United States: Resort Fee Case Against Wyndham Moves Forward

On February 15, 2017, the United States District Court for the Western District of Pennsylvania allowed a purported class action to proceed against Wyndham Hotels.1 The class action alleges that Wyndham engaged in deceptive practices in charging resort fees for hotel rooms booked through its websites.2 In June 2016, plaintiff Thomas Luca Jr. filed a complaint on behalf of himself and purported classes of consumers alleging that Wyndham's websites misrepresented the room cost by failing to adequately disclose that a resort fee would be charged in addition to the advertised room rate, misrepresented the resort fee as a tax, and failed to include the tax on the resort fee in the total amount for the stay displayed, in violation of New Jersey's Consumer Fraud Act (CFA), N.J.S.A. § 56:8-2. 3 Luca also alleged that the Wyndham websites violated New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) by disclaiming liability for violations of the CFA, negligent acts, and malicious, willful or wanton misconduct.4

Motions to Dismiss

Wyndham filed two separate motions to dismiss, one by defendants Wyndham Worldwide Corporation (WWC) and Wyndham Hotel Management, Inc. (WHM) and the other by defendants Wyndham Hotel Group, LLC (WHG) and Wyndham Hotels and Resorts, LLC (WHR), corporate affiliates of WWC and WHM. In the first motion, WWC and WHM argued that plaintiff failed to allege sufficient facts to establish that WWC and WHM were involved in the operation of the websites or should be derivatively liable for the alleged misconduct on the Wyndham websites.5 The District Court agreed, but gave the plaintiffs leave to amend.6 In the other motion, defendants WHG and WHR—the alleged operators of the Wyndham websites at issue—argued that the plaintiff failed to state claims under the CFA and TCCWNA and did not have standing to bring a TCCWNA claim. The Court denied that motion, and in so doing left open the possibility that it may depart from the trend of previous cases that have generally been resolved in favor of website operators.

CFA Claim

Relying on cases finding that no CFA claim can lie where the allegedly deceptive disclosure contains the very information plaintiff alleges to be incomplete or misrepresented, WHG and WHR argued that there could be no CFA violation because the resort fee was repeatedly disclosed during the online booking process.7 WHG and WHR cited cases from other courts that they argued dismissed deceptive practices claims in similar circumstances.8 WHG and WHR further argued that the resort fee disclosures were adequate in light of Federal Trade Commission (FTC) guidance on this very issue.9

In response to Luca's allegation that the website misrepresented the resort fee as a tax, WHG and WHR pointed to disclosures identifying additional "Taxes and Fees" that applied.10 WHG and WHR also argued that Luca cited no case law finding that the failure to include the seven-dollar tax on the resort fee in the total stay amount violated the CFA, or that such failure was material to his decision to reserve the room as required by the CFA.11 Furthermore, WHG and WHR argued that there could be no CFA violation because the website disclosed that other taxes may apply.12

In its opinion, the District Court spent little time dispensing with these arguments. The opinion does not analyze the plaintiff's allegations in light of WHG and WHR's arguments. The District Court briefly discussed only the plaintiff's allegation that the total amount for the stay disclosed on the website did not include the tax on the resort fee.13 The District Court then summarily concludes that WHG and WHR's other arguments about the adequacy of disclosures cannot be resolved at the pleading stage because they went to the reasonableness of the disclosures.14 Thus, the District Court's opinion creates some ambiguity as to the status of plaintiff's other theories of deception—that the Wyndham websites misrepresented the true cost of rooms and mislabeled the resort fee as a tax. Perhaps the District Court was signaling that it does not view them as particularly strong.

WHG and WHR further argued that Luca failed to allege sufficiently an "ascertainable loss" as required by the CFA because he did not allege that he received a room valued lower than promised or that he would have booked a room at another hotel or not travelled if the resort fee disclosures had been adequate.15 However, the District Court held that Luca's allegations that he was charged more for the room than the website led him to believe were adequate to meet the "ascertainable loss" requirement.16

The Court also rejected the defendants' argument that New Jersey law should not apply because none of the alleged conduct took place in New Jersey and because the choice of law provision in the website's terms of use did not govern the reservation, which was a separate contract.17 The District Court concluded that New Jersey law applied because "[p]laintiff's claims are fairly read as arising out of his use of the website, and thus are covered by the Terms of Use and their directive that New Jersey law applies."18

TCCWNA Claim

With respect to the TCCWNA claim, WHG and WHR argued that Luca lacked constitutional standing because he alleged only a procedural violation of the TCCWNA and not a concrete injury, and that he lacked statutory standing because he was not an "aggrieved consumer" under the TCCWNA.19 The District Court rejected the constitutional standing argument because the TCCWNA claim protects against the risk that the website terms of use could be used to limit the plaintiff's right to recover under the CFA, a "concrete and personal" interest.20 The court rejected the statutory standing argument because "aggrieved consumer" has been interpreted to include "one who is suffering the effects of a violation of the TCCWNA."21 However, it left open the possibility that it would revisit this conclusion depending on the New Jersey Supreme Court's response to questions about the meaning of "aggrieved consumer" certified by the United States Court of Appeal for the Third Circuit.22

Finally, the District Court rejected WHG and WHR's argument that Luca failed to plead that the website terms of use violated a "clearly established legal right" as required by the TCCWNA because New Jersey courts have held that CFA violations satisfy this requirement.23

Conclusion

As Wyndham pointed out in its arguments to the District Court, other claims based on conduct similar to that at issue here have generally been resolved in favor of website operators. The District Court's ruling does not directly address the merits, as it merely considered whether the plaintiffs alleged sufficient facts to state a claim under the relevant New Jersey statutes. If this case moves forward, hotel and reservation website operators should follow it closely to see if the District Court's ruling heralds a departure from the prior trend and otherwise provides more ammunition for deceptive practice claims in other jurisdictions.

Footnotes

1. Order, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746 (W.D. Pa. Feb. 15, 2017).

2. See generally Compl., Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746 (W.D. Pa. June 6, 2016).

3. See Compl., Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 14-20, 26-27; see also Pl.'s Mem. of Law in Opposition to Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 8-12.

4. See Compl., Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 27-29.

5. See Mem. of Law in Support of Mot. to Dismiss Filed by Defendants Wyndham Worldwide Corp. and Wyndham Hotel Management, Inc., Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 1 (W.D. Pa. Aug. 15, 2016).

6. Id. at 4.

7. Mem. of Law in Support of Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 8-11.

8. Id. at 12-13.

9. Id. at 12. In November 2012, the FTC sent warning letters to 22 hotel operators encouraging them to review their practices with respect to disclosing hotel resort fees. FTC Press Release, FTC Warns Hotel Operators that Price Quotes that Exclude "Resort Fees" and Other Mandatory Surcharges May Be Deceptive (Nov. 28, 2012), . The warning letter explains that the "most prominent figure for consumers should be the total inclusive estimate" that includes all "unavoidable and mandatory fees." FTC Warning Letter to Hotel Operators (Nov. 2012). For more on the FTC's guidance on disclosing resort fees, see the post about the warning letter on the firm's Seller Beware consumer protection blog.

10. Mem. of Law in Support of Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 13.

11. Reply in Support of Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 4 (W.D. Pa. Oct. 5, 2016).

12. Id. at 4-5.

13. See Opinion, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 4-5.

14. Id.

15. Id. at 5; Mem. of Law in Support of Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 14-15.

16. Opinion, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 5-6.

17. Mem. of Law in Support of Mot. to Dismiss Filed by Defendants Wyndham Hotel Group, LLC, and Wyndham Hotels and Resorts, LLC, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 6-8.

18. Opinion, Luca v. Wyndham Worldwide Corp., No. 2:16-cv-746, at 6.

19. Id. at 7, 10.

20. See id. at 8-9.

21. Id. at 10.

22. Id.

23. Id. at 8 n.5.

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