[00:00:09] Speaker 05: All right. [00:00:09] Speaker 05: I just have a quick question. [00:00:10] Speaker 05: I understand on appellants, they're switching, they're splitting their 20 minutes, 15 minutes to Stephanie Schuster, five minutes to Maya Robbins. [00:00:21] Speaker 05: Is only one of you going to do rebuttal or are each of you planning to do rebuttal? [00:00:33] Speaker 05: And you are? [00:00:34] Speaker 05: Okay. [00:00:42] Speaker 05: Okay. [00:00:46] Speaker 05: All right. [00:00:48] Speaker 05: All right. [00:00:48] Speaker 05: Good morning. [00:00:49] Speaker 01: Good morning. [00:00:50] Speaker 01: May it please the court. [00:00:51] Speaker 01: I'm Stephanie Schuster, here for Dave Ramsey in the Lambeau Group, and I'm going to attempt to reserve three minutes for rebuttal. [00:00:58] Speaker 05: Okay. [00:00:59] Speaker 05: Go ahead. [00:01:00] Speaker 01: All right. [00:01:00] Speaker 01: Plaintiff's contracts with Reed Hine are the foundation for their claims against the defendants here. [00:01:05] Speaker 01: Under either of Washington's tests for equitable estoppel, plaintiffs should not be allowed to avoid the arbitration provisions in those contracts. [00:01:13] Speaker 01: First, the interrelated claims test is satisfied because plaintiffs' whole case is bound up with their Reed-Hein contracts. [00:01:21] Speaker 01: They claim that the defendants conspired with Reed-Hein to fraudulently induce plaintiffs to enter those contracts, knowing Reed-Hein would fail to perform as required by the contracts and thereby harming plaintiffs, the very harm they seek [00:01:35] Speaker 01: sue for and seek recovery for in this case. [00:01:37] Speaker 01: Plaintiffs also invoke specific contractual provisions to make their claims in this case timely. [00:01:42] Speaker 02: Isn't all the conduct that they claim gives rise to liability conduct that occurred before the formation of the contracts? [00:01:53] Speaker 01: Yes and no, Your Honor. [00:01:54] Speaker 01: There's the fraudulent inducement aspect of it. [00:01:56] Speaker 01: There's also an element of the consumer protection theory about sort of the ongoing encouragement of consumers, not just the individuals, but as to the putative class, the ongoing encouragement over a period of time. [00:02:07] Speaker 02: Right, but as to these individuals, because we [00:02:09] Speaker 02: We don't have a class action here yet. [00:02:10] Speaker 01: That's correct. [00:02:11] Speaker 02: As to these individuals, isn't all the conduct that they complain of, conduct that occurred before the formation of the contracts? [00:02:18] Speaker 01: These statements, the alleged fraudulent inducement was pre-formation. [00:02:22] Speaker 01: And again, what they say is why they formed the contracts. [00:02:24] Speaker 01: But their theory of harm is bound up with the performance, or more specifically, the lack thereof. [00:02:29] Speaker 01: Because without the alleged breach, they have no injury. [00:02:33] Speaker 01: Their entire theory is that they were induced into these contracts for the purpose of Reed-Hein to breach to the defendant's benefit, where they split the allegedly ill-gotten gains. [00:02:41] Speaker 02: Let me ask you a question that doesn't have to do with either of your theories. [00:02:44] Speaker 02: But they're both equitable theories. [00:02:46] Speaker 02: They're equitable, stoppable theories. [00:02:49] Speaker 02: And we have a rather strange circumstance in this case, which is the actual signatory to the contract. [00:02:55] Speaker 02: Reed-Hein can't invoke the arbitration clause. [00:03:00] Speaker 02: So if had these parties sued Reed Hine, they would have wanted to make claims against Reed Hine, Reed Hine could not compel them to arbitration, given the rulings of the American Arbitration Association in the past. [00:03:14] Speaker 02: It seems rather strange to say that claims against Reed Hine couldn't proceed to arbitration, but claims against your clients must proceed to arbitration. [00:03:26] Speaker 02: Why is that equitable? [00:03:27] Speaker 01: It's really a question of waiver appropriately, Your Honor. [00:03:30] Speaker 01: And so what the American Arbitration Association found with respect to Reid Hine is that having failed to pay the required fees to the AAA, that per AAA rules, it was not going to administer arbitrations. [00:03:41] Speaker 01: And per AAA rules, the plaintiffs could then pursue actions in court. [00:03:44] Speaker 01: But when we're looking at waiver, you're looking at the intentional relinquishment of a known right. [00:03:49] Speaker 02: Well, you never had a known right. [00:03:50] Speaker 02: See, you're claiming a right by virtue of equitable estoppel. [00:03:55] Speaker 02: Correct. [00:03:55] Speaker 02: So I'm trying to figure out why it's equitable. [00:03:58] Speaker 05: Well, because Reid Hine previously failed to pay the arbitrary fees and awards, thereby forfeiting any right to compel arbitration. [00:04:06] Speaker 05: So why should a non-signatory defendant be able to arbitrate claims that a signatory defendant cannot? [00:04:12] Speaker 02: Answer her question. [00:04:13] Speaker 02: It's better than mine. [00:04:14] Speaker 01: Sure, and I understand them to be quite similar. [00:04:16] Speaker 01: And so equitable estoppel gives rise to an independent right. [00:04:20] Speaker 01: The right of a non-signatory under the equitable estoppel doctrine is not derivative of the signatories to the contract. [00:04:26] Speaker 01: It arises from the conduct of the other party, its litigation conduct, and how the claims are framed that gives rise to the right to equitable estoppel here. [00:04:35] Speaker 02: But doesn't it assume an enforceable arbitration agreement? [00:04:43] Speaker 01: It does, but again, this is a question. [00:04:45] Speaker 02: But this one is now no longer enforceable, given the conduct of Reid-Hein, which, by the way, was half owned by one of your clients. [00:04:53] Speaker 01: Not one of my clients, no. [00:04:55] Speaker 02: Maybe one of hers. [00:04:58] Speaker 02: Yours in the aggregate. [00:04:59] Speaker 01: But in particular, and so I'm being very precise here, the question of Reid-Hein's ability to enforce the arbitration provision and not is not a question of the enforceability of that clause, but about its waiver of its rights under that clause. [00:05:11] Speaker 01: Reid-Hein's conduct. [00:05:13] Speaker 01: was inconsistent with its right to arbitration. [00:05:15] Speaker 01: There is no case law and no policy reason to impute that conduct to Ramsey and the defendants here as a waiver of their independent right as a matter of equitable estoppel. [00:05:24] Speaker 02: Is it also true that there's no case law in Washington that would allow a non-signatory in the position of your clients to enforce this clause? [00:05:35] Speaker 02: You argue that there's these doctrines, but I'm trying to figure out whether there's, is there any Washington case that allows a non-signatory? [00:05:44] Speaker 02: to enforce an arbitration clause under these circumstances? [00:05:48] Speaker 01: Absolutely. [00:05:48] Speaker 01: There are three, and we cite them all in our briefs. [00:05:51] Speaker 02: They rely on two theories, do they not? [00:05:56] Speaker 01: They do. [00:05:57] Speaker 01: You have the David Terry Investments case, the Norwood case, and the Decrypt Capital case, all of which involved [00:06:03] Speaker 01: non-signatory defendants compelling arbitration against a signatory plaintiff. [00:06:06] Speaker 02: But weren't those non-signatory defendants essentially identical or closely related to the signatory defendant? [00:06:14] Speaker 01: In some of the cases they were, and in some of the cases they weren't, that was not essential or even mentioned as part of the holdings in two of those three cases. [00:06:22] Speaker 01: And in those cases where the court spelled out their reasoning, whether it was under the interrelated claims test or the direct benefits test, [00:06:28] Speaker 01: It did not have to do with the relationship between the signatories and non-signatories, but had to do with the relationship between the claims, the wrongs, and issues. [00:06:35] Speaker 01: In particular, the relationship between the plaintiffs' claims and the underlying contractual obligations. [00:06:40] Speaker 02: So let's separate the theories. [00:06:42] Speaker 02: Let's look at direct benefits of Staple for a moment. [00:06:45] Speaker 02: I think I can't find any Washington case that uses direct benefits estoppel to compel a signatory plaintiff to arbitrate. [00:06:58] Speaker 02: Am I right in that? [00:06:59] Speaker 01: That's correct. [00:06:59] Speaker 01: No Washington case has yet applied direct benefits estoppel to compel a signatory plaintiff to arbitration, nor has any Washington court foreclosed that. [00:07:07] Speaker 02: Right. [00:07:07] Speaker 02: So assuming for a moment that I don't want to go there, [00:07:12] Speaker 02: then your reliance has to be on intertwined claims to stop. [00:07:16] Speaker 02: Correct, Your Honor. [00:07:17] Speaker 02: And I'm still stuck with the question of their claims really seem separate from the contracts here. [00:07:23] Speaker 02: What they're saying was you fraudulently induced us to enter into these contracts. [00:07:27] Speaker 02: It turned out later that [00:07:31] Speaker 02: Reid Hine didn't didn't carry through on whatever it says they promised but there and their damages might be measured by the contracts But we really don't have to interpret the contract in order to to rule on their claims Do we you do it in a couple of different ways one is that the breach of the contract is essential to their claims without a breach They have no claim that's undisputed and you have to be able to interpret the contract to determine whether Reid Hine breached it [00:07:58] Speaker 01: But the second has to do with the timeliness of their claims. [00:08:01] Speaker 01: The plaintiffs allege right in their complaint, and they've done it from the very beginning, that specific terms in these contracts are what make their claims timely. [00:08:07] Speaker 01: It's what allows them to invoke the discovery rule and bring their claims with them. [00:08:11] Speaker 04: What terms? [00:08:11] Speaker 04: What terms? [00:08:11] Speaker 04: Can you elaborate? [00:08:12] Speaker 01: Yes, Your Honor, of course. [00:08:13] Speaker 01: The durational term. [00:08:14] Speaker 01: So the term that permits Reed Hine how long it'll... [00:08:19] Speaker 01: It's two terms. [00:08:20] Speaker 01: It's the durational term, how long it has to complete the supposed timeshare exit, and then the definition of exit and what that means. [00:08:26] Speaker 01: Both of which the plaintiff's claims were deceptive and made it so that they were unable to determine whether these contracts were breached until those terms expired. [00:08:33] Speaker 01: And that's the theory that they argued to the district court in avoiding the statute of limitations, the theory the district court adopted in ruling that it's because of those contract terms that they have claims that are timely. [00:08:43] Speaker 04: What about the theory of exit? [00:08:44] Speaker 04: Can you say more about that? [00:08:45] Speaker 01: Sure. [00:08:46] Speaker 01: So they allege that exit is defined in ways, and I'm going to be paraphrasing the complaint, so the court's indulgence, that includes pseudo-legal processes and defined broadly enough that it could include anything, such conduct of sitting on your hands or waiting for foreclosure, inducing foreclosure. [00:09:05] Speaker 01: It's defined in a way that they found confusing and deceptive, which is, again, what they use as to why they couldn't discover their claims. [00:09:11] Speaker 05: Factually. [00:09:12] Speaker 05: It appears from the record that separate from this lawsuit, there have been settlements with Reed Hine and that plaintiffs have already been compensated for the money they paid Reed Hine. [00:09:26] Speaker 05: and or the money they paid timeshare companies while waiting for Reid-Hein to provide services. [00:09:32] Speaker 05: Is that correct or am I wrong on that? [00:09:35] Speaker 01: My understanding, Your Honor, and my colleague may have a more fulsome explanation of this, but my understanding, Your Honor, is that while there was a class settlement against Reid-Hein, there was a provision approved in that class settlement entitled the plaintiffs agreed not to enforce. [00:09:50] Speaker 01: Entitled what? [00:09:51] Speaker 01: The plaintiffs agreed not to enforce on the judgment. [00:09:54] Speaker 01: So no money changed hands. [00:09:55] Speaker 02: Because Reid-Hein didn't have any money. [00:09:56] Speaker 01: Because Reid-Hein's defunct and insolvent. [00:09:58] Speaker 02: Or they actually didn't receive anything in the settlement. [00:10:01] Speaker 01: Some did, up to a point. [00:10:03] Speaker 02: But are those the plaintiffs in this case? [00:10:06] Speaker 02: Or are they not? [00:10:07] Speaker 01: That, again, my colleague would have to answer. [00:10:09] Speaker 01: I know that the plaintiffs in this case are members of the class action, the separate class action that Your Honor references. [00:10:13] Speaker 02: But that would be a defense in any action to some form of liability, I suppose. [00:10:17] Speaker 01: Potentially. [00:10:17] Speaker 02: Whether it proceeded in arbitration or in court, you could say there's partial settlement or partial satisfaction. [00:10:23] Speaker 01: Potentially, Your Honor. [00:10:26] Speaker 01: So and if I could just coming back to interrelated claims estoppel for just a moment again. [00:10:30] Speaker 01: It's we've mentioned the the timeliness of the claims, but it's really important to recognize and looking through the complaint it is replete with allegations about the contracts and about the gun the entire conspiracy here was to get these plaintiffs into contracts that the defendants and read hind are alleged to have knowingly [00:10:48] Speaker 01: put together and concocted a scheme for Reid-Hein to breach and then for the defendants and Reid-Hein to sort of split the profits and split the ill-gotten profits that under the plaintiff's theory should have been returned to them pursuant to these contracts. [00:10:59] Speaker 01: So that's our theory under the interrelated claims test. [00:11:01] Speaker 02: So I want to go back to your interrelated claims theory. [00:11:04] Speaker 02: And what's your best case of the three? [00:11:08] Speaker 02: It seems to me you must be relying on Norwood primarily, correct? [00:11:11] Speaker 01: I like Norwood. [00:11:12] Speaker 01: I also like David Terry Investments, Your Honor. [00:11:14] Speaker 02: Well, but in David Terry Investments, at least we had [00:11:17] Speaker 02: a non-signatory that was essentially the same person. [00:11:22] Speaker 02: And in this case, it seems to me there's a distinction between the individual defendant and Reid Hine. [00:11:28] Speaker 01: Certainly. [00:11:29] Speaker 01: There's no formal relationship between those parties. [00:11:32] Speaker 01: And again, the comparison of Norwood and debitory investment shows that that was not a relevant factor. [00:11:38] Speaker 01: But what you also have here are allegations of conspiracy, regardless of the relationship between the parties, that they all conspired and jointly worked and acted in concert. [00:11:46] Speaker 01: to induce these contracts, have them formed, and then brief them. [00:11:49] Speaker 02: The fact that they acted in concert may or may not make this intertwined with the contracts. [00:11:55] Speaker 02: So I'm trying to figure out how the case law comes into this. [00:11:59] Speaker 02: And when I look at dekept, decrypt, whatever it is, even if it's a precedential opinion, and I'm not sure it is, it says the doctrine applies when your claims are [00:12:14] Speaker 02: based on the same facts as a claim against a signatory. [00:12:18] Speaker 02: And that's not true here, because there is no claim against a signatory. [00:12:22] Speaker 01: Well, there are. [00:12:22] Speaker 01: They're just in separate actions, Your Honor. [00:12:24] Speaker 02: Well, the signatory, it's done. [00:12:27] Speaker 01: But there were nearly identical claims asserted against Reid-Hein in the separate action that, again, followed when there was essentially proof, judgment proof. [00:12:36] Speaker 01: And then you have this action follow, trying to impute the same claim against our clients. [00:12:40] Speaker 02: See, I read that as saying, [00:12:43] Speaker 02: When there's an arbitration against a signatory, we ought to get all the claims that are related into a single arbitration. [00:12:51] Speaker 02: That's the way I read the decrypt case. [00:12:53] Speaker 02: I didn't read it as saying, well, if there's a closed case against a signatory, we ought to compel arbitration for that reason. [00:13:01] Speaker 02: I read this as a judicial economy opinion. [00:13:03] Speaker 01: Well, I don't think it was judicial economy, Your Honor, because the precedent under the Federal Arbitration Act doesn't permit submitting non-arbitrable claims to arbitration for purposes of judicial economy. [00:13:15] Speaker 02: No, but they become arbitrable under this doctrine. [00:13:19] Speaker 01: Equitable estoppel. [00:13:19] Speaker 01: But again, it was because the claims were so similar was one of the ways that the court was able to tell that these claims were interrelated and bound up with the contract, which you have here. [00:13:28] Speaker 02: I just want to get the facts straight, though. [00:13:29] Speaker 02: In decrypt, there was a pending arbitration. [00:13:31] Speaker 02: Was there not against the signatory? [00:13:33] Speaker 01: I believe so, Your Honor. [00:13:34] Speaker 02: And the issue was whether or not these other folks could join it in effect. [00:13:39] Speaker 01: I believe so, Your Honor. [00:13:40] Speaker 01: It was whether the non-signatories claims also should be talked about. [00:13:43] Speaker 01: That's not true here. [00:13:44] Speaker 01: No. [00:13:44] Speaker 01: Here, all of the defendants are non-signatories, and that was by design. [00:13:47] Speaker 01: But again, what David Terry Investments held very clearly is that equitable estoppel, the whole reason the doctrine exists is to prevent plaintiffs from seeking to avoid arbitration agreements that they signed, a signatory plaintiff from avoiding an arbitration agreement they signed, simply by suing non-signatories. [00:14:02] Speaker 01: Regardless of whether they join or don't join a signatory to the case, it's the claims that matter. [00:14:07] Speaker 02: That's not true here. [00:14:08] Speaker 02: because they couldn't sue the signatory, correct? [00:14:14] Speaker 01: I don't know that I follow the premise, Your Honor. [00:14:16] Speaker 01: They did sue the signatory. [00:14:17] Speaker 02: Well, they had to arbitrate against the signatory. [00:14:19] Speaker 01: Well, no, they litigated against the signatory. [00:14:21] Speaker 01: Right. [00:14:21] Speaker 02: They had to arbitrate against the signatory, but the arbitration was thrown out because they didn't pay the fees. [00:14:29] Speaker 02: And so this is not a case in which they made a decision, we'll proceed in arbitration against one side and against another. [00:14:37] Speaker 02: and in court against another. [00:14:40] Speaker 01: Certainly. [00:14:40] Speaker 01: I think you're getting to the judicial economy point. [00:14:42] Speaker 01: Yes. [00:14:42] Speaker 01: Which, again, is not a determinative factor under either of Washington law's equitable estoppel tests. [00:14:48] Speaker 01: And it's not a permissible reason to compel arbitration under the Federal Arbitration Act. [00:14:52] Speaker 05: So if there are no further questions, you might want to reserve a little time for rebuttal. [00:14:57] Speaker 05: Thank you, Your Honor. [00:14:59] Speaker 05: Did you have any questions, Judge Christian? [00:15:01] Speaker 05: Yes, I did. [00:15:01] Speaker 04: All right, come back. [00:15:03] Speaker 04: Come back. [00:15:03] Speaker 04: Judge Hurwitz doesn't mind too much. [00:15:05] Speaker 04: Just one. [00:15:06] Speaker 04: I'm surprised you led with Norwood. [00:15:08] Speaker 04: It seems to me that's a case that's really distinguishable and that there was no way to go forward to determine the nature of the employment relationship or even if there was one without looking awfully hard at that contract. [00:15:18] Speaker 04: And we're out of time. [00:15:20] Speaker 04: So what I understood you to be arguing here really had to do that the contract had to be consulted really only for damages. [00:15:29] Speaker 04: and for statute of limitations. [00:15:31] Speaker 04: That's what I took away from your briefing. [00:15:33] Speaker 04: You argued today that it had more to do with, really had to look to the contract to determine breach, and you haven't persuaded me to be blunt. [00:15:40] Speaker 04: I don't want to tell you that because I appreciate your advocacy. [00:15:42] Speaker 04: Could you take another run at that and give me your best shot at it? [00:15:45] Speaker 04: Why do they have to look at the contract? [00:15:47] Speaker 01: Certainly. [00:15:47] Speaker 01: I mean, they have framed this case that requires the breach of those contracts in order to demonstrate injury, which is an essential element of their claims. [00:15:54] Speaker 01: They're going to have to prove that those contracts were breached. [00:15:56] Speaker 01: And in order to do that, they cannot prove that the contracts were breached without the contract, without demonstrating how it was breached, what Reidhein did, whether it actually failed. [00:16:04] Speaker 04: Just so we can save time, I'm trying to figure out how you think this could be. [00:16:08] Speaker 01: Liken to is analogous to Norwood certainly so Norwood was a case where you couldn't understand the claims without it was the primary of the five reasons that the court ticked through as to why interrelated claims estoppel applied you couldn't understand the claims without the contract didn't have to deal with Interpretation which is without the contract the contract was essential to even understand the context of the place your case like that that is absolutely with this case this entire case is about [00:16:31] Speaker 01: a conspiracy to induce plaintiffs to enter into contracts that no party ever had any intention of performing under and intended to take ill-gotten profits and share them among the defendants here and the signatory of the contract. [00:16:43] Speaker 01: That's this whole case. [00:16:44] Speaker 01: And that's what all of the allegations in the complaint show. [00:16:46] Speaker 01: Without that contract, they have no claim. [00:16:48] Speaker 01: They have no claim of injury. [00:16:49] Speaker 01: Putting aside the timeliness piece, which we do think is sufficient on its own, they have no theory of liability, and they have no injury without the read-hide contract. [00:16:57] Speaker 01: Thank you. [00:16:58] Speaker 05: All right. [00:16:59] Speaker 05: I'll give you one minute for rebuttal. [00:17:01] Speaker 01: Thank you, Your Honor. [00:17:15] Speaker 00: Good morning. [00:17:16] Speaker 00: Good morning. [00:17:17] Speaker 00: As I mentioned, I'd like to reserve one minute for rebuttal, but I may cede that to my colleague to give her a little extra time as well. [00:17:24] Speaker 00: Just as a preliminary note, I wanted to just correct the record a little bit. [00:17:30] Speaker 00: Happy Hour is 50% owned by McKaymax, Inc., which is a different company. [00:17:36] Speaker 00: Reed Hine did not own Happy Hour. [00:17:37] Speaker 00: They're totally different entities. [00:17:40] Speaker 02: When you deal with a separate company, who owns it? [00:17:42] Speaker 02: What did you say? [00:17:43] Speaker 02: Sorry. [00:17:44] Speaker 02: Who owns a separate company? [00:17:45] Speaker 00: The separate company, I think, is nearly almost entirely owned by Brandon Reed, who admittedly was an owner of Reed High. [00:17:51] Speaker 00: You're right. [00:17:52] Speaker 02: So he effectively owes half of Happy Hour. [00:17:54] Speaker 00: Well, sure. [00:17:56] Speaker 00: I guess I'll give you that one. [00:17:59] Speaker 00: But just as a preliminary note, obviously, I'm here to talk about my client, Happy Hour Media Group, completely different company from the Ramses. [00:18:06] Speaker 00: We agree with and incorporate my colleagues' arguments up here. [00:18:10] Speaker 00: We believe that direct benefits estoppel applies. [00:18:14] Speaker 00: Really fundamentally the district court's order allows these plaintiffs to utilize the contract as effectively a sword and a shield here. [00:18:22] Speaker 02: Well, I understand the intertwined argument. [00:18:24] Speaker 02: Tell me what benefit these plaintiffs got out of the contracts. [00:18:28] Speaker 00: Well, I believe the benefit is here more that they are seeking to recuperate funds. [00:18:34] Speaker 02: The benefit is more just that they're able to bring this lawsuit and- Well, but that's, see, normally the direct benefits doctrine applies when I got some benefit out of the contract, but I'm now seeking to avoid it, or seeking to avoid its arbitration clause. [00:18:50] Speaker 02: And here, their theory is not only did we get no benefit out of the contract, we were injured by it because we paid money [00:18:58] Speaker 02: to no effect. [00:19:00] Speaker 02: I understand how that may lead to the intertwined doctrines theory, but I'm having difficulty seeing how the direct benefits theory applies. [00:19:10] Speaker 00: I understand. [00:19:10] Speaker 00: That's an interesting point. [00:19:11] Speaker 00: I think here, these claims have not yet been proven. [00:19:15] Speaker 00: Obviously, this case is in its infancy. [00:19:17] Speaker 00: We have not moved beyond this motion to compel stage. [00:19:20] Speaker 00: As your honors are well aware, there was briefing on motions to dismiss. [00:19:24] Speaker 00: But beyond that, [00:19:26] Speaker 00: It has not yet really been proven in this lawsuit that these plaintiffs actually suffered any kind of alleged injury, right? [00:19:33] Speaker 02: But their theory is that they did. [00:19:34] Speaker 02: Nobody claims, I mean, they're not claiming they took a benefit out of the contracts. [00:19:41] Speaker 02: They're not claiming that their time shares were [00:19:44] Speaker 02: were wiped away or that they got their money back and you don't really claim that their timeshares went away or that they got their money back. [00:19:52] Speaker 00: Certainly. [00:19:53] Speaker 02: So I'm trying to figure out what benefit you claim that they got under these contracts. [00:19:57] Speaker 00: Well in that instance your honor I mean there wouldn't really be a claim right if they had actually gotten out of their timeshare right so if the if the question is like well what's the benefit here they you know they didn't get out of their timeshare they didn't get X Y or Z relief right at pursuant to the contracts that they signed [00:20:14] Speaker 00: If they had gotten any of that, there wouldn't be a claim, and there wouldn't really be a need to... That's why I'm having trouble figuring why this is a direct benefits case. [00:20:21] Speaker 02: They claim they got no benefits. [00:20:23] Speaker 02: You really don't say, oh, yes, you do. [00:20:25] Speaker 02: Yes, you did. [00:20:25] Speaker 02: We got you out of the contract, or we gave you your money back. [00:20:29] Speaker 02: So I don't see any benefit anywhere in this case. [00:20:32] Speaker 05: Sort of claiming a speculative, imagined benefit, but it's not here. [00:20:39] Speaker 05: It's not the facts of this case. [00:20:41] Speaker 00: I think, again, here the benefit is that they have this contract on which they've premised this class action for which they're requesting God knows how much money. [00:20:50] Speaker 00: And at the same time, so they're saying, well, we need this contract. [00:20:54] Speaker 00: The problem here was you guys didn't deliver under the contract, so we're bringing this case to recuperate money. [00:21:00] Speaker 00: While at the same time, they're deliberately avoiding their obligations under the contract to arbitrate their claims. [00:21:06] Speaker 00: And again, plaintiffs have basically studiously ignored the fact [00:21:10] Speaker 00: it is on them to arbitrate these claims as well, because they are signatories. [00:21:13] Speaker 00: And I know that you discussed that with my colleague, and I can let her expand upon that if needed. [00:21:17] Speaker 00: But again, I think that the benefit here is the idea that they have this recourse, I suppose, pursuant to the contract. [00:21:29] Speaker 00: Because as my colleague said, without the contract, there really are no claims. [00:21:34] Speaker 00: They would not have had this relationship with Reid Hine [00:21:37] Speaker 00: Of course, anybody could listen to Dave Ramsey or whoever. [00:21:39] Speaker 05: The validity of the contract in question here? [00:21:45] Speaker 00: Well, I guess, can you specify what you mean by that? [00:21:49] Speaker 05: Well, is anyone saying there wasn't a contract, that there's not an enforceable contract? [00:21:53] Speaker 00: No, I mean, at this stage, I think that's not really in question. [00:21:57] Speaker 00: Like, obviously, they did sign a contract with Reid Hine. [00:22:00] Speaker 00: And so, no, I don't think that, on the point of the arbitrability, definitely not. [00:22:05] Speaker 00: And I would say, you know, at this point, the question of whether the contract was breached in any way, that's more kind of the issue, I would say. [00:22:12] Speaker 00: And again, there's still a question of that. [00:22:16] Speaker 05: Any other questions? [00:22:17] Speaker 05: Nope. [00:22:18] Speaker 05: All right. [00:22:18] Speaker 05: OK. [00:22:19] Speaker 05: Basically, your time's up. [00:22:20] Speaker 05: OK. [00:22:20] Speaker 05: All right. [00:22:21] Speaker 05: Nothing to cede. [00:22:22] Speaker 05: Thank you. [00:22:23] Speaker 05: Thanks. [00:22:27] Speaker 05: All right, we'll hear from the appellees. [00:22:33] Speaker 03: Good morning. [00:22:34] Speaker 03: Good morning, Your Honors. [00:22:35] Speaker 03: Roger David Heiser may please the court. [00:22:38] Speaker 05: Maybe you can just start with answering the question about, did anyone get anything out of this? [00:22:44] Speaker 03: Not that we've been able to find. [00:22:46] Speaker 03: No, no. [00:22:47] Speaker 03: I mean, so, yeah, no. [00:22:48] Speaker 05: This is a- Have there been any settlements with Reed-Hind? [00:22:51] Speaker 05: Have plaintiffs already been compensated for the money they paid Reed-Hind? [00:22:55] Speaker 05: the money they paid TimeShare companies while waiting for Reid Hine to provide services? [00:23:01] Speaker 03: None of the named plaintiffs have, no. [00:23:04] Speaker 03: Now whether or not, when we put the class together, we'll be looking at that issue in terms of who will be a member of the class. [00:23:12] Speaker 03: But at this point, representing the named plaintiffs, the answer- They haven't gotten any money? [00:23:18] Speaker 03: They have not received any benefit from the contract. [00:23:22] Speaker 04: of theory regarding intertwined claims. [00:23:24] Speaker 04: I've said that I'm not persuaded there's the three cases that we've looked to from Washington. [00:23:29] Speaker 04: It seems to me that the Norwood case in particular is really a tangled situation where the claims would have made no sense at all. [00:23:36] Speaker 04: What about the other cases? [00:23:38] Speaker 03: Well, I think all of the cases. [00:23:40] Speaker 03: I mean, the Terry case also requires that the claims that are pled be dependent upon the contractual rights and obligations [00:23:52] Speaker 03: Why isn't that the case here? [00:23:56] Speaker 04: My understanding is there's no question this is a binding contract and nobody's challenging that that's not part of this litigation. [00:24:04] Speaker 03: That's not part of this litigation. [00:24:05] Speaker 03: The contract is not part of this litigation and when I was listening to the questions and responses I thought well maybe the easier way to approach this is to look at [00:24:14] Speaker 03: Why the contract might arguably be even relevant in this case when we litigate it when we try it and I suppose that it you might find some evidence that might be one repository of evidence for the amount of damages in the form of how much was paid up that's what they've argued and I don't have any questions for you, but they've they've argued that the contract is relevant and the intertwined theory that's what they're relying on and [00:24:37] Speaker 04: because of damages, because of statute of limitations. [00:24:39] Speaker 04: And today, another argument or a more fulsome argument about the definition of the breach, what it takes to exit. [00:24:47] Speaker 04: Do you want to speak to that point? [00:24:49] Speaker 03: Well, I don't think it's very complex. [00:24:52] Speaker 03: I think what my clients were deceived into believing by the conduct of Mr. Ramsey and the happy hour defendants [00:25:04] Speaker 03: was that this was the only way, the only trusted way to extinguish these onerous obligations that they had taken on with these timeshares. [00:25:16] Speaker 03: And in fact, we've got, I mean, there's hours and hours of recordings and radio shows and scripts. [00:25:24] Speaker 03: Are you speaking to breach now? [00:25:27] Speaker 03: No, I'm speaking to deceptive conduct. [00:25:30] Speaker 03: My question is different. [00:25:31] Speaker 04: My question was, I was asking about the interconnectedness of your client's claims to the contract. [00:25:42] Speaker 04: And I questioned the extent to which those contracts are necessary to resolve these claims at all that have to do with promotion. [00:25:51] Speaker 04: That's an oversimplification. [00:25:52] Speaker 04: And opposing counsel answered. [00:25:53] Speaker 04: that it's not just that we need to look to the contract for damages and for statute of limitations, but that also we need to look to the contract to determine the definition of exit, and that's what I'm asking you to respond to. [00:26:05] Speaker 03: No, that's not the case. [00:26:06] Speaker 03: The case can be tried. [00:26:08] Speaker 03: How you can legitimately and lawfully exit a contract and break a contract is a matter of law. [00:26:16] Speaker 03: It's an issue that if it's not within the common [00:26:20] Speaker 03: understanding of the jury. [00:26:21] Speaker 03: We can bring experts in if the court deems that they're helpful and appropriate to speak about what the appropriate ways to exit someone from a timeshare contract might be. [00:26:32] Speaker 03: That has nothing to do with the contract. [00:26:36] Speaker 05: Well, you mentioned damages under the intertwined estoppel theory. [00:26:41] Speaker 05: If you are seeking damages to what you said, that might be the way. [00:26:44] Speaker 05: And if you are seeking damages based on the contracts, then why aren't your claims intertwined with the contracts? [00:26:52] Speaker 03: Well, because the damages, we're not seeking damages based upon the contracts. [00:26:55] Speaker 03: We're seeking... Well, you just said you were, a couple of... No, I said that, and I apologize if I didn't speak clearly, [00:27:02] Speaker 03: The measure of those damages may be found in a dollar amount that was put into a contract in terms of the upfront payment, but that amount is also found in the ledgers of the company. [00:27:16] Speaker 03: I mean, it's found in a lot of... The evidence of that is found in a lot of other... It's all tort and statutory claims? [00:27:21] Speaker 03: They're all statutory and tort claims, yes. [00:27:24] Speaker 03: And the predominant claims in this case are under the Washington Consumer Protection Act for pre-contractual conduct. [00:27:31] Speaker 04: Promotion, basically. [00:27:33] Speaker 04: Promotion, is that correct? [00:27:34] Speaker 03: Promotion. [00:27:35] Speaker 04: Marketing. [00:27:36] Speaker 02: Yes. [00:27:37] Speaker 02: Let me ask the question, the same question we've been asking a little bit differently. [00:27:42] Speaker 02: Had your clients not been induced to enter into the contracts by the allegedly tortious activity of the defendants, you'd have no claim. [00:27:54] Speaker 03: Yes? [00:27:55] Speaker 03: That's a very good question, Your Honor, because [00:27:59] Speaker 03: Perhaps under a common law fraud. [00:28:02] Speaker 02: Well, under any theory. [00:28:03] Speaker 02: Well, not under the Washington. [00:28:05] Speaker 02: They would have had no damage, even under the Washington Consumer Act. [00:28:10] Speaker 02: Maybe there's a claim for injunctive relief or something like that. [00:28:13] Speaker 03: Yes, and that's an issue of causation. [00:28:15] Speaker 02: But just stop. [00:28:17] Speaker 02: I think we can agree on this without quibbling. [00:28:21] Speaker 02: I mean, your client's claim for damage in this case arises from the fact [00:28:25] Speaker 02: that the allegedly tortious activity of the defendants induced them to enter into these contracts. [00:28:32] Speaker 02: Yes? [00:28:33] Speaker 03: Well, induce them to pay money or to... Come on. [00:28:37] Speaker 02: Yes, yes, yes. [00:28:39] Speaker 02: We haven't gotten to the money question yet, so let's agree on that for a second. [00:28:44] Speaker 02: My question is, is that enough to make these intertwined with the contracts or is it not? [00:28:50] Speaker 02: Because you're not going to convince me that [00:28:53] Speaker 02: that your real claim here is that you induced us to enter into these contracts. [00:28:58] Speaker 02: So assuming that I believe that, does that make them intertwined or does it not? [00:29:03] Speaker 03: I had not found a case that would suggest that that makes them intertwined. [00:29:08] Speaker 03: The case law that I've read seems to suggest that there needs to be more than just reference to a contract. [00:29:14] Speaker 02: OK, so tell me what more there needs to be and why that's not present here. [00:29:19] Speaker 03: Well, we would allege. [00:29:20] Speaker 03: Well, so for example, this would be a very clear case. [00:29:23] Speaker 03: If Mr. Ramsey wants to step up to the plate and repay and guarantee the 100% money back guarantee that was made in the contract, that would be a contractual issue, right? [00:29:36] Speaker 03: That would be, you know, if we were saying Mr. Ramsey... Not suing for enforcement of the contract. [00:29:41] Speaker 03: Exactly. [00:29:42] Speaker 03: I mean, if he wants to... I mean, if they're saying they want to do that, then maybe that changes the calculus a little bit. [00:29:49] Speaker 02: So the fact that your claims are based on the fact that your claims are based on the inducement of your clients into a contract, in your view, is not enough to make it intertwined. [00:30:03] Speaker 02: I don't believe so, Your Honor. [00:30:04] Speaker 02: Let's get to their second. [00:30:05] Speaker 02: There's another argument they make. [00:30:08] Speaker 02: They say, well, you can't know whether there was damage unless you find a breach of contract. [00:30:15] Speaker 02: Because if they actually did what they promised, then you have no damage. [00:30:20] Speaker 02: even if you were fraudulently induced into them. [00:30:23] Speaker 02: What's your answer to that? [00:30:25] Speaker 03: Well, I mean, I guess there are... Let me see how I can articulate this. [00:30:34] Speaker 03: I guess that they can be one and the same thing, but they're not necessarily the same thing, right? [00:30:39] Speaker 03: I mean, in other words, to sit back and say, I didn't get anything of value. [00:30:45] Speaker 03: I paid something of value, and I didn't get anything in return. [00:30:49] Speaker 03: I've lost all this money. [00:30:50] Speaker 03: I've been harmed in my property using the language of the Washington Consumer Protection Act. [00:30:57] Speaker 03: Okay. [00:30:57] Speaker 03: Well, how are you going to prove that you've been harmed? [00:31:00] Speaker 03: Well, someone promised, and this is where we get to the contract. [00:31:03] Speaker 03: Someone said, I was told if I paid X, you know, if I paid Person A X amount, they would get me out of my timeshare. [00:31:13] Speaker 03: And they didn't. [00:31:15] Speaker 03: Yes, that's a breach of that contract that I had with Person A. [00:31:19] Speaker 03: But the inducement that caused me to do that made by person B is separate and apart from that contract. [00:31:27] Speaker 03: So I guess the end result is the same, but you don't need to interpret the contract and all the terms of the contract. [00:31:38] Speaker 03: to determine that. [00:31:40] Speaker 04: Every time you step away from the microphone, I can't hear you. [00:31:42] Speaker 03: I'm sorry. [00:31:43] Speaker 03: That's all right. [00:31:44] Speaker 03: My old habits as a trial lawyer. [00:31:46] Speaker 03: I apologize. [00:31:46] Speaker 04: You said that you don't need to look at the contract because that's why I missed you. [00:31:49] Speaker 04: Your voice trailed off. [00:31:51] Speaker 03: Yes. [00:31:51] Speaker 03: You don't need to look at the contract to determine whether or not they were exited from their timeshare obligations. [00:31:57] Speaker 03: They either were or they weren't. [00:32:00] Speaker 03: It's a simple fact. [00:32:03] Speaker 02: Well, don't we need to look at the contract? [00:32:05] Speaker 02: And I'm not sure this makes it sufficiently intertwined. [00:32:08] Speaker 02: My difficulty is that I'm not sure the doctrine is tied to whether or not one needs to look at the contract. [00:32:15] Speaker 02: I'm trying to figure out what intertwined really means. [00:32:18] Speaker 02: Surely one needs to see whether they promised in the contract to get out of their time to share obligations, or whether they promised to return money if they couldn't. [00:32:29] Speaker 02: That may or may not make it intertwined. [00:32:32] Speaker 02: So I don't think the doctrine turns on whether or not one needs not look at the contract. [00:32:38] Speaker 02: I'm trying to figure out what are the sufficient indicias of intertwining. [00:32:42] Speaker 03: Well, maybe I can answer. [00:32:44] Speaker 03: I can't answer the question directly, because I haven't found any case law that kind of looks at facts similar to ours and says they're intertwined. [00:32:53] Speaker 03: The case law that's out there, the facts are much more [00:32:59] Speaker 03: definitive in terms of the intertwined nature, if it's an employment contract and the suit is for breach of that employment contract. [00:33:10] Speaker 04: Well, that's the Norwood case. [00:33:12] Speaker 04: It was hard to figure out whether there was an employment contract at all. [00:33:16] Speaker 04: It's almost the opposite end of the spectrum, in my view. [00:33:20] Speaker 04: This is a little closer, it seems to me. [00:33:22] Speaker 04: You have to look at the contract for, and the claims arise out of the contract, at least for damages. [00:33:27] Speaker 04: And their contention is that you relied on this to beat a statute of limitations argument earlier in the case. [00:33:34] Speaker 04: Do you want an opportunity to respond to that? [00:33:36] Speaker 03: Yes. [00:33:37] Speaker 03: And it would be disingenuous of me to say that the contract doesn't hold evidence that's relevant to damages, or that it doesn't hold evidence that's relevant to the breadth of the class when it comes to statute of limitations. [00:33:53] Speaker 03: What about the statute of limitations? [00:33:55] Speaker 04: Did you just respond to the argument opposing House [00:33:58] Speaker 03: Yes, yes, I think that we did make an argument below in terms of what claims would be viable under, that were still viable under the statute of limitations, that the contract itself provided a period of time to allow Reid Hine to get these people, to get our clients out of their time shares. [00:34:23] Speaker 03: And so that their knowledge, [00:34:25] Speaker 04: That had to do with the start of the statute of limitations period? [00:34:28] Speaker 03: Yes. [00:34:29] Speaker 04: That was my impression, and I think you've answered my question. [00:34:36] Speaker 03: I really don't know that there's anything more to add from our briefing. [00:34:42] Speaker 05: You don't need to say any more if we don't have any questions. [00:34:46] Speaker 03: I have other thoughts on other topics that were briefed, but they haven't come up in [00:34:51] Speaker 05: in this argument, and so I'll... To the students that we never penalize someone if they don't want to utilize all of their time. [00:34:59] Speaker 05: It's up to them. [00:35:02] Speaker 05: But they have to answer our questions. [00:35:04] Speaker 05: They can't say, oh, I'm done if we have more questions. [00:35:07] Speaker 05: So basically, if you have no additional comments, we don't appear to have any additional questions, and you can conclude your comments. [00:35:16] Speaker 05: Thank you. [00:35:16] Speaker 03: Thank you very much. [00:35:18] Speaker 05: All right. [00:35:18] Speaker 05: One minute rebuttal. [00:35:23] Speaker 01: Thank you, Your Honors. [00:35:24] Speaker 01: I'll be very brief. [00:35:26] Speaker 01: First, I just want to touch quickly on the question about whether fraud in the inducement of this contract is enough for purposes of the interrelated claims test. [00:35:35] Speaker 01: And I just want to quickly point the court to both the David Terry Investments case, where you had allegations that fraudulent statements were made to induce the contract [00:35:43] Speaker 01: both before the contract was formed as an inducement and during the contract, as well as the metalclad case, which is the California case, but it's the California case that David Terry Investments relies on when defining the equitable estoppel doctrine for purposes of Washington law. [00:35:58] Speaker 01: And in that case, what the court said, that when you have allegations that the signatory and non-signatory colluded to obtain a fraudulent contract, you cannot help but have inherently intertwined claims for purposes of equitable estoppel. [00:36:10] Speaker 01: And in my last few seconds, let's just touch on direct benefits estoppel. [00:36:13] Speaker 01: My first point there is we look to whether the plaintiff claims a direct benefit or knowingly exploits the contract for purposes of the lawsuit, which they do here by focusing on their right to either a refund or an exit. [00:36:25] Speaker 01: But more importantly, the plaintiffs do not dispute that they claim a benefit. [00:36:28] Speaker 01: They dispute whether Washington law permits the doctrine to apply in this signatory, non-signatory circumstance. [00:36:33] Speaker 05: Thank you for your argument both. [00:36:35] Speaker 05: This matter will stand submitted. [00:36:37] Speaker 05: This court will be in recess till tomorrow morning. [00:36:39] Speaker 05: Our madam clerk and attorney, Mrs. Dodds, do you wish the students to remain in the courtroom? [00:36:50] Speaker 01: Yes, they can go to, we'll take a quick break. [00:36:53] Speaker 01: All right. [00:36:54] Speaker 05: And the law clerks will accompany them as well. [00:36:56] Speaker 05: And we will conference at this point to join them subsequently. [00:37:02] Speaker 05: Thank you. [00:37:03] Speaker 05: All rise. [00:37:10] Speaker 05: The court stands in recess till tomorrow morning.