This is a well thought out post written by attorney David Hancock addressing the perils of consumers engaging with self-proclaimed timeshare exit companies.
By accepting referrals from timeshare-exit companies like Timeshare Exit Team and Atlas Vacation Remedies, lawyers harm their clients.
By involving a timeshare-exit company in a client’s representation, these lawyers endanger a client’s attorney-client privilege, and they make it more difficult for a client to terminate his or her financial obligations to a timeshare developer.
Timeshare Developers Are Aggressive Litigators
Major timeshare developers aggressively litigate cases against timeshare-exit companies like Timeshare Exit Team, a.k.a. Reed Hein & Associates.
Reed Hein, for example, has been sued in federal court by (a) Diamond Resorts, (b) Orange Lake Country Club, (c) Welk Resorts, (d) Westgate Resorts, and (e) Wyndham Resorts. In all five of those cases, the timeshare developer also named as defendants the lawyers who accepted referrals from Reed Hein. In each case, the developer alleged that the lawyers were part of a scheme to defraud their own clients. Each developer therefore argued that the lawyers had forfeited the protections that lawyers typically enjoy. These arguments were generally successful.
The Attorney-Client Privilege
The lawsuit between Orange Lake Country Club and Reed Hein is a good case study.
In that case, Orange Lake sued Reed Hein — and Mitchell Sussman and SGB Law. Sussman and SGB Law were sued because both had accepted thousands of client referrals from Reed Hein. In October 2018, a federal court ordered SGB Law to hand over to Orange Lake thousands of email messages and other communications between the law firm and Reed Hein customers whom SGB Law claimed to represent. The court rejected SGB Law’s arguments that the communications were protected from disclosure by the attorney-client privilege.
The court started its analysis with black-letter law: Communications between lawyers and their clients are privileged only when the communications are confidential. A third party’s involvement in an attorney-client communication destroys any claim of privilege.
Because Reed Hein was involved in the communications between SGB Law and the consumers whom Reed Hein had referred to the law firm, the court rejected SGB Law’s claim of attorney-client privilege. The court ordered SGB Law to hand over to Orange Lake the law firm’s communications with thousands of affected consumers.
The court rejected the argument that Reed Hein and SGB Law could somehow circumvent the law requiring that privileged communications be confidential:
The court is not persuaded by SGB Law’s argument that Reed Hein and SGB Law “envisioned a relationship whereby privileged material would be freely exchanged.” What Reed Hein and SGB Law “envisioned” is irrelevant.
The Scam Continues
Reed Hein persisted in its misbehavior.
In October 2019 — one year after the court had ordered SGB Law to disclose attorney-client communications to timeshare developer Orange Lake Country Club — Reed Hein employee Chasity Porter submitted a sworn declaration in a lawsuit filed against Reed Hein by Westgate Resorts.
Incredibly, Porter swore to the following:
If Reed Hein decides to hire a law firm for a customer, Reed Hein and the law firm specifically intend to create a relationship under which privileged relationship is freely exchanged. As such, the law firm, customers, and Reed Hein all intend that the attorney-client privileges and protections apply to all three parties in the agency relationship — the law firm, the customers/clients, and Reed Hein.
The results were predictable. In March 2020, the court ordered SGB Law to produce to thousands of attorney-client communications to Westgate Resorts.
Consumers Suffer
In August 2019, SGB Law lawyer Thomas Breen testified to the negative consequences that consumers suffer when a timeshare developer is able to access a law firm’s files and identify the specific individuals whom the firm represents. According to Breen, timeshare developers are less likely to release a customer from his or her financial obligations when they learn that a customer is associated with a timeshare-exit company.
Breen testified that timeshare developers are willing to “use individuals as pawns in some kind of a competition with Reed Hein.” To prevent those individuals from concluding that Reed Hein has delivered value, timeshare developers are willing “to pummel them financially even further than they already have — to prove a point with Reed Hein.”
Summary & Solution
The take-away for consumers is simple: Timeshare-exit companies are part of the problem in the timeshare industry.
Lawyers who accept client referrals from timeshare-exit companies are also part of the problem. These lawyers deprive their clients of multiple protections that clients are supposed to enjoy — including the right to privileged communications with their lawyer. Having deprived their own clients of this basic protection, these lawyers are unable to effectively fight timeshare developers.
The bottom line: By accepting client referrals from timeshare-exit companies, lawyers convert themselves into part of the timeshare-exit scam.
The solution is simple and straight-forward: If a consumer is interested in terminating legal financial obligations to a timeshare developer, he or she needs an independent lawyer who refuses to work with timeshare-exit companies.
Postscript from me: All of these nefarious self-proclaimed exit companies could be shut down permanently if timeshare developers did the right thing. Offer a respectful way out for fully paid owners and stop suppressing the secondary market.
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