IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN ...ftpcontent5.worldnow.com/wjhl/custom/027 MOL in... · Solutions, Inc., Patton Hospitality Management, LLC, Zealandia Capital,

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE

AT GREENEVILLE STATE OF TENNESSEE, ex rel. ) ROBERT E. COOPER, JR., Attorney General ) and Reporter, ) ) Plaintiff, ) ) v. ) CASE NO.: 2:13-cv-343 ) ESCAPES!, INC.; ESCAPES TRAVEL ) MEMORANDUM OF LAW CHOICES, LLC; ETOURANDTRAVEL, INC.; ) IN SUPPORT OF MOTION FESTIVA DEVELOPMENT GROUP, LLC; ) TO DISMISS FESTIVA REAL ESTATE HOLDINGS, LLC; ) FESTIVA RESORTS ADVENTURE CLUB ) MEMBERS’ ASSOCIATION, INC.; HUMAN ) CAPITAL SOLUTIONS, LLC, f/k/a FESTIVA ) RESORT SERVICES, INC.; PATTON ) HOSPITALITY MANAGEMENT, LLC, f/k/a ) FESTIVA MANAGEMENT GROUP, LLC; ) RESORT TRAVEL & XCHANGE, LLC, a/k/a ) RTX, f/k/a FESTIVA TRAVEL & XCHANGE, ) LLC, f/k/a FTX; ZEALANDIA CAPITAL, INC., ) f/k/a SETI MARKETING, INC.; ZEALANDIA ) HOLDING COMPANY, INC., f/k/a FESTIVA ) HOSPITALITY GROUP, INC.; DONALD ) KEITH CLAYTON; HERBERT HOOVER ) PATRICK, JR.; and )

Case 2:13-cv-00343-JRG-DHI Document 27 Filed 03/03/14 Page 1 of 46 PageID #: 88

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RICHARD ALLEN HARTNETT, ) ) all individually, and all also d/b/a ) 811 Development Corporation; Equivest ) Vacation Club; Escapes!; Escapes, Inc.; ) Escapes Travel Club, LLC; Etourandtravel, Inc.; ) Festiva Adventure Club; Financial Information ) Services, Inc.; Festiva Development Group; ) Festiva Hospitality Group, Inc.; Festiva Resorts ) Services, Inc.; Festiva Resorts Adventure Club ) Members’ Association, Inc.; Festiva Resorts, LLC; ) Festiva Sailing Vacations, Inc.; Festiva Travel & ) Xchange; FTX; Human Capital Solutions, Inc.; ) Kosmas Group International, Inc.; Peppertree ) Vacation Club; Resort Management Services, ) Inc.; Resort Travel & Xchange, LLC; RTX; ) SET1 Marketing, Inc.; Zealandia Capital, Inc.; ) Zealandia Holdings, LLC; and Zealandia ) Holding Company, Inc., ) ) Defendants, ) ) and ) ) 811 DEVELOPMENT CORPORATION; ) FESTIVA SAILING VACATIONS, INC.; ) FINANCIAL INFORMATION SERVICES, INC.; ) KOSMAS GROUP INTERNATIONAL, INC.; ) RESORT MANAGEMENT SERVICES, INC.; ) ZEALANDIA HOLDINGS, LLC; and ) VARIOUS CLAYTON AND PATRICK ) FAMILY TRUSTS 1-10, ) ) Relief Defendants. )

Defendants Zealandia Holding Company, Inc., f/k/a Festiva Hospitality Group, Inc.

(“ZHC”); Patton Hospitality Management, LLC, f/k/a Festiva Management Group, LLC; Festiva

Development Group, LLC, d/b/a Festiva Adventure Club; Zealandia Capital, Inc., f/k/a Seti

Marketing, Inc.; Resort Travel & Xchange, LLC, f/k/a Festiva Travel & Xchange; Festiva Real

Estate Holdings, LLC, f/k/a Festiva Resorts, LLC; Festiva Resorts Adventure Club Members’


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Association; Escapes Travel Choices, LLC; ETourandTravel, Inc.; Human Capital Solutions,

Inc.; Donald K. Clayton (“Clayton”); Herbert H. Patrick, Jr. (“Patrick”); and Richard Hartnett

(“Hartnett”) (collectively, “Moving Defendants”),1 and Relief Defendants 811 Development

Corporation; Festiva Sailing Vacations, Inc.; Financial Information Services, Inc.; Kosmas

Group International, Inc.; Resort Management Services, Inc.; and Zealandia Holdings, LLC,

(collectively “Moving Relief Defendants”)2 hereby submit this Memorandum in Support of their

Motion to Dismiss.3 Movants assert multiple grounds for dismissal as follows:

All Moving Defendants and all Moving Relief Defendants move for dismissal of the entire Complaint pursuant to Fed. R. Civ. P. 12(b)(6), on the grounds that the Complaint as a whole fails to satisfy the pleading standards of Fed. R. Civ. P. 8(a).

All Moving Defendants and all Moving Relief Defendants move alternatively for dismissal of each and every separate claim pursuant to Fed. R. Civ. P. 12(b)(6), on the grounds that each respective claim fails to satisfy the pleading standards of Rule 8(a).

All Moving Defendants and all Relief Defendants move alternatively for dismissal of Counts I, IV, VI and VII pursuant to Fed. R. Civ. P. 12(b)(6), on the grounds that these claims fail to allege fraud with particularity as required by Fed. R. Civ. P. 9(b).

1 “Moving Defendants” includes every individual and entity named as a Defendant (as opposed to a “Relief Defendant”) in this lawsuit, except for Escapes!, Inc. Although each Moving Defendant is legally and actually distinct from every other Moving Defendant, all Moving Defendants overlap to at least some degree in their ownership and/or management. The same cannot be said of Escapes!, Inc., which does not share any such commonalities with the Moving Defendants; it is simply unrelated to the Moving Defendants. See Hartnett Aff., ¶ 3. The undersigned does not represent Escapes!, Inc. and thus cannot speak for it, but suffice it to say the undersigned expects Escapes!, Inc. will further make clear that Plaintiff is simply wrong in its apparent, inexplicable assumption that Escapes!, Inc. has ownership and management – as well as operations – in common with the Moving Defendants. 2 “Moving Relief Defendants” includes all Relief Defendants that are either corporations or limited liability companies; the only Relief Defendants that are not included among the Moving Relief Defendants are the so-called “Various Clayton and Patrick Family Trusts” which, like Escapes!, Inc., is not represented by the undersigned counsel. 3 Although the undersigned has not presumed to change the caption in this case, he notes that it is incorrect in that Human Capital Solutions is not a limited liability company, but rather a corporation. Therefore, it should be identified as “Human Capital Solutions, Inc.” rather than “Human Capital Solutions, LLC.” Similarly, paragraph 13 of the Complaint errs in referring to “Human Capital Resources” rather than “Human Capital Solutions.”


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Defendants Escapes Travel Choices, LLC, ETourandTravel, Inc., Human Capital Solutions, Inc., Patton Hospitality Management, LLC, Zealandia Capital, Inc., and Hartnett, and all Relief Defendants, move for dismissal of all claims brought under the Tennessee Consumer Protection Act, due to Plaintiff’s failure to comply with the 10-day notice provision of Tenn. Code Ann. § 47-18-108(a)(2) as to these particular movants.

Defendants Human Capital Solutions, Inc., ZHC, Clayton, Patrick, and Hartnett,

and all Moving Relief Defendants, move for dismissal for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2).

To the extent that the above motions are not granted and any claims remain against them, all Moving Defendants and all Moving Relief Defendants move alternatively for a more definitive statement pursuant to Fed. R. Civ. P. 12(e).

For the reasons more fully set forth herein, the Motion to Dismiss should be granted in

its entirety, with the Complaint and the claims therein being dismissed – both as a whole and,

alternatively, with respect to particular claims and particular defendants as set forth herein.

THE COMPLAINT

On December 30, 2013, the State of Tennessee, through the Attorney General and

Reporter for the State of Tennessee (“Plaintiff”) and on behalf of the Acting Director of the

Tennessee Division of Consumer Affairs, filed in this Court a Complaint for Permanent

Injunctive and Other Equitable and Statutory Relief based on alleged violations of the

Tennessee Consumer Protection Act, Tenn. Code. Ann. §§ 47-18-101 et seq. (“TCPA”), the

Telemarketing and Consumer Fraud and Abuse Protection Act, 15 U.S.C. § 6101 et seq.

(“Telemarketing Act”), and the FTC Telemarketing Sales Rule, 16 C.F.R. Part 310 (“TSR”),

promulgated under the Telemarketing Act. The Complaint names 14 Defendants – 11

corporations or limited liability companies, labeled as “Festiva Entities,” and three individuals.

The Complaint also names six “Relief Defendants.”

The Defendants – the 11 “Festiva Entities” and the three individual defendants (but not

the Relief Defendants) – are collectively labeled, “Festiva” or “Defendants.” Compl., ¶ 21. The


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Complaint repeatedly refers to the acts of – or events that involved – “Festiva” or “Defendants,”

without indicating which specific Defendant(s) is/are being referred to. The Complaint thus

indiscriminately lumps together all of these myriad separate Defendants, even though it:

(1) acknowledges each Defendant’s very separate existence and legal status, Compl., ¶¶ 7-21;

(2) does not allege in any manner whatsoever that any Defendants are alter egos of any other

Defendants; (3) does not allege that any Festiva Entity has disregarded corporate formalities;

and (4) does not otherwise set forth any basis, beyond the wholly conclusory and boilerplate

allegations of paragraphs 30-32, for doing what it does, which is essentially to treat all

Defendants as indistinguishable parts of a single “Festiva” and to treat the alleged wrongdoing of

this “Festiva” as if it were the wrongdoing of any and all Defendants.

In general, Plaintiff alleges that Defendants violated the TCPA and TSR by employing

various fraudulent practices in the sale and marketing of timeshares and memberships in the Club,

by otherwise violating various prohibitions in the TCPA and TSR, and by failing to comply with

various affirmative obligations prescribed by the TCPA and TSR. The Complaint is 48 pages

long, but most of it does not say anything whatsoever about what any Defendant did wrong – let

alone say which Defendant or Defendants committed any particular wrongdoing or provide any

factual enhancement whatsoever about the wrongdoing that was allegedly done. This is clear

from a thorough examination of the Complaint.

The first 20 pages (paragraphs 1-72) contain allegations regarding jurisdiction, venue, the

identity and nature of Plaintiff, Plaintiff’s authorization to bring claims under the TCPA and

Telemarketing Act, the identity and nature of the Defendants and Relief Defendants, the

Defendants’ involvement in “Commerce,” the Defendants’ involvement and participation in a

“common enterprise,” the background of Festiva Entities, the Defendants’ “course of conduct,”


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and a discussion of the TSR. These pages contain the wholly conclusory allegation that Plaintiff

has “reason to believe that Defendants have violated and continue to violate the TSR and

TCPA,” Compl., ¶ 6, and repeated passing references to the “unlawful acts and practices,”

Compl., ¶¶ 18-28, and “deceptive and abusive acts and practices,” Compl., ¶ 30, supposedly

described elsewhere in the Complaint. These pages also make a wholly conclusory reference to

“the misrepresentation and other misconduct of the Festiva Entities . . . .” Compl., ¶ 31.

Otherwise, the first twenty pages do not allege or identify any wrongdoing by anyone

whatsoever. Still less do they specify which Defendants committed any wrongdoing or provide

any details – no matter how slight – regarding the misconduct.

Page 36 and most of 37 (paragraphs 121-126) do no more than relay second-hand and

even third-hand information regarding litigation and investigations, as well as “complaints ” and

“negative comments” allegedly made by various parties over the course of many years. This

discussion is both misleading and irrelevant to this Complaint and, accordingly, is subject to be

stricken under Rule 12(f), as set forth in a separate motion by the Moving Defendants and

Moving Relief Defendants filed contemporaneously herewith. For purposes of this motion to

dismiss, the salient point is that these pages do not allege any wrongdoing, let alone allege any

wrongdoing with any factual matter whatsoever; instead, they merely report (apparently in a bald

attempt to smear Defendants) on the general existence of various complaints, investigations and

litigation.4 These pages allege only the bare fact that complaints and litigation/investigations

exist; they do not identify the nature of any wrongdoing alleged therein, let alone provide any

specifics whatsoever about the wrongdoing or even who committed it.

4 Moreover, as explained in the brief in support of the Motion to Strike, the Complaint’s reporting in this regard is inaccurate and misleading.


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Pages 37 through 44 (paragraphs 127-143) set forth the eight counts for relief. With the

exception of Counts VI and VII, the counts are set forth with great brevity. With the exception of

Count VIII (which refers to wrongdoing alleged elsewhere in the Complaint but does not itself

allege any wrongdoing), all counts allege a violation of the TSR or TCPA, but all do so in the

most conclusory and general of ways. This is true even for Count VI. Although Count VI

ostensibly provides some specificity in that it alleges 28 different ways in which the TCPA was

violated, in fact the specificity is illusory because each of the 28 phrases is described in an

exceedingly broad but short snippet with no context or description whatsoever. In fact, neither

Count VI nor any other count describes any kind of alleged wrongdoing with any specificity

whatsoever in terms of who did what, when, where or how.

The Complaint then continues with a single paragraph (paragraph 144) alleging

“Consumer Injury,” which merely references “Defendants’ violations of the TSR and TCPA.”

Compl., ¶ 144. The Complaint concludes with a Prayer for Relief, as preceded by two

paragraphs of allegations regarding the Court’s power to grant relief. Compl., ¶ 145 et seq.

That leaves only pages 21 through 35 (paragraphs 76 through 120), which manifestly are

meant to comprise the Complaint’s substantive discussion of wrongdoing by the Defendants. The

Court will draw its own conclusions from reading these pages, but suffice it to say that the

substantive discussion is exceedingly general, providing no dates (precise or approximate) for

any acts whatsoever, no identification of particular Defendants responsible for any particular

wrongdoing, and no identification of particular individuals who personally committed any acts of

wrongdoing. With respect to where and how illegal acts were committed, these pages provide

almost no description. In the very rare instances where these pages appear to provide some

description of the “where” or “how” concerning illegal conduct, it is very general – such as “at a


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Tennessee hotel or meeting facility within driving distance of the consumer’s home, or in many

instances, in the consumer’s home,” Compl., ¶ 101, or “[by] finding technical reasons to refuse

to honor cancellation requests, or claim[ing] the consumer was previously advised of a no-

cancellation policy.” Compl., ¶ 115. Moreover, as to the “what” of alleged false

misrepresentations, with few exceptions the Complaint is general, discussing the subject matter

of an alleged misrepresentation (e.g., that there would be an extension of a consumer’s

cancellation deadline, Compl., ¶ 109, or ), but not what was said. 5

Moreover, a substantial portion of pages 21-36 describes alleged conduct that is simply

not illegal. For instance, it is not unlawful, under the TCPA or TSR, or otherwise, to supposedly

“disregard due process concerns brought to its attention by arbitration associations and others.”

Compl., ¶ 120. Nor is it unlawful, as another example, to allegedly “engage[ ] in high pressure

sales presentations,” Compl., ¶ 102, or to make “fast-talking sales pitches.” Compl., ¶ 91.

As noted above, all 11 entity Defendants are referred to as “Festiva Entities,” and all

Defendants (both the Festiva entities and the three individuals) are collectively referred to under

the monolithic terms “Festiva” or “Defendants.” This is particularly true as to alleged acts of

wrongdoing. Throughout the Complaint, with virtually no exceptions, it is “Festiva” – and not

any particular entity or individual – who allegedly engaged in the alleged wrongful conduct.

In summary, the Complaint is loaded with conclusory allegations, repeatedly making, or

referring to, allegations that unspecified Defendants committed “unlawful acts or practices,”

“deceptive and abusive acts,” or “violations of the law,” and so forth. Beyond these “labels and

5 The observations of this paragraph, regarding the extreme generality of the allegations contained in pages 21-36, are no less true for the alleged “deceptive acts and practices” set forth in paragraph 102. Paragraph 102 sets forth 17 “deceptive acts and practices,” but does not disclose the who, what, where, when or how as to a single one of these 17, and instead provides only a short and conclusory description of each of the 17. The same also can be said for the 11 “unlawful means” alleged in paragraph 103. The fact that these lists are lengthy does not mean that these alleged illegal means and practices have been described adequately; in fact, not a single item on the list has been described adequately.


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conclusions,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), the Complaint provides

relatively little regarding alleged wrongdoing. To the extent that it sets forth alleged facts

regarding alleged wrongdoing, they are exceedingly general. Nowhere in the Complaint does the

Complaint identify which Defendant(s) committed which acts – let alone describe, even

generally, which employees or agents of particular Festiva Entities committed any acts attributed

to those entities. Nor does the Complaint provide any dates whatsoever – by specific date,

approximate date, or even approximate date range – regarding any alleged misconduct. This

omission is particularly glaring – and problematic for any defendant seeking to respond to the

Complaint – because the Complaint by its terms discusses conduct beginning in August 2000,

Compl., ¶ 33, and alleges that wrongful conduct continues to the present day. Compl., ¶ 6.

Finally, the Complaint provides little information as to where and how illegal acts were

performed.


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ARGUMENT

The Complaint in its entirety is subject to dismissal under Rule 12(b)(6) because it fails

as a whole to satisfy the pleading requirements of Rule 8(a). Alternatively, each and every

claim, examined individually, is subject to dismissal under Rule 12(b)(6) for failure to satisfy

Rule 8(a). In addition, Counts I, IV, VI and VII in particular are subject to dismissal

alternatively under Rule 12(b)(6) because each respective count fails to allege fraud with

particularity as required by Rule 9(b), which is applicable to each of those counts.

Furthermore and alternatively, the TCPA claims against many particular defendants must be

dismissed because Plaintiff failed to provide those defendants with the 10 days’ notice required

by Tenn. Code Ann. § 47-18-108(a)(2). Additionally, regardless of whether any claims survive

against some defendants, Defendants Human Capital Solutions, Inc., ZHC, Clayton, Patrick,

and Hartnett, and all Moving Relief Defendants must be dismissed from this lawsuit for

lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Finally, to the extent that any

claims remain against any defendants after the Court’s consideration of these arguments,

Plaintiff should be required to make a more definite statement pursuant to Fed. R. Civ. P. 12(e).

I. The Complaint should be dismissed in its entirety pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, because as a whole it fails to comply with the pleading requirements of Rule 8(a).

Under Fed. R. Civ. P. 12(b)(6), the Complaint as a whole should be dismissed for failure

to state a claim upon which relief can be granted, because it fails to satisfy the pleading

standards of Fed. R. Civ. P. 8(a) as articulated by the U.S. Supreme Court.


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A. On a motion to dismiss pursuant to Rule 12(b)(6), the sufficiency of the complaint under Rule 8(a) is assessed under the pleading standards set forth in Twombly and Iqbal.

The pleading standards implicated by a motion to dismiss under Rule 12(b)(6) are well-

established. As this Court explained in Gillette v. Town of Jonesborough, 2013 U.S. Dist.

LEXIS 96685 (E.D. Tenn. July 11, 2013):

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal of a lawsuit for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Rule 8(a)(2) instructs that a pleading should be “a short and plain statement of the claim showing that the pleader is entitled to relief.” The purpose of a complaint is to “give the defendant fair notice of what the plaintiff's claim is and the ground upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of [his] ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). “To avoid dismissal under Rule 12(b)(6), a complaint must contain either direct or inferential allegations with respect to all the material elements of the claim.” Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir. 2003). In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court explained that analysis under Rule 12(b)(6) requires a two-pronged approach. First, the reviewing court should determine what allegations within the complaint can be classified as “legal conclusions” and disregard them for purposes of deciding the motion. Id. at 678. Second, the court should evaluate the remaining portions of the complaint, i.e. the well-pleaded facts, and ascertain whether it gives rise to a “plausible claim for relief.” Id. at 679. At the second stage, the court “must accept as true all of the factual allegations contained in the complaint,” Erickson v. Pardus, 551 U.S. 89 (2007) (per curiam), and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.’” Twombly, 550 U.S. at 556. “The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

Id. at *2-4. A complaint must contain something more than a statement of facts that merely creates

speculation or suspicion of a legally cognizable cause of action. See Twombly, 550 U.S. at


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555. To avoid dismissal a plaintiff must allege “enough facts to state a claim to relief that is

plausible on its face.” Id. at 570.

“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.”

Iqbal, 556 U.S. at 678, “Where a complaint pleads facts that are ‘merely consistent with’

a defendant's liability, it ‘stops short of the line between possibility and plausibility of

entitlement to relief.’” Id. (quoting Twombly, 127 S. Ct. at 1966)). Rule 8 requires “more than

an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. “Nor does a complaint

suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (citing

Twombly, 550 U.S. at 557).

As noted in Gillette, in order to withstand a motion to dismiss, a plaintiff must

adequately allege each element of its claim(s). See Partee v. City of Memphis, 449 Fed. Appx.

444 (6th Cir. Nov. 22, 2011); Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005) (“To survive

a motion to dismiss under Rule 12(b)(6), a complaint must contain either direct or inferential

allegations respecting all the material elements to sustain a recovery under some viable legal

theory.”); Barnett v. Barnett, 2013 U.S. Dist. LEXIS 92955 (E.D. Tenn. July 2, 2013) (quoting

Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir. 2003)). Absent sufficient

allegations of one or more elements, a claim must be dismissed. See Ohio Police & Fire

Pension Fund v. Standard & Poor's Fin. Servs., 700 F.3d 829, 843 (6th Cir. 2012).

B. The Complaint as a whole fails to satisfy Rule 8(a)’s pleading standards because it lumps together all Defendants and fails to allege which Defendants committed which alleged wrongful acts.

In the Complaint, Plaintiff does nothing whatsoever to allege that any specific Defendant

committed any specific act. Instead, the Complaint simply alleges that certain acts took place and


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then, in rote fashion, attributes all of those acts to all of the Defendants by using the general term

“Festiva” in identifying the party performing the actions – even though, according to Plaintiff’s

own allegations, the Defendants are all distinct legal entities or natural persons. Plaintiff’s

blanket approach to pleading is insufficient under Rule 8(a) and 12(b)(6) standards, requiring

that the Complaint be dismissed.

Once mere conclusory allegations are ignored, the Complaint’s remaining content falls short

of stating a claim for relief under the TSR or the TCPA that is plausible on its face. Put differently,

the claim has no facial plausibility because the actual pleaded factual matter (as opposed to

conclusory statements) does not allow the court to draw the reasonable inference that Defendants

(or any particular Defendant) are liable for the misconduct alleged. See Iqbal, 556 U.S. at 677

(quoting Twombly, 550 U.S. at 556). There is so little factual matter that it is difficult to draw any

inferences from it, let alone that one or more Defendants is liable for violations of the TSR and

TCPA.

It is certainly not possible to infer that any particular Defendant is liable under the TSR and

TCPA, and this alone dooms the Complaint. As indicated above, the Complaint describes the

unique nature of status of each defendant, but then, contradictorily, proceeds as if Defendants

constitute a monolithic “Festiva,” as if the (alleged) act of one Defendant is the act of all. In

particular, the Complaint assumes that any wrongful act or omission committed by any

Defendant is automatically attributable to each and every other distinct corporate or individual

Defendant; the Complaint apparently goes so far as to attribute every alleged wrongful act of any

corporation or LLC Defendant to every individual Defendant, and vice versa.

This is bad enough, but even worse is that the Complaint does not attribute any particular

acts to any particular Defendant to begin with; instead of identifying particular Defendants


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committing particular acts, the Complaint insinuates that all of the 14 Defendants itself (or

himself) performed each of the acts alleged to give rise to the claims in the Complaint.

Threadbare allegations that “all defendants” engaged in some alleged misconduct fails

to meet the Federal Rules’ pleading standards for stating a claim against a particular defendant,

particularly as those standards have been elucidated in Iqbal and Twombly. See Bondex Int'l,

Inc. v. Hartford Accident & Indem. Co., 667 F.3d 669, 681 (6th Cir. 2011); Tatone v. SunTrust

Mortg., Inc., 857 F. Supp.2d 821, 831 (D. Minn. 2012). (“A complaint which lumps all

defendants together and does not sufficiently allege who did what to whom, fails to state a claim

for relief because it does not provide fair notice of the grounds for the claims made against a

particular defendant.”) . Cf. Gurman v. Metro Hous. & Redevelopment Auth., 2011 U.S. Dist.

LEXIS 70267 at *3 (D. Minn. June 30, 2011) (dismissing amended complaint for failing to meet

Rule 8 pleading standards and noting that “this Court has repeatedly criticized the filing of

‘kitchen-sink’ or ‘shotgun’ complaints – complaint in which a plaintiff brings every conceivable

claim against every conceivable defendant.”) .

For this reason alone, the Complaint therefore is fatally deficient in its entirety.

II. Even if the Complaint as a whole were not subject to dismissal, each and every separate claim must be dismissed as to all, or alternatively as to some, Defendants pursuant to Rule 12(b)(6).

For the reasons set forth above, the entire Complaint must be dismissed because as a

whole it fails to satisfy Rule 8(a). However, even if that were not the case, every one of the

respective claims would individually warrant dismissal pursuant to Rule 12(b)(6) because it fails

to state a claim for relief upon which relief can be granted. The eight respective counts will be

discussed below in sequence.


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A. Counts I and II, alleging violations of particular provisions of the TSR, must be dismissed because the Complaint fails to allege the non-applicability of an exemption to liability under these provisions and in fact shows that the exemption is applicable.

Count I alleges false representations and inadequate disclosures, in violation of 16 C.F.R.

§ 310.3(a)(1)(i)-(v) and (a)(2). Count II alleges failure to promptly make required oral

disclosures, in violation of 16 C.F.R. § 310.4(d)(1)-(3). However, claims under both of these

two specific provisions of the TSR are subject to an exemption: “The following acts or practices

are exempt from this Rule: . . . (3) Telephone calls in which the sale of goods or services or

charitable solicitation is not completed, and payment or authorization of payment is not required,

until after a face-to-face sales or donation presentation by the seller or charitable organization . . .

.”6 16 C.F.R. § 310.6(b)(3).

Plaintiff nowhere alleges that this key exemption is inapplicable; indeed, Plaintiff fails

even to acknowledge the existence of this exemption. Perhaps Plaintiff would claim that it is not

required to plead the non-applicability of a statutory exemption to liability. Even if that were so,

Plaintiff’s claim would still fail because the Complaint affirmatively shows that the exemption in

fact is applicable. Indeed, one of the main thrusts of the Complaint is that “Festiva” makes phone

calls not to complete sales or to obtain payment or authorization of payment, but rather to induce

consumers to come to “a face-to-face sales . . . presentation by” Festiva, 16 C.F.R.

§ 310.6(b)(3), where Festiva hopes that the sale will be completed and payment made or

authorized. In fact, the Complaint alleges that “the purpose of Festiva’s telephone calls is to lure

consumers to one of their sales centers for a lengthy, high pressure sales pitch . . . .” Compl.,

6 “[T]his exemption does not apply to the requirements of §§ 310.4(a)(1), (a)(7), (b) and (c).” 16 C.F.R. § 310.6(b)(3). Accordingly, this exemption is not a defense to Plaintiff’s TSR claims brought under either 16 C.F.R. §§ 310.4(a)(1), (a)(7), (b) or (c) – namely, Counts III and V. Accordingly, this exemption is not invoked herein as a defense to Count III or Count V.


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¶ 79. The Complaint alleges that “Festiva’s telemarketing calls initially focus on building

excitement regarding the consumer’s prize or gift.” Compl., ¶ 79. Plainly, those calls are not

focused on completing a sale or obtaining payment during the call itself. Likewise, Festiva

allegedly “places outbound telemarketing calls to existing Festiva timeshare owners and

members,” sometimes using a particular pretext, “in order to lure the consumer to one of

Festiva’s sales centers or to an area hotel or meeting facility.” Compl., ¶ 88. Other paragraphs

similarly make clear that the phone calls are for the purpose of persuading the consumer to attend

a face-to-face meeting. Compl., ¶ 87, 91.

The Complaint also makes clear that the actual sale is to be completed only at the face-to-

face meeting. Compl., ¶ 87 (alleging that the in-person meetings at Festiva’s sales centers are

intended “to coerce the consumer into buying thousands of dollars of vacation ‘points.’”). Other

paragraphs likewise make clear that any sale is to be completed not during any telephone call,

but only at an in-person sales presentation. E.g., Compl., ¶¶ 91, 108.

Thus, the Complaint itself clearly reveals the applicability of the TSR’s exemption to

liability under the provisions underlying Counts I and II. Those provisions therefore are,

according to the Complaint itself, inapplicable as a matter of law, and Counts I and II therefore

must be dismissed.

B. Count III, alleging that Defendants have made phone calls to consumers who previously requested them not to call, in violation of 16 C.F.R. § 310.4(b)(1)(iii)(A), must be dismissed because the allegations are wholly conclusory.

In Count III, Plaintiff alleges that Defendants “have made, or have caused a telemarketer

to make, outbound telephone calls, in which the telemarketer has called and continued to place

numerous calls to consumers who previously requested them not to call.” Compl., ¶ 131. An

examination of the Complaint reveals only one other reference to such conduct: “In numerous


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instances, Festiva has called, and continues to call consumers who previously requested that

Festiva not call them.” Compl., ¶ 75. These two sets of essentially identical allegations are all

the Plaintiff has to say about such conduct, and yet they do no more than merely recite the

regulation that this conduct supposedly violates, which prohibits “any outbound telephone call to

a person when: That person previously has stated that he or she does not wish to receive an

outbound telephone call made by or on behalf of the seller whose goods or services are being

offered . . . .” 16 C.F.R. § 310.4(b)(1)(iii)(A). Plaintiff’s allegations merely mirror this

prohibition, nothing more. The Complaint provides no dates (even approximate), no locations, no

specification (even generally) of who the consumers were or what they said to any Defendant, no

names of any particular Defendant, no context, and indeed no factual enhancement of any kind

whatsoever. In fact, Plaintiff does not even allege that such phone calls were made to residents of

Tennessee, which appears to be (and for obvious reasons should be) a statutory requirement for

Plaintiff to bring to bring this TSR claim. See 15 U.S.C. § 6103(a) (authorizing state attorney

general to bring a civil action, under certain circumstances, if he or she “has reason to believe

that the interests of the residents of that State have been or are being threatened or adversely

affected” by someone violating a provision of the TSR).

Thus, as to Count III, Plaintiff offers only recitation of the elements of the alleged

violation. However, this is insufficient, because “a plaintiff's obligation to provide the ‘grounds’

of [his] ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550

U.S. 544, 555 (2007) (internal citations omitted). In other words, “the tenet that a court must

accept a complaint’s allegations as true is inapplicable to threadbare recitals of a cause of action

elements, supported only by conclusory statements.” Iqbal, 556 U.S. at 663. At most, that is all


17

Plaintiff has provided here. Count III utterly fails to satisfy Rule 8(a) as construed by Twombly

and Iqbal and therefore must be dismissed.

C. Count IV, alleging violations of a particular provision of the TSR, must be dismissed because the Complaint fails to allege the non-applicability of the TSR’s exemption to liability under this provision and in fact shows that the exemption is applicable.

Count IV alleges that “[i]n numerous instances, in connection with the telemarketing of

timeshares and vacation clubs, Defendants have failed to truthfully disclose, in a clear and

conspicuous manner, before a customer pays for the goods or services offered, a statement

describing Festiva’s cancellation policy.” Compl., ¶ 133. Defendants allegedly thus have violated

16 C.F.R. § 310.3(a)(1)(iii). Like Counts I and II, however, Count IV must be dismissed because

Plaintiff failed to allege the non-applicability of the exemption to liability contained in 16 C.F.R.

§ 310.6(b)(3) and, more to the point, has made allegations that affirmatively show that the

exemption is applicable. As discussed above, the alleged telemarketing of “Festiva” – the basis

for Count IV – did not involve completing sales (or making or authorizing payment) over the

telephone, but instead was intended to induce purchasers to come to a face-to-face meeting to

complete the sale. Thus, the exemption is squarely applicable, and Count IV must be dismissed.

D. Count V, alleging violations of the National Do Not Call Registry, must be dismissed because the allegations are wholly conclusory.

In Count V, Plaintiff alleges that Defendants “have engaged in, or have caused a

telemarketer to engage in, initiating an outbound telephone call to a person’s telephone number

on the DNC [Do Not Call] Registry in violation of the TSR, 16 C.F.R. § 310.4(b)(1)(iii)(B).”

Compl., ¶ 135. An examination of the Complaint reveals only one other place where such

conduct is referenced. Specifically, in consecutive paragraphs, the Complaint alleges only: “In

numerous instances, Festiva has called, and continues to place numerous calls, to consumers who


18

have their phone numbers listed on the DNC Registry. In numerous instances, Festiva has called,

and continues to call consumers who have told Festiva they have registered their phone numbers

on the DNC Registry.” Compl., ¶¶ 73-74. These sets of essentially identical allegations are all

the Plaintiff has to say about the conduct underlying Count V, and yet they do no more than

essentially incant the regulation that this conduct supposedly violates, which prohibits “any

outbound telephone call to a person when: That person’s telephone number is on the “do-not-

call” registry, maintained by the Commission, of persons who do not wish to receive outbound

telephone calls to induce the purchase of goods or services . . . .” 16 C.F.R. § 310.4(b)(1)(iii)(B).

Like the allegations concerning Count III, the allegations of Count V provide no dates (even

approximate), no locations, no specification (even generally) of who the consumers were or what

they said to any Defendant, no names of any particular Defendant, no context, and indeed no

factual enhancement of any kind whatsoever. Again, Plaintiff does not even allege that any such

phone calls supposedly made in violation of the TSR were made to residents of Tennessee, an

apparent requirement under 15 U.S.C. § 6103(a) for Plaintiff to bring to bring this TSR claim.

As discussed above in connection with Count III, this approach is entirely inadequate

under Twombly and Iqbal. Accordingly, Count V must be dismissed.

E. Count VI, alleging violations of the TCPA, must be dismissed because the allegations are wholly conclusory and fail to provide Defendants fair notice of the claim.

In Count VI, Plaintiff rattles off 28 alleged examples of conduct that allegedly violates

nine particular provisions of the TCPA. Compl., ¶ 137-138. Plaintiff makes no effort to connect

any of the 28 examples to any of the nine provisions. If Plaintiff assumes that the connection is

obvious, it is mistaken. The Court will draw its own conclusions, but to a large extent

Defendants can only guess which alleged conduct violates which provision(s) of the TCPA. In

that sense, Count VI fails to state a claim. As this Court has noted: “Rule 8(a)(2) instructs that a


19

pleading should be ‘a short and plain statement of the claim showing that the pleader is entitled

to relief.’ The purpose of a complaint is to ‘give the defendant fair notice of what the plaintiff's

claim is and the ground upon which it rests.’” Gillette v. Town of Jonesborough, 2013 U.S. Dist.

LEXIS 96685, *2 (E.D. Tenn. July 11, 2013) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957)).

Moreover, the allegations are wholly conclusory, devoid of any factual enhancement. It

could hardly be otherwise, as the Complaint simply does not contain enough factual matter to

describe in any non-conclusory way 28 different violations. As noted above, to the extent that the

Complaint has any actual factual allegations regarding Defendants’ misconduct, they are

virtually all contained in pages 21 through 36, which devoted some space to discussing activity

that was not necessarily even unlawful. The Complaint simply does not provide – and as written

does not even have room to provide – factual enhancement for the 28 different kinds of alleged

conduct in violation of the TCPA. Moreover, the content of Count VI itself was of no help in this

regard, as its recitation of each of the 28 was limited to the briefest of snippets. See Compl.,

¶ 137.

Again, as with Counts III and V, the Complaint fails to allege facts as opposed to mere

conclusory allegations that support a claim for relief on Count VI. Count VI therefore must be

dismissed.

F. Count VII, alleging violations of the TCPA’s prize and travel promotions statutes, must be dismissed because the allegations are wholly conclusory, fail to allege the non-applicability of an exemption to liability, and indeed affirmatively show that the exemption to liability is applicable.

In Count VII, Plaintiff asserts claims under the so-called prize and travel promotions

statutes, which are codified within the TCPA at Tenn. Code Ann. §§ 47-18-120 & 47-18-124.

By its terms, each of these statutes contains a provision (the “Time-Share Act clause”)

that renders such statutes inapplicable to the “[a]dvertising and promotional plans of person


20

covered by the provisions of the Tennessee Time-Share Act of 1981 compiled in title 66, chapter

32, part 1 . . . .” Tenn. Code Ann. §§ 47-18-120(f)(1) & 47-18-124(g)(1). Plaintiff fails to allege

that the Time-Share Act clause – rendering the prize and travel promotions statutes

inapplicable – does not apply here. Again, as with the exemption to liability under the TSR

discussed above, perhaps Plaintiff would argue that it need not affirmatively allege the

inapplicability of a provision – like the Time-Share Act clause – that would render these statutes

inapplicable. Again, however, even if true, that argument would be unavailing for Plaintiff

because Plaintiff’s own allegations show that the Time-Share Act clause is applicable in that the

advertising and promotional plans alleged are covered by the provisions of the Tennessee Time-

Share Act of 1981(the “Time-Share Act”).7

As noted in the Time-Share Act clause, the Time-Share Act is compiled in title 66,

chapter 32, part 1, i.e., Tenn. Code. Ann. § 66-32-101 et seq. Chapter 32 is titled, “Time-Share

Programs and Vacation Clubs,” thus indicating that the Festiva Adventure Club well may be

covered by the Time-Share Act as a “vacation club” even though it is not a time-share program

in the traditional sense that it involves consumers owning partial interests in particular deeded

property.

The Time-Share Act covers “time-share use” and “time-share intervals,” prescribing, in

section after section, rules covering “time-share use” or “time-share intervals.” It regulates,

among other things, “offer[ing] for sale or sell[ing] time-share intervals in this state,” Tenn.

Code. Ann. § 66-32-131, “advertising for the offer or sale of time-share intervals,” Tenn. Code.

Ann. § 66-32-132, and “the operation of any prize or gift promotional offer, by any means,

7 This is not to say that any Defendant takes the position that it (or he) is in fact subject to the Time-Share Act clause. Rather, it is merely to say that if the Complaint’s allegations are in fact true, Defendants would be subject to the Time-Share Act.


21

including, but not limited to, by mail, by telephone, by advertisement or in person, for a time-

share project.” Tenn. Code. Ann. § 66-32-133.

“‘Time-share interval’ means a time-share estate or a time-share use.” Tenn. Code. Ann.

§ 66-32-102(20). In turn, “‘time-share use’ means any contractual right of exclusive occupancy

which does not fall within the definition of a ‘time-share estate’ including . . . a club

membership [or] vacation club interest . . . .” Tenn. Code. Ann. § 66-32-102(24). And, in turn,

“‘[v]acation club’ means any system or program with respect to which a purchaser obtains, by

any means, a recurring right to use and occupy accommodations and facilities, if any, in more

than one (1) component site through the mandatory use of a reservation system, whether or not

the purchaser's use and occupancy right is coupled with an interest in real property.” Tenn.

Code. Ann. § 66-32-102(26).

From these provisions, it is clear that Plaintiff’s allegations in Count VII relate to the

“[a]dvertising and promotional plans of persons covered by the provisions of the Tennessee

Time-Share Act of 1981,” Tenn. Code Ann. §§ 47-18-120(f)(1) & 47-18-124(g)(1), thus

rendering the prize and travel promotion statutes inapplicable. Without question, the Complaint

alleges that Defendants are operating, and conducting advertising and promotion activities

regarding, a business that clearly fits within the statutory definition of “vacation club.”8

Therefore, Defendants allegedly are engaged in the sales and marketing of “time-share use” and

“time-share intervals,” meaning that they and their advertising and promotional activities are

governed by the Time Share Act. Thus the prize and travel promotion statutes are plainly

inapplicable on the face of the Complaint, and Count VII must be dismissed.

8 Indeed, the Complaint goes so far as to allege that Defendants are engaged in the sales and marketing of “timeshares” and not just vacations or a vacation club. See, e.g., Compl., ¶ 33. This makes it even clearer that under the allegations of the Complaint, the Time-Share clause is applicable.


22

G. Count VIII, seeking imposition of a constructive trust against the Relief Defendants for unjust enrichment, must be dismissed because Plaintiff fails to allege all essential elements of a claim for unjust enrichment or for a constructive trust and because the allegations that are made in support of Count VIII are wholly conclusory.

In Count VIII, Plaintiff seeks to impose a constructive trust against the Relief Defendants

that would result in disgorgement of “ill-gotten funds” which would “unjustly enrich” the Relief

Defendants were they allowed to keep them. Compl., ¶ 141. Plaintiff appears to assert two

claims in Count VIII: one for unjust enrichment, and one for constructive trust. However,

Plaintiff completely fails to state a claim either for unjust enrichment or constructive trust,

having provided here allegations that fail to assert all essential elements of either and that in any

event are entirely conclusory.

1. Plaintiff is required to allege all essential elements for unjust enrichment and constructive trust claims and has failed to do so.

As this Court has noted, a plaintiff’s claim fails if the plaintiff does not allege the

elements of the claim or at least facts from which the Court could infer the necessary elements.

Gillette v. Town of Jonesborough, 2013 U.S. Dist. LEXIS 96685, *3 (E.D. Tenn. July 11, 2013)

(quoting Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir. 2003)); Feil v. Bank of

America, 2013 U.S. Dist. LEXIS 54261 (E.D. Tenn. Apr. 15, 2013). If the plaintiff fails to do so,

the complaint will lack sufficient facts “to allow the Court ‘to draw the reasonable inference that

the defendant is liable for the misconduct alleged.’” Id. at *12 (quoting Iqbal, 556 U.S. at 677).

Like any other claim, a claim for unjust enrichment should be dismissed for failure to

state a claim if the plaintiff has not pleaded all of the elements necessary to prove that a

defendant was unjustly enriched. See Savett v. Whirlpool Corp., 2012 U.S. Dist. LEXIS 124086,

*19-20 (N.D. Ohio Aug. 31, 2012). As for the elements of unjust enrichment under Tennessee

law:


23

Unjust enrichment is a quasi-contractual theory or is a contract implied-in-law in which a court may impose a contractual obligation where one does not exist. Such contracts are not based upon the intention of the parties but are obligations created by law and are "founded on the principle that a party receiving a benefit desired by him, under the circumstances rendering it inequitable to retain it without making compensation, must do so." A contractual obligation under an unjust enrichment theory will be imposed when: (1) no contract exists between the parties or, if one exist, it has become unenforceable or invalid; and (2) the defendant will be unjustly enriched absent a quasi-contractual obligation.

B & L Corp. v. Thomas and Thorngren, Inc., 162 S.W.3d 189, 217 (Tenn. App. 2004). “Each

case must be decided according to the essential elements of quasi contract, to-wit: A benefit

conferred upon the defendant by the plaintiff, appreciation by the defendant of such benefit, and

acceptance of such benefit under such circumstances that it would be inequitable for him to

retain the benefit without payment of the value thereof.” Id. “Quasi-contractual theory of

recovery involves the willing conferring of a benefit by one party to the other and is

contraindicated when the benefit alleged is involuntarily conferred.” Id.

Unjust enrichment, quasi contract, quantum merit, and contracts implied at law all

describe “‘that class of implied obligations where, on the basis of justice and equity, the law will

impose a contractual relationship between parties, regardless of their assent thereto.’” Raleigh

Commons, Inc. v. SWH, LLC, No. W2011-01298-COA-R3-CV (Tenn. App. June 28, 2013)

(quoting Paschall's, Inc. v. Dozier, 219 Tenn. 45, 407 S.W.2d 150, 154 (Tenn.1966)).

As noted above, Plaintiff must allege all of the elements of unjust enrichment or suffer

dismissal. See Savett, 2012 U.S. Dist. LEXIS 124086, at *19. Thus, Plaintiff must allege, “[a]

benefit conferred [willingly] upon the defendant by the plaintiff, appreciation by the defendant of

such benefit, and acceptance of such benefit under such circumstances that it would be

inequitable for him to retain the benefit without payment of the value thereof.” B & L Corp., 162

S.W.3d at 217. However, Plaintiff has not done so. Instead, Plaintiff has alleged only that the


24

Relief Defendants all “received ill-gotten funds [from some unspecified origin] or otherwise

benefitted [in some unspecified manner] from funds that are the proceeds of Defendants’ [not

Relief Defendants’] unlawful practices” and that retention of such funds would “unjustly enrich”

Relief Defendants. Plaintiff has failed to allege, as required, that it [or the consumers it purports

to represent] has willingly conferred a benefit upon Relief Defendants. Therefore, the claim for

unjust enrichment must be dismissed pursuant to Rule 12(b)(6).

The related claim for constructive trust fails for the same reason. Under Tennessee law:

A constructive trust requires some element of fraud, concealment, duress, etc., such that a person has obtained property "which he ought not, in equity and good conscience, hold and enjoy." Such a trust may be imposed where: 1) a person procures the legal title to property in violation of a duty to the actual

owner;

2) the title to property is obtained by some inequitable means; 3) a person makes use of some influence in order to obtain title on better terms

than it otherwise would have been obtained; 4) a person acquires property with notice that someone else is entitled to its

benefits.

Estate of Queener v. Helton, 119 S.W.3d 682, 687 (Tenn. App. 2003) (citation omitted). If these

elements are not shown, a claim for constructive trust fails. See id. Here, Plaintiff has alleged

none of these elements. Accordingly, like the related claim for unjust enrichment, the claim for

constructive trust should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.

2. The allegations of Count VIII are wholly conclusory.

Even if Plaintiff needed to allege only that Relief Defendants ultimately received ill-

gotten gains from Defendants and that this would unjustly enrich Relief Defendants, Count VIII

would still fail to state a claim under Rule 8(a) because the Complaint’s allegations in this regard

are entirely conclusory. Plaintiff simply asserts that Relief Defendants ultimately received ill-


25

gotten gains from Defendants and that this would unjustly enrich Relief Defendants, but fails to

provide any facts whatsoever to support these conclusory assertions: no facts regarding the

manner of receipt, the dates (approximate or otherwise) of receipt, the circumstances of receipt,

or the extent of Relief Defendants’ knowledge of how Defendants received the funds they

allegedly passed on to the Relief Defendants. Indeed, beyond the conclusory assertions of ill-

gotten gains and unjust enrichment – which must be disregarded under Twombly and Iqbal –

Plaintiff provides absolutely nothing to support its claim(s) in Count VIII. Therefore, Count VIII

fails to satisfy Rule 8(a) and must be dismissed pursuant to Rule 12(b)(6).

III. Counts I, IV, VI and VII must be dismissed not only for the above-referenced reasons, but alternatively for failure to allege fraud with particularity as required for those claims under Rule 9(b).

The Complaint, while failing to satisfy the pleading standards of Rule 8(a) with respect to all

claims, fails even more completely to satisfy the standards of Rule 9(b) with respect to some claims.

Rule 9(b), of course, provides in pertinent part that “[i]n alleging fraud or mistake, a party must state

with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Plaintiff has

done no such thing, despite being required to do so with respect to Counts I, IV, VI and VII.

Therefore, those claims must be dismissed under Rule 12(b)(6), even assuming arguendo that the

entire Complaint was not subject to dismissal for failure to state a claim under Rule 8(a), as set forth

above.

A. Rule 9(b) is applicable to Counts I, IV, VI and VII.

Although Plaintiff has not asserted fraud claims per se, Plaintiff’s claims brought under

the TCPA (Counts VI and VII), and 16 C.F.R. § 310.3 (Counts I and IV) sound in fraud and

therefore must comply with Rule 9(b). It is axiomatic that the intentional use of false

representations to induce another to act is the very essence of an allegation of fraud, and that is

what the Complaint alleges over and over (albeit in merely conclusory fashion). When a state-law


26

claim sounds in fraud, it triggers Rule 9(b)’s heightened standards. Republic Bank & Trust Co.

v. Bear Stearns & Co., 683 F.3d 239, 247 (6th Cir. 2012). It is clear that TCPA claims in

particular are subject to the heightened pleadings requirements of Rule 9(b). See Metro. Prop. &

Cas. Ins. Co. v. Bell, 2005 U.S. App. LEXIS 17825, at *16 (6th Cir. 2005) (under Rule 9(b),

complaints alleging unfair or deceptive acts or practices under the Tennessee Consumer

Protection Act must be pled with specificity); LeBlanc v. Bank of America, No. 2:13-cv-02001

(W.D. Tenn. June 18, 2013); Marshall v. ITT Tech. Institute, No. 3:11-CV-552 (E.D. Tenn. Apr.

11, 2012). Therefore, if a TCPA claim fails to provide the particularity required, it will be

dismissed. See Sony/ATV Music Publishing LLC v. D.J. Miller Music Distribs., Inc., 2011 U.S.

Dist. LEXIS 116158, at *27-29 (M.D. Tenn. Oct. 7, 2011).

As for claims under the TSR, although there is a split of authority on the issue, a district

court in this state has specifically held that violations of 16 C.F.R. § 310.3 sound in fraud and

therefore claims brought thereunder are subject to Rule 9(b). State of Tennessee v. Lexington

Law Firms, 1997 U.S. Dist. LEXIS 7403, at * 5-6 (May 14, 1997). Because two of Plaintiff’s

TSR claims (Counts I and IV) are brought under this section, they must be pled with

particularity.

The Sixth Circuit has made clear what is required of claims governed by Rule 9(b).

Plaintiff can satisfy Rule 9(b) only by pleading with particularity the “time, place and contents of

the false representations, as well as the identity of the person making the misrepresentation and

what [that person] obtained thereby.” Republic Bank & Trust Co., 683 F.3d at 247. See also

Paragon Fin. Group v. Bradley Factor, Inc., 2003 U.S. Dist. LEXIS 22105, at *41 (E.D. Tenn.

Sept. 15, 2003) (fraud count satisfies 9(b) when it specifies “the parties and the participants to

the alleged fraud, the representations made, the nature in which the statements are alleged to be


27

misleading or false, the time, place and content of the representations, the fraudulent scheme, the

fraudulent intent of the defendants, reliance on the fraud, and the injury resulting from the

fraud”) (citing Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 679 (6th Cir. 1988)).

B. Counts I, IV, VI and VII fail to satisfy the requirements of Rule 9(b).

Counts I, IV, VI and VII fail to satisfy Rule 9(b) for two different but related reasons.

First, without question, the Complaint fails to identify – even generally – many of the particulars

required by Rule 9(b), including the time and place misrepresentations were made, what

Defendants gained as a result of the misrepresentations, how Plaintiff (or the consumers it

purports to represent) were injured as a result of those representations, and, as further discussed

immediately below, who made the misrepresentations. As to these matters, there is absolutely no

particularity whatsoever.

As to time, for example, alleged misrepresentations are not dated even to an approximate

year; the Complaint describes events beginning as early as 2000. The closest it comes to dating

any misrepresentation is to claim that a particular telephone sales script has been used “since at

least 2006.” Compl., ¶ 80. It is striking how far the Complaint is from providing the time of any

misrepresentation. As for what Defendants gained from their alleged misconduct, the Complaint

merely alludes repeatedly to the most general of terms, “ill-gotten gains,” and, in one place, “the

sale of hundreds of thousands of dollars of timeshares and other vacation products to consumers

in Tennessee and elsewhere.” Compl., ¶56.

Second, the Complaint violates Rule 9(b) (just as it violates Rule 8(a), as discussed above) by

lumping all of the Defendants together under the broad labels “Festiva,” “Festiva Entities” or

“Defendants” and making no effort to allege how any specific Defendant committed any acts or

omissions in violation of the TCPA or TSR. To satisfy Rule 9(b) in cases involving multiple


28

defendants, the plaintiff must meet the particularity requirement with respect to each individual

defendant and cannot avoid that requirement simply by grouping all of the defendants together

under one omnibus actor. Greene v. Benefit Mortg. Corp., 2009 U.S. Dist. LEXIS 1163, at *9 (E.D.

Mich. Jan. 8, 2009). A plaintiff cannot satisfy the pleading standards of Rule 9(b) – let alone Rule

8(a) – by merely attributing all alleged acts to one monolithic amalgam of all Defendants that

does not actually exist. See Hoover v. Langston Equip. Assocs., 958 F.2d 742, 745 (6th Cir. 1992)

(affirming dismissal of count pursuant to Rule 9(b) because “plaintiffs had not alleged with

specificity who had made particular misrepresentations and when they were made but rather

plaintiffs had articulated general averments of fraud attributed to ‘the defendants’ . . . . and

allege[d] misrepresentations without sufficiently identifying which defendants made them,”

thereby “not enabl[ing] a particular defendant to determine with what it is charged.”). Rather,

“‘each individual defendant must be appraised [sic] separately of the specific acts of which he is

accused, especially in a case involving multiple defendants.’” Benoay v. Decker, 1984 U.S. App.

LEXIS 14244, at *11 (6th Cir. 1984) (quoting district court opinion in affirming district court’s

rejection of claims for failure to satisfy Rule 9(b)). “Where there are multiple defendants, a claim

must identify which of the defendants made the alleged misrepresentations.” Yaldu v. Bank of

Am. Corp., 700 F. Supp. 2d 832, 839 ( E.D. Mich. 2010) (citing Hoover, 958 F.2d at 745).

In short, the “‘plaintiff is required to meet the Rule 9(b) standards as to each defendant

against whom fraud is alleged.’” In re Nat'l Century Fin. Enters., Inc., 504 F. Supp. 2d 287, 315

(S.D. Ohio 2007) (quoting S.E.C. v. Blackwell, 291 F. Supp.2d 673, 696 (S.D. Ohio 2003)). As

indicated above, Plaintiff has failed to do so, and this failure is fatal to Counts I, IV, VI and VII the

Petition.


29

IV. Regardless of what other claims must be dismissed as to which movants, the TCPA claims in particular must be dismissed as to all Moving Relief Defendants and six of the Moving Defendants because Plaintiff failed to provide them the ten-day notice required by Tenn. Code Ann. § 47-18-108(b).

The Tennessee Consumer Protection Act (“TCPA”) grants the Attorney General and

Reporter the power to “bring an action in the name of the state . . . to restrain by temporary

restraining order, temporary injunction, or permanent injunction the use” of an act or practice

alleged to violate the TCPA. See Tenn. Code. Ann. § 47-18-108(a)(1). At least ten days prior to

bringing such an action, however, the Division of Consumer Affairs “shall . . . give notice to the

person against whom proceedings are contemplated and give such person an opportunity to

present reasons why such proceedings should not be instituted.” Id. § 47-18-108(a)(2). This

notice-and-opportunity requirement may be excused only if “the division determines in writing

that the purposes of this part will be substantially impaired by delay in instituting legal

proceedings.” Id.

In this case, Plaintiff of course has brought an action seeking injunctive relief, but did so

without providing pre-suit notice and opportunity to six of the Moving Defendants or any of the

Moving Relief Defendants, and without providing the requisite written determination that the

notice-and-opportunity provision should be excused.9

Defendant does not dispute that Moving Defendants Festiva Real Estate Holdings, LLC,

Resort Travel & Xchange, LLC, Zealandia Holding Co., Festiva Resorts Adventure Club

Members’ Association, Inc., Festiva Development Group, LCC, Herbert Patrick, and Donald

9 Plaintiff also may have failed to provide the required notice to Defendant Escapes!, Inc., and the various alleged trusts that are Relief Defendants, but those entities are not parties to the current motion and not represented by the undersigned counsel. Moving Defendants and Moving Relief Defendants take no position on whether those entities received the required notice.


30

Clayton all received the required notice.10 However, all six Moving Relief Defendants, and

Defendants Escapes Travel Choices, LLC, ETourandTravel, Inc., Human Capital Solutions, Inc.,

Patton Hospitality Management, LLC, Zealandia Capital, Inc., and Richard Hartnett never

received any such notice. See Declaration of Richard Allen Hartnett (“Hartnett Decl.), ¶¶ 4-5

(describing lack of notice to Defendants Hartnett and Escapes Travel Choices, LLC); Declaration

of William W. Horton (“Horton Decl.”), ¶ 5 (describing lack of notice to Defendant Patton

Hospitality Management, LLC and Relief Defendant Resort Management Services, Inc.);

Declaration of Herbert H. Patrick, Jr. (“Patrick Decl.”), ¶ 11 (describing lack of notice to the

other five Moving Relief Defendants and Defendants Human Capital Solutions, Inc.,

ETourandTravel, Inc., and Zealandia Capital, Inc.).

The question is what the remedy is for the apparent failure of Plaintiff to comply with this

statutory requirement. Although Tennessee courts have not directly addressed the proper remedy

for a violation of the notice-and-opportunity provision of section 47-18-108(a)(2), the plain

language of the statute, and analogous state and federal case law, demonstrate that the State’s

claims against the 10 defendants who did not receive pre-suit notice and opportunity must be

dismissed.11

The statute explicitly states that notice and opportunity “shall” be given before a suit may

be filed. “The use of the word ‘shall’ . . . indicates that the legislature intended the requirements 10 Festiva Resorts Adventure Club Members’ Association, Inc. will not dispute receiving notice for purposes of this motion, even though notice actually was addressed not to it, but rather to “Festiva Adventure Club, Inc.” 11 Federal courts seem to tend to treat these pre-suit notice provisions as jurisdictional prerequisites, suggesting that a 12(b)(1) motion might be the most appropriate vehicle for dismissal due to failure to provide notice. Courts have not always been very precise, however. See Atlantic States Legal Found., Inc., 61 F.3d at 478 n.6 (“Although the [Supreme] Court did not determine whether the notice provision [of the Emergency Planning and Community Right-to-Know Act of 1986] ‘is jurisdictional in the strict sense of the term,’ it left no doubt that failure to comply requires dismissal.”) (quoting Hallstrom v. Tillamook County, 493 U.S. 20, 31 (1989)). Accordingly, the motion to dismiss for failure to provide the required ten-day notice is being brought under Fed R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, and alternatively under Fed. R. Civ. P. 12(b)(1) for lack of subject-matter jurisdiction.


31

to be mandatory, not directory.” Myers v. AMISUB (SFH), Inc., 382 S.W.3d 300, 308 (Tenn.

2012) (interpreting similar language in the Tennessee Health Care Liability Act (“THCLA”));

see also Duncan v. Med. Educ. Assistance Corp., No. 2:12-cv-182, 2013 U.S. Dist. LEXIS

43891 (E.D. Tenn. Mar. 27, 2013) (Greer, J.) (same); Garay v. Hamblen County, Tenn.,

No. 2:11-cv-128, 2013 U.S. Dist. LEXIS 41939 (E.D. Tenn. Mar. 26, 2013) (Greer, J.) (same).

The requirement of notice and opportunity is mandatory because “‘the prescribed mode of action

is of the essence of the thing to be accomplished.’” Id. (quoting 3 Norman J. Singer & J.D.

Singer, Statutes and Statutory Construction § 57:2 (7th ed. 2008)). That is, the essence of § 47-

18-108(a)(2) is that, before a suit seeking injunctive relief may be filed, the person against whom

it is contemplated must be given notice and an opportunity “to present reasons why such

proceedings should not be instituted.”

Compliance with the notice-and-opportunity provision allows the recipient to prepare to

defend against a request for injunctive relief. It also reflects the legislature’s goal of avoiding the

unnecessary expenditure of judicial resources. Upon receiving notice, the recipient may

voluntarily agree to stop the practices that the State would otherwise seek to enjoin. Or the State

may be persuaded, after hearing the recipient “present reasons,” that proceedings seeking

injunctive relief should not in fact be instituted – or at least should not be instituted with respect

to a particular person or particular practice. Or the recipient and the State might come to some

other form of settlement agreement. In any event, the time and resources of the State, the courts,

and the person subject to the suit may be conserved. Allowing the State to simply ignore the

notice-and-opportunity provision would thwart the essential purposes of the statute.

The mandatory nature of the provision is confirmed by the statute’s structure. Section

47-18-108(a)(2) specifies that there is a single circumstance when the notice-and-opportunity


32

requirement may be excused – namely, upon a written determination by the division of consumer

affairs “that the purposes of this part will be substantially impaired by delay in instituting legal

proceedings.” T.C.A. § 47-18-108(a)(2). This specific exception would have no meaning if the

State could, without suffering any real consequences, simply institute proceedings absent notice

and opportunity whenever it thought that doing so would be advantageous. Moreover, the notice-

and-opportunity requirement appears immediately after the provision granting the Attorney

General and Reporter the power to seek injunctive relief, id. § 47-18-108(a)(1), and immediately

before the provision establishing where venue is proper, id. § 47-18-108(a)(3). This placement

makes clear that the notice-and-opportunity provision is a specific, binding limitation on the

State’s power to bring suit, not merely a suggestion that the State may take or leave.

Treating the provision as mandatory also comports with case law interpreting analogous

provisions of federal law. As the Supreme Court has explained, in interpreting a pre-suit notice

provision under the Resource Conservation and Recovery Act, “compliance with the 60-day

notice provision is a mandatory, not optional, condition precedent for suit.” Hallstrom v.

Tillamook County, 493 U.S. 20, 26 (1989). As such, the failure to comply with the notice

provision requires that the suit be dismissed. Id. at 31-32; see also, e.g., Atl. States Legal Found.,

Inc. v. United Musical Instruments, U.S.A., Inc., 61 F.3d 473, 478 (6th Cir. 1995) (requiring

dismissal for failure to comply with pre-suit notice provision of the Emergency Planning and

Community Right-to-Know Act of 1986); Winder v. Erste, 566 F.3d 209, 213-14 (D.C. Cir.

2009) (requiring dismissal for failure to comply with pre-suit notice provision of the D.C.

Whistleblower Act). In short, where, as here, pre-suit notice is required by statute before an

action may be filed, “the giving of . . . notice is not simply a desideratum; it is a jurisdictional

necessity.” Ctr. for Biological Diversity v. Marina Point Dev. Co., 566 F.3d 794, 800 (9th Cir.


33

2009). “That is to say, the notice is not just an annoying piece of paper intended as a stumbling

block for people who want to sue; it is purposive in nature and the purpose is to accomplish

corrections where needed without the necessity of” court intervention. Id.

Because the State has failed to comply with the notice-and-opportunity requirements of

§ 47-18-108(a)(2) with regard to all six Moving Relief Defendants and six of the Moving

Defendants, the TCPA claims against those 12 parties must be dismissed. Cf. Garay, 2013 U.S.

Dist. LEXIS 41939, at *10-11 (explaining that, under the THCLA, notice must be given

separately to each named defendant). The notice-and-opportunity requirement, explicitly set

forth in the statute, is not simply “an annoying piece of paper.” It reflects the legislature’s

judgment that certain steps must be taken in these circumstances before a suit seeking injunctive

relief may be instituted; when those steps are not taken, the statutory prerequisites have not been

satisfied, and the case must be dismissed.

V. All Moving Relief Defendants and Defendants Human Capital Solutions, Inc., ZHC, Clayton, Patrick, and Hartnett should be dismissed pursuant to Fed R. Civ. P. 12(b)(2) due to this Court’s lack of personal jurisdiction. A. Plaintiff is asserting specific rather than general jurisdiction, meaning that

Plaintiff must satisfy a three-part test as to each Defendant or Relief Defendant. When a federal court has federal question subject-matter jurisdiction, personal

jurisdiction over a defendant exists if the defendant is amenable to service of process under the

forum state's long-arm statute and if the exercise of personal jurisdiction would comport with

due process. See Community Trust Bancorp, Inc. v. Community Trust Finan. Corp., 692 F.3d

469, 471 (6th Cir. 2012). “Tennessee's long-arm statute has been interpreted to be coterminous

with the limits on personal jurisdiction imposed by the Due Process Clause of the United States

Constitution, and thus, the jurisdictional limits of Tennessee law and of federal constitutional law

of due process are identical.” Intera Corp. v. Henderson, 428 F.3d 605, 616 (6th Cir. 2005)


34

(internal quotation marks omitted). For this reason, “the two inquiries merge and the court need

only determine whether the assertion of personal jurisdiction . . . violates constitutional due

process." Id. (internal quotation marks omitted).

“There are two kinds of personal jurisdiction within the Federal Due Process inquiry:

(1) general personal jurisdiction, where the suit does not arise from defendant's contacts with the

forum state; and (2) specific jurisdiction, where the suit does arise from the defendant's contacts

with the forum state.” Conn v. Zakharov, 667 F.3d 705, 712-713 (6th Cir. 2012).

Among its many flaws as regards personal jurisdiction, the Complaint does not make

clear whether it asserts general jurisdiction or specific jurisdiction. However, it is entirely clear,

under Goodyear Dunlop Tires Ops, S.A. v. Brown, 564 U.S. ___, 131 S. Ct. 2846 (2011), and its

progeny that general jurisdiction could not and would not apply. “Goodyear made clear that only

a limited set of affiliations with a forum will render a defendant amenable to all-purpose

jurisdiction there. ‘For an individual, the paradigm forum for the exercise of general jurisdiction

is the individual's domicile; for a corporation, it is an equivalent place, one in which the

corporation is fairly regarded as at home.’” Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014)

(quoting Goodyear). The paradigm forum for the three individual defendants, therefore, is their

respective domiciles, which the Complaint shows is not Tennessee, but rather North Carolina

(for defendants Clayton and Patrick) and South Carolina (for defendant Hartnett). Compl., ¶¶ 19-

21. There certainly is no indication whatsoever that any of these individuals can be regarded as

domiciled or in any sense “at home” in Tennessee. Thus, general jurisdiction clearly is

inapplicable for the individuals.

“With respect to a corporation, the place of incorporation and principal place of business

are paradig[m] . . . bases for general jurisdiction. Those affiliations have the virtue of being


35

unique – that is, each ordinarily indicates only one place – as well as easily ascertainable.” Id.

(citations and internal quotation marks omitted). “Accordingly, the inquiry under Goodyear is

not whether a foreign corporation's in-forum contacts can be said to be in some sense

‘continuous and systematic,’ it is whether that corporation's ‘affiliations with the State are so

“continuous and systematic” as to render [it] essentially at home in the forum State.’” Id. at 761

(quoting Goodyear). Again, the Complaint indicates that the paradigm forum for all of the

corporate Moving Defendants and corporate Relief Defendants is not Tennessee; each of them is

incorporated in Florida or Nevada and has a principal place of business in Florida or North

Carolina. Complaint, ¶¶ 13, 17, 22-27. There certainly is no indication whatsoever that any of

these can be regarded as in any sense “at home” in Tennessee. Thus, general jurisdiction clearly

is inapplicable for both corporate Moving Defendants and all Corporate Relief Defendants.

With respect to specific jurisdiction, the Sixth Circuit has made clear the applicable due

process inquiry:

To determine whether a plaintiff's exercise of jurisdiction satisfies due process, we apply a three-part specific jurisdiction analysis:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir.1968).

As “the constitutional touchstone” of personal jurisdiction,” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 85 L.Ed.2d 528 (1985), the purposeful availment requirement ensures that the defendant's actions create a “substantial connection” to the forum state, such that the defendant “should reasonably anticipate being haled into court there,” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 889 (6th Cir.2002) (internal quotation marks omitted). Such a requirement protects a defendant from being “haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of


36

the unilateral activity of another party or a third person.” Id. (quoting Burger King Corp., 471 U.S. at 475, 105 S. Ct. 2174 (internal quotation marks omitted).

Community Trust Bancorp, Inc., 692 F.3d at 471-72. If any one of the three requirements for

specific jurisdiction is not satisfied by the plaintiff, then personal jurisdiction does not exist. See

id. at 472.

Moreover, as indicated in Community Trust Bancorp and as discussed immediately

below, it is Plaintiff’s burden to establish these three requirements for specific jurisdiction, first

by including specific facts in the Complaint showing or at least implying their existence, and

then, if and when confronted with a properly-supported motion to dismiss for lack of personal

jurisdiction (like the instant motion), presenting (generally by affidavit) facts sufficient to make a

prima facie showing of personal jurisdiction.

B. The Complaint must allege specific facts establishing with reasonable particularity that the requirements for (specific) personal jurisdiction have been satisfied, and even if it does, Plaintiff still must make a prima facie showing of personal jurisdiction as to Defendants and Relief Defendants who have made a properly-supported motion to dismiss.

“[T]he plaintiff must follow the general guidelines for pleading standards – the plaintiff

must allege specific facts to show the standard has been met for personal jurisdiction.”

Chencinski v. Murga, 2013 U.S. Dist. LEXIS 103656, *4 (E.D. Mich. July 23, 2013) (citing

Palnik v. Westlake Enter., 344 F. Appx. 249, 251 (6th Cir. 2009)); id. at *11-12 (“Current

pleading standards require the plaintiff to allege specific facts in the complaint . . . and this

standard also applies to findings of personal jurisdiction”) (citing Twombly and Iqbal); Haley

Paint Co. v. E.I. Dupont De Nemours & Co., 775 F. Supp.2d 790, 799 (D. Md. 2011) (“the

pleading standards articulated in Twombly and Iqbal apply to Rule 8(a)(1) which requires ‘a

short and plain statement of the grounds for the court’s [personal] jurisdiction’”) (citing Palnik

and Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063 (10th Cir. 2008)). Therefore,


37

“[i]nitially, ‘the complaint must have “established with reasonable particularity” those specific

facts that support jurisdiction.’” Medchoice Fin., LLC v. ADS Alliance Data Sys., 857 F. Supp.2d

665, 675 (S.D. Ohio 2012) (quoting Palnik, 344 Fed. Appx. at 251).

Even if a Complaint satisfies these standards, and thus clears the hurdle of Twombly and

Iqbal, a plaintiff is not yet out of the woods as regards personal jurisdiction. Instead, in the face

of a properly-supported motion to dismiss the complaint pursuant to Rule 12(b)(2), the plaintiff

cannot rely on the complaint, but rather must set forth specific facts showing that the court has

personal jurisdiction. See Chencinski, 2013 U.S. Dist. LEXIS 103656, at *12 (citing Theunisson

v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991)). This generally means submitting affidavits

that make a prima facie showing of personal jurisdiction, failing which the plaintiff cannot

defeat the motion to dismiss. See Miller v. Axa Winterthur Ins. Co., 694 F.3d 675, 678 (6th Cir.

2012) (citing Theunisson, 935 F.2d at 1458).12

C. The Complaint fails to adequately allege facts that support this Court’s (specific) personal jurisdiction over the Moving Defendants and corporate Relief Defendants.

With respect to All Relief Defendants and Moving Defendants Human Capital Solutions,

Inc., ZHC, Clayton, Patrick, and Hartnett, the Complaint lacks sufficient allegations of specific

facts to support personal jurisdiction.

With respect to each Relief Defendant, the Complaint asserts only two “facts” to support

personal jurisdiction, and this only “upon information and belief.” They are that each respective

Relief Defendant: (1) “has transacted and continues to transact business in this District,” and

(2) “has received ill-gotten funds that are the proceeds of the unlawful acts or practices alleged in

12 The plaintiff’s burden is to make a prima facie showing, if the court decides the Rule 12(b)(2) motion to dismiss without an evidentiary hearing, based solely on the affidavits. See Theunisson, 935 F.2d at 1458. However, if the district court were to hold an evidentiary hearing, the plaintiff would be required to meet the “‘preponderance of the evidence standard.’” Kroger Co. v. Malease Foods Corp., 437 F.3d 506, 510 n.3 (6th Cir. 2006) (quoting Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir.1989)).


38

this Complaint . . . .” Complaint, ¶¶ 22-27. These purported “facts” are actually merely

conclusory allegations and thus are insufficient. “Plaintiff's bare conclusory allegations in the

Amended Complaint . . . that Defendant . . . conducts business within the United States are

insufficient as well.” Prakash v. Altadis U.S.A. Inc., 2012 U.S. Dist. LEXIS 46337, *67 (N.D.

Ohio March 30, 2012). “Bare allegations or conclusory statements are insufficient to establish

personal jurisdiction; instead, the plaintiff ‘must allege specific facts connecting each defendant

with the forum.’" Dean v. Walker, 756 F. Supp.2d 100, 102 (D.D.C. 2010) (quoting GTE New

Media Servs., Inc. v. Ameritech Corp., 21 F. Supp.2d 27, 36 (D.D.C. 1998)). This was the law

even before Twombly and Iqbal were decided and raised the bar with respect to what facts must

be pleaded. See Wenz v. Memery Crystal, 55 F.3d 1503, 1509 (10th Cir. 1995) (dismissing

complaint for lack of personal jurisdiction where it “fail[ed] to allege any facts in support of

[Plaintiff’s] conclusory statement that the ‘defendants transacted business’ in Colorado”). Iqbal

and Twombly, for their part, have confirmed that such conclusory allegations are to be accorded

no weight in assessing the sufficiency of the allegations to establish personal jurisdiction.

Moreover, even if they were entitled to some weight, Plaintiff’s alleged “facts” are

extremely general and not nearly specific enough to support personal jurisdiction over any Relief

Defendant. They are worthless in establishing the second and third requirements for specific

jurisdiction, i.e., that the cause(s) of action arose from the respective defendants’ activities in

Tennessee and that the acts of the respective defendants (or the consequences caused by the

defendant) have a substantial enough connection with Tennessee to make the exercise of

jurisdiction reasonable. The Complaint alleges no facts at all about the Relief Defendants’

activities in Tennessee (beyond the bare alleged fact that there were some), let alone facts

regarding the relationship between those acts and Plaintiff’s causes of action or facts or


39

consequences showing a connection with Tennessee that would render the exercise of

jurisdiction in Tennessee reasonable.

The Complaint is similarly deficient as to the Moving Defendants. With respect to each

of the two corporate Moving Defendants and the three individual Moving Defendants, the

Complaint asserts only one “fact” to support personal jurisdiction: that they “have transacted and

continued to transact business in this District.” Complaint, ¶¶ 13, 17, 19-21. However, this is a

mere conclusory allegation and thus is insufficient and indeed, as noted above, under Twombly

and Iqbal is entitled to no weight at all. Otherwise, the Complaint says absolutely nothing about

the basis for specific jurisdiction over these five Moving Defendants in particular, and instead

merely lumps them in with all other corporate Defendants, e.g., Compl., ¶ 18, or all other

Defendants, e.g., Compl., ¶ 30-32, and then makes sweeping conclusory allegations about the

acts of these groups of defendants as a whole. “Lumping all the ‘defendants’ together for

purposes of alleging connections to [Tennessee] . . . is patently insufficient. [The various

defendants are separate entities and are presumptively entitled to have independent existence –

which means that plaintiffs must either establish a basis for subjecting each of them,

individually, to the jurisdiction of this Court, or must satisfy the Court that TRU's jurisdictional

contacts can be attributed to its affiliates . . . ." Cenage Learning, Inc. v. Buckeye Books, 531 F.

Supp.2d 596, 599 (S.D.N.Y. 2008). See also Cosmetic Warriors Ltd. V. Abrahamson, 723 F.

Supp.2d 1102, 1109 (D. Minn. 2010) (criticizing plaintiff for “lump[ing] all of the Defendants

together, despite the well-settled rule that each defendant’s contacts with the forum state must be

assessed individually)(internal quotation marks omitted); id. (“‘The requirements [for personal

jurisdiction] must be met as to each defendant.’”) (emphasis in original) (quoting Rush v.

Savchuk, 444 U.S. 320, 332 (1980)); Covey v. System USA, LLC, 2012 U.S. Dist. LEXIS 152613


40

(E.D. Okla. Oct. 24, 2012) (“Plaintiff lumps all ‘systems’ defendants together, failing to provide

specific facts as to each individual defendant. Plaintiff has failed to meet her burden of

establishing personal jurisdiction over this defendant.”); Flava Works, Inc. v. Roje on Holiday

Inc., 2012 U.S. Dist. LEXIS 60871, *14 (S.D. Fla. May 1, 2012) (“The Court notes that Plaintiff

indiscriminately lumps all of Defendants together in this list. It cannot do this; it must establish

personal jurisdiction over each individual Defendant based on that Defendant's activities in and

contacts with Florida”); Gonzalez v. Bank of America, 2011 U.S. Dist. LEXIS 16963, *7 (S.D.

Tex. Feb. 20, 2011) (finding lack of personal jurisdiction over a defendant that was a partial

owner of another defendant, where plaintiff did not allege that the “owners did anything to

justify the court’s collapsing the corporate entities into one or making the parent amenable to

jurisdiction in Texas”).

Even if Plaintiff had adequately alleged specific facts supporting personal jurisdiction as

to each of the corporate Moving Defendants (which it has not), that would not automatically

mean it had adequately alleged specific facts as to each individual defendant. Neither the

individuals’ status as officers of various entity defendants who are subject to jurisdiction, nor

Plaintiff’s (improper) decision to lump the individuals together with various entity defendants

under some collective term, would mean that personal jurisdiction over any entities is imputed to

them. As discussed by one district court:

[Plaintiff] QBP does not allege that Donnell has had any contacts with Minnesota. Instead, it lumps all "Defendants" together, both in its Complaint and its Memorandum, alleging they are all subject to personal jurisdiction in Minnesota for advertising, selling, and distributing goods here. But a person's "status as a corporate officer . . . alone cannot establish sufficient contacts to exercise personal jurisdiction." Stratasys, Inc. v. Protopulsion, No. A10-2257, 2011 WL 2750720, at *5 (Minn. Ct. App. July 18, 2011). QBP must establish that Donnell himself had sufficient contacts with Minnesota – whether in a personal or business capacity – to satisfy the Due Process Clause. It may not attribute his companies' contacts to him. Because QBP has not alleged any contact between


41

Donnell and Minnesota and the record reflects none – except a single family vacation here thirty years ago – the Court concludes that Donnell should be dismissed from the action for lack of personal jurisdiction.

Quality Bicycle Prods., Inc. v. BikeBaron, LLC, 2013 U.S. Dist. LEXIS 96158, *12-13 (D. Minn.

July 13, 2013).

In summary, because Plaintiff has “failed in [its] pleading to allege any specific facts that

might lead to a finding of personal jurisdiction over the Defendants, and where the record

indicates that no such facts would be discovered, the court must conclude that extending

jurisdiction over Defendants would be improper and unconstitutional.” Chencinski v. Murga,

2013 U.S. Dist. LEXIS 103656, *17 (E.D. Mich. July 23, 2013).

D. Even if the Complaint did sufficiently allege specific facts establishing personal jurisdiction, Plaintiff would fail to meet its burden of making a prima facie case of personal jurisdiction as to the six specified Moving Defendants and all Moving Relief Defendants .

Since Plaintiff has not alleged specific facts that establish with reasonable particularity

that these defendants are subject to personal jurisdiction, Plaintiff fails to meet its burden, and it

is irrelevant what the defendants’ affidavits (or declarations) say. See Palnik v. Westlake

Entertainment, Inc., 344 Fed. Appx. 249, 251 (6th Cir. 2009). In other words, since Plaintiff has

failed to make sufficient allegations as to personal jurisdiction over these defendants, it does not

matter whether defendants submit affidavits contradicting any assertion that personal jurisdiction

is proper. See id.

Even if Plaintiff had sufficiently alleged facts supporting personal jurisdiction over these

defendants, however, it would remain Plaintiff’s burden to make an adequate showing to support

personal jurisdiction. See id. As noted above, supra note 12, Plaintiff’s burden is by a

preponderance of the evidence if an evidentiary hearing is held, or at least to make a prima facie

showing if no evidentiary hearing is held. To make a prima facie showing in the face of a


42

properly-supported motion to dismiss for lack of personal jurisdiction (like the present motion),

Plaintiff cannot stand on its pleadings, but rather must show, by affidavit or otherwise, that

personal jurisdiction exists. See Miller v. Axa Winterthur Ins. Co., 694 F.3d 675, 678 (6th Cir.

2012) (citing Theunisson, 935 F.2d at 1458).

The declarations submitted on the Moving Defendants’ behalf show that there is no basis

for personal jurisdiction over any of the Moving Relief Defendants or Defendants Human

Capital Solutions, Inc., ZHC, Clayton, Patrick, and Hartnett. Specifically, Defendant Patrick’s

Declaration shows a lack of facts to support personal jurisdiction over: (a) Defendant Patrick, see

Patrick Decl., ¶¶ 13-29; (b) Defendants Human Capital Solutions, Inc. and Zealandia Holding

Co., Inc., see Patrick Decl., ¶ 6; and (c) Relief Defendants Kosmos Group, International,

Inc., 811 Development Corporation, Financial Information Services, Inc., Festiva Sailing

Vacations, Inc., and Zealandia Holdings, LLC. See Patrick Decl., ¶¶ 7-9. Defendant

Clayton’s Declaration shows a lack of facts to support personal jurisdiction over Defendant

Clayton. Declaration of Donald K. Clayton, ¶¶ 2-19. Defendant Hartnett’s Declaration shows a

lack of facts to support personal jurisdiction over Defendant Hartnett. Hartnett Decl., ¶¶ 2, 6-22.

Finally, William W. Horton’s Declaration shows a lack of facts to support personal jurisdiction

over Relief Defendant Resort Management Services, Inc.

As noted above, in the face of this showing, Plaintiff must make a prima facie showing of

personal jurisdiction, which it will be unable to do. Therefore, even if the Complaint contained

sufficient allegations to require this Court to look at the parties’ respective affidavits (or

declarations) with respect to jurisdiction, Plaintiff would fail to defeat these defendants’ motion

to dismiss for lack of personal jurisdiction.


43

VI. In the alternative, if the entire Complaint is not dismissed, Plaintiff should be required to amend the complaint with respect to whatever claims remain after the Court decides which separate claim(s) to dismiss. If the Court declines to dismiss the Complaint in its entirety, it should order Plaintiff to

file and properly serve an amended complaint with a more definite statement of whatever claims

are not dismissed, pursuant to Fed. R. Civ. P. 12(e). Under the Rule, the district court can order a

more definite statement when the pleading at issue “is so vague or ambiguous that the

[responding] party cannot reasonably prepare a response.” Fed. R. Civ. P. 12(e).

As noted above, each and every allegation in the Complaint of wrongdoing by “Festiva”

is actually an allegation against 11 distinct entities and three (3) natural persons, thus potentially

requiring 14 separate responses. This is not only unduly burdensome, but likely unnecessary

given that surely even Plaintiff ultimately would concede that certain acts were committed only by

a limited number of Defendants. However, the Complaint fails to provide the clarity necessary to

identify those individual Defendants, thus preventing the respective Defendants from identifying

those allegations that merit a response from them in particular.

As for the Relief Defendants, as noted above, they have been provided absolutely no

information beyond the skimpiest and most conclusory of allegations as to why they essentially are on

the hook for the alleged transgressions of Defendants; they hardly can be expected to know how to

respond, or even what to respond to.

As noted above, this state of affairs cries out for dismissal of the entire Complaint for failure to

comply with Rule 8(a). If the Court declines to dismiss all the claims in the Complaint, however, it

should require Plaintiff to amend the Complaint to provide a more definitive statement as to whatever

claims remain once the Court decides which separate claim(s) to dismiss pursuant to the arguments set

forth above. Specifically, Plaintiff should be ordered to allege which Defendant(s) or Relief


44

Defendant(s) engaged in the conduct (or receipt of ill-gotten gains) it views as wrongful, and to

specifically make the particularized allegations required by Rule 9(b) where appropriate.

CONCLUSION

For the reasons set forth herein, the Complaint should be dismissed with prejudice in its

entirety pursuant to Fed. R. Civ. P. 12(b)(1), (2) & (6), or alternatively with respect to particular claims

and particular Defendants and Relief Defendants as set forth herein, pursuant to Fed. R. Civ. P.

12(b)(1), (2) & (6).

Respectfully submitted,

/s/ Eli J. Richardson Eli J. Richardson (BPR # 23443) [email protected] BASS, BERRY & SIMS PLC 150 Third Avenue South, Suite 2800 Nashville, TN 37201 (615) 742-7825 – Direct Telephone (615) 742-0416 – Direct Facsimile Attorneys for Defendants


45

CERTIFICATE OF SERVICE I hereby certify that a true and exact copy of the foregoing document has been served on this the 3rd day of March, 2014, as follows:

VIA THE COURT’S ECF SYSTEM: Olha N.M. Rybakoff, Esq. Office of the Attorney General Consumer Advocate & Protection Division 425 Fifth Avenue North, 3rd Floor Nashville, TN 37243 ATTORNEYS FOR PLAINTIFF VIA FIRST-CLASS, POSTAGE PREPAID U.S. MAIL: CT Corporation System 800 Gay Street Suite 2021 Knoxville, TN 37929-9710 REGISTERED AGENT FOR DEFENDANT ESCAPES!, INC. /s/ Eli J. Richardson Eli J. Richardson

12874252.2


Documents

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN ...ftpcontent5.worldnow.com/wjhl/custom/027 MOL in... · Solutions, Inc., Patton Hospitality Management, LLC, Zealandia Capital,