OPT OUT of the Proposed Class-Action Settlement!
All WorldMark owners should have received notice of a proposed settlement in the class action case Wixon v. Wyndham. You have three choices – object to the settlement, opt out of the settlement, or do nothing (essentially accepting the settlement). I strongly urge all owners to OPT OUT of the settlement. We will never reach the 50% opt-out required to automatically defeat the settlement, but if a significant number of owners opt-out we will send a message to the Judge that this settlement is NOT in owners’ best interests. Opting out does not affect your participation in the settlement; if it is approved, it will affect all owners equally.
But WHY should we out opt?
What’s wrong with the settlement?
Here are the worst of the problems.
FUTURE CREDIT VALUES (VII.A.1)
“Neither past practices nor credit values at existing resorts shall restrict or limit Wyndham’s reasonable discretion to set credit values at any new resort or require the new resort to be at the same level as credit values at any existing resorts. Wyndham’s consideration of the credit values at any existing resorts. Wyndham’s consideration of the credit values at existing WorldMark resorts in allocating credit values to units at any new WorldMark resort shall be valid, reasonable, and sufficient exercise of its discretion under Section 3.4(a) of the Declaration of Vacation Ownership.
WHAT? This passage, buried in the “releases and jurisdiction” section of the Settlement, is without question the most damaging portion of the settlement. There is NO MENTION of this clause in the Summary Notice sent to all owners. It completely removes the Relative Use Value protection built into our Governing Documents! If this is approved, then Wyndham can put any resort it wants anywhere it wants at any credit value it wants. The Club is left with absolutely NO protection against Wyndham dumping millions of cheap credits into our system, devaluing our credits faster than we could possibly dream. IF THIS IS APPROVED, WORLDMARK THE CLUB AS WE KNOW IT IS FINISHED.
RELEASE OF CLAIMS (VII.B)
This passage absolves Wyndham of ALL claims, “whether known or unknown, suspected or unsuspected, asserted or unasserted, foreseen or unforeseen …” that are in any way related to “any claim that was OR COULD HAVE BEEN asserted against Wyndham or any Released Person by the Class Representatives or any member of the Settlement Class.” (Emphasis added.) In other words, Wyndham cannot be held responsible for anything they have done up until the date of settlement, EVEN IF NO ONE KNEW ABOUT IT! In fact, it attempts to specifically negate a clause of the California Civil Code that makes such all-encompassing waivers illegal.
If nothing else in the Settlement makes you want to opt out, this clause alone should! Even if you can not picture yourself ever entering into a legal action against Wyndham, forever giving up that right should give you great concern.
CREDIT CANCELATION (III.A)
Under the settlement, Wyndham will “retire” (make no longer available to sell) 22 million credits and reduce credit values at some of the inflated resorts. The intent is to give relief for years of Wyndham’s over-pricing of resorts. Sounds great, but … did you look at the credit reductions (Exhibit D to the settlement)? An Anaheim 2-bedroom unit is being reduced from 16,500 credits per week to 16,000. That is relief? That’s still a 60% increase over the 10,000 credit standard price. The other reductions are all similar; miniscule reductions that still leave the resorts seriously over-priced.
EXTRACTION OF UNITS AND CREDITS (III.B)
The Settlement provides for Wyndham to retire about 245 million unsold credits. In exchange, they will remove between 400 and 421 units from the WorldMark system. There are at least three problems with this:
1) In theory, those units will be from the under-performing resorts identified in Exhibit E of the agreement. But the settlement gives Wyndham the right to “substitute” other units, subject only to the approval of the WorldMark Board and the attorneys who put together this settlement. The WorldMark Board has demonstrated repeatedly that they are more interested in Wyndham Vacation Ownership’s commercial success than in WorldMark the Club’s best interest.
2) Wyndham is “buying” these units from WorldMark by retiring about 2.5 million unsold credits. But these credits are more liability to Wyndham than they are asset! For the last several years, Wyndham has been saddled with many times more unsold credits than they like to hold because they over-built. They are required to pay the maintenance fees on these credits. The maintenance fee on 245 million credits is approximately $18 million. So Wyndham gets to STOP paying WorldMark $18 million per year, and gets over 400 units to do with as they please (sell as WVO/Fairfield units, rent to the general public, etc.). How does this benefit owners?
3) WorldMark’s bylaws REQUIRE that removal of any units from the Club be accepted by vote of the owners. This settlement would remove over 400 units with NO input from owners! They try to get around the vote requirement by stating that owners who do not opt out of the settlement are deemed to have voted in favor of it. “Failure to withdraw” is NOT the same thing as an affirmative vote!
EXCHANGE OF ANAHEIM UNITS (III.C)
The Settlement trades 21 WorldMark Anaheim units for weeks equivalent to 21 Wyndham Dolphin’s Cove units. WorldMark is to give up deeded whole ownership of 21 units in exchange for floating weeks “equivalent to” 21 units? Why would we trade something that the Club owns and controls completely for something that the Club would have to share with other owners and systems? And this is assuming that 21 units at the new Anaheim resort are of equal value (property value, not “use value”) to 21 units at the old Dolphin’s Cove resort. Again, the settlement is removing units from the Club without a vote of owners, directly in conflict with the Club’s governing documents.
AGGREGATE CHANGES IN CREDITS (III.D)
This clause describes the net effect of Wyndham retiring some credits and exchanging others for units. Wyndham points to this clause to show how beneficial this settlement is for owners.
As I already pointed out, the 245 million credits they are trading for units actually benefits Wyndham more than it does WorldMark. “WorldMark owners would be relieved of maintenance and other costs associated with the extracted units.” Yes, and they will also be relieved of the $18 million in maintenance fee income that Wyndham pays on those credits. The reduction in costs is in theory offset by the loss of income. I say “in theory” because Wyndham will likely be extracting SOME units from several different resorts, and not completely removing any one resort. Removing some units will remove the costs associated with those specific units -- cleaning, maintenance, repair, utilities, etc – but will not proportionately reduce the shared costs for the resorts in which those units are located.
Wyndham and the attorneys also put a lot of emphasis on the fact that removing these millions of credits also removes Wyndham’s power to vote those credits, therefore reducing Wyndham’s influence on WorldMark elections. But it does not completely remove it. As of the 2010 election, Wyndham held 423,865,600 credits. Removing 275 million will still leave Wyndham with nearly 149 million credits. In the 2010 elections, 149 million credits equaled 26,550 votes – over 11% of all votes cast. And the number of Wyndham is growing even without new construction, as they continue to foreclose on defaulted accounts.
The effect of the settlement on Wyndham’s influence on the elections is also diminished by the timing of the two settlements. The settlement that was reached in the Director suit in 2010 included certain restrictions on Wyndham’s actions intended to reduce their ability to influence the elections. Those restrictions are in effect through the 2012 election. The projected completion date of the currently proposed settlement, if all goes perfectly, is fall 2012. That means that as long as the original election reforms are in place, Wyndham will still hold enough credits (votes) to completely control the outcome of the elections directly by their votes. By the time that they give up the credits contemplated by this settlement, the protections from the earlier settlement will have expired and they can go back to controlling the elections through their control of all communication and the election process itself.
TRAVELSHARE WITH FUNTIME (III.E)
This clause is meaningless to WorldMark owners. Wyndham will continue to sell Travelshare if it so chooses; it will simply replace the Fun Time component with a similar program under a new name. Existing Fun Time accounts will also continue to exist.
ELECTION WEBSITE (III.G)
The settlement provides for a separate website to supposedly enable owner-to-owner communication during the election cycle. We saw last year how this website will work.
1. It is only online during the limited time defined as “the election cycle” (despite Wyndham’s freedom to solicit for proxy assignments months earlier).
2. Owners are limited in the frequency of their posts. It started out with one post per election; I believe it was later changed to one per month.
3. There is no possibility of response or follow-up to posts.
4. Posts are still subject to review “by the WorldMark Board of the Board’s authorized designee.” The Board’s authorized designee is ALWAYS a Wyndham employee.
Thank you for sticking with me through this very long analysis! An excellent source for further information and discussion on the topic of the proposed settlement is the WorldMark Owners’ website, WMOwners.com. Here is a direct link to the settlement discussion: http://www.wmowners.com/forum/viewforum.php?f=86.
