction granted to the Washington Superior Courts venued in Snohomish County. REED liability under this Agreement is strictly limited to contract damages not to exceed the Fee Amount. Prior to any litigation, the parties agree to ?rst attempt good faith mediation. AVOID OWNER DEFAULT REED HEIN wants you to receive what you paid far (and to be able to end your Timeshare Ownership without unnecessary costs). As discussed on Page 1, you have few duties owed under this Agreement, Page - 2 initialis) Date ll, 21/151 EXHIBIT 20 Case Document 25 Filed 10/06/17 PageID.767 Page 64 of 78 but they are important to accomplish in order to avoid a default and forfeiture of your deposited funds. You will only have a few documents to properly and timely sign. So please avoid an unnecessary delay and call immediately if you think there could be any problem with performance. (We can heipi) ARANTEE REED guarantees that it will obtain exit agreement from the Resort regarding your Timeshare Ownership, or your Fee Amount will be refunded. This Guarantee is met even though the OWNER may not accept the terms of the Resort's exit agreement. This Guarantee is contingent upon: all information that is provided to REED HEIN by the CLIENT as having been accurate and complete, and full cooperation with the CLIENT to respond to any (?Request For Information?) by REED or the Resort. This Guarantee does not apply to any transaction where the CLIENT stops or delays the exit process or refuses to sign a procured exit offer. This Guarantee is valid only when the CLIENT ful?lls the duties required of them. If the CLIENT delays the process Or does not property or timely respond to REED requests, then the Guarantee is void. If the requested exit from Timeshare Ownership cannot be obtained, and CLIENT has fully cooperated with REED HEIN, the Fee Amount you have paid for this Agreement will be fully refunded. [Select and mark the applicable Bax]: CLIENT warrants that his/her Timeshare is owned free and clear of any mortgages or other lien encumbrances. a CLIENT acknowledges the existence of a mortgage. RlGi-i'i' TO CANCEL Tl-iiS AGREEMENT You may cancel this Agreement at any time priorto midnight of the third business day after the date of signing this Agreement. in order to be a valid cancellation, you must mail your signed cancellation notice to REED address listed at the top of this Agreement, by certi?ed mail, return receipt requested, postage prepaid. Please call us first for rapid resolution of any concerns. REED HEIN has never had a Better Business Bureau or Washington State Attorney General complaint, or any other form of government action in all 50 states and Canada. We plan on keeping this unblemished record with the consumer public and our valued clients. 50 ?rfanything concerns you piease call us: we are committed to making this a positive closing chapter to your timeshare ownership. NOTICES Any notices or other communications desired or required to be given under this Agreement shail be in writing and shall be sent by certi?ed mail, return receipt requested, postage prepaid to REED to their address listed at the top of this Agreement, and/or, to the OWNER to their address listed in the attached Membership Processing form. 9 -3 Mas/(L age EXHIBIT 21 Case Document 25 Filed 10/06/17 PagelD.768 Page 65 of 78 ATTORNEYS FEES if any dispute should arise between the parties, the prevailing party shall be awarded by the court its reasonable costs and expenses, including reasonable attorney? 5 fees. successonmo ASSIGNS This Agreement shall be binding upon and shall inure to the bene?t of the parties hereto and their respective successors and assigns. REED may assign this Agreement or all or any part of its rights and obligations hereunder to one or more parties without the consent of OWNER. AMENDMENTS This Agreement may not be changed, modi?ed or terminated except by a written instrument executed by both parties hereto. AGREEMENT This Agreement contains all of the terms agreed upon between the parties with respect to the subject matter hereof and supersedes any and all prior written or oral understandings. ll OWNER Date REED Authorized Agent: Date ?l 13/ ?5 L) reedhein ASSOCIATES Page - 4 . initialls)- Date EXHIBIT 22 23' timesharea-xcitteam By medhein 8. ASSOCWES mummy.- - USA TIMESHARE INFORMATION Case 3:17 m: Amen: ?ights/Yr Wm" Name Fees/Bad: Mam (dick here Malmezlaaca Fee ?mam?: 58$ (INCLUDE for notes) $2 comm m) AVGCosti Datedf?u'st TatFumremm ParNIght ("?5123de who MTGPamnt Payments (mantis I a nuawk mm) MTG ?Month Term of ADO, . El $322 1 $12,355 $211 120 $139 $5,995 n1- ?rn LU Tom! Yearly Maint Feesi $832; Total COS: 9" "$34357 ?v Which as? ?these weaid was ra'?hzar pay? g; 5 . T5 mrt- Total (Nut ISws) special MPsf?ext {Bedhein a Assessments Tara! Future Assmnis+Fut. MFG Pmts. Exat Fee Total W's! vs $26599523f9'; 2.1 Reed Hein Client Adviser. Tyler Feliczak Of?ce Address: 4695 MacArthur Cawt 11th Floor New Beach, CA 92 650 Direct. (858} 922-5069 Mam.- L435) 415.1200 Pag- Page 66 of 78 EXHIBIT Case Document 25 Filed 10/06/17 Page 67 of 78 Initial Here Initial Here Initial Here Initial Here initial Here Initial Here initial Here Initial Here Initial Here . "Eh-r timeshareeXItteam Things To Remember If you have not received a Welcome email from Reed Hein within 3-5 days please check your spam/Junk folder. Many times emails from us end up in client?s spam/junk folders instead of their inboxes, so when you receive your Welcome email, add the email address to your contacts so all future emails will go straight to your inbox. if you still have not received any emails from us please call the client adviser you signed up with so we can solve any email problems. DO NOT CALL the Timeshare Company at all, even if you are just asking if they have heard from us or what the current status is. An! contact from you to any of the parties involved besides Reed Hein Associates will cause the entire process to slow down and in most cases prolong your exit. Please remember that you have retained us to handle this exit for you. We do not communicate or release you from debts that are held by third party lenders. DO NOT TALK to anyone from your'l?lmeshare Company or Collection agency unless told to do so by Reed Hein Associates. They will make a last ditch effort to bombard you with calls during the time period before they must comply with any cease and desist orders. if you answer, simply hang up. After 30 Days, always get their name and contact info including fax number and correspondence address and forward that to us so we can send notification again or directly to that individual or department. Please remember that the last thing most of the timeshare companies want is to release documentation that admits their agreement to let you out of your contract. Like we said before, we will get you a copy of such an agreementif we can, but regardless if we are able to, we will give you an of?cial notification from us that you have been released. In cases where the timeshare Was deeded, you can make a copy of the quit claim once it has been notarized before sending it back to us which releases your name off of the timeshare permanently. STAY POSITIVE, we will get you out of your timeshareis] and all future associated financial obligations. Our Client Managers work with an attorney to exit your timeshare. This process can seem very slow at times as the timeshare companies will drag out the process as much as possible. Please do not despair, we WILL get you out. It?s not a question of IF, only a question of WHEN. PLEASE TELL as many people as you can that The Timeshare Brit [em has gotten you out of your timeshare when you have been exited. Just remember that because of the confidentiality agreement, you CANNOT SAY the name of the Timeshare Company or Resort. Remember, if you send us a referral and they sign up to get out of their timeshare, WE Will. SEND you $150?! Updates regarding your exit process will be emailed or mailed out Reminder, your Client Manager is the liaison between you and our attorney. If you have any questions or concerns that you would like addressed, please contact your Client Manager. reedhein a ASSOCIATES 3400 188?? Street Southwest, Suite 300 WA 98037 EXHIBIT 24 Case Document 25 Filed 10/06/17 PageID.771 Page 68 of 78 reedhein ASSOCIATES Newport Beach, 1 1/23/15 AGREEMENT FORM USA Headquarters Canada Headquarters 3400 188th St SW 2630 Croydon Dr 300 Suite 200 WA 98037 Surrey, BC V32 6T3 1-855~733-3434 1-855-733-3434 U.S. Fax: 1425-3538-1995 In Person Chink?Ac so Tyler Feliczak Owner/Client Information Name IPhona 1 (Pullman: Billng Address: [Wanna 2 (SECONDARY): city Sig/Prov. ountnr Zip/Postal Code mall CA USA - . Paym nt Inform ation Timeshare Exit Fee $539500 EACH (USEACH Amt. Damn Cardls) Total Other Enter Name an Card Amt. Total Price $6,645.00 1) I Select One Acct? CCV Downpayment $6,645.00 Signature Enter Name on Card Amt. Balance Due I $0.00 2 . Select One Acct? Exp CCV Signature Exit lhformation Special Arrangements/Additional CC's: 1 Number of?rimahares Eds with Balance Owing 1 {Exits NO Balance Owing ?Pk (lient?AIkatI?Z?J Tyler Felicznk Version 15.10.29 Client I - 4w Cl?lont Date EXHIBIT 25 Case Document 25 Filed 10/06/17 PageID.772 Page 69 on8 TIMESHARE DESCRIPTION SHEET reedheln USA Headquarters Canada Headquarters 3400 188th St SW, Suite 300 2630 Croydon Dr WA 98037 Suite 200 1-855-733~3434 Surrey, BC V32 6T3 U.S. Fax: 1425-3984995 Owner Namds) Resort Ciub Name: Clty/State/Country: DDeeded Property or EMembership Points DLease Term Ending Owner Annual Points: 4000 Banked Points: Login Password Anniversary Month Website DStudio D1 BD D2 an D3 so Timeshare Use Location 7 7' Even DOdd Driennial State/Prov. CA Out of Comm/D Floating Week Fixed Week URCI or II Acct. DUpgraded in (Year) Maintenance Fees paid 12/31/15 Initial-? How much are your Maint. Fees? $832.12 How Often?? Annualiy initial:- if Other Maintenance Fees past due amount?: Does this include taxes? .Yes DNO If not, how much? Are payments automatically withdrawn? DYes .No (Also NO if in process of turning off Special Assessment Due? Des Eula if yes, amount due? initial:- Approximate Mortgage Lien owed $12,855.63 Payment 23 initial: Are your Mortgage Payments {or other lien payments) Current? I es initial: - How much are Mortgage Payments behind? Initial:- Checklist DAttach Original Contract Documents UExit Agreement DDeed DAttach a Recent Maintenance Fee Statement DAgreement Form DPersonal Picture identi?cation (Driver's License or Gov't Photo lD} EAuthorization Form Owner's Phone Number: Owner's Cell Phone Number: emam? renames: Owner's Phone Number: Owner?s Cell Phone Number: Email: Mailing Address: By signing below, you acknowledge this Form has been carefully reviewed and you have supplied true and accurate information. lDatEXhtl?-Eyff. lien?s) Signature: Case Document 25 Filed 10/06/17 PageID.773 Page 70 of 78 mmumme feEdhein 8: ASSOCIATES Enter C??em?e Name Exit Toma Before magma, $5,995 DECQU NTS 2.5% Cred. Card Discount 5% Check/Cheque Discount $6320 or $5,645 $175 $353 Mark GNLY to 599%? Which NF szaon Reed Hein Client Adviser: Tyler Feliczak af?ne Address: 4695 MacArthur Court 11th Floor Newport Beach, CA 92660 Main: (425)415~1200 Direct: {858) 922-5069 EXHIBIT 27 Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.774 Page 71 of 78 EXHIBIT G EXHIBIT G 28 Case Document 25 Filed 10/06/17 PageID.775 Page 72 of 78 "Our personaliia to you is that our team of consumer advocates will get you out of your timeshare, penodT Brandon Reed Founder. Timeshare Extt Team or call us at 1-800-848-2911 4:833 .- BUSINESS EXHIBIT 29 Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.776 Page 73 of 78 EXHIBIT H EXHIBIT H 30 Case Document 25 Filed 10/06/17 PageID.777 Page 74 of 78 PROMISSORY NOTE FOR VALUE RECEIVED. the undersigned, hereinafter referred to as ?Maker". residing at promises to pay to the order of Reed Heln Associates. LLC. hereafter referred to as ?Holder", located at 3400 188th Street SW, WA, 98037 the sum of One Thousand, US Dollars. Payment Terms (A) Term Holder will pay $1,000 to Welk Resorts on behalf of Maker. Maker shall reimburse Holder per the terms stated in the attached Finance Agreement. which is considered part of this Promissory Note and is incorporated herein by reference in its entirety. (8) Delivery - Payments shall be delivered to the Holder at the address shown above or any other such address as may later be agreed upon by both parties. (C) Prepayments - If the Maker prepays the Note in part. the Maker agrees to continue to make the regularly scheduled payments until all amounts due under the Note are paid. There will be no penalty for prepayment of some or all of the Note. Failure to Pay (A) Default - Maker will be in default for any of the following reasons: Maker does not pay the full amount of each by the date stated in the Payment Terms above, (ii) if Maker defaults on any promise made in this Note or any other note, loan or agreement with the Holder. death of the Maker, (iv) if the Maker ?les a bankruptcy petition or anyone ?les a bankruptcy petition against the Maker, or if the Maker becomes insolvent and/or cannot pay the Maker's debts as they come due. Maker waives any notice of default. (B) Acceleration If at any time the Maker is in defaultas speci?ed herein, Holder may require the Maker to immediately pay the full amount remaining due under the Note. (C) Payment of Note Holders Costs and Expenses - in the event of any default, the undersigned agrees to pay all reasonable attorney fees and costs of collection to the extent permitted by law. EXHIBIT 31 Case Document 25 Filed 10/06/17 PageID.778 Page 75 of 78 FINANCE AGREEMENT Beginning on November 1, 2016, and until the balance of $1,000.00 (?Amount Financed?) is paid in Full, I, authorize the following payments to Reed Hein 8: Associates, LLC: SELECT ONE: 5 equal payments of November 1, 2016 $200 per month March 1, 2017 OR E10 equal payments of November 1, 2016 5100 per month August 1, 2017 SELECT ONE: Payment will be made on my Credit Card or via ACH, as directed below. ACH Name on Account Bank Routing Number Account Number .caeorr CARD Name on Credit Card Amour, Number Expiration Date Payments will be processed on the 1St of each month. Your signature below indicates acceptance of th bove terms and conditions. Signature Date EXHIBIT 32 Case Document 25 Filed 10/06/17 PageID.779 Page 76 of 78 Notice Any notice that must be given to Maker under this Note will be given by delivering it or mailing it by certi?ed mail addressed to Maker at the Maker's address above. If Maker provides a different address than the address listed above, Holder must give notice to Maker at the most recent address provided. Any notice that must be given to Holder under this Note will be given by delivering it or mailing it by certi?ed mail addressed to Note Holder at the Holder?s address above. If Note Holder provides a different address than the address llsted above, Maker must give notice to Holder at the most recent address provided. Modification No modi?cation or waiver of any of the terms of the Agreement shall be allowed unless by written agreement executed by both parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. Amendment of Promissog Note This Promissory Note may be modi?ed or amended only by written agreement duly executed by the Holder and Maker. Signature of Maker Date Signature of Holder Date EXHIBIT 33 Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.780 Page 77 of 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 CERTIFICATE OF SERVICE I am employed in the County of Orange, State of California, am over the age of 18 and not a party to the within action. My business address is Godes & Preis LLP, 300 Spectrum Center Drive, Suite 1420, Irvine, CA 92618. On the date set forth below, I served the foregoing documents described as SECOND AMENDED COMPLAINT on all interested parties in this action as follows: [ X] BY CM/ECF NOTICE OF ELECTRONIC FILING - I caused said document(s) to be served by means of this Court's electronic transmission of the Notice of Electronic filing through the Court's transmission facilities, to the parties and/or counsel who are registered CM/ECF Users set forth in the service list obtained from this Court. [ ] BY MAIL: I am "readily familiar" with Godes & Preis, LLP's practice for collecting and processing correspondence for mailing with the United States Postal Service. Under that practice, it would be deposited with the United States Postal Service that same day in the ordinary course of business. Such envelope(s) were placed for collection and mailing with postage thereon fully prepaid at Irvine, California, on that same day following ordinary business practices. LINCOLN, GUSTAFSON & CERCOS, LLP Teresa M. Beck, Esq. tbeck@lgclawo(fice.com Paul H. James, Esq. 550 West "C" Street, Suite 1400 San Diego, CA 92101 Telephone: (619) 233-1150 Facsimile: (619) 233-6949 WILSON, ELSER, MOSKOWITZ, EDELMAN &DICKERLLP David S. Eisen david. e isen@wilsonelser.com Gregory K. Lee gregory. lee@wilsonelser.com 555 South Flower Street, Suite 2900 Los Angeles, CA 90071-2407 Telephone: (213) 443-5100 Facsimile: (213) 443-5101 Attorneys for Defendant KEN B. PRIVETT, PLC Attorneys for Defendant REED HEIN & ASSOCIATES, LLC 27 28 CERTIFICATE OF SERVICE Case 3:17-cv-01499-L-AGS Document 25 Filed 10/06/17 PageID.781 Page 78 of 78 1 2 3 4 5 6 7 8 9 10 11 12 KLINEDINST P.C. Heather L. Rosing, Esq. hrosing@klinedinstlaw.com Gregor A. Hensrude, Esq. ghensrude@klinedinstlaw.com Robert M. Shaughnessy, Esq. rshaughnessy@klinedinstlaw.com 501 W Broadway, Ste. 600 San Diego, CA 92101 Telephone: (619) 239-8131 Facsimile: 619 238-8707 Attorneys for Defendant SCHROETER GOLDMARK & BENDER, P.S. I declare that I am employed in the office of a member of the bar of this Court at whose direction this service was made. [ x] (Federal) I declare under penalty of pe1jury under the laws of the United State of America thatthe above is true and correct. Executed on October 6, 2017, at Irw~ ~ 13 14 DANIELLE FREDERICK 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE