Opinion
CIVIL ACTION NO. 1:20-CV-441-LY
11-13-2020
Shane CAHILL and Nye Peterson, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. TURNKEY VACATION RENTALS, INC., Defendant.
Bryan L. Clobes, Pro Hac Vice, Cafferty Clobes Meriwether & Sprengel LLP, Media, PA, Daniel O. Herrera, Pro Hac Vice, Kaitlin Naughton, Cafferty Clobes Meriwether & Sprengel LLP, Chicago, IL, James Hatchitt, Sean E. Breen, Randy Howry, Howry, Breen & Herman, LLP, Austin, TX, Joseph G. Sauder, Pro Hac Vice, Sauder Schelkopf LLC, Berwyn, PA, for Plaintiffs. Arthur Gollwitzer, III, Michael Best & Friedrich LLP, Austin, TX, for Defendant.
Bryan L. Clobes, Pro Hac Vice, Cafferty Clobes Meriwether & Sprengel LLP, Media, PA, Daniel O. Herrera, Pro Hac Vice, Kaitlin Naughton, Cafferty Clobes Meriwether & Sprengel LLP, Chicago, IL, James Hatchitt, Sean E. Breen, Randy Howry, Howry, Breen & Herman, LLP, Austin, TX, Joseph G. Sauder, Pro Hac Vice, Sauder Schelkopf LLC, Berwyn, PA, for Plaintiffs.
Arthur Gollwitzer, III, Michael Best & Friedrich LLP, Austin, TX, for Defendant.
ORDER
LEE YEAKEL, UNITED STATES DISTRICT JUDGE
Before the court are Defendant's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) filed July 30, 2020 (Doc. #18); Plaintiffs’ Response in Opposition to Defendant TurnKey Vacation Rental Inc.’s Motion to Dismiss For Failure to State a Claim filed on August 20, 2020 (Doc. #22); and Reply in Support of TurnKey's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) filed on September 9, 2020 (Doc. #24). Having considered the motion, response, and reply, the court is of the opinion that the motion to dismiss should be granted for the reasons to follow.
I. BACKGROUND
Plaintiffs Shane Cahill and Nye Peterson, individually and on behalf of all others similarly situated, filed suit against Defendant TurnKey Vacation Rentals, Inc. ("TurnKey"). TurnKey is a full-service vacation-rental property-management company. Plaintiffs rented homes through TurnKey and agreed to be bound by TurnKey's Guest Agreement and Terms of Service (together "Rental Contracts") issued June 15, 2013. When the COVID-19 pandemic hit the United States in March 2020, local and state governments began issuing stay-at-home orders and travel restrictions, preventing Plaintiffs from being able to stay in the homes they had rented through TurnKey. In response to this crisis, TurnKey issued credit for the cost of the stay to guests, which can be used over an 18-month period, instead of a full refund.
Plaintiffs filed this suit asserting breach of contract, unjust enrichment, and conversion. Plaintiffs argue that the Rental Contracts stipulate that guests are entitled to a refund, not a credit, under these circumstances. However, TurnKey argues that the Rental Contracts clearly and unambiguously state that guests, including Plaintiffs, are not entitled to a refund after the cancellation period. Therefore, TurnKey asserts that this case should be dismissed with prejudice.
II. STANDARD OF REVIEW
Rule 12(b)(6) allows for dismissal of an action "for failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Although a complaint does not need detailed factual allegations, in order to avoid dismissal the factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; see also Cuvillier v. Taylor , 503 F.3d 397, 401 (5th Cir. 2007). A plaintiff's obligation "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly 550 U.S. at 555, 127 S.Ct. 1955. The Supreme Court expounded on the Twombly standard, explaining that a complaint must contain sufficient factual matter to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Courts are to determine if the claim is plausible, "not to evaluate the plaintiff's likelihood of success." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC , 594 F.3d 383, 387 (5th Cir. 2010). In evaluating a motion to dismiss, the court must construe the complaint liberally and accept all of the plaintiff's factual allegations in the complaint as true. See In re Katrina Canal Breaches Litig. , 495 F.3d 191, 205–06 (5th Cir. 2009).
In a Rule 12(b)(6) motion, "courts must limit their inquiry to the facts stated in the complaint and the documents either attached to or incorporated in the complaint," and "may also consider matters of which they may take judicial notice." Lovelace v. Software Spectrum, Inc. , 78 F.3d 1015, 1018–19 (5th Cir. 1996) ; see In re Katrina Canal Breaches Litig. , 495 F.3d at 205. Therefore, courts may consider documents referred to in the complaint that are essential to the plaintiff's claims. Lone Star Fund V , 594 F.3d at 387. III. ANALYSIS
Breach of Contract
Under Texas Law, "the essential elements of a breach-of-contract claim are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach." Mullins v. TestAmerica, Inc. , 564 F.3d 386, 418 (5th Cir. 2009) (quoting Aguiar v. Segal , 167 S.W.3d 443, 450 (Tex. App.—Houston [14th Dist.] 2005, pet. denied) ) (quotations omitted). To analyze whether a breach occurred, the court must interpret the contract. Contract interpretation is a matter of state law. DIRECTV, Inc. v. Imburgia , 577 U.S. 47, 54, 136 S.Ct. 463, 193 L.Ed.2d 365 (2015) (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ. , 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ). Therefore, Texas law applies to the interpretation of the Rental Contracts.
"The Court's task is to ‘ascertain the true intentions of the parties as expressed in the writing itself ’ " Burlington Resources Oil & Gas Co. LP v. Texas Crude Energy, LLC , 573 S.W.3d 198, 202-03 (Tex. 2019) (quoting Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am. , 341 S.W.3d 323, 333 (Tex. 2011) ) (emphasis added); see ConocoPhillips Co. v. Koopmann , 547 S.W.3d 858, 874 (Tex. 2018). Courts "give terms their plain, ordinary, and generally accepted meaning unless the instrument shows that the parties used them in a technical or different sense." ConocoPhillips , 547 S.W.3d at 874. Courts "have developed rules of interpretation to determine a contract's meaning and canons of construction to determine its legal effect." McCarty v. Montgomery , 290 S.W.3d 525, 532 (Tex. App.—Eastland 2009, pet. denied). These rules include:
1. Construe the agreement as a whole; 2. Give each word and phrase its plain, grammatical meaning unless it definitely appears that such meaning would defeat the parties’ intent; 3. Construe the agreement, if possible, so as to give each provision meaning and purpose so that no provision is rendered meaningless or moot; 4. Express terms are favored over implied terms or subsequent conduct; and 5. Surrounding circumstances may be considered—but to determine the appropriate meaning to ascribe to the language chosen by the parties.
Id. (quoting Mark K. Glasser & Keith A. Rowley, On Parol: The Construction and Interpretation of Written Agreements and the Role of Extrinsic Evidence in Contract Litigation , 49 BAYLOR L. REV. 657, 664-82 (1997) ).
The most relevant part of the rental agreement is Section 14, Payment and Cancellations, which provides in pertinent part:
All reservations which are made more than 10 days in advance are fully refundable if the guest cancels the reservation within 72 hours after the time of booking. After this cancellation period expires, all guest payments are non-refundable.
(Emphasis added). The terms are clear and unambiguous: "all guest payments are non-refundable" after the cancellation period. The parties agreed that TurnKey would not be required to refund any guest payments after the cancellation period for any reason and did not include language to the contrary.
Additionally, TurnKey argues that it is not required to issue a refund under Section 9, Weather and Other Unforeseen Events. Plaintiffs argue that Section 9 does not apply because it does not cover pandemics and, even if pandemics were covered, the cancellations were caused by government actions, not the COVID-19 pandemic. Section 14 states:
TurnKey does not accept liability for any inconveniences arising from ... natural disasters, acts of God or other reasons beyond its control. No refunds will be given for any delays or cancellations due to such conditions. Travel Insurance is highly recommended
Because Section 14 clearly and unambiguously states that TurnKey is not required to refund Plaintiffs’ payments, the court need not consider Section 9.
Plaintiffs assert that Section 12, Unavailability shows that they are entitled to a refund. Section 12 provides:
In the rare event the Home that [sic] you have reserved is for sale, is sold or is otherwise unavailable for any reason as determined by TurnKey , then TurnKey, in our discretion, may provide Guest with a comparable home at no additional cost to the Guest or cancel and refund Guest's reservation.
(Emphasis added). Plaintiffs argue that this section requires TurnKey to issue a refund when the home is unavailable and TurnKey cannot provide the guest with a comparable home. However, the plain language of Section 12 gives TurnKey the power to decide both when the section applies and whether it will issue a refund or provide a comparable home. The section specifies that TurnKey is the party that determines when the home is unavailable for any reason not listed. Moreover, the agreement states that TurnKey has the discretion to provide a refund or a comparable home if it determines the home is unavailable. There is no language suggesting TurnKey is required to provide a refund when the home is unavailable.
Athough TurnKey is not required to provide a refund or comparable home under Section 12, it did provide a comparable home to Plaintiffs—it issued credit for the full cost of the rent to guests, including Plaintiffs, who cancelled due to COVID-19. Plaintiffs argue that providing a credit is not a comparable home; however, this argument is unconvincing. The credits can be used to rent the same home at the same rate or, in some cases, any TurnKey home anytime through 2021. The credit is equivalent to a comparable home, as no home was available at the same time Plaintiffs rented homes due to government regulations in response to the COVID-19 pandemic.
Plaintiffs also identify Section 6, Maintenance and Access in support of their argument that they are entitled to a refund. Section 6 provides:
If a maintenance issue occurs that cannot be fixed in a reasonable amount of time or if the Home is unavailable for any reason as determined in our discretion , we reserve the right to cancel and refund you or offer to relocate you to another home at our discretion.
(Emphasis added). Like Section 12, Section 6 gives TurnKey the discretion to decide when a home is unavailable and if it wants to give the guest a refund or relocate the guest. Moreover, the COVID-19 pandemic is not related to maintenance; therefore, Section 6 does not apply.
In addition, the exceptions that Plaintiffs point to under Sections 12 and 6 apply when TurnKey cancels the reservation. Here, Plaintiffs cancelled the reservation, not TurnKey. Therefore, these sections are not relevant to Plaintiffs’ case.
Plaintiffs also argue that TurnKey would be able to act in bad faith if the court finds that TurnKey is not required to issue refunds in this case. In general, "the adequacy of performance will be upheld if made in good faith." Clover Staffing, LLC v. Johnson Controls World Servs., Inc. , 465 F. Supp. 2d 670, 684 (S.D. Tex. 2006) (quoting Black Lake Pipe Line Co. v. Union Constr. Co. , 538 S.W.2d 80, 88 (Tex. 1976) (overruled on other grounds)) (quotations omitted). "When, as here, performance is conditioned on one party's judgment or determination, courts imply a requirement that such judgment is exercised in good faith." Shoe-Bar Ranch, Inc. v. Preferred Proppants, LLC , No. MO:17-CV-00210-DC, 2018 WL 8244907, at *5, 2018 U.S. Dist. LEXIS 232680, at *15 (W.D. Tex. 2018) (quoting Young v. Neatherlin , 102 S.W.3d 415, 420 (Tex. App.—Houston [14th Dist.] 2003, no pet.) ) (quotations omitted). Therefore, TurnKey has the discretion to cancel reservations and to provide refunds or a comparable home when TurnKey decides it is appropriate, but TurnKey must act in good faith. There is no evidence that TurnKey acted in bad faith by not issuing refunds under these circumstances.
In fact, TurnKey decided to issue credit to Plaintiffs who cancelled due to the COVID-19 pandemic even though TurnKey was not required to provide any form of a refund or comparable home. Thus, TurnKey provided compensation beyond what was required by the contract.
Plaintiffs also assert that if the Rental Contracts are interpreted such that TurnKey is not required to refund guests for any reason after the cancellation period, the contracts would lack consideration and would be illusory. "When illusory promises are all that support a purported bilateral contract, there is no mutuality of obligation, and therefore, no contract." In re 24R , 324 S.W.3d 564, 567 (Tex. 2010) (citing Vanegas v. Am. Energy Servs. , 302 S.W.3d 299, 301–02 (Tex. 2009)). "A promise is illusory if it does not bind the promisor, such as when the promisor retains the option to discontinue performance." Id. (citing Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 849 (Tex. 2009) ).
The two cases cited by Plaintiffs regarding illusory contracts deal with arbitration agreements or clauses. In re 24R, Inc. , 324 S.W.3d at 567 ; Harris v. Blockbuster Inc. , 622 F. Supp. 2d 396, 397 (N.D. Tex. 2009). The standard in these cases is whether the arbitration agreement is illusory because the drafter of the contract had the ability to modify the terms of the contract unilaterally without the other party's consent. In re 24R , 324 S.W.3d at 567 ("An arbitration clause is not illusory unless one party can avoid its promise to arbitrate by amending the provision or terminating it altogether."); Harris , 622 F. Supp. 2d at 398 ("The basis of the Plaintiffs’ claim that the arbitration provision is illusory is that [Defendant] reserves the right to modify the Terms and Conditions, including the section that contains the arbitration provision"). Here, TurnKey did not modify the terms of the Rental Contracts. Instead, it enforced the contract as written.
The Rental Contracts are not illusory because the promises supporting them are not illusory. TurnKey promises to provide rental homes to guests and guests promise to pay rent. TurnKey also impliedly promises to act in good faith. Moreover, TurnKey promises to issue refunds during the cancellation period only. The cancellation policy may seem harsh, but that does not make the contract illusory. Guests who agree to the seemingly harsh cancellation policy can avail themselves of TurnKey's services and platform to find and rent the right home. For these reasons, the court finds that the contracts are not illusory and are enforceable.
Even though the Rental Contracts would not be illusory if TurnKey decided to give Plaintiffs nothing after the cancellation period, TurnKey actually gave Plaintiffs something for cancelling—a credit for the cost of the rent. TurnKey also recommended that Plaintiffs purchase travel insurance in Section 9 because of the strict cancellation policy. Plaintiffs neglected to do this.
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TurnKey also points to the Terms of Service to argue that it is not required to provide refunds. Whether the Terms of Service supports TurnKey is irrelevant because the Guest Agreement is clear and unambiguous. In any event, even if the Terms of Service differed from the Guest Agreement, the Guest Agreement controls. Therefore, the court need not interpret the Terms of Service.
Because the plain language of the contract clearly and unambiguously states that TurnKey is not required to issue refunds to Plaintiffs, the court concludes that Plaintiffs have not pleaded sufficient facts for the breach-of-contract claim to be plausible on its face. Therefore, the court will grant TurnKey's motion to dismiss on Plaintiffs’ breach-of-contract claim.
Unjust Enrichment
Under Texas Law, "[u]njust enrichment is an equitable principle holding that one who receives benefits unjustly should make restitution for those benefits." Villarreal v. Grant Geophysical, Inc. , 136 S.W.3d 265, 270 (Tex. App.—San Antonio 2004, pet. denied). "[W]hen a valid, express contract covers the subject matter of the parties’ dispute, there can be no recovery under [unjust enrichment]." Fortune Prod. Co. v. Conoco, Inc. , 52 S.W.3d 671, 684 (Tex. 2000) ; TransAmerican Nat. Gas Corp. v. Finkelstein , 933 S.W.2d 591, 600 (Tex. App.—San Antonio 1996, writ denied) (citing Lone Star Steel Co. v. Scott , 759 S.W.2d 144, 154 (Tex. App.—Texarkana 1988, writ denied) ). However, "[t]here are three exceptions to the general rule: (1) when the validity or terms of the express contract are in dispute; (2) when the defendant committed fraud; and (3) when the plaintiff overpaid." Click v. General Motors LLC , No. 2:18-CV-455, 2020 WL 3118577, at *9 (S.D. Tex. 2020) (citing Fortune Prod. Co. , 52 S.W.3d at 684 ).
Plaintiffs argue that their unjust-enrichment claim should be upheld under the first and third exceptions. Plaintiffs argue that the first exception applies because the Rental Contracts are illusory. The court has concluded that the contracts are valid and enforceable, so the first exception does not apply. Moreover, Plaintiffs argue that they overpaid on the contract and the third exception applies. However, the third exception only applies when the party paid more than the contract terms require. See Click , 2020 WL 3118577, at *10. In this case, Plaintiffs paid for the cost to rent the home and not more. Therefore, the third exception does not apply.
Because a valid, express contract exists and Plaintiffs did not pay more than the contract price, the court concludes that Plaintiffs have not pleaded sufficient facts for the unjust-enrichment claim to be plausible on its face. Therefore, the court will grant the motion to dismiss as to Plaintiffs’ unjust-enrichment claim.
Conversion
Under Texas Law, "[c]onversion is the wrongful exercise of dominion or control over the property of another in denial of, or inconsistent with, the other's rights in the property." Morey v. Page , 802 S.W.2d 779, 786 (Tex. App.—Dallas 1990, no writ) (citing Waisath v. Lack's Stores, Inc. , 474 S.W.2d 444, 446 (Tex. 1971) ). "There can be no conversion where the owner has expressly or impliedly assented to the taking or disposition." Lone Star Beer, Inc. v. Republic Nat'l Bank of Dallas , 508 S.W.2d 686, 687 (Tex. Civ. App.—Dallas 1974, no writ) (quoting Lone Star Beer, Inc. v. First Nat. Bank of Odessa , 468 S.W.2d 930, 933 (Tex. Civ. App.—El Paso 1971, no writ) ).
Again, the court has concluded that the Rental Contracts are enforceable and TurnKey is not required to issue a refund to Plaintiffs. Thus, TurnKey did not wrongfully exercise dominion over Plaintiffs’ payments. For this reason, the court concludes that Plaintiffs have not pleaded sufficient facts for the conversion claim to be plausible on its face. Therefore, the court will grant the motion to dismiss as to Plaintiffs’ conversion claim. IV. CONCLUSION
IT IS THEREFORE ORDERED that Defendant's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) filed July 30, 2020 (Doc. #18) is GRANTED.
IT IS FURTHER ORDERED that all of Plaintiffs’ claims are DISMISSED WITH PREJUDICE .