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Fullbright v. Spinnaker Resorts, Inc.

Supreme Court of South Carolina

May 17, 2017

Paula Fullbright and Mark Fullbright, Plaintiffs,
v.
Spinnaker Resorts, Inc., d/b/a Spinnaker Resorts South Carolina, Inc., Defendant. and Paul Chenard and Rebecca Chenard, Plaintiffs,
v.
Hilton Head Island Development Co., L.L.C., d/b/a Coral Resorts and Sunrise Vacation Properties, Ltd., d/b/a Coral Resorts, Defendants. James Nichols and Irene Nichols, Plaintiffs,
v.
Hilton Head Island Development Co., L.L.C., Sunrise Vacation Properties, Ltd., Sherri J. Smith, Patrick Budnik, and Robert Lauderman, d/b/a Coral Resorts, Defendants. Linda Renchkovsky, Plaintiff,
v.
Coral Resorts, L.L.C. and Sunrise Vacation Properties, Ltd., d/b/a Coral Resorts, Defendants. Robert Curry, Jr. and Monica R. Curry, Plaintiffs,
v.
Hilton Head Island Development Co., L.L.C., d/b/a Coral Resorts and Sunrise Vacation Properties, Ltd., d/b/a Coral Resorts, Defendants. Charles Olenick and Karen Maniscalco, Plaintiffs,
v.
Coral Resorts, L.L.C. and Sunrise Vacation Properties, Ltd., d/b/a Coral Resorts, Defendants. Phillip Ross and Kimberly Ross, Plaintiffs,
v.
Hilton Head Island Development Co., L.L.C., Sunrise Vacation Properties, Ltd., Sherri J. Smith, David Watson, and Sheldon Stanhope, Defendants. Appellate Nos. 2016-001765, 2016-001766

          Heard February 8, 2017

         ON CERTIFICATION FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA Patrick Michael Duffy, United States District Judge

          Joseph DuBois and Zach S. Naert, both of Naert & DuBois, L.L.C., of Hilton Head Island, for Plaintiffs

          Barry L. Johnson, of Johnson & Davis, P.A., of Bluffton, for Defendant Spinnaker Resorts, Inc., d/b/a Spinnaker Resorts South Carolina, Inc. Nekki Shutt, Kathleen M. McDaniel, and Jacqueline M. Pavlicek, all of Callison Tighe & Robinson, L.L.C., of Columbia, for Defendants Coral Resorts, L.L.C. and Hilton Head Island Development Co., L.L.C.; Thornwell F. Sowell, III and Bess J. DuRant, both of Sowell Gray Stepp & Laffitte, L.L.C., of Columbia, for Defendants Sunrise Vacation Properties, Ltd., Sherri J. Smith, David Watson, Sheldon Stanhope, and Robert Lauderman; and James E. Smith, Jr., of James E. Smith, Jr., P.A., of Columbia, for Defendants.

          Angus H. Macaulay and Michael P. Scott, both of Nexsen Pruet, LLC, of Columbia, for amicus curiae, American Resort Development Association. R. Hawthorne Barrett, of Turner Padget Graham & Laney, P.A., of Columbia, for amicus curiae, Myrtle Beach Area Chamber of Commerce.

          KITTREDGE JUSTICE.

         The Court agreed to answer the following certified questions from the United States District Court for the District of South Carolina:

1. Does the South Carolina Real Estate Commission have exclusive jurisdiction to determine whether a violation of the South Carolina Vacation Time Sharing Plans Act[1] (the Timeshare Act) has occurred?
2. Is the South Carolina Real Estate Commission's determination of a violation of the Timeshare Act a condition precedent to a purchaser bringing a private cause of action to enforce the provisions of the Timeshare Act?
3. Are the South Carolina Real Estate Commission's determinations as to whether the Timeshare Act was violated binding on courts of the judicial branch?

         These questions arose from two sets of litigation (Fullbright and Chenard) in the federal district court involving individuals (collectively, Plaintiffs) who entered into contracts with developers (collectively, Defendants) to purchase interests in vacation time sharing plans (timeshare plans) for real estate on Hilton Head Island. As these cases present the same legal questions, they were consolidated for oral argument before the Court. We now resolve them in a single opinion.

         Because the Timeshare Act contains an unambiguous provision authorizing a purchaser or lessee to bring a private action to enforce the Act, we are constrained to answer the first two questions "no." We also answer the third question "no, " provided the South Carolina Real Estate Commission's decision has not been subjected to judicial review.

         I.

         On June 24, 2014, Paula and Mark Fullbright (the Fullbrights) entered into a contract with Spinnaker Resorts, Inc. (Spinnaker) to purchase an interest in a timeshare plan for the company's Hilton Head resort, Bluewater by Spinnaker (Bluewater). The Fullbrights commenced a purported class action against Spinnaker on April 2, 2015, and filed an amended complaint on May 20, 2015, alleging Spinnaker violated the Timeshare Act by failing to comply with the Act's registration requirements.[2] The Fullbrights sought the return of all money paid under the contract, with interest, as well as a declaration that the contract was invalid and nonbinding.

         After the Fullbrights filed the lawsuit, the South Carolina Real Estate Commission (the REC) issued an order dated September 15, 2015, [3] stating that Bluewater had been issued an order of registration effective September 2, 2014. Significantly, the REC order provided that Bluewater's registration was retroactive to March 15, 2006. The retroactive registration was significant in that the REC sought to deem Bluewater's registration in effect on the date of the Fullbrights' purchase. Spinnaker moved to dismiss the complaint for lack of subject matter jurisdiction, but the federal district court, believing the case involved novel questions of South Carolina law, denied the motion.

         Like the Fullbrights, the plaintiffs in the Chenard cases are individuals that entered into contracts to purchase interests in timeshare plans for Hilton Head resorts. In addition to claims for violations of the Timeshare Act, they brought claims for, among other things, fraud, negligent misrepresentation, and violations of the South Carolina Unfair Trade Practices Act.[4] Their claims under the Timeshare Act included allegations that the timeshare plans they agreed to were not properly registered with the REC, and they sought to void their purchase contracts. The Chenard defendants moved to dismiss the Timeshare Act claims, arguing that the REC has exclusive jurisdiction to investigate violations of the Act and, therefore, the court lacked subject matter jurisdiction. The court denied the motion, stating that the Timeshare Act "also contemplates a private right of action." Chenard v. Hilton Head Island Dev. Co., No. 9:14-3347-SB, 2016 WL 7183047, at *3 (D.S.C. Mar. 30, 2016). The court also noted that there were cases involving similar allegations currently pending in state court and, to minimize conflicts between the ongoing state and federal litigation on this novel issue, solicited proposed questions for certification to this Court. See id. at *1, *3 n.4.

         After further briefing by the parties, the court issued certification orders, and we agreed to answer the questions listed above. In answering these questions, we express no opinion as to the merits of Plaintiffs' claims, the resolution of which remains in the federal district court.

         II.

         The questions posed to the Court are aimed at clarifying the extent of the REC's authority to regulate the time sharing industry and what role, if any, the courts have in that process. Plaintiffs argue they have a constitutional and statutory right to initiate judicial proceedings without regard for the REC's actions, whereas Defendants argue ...


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