A potential class action lawsuit against a pair of timeshare developers on Hilton Head Island will be able to move forward after the South Carolina Supreme Court ruled May 17 that purchasers and lessees can bring private actions against developers to enforce the state’s Timeshare Act. The defendants in the case had asked the court to rule that the state’s Real Estate Commission had exclusive jurisdiction to determine whether a violation of the act had occurred.
Dozens of plaintiffs have filed lawsuits against Coral Resorts and Bluewater by Spinnaker alleging, among other things, that the developers violated the Timeshare Act by failing to comply with its registration requirements. The defendants had moved to dismiss the lawsuits, arguing that the courts lacked jurisdiction over the subject matter.
Some of the suits were filed in federal court, and U.S. District Judge Patrick Michael Duffy certified three questions that were taken up and consolidated by the Supreme Court: Whether the REC has exclusive jurisdiction over such complaints, whether the REC has to determine that a violation has occurred before a private action can commence, and whether a determination by the REC about whether a violation has occurred is binding on the judicial branch.
They unanimously answered all three questions in the negative.
Justice John Kittredge, writing for the court, said that the defendants’ arguments for placing exclusive jurisdiction with the REC were grounded in appeals to public policy concerns—decisions the court said were solely the province of the legislature. The Timeshare Act states that its provisions “do not limit the right of a purchaser or lessee to bring a private action to enforce” it, and Kittredge said that this language was unambiguous, and thus the court was precluded from interpreting it in the manner the defendants had requested.
“We readily acknowledge there is considerable merit to Defendants’ concerns, and we do not reject them lightly. However valid Defendants’ concerns may be, they must yield to the plain language of a statute that commands a different result,” Kittredge said. “Given this unambiguous language, we would exceed our judicial role were we to allow Defendants’ policy arguments to override the policy expressed by the General Assembly.”
For the same reasons, the court also rejected the defendants’ second request, to make an REC determination a prerequisite for filing a lawsuit, saying that it would be precisely the sort of restriction on purchasers’ rights explicitly precluded by the statute. It also rejected, albeit with some qualifications, the defendants’ third request, to make the REC’s determinations binding on the judiciary. The court said that such a ruling would effectively nullify its answers to the first two questions.
“In short, the courts should provide the REC’s decisions the same deference as any other agency’s, no more and no less,” Kittredge wrote. “That said, if a court declares that the REC acted within its lawful authority in issuing a particular decision, the REC’s decision is then binding on the court. If the court satisfies itself that the decision was lawful, there will be no further inquiry into the wisdom of the REC’s decision.”
Joseph DuBois and Zach Naert of Naert & DuBois in Hilton Head Island represent the plaintiffs. Naert said his clients were eager to now have the chance to move forward with the suits, which contest the validity of over $64 million worth of timeshares sold by the two developers. Some of the suits have been stuck in a holding pattern for years pending a resolution of the jurisdictional issues.
“I think the court stated it correctly that the public policy is what the legislature has put in the statute,” Naert said. “And in that circumstance where the statute is clear and the intent of the legislature is clear, the court doesn’t get to substitute its own opinion as to what thinks would be a better policy over what the legislature clearly expressed in the statute.”
Nekki Shutt of Callison Tighe & Robinson in Columbia was among the attorneys who represent Hilton Head Island Development Co., doing business as Coral Resorts, one of several defendants in the case. Shutt said that her clients have orders, reviewed by the state’s Administrative Law Court, stating that Coral Resorts’ registration status has always been in good standing since the resorts were begun, making those issues moot according to the court’s order.
“All that remains to Plaintiffs’ claims against Coral are fact-driven disputes over what he said or she said. Coral intends to continue to vigorously defend those claims,” Shutt said.
The 16-page decision is Fullbright v. Spinnaker Resorts, Inc. (Lawyers Weekly No. 010-032-17). The full text of the opinion is available online at sclawyersweekly.com.
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