DIAMOND RESORTS US v. PANDORA MARKETING, LLC

Full title: DIAMOND RESORTS U.S. COLLECTION DEVELOPMENT, LLC, et al., Plaintiffs, v…

Court: United States District Court, C.D. California

Date published: Feb 17, 2023

656 F. Supp. 3d 1073 (C.D. Cal. 2023)

Opinion

CV 20-5486 DSF (ADSx)

2023-02-17

DIAMOND RESORTS U.S. COLLECTION DEVELOPMENT, LLC, et al., Plaintiffs, v. PANDORA MARKETING, LLC d/b/a Timeshare Compliance, et al., Defendants. Intermarketing Media, LLC d/b/a Resort Advisory Group, Counter-claimant, v. Diamond Resorts U.S. Collection Development, LLC, et al., Counter-defendants.

Lindy Kathryn Keown, Pro Hac Vice, Brandon T. Crossland, Pro Hac Vice, Baker and Hostetler LLP, Orlando, FL, Albert G. Lin, Pro Hac Vice, Douglas A. Vonderhaar, Pro Hac Vice, Kayla Marie Prieto, Pro Hac Vice, Marissa A. Peirsol, Pro Hac Vice, Baker and Hostetler LLP, Columbus, OH, Caroline Dettmer Slye, Pro Hac Vice, Baker and Hostetler LLP, Cincinnati, OH, Daniella E. Martinez, Pro Hac Vice, Baker and Hosteler LLP, Houston, TX, Nicole C. Cemo, Teresa C. Chow, Baker and Hostetler LLP, Los Angeles, CA, for Plaintiffs/Counter-Defendants Diamond Resorts U.S. Collection Development, LLC, Diamond Resorts Hawaii Collection Development, LLC. Cathleen Mulligan Golden, David E. Outwater, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, David Alan Klein, Pro Hac Vice, Law Offices of David Alan Klein PC, Cherry Hill, NJ, for Counter-Claimant. Benjamin D. Scheibe, Eric M. George, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Amy Leigh Baker, Rimon PC, Orlando, FL, John Joseph Bennett, Jr., Pro Hac Vice, Jonathan Michael Sykes, Pro Hac Vice, Paul Nicholas Mascia, Pro Hac Vice, Nardella and Nardella PLLC, Orlando, FL, Emily Lilburn, Pro Hac Vice, Ellis George Cipollone O'Brien Annaguey LLP, New York, NY, Patrick A. Bradford, Pro Hac Vice, Bradford Edwards and Varlack LLP, New York, NY, Panda L. Kroll, Panda Kroll and Associates, Camarillo, CA, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, for Defendant Pandora Marketing, LLC. Benjamin D. Scheibe, Eric M. George, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Cathleen Mulligan Golden, David E. Outwater, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, David Alan Klein, Pro Hac Vice, Law Offices of David Alan Klein PC, Cherry Hill, NJ, for Defendant Intermarketing Media, LLC. David P. Hall, Randall Stepp, Carlsbad Law Group LLP, Carlsbad, CA, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, Andrew D. Stolper, Irvine, CA, for Defendants JL Sean Slattery, Carlsbad Law Group, LLP, Del Mar Law Group, LLP, Slattery, Sobel and DeCamp, LLC. Albert G. Lin, Baker and Hostetler LLP, Columbus, OH, Nicole C. Cemo, Baker and Hostetler, Los Angeles, CA, for Counter-Defendant Diamond Resorts International, Inc.

Dale S. Fischer, United States District Judge

Lindy Kathryn Keown, Pro Hac Vice, Brandon T. Crossland, Pro Hac Vice, Baker and Hostetler LLP, Orlando, FL, Albert G. Lin, Pro Hac Vice, Douglas A. Vonderhaar, Pro Hac Vice, Kayla Marie Prieto, Pro Hac Vice, Marissa A. Peirsol, Pro Hac Vice, Baker and Hostetler LLP, Columbus, OH, Caroline Dettmer Slye, Pro Hac Vice, Baker and Hostetler LLP, Cincinnati, OH, Daniella E. Martinez, Pro Hac Vice, Baker and Hosteler LLP, Houston, TX, Nicole C. Cemo, Teresa C. Chow, Baker and Hostetler LLP, Los Angeles, CA, for Plaintiffs/Counter-Defendants Diamond Resorts U.S. Collection Development, LLC, Diamond Resorts Hawaii Collection Development, LLC.

Cathleen Mulligan Golden, David E. Outwater, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, David Alan Klein, Pro Hac Vice, Law Offices of David Alan Klein PC, Cherry Hill, NJ, for Counter-Claimant.

Benjamin D. Scheibe, Eric M. George, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Amy Leigh Baker, Rimon PC, Orlando, FL, John Joseph Bennett, Jr., Pro Hac Vice, Jonathan Michael Sykes, Pro Hac Vice, Paul Nicholas Mascia, Pro Hac Vice, Nardella and Nardella PLLC, Orlando, FL, Emily Lilburn, Pro Hac Vice, Ellis George Cipollone O'Brien Annaguey LLP, New York, NY, Patrick A. Bradford, Pro Hac Vice, Bradford Edwards and Varlack LLP, New York, NY, Panda L. Kroll, Panda Kroll and Associates, Camarillo, CA, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, for Defendant Pandora Marketing, LLC.

Benjamin D. Scheibe, Eric M. George, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Cathleen Mulligan Golden, David E. Outwater, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, David Alan Klein, Pro Hac Vice, Law Offices of David Alan Klein PC, Cherry Hill, NJ, for Defendant Intermarketing Media, LLC.

David P. Hall, Randall Stepp, Carlsbad Law Group LLP, Carlsbad, CA, Eric A. Westlund, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Randi Ellen Pinckes, Outwater and Pinckes LLP, Irvine, CA, Andrew D. Stolper, Irvine, CA, for Defendants JL Sean Slattery, Carlsbad Law Group, LLP, Del Mar Law Group, LLP, Slattery, Sobel and DeCamp, LLC.

Albert G. Lin, Baker and Hostetler LLP, Columbus, OH, Nicole C. Cemo, Baker and Hostetler, Los Angeles, CA, for Counter-Defendant Diamond Resorts International, Inc.

Order re Special Master's Report & Recommendation (Dkt. 715)

Dale S. Fischer, United States District Judge

On September 19, 2022, the Special Master filed his report and recommendation regarding the parties' motions for summary judgment. Dkt. 715 (Report). Plaintiffs and Counter-defendants, Diamond Resorts U.S. Collection Development LLC and Diamond Resorts Hawaii Collection Development LLC (collectively, Diamond) move to modify and adopt the Report as modified. Dkt. 723 (Pls. Objs.). Defendant Pandora Marketing LLC objects to the Report on the grounds that the Special Master exceeded his mandate by deciding

contested factual issues and failed to resolve the issue of constitutional standing. Dkt. 721 (Pandora Objs.) at 1. Defendants Slattery, Sobel & Decamp, LLP, Del Mar Law Group, LLP, Carlsbad Law Group LLP, and JL "Sean" Slattery, Esq. (collectively, the Defendant Law Firms) also object to the report on various grounds. Dkt. 724 (Slattery Def. Objs.). Defendant and Counter-claimant Intermarketing Media LLC (RAG) object to portions of the Report and move to adopt in part. Dkt. 725 (RAG Objs.). The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78; Local Rule 7-15.

I. BACKGROUND

Diamond brought this action against Defendants under state and federal laws for false advertising, unfair business practices, civil conspiracy, and tortious interference with contractual relations. Dkt. 307 (FAC) ¶¶ 296-475. RAG filed a counterclaim alleging Diamond interfered with contractual relationships with its clients. See Dkt. 443.

On March 14, 2022, Diamond filed a Motion for Partial Summary Judgment. Dkt. 591 (Diamond MSJ). On March 15, 2022, Pandora and RAG (the Exit Defendants), and the Defendant Law Firms filed their motions for summary judgment. See Dkts. 596 (Exit Defs. MSJ) and 600 (Def. Law Firms MSJ). On April 18, 2022, following Diamond's motion for the appointment of a Special Master, the Court ordered the parties to meet and confer and agree on a Special Master to hear the parties' summary judgment motions. See Dkt. 683 at 2.

On August 3, 2022, the Court appointed Hon. Patrick J. Walsh (Ret.) to serve as Special Master to hear the parties' summary judgment motions. Dkt. 685 (Special Master Order) at 2. The Special Master's duties were "to hear and recommend to the court the disposition of the Parties' pending summary judgment motions, with no limitations on the powers enunciated by Rule 53(c)." Id. However, he did not have the authority to "conduct any evidentiary hearing or decide any contested factual issues." Id.

On September 19, 2022, the Special Master filed his report and recommended that the motion for summary adjudication of the following facts be granted and the Court accept these facts as uncontested:

(1) The Exit Defendants falsely claimed in commercial advertisements and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts;

(2) The Exit Defendants falsely claimed in these ads and promotions that they had a 100% success rate;

(3) These advertisements and promotions constituted commercial speech;

(4) These advertisements were disseminated to a vast audience of the purchasing public through television, radio, internet, and print ads;

(5) Based on these false and misleading ads, some of Diamond's timeshare owners contacted the Exit Defendants. In promotional calls that followed, the Exit Defendants' analysts repeated the above false claims and expanded on them. In addition, they counseled the owners to stop making payments to Diamond. Some of the owners listened and stopped making payments;

(6) Further, because the statements identified in subsection (i) and (ii) are literally false and because Pandora and RAG knew that they were false, it is presumed that these statements were material and that they deceived the owners who purchased Defendants' services; and

(7) Diamond has lost revenue from timeshare owners who stopped paying Diamond as a result of the Exit Defendants' false and misleading advertisements and promotions.

Report at 54-55 (citation omitted).

The Special Master noted that the issue of how many of Diamond's timeshare owners breached their contracts as a result of the Exit Defendants' intervention and the amount of damages Diamond is entitled to as a consequence is in dispute. Id. at 55. He recommended "that Diamond's Lanham Act claims accruing prior to January 31, 2017" and "tortious interference with contract claims against Pandora and RAG that accrued prior to January 31, 2018, and for Defendant Law Firms before May 6, 2018" be found to be barred by the statute of limitations. Id. He also recommended that the parties' remaining requests for summary judgment be denied. Id.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 53 provides that courts "acting on a master's order, report, or recommendations," "must give the parties notice and an opportunity to be heard." Fed. R. Civ. P. 53(f)(1). Courts "may adopt or affirm, modify, wholly or partly reject or reverse, or resubmit to the master with instructions" the Special Master's order, report, or recommendations. Id. The legal conclusions of a special master are reviewed de novo. Valdivia v. Schwarzenegger, 599 F.3d 984, 988 (9th Cir. 2010) (citing United States v. Clifford Matley Family Trust, 354 F.3d 1154, 1163 n.10 (9th Cir. 2004)); Fed. R. Civ. P. 53(f)(4). Courts are to review all objections to a special master's findings of fact de novo unless the parties stipulate that those findings be reviewed for clear error or that the findings will be final. Fed. R. Civ. P. 53(f)(3); see In re Cathode Ray Tube (CRT) Antitrust Litig., No. C-07-5944 JST, 2016 WL 10644540, at *1 (N.D. Cal. Jan. 5, 2016). In addition, courts "may set aside a master's ruling on a procedural matter only for an abuse of discretion." Fed. R. Civ. P. 53(f)(5).

In its Order appointing the Special Master, the Court noted that it would review the master's recommendations de novo pursuant to Rule 53(f). Special Master Order at 2. "Under the de novo standard of review, [courts] do not defer to the ... ruling but freely consider the matter anew, as if no decision had been rendered." United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988).

III. DISCUSSION

A. Constitutional Standing

As the party invoking jurisdiction, Diamond bears the burden of establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). For Diamond to allege Article III standing, it must sufficiently plead an (i) injury-in-fact, (ii) that is causally connected to Defendants' challenged conduct, and (iii) is likely to be "redressed by a favorable decision." Id. at 560-61, 112 S.Ct. 2130 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 38, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976)). The alleged injury-in-fact must be: (i) "concrete and particularized" and (ii) "actual or imminent, not 'conjectural' or 'hypothetical.'" Id. at 560, 112 S.Ct. 2130 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990)). "[E]ach element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Id. at 561, 112 S.Ct. 2130. On summary judgment, "the plaintiff can no longer rest on ... 'mere allegations,' but

must 'set forth' by affidavit or other evidence 'specific facts,' ... which for purposes of the summary judgment motion will be taken to be true." Id. (citing Fed. R. Civ. P. 56(e)). "And at the final stage, those facts (if controverted) must be supported adequately by the evidence adduced at trial." Id. (internal quotation marks and citation omitted).

Pandora asserts that the Special Master failed to resolve the issue of constitutional standing. Pandora Objs. at 1. It argues that there is "serious doubt about whether Plaintiffs owned the 764 loans upon which they sued at the time of alleged injury," and Diamond's ownership of the 764 loans was mistakenly assumed based on its complaint. Id. Pandora contends that Diamond's parent company filed financial reporting documents with the Securities & Exchange Commission (SEC) that confirm that Diamond securitizes timeshare owners' loan obligations and sells them to third parties, and the testimony of Kate Gingras, Diamond's Vice President of Financial Services further confirms that approximately 75% of its loans are securitized. Id. at 5 (citing Dkt. 596-13, Ex. NN). Pandora argues that because Diamond sold the loans and did not own them at the time of the alleged injury, Diamond did not suffer an injury in fact. Id. at 5.

RAG joins Pandora's objection, asserting that Diamond has failed to establish ownership of the loans and that all loan payments are made payable to Diamond Resorts Financial Services, Inc. (DRFSI), and the owners' failure to make payments was reflected on IRS Form 1099-Cs issued by DRFSI as the creditor. RAG Objs. at 1-2.

Diamond asserts that the Special Master correctly rejected Defendants' argument because they did not fully raise the issue of standing until after the Special Master issued his tentative ruling. Pls. Objs. at 6; Dkt. 726 (Pls. Opp'n) at 2. It asserts that "Judge Walsh is correct that Defendants waited too long to solidify their standing arguments and should not be able to engage in trial by ambush. Defendants had over two years to conduct discovery on the standing issue, but chose not to do so." Pls. Objs. at 7. Alternatively, Diamond argues that the Exit Defendants' argument fails on the merits because Diamond has provided evidence establishing that it entered into contracts with timeshare owners and owns the loans at issue. Id. at 8; Pls. Opp'n at 3-4. Diamond asserts that it is injured when owners default on their loans, regardless of whether the loans are securitized, because "Diamond remains responsible for the performance of the loans through their lifecycle even if the payment stream is pledged as collateral." Pls. Objs. at 9 (citing Dkt. 633-37, Ex. 131 (Gingras Tr.) 64:10-67:7; Dkt. 723-2, Ex. 270 (Gingras Decl.) ¶ 4). And "[w]hen a securitization facility experiences losses due to defaults on the underlying loans, Diamond must cure the facilities, primarily by either replacing the defaulted loan or paying it in full in cash." Id. Diamond also asserts that the 1099-C tax forms are immaterial because DRFSI services the loan and prepares the tax forms if a timeshare owner defaults. Id. at 9-10 (citing Gingras Decl. ¶ 3; Dkt. 603-100 (Counterstatement of Facts) ¶ 174; Dkt. 633-72, Ex. 247 (Harris Tr.) 251:8-12).

The Court finds on de novo review that Diamond has set forth specific facts that, if true, establish ownership. It is undisputed that Diamond had contracts with timeshare owners who purchased timeshare points, and that the contracts provided that if the owner failed to make a payment, Diamond could terminate the contracts for default. See Dkt. 596-13, Ex. AA. Pandora and RAG provided services to assist timeshare owners with "exiting"

their contracts with timeshare developers like Diamond. Pandora and RAG analysts instructed timeshare owners with contracts with Diamond to stop making payments due under their contracts and some owners stopped making payments based on that advice. See, e.g., Dkt. 593-1, Ex. 4 (I. Martinez Tr.) 45:14-22; Dkt. 591-4, Ex. 3 (Bellard Tr.) 35:24-36:5, 47; Dkt. 591-4, Ex. 5 (C. Martinez Tr.) 38:23-39:6; Dkt. 591-8, Ex. 125 (R. Martinez Decl.) ¶¶ 6, 9.).

Diamond alleges that it suffered injury in fact and has presented evidence that it was harmed by owners defaulting on their loans. Kate Gingras, Diamond's Vice President of Financial Services, stated that Diamond remains responsible for the performance of timeshare owners' loans throughout their lifecycle even if the loans are securitized. Gingras Decl. ¶ 4. She specifically stated that when a securitization or lending facility experiences a loss due to a default, it is Diamond's responsibility to cure the default by replacing the defaulted loan or paying it full in cash, and as a result, Diamond suffers the loss. Id.; see Gingras Tr. 64:10-67:7.

Moreover, the Special Master found that the record was "not nearly established enough" to resolve the issue of the ownership of the loans. Report at 25. The Court agrees. Pandora relies on two pieces of evidence to support its argument that Diamond securitizes owners' loan obligations and sells them to third parties and therefore, did not own the loans at issue at the time of the alleged injury. First, Pandora cites to a Preliminary Offering Memorandum filed by Diamond's parent company, Hilton Grand Vacations, with the SEC, in which the company disclosed that approximately 77% of Diamond's vacation ownership interval (VOI) loans are securitized. They note that Gingras testified that approximately 75% of loans are securitized. Pandora Objs. at 5; see Dkt. 596-13, Ex. MM. The Court finds that this is insufficient to establish Diamond did not own the loans. According to Diamond, not all loans are securitized, Gingras Decl. ¶ 4, and the Court has not been presented with evidence as to how many loans at issue in this case have been securitized. Further, even if the loans are securitized, Diamond has demonstrated that it is still harmed by timeshares owners defaulting on their loans. RAG also points to the IRS Form 1099-Cs as an indicator that all payments are made to DRFSI and that DRFSI is the creditor, but Diamond provides evidence that DRFSI simply services loans on behalf of Diamond.

The Court finds that Diamond has met its burden at this stage. Diamond provides evidence of specific facts establishing ownership. Taken as true, these facts raise a triable issue. However, controverted facts will have to be adequately supported by evidence adduced at trial. Lujan, 504 U.S. at 561, 112 S.Ct. 2130. Pandora and RAG's objections are overruled.

B. Lanham Act

1. Statutory Standing

Pandora asserts that the Special Master incorrectly found that Defendants' argument that Diamond lacked standing to sue under the Lanham Act was foreclosed by the Court's prior order. Pandora Objs. at 7. It argues that in order to show injury under the Lanham Act when there is no direct competition, Diamond must "show that its lost sales to Defendants amount to an irrefutable loss, near 1-to-1." Id. Pandora contends that there is no evidence in the record of such a loss because Diamond did not lose any sales. Id. at 8-9.

The Court addressed this issue at the motion to dismiss stage and found that Diamond met its burden at the time; Diamond appropriately alleged damages flowing

from the false advertising, including contractual losses, the loss of additional sales, the loss of ancillary service sales, and the loss of referral sales. Dkt. 233 (MTD Order) at 9. The Court determined that there was a direct link between Defendants' advertisements and communications, and timeshare owners ceasing payments to Diamond and found proximate cause was adequately alleged. Id. at 10. Pandora now disputes that Diamond has the evidentiary support to maintain this finding.

The Supreme Court has held a Lanham Act claim is available only to plaintiffs whose interests fall within the zone of interests protected by the law invoked and whose injuries are proximately caused by violations of the statute. Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 129-132, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014). The zone of interest test is not a particularly demanding one and the benefit of the doubt goes to the plaintiff. Id. at 130, 134 S.Ct. 1377 (citation omitted). "[T]he test forecloses suit only when a plaintiff's interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized the plaintiff to sue." Id. (internal quotation marks and citation omitted). "[T]o come within the zone of interests in a suit for false advertising" under the Lanham Act, a plaintiff must show "an injury to a commercial interest in reputation or sales." Id. at 131-32, 134 S.Ct. 1377. To establish proximate cause, a plaintiff "ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff." Id. at 133, 134 S.Ct. 1377; see Obesity Rsch. Inst., LLC v. Fiber Rsch. Int'l, LLC, 310 F. Supp. 3d 1089, 1106 (S.D. Cal. 2018).

The Court finds on de novo review that Diamond has standing to sue under the Lanham Act. As discussed above, Diamond has presented evidence that it suffered an injury to its commercial interests as a result of owners defaulting on their loans after engaging Pandora and RAG and being told to stop making payments. There is also evidence to support Diamond's allegations that Pandora and RAG proximately caused its injuries. For instance, there is evidence in the record establishing that certain timeshare owners were misled by the advertisements, retained Pandora or RAG as a result, and stopped paying Diamond following their engagement with Defendants. See, e.g., Dkt. 603-80, Ex. 248 (Bellard Tr.) 29:24-31:16, 34:9-36:5. For these reasons, Pandora's objection is overruled.

2. Proximate Cause

Pandora objects to the Report on the ground that the Special Master erred in finding sufficient evidence of proximate cause based on the Court's prior ruling. Pandora Objs. at 8 (citing Report at 14). Pandora asserts that the national advertisements cannot establish a Lanham Act violation on their own, and the analyst/sales calls cannot by themselves establish a violation. Id. at 8-9 (citing Report at 16 fn. 6). It contends that the Court's prior ruling at the motion to dismiss stage did not address the sufficiency of the evidence and the Court required evidence to substantiate proximate causation. Id. at 9. Pandora asserts "[n]o such evidence has emerged." Id.

Pandora asserts that the Report cites only the testimony of two individuals — Harry Bellard and Isidoro Martinez — as illustrative of the causal chain between the false advertisements, timeshare owners being

told by Pandora and RAG to stop making payments to Diamond, and owners stopping payments as a result. Id. at 9. However, according to Pandora, nothing in their testimony suggests that the false advertisements led them to hire Pandora, and Diamond cannot extrapolate that causal chain to all 764 timeshare owners. Id. at 9-10.

Pandora misunderstands the Special Master's findings. The Special Master found that Defendants' argument — that Diamond has the burden of establishing that timeshare owners cancelled their contracts or stopped making payments due solely to false statements in Defendants' ads and that the sales pitches by its analysts do not constitute advertisements under the Lanham Act — was foreclosed by the Court's prior ruling on Defendants' motion to dismiss. Report at 13-14. The Report states that "the Court has already determined that is the combination of ads and the promotional calls that give rise to the Lanham Act claims in this case." Id. at 15. The Special Master interpreted the Court's order to mean that Diamond could establish proximate cause by linking the ads to the promotional calls to the owners defaulting on their contracts. Id. at 16.

The Court agrees with the Special Master. In its order denying Defendants' motion, the Court stated that there was "a direct link between Exit Defendants' disparaging advertisements and communications and individuals ceasing payments to Diamond." MTD Order at 10. The Court went on to state, "There are a limited number of Diamond Owners who stopped paying Diamond as a result of engaging the Exit Defendants' services. Through discovery, the parties can easily determine which of these Owners engaged the Exit Defendants as a result of the alleged false advertising." Id. Diamond may establish proximate cause by linking the ads to Pandora and RAG's promotional calls to owners defaulting on their contracts.

Pandora also argues that the Court's ruling at the motion to dismiss stage did not address the sufficiency of the evidence. However, the Special Master's findings are not based solely on the Court's order. He examined the evidence. See Report at 17-20. The Special Master denied the Exit Defendants summary judgment on Diamond's Lanham Act claim, finding that Diamond established a link between the calls with the Exit Defendants and timeshare owners' defaults and that there was sufficient direct and circumstantial evidence to support a finding of proximate cause. Id. at 20. The Special Master noted that Diamond did not argue that it established causation or damages as to all of its timeshare owners who retained the services of the Exit Defendants, and the issue was reserved for trial. Id. at 21 n.7.

The Court agrees with the Special Master's conclusion. The Special Master did not conclude that Diamond established proximate cause as to all timeshare owners who retained the Exit Defendants' services, simply that there was sufficient evidence to potentially support such a finding. Summary judgment is improper "'where divergent ultimate inferences may reasonably be drawn from the undisputed facts.'" Fresno Motors v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014). Instead, "the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (simplified). Summary judgment is inappropriate here. Pandora's objection is overruled.

C. Statute of Limitations

Diamond, RAG, and the Defendant Law Firms object to the Special Master's findings

on the statute of limitation for Diamond's Lanham Act claims and tortious interference claims. The Exit Defendants argued that Diamond's Lanham Act claims were barred by California's three-year statute of limitations governing fraud claims, which they contend began to run in 2015 or 2016, when an employee first noticed that there were exit companies advertising exit services. Report at 22. Diamond responded that under the "discovery rule," the statute of limitations does not begin to run until the plaintiff knows the basic facts giving rise to potential liability, and that the Exit Defendants and Defendant Law Firms employed a complex scheme to prevent Diamond from discovering their involvement at the time an owner defaulted. Id. at 22-23.

The Special Master "accepted Diamond's argument that the discovery rule applies" and determined that Diamond's argument that "the statute of limitations did not begin to run until Diamond knew the basic facts giving rise to potential liability" was "a good one." Id. at 23. He reasoned that the fact that a timeshare owner stopped making a payment on a contract is not enough to trigger an investigation into why that happened. Id. at 23. Rather, "the basic facts Diamond needed to know to trigger an inquiry were that Diamond owners stopped paying their contracts and that Defendant Law Firms were representing them." Id. The Special Master concluded, "As to these timeshare owners, Diamond had the facts and, therefore, Defendants are entitled to summary judgment on statute of limitations grounds[.]" Id. The Report recommended, "that Diamond's Lanham Act claims accruing prior to January 31, 2017, in which the owners stopped paying under the timeshare contract and Defendant law firms sent a letter to Diamond informing Diamond that the Defendant law firm was representing the timeshare owner be barred under the statute of limitations" and that the "same analysis applies to the tortious interference with contract claims against Pandora and RAG that accrued prior to January 31, 2018, and for Defendant Law Firms before May 6, 2018." Id. at 55.

Diamond objects to the findings and argues that given it received a small number of letters and the letters did not say that the owners stopped making payments on the advice of Defendants, a jury should decide whether Diamond should have nonetheless known that the "seemingly run-of-the-mill cease and desist and/or demand letters from small, unknown, California law firms may have been part of a nationwide scam." Pls. Objs. at 16. Diamond contends that under these circumstances, the case law is clear that the determination as to the reasonable date of discovery of Defendants' scheme should be left to the jury. Id.

RAG requests that the Court adopt the Special Master's finding that it is entitled to summary judgement on statute of limitations grounds for contracts breached on or before January 31, 2017, but contends that the Court should apply the cut-off to require RAG to show only that Diamond's contracts were breached by that date, not that Diamond had received communication from the Defendant Law Firms notifying Diamond of their involvement. RAG Objs. at 14.

The Defendant Law Firms object to the findings, asserting that Diamond did not properly raise the delayed discovery rule in this case and the Special Master erred in considering it. Slattery Def. Objs. at 3. They argue that a plaintiff seeking to take advantage of the delayed discovery rule must plead the time and manner of discovery, and Diamond's original complaint did not allege any facts showing the time and

place of discovery and the Fourth Amended Complaint did not preserve the delayed discovery rule. Id. at 3-4. They also argue that the Special Master inappropriately limited the application of the statute of limitations because based on its pleading and its vice-president's testimony, "Diamond was aware of the Defendants as of 2016" and "when the Diamond owners ceased making payments, the statute of limitations accrued." Id. at 6. They assert that "[a]ny interference damages Diamond contends it suffered from owners who stopped making payments prior to May 6, 2018, are barred" because the "statute of limitation begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing[.]" Id. (internal quotation marks and citation omitted).

"[S]tatutes of limitations are affirmative defenses, not pleading requirements." Wyatt v. Terhune, 315 F.3d 1108, 1117 (9th Cir. 2003), overruled on other grounds by Albino v. Baca, 747 F.3d 1162 (9th Cir. 2014) (en banc); Fed.R.Civ.P. 8(c)(1). "A defendant raising the statute of limitations as an affirmative defense has the burden of proving the action is time barred," "[b]ut when a defendant moving for summary judgment meets its initial burden of showing that the applicable statute of limitations would bar the plaintiff's claim ... then the plaintiff has the burden of showing that an exception to the statute of limitations applies, such as the discovery rule[.]" Evox Prods. LLC v. Chrome Data Sols., LP, No. 3:16-cv-0057-PK, 2018 WL 6059530, at *10 (D. Or. Sept. 6, 2018) (internal quotation marks and citations omitted).

"Generally speaking, a cause of action accrues at the time when the cause of action is complete with all of its elements." Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 807, 27 Cal.Rptr.3d 661, 110 P.3d 914 (2005). The discovery rule "postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action." Fox, 35 Cal.4th at 807, 27 Cal.Rptr.3d 661, 110 P.3d 914. "Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing[.]" Jolly v. Eli Lilly & Co., 44 Cal.3d 1103, 1111, 245 Cal.Rptr. 658, 751 P.2d 923 (1988).

"Because the plaintiff must be diligent in discovering the critical facts, a plaintiff who did not actually know of his claim will be barred if he should have known of it in the exercise of due diligence." O'Connor v. Boeing North American, Inc., 311 F.3d 1139, 1147 (9th Cir. 2002) (simplified) (citations omitted). "A plaintiff is 'held to her actual knowledge as well as knowledge that could reasonably be discovered through investigation of sources open to her.'" Id. (quoting Jolly, 44 Cal.3d at 1109, 245 Cal.Rptr. 658, 751 P.2d 923). "So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her." Jolly, 44 Cal.3d at 1111, 245 Cal. Rptr. 658, 751 P.2d 923. The discovery rule does not apply if a plaintiff "has actual or constructive notice of its claims." Gen. Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir. 1991). "It is the burden of the plaintiff to show a triable issue of fact under the discovery rule[.]" Rustico v. Intuitive Surgical, Inc., 424 F. Supp. 3d 720, 737 (N.D. Cal. 2019) (internal quotation marks and citation omitted).

The Defendant Law Firms assert that Diamond had to have alleged facts showing the time and place of discovery of the wrongdoing in its complaint in order to rely on the discovery rule. Slattery Defs. Objs. at 3. Although the cases they cite require plaintiffs to plead facts

showing the time and manner of discovery and plaintiffs' inability to have made such a discovery earlier despite reasonable diligence, courts apply this standard at the pleadings stage. See, Yumul v. Smart Balance, Inc., 733 F. Supp. 2d 1134, 1143-44 (C.D. Cal. 2010) (noting that because Yumul did not allege "in any form the manner of her discovery, her complaint does not adequately plead tolling under the delayed discovery rule"); E-Fab, Inc. v. Accountants, Inc. Servs., 153 Cal. App. 4th 1308, 1319, 64 Cal.Rptr.3d 9 (2007) (finding that plaintiff's claims were not time-barred and reversing judgment of dismissal); Keilholtz v. Lennox Hearth Products Inc., No. C 08-00836 CW, 2009 WL 2905960, *3 (N.D. Cal. Sept. 8, 2009) (granting defendants' motion to dismiss). At summary judgment, courts consider the evidence before them. See, e.g., O'Connor, 311 F.3d at 1150; Rustico, 424 F. Supp. 3d at 737-40; Lucas, 212 F. Supp. 3d at 959-60; Evox Prods. LLC, 2018 WL 6059530, at *10-12. Moreover, "resolution of the statute of limitations issue is normally a question of fact," but summary judgment is appropriate "where the uncontradicted facts established through discovery are susceptible of only one legitimate inference." Jolly, 44 Cal.3d at 1112, 245 Cal.Rptr. 658, 751 P.2d 923; see Gen. Bedding Corp., 947 F.2d at 1398 ("Ordinarily we leave the question of whether a plaintiff knew or should have become aware of a fraud to the jury.... Where there are disputed questions of fact or facts susceptible to opposing inferences as to when the statute of limitations for fraud commenced, summary judgment is not appropriate.") (internal quotation marks and citations omitted).

The Court finds on de novo review that the discovery rule applies here. Diamond asserted in its opposition to Defendants' motion for summary judgment that Defendants engaged in a multi-layer, multi-party scheme that prevented it from identifying the causes of owners' defaults on timeshare contracts. Dkt. 603 (Pls. Opp'n to MSJ) at 48. Diamond explained that the evidence showed that the Defendant Law Firms typically sent two letters to Diamond with little to no follow up; the McCroskey Defendants did not send letters to Diamond after 2017 or 2018 and intentionally hid their involvement in the exit process; Defendants did not communicate with Diamond for purposes of litigating or negotiating an exit; Defendants pretended to be the owner or the relative of an owner when calling Diamond; and the Exit Defendants engaged owners for several months before owners were introduced to the lawyer defendants. Id. at 49. RAG contends that a letter from an attorney is not notice that an exit company is involved and presents evidence that the lawyer defendants were not the only attorneys who represented RAG clients against Diamond from 2016 to present. RAG Objs. at 14 (citing Dkt. 622 (Pinckes Decl.), Exs. Y-1 and Y-2). The Defendant Law Firms also point out that on June 10, 2020, Kate Gingras testified that Diamond started noticing third-party exit activities four to five years ago. Slattery Def. Objs. at 5 (citing Dkt. 596-13, Ex. GG 240:2-7). There are disputed questions of fact as to when the statute of limitations commenced. The Court finds summary judgment is inappropriate. When Diamond reasonably should have known or investigated the Defendants' involvement in its timeshare owners defaulting on their contracts is a question of fact for the jury.

D. Additional Objections

1. Pandora's Objections

Pandora asserts the Special Master erred in finding that timeshare owners stopped paying Diamond because Defendants instructed them to stop paying.

Pandora Objs. at 12. In reaching that conclusion, the Special Master cited the deposition testimony of four timeshare owners, and stated that the "record is replete with evidence, including testimony from Diamond timeshare owners, transcripts of phone calls with timeshare owners, and written correspondence with timeshare owners, that establish that they stopped paying Diamond when Defendants Pandora and RAG told them to." Report at 6, 41-42. The Court agrees. Diamond has presented other evidence that Defendants instructed owners to stop making payments. See, e.g., Dkt. 591-7, Exs. 94, 108, 109, and 112; Dkt. 591-8, Ex. 128 at 14. The Court finds on de novo review that timeshare owners stopped paying Diamond because Defendants told them to stop making payments. The objection is overruled.

Pandora asserts that the Special Master erred in finding that the following facts were undisputed: (1) "There is no dispute that Diamond has contracts with its owners."; (2) "The Exit Defendants falsely claimed ... that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts" and "the statements identified [] are literally false."; (3) "Based on these false and misleading ads, some of Diamond's timeshare owners contacted Defendants."; (4) "Diamond has lost revenue from timeshare owners who stopped paying Diamond."; and (5) "Diamond ... issues an IRS 1099 form, reflecting that the owner's debt to Diamond [Plaintiffs] has been cancelled...." and "This results in the owners ... receiving an IRS form 1099 for the cancellation of the debt they own [sic] to Diamond [Plaintiffs]." Pandora Objs. at 12-15. On de novo review the Court finds that these facts are undisputed.^{1 1}

1 The Court notes that the IRS 1099-C forms identify DRFSI as the creditor. See, e.g., Dkt. 596-13, Ex. PP. However, Diamond provides evidence that DRFSI simply services loans on behalf of Diamond. It is undisputed that Diamond had contracts with timeshare owners, and the IRS 1099-C forms reflect that a timeshare owner's debt to Diamond has been cancelled.

1 Diamond has settled its claims against the McCroskey Law Group, LLP.

Pandora also contends that references to findings of a Lanham Act violation are erroneous because the Special Master did not conclude that proximate cause existed for any particular timeshare owner. Id. at 15. It argues that Diamond must prove proximate causation for each timeshare owner at trial, and requests that the Court remove or revise these statements in its order to clarify that proximate cause has not been established. Id. The elements of a Lanham Act false advertising claim are:

(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products.

Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). The Special Master found that Diamond met its burden of establishing facts supporting a finding that Defendants' conduct satisfied each of these elements. Report at 36-37. However, the Report makes clear that "[t]he issue of how many of Diamond's owners breached their contracts as result

of Defendants' intervention and the amount of damages Diamond is entitled to is in dispute and will have to be resolved by the jury." Id. at 3, 21 n.7. The Court finds on de novo review that Diamond met its burden of demonstrating that there is no triable issue of fact as to the Exit Defendants having violated the Lanham Act. The issue of how many timeshare owners breached their contracts as result of the Exit Defendants' intervention and the amount of damages Diamond is entitled to remains in dispute The objection is overruled.

2. RAG's Objections

RAG argues that the Special Master exceeded his authority by making certain findings of fact because the Court's order appointing the Special Master, did not empower him to decide any contested factual issues. RAG Objs. at 3. RAG asserts that the Exit Defendants contest the following statements and requests that they be disregarded:

The Exit Defendants falsely claimed in commercial advertisements and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts. (R & R 2:16-19 and 54:11-14)

The record is replete with evidence, including testimony from Diamond timeshare owners, transcripts of phone calls with timeshare owners, and written correspondence with timeshare owners, that establish[es] that they stopped paying Diamond when Defendants Pandora and RAG told them to. (R & R 41:27-42:3)

These ads and the promotional calls that followed led many, if not most, of the 750+ owners to hire the Exit Defendants. Many, if not most, of them were told to stop paying Diamond and did. (R & R 20:26-28.)

Id. As discussed above, the first statement is undisputed. The Special Master did not exceed the scope of his authority in making this finding because he did not decide a contested factual issue. The Court finds on de novo review that there is evidence that establishes that timeshare owners stopped paying Diamond after the Exit Defendants instructed them to stop making payments. The Court also finds that the Exit Defendants' ads and promotional calls led some of Diamond's timeshare owners to hire the Exit Defendants, the Exit Defendants told owners to stop making payments to Diamond, and owners stopped making payments. RAG's objections are overruled.

Next RAG asserts that the Special Master's conclusions should be disregarded to the extent the findings are outside the scope of Diamond's motion for partial summary judgment. RAG Objs. at 3. It contends that the Report contains several findings of causation and harm despite admitting that there are disputes of fact as to both issues and acknowledging that Diamond did not move for summary judgment on these issues. Id. at 3-4. But Diamond's motion was not the only one before the Special Master. The Special Master was appointed to hear the summary judgment motions filed by all parties, see Special Master Order, and considered the Exit Defendants' motion and the Defendant Law Firms' motion, see Report at 2. The Exit Defendants argued that they were entitled to summary judgment on the ground that Diamond failed to present sufficient evidence to maintain their Lanham Act and tortious interference claims. See Exit Defs. MSJ. RAG and Pandora specifically argued that Diamond's evidence failed to create a triable issue of fact as to proximate causation under the Lanham Act, id. at 37, and that Diamond could not create a material issue of fact as to whether the Exit Defendants' actions caused

owners to stop making payments, id. at 49. The Special Master's findings do not go beyond the scope of his appointment. RAG's objection is overruled.

RAG also argues that the Special Master's conclusions should be disregarded to the extent the Report failed to properly distinguish between RAG and Pandora. RAG Objs. at 6. RAG asserts that RAG and Pandora are separate entities such that Diamond must prove there are no material facts in dispute as to each entity. Id. It asserts that the following conclusions made by the Special Master are inaccurate and unsupported with respect to RAG: (1) The vast majority of timeshare owners contacted the Exit Defendants after viewing one or more of their ads; and (2) The Special Master disagreed with Defendants that Diamond had not produced any direct evidence establishing that an owner was misled by one of Pandora/RAG's ads, retained Pandora or RAG as a result, and thereafter, stopped paying Diamond. Id. at 7-8. The Special Master also noted that Pandora and RAG analysts, some of whom worked for both companies at the same time, were communicating a consistent message to owners and analysts testified to that fact. Report at 5 n.2. RAG points out that Jason Krieck "testified that after RAG separated from Pandora, RAG did not use the scripts which were used by Pandora's analysts" and asserts Diamond did not depose any RAG analysts to determine what script they used before May 1, 2019 and after September 1, 2020. Id. at 8.

The Court finds on de novo review that the Special Master's findings are supported and warranted with respect to RAG. The parties do not dispute that Pandora and RAG entered into a service agreement whereby Pandora performed certain services for RAG, the two entities worked out of the same premises for that period of time and used similar methods, and some Pandora employees worked on RAG matters. See Dkt. 609 at 5, 7. The Exit Defendants engaged in essentially the same methods, see Report at 5-9, and do not dispute that certain employees such as Ashleigh Matua, Luke King, Taylor Otto, and Courtland Llauger worked for both RAG and Pandora. See Diamond MSJ at 45; Dkt. 726 (Diamond Resp. to Exit Defs. Objs.) at 15-16. The Court agrees with RAG that the Special Master erroneously indicated that Isidoro Martinez testified that he viewed a RAG ad and was instructed by RAG to stop making payments to Diamond.^{2 2} Martinez was a Pandora customer, and the Court disregards those statements. I. Martinez Tr. 42:15-46:9. However, Renee Martinez testified that Jason Krieck of RAG told her to stop making payments on her timeshare. Dkt. 591-8, Ex. 125. Other RAG customers were also advised by RAG to stop making payments to Diamond. See, e.g., Dkt. 591-5, Ex. 49; Dkt. 591-7, Exs. 108, 109, 111, 112; Dkt. 603-20, Ex. 188. Moreover, the Special Master noted that "Diamond's evidence linking the ads to the calls is thin" and that issues of causation and damages were reserved for trial. See Report at 20-21. Diamond will have to establish causation and damages with respect to the 750+ owners who enlisted the Exit Defendants' services and stopped paying Diamond and therefore, RAG's objection is sustained as to the I. Martinez testimony and otherwise overruled.

2 Isidoro Martinez discussed viewing advertisements from and entering into a contract with Timeshare Compliance, which is Pandora. I. Martinez Tr. 42:15-43:10.

2 Defendants argue that there are issues of fact as to how many analysts used the scripts, when they started using these scripts, etc. I do not find these arguments persuasive. Comparing the scripts with the transcripts of calls, it is clear that Pandora and RAG analysts (some of whom worked for both companies at the same time) were communicating a consistent message to the timeshare owners. Indeed, analysts testified to that fact. Further, it makes no sense that Defendant Exit Companies would condone different analysts saying different things to different customers.

RAG objects to the following findings and conclusions on the grounds that they are disputed:

1. "(i) The Exit Defendants falsely claimed in commercial advertisements

and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts."

2. "(ii) The Exit Defendants falsely claimed in these ads and promotions that they had a 100% success rate."

3. "There is no dispute that Diamond had contracts with its owners."

4. "The record is replete with evidence, including testimony from Diamond timeshare owners, transcripts of phone calls with timeshare owners, and written correspondence with timeshare owners, that establish that they stopped paying Diamond when Defendants Pandora and RAG told them to."

5. "Using statistical analysis, [Drs. Isaacson and Baldwin] link the false ads to the likelihood of default. (Ex. 120, Isaacson Report at 11, 34-39 (concluding timeshare owners who see Defendants' ads are 20 times more likely to hire Pandora or RAG and default on timeshare contract); Exh. 129, Baldwin Report at 11)."

RAG Objs. at 8-14. On de novo review the Court finds that the first four statements are undisputed facts. With respect to the last statement, the Special Master noted that Defendants challenged the validity and reliability of Diamond's experts' opinion in motions in limine. He appropriately determined that he was not tasked with resolving the motions in limine and considered the reports for purposes of summary judgment. Report at 19. The Court will consider RAG's objections to the expert reports when ruling on the parties' motions in limine.

3. Diamond's Objections

Diamond requests that the Court modify the Special Master's findings with respect to the Exit Defendants' advertisements regarding class actions and bundled lawsuits, money back guarantees, and automatic inheritance by heirs. Pls. Objs. at 3. Diamond objects to the findings that: (1) the evidence is mixed as to whether the Exit Defendants were touting the prospect of class actions or bundled lawsuits to persuade potential customers to sign up; (2) there are issues of fact as to whether the Exit Defendants advertised and honors money back guarantees; (3) the evidence is mixed as to whether the ads and sales pitches include language about the heirs inheriting the timeshare and though some of the ads mention that fact, most do not; and (4) the Exit Defendants' statements that heirs will automatically inherit the timeshares is not false. Id. at 3-6. Diamond contends that the findings overlook significant evidence and that there are no genuine disputes of fact on these issues. Id. On de novo review, the Court finds that genuine disputes of fact exist as to these issues. Diamond's objections are overruled.

Diamond also objects to the Special Master's denial of summary judgment on its tortious interference claims "because Defendants argue that the contracts are not valid on the ground that they are (1) voidable (based on allegations of fraudulent inducement) and/or (2) void (because Diamond is not a licensed finance lender under California law." Id. at 10. Diamond asserts that this is legally and factually incorrect. The Special Master explained that the Exit Defendants submitted declarations of three Diamond timeshare owners who claim that they were misled by Diamond's sales representatives and pressured into buying Diamond timeshares; Diamond objected to the declarations on the ground that they were hearsay and not produced in discovery. Report at 43. The Special Master also noted that the record "is devoid of sufficient evidence to conclude

one way or the other about whether Diamond ran afoul of California law." Id. at 44. The Court finds on de novo review that summary judgment is not warranted on Diamond's tortious interference claims because genuine issues of material fact remain.

Next, Diamond objects to the findings regarding its claim of contributory violations of the Lanham Act by the Defendant Law Firms, and argues that the Court should grant partial summary judgment on the claim. Pls. Objs. at 13. It asserts that the Defendant Law Firms knew of and materially participated in the Exit Defendants' false advertising, provided a necessary service without which the false advertising would not be possible, and failed to stop the scheme. Id. at 13-18. Diamond and the Defendant Law Firms sought summary judgment on this claim. Report at 44-45. The Special Master found summary judgment was not appropriate on the ground that his finding that the Exit Defendants violated the Lanham Act was based on advertisements and promotional sales pitches but there was no evidence that all or most of the lawyers knew what was being said on the phone calls between the Exit Defendants' analysts and timeshare owners. Id. at 46. The Court finds on de novo review that summary judgment is not warranted in favor of Diamond.

Diamond also objects to the Special Master's denial of summary judgment on its UCL claim based on the Exit Defendants' operation of an unlawful attorney referral service on the ground that the claim was not adequately pleaded. Id. at 17. Diamond argues that it has adequately alleged that the Exit Defendants violated the UCL by operating an unlawful attorney referral service, and notes that Defendants have not cited, nor is Diamond aware of, any cases that require use of the words "§ 6155" in the complaint when the allegations clearly accuse the Defendants of operating an illegal referral scheme in violation of the UCL. Id. at 18. The Defendant Law Firms counter that there is "no allegation that the Exit Companies were unlicensed attorney referral services much less notice that Business and Professions Code section 6155 was at issue." Slattery Objs. at 7. They assert that "Diamond's list of possible violations did not provide sufficient notice that an unlicensed attorney referral service was part of this case." Id. The Court finds on de novo review that Diamond did not adequately plead its UCL claim based on Exit Defendants' operation of an unlawful attorney referral service, and summary judgment is not warranted.

Diamond argues that the Court should grant partial summary judgment on its civil conspiracy claim. Pls. Objs. at 20-22. The Special Master denied summary judgment because he found that there were questions of fact surrounding the nature of Pandora and RAG's relationship, and the Defendant Law Firms' knowledge of the Exit Defendants' ads and call scripts. Report at 51-52. On de novo review, the Court finds that questions of fact remain as to these issues and summary judgment is inappropriate.

Finally, Diamond argues that RAG's counterclaims should be dismissed. Pls. Objs. at 22. The Special Master found "material issues of fact in dispute that preclude summary judgment on this counter claim." Report at 53. The Court finds on de novo review that factual disputes preclude summary judgment on RAG's counterclaim. As the Special Master notes, the evidence shows that Diamond had a program to allow timeshare owners to seek modification of their timeshare contracts and that Diamond did not allow owners to

participate if they had hired an exit company, and Diamond informed timeshare owners about this policy and encouraged them to end their relationship with the exit companies.

IV. CONCLUSION

The Court adopts the Special Master's Report and Recommendation with the modifications addressed above.

IT IS SO ORDERED.

Attachment

Hon. Patrick J. Walsh (Ret.)

Special Master

Signature Resolution

633 W. 5th Street, Ste. 1000

Los Angeles CA 90071

(323) 395-4970

judgewalsh@signatureresolution.com

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

DIAMOND RESORTS U.S. COLLECTION DEVELOPMENT, LLC, ET AL., Plaintiffs,

v.

PANDORA MARKETING, LLC d/b/a TIMESHARE COMPLIANCE, ET AL., Defendants.

AND ALL RELATED COUNTERACTIONS

2:20-cv-05486-DSF-ADS

SPECIAL MASTER'S REPORT AND RECOMMENDATION RE: (1) PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGEMENT AS TO COUNTS I, II, III, IV, VII, X, XI, XII, XIII, XIV, AND XVI AND DISMISSAL OF RAG'S COUNTERCLAIM; (2) DEFENDANT PANDORA MARKETING, LLC, AND INTERMARKETING MEDIA, LLC'S MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION ON ITS CLAIMS AND DEFENSES; AND (3) DEFENDANT CARLSBAD LAW GROUP, LLP, AND DEL MAR LAW GROUP'S MOTION FOR SUMMARY JUDGMENT

I.

INTRODUCTION

Plaintiff Diamond Resorts U.S. Collection Development, LLC and Diamond Resorts Hawaii Collection Development, LLC (hereinafter "Diamond") sell timeshares. Defendants Pandora Marketing, LLC (hereinafter "Pandora") and Intermarketing Media, LLC, d/b/a Resort Advisory Group (hereinafter "RAG") (collectively the "Exit Defendants") market a service that purports to help timeshare owners legally cancel their timeshare contracts based on consumer protection laws with the help of lawyers working at Defendant law firms Slattery, Sobel & DeCamp, LLP; Del Mar Law Group, LLP; Carlsbad Law Group, LLP; and McCroskey Law Group, LLP (hereinafter, collectively "Defendant Law Firms").¹ Diamond brings this action against Defendants under state and federal laws for false advertising, unfair business practices, conspiracy, and tortious interference with contract, alleging, in essence, that what Defendants are

doing is misleading, improper, and unlawful.

Defendant RAG has filed a counterclaim, alleging that Diamond is interfering with contractual relationships with RAG's clients.

Before me are: (1) Diamond's Motion for Partial Summary Judgment (Dkt. No. 591); (2) the Exit Defendants' Motion for Summary Judgment (Dkt. No. 600); and (3) Defendant Law Firms' Motion for Summary Judgment (Dkt. No. 627). For the following reasons, I recommend that the Court conclude that there are no material issues of fact in dispute as to the following facts:

(i) The Exit Defendants falsely claimed in commercial advertisements and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts;

(ii) The Exit Defendants falsely claimed in these ads and promotions that they had a 100% success rate;

(iii) These advertisements and promotions constituted commercial speech;

(iv) These advertisements were disseminated to a vast audience of the purchasing public through television, radio, the internet, and print ads;

(v) Based on these false and misleading ads, some of Diamond's timeshare owners contacted the Exit Defendants. In promotional calls that followed, the Exit Defendants' analysts repeated the above false claims and expanded on them. In addition, they counseled the owners to stop making payments to Diamond. Some of the owners listened and stopped making payments.

(vi) Further, because the statements identified in subsection (i) and (ii) are literally false and because Pandora and RAG knew that they were false, it is presumed that these statements were material and that they deceived the owners who purchased the Exit Defendants' services. AECOM v. Energy and Construction, Inc. v. Ripley, 348 F. Supp.3d 1038, 1056 (C.D. Cal. 2018), rev'd on other grounds, 851 F. App'x 20 (9th Cir. 2021);

(vii) Diamond has lost revenue from timeshare owners who stopped paying Diamond as a result of the Exit Defendants' false and misleading advertisements and promotions.

The issue of how many of Diamond's owners breached their contracts as a result of Defendants' intervention and the amount of damages Diamond is entitled to is in dispute and will have to be resolved by the jury.

(viii) Diamond's Lanham Act claims accruing prior to January 31, 2017, in which the owners stopped paying under the timeshare contract and Defendant law firms sent a letter to Diamond informing Diamond that the Defendant law firm was representing the timeshare owner, are barred by the statute of limitations. This same analysis applies to the tortious interference with contract claims against Pandora and RAG that accrued prior to January 31, 2018, and for Defendant Law Firms prior to May 6, 2018.

As to the remaining issues, I find that there are material issues of fact in dispute and neither side is entitled to summary adjudication.

II.

SUMMARY OF FACTS

Diamond sells timeshare points that can be used for vacation units throughout the United States. The sales are completed pursuant to sales contracts between Diamond and the buyer, which, for some buyers, includes a financing agreement. (See,

e.g., Exh. AA, Purchase and Security Agreement.) The contracts bind the buyers to pay for the timeshare points (if they are not paid for at the time of closing) and to pay annual maintenance fees and special assessment fees in perpetuity. Some of the contracts include an arbitration clause, requiring that contract disputes be resolved through arbitration, and bar class actions and collective actions. (Exh. AA, Purchase and Security Agreement at 7.) The contracts purportedly bind the buyer's heirs, assuming Diamond determines that they are creditworthy. (Exh. BB-1, Diamond's Response to Defendants' Request for Admissions, No. 12.) The contracts also provide that if a buyer fails to make payments, Diamond can terminate the contracts for default.

Some of the people who have purchased timeshare points from Diamond complain that its representatives employed unscrupulous sales tactics such as misrepresentations and undue pressure to cajole them into buying in the first place or upgrading to a premium level thereafter. (Exh. O1, Bellard Depo. at 32-33; Exh. O5, Young Decl.; Exh. U, Robert and Donna Letton Decl.; Exh. V, Free Report; Exh. W, Gringas Depo. at 151 and 204; Exhs. K1-K3, Owners' Complaints.) In 2016, Diamond was sued by the state of Arizona for using such tactics and Diamond ultimately settled with the State, agreeing to change its practices.

Pandora and RAG were created to provide a service for timeshare owners who want to get out of their timeshare contracts. In their ads--which do not mention Diamond by name--they represent to timeshare owners that Defendants can help them legally cancel their timeshare contracts. In these ads and in the promotional sales calls that follow, Pandora and RAG represent that, with the help of Defendant Law Firms, they can persuade timeshare companies to cancel timeshare contracts through lawful means, such as by bringing lawsuits or threatening to do so. (See, e.g., Exh. 26, Pandora Ad at 000004; Exhs. 36-38, RAG Ads.) Pandora and RAG analysts explain that they are able to do this with the help of affiliated counsel based on the fact that Diamond exerted undue pressure on the timeshare owners and misrepresented things about the timeshare and the contract, which justifies legally cancelling the contract.

Some Pandora and RAG analysts follow scripts in these calls to insure a consistent message. (Exh. 44 Otto Depo. at 107; Exh. 16 Luke Depo. at 151-52, 155.) Others, who do not use a script, nevertheless convey a consistent message. This message is communicated to the analysts by Defendants in initial training and weekly meetings that follow.² (Exh. 16, Luke Depo. at 151-52, 158.)

In the calls with Diamond owners, the analysts represent that they have never lost a case because they only take cases that they are sure they can win. (See, e.g., Exh. 48, RAG Call Transcript at 4 (explaining the reason RAG has a A+ rating from the Better Business Bureau is because "we've never lost a case that we've accepted."); Exh. 54, Pandora Call Transcript

at 25 ("We have a 100 percent success rate of canceling timeshare contracts, legally, permanently, forever.".) At times, they represent that there is a 100% money-back guarantee for their services, and at times not. At times they also claim that the owner's heirs will automatically be strapped with the obligation to continue paying for the timeshare once the owner dies and at times they do not.

During the process of signing up the owners, Pandora and RAG analysts instruct the owners to stop making payments to Diamond that are due under the contract. (See, e.g., Exh. 4, I. Martinez Depo. at 45 ("they told us that we needed to stop making payments immediately").) Some of the owners heed this advice and stop paying Diamond. (See, e.g., Exh. 3, Bellard Depo. at 35-37, 47 (Pandora staff told him not to pay Diamond any longer and he listened and stopped paying, explaining, "[A]fter this contract [with Pandora] I didn't pay Diamond."); Exh. 5, C. Martinez Depo. at 39 ("Q: Based upon your conversations with [Pandora], did you ever make any payment on your maintenance fees. A: No. I did not make payments on my fees."); Exh. 125, R. Martinez Decl. at ¶¶ 6 and 9 (explaining RAG sales representative Jason Krieck told her to stop making payments on Diamond timeshare and she listened to him and stopped making payments).)³ Defendants charge a fee for their services--based on how much the owners owe to Diamond--that ranges from $3,500 to tens of thousands of dollars.

3 As Defendants point out, this advice is in direct contradiction to the language of the Exit Defendants' contracts with the owners, which informs them that the owner is responsible for making payments to Diamond.

Once the owners have signed on, Pandora and RAG refer the owners to Defendant Law Firms. These firms are paid in the neighborhood of $700 to send two letters to Diamond on behalf of the owners. The first letter informs Diamond that the law firm now represents the owner and admonishes Diamond that it must cease and desist from having any contact with the owner. This causes Diamond to stop sending communications, including deficiency notices and default notices, to the owners, who are then left in the dark as to what is happening with their timeshare. The second letter requests that Diamond cancel the timeshare contract. Diamond either ignores these letters or responds with a letter rejecting the offer.

The foregoing practice is exemplified in the following email chain between a Pandora employee and counsel at Defendant Del Mar Law Group ("DMLG"), regarding a Diamond owner who had hired Pandora and, in turn, counsel, to cancel her timeshare contract:

Hi [Counsel],

Just an FYI —

I had a lengthy conversation with this client. She mentioned that when she spoke to you, you mentioned that DMLG only sends out two letters and then no further work is done on a file. She stated that you also mentioned the reason is because the attorneys at DMLG are only receiving minimal pay. She was extremely upset that she paid money to have this [contract] cancelled and now knows direct from the firm that only two letters were sent out, a denial letter was received in return and no further work would be done on her case. She said that she's current on payments so she wouldn't even fall into foreclosure soon.

Please know that we do not want this information mentioned to clients. Whenever we ask the firm to contact a client, we are doing so in hopes that the firm

reassures the client that they're doing all that they can to help cancel, not that they aren't doing anything else in the file besides sending out two letters. This client expressed that she completely lost hope in our process after speaking to the firm directly handling her file.

We will be refunding this client.

(Exh. 81.)

DMLG counsel emailed back, explaining:

My bad, I don't typically talk to a client at this length. However, she kept insisting on further explanation. In retrospect, I should have kept her to a minimum. It's not always easy speaking with these disgruntled clients. I apologize. Lesson learned.

I did also tell her that we continue to monitor the file. Was she told by [Pandora] to stop making payments?

(Exh. 81.)

Pandora responded:

Yes, less is more when it comes to clients honestly. They already feel like we're a scam because of their history with the developer so we try to l[ure] them away from that feeling by letting them know all is good as long as they aren't hearing from the developer and if the trade block is in place (for debt clients).

Yes, she was told that she may stop payments if she chooses, however she never wanted to. I let her know this may be why the developer is not abiding which she did not want to hear. She requested a refund and we chose to keep it.

(Exh. 81.)

DMLG counsel replied back:

Thanks for the further info. Again, I apologize and, rest assured, I learned from this mistake!!

(Exh. 81.)

The owner's failure to make contract payments ultimately causes Diamond to cancel the contract based on breach. (Exh. II, Notice of Mortgage Acceleration on Contract.) Diamond then reports the cancellation to the credit reporting agencies and issues an IRS 1099 form, reflecting that the owner's debt to Diamond has been cancelled, which is a taxable event. (Exh. PP, IRS 1099-C Form; Exh. 125, R. Martinez Decl. at ¶¶ 9 and 13.)

III.

ANALYSIS

A. Standard of Review

Summary judgment is warranted under Federal Rule of Civil Procedure 56 if there are no genuine issues of material fact in dispute and a party is entitled to judgment as a matter of law. The Court views the evidence and the inferences to be drawn from it in a light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

There are two avenues for proceeding in summary judgment. The first is to marshal the evidence to show that there is only one possible outcome under the law based on the uncontested facts. In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010). The second is by pointing out that the non-moving party is unable to present evidence to prove an element of its claim or defense upon which it carries the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party

satisfies this burden, the party opposing the motion must set forth specific facts, through declarations or admissible evidence, showing that there is a genuine issue of fact in dispute. Id. at 323-24, 106 S.Ct. 2548; Fed. R. Civ. P. 56(c)(1).

Where there are issues of fact barring summary judgment on an entire claim, the Court is empowered to enter summary adjudication on any material fact that is not in dispute and treat that fact as established in the case. Fed. R. Civ. P. 56(g); see also Am. Nurses' Ass'n v. State of Ill., 783 F.2d 716, 729 (7th Cir. 1986).

B. Diamond's Lanham Act Claims Against Pandora and RAG (Counts I and III)

In its first and third causes of action, Diamond sues the Exit Defendants under the Lanham Act, alleging that they made false statements in their advertising about the law governing timeshare contracts and Defendants' services in order to trick the owners into signing up for their services. (Fourth Amended Complaint ("FAC") at ¶¶ 296-312, pp. 83-86 (Pandora) and ¶¶ 326-42, pp. 89-92 (RAG).) Diamond has moved for partial summary adjudication, seeking a ruling that the following statements in the Exit Defendants' ads amount to false advertising under the Lanham Act:

(1) Defendants legally terminate timeshare contracts based on the timeshare developer's misrepresentations and unethical sales practices.

(2) Owners obtain an "exit" from their contracts through the legal work of attorneys based on consumer protection laws.

(3) The attorneys file litigation, class actions, or bundled lawsuits, or threaten such litigation to negotiate an "exit."

(4) The exit service has 100% success rate or a 100% money-back guarantee.

(5) The heirs of timeshare owners will automatically inherit the payment obligations of the timeshare contract.

(Diamond's Motion for Summary Judgment (hereinafter "Diamond's Motion") at 11-22.).

The Exit Defendants have also moved for summary judgment on the Lanham Act claims, arguing that Diamond cannot establish standing and proximate cause. (Defendants Pandora and RAG's Motion for Summary Judgment (hereinafter "Exit Defendants' Motion") at 12; Defendants Pandora and RAG's Opposition to Diamond's Motion for Summary Judgment (hereinafter "Exit Defendants' Opposition") at 33.) They also contend that Diamond cannot prove that the ads are false or misleading. Finally, they argue that the Lanham Act claims are barred by the statute of limitations. (Exit Defendants' Motion at 32-48.)

The Defendant Law Firms have also moved for summary judgment on Diamond's Lanham Act claims, arguing that Diamond does not have any evidence establishing that its timeshare owners stopped making payments to Diamond as a result of the ads. (Defendant Law Firms' Motion for Summary Judgment at 1-11.)

The Lanham Act proscribes misrepresentation of goods or services in commercial advertising or promotion. 15 U.S.C. § 1125(a)(1)(B). To establish a claim under the Lanham Act, a plaintiff must prove that a defendant (a) made a false statement (b) of material fact (c) about plaintiff's business (d) in a commercial advertisement (e) that entered interstate commerce (f) that actually deceived or had the tendency to deceive a substantial segment of the plaintiff's audience and (g) was likely to influence the customer's decision (h) causing injury to the plaintiff.

Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997).⁴

4 There does not appear to be any dispute that the Exit Defendants' ads themselves amounted to commercial speech and have been disseminated in interstate commerce. The ads were available on the internet, TV, and radio. For example, one YouTube ad that was identified in the Fourth Amended Complaint was viewed 18,925 times. (Exh. 31.) Lawyer Defendant Slattery testified in his deposition that he saw one of the ads on TV.

1. Standing

The Exit Defendants argue that Diamond is required to prove standing under the Lanham Act by a showing that Defendants are direct commercial competitors, citing Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 735 (9th Cir. 1999). (Exit Defendants' Motion at 33.) They assert that the evidence establishes that they are not competitors with Diamond--at least not direct competitors--and that, therefore, Diamond does not have standing to pursue its Lanham Act claims against them. In the alternative, they argue that there are questions of fact surrounding this issue, which bar summary judgment for Diamond.

The Exit Defendants' standing argument is foreclosed by the Court's previous order, denying Defendants' motion to dismiss the Second Amended Complaint on the same ground. There, the Court concluded that, despite the fact that the Exit Defendants and Diamond were not direct competitors, Diamond's claims against them fell within the ambit of the Lanham Act. See Diamond Resorts U.S. Collection Development, LLC v. Pandora Mktg. ("Pandora"), 2020 WL 8768056, at *5 (C.D. Cal. Nov. 9, 2020) ("[A] plaintiff need not be a direct competitor to have standing to bring a false advertising claim."), citing Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 136, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014). For that reason, this argument is rejected.⁵

5 To the extent that I have misread the Court's ruling or the Court finds that the Lanham Act only applies to direct competitors, I would conclude that Diamond does not have standing, as Diamond and the Exit Defendants are not direct competitors. If that were the case, Defendants would be entitled to summary judgment on the Lanham Act claims.

2. Proximate Cause

Relying on Lexmark, 572 U.S. at 131-32, 134 S.Ct. 1377, the Exit Defendants argue that Diamond has the burden of establishing that the timeshare owners cancelled their contracts or stopped making payments due solely to false statements in Defendants' ads. (Exit Defendants' Opposition at 19-21.) They contend that Diamond must tie a specific false statement in an ad to the loss of revenue. In Defendants' view, Diamond cannot do this because the evidence is to the contrary, i.e., none of Diamond's owners reported that he or she stopped paying Diamond due to Defendants' ads alone. The Exit Defendants and the Defendant Law Firms argue further that Diamond failed to develop evidence as to the individual owners during discovery and it is too late to do so now.

Diamond counters that it does not have to show that the owners stopped paying based solely on the ads. Diamond maintains that it was the combination of the ads and the ensuing promotional calls with the Exit Defendants' analysts that led to the owners' breach. According to Diamond, the Exit Defendants used the false and misleading statements in the ads to lure the owners to call them. Once they did, the analysts were able to present their sales pitches--which were filled with additional

false and misleading claims--which ultimately caused the owners to hire Defendants and stop paying Diamond. Diamond argues that the Court has already ruled that the ads combined with the analysts' spiel give rise to a claim under the Lanham Act.

Defendants counter that the sales pitches by the analysts do not constitute advertisements under the Lanham Act and, therefore, have no bearing on the summary judgment motions. (Exit Defendants' Opposition at 8, note 4.)

Defendants' arguments are foreclosed by the Court's previous ruling, which rejected Defendants' motion to dismiss the Lanham Act claims on the ground that Diamond had not asserted proximate cause. Pandora, 2020 WL 8768056, at *5. There, the Court noted that Diamond had alleged that the Exit Defendants were violating the Lanham Act through the use of false and misleading ads, which induced the owners to call Defendants' analysts, who communicated additional false claims to the owners. Pandora, 2020 WL 8768056, at *1-*2. In rejecting Defendants' argument that Diamond had not alleged proximate cause, the Court explained:

There is a direct link between Exit Defendants' disparaging advertisements and communications and individuals ceasing payments to Diamond.

Pandora, 2020 WL 8768056, at *5.

Thus, the Court has already determined that it is the combination of the ads and the promotional calls that give rise to the Lanham Act claims in this case. This ruling is consistent with what other courts have done in identical cases involving identical allegations against exit companies like Pandora and RAG. See, e.g., Wyndham Vacation Ownership v. Gallagher, 2019 WL 5458815, at *7 (M.D. Fla. Sept. 10, 2019) ("Here, Wyndham alleges that the Lanham Act Claim Defendants published false and/or misleading advertising statements that caused Wyndham Owners to hire Timeshare Owners Relief and Resort Legal Team, who then instructed those same owners to cease making payments to Wyndham under their timeshare contracts. As a result, Wyndham suffered economic harm. Taking these allegations as true ... the Court finds that Wyndham has presented sufficient facts to plead proximate cause") (citing Westgate Resorts, Ltd. v. Reed Hein Assocs., LLC., 2018 WL 5279156, at *9-10 (M.D. Fla. Oct. 24, 2018)); and Diamond Resorts, Int'l. v. Aaronson, 371 F. Supp.3d 1088, 1110 (M.D. Fla. 2018); but see Orange Lake Country Club, Inc. v. Reed Hein & Assocs., LLC, 2019 WL 7423517, at *14 (M.D. Fla. Oct. 4, 2019) (finding plaintiff timeshare company's claim that ads caused timeshare owners to hire defendant exit company who counseled owners to stop making payments too remote to satisfy Lanham Act's proximate cause requirement). Under this reading of the Court's order, Diamond can establish proximate cause by linking the ads to the promotional calls to the owners defaulting.⁶ The Exit Defendants argue, nevertheless, that Diamond has not tied the ads to the defaults. (Exit Defendants' Motion at 13.) They contend that Diamond has not proffered a single owner who testified that he or she: (1) saw one of the Exit Defendants' ads and was deceived by the false claims therein; (2) called the Exit Defendant as a result of the ad; and (3) was then instructed to stop paying and, in fact, did stop paying. The Exit Defendants point out that that is what the Court anticipated Diamond would do when it denied Defendants' motion to dismiss the Lanham Act claims in 2020:

6 To the extent that I have misinterpreted the Court's ruling or read too much into it and in fact the Court concludes that it is only the ads themselves that are relevant to the proximate cause analysis, I would conclude that Diamond has not established proximate cause. Diamond does not argue that anyone stopped making payments based on the ads alone. Further, even if it did, there is no evidence to support such an argument. The ads merely informed the owners that the Exit Defendants could help them legally cancel their contracts. It did not tell them how they could do that or suggest to them that they should stop paying Diamond. There is no evidence that any timeshare owners stopped paying Diamond as a result of simply viewing an ad.

There are a limited number of Diamond Owners who stopped paying Diamond as a result of engaging the Exit Defendants' services. Through discovery, the parties can easily determine which of these Owners engaged the Exit Defendants as a result of the alleged false advertising.

Pandora, 2020 WL 8768056, at *6 (emphasis added).

The Exit Defendants argue that, in fact, Diamond made a conscious decision not to develop this evidence because, when it initially questioned owners about why they enlisted the Exit Defendants' services and stopped paying Diamond, the owners told Diamond things that it did not want to hear.

In their own summary judgment motion, Defendant Law Firms echo these arguments and emphasize that Diamond's responses to interrogatories and the testimony from its Rule 30(b)(6) witness bolster Defendant Law Firms' position that Diamond does not have any evidence to connect the ads to the defaults.

I disagree with Defendants that Diamond has not produced any direct evidence establishing that an owner was misled by one of Diamond's ads, retained one of the Exit Defendants as a result, and, thereafter, stopped paying Diamond. For example, Harry Bellard testified in his deposition that he learned about Pandora through ads, which included "something to the effect" that Pandora could help him exit his timeshare. (Exh. 248, Bellard Depo. at 29-31.) He did not recall if the ad included the phrase "legally cancel" but did remember it included a 100% money-back guarantee. (Exh. 248, Bellard Depo. at 30.) The ads influenced his decision to retain Pandora. (Exh. 248, Bellard Depo. at 30.) Thereafter, Bellard contacted Pandora and was told to stop paying Diamond and he did. (Exh. 248, Bellard Depo. at 35-36.)

Isidoro Martinez testified that he viewed RAG ads on the internet, including one in which RAG guaranteed that it could help timeshare owners get out of their timeshare contracts, which influenced his decision to exit his timeshare with Diamond. (Exh. 4, I. Martinez Depo. at 42-43.) He called RAG and was told to stop paying Diamond and he did. (Exh. 4, I. Martinez Depo. at 45-47.)

But direct evidence like that from Bellard and Martinez is scarce. In fact, a fair reading of this extensive record establishes that there is little direct evidence of false statements in ads, leading to calls to the Exit Defendants, leading to defaulted contracts. The other owners who were asked and could remember the ads seemed to not really remember what representation in the ad convinced them to call the Exit Defendants

Diamond has sought to fill that gap with circumstantial evidence. It points out, for example, that the ads were widespread and notes that the record includes evidence that more than 100 owners were told by the Exit Defendants or Defendant Lawyers to stop making payments and did.

(Exhs. 48-53, 181-242.) Accepting this evidence at face value, however, it does not directly tie the ads to the defaults for these 100 owners.

Diamond also points to the deposition testimony of one of Pandora's partners who testified that 90% of the owners who called into Pandora seeking its services had done so in response to one of Pandora's TV or radio ads. (Exh. 14, Wilson Depo. at 61-62, 110-111.)

Diamond also points out that Pandora and RAG have signed up more than 750 Diamond timeshare owners who stopped making payments to Diamond thereafter. Diamond argues that this is additional circumstantial evidence that these owners relied on Defendants' ads to enlist Exit Defendants' services.

Though some of these owners may not have initiated contact with Pandora or RAG after viewing one of their ads (and could have, instead, been contacted by the Exit Defendants after being identified via property records listing them as timeshare owners), the evidence establishes that the vast majority contacted the Exit Defendants after viewing one or more of their ads. The Exit Defendants do not claim otherwise. In fact, as set out above, 90% of the incoming calls stem from these ads. (Exh. 14, Wilson Depo. at 61-62, 110-111.)

Diamond seeks to rely on its experts, Drs. Isaacson and Baldwin, to establish proximate cause. Using statistical analysis, these experts link the false ads to the likelihood of default. (Exh. 120, Isaacson Report at 11, 34-39 (concluding timeshare owners who see Defendants' ads are 20 times more likely to hire Pandora or RAG and default on timeshare contract); Exh. 129, Baldwin Report at 11). Generally speaking, consumer surveys and market research like that performed by Diamond's experts are admissible in a Lanham Act case. See, e.g., Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1261 (11th Cir. 2004) ("Consumer survey research often is a key part of a Lanham Act claim alleging that an advertisement is misleading or deceptive."). But, as Defendants point out, unverified expert reports are generally insufficient to create triable issues of fact in opposition to a summary judgment motion. See, e.g., Liebling v. Novartis Pharm. Corp., 2014 WL 12576619, at *1 (C.D. Cal. Mar. 24, 2014); but cf., Aaronson, 371 F. Supp. 3d at 1102-03 (finding expert's opinion that Diamond had suffered losses as a result of exit company's practices raised issue of fact precluding summary judgment on Lanham Act claims).

Defendants also note that they have challenged the validity and reliability of Diamond's experts' opinions through motions in limine. I am not tasked with resolving the motions in limine. Thus, at this stage, Diamond's experts' reports are part of this case and I have considered them for the purpose of analyzing Defendants' motions for summary judgment. Having done so, I conclude that the experts' reports serve as an additional, albeit marginal, reason to deny Defendants' motions for summary judgment on the Lanham Act claims.

Thus, to the extent that the Exit Defendants seek summary judgment on Diamond's Lanham Act claims based on the fact that Diamond has not established a connection between the false statements in the ads and the default on the contracts, their motion is denied.

The same analysis applies to Diamond's argument that it has established proximate cause. There is no question that Diamond has established a link between the calls with the Exit Defendants and the defaults that followed. (See, e.g., Exh. 3, Bellard Depo. at 35-37, 47 (testifying that Pandora staff told him not to pay Diamond any

longer and that he listened and stopped paying Diamond, explaining, "[A]fter this contract [with Pandora] I didn't pay Diamond."); Exh. 5, C. Martinez Depo. at 39 ("Q: Based upon your conversations with [Pandora], did you ever make any payment on your maintenance fees. A: No. I did not make payments on my fees."); Exh. 125, R. Martinez Decl. at ¶¶ 6 and 9 (explaining RAG sales representative Jason Krieck told her to stop making payments on Diamond timeshare and she listened to him and stopped making payments).) But Diamond's evidence linking the ads to the calls is thin as explained above. Nevertheless, in the context of this case and the motion before me, I find that there is sufficient direct and circumstantial evidence to support a finding of proximate cause. The sole purpose for creating Pandora and RAG was to help timeshare owners cancel their contracts with timeshare companies like Diamond. The Exit Defendants solicited these owners through ads that contained false and misleading statements. These ads and the promotional calls that followed led many, if not most, of the 750+ owners to hire the Exit Defendants. Many, if not most, of them were told to stop paying Diamond and did. This is enough to establish proximate cause.⁷

7 Diamond is not arguing that it has established causation or damages as to the 750+ owners who enlisted the Exit Defendants' services and stopped paying. (Diamond's Opposition to Defendant Law Firms' Motion at 5 ("Diamond admits that there is a dispute of fact as to [causation and damages] that cannot be resolved on summary judgment.").) That issue is reserved for trial.

3. Limiting Diamond to the Allegations in the Fourth Amended Complaint

The Exit Defendants argue that Diamond's motion should be limited to the four categories of allegedly false statements that it pled in the Fourth Amended Complaint, i.e., (1) Defendants can help timeshare owners out of the contracts in a safe and legal manner; (2) the timeshare contracts obligate the owner's children; (3) Defendants offer a money-back guarantee; and (4) timeshare developers use high-pressure sales tactics and dishonest sales agents to make sales and they never live up to their promises. (Exit Defendants' Opposition at 12-14.) The Exit Defendants claim that because allegations of false statements are subject to Federal Rule of Civil Procedure 9(b)'s heightened pleading standard, Diamond should not now be allowed to proceed on claims, for example, that Defendants falsely represented that they employed "bundled" lawsuits or class actions or that they advertised a 100% success rate. (Exit Defendants' Opposition at 14, citing Kearns v. Ford Motor Co., 567 F.3d 1120, 1125-27 (9th Cir. 2009).) The Exit Defendants contend that they limited their efforts in discovery to the statements raised in the Fourth Amended Complaint and argue that Diamond should be limited to those statements in its summary judgment motion.

As Diamond points out, however, in the Fourth Amended Complaint it noted that it was providing exemplars of the false advertising and explained that other similar ads would be revealed in discovery. (FAC ¶¶ 87 and 93.) Furthermore, it appears that these other ads and the analysts' scripts and transcripts containing similar claims were, in fact, produced by Defendants in discovery and that the parties pursued discovery relating to them, as evidenced by the depositions and the discovery responses. As such, the Exit Defendants have not been unfairly prejudiced and I will consider other statements made by them in promoting their services. See,

e.g., Summit v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 937 (C.D. Cal. 1996) (denying motion to dismiss claims for lack of notice where court found defendant given fair notice of additional allegations based on plaintiff's representation that ads in the complaint were merely examples and illustrative and not exhaustive of Lanham Act claims).

4. The Statute of Limitations Defense

Diamond filed this action in January 2020. In their Motion for Summary Judgment, the Exit Defendants argue that Diamond's Lanham Act claims are barred by the three-year statute of limitations governing fraud claims, which they contend began to run in 2015 or 2016, when, according to one of Diamond's employees, she first noticed that there were exit companies advertising exit services. (Exit Defendants' Motion at 48.)

Diamond counters that, under the "discovery rule," the statute of limitations did not begin to run until it knew the "basic facts giving rise to potential liability" underlying those claims. It argues that the Exit Defendants and Defendant Law Firms employed a complex scheme that prevented Diamond from identifying the causes of the owners' default or knowing of Defendants' involvement at the time of default. (Diamond's Opposition at 47-50.) Diamond argues further that, to the extent that the issue turns on its employee's testimony, it necessarily involves a question of fact that must be left to the jury to decide. (Diamond's Opposition at 38-39.)

Accepting Diamond's argument that the discovery rule applies and, therefore, that the statute of limitations did not begin to run until Diamond knew the basic facts giving rise to potential liability, Defendants' argument is a good one. The basic facts Diamond needed to know to trigger an inquiry were that Diamond owners stopped paying on their contracts and that Defendant Law Firms were representing them. As to these timeshare owners, Diamond had the facts and, therefore, Defendants are entitled to summary judgment on statute of limitations grounds as to these owners.

Defendants maintain that the better cut-off for the statute of limitations would be when the owners stopped making payments. In Defendants' view, that is when Diamond should have been on notice and conducted an inquiry.

This argument is rejected. Diamond has 400,000 owners. Defendants are allegedly responsible for about 750 of them defaulting on their contracts. Presumably, during the period from 2015 to 2020, there were many more owners who stopped paying who had not hired the Exit Defendants. Thus, the fact that an owner stopped making a payment on a timeshare contract is not enough to trigger an investigation into what was happening. Further, though Defendant Lawyers usually wrote letters to Diamond informing it that the lawyers were representing the owners, they did not always do that. In fact, at least one of the law firms, the McCroskey firm, intentionally concealed its involvement from Diamond by drafting letters for clients to send to Diamond under their own signatures.

For all these reasons, the more appropriate cut-off is the date Diamond received the first letter from the law firm, informing Diamond that they represented the owner. That letter, combined with the fact that the owner was no longer paying under the contract, should have prompted Diamond to investigate and find out why. Obviously, there were different dates for different owners and the record is not sufficient to make this determination as to each owner. That will have to be proved up at a later date. 5. The Ownership of the Debt Issue

The Exit Defendants argue that Diamond is not entitled to summary judgment on the Lanham Act claims because it sells 75% of its timeshare loans to third parties and there is an issue of fact as to which of these loans it still holds. (Exit Defendants' Motion at 25.) In Defendants' view, this bars Diamond from pursuing these claims because it cannot prove that it lost money due to Defendants' acts. The Exit Defendants also argue that relief is not warranted because Diamond cannot establish which Diamond corporate entity lost money as a result of Defendants' practices. (Exit Defendants' Motion at 26.) They contended at oral argument and in an email that followed that, absent evidence that Diamond re-acquired the loans and an assignment of the causes of action on the loans, it cannot proceed in this case, citing, inter alia, Oaktree Capital Mgmt., L.P. v. KPMG, 963 F. Supp. 2d 1064, 1077-81 (D. Nev. 2013). They see this as a "silver bullet," necessitating dismissal of the case.

Diamond responds that it owns all of the loans and that it does not sell them when it securitizes them. It also contends that the issues regarding ownership of the loans have not been fleshed out by the parties during discovery and come as a surprise to Diamond in the midst of this summary judgment motion. It notes that some of Defendants' arguments and citations were presented only after I issued a tentative decision on these summary judgment motions.

Defendants counter that they raised the issue as an affirmative defense in their Answers to the Fourth Amended Complaint and, therefore, Diamond should have anticipated that this issue was coming. I do not find this argument persuasive as Defendants raised 33 affirmative defenses each in their Answers, many of which they have, presumably, abandoned.

Diamond argues further that Defendants have not tied their arguments to the specific loans in this case. I disagree. Defendants have pointed out that the 1099s Diamond relies on in support of their motion were not issued by Diamond.

Ultimately, I side with Diamond and conclude that these issues have arisen very late in the context of these motions for summary judgment and the record is not nearly established enough to resolve them. I note further that, in Defendants' briefing on the motions, they did not crystalize their arguments as they have done since then in oral argument and in an email following oral argument. For this reason, Defendants' argument that they are entitled to dismissal on this ground is rejected.

6. Diamond's Reputation

The Exit Defendants argue that Diamond has such a miserable reputation that there is a question of fact as to whether the owners cancelled their contracts due to anything Defendants did or said. Though there is certainly evidence that Diamond's reputation was not stellar--which is presumably why Diamond is not arguing in summary judgment that it has suffered damage to its reputation--the evidence establishes that the Exit Defendants' analysts told owners to stop paying and the owners listened. The accounts of owners proffered by Diamond clearly establish that. The Exit Defendants' argument that there may have been other reasons why some owners stopped paying does not negate Diamond's showing that the owners stopped paying because Defendants told them to. See Diamond Resorts International, Inc. v. Aaronson, 371 F.Supp.3d 1088, 1110 (M.D. Fla. 2019) ("[C]ausation just requires that the false advertising proximately caused the claimed injury--it

need not be the only cause or even the predominant cause of the injury.")

7. The Merits of the Motions Regarding the Lanham Act Claims

As for the merits of the summary judgment motions on the Lanham Act claims, Diamond alleges that the Exit Defendants' ads, and their analysts' representations in sales calls flowing from the ads, falsely claimed:

(1) Defendants legally terminate timeshare contracts based on the timeshare developer's misrepresentations and unethical sales practices.

(2) Owners obtain an "exit" from their contracts through the legal work of attorneys based on consumer protection laws.

(3) The attorneys file litigation, class actions, or bundled lawsuits, or threaten such litigation to negotiate an "exit."

(4) The exit service has 100% success rate or a 100% money-back guarantee.

(5) The heirs of timeshare owners will automatically inherit the payment obligations of the timeshare contract.

(Diamond's Motion at 12.)

The Exit Defendants contend that the ads themselves do not say what Diamond says that they do. They object to Diamond's efforts to "shoehorn" the sales calls into the advertising to support its argument. (Exit Defendants' Opposition at 21-22.) They point out, for example, that the scripts for the calls contain only occasional references to bundling of lawsuits. (Exit Defendants' Opposition at 22.) They argue further that only rarely did analysts represent that they had a 100% success rate and/or a money-back guarantee. Finally, they argue that none of the ads or call scripts states that the owners' heirs will automatically inherit the contract payment obligations. I address each alleged statement in turn.

Both Pandora's and RAG's ads say that, with the help of their lawyers, relying on consumer protection laws, they can help owners legally cancel their contracts based on false statements made by the timeshare company's sales representatives at the time of the contract. For example, in a 39-page sales brochure titled, "How to Break From Your Timeshare," Pandora explains that it is a consumer-advocacy firm that helps people cancel timeshare contracts. (Exh. 26, Sales Brochure at Pandora 000004.) It touts the fact that it gets owners out of their timeshare contracts legally and permanently with the help of a lawyer because "the only way [the timeshare company] will let you out is if they have to[] or face a lawsuit or even worse, a class action lawsuit." (Exh. 26 at Pandora 000004.) Pandora explains how they do this: "When timeshare developers use deceptive and unethical sales techniques, the Timeshare Compliance team relies on consumer-protection laws to void contracts." (Exh. 26 at Pandora 000006.) It provides further, "When developers do not comply with the compliance laws, the team at [Pandora] succeeds in cancelling timeshare contracts." (Exh. 26 at Pandora 000004.) It explains that Pandora is able to cancel the contracts based on misleading sales practices, fraud and omissions in the sales and marketing processes and that its team "relies on consumer protection laws to void contracts." (Exh. 26 at Pandora 000006.)

Exhibit 27 to Diamond's Motion is a Pandora radio ad containing a similar message. It informs the listener that Pandora makes the developers legally cancel the contracts.

RAG has employed similar claims in its advertisements. Exhibits 36-38 to Diamond's Motion are RAG commercials in which the speaker represents that timeshare

companies lure the unwary into sales meetings where unethical sales representatives trick the hapless attendees into signing contracts. The speaker explains that RAG relies on consumer protection laws that lead developers to cancel timeshare contracts for RAG clients. In another ad, which invites the timeshare owner to click on an icon to take a "60 second quiz," RAG touts that, "We are the only company in the USA who can safely cancel your timeshare, guaranteed." (Exh. 39.)

The analysts' presentations to the owners build on these themes and include other claims that are aimed at convincing owners to hire Pandora or RAG to help them cancel their contracts. Diamond has submitted five scripts used by analysts in making their sales pitches. (Exh. 46.) The scripts are essentially identical. And, though not all of the analysts used scripts, (see Exh. 16, King Depo. at pp. 151, 155-56, 163-64), even the analysts who did not, consistently communicated the same message, which the Exit Defendants standardized via initial training and weekly meetings between management. (Exh. 16, King Depo. at 151-52, 158.)

The Exit Defendants argue that the scripts--which they produced in discovery--have not been authenticated and are hearsay. (Exit Defendants' Opposition at 28.) This argument is rejected. The fact that Defendants produced the scripts in discovery and the scripts were prepared by Defendants' employees to be used for sales calls with prospective customers is enough to overcome these objections. See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F.Supp.2d 966, 972 (C.D. Cal. 2006) (finding authentication requirement met when party opposing summary judgment had produced the documents in discovery and concluding documents were non-hearsay under Federal Rule of Evidence 801(d)(2) since they were created by company's employees).

Diamond has also submitted transcripts from recorded telephone calls between owners and Pandora and RAG analysts. The messaging in the recorded calls is strikingly similar to the scripts, indeed, almost verbatim in many parts, and contains the representations that Diamond alleges that they do, notably: "We represent people who have been lied to by unethical timeshare salespersons. We help you legally cancel your contract based on consumer protection laws." (Exh. 46 at 98931.1-.3; Exh. 47 at 4-5; Exh. 49 at 4, 15, 18-19, 30-31, 55-56.) They also claim, in essence, "We only take cases we can win. And we have never lost a case that we have taken." (Exh. 47 at 12, 27, 52; Exh. 48 at 4, 17; Exh. 49 at 15, 34, 37, 89.)

As to Diamond's claim that the Exit Defendants were touting the prospect of class actions or bundled lawsuits to persuade potential customers to sign up, the evidence is mixed. Though Pandora made reference to class actions in its brochure (Exh. 26, Pandora Sales Brochure at Pandora 00004) and in some of its calls (Exh. 49 at page 30-31 (reference to "bundled" cases); Exh. 50 at 19 (explaining they have a bundle of Diamond cases right now so the owner should hurry and get on board so that he can be included in that action)), most of the other ads, the scripts, and the transcripts of the calls do not support Diamond's claim that Defendants regularly represented to owners that they pursued class actions or bundled lawsuits.

Diamond's claim that the Exit Defendants advertise a 100% success rate is supported by the record. (Exh. 26 Pandora at 000004 ("We only take cases we know can be won"); Exh. 39, Pandora Ad ("We are the only company in the USA who can safely cancel your timeshare, guaranteed"); Exh. 47, Pandora Call Transcript,

at 12 ("We've never lost a case that we've accepted"), at 27 ("[W]e've gotten every single one of our Diamond Clients out of their timeshare"), at 52 (explaining that Pandora has never lost a case); Exh. 48, RAG Call Transcript at 4, (explaining that the reason RAG has an A+ rating from the Better Business Bureau is because "we've never lost a case that we've accepted"); Exh. 49, RAG Call Transcript, at 15 ("We do not take every case. But of the cases that we take, we have won every single case").)

As to the money-back guarantee, the evidence is mixed. At times, Pandora advertised a money-back guarantee. (Exh. 33, Advertisement, ("They [Pandora] offer a money back guarantee[.]"); Exh. 40, Pandora Advertisement ("They [Pandora] offer a money back guarantee[.]"); see also Exh. 34, Pandora Advertisement ("[Pandora] offers a program ensuring that they don't get paid until that timeshare contract is canceled.").) In late 2017 or early 2018, however, it appears that Pandora stopped offering money-back guarantees. (Exit Defendants' Opposition at 26; see also Exh. 26, Pandora Brochure at 000004 ("We only take cases we know can be won. Beware of firms who take all cases. Even worse is the practice of offering false money back guarantee. These are red flags and are typically not backed by anything other than a fancy graphic on a website.").)

RAG uniformly did offer a money-back guarantee. (Exhs. 36, 37, and 41, RAG Advertisements, ("If your timeshare developer doesn't cancel your timeshare contract, we will refund all fees for our services. That's our 100% guarantee specified in each service agreement we send."); Exh. 38, ("At Resort Advisory Group, we offer a 100% money back guarantee. Developers will cancel your contract and save you thousands, or you will not pay a penny for our service.").)

The Exit Defendants contend that there are issues of fact surrounding Diamond's argument that Defendants do not honor their money-back guarantee. (Exit Defendants' Opposition at 26.) They point to the fact that they refunded Mr. Eddie Saul a portion of his fee even though his contract had been cancelled. (Exit Defendants' Opposition at 26.) They contend that Pierre and Marie Beaubrun were not entitled to a refund but Pandora returned 80% of their money, anyway. (Exit Defendants' Opposition at 27.) And they argue that Bonnie Wright and Mimi Demian were not entitled to a refund because their timeshare contracts had been cancelled. (Exit Defendants' Opposition at 27.) I agree. There are questions of fact as to the money-back guarantee, which bars summary adjudication on this point.

Diamond claims that the Exit Defendants falsely assert in their ads that children and other heirs "automatically" inherit the timeshare contract payment obligations. This claim is rejected. To begin with, the contracts that have been submitted include a clause that ostensibly binds the heirs to the contract. (Exh. BB-1, Diamond's Response to Defendants' Request for Admissions, No. 12.) Thus, the Exit Defendants' statements that the heirs will automatically inherit the timeshare is not false.

Diamond seems to want to turn this issue on its head, arguing that the heirs do not "automatically" get to step into the shoes of the owners because Diamond has to approve of the heirs before the transfer. It wants to argue, it seems, that the timeshares are valuable assets that the heirs would treasure but are unable to obtain them unless Diamond allows them to. This argument is specious. The plain language of the contract provides that the heirs are

bound by the contract when the owners die. Under the contract, only Diamond can elect not to saddle the heirs with it. The heirs do not have that option. Diamond points out that all 50 states have laws allowing people to disclaim their inheritance, so, in fact, the heirs are not automatically bound. Here, again, I disagree. Under the timeshare contract, the heirs are automatically bound, unless Diamond decides otherwise, and the fact that the heirs can bring an action to disavow their ownership does not alter the fact that on the death of the owner, usually a parent, they are bound.

As to the merits of Diamond's claim, the evidence is mixed as to whether the ads and sales pitches include language about the heirs inheriting the timeshare. Though some of the ads mention that fact, most do not. And the "evidence" Diamond relies on--(1) two screenshots from a Pandora advertisement it has embedded in the Fourth Amended Complaint (Exh. 31 at 33); (2) the deposition testimony of Jason Krieck (Exh. 31 at 173); and (3) an ad from a YouTube video--is not compelling. The unverified Fourth Amended Complaint is not evidence. Jason Krieck testified that he was not familiar with the ad. And the YouTube video provides only that, "Your kids will probably inherit your payment," (Exh. 171), not that they automatically will. The scripts, (Exh. 46 at 98931.3, 98931.7, 98931.9), and the transcripts, (Exh. 47 at 11-12; Exh. 48 at 14; Exh. 49 at 20-21; Exhs. 51-56), often do include language that the owner's children or heirs will automatically inherit, but not always. In the end, I conclude that there are material issues of fact in dispute as to whether the Exit Defendants are consistently promoting their services by falsely claiming that the timeshares automatically pass to the heirs.

I do find, however, that it is uncontroverted that the Exit Defendants' ads and the sales pitches that follow communicate to prospective customers that the Exit Defendants represent timeshare owners who were tricked into purchasing their timeshares based on false and misleading statements by salespersons in a climate of undue pressure. Those ads and the sales pitches that follow further communicate that, with the help of counsel, Defendants will assist the owners in legally cancelling their contracts through a campaign of pressure on the developers and/or litigation grounded in consumer protection laws. The evidence also establishes that, in fact, the Exit Defendants do not assist the owners in legally cancelling their contracts based on Diamond's unscrupulous acts. Rather, Defendants counsel the owners to stop making payments and, when they do, Diamond cancels the contracts based on breach of contract. This results in the owners being reported to the credit agencies and, thereafter, receiving an IRS Form 1099 for the cancellation of the debt they owe to Diamond.

The Exit Defendants vehemently disagree. They argue that the statements are not literally false. They contend that they are literally true, ambiguous, and/or non-actionable statements of opinion or puffery. (Exit Defendants' Motion at 20.) They point out, for example, that Diamond has a reputation for unscrupulous sales tactics and that it repeatedly lies to timeshare buyers. (Exit Defendants' Motion at 15-18.) Thus, in their view, their marketing and promotions that state that they can help owners get out of timeshare contracts because of bad acts by developers is neither false nor misleading.

To be clear, I am not making any findings regarding Diamond's use of questionable sales tactics to close timeshare contracts. In fact, the evidence that the Exit

Defendants have discussed at pages 15-18 of their Motion and pages 2-5 and 20-21 of their Opposition supports their contention that Diamond does employ these tactics. Even the evidence that Diamond has submitted, like the call transcripts with Diamond owners, supports this claim. What I am finding is that there is no question that the Exit Defendants generally do not rely on these questionable tactics and consumer protection laws that prohibit such tactics to help the owners legally cancel their timeshares. The unambiguous factual message that the Exit Defendants are communicating to the timeshare owners is that they are selling a service in which they and their lawyers legally cancel the owners' timeshare contracts based on improprieties by Diamond. (Exh. 30, Pandora Ad, "Our team can legally terminate your time share agreement[.]"). The Exit Defendants are not providing that service and they know it. The timeshare contracts are being cancelled because the owners follow Defendants' advice and stop making payments on the contracts, which triggers foreclosure by Diamond based on default. There are no lawsuits to speak of. There are no cancellations based on threats of litigation. The terminations are not the result of anything that Diamond did or said in the marketing and sales of the timeshares. Instead, they are based on common, run-of-the-mill defaults.

This process is not "legal" as that term is generally understood within and without the legal profession and, therefore, the Exit Defendants' repeated assertion that they accomplish cancellation by legal means is false. The owners are breaching their contracts based on Exit Defendants' advice to stop paying Diamond and they in fact suffer negative consequences of breaching, including negative credit reporting and tax liability.

The Exit Defendants point to three clients whom they have helped achieve cancellation based on legal grounds. (Exit Defendants' Opposition at 7, 25.) They note that Defendant Carlsbad Law Group filed an arbitration on behalf of Richard Johnson and another on behalf of Debbie and Sam Prescott. Yet Pandora and RAG combined have entered into agreements with more than 750 of Diamond's owners. (Exh. 22, Pandora's April 2020 Responses to Interrogatories, Question 9 and attached list (more than 550 as of April 2020); Exh. 23, RAG's April 2020 Responses to Interrogatories, Question 9 and attached list (more than 225).)⁸

8 Diamond and the Exit Defendants seem to agree that the number is now 764, though that number could be reduced to 746.

The Exit Defendants cite to a fourth owner, Janice Hayes, whom Diamond brought a case against in arbitration. Defendants note that Defendant Law Firm in that case was able to successfully assert California's anti-deficiency law on her behalf. They argue that this shows that "owners can legally get out of their timeshare contracts." (Exit Defendants' Opposition at 7.)

I disagree. First, the evidence does not support this claim. It appears that Ms. Hayes' arbitration was decided under Nevada law, not California law, and that the arbitrator ruled in her favor on the ground that Diamond had elected its remedy, i.e., cancellation of the contract, and, therefore, was foreclosed from proceeding against her for damages. (Exh. D to the Slattery Declaration.) Further, to the extent that the lawyers were able to convince the arbitrator that she was protected under California's anti-deficiency law, that law limits

the recovery in a foreclosure action to the proceeds of a foreclosure sale. The fact that Defendants were able to prevent Diamond from satisfying the deficiency based on this law does not show that Defendants helped Ms. Hayes legally cancel her timeshare agreement.

Even accepting Defendants' arguments that they pursued litigation in three or four out of 750 cases, that does not establish that material issues of fact exist as to whether they are actually providing the service they are advertising.

In their Motion, the Exit Defendants assert that they paid for the legal expenses in 16 arbitration cases with Diamond and cite to the declarations of Rich Folk and Jason Krieck to support this fact. (Defendants' Motion at 19.) Neither declaration supports this claim.

In the end, I conclude that Diamond has met its burden of establishing the following facts relating to the Claims I and III:

(i) The Exit Defendants falsely claimed in commercial advertisements and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts;

(ii) The Exit Defendants falsely claimed in these ads and promotions that they had a 100% success rate;

(iii) These advertisements and promotions constituted commercial speech;

(iv) These advertisements were disseminated to a vast audience of the purchasing public through television, radio, the internet, and print ads;

(v) Based on these false and misleading ads, some of Diamond's timeshare owners contacted the Exit Defendants. In promotional calls that followed, the Exit Defendants' analysts repeated the above false claims and expanded on them. In addition, they counseled the owners to stop making payments to Diamond. Some of the owners listened and stopped making payments.

(vi) Further, because the statements identified in subsection (i) and (ii) are literally false and because Pandora and RAG knew that they were false, it is presumed that these statements were material and that they deceived the owners who purchased the Exit Defendants' services. AECOM v. Energy and Construction, Inc. v. Ripley, 348 F. Supp.3d 1038, 1056 (C.D. Cal. 2018), rev'd on other grounds, 851 F. App'x 20 (9th Cir. 2021);

(vii) Diamond has lost revenue from timeshare owners who stopped paying Diamond as a result of the Exit Defendants' false and misleading advertisements and promotions.

C. Diamond's Claims Against Pandora and RAG for Violations of California's False Advertising Law (Count XIII)

Diamond has brought a claim against the Exit Defendants for violating California's False Advertising Law, California Business and Professions Code § 17500. It argues that it is entitled to summary adjudication on this claim for the same reasons it is entitled to summary adjudication on the Lanham Act claims. (Diamond's Motion at 22.) Defendants argue that, because Diamond has not established its Lanham Act claims, it is not entitled to summary judgment on its state claims for false advertising.

The two laws are so similar that a violation of the Lanham Act necessarily amounts to a violation of California's False advertising law. Defendants have not argued otherwise. (Exit Defendants' Opposition at 11-12.) As such, Diamond is entitled to summary adjudication on the state law claim against the Exit Defendants to the

same extent it is entitled to summary adjudication on the Lanham Act claims.

D. Diamond's Claims Against Pandora and RAG for Violations of California's Unfair Competition Law (Count XI)

Diamond contends that the Exit Defendants' violations of the Lanham Act and state false advertising act (as well as their alleged tortious interference with contract and civil conspiracy) also constitute a violation of California's Unfair Competition Law, California Business and Professions Code § 17200. (Diamond's Motion at 31-32.).

California's Unfair Competition Law proscribes "any unlawful, unfair or fraudulent business act or practice." Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999). The law defines "unfair competition" to include "unfair, deceptive, untrue or misleading advertising...." Having concluded that the Exit Defendants' representations (that they were 100% successful in helping timeshare owners legally cancel their contracts using consumer protection laws based on misrepresentations by Diamond's sales force) were false and misleading under the Lanham Act, I must also conclude that Diamond has established those facts under the Unfair Competition Law. See, e.g., Twentieth Century Fox Film Corp. v. Dastar Corp., 2000 WL 35503105, at *12 (C.D. Cal. Jan. 4, 2000) (granting motion for summary judgment on California's Unfair Competition Law claim, explaining "the Court's finding that defendants' actions are misleading under the Lanham Act controls the resolution of the unfair competition claim.").

Diamond further contends that the Exit Defendants have violated the state Unfair Competition Law by operating an unregistered referral service for Defendant Law Firms, in violation of California Business and Professions Code § 6155. The Exit Defendants argue that Diamond cannot pursue a claim based on the allegedly unlawful lawyer referral service because it did not raise this claim in the Fourth Amended Complaint. Diamond counters that, although it did not specifically allege a violation of § 6155, it did mention more than once in the that the Exit Defendants were referring timeshare owners to Defendant Law Firms.

Here, I side with Defendants. Diamond did not put Defendants on notice that it was pursuing a claim based on an illegal referral service and cannot now, under the guise of summary judgment, make that clear to them and seek judgment on the issue.

Diamond's other unfair competition law claims are predicated on its tortious interference and civil conspiracy claims. For the reasons discussed below, I find that there are issues of fact barring summary judgment on these claims. As such, Diamond is not entitled to summary adjudication on Unfair Competition Law claims based on these theories.

E. Diamond's Tortious Interference Claims (Counts II and IV)

In Counts II and IV, Diamond sues the Exit Defendants for tortious interference with contract. Diamond alleges that Defendants knew that Diamond's timeshare owners had contracts with Diamond; that Defendants intentionally interfered with those contracts by telling the owners to stop making payments due under the contracts; and that the owners listened and stopped making payments.

Each side has moved for summary judgment on these claims. In Defendants' motion, they argue that Diamond does not have sufficient evidence to prove causation

or standing. (Exit Defendants' Motion at 48-54.) They also contend that Diamond's claims stemming from contracts that were breached before January 2017 are barred by the statute of limitations. (Exit Defendants' Motion at 54.) In their opposition to Diamond's motion, Defendants argue that there are factual issues in dispute that bar summary judgment for Diamond, including: (1) proximate cause; and (2) enforceability of the timeshare contracts. (Exit Defendants' Opposition at 38-43.)

To prevail on its claim for tortious interference with contract, Diamond must show: (1) there were valid contracts between Diamond and the owners; (2) Defendants knew about the contracts; (3) Defendants acted with intent to induce the owners to breach the contracts or disrupt the contractual relationships; (4) the owners breached or disrupted the contracts; and (5) Diamond suffered damages as a result. See Blizzard Ent. Inc. v. Ceiling Fan Software LLC, 28 F. Supp. 3d 1006, 1015 (C.D. Cal. 2013); Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126, 270 Cal.Rptr. 1, 791 P.2d 587 (1990).

There is no dispute that Diamond had contracts with its owners; that the Exit Defendants knew that Diamond had contracts with its owners; and that the Exit Defendants intentionally interfered with those contracts by, among other things, directing the owners to stop making payments under the contracts. The evidence also establishes that some owners listened to the Exit Defendants when they told them to stop making payments on the contracts. (See, e.g., Exh. 3, Bellard Depo. at 35-37, 47 (testifying that Pandora staff told him not to pay Diamond any longer and that he listened and stopped paying Diamond, explaining, "[A]fter this contract [with Pandora] I didn't pay Diamond."); Exh. 5, C. Martinez Depo. at 39 ("Q: Based upon your conversations with [Pandora], did you ever make any payment on your maintenance fees. A: No. I did not make payments on my fees."); Exh. 125, R. Martinez Decl. at ¶¶ 6 and 9 (explaining RAG sales representative Jason Krieck told her to stop making payments on Diamond timeshare and she listened to him and stopped making payments).)

The Exit Defendants' opposition to Diamond's summary judgment motion on this claim is three-fold. First, they contend that Diamond has failed to establish proximate cause by individualized showings that owners stopped paying on the contracts due to Defendants' conduct. (Exit Defendants' Opposition at 38-42.) The evidence, as outlined above, is contrary to this argument. The record is replete with evidence, including testimony from Diamond timeshare owners, transcripts of phone calls with timeshare owners, and written correspondence with timeshare owners, that establish that they stopped paying Diamond when Defendants Pandora and RAG told them to.

In addition to the evidence from the individual owners, Diamond has presented the expert opinion of statistician Dr. Jamie Baldwin, who has analyzed the data and determined that owners are 20 times more likely to default after hiring an exit company like Pandora or RAG. (Exh. 129, Baldwin Report at page 8.) Defendants argue that Dr. Baldwin's approach is flawed for several reasons, including that the survey he conducted and relies on included timeshare owners from all timeshare companies, not just Diamond, and, therefore, his conclusions are tainted. (Exit Defendants' Reply at 40-42.) They point out that their expert, Dr. Loren Naidoo, has noted this defect as well as others in her rebuttal report and contend that this highlights material issues of fact in dispute. (Exh. SS,

Dr. Naidoo's Rebuttal Report.) They also note that they have moved in limine to block Dr. Baldwin's testimony at trial under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).

I have not relied on Dr. Baldwin's opinion in reaching my finding that Diamond is entitled to summary adjudication on the issue of proximate cause for the tortious interference claim. I have relied, instead, on the testimony of Diamond owners who reported that they stopped paying Diamond because the Exit Defendants told them to. This is enough to establish proximate cause on this issue and warrant summary adjudication. As to how many owners stopped paying based on the Exit Defendants' interference with the contracts and how much revenue Diamond lost, those are issues for the jury.⁹

9 In RAG's Objections to my second tentative, it criticized my finding that Diamond had established proximate cause, explaining, "[P]roximate cause is not an element of a claim for tortious interference with contract." (Objections at 6.) In the Exit Defendants' Motion for Summary Judgment and in their Opposition to Diamond's Motion for Summary Judgment, however, RAG (along with Pandora) argued that, in fact, "proximate causation is a vital element" of a tortious interference claim, citing cases and the state pattern jury instruction, and arguing that, without a showing of proximate cause, Diamond could not prevail on this motion. (Exit Defendants' Motion for Summary Judgment at 48-49 and Exit Defendants' Opposition to Diamond's Motion for Summary Judgment at 38-39.)

The Exit Defendants also contend that they cannot be liable for tortious interference with the timeshare contracts because the contracts are void or voidable. They base this argument on the fact that: (1) Diamond induced the owners to sign the contracts through fraud; and (2) Diamond is not a licensed finance lender under California law. (Exit Defendants' Opposition at 42-43.) In support of these arguments, Defendants have submitted the declarations of three Diamond timeshare owners who claim, in essence, that they were misled by Diamond's sales representatives and pressured into buying Diamond timeshares. (See Exit Defendants' Motion, Exhs. 5-7, Decls. of Phil Kiefer, Serlena Parks, and Riley Young.) Diamond objects to these declarations on the ground that they are hearsay and that they were not produced in discovery. As to the contracts, it points out that Defendants have the burden of proving that the contracts are void or voidable and have fallen short. (Diamond's Reply at 23-24.) Furthermore, in Diamond's view, its sale of timeshare points over time amounts to bona fide credit sales, not consumer loans. (Diamond's Reply at 24, n. 37.)

The parties disagree as to whether Defendants' void/voidable contract theory is properly characterized as an element of Diamond's tortious interference claim (i.e., the existence of a valid contract) or as an affirmative defense that must be pled and proved by Defendants. (See Exit Defendants' Opposition at 42-44; and Diamond's Reply at 23-24.) As Diamond points out in its Reply brief, the issue of whether the contracts were void or voidable was raised for the first time in the Exit Defendants' Opposition to Diamond's Motion. Clearly, Diamond did not anticipate this defense and the record, frankly, is devoid of sufficient evidence to conclude one way or the other whether Diamond ran afoul of California law. I find, therefore, that there are numerous issues of fact in dispute that preclude summary judgment for either side on this ground.

Finally, Defendants have raised the statute of limitations as a defense to Diamond's motion for summary judgment and have asserted the statute in support of

their own motion, seeking to block Diamond from pursuing any claims before 2017. For the reasons explained above, Defendants are entitled to summary judgment on statute of limitations grounds on those claims where they can show that an owner stopped paying on its contract and the Lawyer Defendants sent Diamond a letter informing Diamond that it was representing the owner prior to January 31, 2017.

F. Diamond's Claim Against Defendant Law Firms for Contributory Violations of the Lanham Act (Count VII)

In Count VII, Diamond alleges that Defendant Law Firms are liable for contributing to Pandora and RAG's Lanham Act violations because they materially participated in Pandora and RAG's efforts to convince owners to breach their timeshare contracts with Diamond. (Diamond's Motion at 23-28; Diamond's Reply at 19-20.) The Exit Defendants oppose the motion on behalf of the Defendant Law Firms. The Defendant Law Firms have also filed their own motion for summary judgment on these claims.

In order to establish that Defendant Law Firms are liable for contributory false advertising under the Lanham Act, Diamond must prove that they contributed to the false advertising by knowingly inducing it, causing it, or materially participating in it. Duty Free v. Estee Lauder Cos. Inc., 797 F.3d 1248, 1277 (11th Cir. 2015); Diamond Resorts U.S. Collection Development, LLC v. Pandora Marketing, LLC, 2021 WL 1573073, at *4 (C.D. Cal. Apr. 12, 2021). Diamond contends that there is no doubt that the lawyers knew about the false advertising because it is so widespread on "TV, radio, internet, telemarketing, and scripted sales presentations." (Diamond's Motion at 25.) It argues that the fact that the Exit Defendants have spent about 10 million dollars on marketing between 2017 and 2019 establishes that element.

The Exit Defendants argue that there are questions of fact as to how much of the advertising the Defendant Law Firms were exposed to, which turns, in part, on how widespread the advertising was. (Exit Defendants' Opposition at 34-35.) They argue that the bare fact that Pandora and RAG spent millions of dollars on marketing fails to establish how many ads there were or the scope of the advertising sufficient to support summary judgment.

The Exit Defendants also argue that there is no evidence that the Defendant Law Firms encouraged Pandora and RAG to make these misrepresentations. They have submitted the testimony of the principal of one of Defendant Law Firms, Sean Slattery, in which he explains that he was aware that Pandora and RAG advertised but was not aware of the specifics of the ads, for example, that they were offering a 100% guarantee or that they were representing that the lawyers would be filing litigation, class actions, or bundled cases. (Exit Defendants' Opposition at 34-35.) Finally, the Exit Defendants contend that Diamond has failed to establish that Defendant Law Firms had the power to tell Pandora and RAG to stop the advertising and, therefore, cannot be held liable for contributing to the Lanham Act violations. (Exit Defendants' Opposition at 35.)

Here, I side with Defendants. My finding that Pandora and RAG violated the Lanham Act by falsely asserting in their advertisements and promotions that they could help owners legally cancel their contracts with the help of their legal team was based not only on the advertisements but also on the promotional sales pitches that followed. These sales pitches were integral to my findings that Pandora and RAG

violated the Lanham Act. Regardless of how widespread the dissemination of the ads was--and Diamond's reliance on the marketing budget from 2017-19 alone is not enough to prove that in the context of this motion--there is no evidence that all or even most of the lawyers knew what was being said on the phone calls between the Exit Defendants' analysts and the owners. It was in those calls that the owners were being told that Pandora and RAG had never lost a case. It was also in those calls that the owners were told to stop paying Diamond. Importantly, in the context of Diamond's motion for summary judgment, the inferences to be drawn from the evidence are viewed in a light most favorable to Defendants. Because the facts are in dispute, Diamond is not entitled to summary judgment on this ground.¹⁰

10 Diamond argues that there is evidence that on occasion a lawyer may have listened to the recorded calls between the analysts and an owner. Accepting this as true, it is not enough to establish that all of the Defendant Law Firms had knowledge of what was being said.

The Defendant Law Firms contend that they are entitled to summary judgment on Diamond's contributory violations claim because Diamond has failed to provide any evidence that any or all owners stopped making payments due to false advertising by the Exit Defendants. (Defendant Law Firms' Motion at 1-11.). As discussed above, I have found that Diamond has produced evidence that at least some owners stopped making payments after being lured by the ads into calling the analysts and then being told to stop making payments. As such, Defendant Law Firms' argument on this score is rejected.

G. Diamond's Claims Against Defendant Law Firms for Aiding and Abetting Pandora and RAG's Tortious Interference with Contracts and Unfair Competition (Counts XIV and XVI)

Diamond argues that Defendant Law Firms knowingly participated in Pandora and RAG's efforts to convince timeshare owners to sign up with Pandora and RAG and stop making payments to Diamond. (Diamond's Motion at 42-45.) Diamond points to the Court's previous ruling in which it found that the Defendant Law Firms could be liable for aiding and abetting if it was shown that these Defendants knew of the scheme and gave substantial assistance by agreeing to accept the referrals, which the lawyers understood was necessary to perpetuate the scheme. (Diamond's Motion at 42, citing Pandora, 2021 WL 1573073, at *11-12.)

The Exit Defendants oppose the motion on behalf of Defendant Law Firms, arguing that Diamond has not established that it is entitled to summary judgment on any of the underlying claims and, therefore, there is no basis for a finding that the Defendant Law Firms aided and abetted any violations. (Exit Defendants' Opposition at 34, 37-38.) Defendant Law Firms also dispute Diamond's claims.

As noted above, I find that there are material issues of fact as to how much the Defendant Law Firms knew when they accepted the referrals in this case. It appears likely that they knew that Pandora and RAG were advertising that they could help timeshare owners legally cancel timeshare contracts with the help of Defendant Law Firms. These representations were included in the ad campaign being aired and in print and on the internet. But a major component of my finding that the Exit Defendants committed violations of the Lanham Act was my finding that the "analysts" had made additional, critical misrepresentations in the calls. These misrepresentations included that they obtained legal cancellations through their attorneys based on unsavory acts committed

by Diamond's sales force, that they had never lost a case, and that the owners should stop making payments on their contracts with Diamond. The extent of the lawyers' knowledge about what was being said in these promotional calls is in dispute, which precludes summary judgment on Diamond's aiding and abetting claims.

Defendant Law Firms contend that Diamond's claim for aiding and abetting tortious interference is barred by the statute of limitations, which is two years under California law. (Defendant Law Firms' Motion at 15-16; Reply at 5-6.) They contend that they were added as defendants to this action on May 6, 2020 and, therefore, any alleged tortious interference claims relating to cancellations that took place before May 6, 2018 are barred. They argue that the cause of action accrued for aiding and abetting tortious interference on the date Diamond's owners made their last contract payment. As to that date, Defendants rely on Diamond's evidence that shows that 151 owners who employed RAG's exit services and 106 owners who employed Pandora's exit services made their last payment to Diamond before January 1, 2018. (Defendant Law Firms' Motion at 15.) The Defendant Law Firms further contend that the aiding and abetting claims do not relate back to the date Diamond filed its original complaint. (Defendant Law Firms' Motion at 14-17.) Diamond counters that, under the "discovery rule," the statute of limitations did not begin to run until they discovered what the law firms were doing, which is a question of fact. (Diamond's Opposition at 47-50.)

For the reasons explained above, I find that Defendants are entitled to summary judgment on statute of limitations grounds on those claims where they can show that an owner stopped paying on its contract and the Lawyer Defendants sent Diamond a letter informing Diamond that it was representing the owner.

Finally, as to Diamond's motion for summary adjudication on its Unfair Competition Law claim based on Defendants' unlicensed attorney referral operation, as explained above, because Diamond did not raise this claim in its Fourth Amended Complaint, its motion for summary judgment on this ground is denied.

H. Diamond's Civil Conspiracy Claims (Count X)

In Count X, Diamond claims that Pandora and RAG conspired to create an unlawful exit scheme and, with the knowing assistance of the Defendant Law Firms, operated that scheme. (Diamond's Motion at 45-50.) According to Diamond, the evidence is uncontradicted that Pandora and RAG created a false advertising campaign in which they represented that their exit service would help owners legally cancel their timeshare contracts based on the developer's unscrupulous sales tactics through litigation, class actions, or negotiations. (Diamond's Motion at 47-48.) Diamond alleges that Pandora and RAG did not tell the timeshare owners that the contracts were actually cancelled due to default when they took the sales analysts' advice and stopped paying on the contract. Diamond also alleges that Defendants operated an illegal lawyer referral service and are failing to inform the owners that no legal work was being done.

As to the Defendant Law Firms, Diamond charges that they were accepting the referrals to assist Pandora and RAG in signing up timeshare owners despite the fact that they were aware of the false advertising. (Diamond's Motion at 49.) Diamond alleges further that Defendant Law Firms conceal the fact that they are not providing the advertised services and that the sum and substance of their representation

is to send two letters to Diamond. (Diamond's Motion at 48.) In addition, Diamond claims that the Defendant Law Firms were blocking communications between Diamond and the owners, which prevented the owners from finding out that they were in default, which resulted in the contracts being cancelled due to nonpayment. Diamond also alleges that the lawyers helped draft a brochure used by the Exit Defendants. Finally, Diamond alleges that the Defendant Law Firms were violating their fiduciary duties to their clients by participating in this scheme because they stopped working on the file when the owners failed to make payments to the Exit Defendants.

The Exit Defendants contend that there are issues of fact as to whether they committed any wrongful conduct and whether Diamond was damaged as a result. (Exit Defendants' Opposition at 36, 44-46.) They argue that the evidence establishes that the Defendant Law Firms did not have any discussions with Pandora about the advertisements, including the language about a 100% guarantee. (Opposition at 36-37.) The Exit Defendants further contend that the Defendant Law Firms did not know that Pandora and RAG were advertising that the exit services would include class actions, litigation, or bundled cases. (Exit Defendants' Opposition at 37.)

A civil conspiracy consists of an agreement between two or more people to do something illegal, an act in furtherance of the conspiracy, and damages arising from the conduct. Kidron v. Movie Acquisition Corp., 40 Cal. App. 4th 1571, 1581, 47 Cal.Rptr.2d 752 (1995). In other words, it takes two (at least) to have a conspiracy. Diamond argues that this prong is satisfied because Pandora and RAG were separate entities and they conspired to work together to perpetrate this fraud. (Diamond's Motion at 45-46.) Earlier in its motion, however, Diamond argued that Pandora and RAG "operated as a single unit." (Diamond's Motion at 2.) The evidence is not clear as to which statement is true. It appears that at times Pandora and RAG operated out of the same office space, using many of the same employees, and that the scripts they employed were similar and, in some cases, identical. It also appears that at times they did not share such a close relationship. And, though for purposes of these motions, I generally treated Pandora and RAG as separate entities, there are questions of fact regarding the nature of their relationship, barring summary judgment.¹¹

11 Diamond points out that Pandora and RAG agreed in June 2019, that Pandora would conduct marketing for RAG. (Exh. 12, Services Agreement.) This agreement, however, does not explain the nature of their ownership/relationship nor does it establish that there was a conspiracy.

As to Defendant Law Firms, here, too, questions of fact remain that have been identified throughout this Report and Recommendation. Though it might be reasonable to assume that the lawyers were aware of the ads since they were published to a wide audience (as confirmed by the fact that they were aired on TV, radio, and the internet), assumptions cannot form the basis of a summary judgment finding. This is particularly true where I am bound to interpret the inferences drawn from the evidence in Defendants' favor. Further, there is no evidence that all or even most of the lawyers reviewed the call scripts or listened to the calls between the owners and the sales analysts. These calls are critical links to causation and there are issues of fact surrounding them. As such, Diamond's motion for summary judgment on this claim is denied. I. RAG's Counterclaim Against Diamond for Tortious Interference with Contractual Relations

RAG has filed a counterclaim against Diamond for allegedly interfering with contractual relations between RAG and its clients. RAG alleges that Diamond knew that these clients had entered into contracts with RAG for exit services and that Diamond, nevertheless, encouraged them to end their relationships with RAG by, among other things, not allowing them to apply for Diamond's Transitions program (which allowed some owners to cancel their timeshare contracts) as long as they maintained a relationship with RAG.

Diamond has moved for summary judgment on this claim, arguing that RAG does not have any evidence to establish that any of its clients refused to sign a contract with RAG or terminated a contract with RAG based on anything Diamond's representatives did or said. (Diamond's Motion at 51.) It argues further that RAG does not have any evidence that Diamond was aware that any of its timeshare owners had retained RAG. It also contends that RAG cannot show that Diamond interfered with those contracts or that RAG lost money as a result. Finally, it points out that all of the RAG clients who were denied an opportunity to participate in the Transitions program were denied for reasons other than that they were working with RAG.

RAG responds that there are material issues of fact as to whether Diamond knew that RAG had contracts with these owners. It points out that Diamond has conceded that one of its employees sent an email to an owner telling the owner that he was ineligible for the Transitions program because he had hired an exit company and recommended that the owner contact the Attorney General's office and report the exit company. Diamond responds that it is not clear if this timeshare owner was a RAG client.

RAG argues that it had to expend additional time and energy convincing its clients to stay with RAG after Diamond tried to convince them to drop RAG. In its Reply Brief, Diamond contends that RAG's failure to produce evidence on this and other issues is, in and of itself, sufficient cause to grant Diamond's motion on these claims.

There are material issues of fact in dispute that preclude summary judgment on this counterclaim. The evidence establishes that Diamond had a program to allow timeshare owners to seek modification of their timeshare contracts and that Diamond did not allow owners to participate in the program if they had hired an exit company like Pandora and RAG. Further, at times, Diamond would tell owners of this policy and encourage them to terminate their relationship with the exit companies. The evidence also establishes that in many cases lawyers working for Pandora and RAG on behalf of the timeshare owners sent letters to Diamond informing it that they represented the timeshare owners. Thus, Diamond knew that these timeshare owners seeking relief were working with a timeshare company and Diamond encouraged them to breach their contract with that company. But there are more questions than answers when it comes to this evidence.

As for damages, though the evidence is thin, RAG has presented some evidence that it suffered damages purportedly as a result of Diamond's conduct, precluding summary judgment on this claim.

IV.

CONCLUSION

For the reasons set forth above it is recommended that Diamond's Motion for

Summary Adjudication on the following facts be granted and that the Court accept these facts as uncontested:

(i) The Exit Defendants falsely claimed in commercial advertisements and promotions that, with the help of their lawyers, relying on consumer protection laws, they could help owners legally cancel their timeshare contracts;

(ii) The Exit Defendants falsely claimed in these ads and promotions that they had a 100% success rate;

(iii) These advertisements and promotions constituted commercial speech;

(iv) These advertisements were disseminated to a vast audience of the purchasing public through television, radio, internet, and print ads;

(v) Based on these false and misleading ads, some of Diamond's timeshare owners contacted the Exit Defendants. In promotional calls that followed, the Exit Defendants' analysts repeated the above false claims and expanded on them. In addition, they counseled the owners to stop making payments to Diamond. Some of the owners listened and stopped making payments.

(vi) Further, because the statements identified in subsection (i) and (ii) are literally false and because Pandora and RAG knew that they were false, it is presumed that these statements were material and that they deceived the owners who purchased Defendants' services. AECOM v. Energy and Construction, Inc. v. Ripley, 348 F. Supp.3d 1038, 1056 (C.D. Cal. 2018), rev'd on other grounds, 851 F. App'x 20 (9th Cir. 2021);

(vii) Diamond has lost revenue from timeshare owners who stopped paying Diamond as a result of the Exit Defendants' false and misleading advertisements and promotions.

The issue of how many of Diamond's owners breached their contracts as a result of the Exit Defendants' intervention and the amount of damages Diamond is entitled to as a consequence is in dispute.

It is further recommended that Diamond's Lanham Act claims accruing prior to January 31, 2017, in which the owners stopped paying under the timeshare contract and Defendant law firms sent a letter to Diamond informing Diamond that the Defendant law firm was representing the timeshare owner be barred under the statute of limitations. This same analysis applies to the tortious interference with contract claims against Pandora and RAG that accrued prior to January 31, 2018, and for Defendant Law Firms before May 6, 2018.

Finally, it is recommended that the parties' remaining requests for summary judgment/adjudication be denied.

DATED: September 19, 2022.

/s/ PATRICK J. WALSH

HON. PATRICK J. WALSH (Ret.)

Special Master