Consumer complaints against Hilton Head timeshare company shrouded in secrecy

dburley@islandpacket.comJune 7, 2014 

The Coral Sands Resort property at 66 Pope Avenue on June 11, 2014.

JAY KARR — Staff photo Buy Photo

As more than 25 consumer-fraud lawsuits against a Hilton Head Island timeshare company inch forward, it's hustling to keep documents that might shed light on its practices from becoming public.

Coral Resorts LLC, which operates four timeshare properties on Hilton Head and has been hit with numerous consumer complaints over the years, has gone to lengthsto suppress what originally were public records, according to court documents. The records include testimony from a Coral Resorts executive that could prove the company broke the law, leaving it vulnerable to a class-action lawsuit, plaintiffs' attorneys allege in a request for such a lawsuit.

Attorneys representing the timeshare company have obtained two court orders to seal the documents. One order, written by Administrative Law Court Chief Judge Ralph K. AndersonIII, forbids those involved from acknowledging the records even exist.

Coral Resorts' lawyers say the documents reveal trade secrets and proprietary information about the firm, which operates Port O'Call at Shipyard Plantation, Island Links, Coral Sands and Coral Reef resorts.

"If you were being sued and someone wanted to get at you, and let's say they filed your tax returns in court records, you would want that private information withdrawn," lead attorney Nekki Shutt said. "It's the same thing for corporations."

Asked what information in the files was so sensitive, she declined to comment, citing the seal on the files.

"There's nothing secret going on," Shutt said. "We've followed civil procedure to protect our client's trademark information."

Hilton Head attorneys Zach Naert and Joseph DuBois, who represent 47 owners in 26 lawsuits against the company, say the documents are public record and relevant to their cases. The documents include a transcript from a S.C. Real Estate Commission hearing and business records the resorts have filed with the state.

Furthermore, the documents contain more than proprietary information on Coral Resorts, Naert contends. They would show that the company repeatedly broke the law, he said in a June 17, 2013, hearing in Beaufort. They also might offer a glimpse into an organization that's been hit with about 1,000 complaints from more than 100 owners in just the past three years, according to federal and state agencies, consumer-advocacy websites and the Town of Hilton Head Island.

As many as two dozen of the complaints were sent toMayor Drew Laughlin. An attorney in private practice, Laughlin represents the resorts' homeowners associations in several lawsuits and Coral Resortsitself in another. Naert and Dubois have argued there is little apparent difference between the resorts and the associations. They say B. Dean Pierce, CEO of the resorts, is also president of the associations.

Laughlin passes along complaints he receives to town manager Steve Riley, to avoid a conflict of interest, he said Thursday.

Earlier in his term, Laughlin seemed sympathetic and interested in helping those who complained about Coral Resorts, emails suggest.

In a September 2011 email to town manager Steve Riley, Laughlin asked, "is there any better response we can give" than merely telling people who complain that regulating timeshares isn't the town's responsibility.

Then Coral hired him, as early as June 2012, according to town emails.

Laughlin said he did not have a change of heart. Instead, he said he merely took on a client in his private practice, separate from his public role as mayor.

"I'm a private, practicing attorney," he said. "This is no different than any case where I represent a client as a lawyer."

Riley said the town has not changed the way it handles complaints about the resorts since Laughlin was hired by the timeshare company.

Hundreds of owners, including retired postal workers, military veterans and school teachers have alleged they were misled by Coral Resorts over the years. Attempts to reach company officials have been unsuccessful. A Coral Resorts spokesman said Saturday that comments by Shutt, the company's attorney, reflect its position. Shutt has maintained that complaints from people who say they were misled by Coral Resorts are without merit.

Many owners assert they were deceived by sales pitches and signed contracts that didn't reflect what they were promised by salesmen, according to lawsuits and official complaints. Others say promises made -- such as a unit by the pool, waived maintenance fees, an available timeshare every year -- didn't come true, according to lawsuits. Some say timeshare staff pledged to rent the units for would-be buyers and buy them back if they ever wanted to sell.

Coral Resorts denies such claims. The firm's attorneys argue these owners represent "a small but vocal subset" of the more than 20,000 people who visit the resorts every year.

MAYOR'S INVOLVEMENT

The town has long received complaints about Coral Resorts, according to Riley, the town manager.

But since the state Real Estate Commission is the timeshare industry's regulatory body, there's little the town can do to address those complaints, he said.

"If people are being mistreated, it's highly unfortunate," he said. "But it's not under our jurisdiction ... what we do doesn't give me the right to pass judgment or regulate businesses or their practices."

In the past, town officials, including the mayor, have considered whether they could do more to help those who felt wronged.

In August 2011, Councilman Lee Edwards shareda story about a woman who had told him she was cheated by a timeshare business. Edwards asked town staff to look into what could be done about businesses that generate frequent complaints. Edwards mentioned Coral Sands Resort, a Coral Resorts operation specifically.

Town attorney Brian Hulbertq answered that there were a few options, including mentioning the complaints to the state Department of Consumer Affairs or writing a letter to the business.

"There is no enforcement mechanism or punishment the town may take merely based on one sides' complaint," he wrote to assistant town manager Greg Deloach. "If the town were to now accept complaints against businesses, would we open up a new department to handle this? Are we going to regulate all businesses and investigate all complaints?"

Laughlin weighed in the following month after receiving an email from a Massachusetts man who claimed he was cheated by Coral Sands.

"Do we have any idea what Coral Sands is doing that gives rise to these complaints?" Laughlin emailed Riley on Sept. 26, 2011.

Nine months later, Laughlin was representing Coral Resortsin a business case against a marketing firm. More recently, he's taken on Coral Resorts' homeownersassociations as clients. Owners allege the associations have failed to protect them from fraud and are complicit in the scams, according to complaints filed by Naert and DuBois.

Laughlin said he's received about 25 complaints about Coral Resorts since being hired by the company in 2012. He forwards them to the town manager, he said.

He said he typically doesn't inform owners who complain to the town that he represents the homeowners associations.

"I had one guy call me on the phone," Laughlin said. "I told him."

Asked if his involvement with Coral Resorts prevents the town from being more proactive toward a company that could potentially harm Hilton Head's image, Laughlin said that if the town decided to do more, he "wouldn't be involved."

Riley said the mayor's involvement hasn't changed the position of the town on Coral Resorts.

"Once we found out the mayor was involved, we left him out of it," he said. "It doesn't mean if we needed to do something we wouldn't do it, but the mayor wouldn't be a part of the conversation."

MOVING FORWARD

A decision last month by S.C. Supreme Court Chief Justice Jean Toal assigned more than 25 pending and all future court cases against the company to one judge, Circuit Court Judge Ernest Kinard. The order gives him jurisdiction over all courts in which cases are filed against the company.

On Thursday, Kinard sent 13 of the lawsuits to arbitration. The rest were put on hold until appeals that question the suppression of once-public documents are heard. Despite putting the cases on hold, Kinard said he expects three magistrate court lawsuits filed by Naert and DuBois to be tried in August.

"It's highly unlikely I'll grant motions to dismiss," he said Thursday, in response to requests by Coral Resorts.

Sondra Ettlinger, an owner suing the company for unfair trade practices, drove from University Park, Fla., to attend the hearing in Beaufort.

She said she's owned timeshares for 25 years in places like Florida, Barbados and Spain. Coral Resorts is the only one to have given her problems.

"How this organization is able to operate like this is beyond comprehension," she said.

The bundle of lawsuits are similar to cases filed against Coral Resorts by 66 Island Links owners in 2004.

The owners sued Coral Resorts after it levied a one-time assessment to raise $3.7 million for improvements to the property, according to court records.

They claimed the assessment was illegal and that Coral Resorts changed the master deed without the owners' approval.

Those cases were settled in 2008, according to court records. Columbia-based attorney George McMaster, who represented the owners, declined to discuss the lawsuits last week.

Naert and DuBois' law firm also has butted heads with Coral Resorts in federal court.

In December, the timeshare company sued the law firm over its alleged use of Coral Resorts registered trademarks to generate hits on the law firm's website.

The company accused the law firm of purchasing keywords related to the resorts through search engines such as Google. Those purchases drive the law firm's website to the top of the list when the resorts are searched, Coral Resorts' complaint said.

The resorts lost business because potential customers were led to assume there was an affiliation between the law firm and the timeshares, according to the lawsuit.

Naert and DuBois' motion to dismiss the suit is pending, according to court records.

Follow reporter Dan Burley on Twitter at twitter.com/IPBG_Dan.

Documents

Click or tap on the document title below (or, in some mobile devices, tap on the document itself) to open in a new window for reading.

Page 1: In this email, Hilton Head Island town attorney Brian Hulbert outlines what the town can tell people who contact town officials with complaints about Coral Resorts.

Page 2: Mayor Drew Laughlin's response on Sept. 26, 2011, to someone who complained to the town about Coral Resorts.

Page 3: Mayor Drew Laughlin, in another email on Sept. 26, 2011, asking town manager Steve Riley if the town can give people who complain about Coral Resorts "a better answer," and asking for details on the practices of Coral Sands, one of the timeshares operated by Coral Resorts.

Page 4: An email Mayor Drew Laughlin forwarded to town manager Steve Riley on June 28, 2012, saying he is representing "Coral" in court.

Emails relating to concerns about Coral Resorts

Additional documents

1. A memorandum from the chief judge of South Carolina's Administrative Law Court forbids ​the ​release of​ documents related to Coral Resorts or even ​acknowledgement ​that legal proceedings involving the timeshare operation are underway.

Coral Resorts secrecy order

2. This order from the chief judge of South Carolina's Administrative Law Court provides background on Coral Resorts' efforts to prevent a transcript of a hearing before the state Real Estate Commission from becoming public. Lawyers representing people who believe they were misled by Coral Resorts say the release of the transcript is essential to their case against the timeshare company. Toward the end of the order, the judge sharply chastises the state Real Estate Commission for "bewildering" actions regarding Coral Resorts.

Administrative Law Court order on transcript secrecy

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