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This excerpt taken from the WYN 10-Q filed May 7, 2009. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims,
fraud and other statutory claims and negligence claims asserted
in connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, consumer protection, fraud and other statutory claims
asserted by members and negligence claims by guests for alleged
injuries sustained at resorts; for our vacation ownership
business—breach of contract, bad faith, conflict of
interest, fraud, consumer protection claims and other statutory
claims by property owners’ associations, owners and
prospective owners in connection with the sale or use of
vacation ownership interests, land or the management of vacation
ownership resorts, construction defect claims relating to
vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination, harassment and wage and hour claims, claims of
infringement upon third parties’ intellectual property
rights, tax claims and environmental claims.
This excerpt taken from the WYN 10-K filed Feb 27, 2009. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims,
fraud and other statutory claims and negligence claims asserted
in connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection, fraud and other statutory claims
asserted by members and negligence claims by guests for alleged
injuries sustained at resorts; for our vacation ownership
business—breach of contract, bad faith, conflict of
interest, fraud, consumer protection claims and other statutory
claims by property owners’ associations, owners and
prospective owners in connection with the sale or use of
vacation ownership interests, land or the management of vacation
ownership resorts, construction defect claims relating to
vacation ownership units or resorts
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and negligence claims by guests for alleged injuries sustained
at vacation ownership units or resorts; and for each of our
businesses, bankruptcy proceedings involving efforts to collect
receivables from a debtor in bankruptcy, tax claims, employment
matters involving claims of discrimination, harassment and wage
and hour claims, claims of infringement upon third parties’
intellectual property rights and environmental claims.
This excerpt taken from the WYN 10-Q filed Nov 10, 2008. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims,
fraud and other statutory claims and negligence claims asserted
in connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both
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affiliates and members in connection with their respective
agreements, bad faith, and consumer protection, fraud and other
statutory claims asserted by members and negligence claims by
guests for alleged injuries sustained at resorts; for our
vacation ownership business—breach of contract, bad faith,
conflict of interest, fraud, consumer protection claims and
other statutory claims by property owners’ associations,
owners and prospective owners in connection with the sale or use
of vacation ownership interests, land or the management of
vacation ownership resorts, construction defect claims relating
to vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination, harassment and wage and hour claims, claims of
infringement upon third parties’ intellectual property
rights and environmental claims.
This excerpt taken from the WYN 10-Q filed Aug 8, 2008. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims,
fraud and other statutory claims and negligence claims asserted
in connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection, fraud and other statutory claims
asserted by members and negligence claims by guests for alleged
injuries sustained at resorts; for our vacation ownership
business—breach of contract, bad faith, conflict of
interest, fraud, consumer protection claims and other statutory
claims by property owners’ associations, owners and
prospective owners in connection with the sale or use of
vacation ownership interests, land or the management of vacation
ownership resorts, construction defect claims relating to
vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
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debtor in bankruptcy, employment matters involving claims of
discrimination, harassment and wage and hour claims, claims of
infringement upon third parties’ intellectual property
rights and environmental claims.
This excerpt taken from the WYN 10-Q filed May 8, 2008. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims,
fraud and other statutory claims and negligence claims asserted
in connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection, fraud and other statutory claims
asserted by members and negligence claims by guests for alleged
injuries sustained at resorts; for our vacation ownership
business—breach of contract, bad faith, conflict of
interest, fraud, consumer protection claims and other statutory
claims by property owners’ associations, owners and
prospective owners in connection with the sale or use of
vacation ownership interests, land or the management of vacation
ownership resorts, construction defect claims relating to
vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination, harassment and wage and hour claims, claims of
infringement upon third parties’ intellectual property
rights and environmental claims.
This excerpt taken from the WYN 10-K filed Feb 29, 2008. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims and
other statutory claims and negligence claims asserted in
connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection claims asserted by members and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, bad faith, conflict of interest, fraud, consumer
protection claims and other statutory claims by property
owners’ associations, owners and prospective owners in
connection with the sale or use of vacation ownership interests,
land or the management of vacation ownership resorts,
construction defect claims relating to vacation ownership units
or resorts and negligence claims by guests for alleged injuries
sustained at vacation ownership units or resorts; and for each
of our businesses, bankruptcy
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proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination and wage and hour claims, claims of infringement
upon third parties’ intellectual property rights and
environmental claims.
This excerpt taken from the WYN 10-Q filed Nov 8, 2007. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as consumer protection claims and
other statutory claims and negligence claims asserted in
connection with alleged acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection claims asserted by members and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, bad faith, conflict of interest, fraud, consumer
protection claims and other statutory claims by property
owners’ associations, owners and prospective owners in
connection with the sale or use of vacation ownership interests,
land or the management of vacation ownership resorts,
construction defect claims relating to vacation ownership units
or resorts and negligence claims by guests for alleged injuries
sustained at vacation ownership units or resorts; and for each
of our businesses, bankruptcy proceedings involving efforts to
collect receivables from a debtor in bankruptcy, employment
matters involving claims of discrimination and wage and hour
claims, claims of infringement upon third parties’
intellectual property rights and environmental claims.
This excerpt taken from the WYN 10-Q filed Aug 9, 2007. Wyndham
Worldwide Litigation
We are involved in claims and legal actions arising in the
ordinary course of our business including but not limited to:
for our lodging business—breach of contract, fraud and bad
faith claims between franchisors and franchisees in connection
with franchise agreements and with owners in connection with
management contracts, as well as negligence claims asserted in
connection with acts or occurrences at franchised or managed
properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection claims asserted by members and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, bad faith, conflict of interest, fraud, consumer
protection act and other statutory claims by property
owners’ associations, owners and prospective owners in
connection with the sale or use of vacation ownership interests,
land or the management of vacation ownership resorts,
construction defect claims relating to vacation ownership units
or resorts and negligence claims by guests for alleged injuries
sustained at vacation ownership units or resorts; and for each
of our businesses, bankruptcy proceedings involving efforts to
collect receivables from a debtor in bankruptcy, employment
matters involving claims of discrimination and wage and hour
claims, claims of infringement upon third parties’
intellectual property rights and environmental claims.
Cendant
Litigation
Under the separation agreement, we agreed to be responsible for
37.5% of certain of Cendant’s contingent and other
corporate liabilities and associated costs related to the
Cendant litigation described below.
After the April 15, 1998 announcement of the discovery of
accounting irregularities in the former CUC business units, and
prior to the filing of this report, approximately 70 lawsuits
claiming to be class actions and other proceedings were
commenced against Cendant and other defendants, of which a
number of lawsuits have been settled. Three lawsuits remain
unresolved in addition to the matters described below.
In Re: Cendant Corporation Litigation, which we refer to
as the Securities Action, is a consolidated class action in the
U.S. District Court for the District of New Jersey brought
on behalf of all persons who acquired securities of Cendant and
CUC, except the PRIDES securities, between May 31, 1995 and
August 28, 1998. Named as defendants are Cendant; 28 former
officers and directors of Cendant, CUC and HFS Incorporated; and
Ernst & Young LLP, CUC’s former independent
accounting firm.
The Amended and Consolidated Class Action Complaint in the
Securities Action alleges that, among other things, the lead
plaintiffs and members of the class were damaged when they
acquired securities of Cendant and CUC because, as a result of
accounting irregularities, Cendant’s and CUC’s
previously issued financial statements were materially false and
misleading, and the allegedly false and misleading financial
statements caused the prices of Cendant’s and CUC’s
securities to be inflated artificially.
On December 7, 1999, Cendant announced that it had reached
an agreement to settle claims made by class members in the
Securities Action for approximately $2,850 million in cash
plus 50% of any net recovery Cendant receives from
Ernst & Young as a result of Cendant’s
cross-claims against Ernst & Young as described below.
This settlement received all necessary court approvals and was
fully funded by Cendant on May 24, 2002.
On January 25, 1999, Cendant asserted cross-claims against
Ernst & Young that alleged that Ernst &
Young failed to follow professional standards to discover, and
recklessly disregarded, the accounting irregularities and is
therefore liable to Cendant for damages in unspecified amounts.
The cross-claims assert claims for breaches of Ernst &
Young’s audit agreements with Cendant, negligence, breaches
of fiduciary duty, fraud and contribution. On July 18,
2000, Cendant filed amended cross-claims against
Ernst & Young asserting the same claims. On
March 26, 1999, Ernst & Young filed cross-claims
against Cendant and certain of Cendant’s present and former
officers and directors that alleged that any failure by
Ernst & Young to discover the accounting
irregularities was caused by misrepresentations and omissions
made to Ernst & Young in the course of its audits and
other reviews of Cendant’s financial statements.
Ernst & Young’s cross-claims assert claims for
breach of contract, fraud, fraudulent inducement, negligent
misrepresentation and contribution. Damages in unspecified
amounts are sought for the costs to Ernst & Young
associated with defending the various shareholder lawsuits, lost
business it claims is attributable to Ernst &
Young’s association with Cendant and for harm to
Ernst & Young’s reputation. On June 4, 2001,
Ernst & Young filed amended cross-claims against
Cendant asserting the same claims. This case is scheduled for
trial on March 4, 2008.
Cendant Tax Audit. The IRS has opened an
examination for Cendant’s taxable years 2003 through 2006
during which we were included in Cendant’s tax returns.
Although we and Cendant believe there is appropriate support for
the positions
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taken on its tax returns, we and Cendant have recorded
liabilities representing the best estimates of the probable loss
on certain positions. We and Cendant believe that the accruals
for tax liabilities are adequate for all open years, based on
assessment of many factors including past experience and
interpretations of tax law applied to the facts of each matter.
Although we and Cendant believe the recorded assets and
liabilities are reasonable, tax regulations are subject to
interpretation and tax litigation is inherently uncertain;
therefore, our and Cendant’s assessments can involve both a
series of complex judgments about future events and rely heavily
on estimates and assumptions. While we and Cendant believe that
the estimates and assumptions supporting the assessments are
reasonable, the final determination of tax audits and any other
related litigation could be materially different than that which
is reflected in historical income tax provisions and recorded
assets and liabilities. Based on the results of an audit or
litigation, a material effect on our income tax provision, net
income, or cash flows in the period or periods for which that
determination is made could result.
This excerpt taken from the WYN 10-Q filed May 10, 2007. Wyndham
Worldwide Litigation
Wendell and Sandra Grimes, et al. v. Fairfield Resorts,
Inc., FairShare Vacation Owners Association,
et al. This class action complaint was filed
on July 19, 2005 in the U.S. District Court for the
Middle District of Florida. It alleged, under a variety of legal
theories, that the defendants violated their duties to the
members of FairShare Plus through self-serving changes to the
reservation and availability policies (including an affiliation
with RCI), which diminished the value of the vacation ownership
interests purchased by the members and rendered it more
difficult for members to obtain reservations at their home
resort. The complaint did not seek monetary damages in a
specified amount, nor did it specify the form of injunctive or
declaratory relief sought. Plaintiffs filed their motion for
class certification on October 18, 2005, and defendants
submitted their opposition on January 18, 2006. On
April 26, 2006, the court heard oral argument but did not
rule on the plaintiffs’ motion for class certification. On
April 27, 2006, the court denied the plaintiffs’
motion for class certification. On May 11, 2006, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh
Circuit a petition for an interlocutory review of the District
Court’s April 27 order denying class certification. On
May 15, 2006, the District Court ordered plaintiffs to file
not later than May 31, 2006, an amended complaint which
omitted class action allegations. On or about May 31, 2006,
plaintiffs filed an amended complaint omitting the class action
allegations. On June 7, 2006, defendants moved to dismiss
the amended complaint for lack of subject matter jurisdiction.
On June 21, 2006, the U.S. Court of Appeals for the
Eleventh Circuit denied the plaintiff’s petition for an
interlocutory review of the District Court’s April 27
order. On July 14th, 2006, the U.S. District Court
granted defendants’ motion to dismiss the amended complaint
for lack of subject matter jurisdiction. On August 8th,
2006, plaintiffs filed a notice of final appeal before the
Eleventh Circuit Court of Appeals. Plaintiffs filed their
appellate brief on September 25, 2006. Defendants filed
opposition to plaintiffs’ appeal on October 23, 2006.
Plaintiffs filed their reply to defendants’ opposition on
November 6, 2006. On January 30, 2007, the Court of
Appeals affirmed the ruling of the District Court denying class
certification and not permitting plaintiffs to file a second
amended complaint to redefine the proposed class. Plaintiffs did
not file a petition for certiorari to the U.S. Supreme Court
before the April 30, 2007 deadline to do so following the
11th Circuit’s decision. We consider this matter to be
concluded.
In Re: Resort Condominiums International, LLC and RCI
Canada, Inc. On August 4,
2004 companion complaints were filed against Resort
Condominium International, LLC and RCI Canada, Inc. (the
“RCI Parties”) in three Alberta jurisdictions alleging
that the RCI Points program was an unlicensed travel club and
the unregistered sales of memberships in the program was a
regulatory violation of the Alberta Fair Trading Act. The
complaints sought statutory penalties. The RCI Parties’
defense was premised upon the fact that the RCI Points program
simply provides a system to use accommodations currently owned
by the vacation ownership consumer and is not a travel club, as
defined in the statute, as it does not involve the future
purchase of accommodations. The matters were consolidated for
trial. The Government indicated during a status hearing on
January 17, 2007 that it did not intend to pursue its
claims against the RCI Parties. The RCI Parties were apprised
that on April 19, 2007, the Government withdrew the claims
on the record before the court, concluding the matter as to the
RCI Parties.
Source v. Cendant Corporation. Source,
Inc., which we refer to as Source, filed suit against Cendant on
July 28, 2005 in the U.S. District Court for the
Eastern District of Texas. Source alleged infringement of four
patents related to Source’s “centralized consumer cash
value accumulation system for multiple merchants.” Source
alleged that Wyndham Hotel Group’s TripRewards program
infringed upon Source’s guest loyalty system. Source sought
monetary damages and injunctive relief. While the parties
discussed a nuisance value settlement, Cendant filed an answer
and motion to stay the litigation pending reexamination of two
of the patents by the Patent and Trademark Office. The motion
for stay was granted, and the matter was stayed until April
2006. We applied for an extension of that stay, which Source
opposed. The Court lifted the stay. The parties have filed a
joint motion to dismiss the matter without prejudice and have
committed to exploring possible business solutions to the
dispute. The dismissal order was signed by the Court on
August 10, 2006 and we consider the litigation to be
concluded.
In addition, we are involved in claims and legal actions arising
in the ordinary course of our business including but not limited
to: for our lodging business—breach of contract, fraud and
bad faith claims between franchisors and franchisees in
connection with franchise agreements and with owners in
connection with management contracts and negligence claims
asserted in connection with acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection claims asserted by members and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, bad faith, conflict of interest, fraud, consumer
protection act and other statutory claims by property
owners’ associations, owners and prospective owners in
connection with the sale
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of vacation ownership interests, land or the management of
vacation ownership resorts, construction defect claims relating
to vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination and wage and hour claims, claims of infringement
upon third parties’ intellectual property rights and
environmental claims.
This excerpt taken from the WYN 10-K filed Mar 7, 2007. Wyndham
Worldwide Litigation
Wendell and Sandra Grimes, et al. v. Fairfield
Resorts, Inc., FairShare Vacation Owners Association,
et al. This class action complaint was filed on
July 19, 2005 in the U.S. District Court for the
Middle District of Florida. It alleges, under a variety of legal
theories, that the defendants violated their duties to the
members of FairShare Plus through self-serving changes to the
reservation and availability policies (including an affiliation
with RCI), which diminished the value of the vacation ownership
interests purchased by the members and rendered it more
difficult for members to obtain reservations at their home
resort. The complaint does not seek monetary damages in a
specified amount, nor does it specify the form of injunctive or
declaratory relief sought. Plaintiffs filed their motion for
class certification on October 18, 2005, and defendants
submitted their opposition on January 18, 2006. On
April 26, 2006, the court heard oral argument but did not
rule on the plaintiffs’ motion for class certification. On
April 27, 2006, the court denied the plaintiffs’
motion for class certification. On May 11, 2006, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh
Circuit a petition for an interlocutory review of the District
Court’s April 27 order denying class certification. On
May 15, 2006, the District Court ordered plaintiffs to file
not later than May 31, 2006, an amended complaint which
omits class action allegations. On or about May 31, 2006,
plaintiffs filed an amended complaint omitting the class action
allegations. On June 7, 2006, defendants moved to
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dismiss the amended complaint for lack of subject matter
jurisdiction. On June 21, 2006, the U.S. Court of
Appeals for the Eleventh Circuit denied the plaintiff’s
petition for an interlocutory review of the District
Court’s April 27 order. On July 14th, 2006, the
U.S. District Court granted defendants’ motion to
dismiss the amended complaint for lack of subject matter
jurisdiction. On August 8th, 2006, plaintiffs filed a
notice of final appeal before the Eleventh Circuit Court of
Appeals. Plaintiffs filed their appellate brief on
September 25, 2006. Defendants filed opposition to
plaintiffs’ appeal on October 23, 2006. Plaintiffs
filed their reply to defendants’ opposition on
November 6, 2006. On January 30, 2007, the Court of
Appeals affirmed the ruling of the District Court denying class
certification and not permitting plaintiffs to file a second
amended complaint to redefine the proposed class.
In Re: Resort Condominiums International, LLC and RCI
Canada, Inc. On August 4, 2004 companion
complaints were filed against Resort Condominium International,
LLC and RCI Canada, Inc. (the “RCI Parties”) in
three Alberta jurisdictions alleging that the RCI Points
program is an unlicensed travel club and the unregistered sales
of memberships in the program is a regulatory violation of the
Alberta Fair Trading Act. The complaints seek statutory
penalties. The RCI Parties’ defense is premised upon the
fact that the RCI Points program simply provides a system to use
accommodations currently owned by the vacation ownership
consumer and is not a travel club, as defined in the statute, as
it does not involve the future purchase of accommodations. The
matters have been consolidated for trial commencing
April 16, 2007 in Calgary. Settlement talks between the
Government and the co-defendant developer reached an impasse.
The Government indicated during a status hearing on
January 17, 2007 that it does not intend to pursue its
claims against the RCI Parties. The RCI Parties are awaiting the
Government’s formal application withdrawing the claims.
Source v. Cendant Corporation. Source, Inc.,
which we refer to as Source, filed suit against Cendant on
July 28, 2005 in the U.S. District Court for the
Eastern District of Texas. Source alleges infringement of four
patents related to Source’s “centralized consumer cash
value accumulation system for multiple merchants.” Source
alleges that Wyndham Hotel Group’s TripRewards program
infringes upon Source’s guest loyalty system. Source seeks
monetary damages and injunctive relief. While the parties have
discussed a nuisance value settlement, Cendant has filed an
answer and motion to stay the litigation pending reexamination
of two of the patents by the Patent and Trademark Office. The
motion for stay was granted, and the matter was stayed until
April 2006. We applied for an extension of that stay, which
Source opposed. The Court has lifted the stay. The parties have
filed a joint motion to dismiss the matter without prejudice and
have committed to exploring possible business solutions to the
dispute. The dismissal order was signed by the Court on
August 10, 2006.
In addition, we are involved in claims and legal actions arising
in the ordinary course of our business including but not limited
to: for our lodging business—breach of contract, fraud and
bad faith claims between franchisors and franchisees in
connection with franchise agreements and with owners in
connection with management contracts and negligence claims
asserted in connection with acts or occurrences at franchised or
managed properties; for our vacation exchange and rentals
business—breach of contract claims by both affiliates and
members in connection with their respective agreements, bad
faith, and consumer protection claims asserted by members and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, conflict of interest, fraud and consumer protection
act claims by property owners’ associations, owners and
prospective owners in connection with the sale of vacation
ownership interests, land or the management of vacation
ownership resorts, construction defect claims relating to
vacation ownership units or resorts and negligence claims by
guests for alleged injuries sustained at vacation ownership
units or resorts; and for each of our businesses, bankruptcy
proceedings involving efforts to collect receivables from a
debtor in bankruptcy, employment matters involving claims of
discrimination and wage and hour claims, claims of infringement
upon third parties’ intellectual property rights and
environmental claims.
This excerpt taken from the WYN 10-Q filed Nov 14, 2006. Wyndham
Worldwide Litigation
Wendell and Sandra Grimes, et al. v. Fairfield
Resorts, Inc., FairShare Vacation Owners Association,
et al. This class action complaint was filed on
July 19, 2005 in the U.S. District Court for the
Middle District of Florida. It alleges, under a variety of legal
theories, that the defendants violated their duties to the
members of FairShare Plus through self-serving changes to the
reservation and availability policies (including an affiliation
with RCI), which diminished the value of the vacation ownership
interests purchased by the members and rendered it more
difficult for members to obtain reservations at their home
resort. The complaint does not seek monetary damages in a
specified amount, nor does it specify the form of injunctive or
declaratory relief sought. Plaintiffs filed their motion for
class certification on October 18, 2005, and defendants
submitted their opposition on January 18, 2006. On
April 26, 2006, the court heard oral argument but did not
rule on the plaintiffs’ motion for class certification. On
April 27, 2006, the court denied the plaintiffs’
motion for class certification. On May 11, 2006, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh
Circuit a petition for an interlocutory review of the District
Court’s April 27 order denying class certification. On
May 15, 2006, the District Court ordered plaintiffs to file
not later than May 31, 2006, an amended complaint which
omits class action allegations. On or about May 31, 2006,
plaintiffs filed an amended complaint omitting the class action
allegations. On June 7, 2006, defendants moved to dismiss
the amended complaint for lack of subject matter jurisdiction.
On June 21, 2006, the U.S. Court of Appeals for the
Eleventh Circuit denied the plaintiff’s petition for an
interlocutory review of the District Court’s April 27
order. On July 14th, 2006, the U.S. District Court
granted defendants’ motion to dismiss the amended complaint
for lack of subject matter jurisdiction. On August 8th,
2006, plaintiffs filed a notice of final appeal before the
Eleventh Circuit Court of Appeals. Plaintiffs filed their
appellate brief on September 25, 2006. Defendants filed
opposition to plaintiffs’ appeal on October 23, 2006.
Plaintiffs filed their reply to defendants’ opposition on
November 6, 2006.
In Re: Resort Condominiums International, LLC and RCI
Canada, Inc. On August 4, 2004 companion
complaints were filed against Resort Condominium International,
LLC and RCI Canada, Inc. in three Alberta jurisdictions alleging
that the RCI Points program is an unlicensed travel club and the
unregistered sales of memberships in the program is a regulatory
violation of the Alberta Fair Trading Act. The complaints seek
statutory penalties. RCI’s defense is premised upon the
fact that the RCI Points program simply provides a system to use
accommodations currently owned by the vacation ownership
consumer and is not a travel club, as defined in the statute, as
it does not involve the future purchase of accommodations The
matters have been consolidated for trial commencing
April 16, 2007 in Calgary. Settlement talks between the
Government and the co-defendant developer have reached an
impasse. RCI is exploring whether the Government will
voluntarily dismiss RCI from these matters. The Government has
indicated it intends to dismiss RCI from the matters at an
upcoming status hearing in January 2007.
Source v. Cendant Corporation. Source, Inc.,
which we refer to as Source, filed suit against Cendant on
July 28, 2005 in the U.S. District Court for the
Eastern District of Texas. Source alleges infringement of four
patents related to Source’s “centralized consumer cash
value accumulation system for multiple merchants.” Source
alleges that Wyndham Hotel Group’s TripRewards program
infringes upon Source’s guest loyalty system. Source seeks
monetary damages and injunctive relief. While the parties have
discussed a nuisance value settlement, Cendant has filed an
answer and motion to stay the litigation pending reexamination
of two of the patents by the Patent and Trademark Office. The
motion for stay was granted, and the matter was stayed until
April 2006. We applied for an extension of that stay, which
Source opposed. The Court has lifted the stay. The parties have
filed a joint motion to dismiss the matter without prejudice and
have committed to exploring possible business solutions to the
dispute. The dismissal order was signed by the Court on
August 10, 2006.
In addition, we are involved in claims and legal actions arising
in the ordinary course of our business including: for our
lodging business—breach of contract, fraud and bad faith
claims between franchisors and franchisees in connection with
franchise agreements and with owners in connection with
management contracts and negligence claims asserted in
connection with acts or occurrences at franchised or managed
properties; for our vacation exchange and rental
business—breach of contract claims by both affiliates and
members in connection with their respective agreements and
negligence claims by guests for alleged injuries sustained at
resorts; for our vacation ownership business—breach of
contract, conflict of interest, fraud and consumer protection
act claims by property owners’ associations, owners and
prospective owners in connection with the sale of vacation
ownership interests or the management of vacation ownership
resorts, construction defect claims relating to vacation
ownership units or resorts and negligence claims by guests for
alleged injuries sustained at vacation ownership units or
resorts; and for each of our businesses, bankruptcy proceedings
involving efforts to collect receivables from a debtor in
bankruptcy and employment matters involving claims of
discrimination and wage and hour claims.
Cendant
Litigation
Under the separation agreement, we agreed to be responsible for
37.5% of certain of Cendant’s contingent and other
corporate liabilities and associated costs related to the
Cendant litigation described below.
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After the April 15, 1998 announcement of the discovery of
accounting irregularities in the former CUC business units, and
prior to the issuance of the Information Statement,
approximately 70 lawsuits claiming to be class actions and other
proceedings were commenced against Cendant and other defendants,
of which a number of lawsuits have been settled. Approximately
five lawsuits remain unresolved in addition to the matters
described below.
In Re Cendant Corporation Litigation, which we refer to
as the Securities Action, is a consolidated class action in the
U.S. District Court for the District of New Jersey brought
on behalf of all persons who acquired securities of Cendant and
CUC, except the PRIDES securities, between May 31, 1995 and
August 28, 1998. Named as defendants are Cendant; 28
current and former officers and directors of Cendant, CUC and
HFS Incorporated; and Ernst & Young LLP, or
Ernst & Young, CUC’s former independent accounting
firm.
The Amended and Consolidated Class Action Complaint in the
Securities Action alleges that, among other things, the lead
plaintiffs and members of the class were damaged when they
acquired securities of Cendant and CUC because, as a result of
accounting irregularities, Cendant’s and CUC’s
previously issued financial statements were materially false and
misleading, and the allegedly false and misleading financial
statements caused the prices of Cendant’s and CUC’s
securities to be inflated artificially.
On December 7, 1999, Cendant announced that it had reached
an agreement to settle claims made by class members in the
Securities Action for approximately $2,850 million in cash
plus 50% of any net recovery Cendant receives from
Ernst & Young as a result of Cendant’s
cross-claims against Ernst & Young as described below.
This settlement received all necessary court approvals and was
fully funded by Cendant on May 24, 2002.
On January 25, 1999, Cendant asserted cross-claims against
Ernst & Young that alleged that Ernst & Young
failed to follow professional standards to discover, and
recklessly disregarded, the accounting irregularities and is
therefore liable to Cendant for damages in unspecified amounts.
The cross-claims assert claims for breaches of Ernst &
Young’s audit agreements with Cendant, negligence, breaches
of fiduciary duty, fraud and contribution. On July 18,
2000, Cendant filed amended cross-claims against
Ernst & Young asserting the same claims. On
March 26, 1999, Ernst & Young filed cross-claims
against Cendant and certain of Cendant’s present and former
officers and directors that alleged that any failure by
Ernst & Young to discover the accounting irregularities
was caused by misrepresentations and omissions made to
Ernst & Young in the course of its audits and other
reviews of Cendant’s financial statements. Ernst &
Young’s cross-claims assert claims for breach of contract,
fraud, fraudulent inducement, negligent misrepresentation and
contribution. Damages in unspecified amounts are sought for the
costs to Ernst & Young associated with defending the
various shareholder lawsuits, lost business it claims is
attributable to Ernst & Young’s association with
Cendant and for harm to Ernst & Young’s
reputation. On June 4, 2001, Ernst & Young filed
amended cross-claims against Cendant asserting the same claims.
Semerenko v. Cendant Corp., et al. and P.
Schoenfield Asset Management LLC v. Cendant Corp.,
et al. in the U.S. District Court for the District
of New Jersey were initially commenced in October and November
of 1998, respectively, on behalf of a putative class of persons
who purchased securities of American Bankers Insurance Group,
Inc., between January 27, 1998 and October 13, 1998.
On April 4, 2006, Cendant entered into an agreement to
settle this matter for $22 million. On or about
October 5, 2006, we contributed to Avis Budget
approximately $8 million constituting 37.5% of the
settlement.
Cendant Tax Audit. The IRS is currently
examining Cendant’s federal income tax returns for taxable
years 1998 through 2002 during which our business was included
in Cendant’s tax returns. Over the course of the audit, we
and Cendant have responded to various requests for information,
primarily focused on the 1999 statutory merger of Cendant’s
former fleet business; the calculation of the stock basis in the
1999 sale of a Cendant subsidiary; and the deductibility of
expenses associated with the shareholder class action litigation
resulting from the merger with CUC. Recently, Cendant advised us
that it will accept the IRS’s proposed assessments on all
issues affecting the 1998 to 2002 examination period except for
the assessments relating to the shareholder litigation. We
believe our reserves are adequate with respect to all issues,
including with respect to the IRS claims relating to the
shareholder litigation. Cendant has advised us that it believes
it has a strong legal basis for its shareholder litigation
position and has a tax opinion from a third party supporting
Cendant’s position. We and Cendant believe Cendant will
prevail on the shareholder litigation position upon further
review by the IRS or litigation, if necessary. If Cendant were
not successful on this position, there may be a material adverse
effect on our net income or cash flows in the period or periods
for which that determination is made.
We are subject to a number of risks relating to the separation,
our business and the trading price of our common stock. For a
description of these risk factors, please refer to Item 1A,
Risk Factors, in our Quarterly Report on
Form 10-Q
filed with the SEC on August 18, 2006, and under “Risk
Factors” in our Information Statement filed with the SEC on
July 19, 2006 as Exhibit 99.1 to a Current Report on
Form 8-K.
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