Reed Hein’s victims deserve ongoing access to information about the State of Washington’s pending lawsuit against the company.
Table of Contents
- Overview of Summary Judgment
- State’s Motion for Partial Summary Judgment (Reed Hein As Debt Adjuster) — Does Reed Hein meet the law’s definition of a debt adjuster?
- State’s Motion for Partial Summary Judgment (Reed Hein As Timeshare Seller) — Does Reed Hein violate the Consumer Protection Act by claiming in advertising that “Reed Hein does not sell timeshares,” when Reed Hein refers customers to a company that sells timeshares?
- State’s Motion for Partial Summary Judgment (Reed Hein As Credit-Repair Specialist) — Does Reed Hein meet the law’s definition of a credit services organization?
- State’s Motion for Partial Summary Judgment (Reed Hein and Sussman Law Firm) — Does the business relationship between Reed Hein and lawyer Mitchell Sussman violate the Consumer Protection Act?
Every case starts with a complaint and an answer.
- Dkt. 1 – Complaint, filed by the State on February 4, 2020.
The State’s complaint alleges more than forty ongoing violations of the Washington Consumer Protection Act and multiple additional violations of other state laws intended to protect consumers. Among other relief, the State is asking the Court to prohibit Reed Hein from continuing to sell “timeshare-exit services.”
The State summarizes its allegations at Paragraph 1.5 of the complaint: “Virtually every aspect of [Reed Hein’s] operation is deceptive or unfair in violation of the State Consumer Protection Act, and thousands of people across the United States and Canada — including more than 2,500 consumers in Washington — have fallen victim to [Reed Hein’s] practices.”
Attorney General Bob Ferguson is the State of Washington’s chief law-enforcement officer. Ferguson authorized the State’s lawsuit against Reed Hein.
- Dkt. 12 – Answer, filed by Reed Hein and Brandon Reed on February 25, 2020.
Reed Hein’s answer employs a tactic that Reed Hein uses regularly — blame the timeshare developers. It is easy tactic to use. Timeshare developers regularly engage in abusive sales and billing practices, and they are unpopular with many consumers.
Reed Hein’s answer begins with a lengthy essay criticizing the timeshare industry. According to the answer, Reed Hein
- Dkt. 19 – Answer, filed by Trevor Hein on May 18, 2020.
Reed Hein founder Trevor Hein filed a separate answer. Hein claimed to have had nothing to do with Reed Hein management since 2016. Hein acknowledged that he owned forty percent of the company, and he remained silent about his share of company profits.
Brandon Reed (l) regularly defends himself and his company against allegations of consumer fraud by arguing that timeshare developers are bad.
Trevor Hein (r) argues that his job at Reed Hein is limited to depositing checks. According to Hein, he has nothing to do with the company’s operations.
Protective orders are increasingly common in civil litigation.
Hancock.Law’s position is that courts are too quick to authorize protective orders. Protective orders allow parties to use the public’s open court system to resolve their disputes while preventing members of the public from learning facts that the parties prefer to keep secret.
- Dkt. 23 – Protective Order, signed by Judge McHale on May 22, 2020.
The Court’s protective order allows Reed Hein to label any document produced to the State during litigation as confidential, so long as Reed Hein’s lawyer was willing to argue that the document contained (a) proprietary information such as a trade secrets, (b) personal information, (c) information protected by the constitutional right to privacy, or (d) information otherwise entitled to protection.
If Reed Hein labels a document confidential, the State cannot file the document in court without Reed Hein’s authorization.
If Reed Hein refuses to give its authorization, the State has to file a motion to disclose.
So far, the State has been forced to file several motions to disclose.
The Orange Lake Settlement
The State filed its first motion to disclose on June 17, 2020.
Reed Hein had designated as confidential the amount of money it had paid to settle a lawsuit filed by Orange Lake Country Club — a major timeshare developer headquartered in Florida.
In January 2020, Reed Hein and Orange Lake settled the lawsuit — only two days before a jury trial was scheduled to begin in an Orlando federal courthouse. Orange Lake had filed the lawsuit against Reed Hein more than two years earlier, in August 2017. By the time of trial, Reed Hein had spent millions of dollars in attorney fees.
Reed Hein issued a press release describing the settlement as a “major win for consumers” that had delivered “timeshare exits” to more than thirteen hundred Orange Lake timeshare owners.
The plain text of the settlement agreement says otherwise. Orange Lake agreed to waive all its claims against Reed Hein, Brandon Reed, and Trevor Hein. Orange Lake’s claims against Reed Hein customers were entirely unaffected by the settlement agreement. Paragraph 2 of the agreement is clear and unambiguous: “Orange Lake’s release of Reed Hein does not include any claims Orange Lake may have against the individual owners of timeshare accounts.”
The truth is that Reed Hein customers got nothing from the settlement agreement.
Reed Hein told the public that it had secured a “major win for consumers” by settling a lawsuit filed by Orange Lake Country Club. In fact, Reed Hein gave Orange Lake $750,000.00.
The plain text of the settlement agreement also makes it clear that Timeshare Exit Team suffered a humiliating defeat. The truth is that Reed Hein paid Orange Lake $750,000.00.
The truth is that only two days before getting the chance to hold a major timeshare developer accountable in a public courtroom, Timeshare Exit Team canceled the fight.
And then claimed victory.
- Dkt. 26 – Motion to Disclose Settlement Amount, filed by the State on June 17, 2020.
- Dkt. 27 – Declaration of Aaron Fickes.
After settling its case against Orange Lake Country Club, Reed Hein issued a press release full of misrepresentations and half-truths.
- Dkt. 35 – Response to Motion to Disclose Settlement Amount, filed by Reed Hein on June 24, 2020.
- Dkt. 36 – Declaration of former executive.
Reed Hein argued that lawyers representing other timeshare developers would use the information to gain an unfair advantage in their own lawsuits against Reed Hein. According to Reed Hein, the settlement amount was therefore a “trade secret.”
Reed Hein’s argument was weak: In a blog post published in June 2020, Hancock.Law demonstrated that the lawyers representing other timeshare developers already knew all about the settlement agreement. In reality, Reed Hein wanted to prevent its own customers from learning the truth — Reed Hein backed down from a timeshare developer only days before jury trial was scheduled to begin.
- Dkt. 37 – Reply on Motion to Disclose Settlement Amount, filed by the State on June 26, 2020.
The State’s reply brief attacked Reed Hein for being dishonest with its own customers. The State argued that Reed Hein shouldn’t be allowed to describe the settlement agreement to its customers as a “landmark” example of its success — while concealing the truth.
The Court agreed with the State.
- Dkt. 38 – Order Granting Motion to Disclose Settlement Amount, signed by Judge McHale on July 2, 2020.
The State of Washington forced Reed Hein to disclose the truth about the company’s settlement with Orange Lake Country Club. Incredibly, Reed Hein today persists in describing its humiliating loss as a “major win for consumers.”
Motion for a Preliminary Injunction
The State asked the Court to order Reed Hein to maintain $6.5 million in a reserve account — to always have sufficient funds to make good on its promise of a one-hundred-percent money-back guarantee.
When the State filed the motion, Reed Hein had failed to deliver “timeshare exits” to more than fifteen thousand customers. Reed Hein faced potential liability to those customers in an amount that exceeded $58 million.
The Court denied the State’s motion.
- Dkt. 39 – Motion for a Preliminary Injunction, filed by the State on July 7, 2020.
- Dkt. 18 – Declaration of Mary Elizabeth Howe.
- Dkt. 40 – Declaration of Mary Elizabeth Howe.
- Dkt. 29 – Declaration of Eric Peters.
- Dkt. 30 – Declaration of Anton Borbes.
- Dkt. 31 – Declaration of Shirley Bowe.
- Dkt. 32 – Declaration of Amanda Heard.
- Dkt. 33 – Declaration of Mary Diggs Hobson.
- Dkt. 34 – Declaration of Steven Ladieu.
The State’s motion relied in part on the deposition testimony of Thomas Parenteau, Reed Hein’s former chief operating officer. According to Parenteau, Reed Hein spends approximately ten million dollars per year on advertising, and the company’s most important endorser is Dave Ramsey.
In 2015, Shirley Bowe paid Reed Hein $3,702 to terminate her timeshare obligations. She paid an additional $460 in 2017. By 2018, Reed Hein had failed to deliver on its promised “timeshare exit,” and Ms. Bowe demanded the refund to which she was entitled. She never received her promised refund, nor an explanation for why Reed Hein was denying her request.
Customers Amanda Heard, Mary Diggs Hobson and Steven Ladieu endured similar experiences with Reed Hein. Only Mr. Ladieu was successful in securing a refund — which Reed Hein gave him only after he filed a consumer complaint with the Washington State Attorney General.
After five years of working Shirley Bowe’s file, Timeshare Exit Team had (a) failed to deliver on its promise of a “timeshare exit,” (b) failed to honor its money-back guarantee, and (c) failed to explain its behavior.
- Dkt. 68 – Response to Motion for a Preliminary Injunction, filed by Reed Hein on August 10, 2020.
Reed Hein’s response brief argued that a preliminary injunction was unnecessary because Reed Hein consistently provides dissatisfied customers with refunds upon request.
At the time Reed Hein submitted this response brief, Hancock.Law had filed more than ten demands for arbitration against the company. Clients had demanded refunds, and Reed Hein had ignored or refused their demands.
The State had the disadvantage of filing this motion during the first six months of the pandemic. Because of local coronavirus protocols, the State was unable to present the Court with live testimony. The Court resolved all questions of fact on a dry record of declarations and exhibits.
Lawyer Stephanie Loosvelt was general counsel for Reed Hein and its advertising agency Happy Hour Media Group until late 2020. Ms. Loosvelt argued that Reed Hein had sufficient funds to pay customer refunds because Reed Hein’s $750,000 settlement obligation to Orange Lake was paid by an insurance company.
- Dkt. 109 – Reply on Motion for a Preliminary Injunction, filed by the State on August 12, 2020.
The State framed the Court’s decision in stark terms: The Court could either (a) grant the State’s motion for a preliminary injunction, or (b) allow Reed Hein to “continue victimizing consumers with a guarantee that it fails to honor.”
The Court found the the State had failed to meet its burden of proof.
- Dkt. 80 – Order Denying Motion for a Preliminary Injunction, signed by Judge McHale on August 17, 2020.
Overview of Summary Judgment
A court properly grants summary judgment when the undisputed material facts entitle a party to judgment as a matter of law.
In today’s civil-justice system, a jury’s function is principally to resolve disputes questions of fact. If one witness says that the traffic light was green and another witness says that the traffic light was red, jurors have the authority to decide which witness is telling the truth.
If the relevant facts are undisputed, the civil jury is unnecessary. A judge can apply the law to the undisputed facts and thereby resolve the case, or a particular aspect of the case. A judge’s determination that one party is entitled to judgment as a matter of law is called summary judgment.
To date, the State of Washington has filed four motions for partial summary judgment. The State has argued that the undisputed relevant facts demonstrate that (1) Reed Hein unlawfully offers debt-adjustment services, (2) Reed Hein commits a deceptive trade practice by advertising that it isn’t a listing company, (3) Reed Hein unlawfully offers credit-repair services, and (4) Reed Hein commits a deceptive trade practice by relying on the methods of lawyer Mitchell Sussman.
The Court rejected the State’s first two arguments in May 2021.
Motion for Partial Summary Judgment (Reed Hein As Debt Adjuster)
In May 2021, the State asked the Court to find that Reed Hein is a “debt adjuster,” and that the company has violated the Washington State Debt Adjusting Act.
The State Debt Adjusting Act defines a “debt adjuster” as “any person engaging in or holding himself or herself out as engaging in the business of debt adjusting for compensation.”
The Act contains multiple protections for consumers. If Reed Hein is found to be a debt adjuster, it has violated multiple provisions of the Act. For example, Section 130(3) of the Act forbids a debt adjuster from “accepting a power of attorney authorizing it to employ or terminate the services of any attorney or to arrange the terms of or compensate for such services.” Reed Hein requires customers to sign a power-of-attorney form giving the company precisely that level of authority.
Reed Hein customers sign a power-of-attorney form that gives Reed Hein the authority to hire and fire lawyers. The State Debt Adjusting Act forbids a debt adjuster from accepting a power-of-attorney vesting it with such broad authority.
The Court denied the motion.
- Dkt. 212 – Motion for Partial Summary Judgment (Debt Adjusting Act), filed by the State on May 7, 2021.
Page 1 of the State’s brief contains a summary of its argument: “The salient facts are not subject to dispute: For nearly nine years, Defendant Reed Hein has charged — and continues to charge — thousands of vulnerable consumers illegal fees to manage and adjust their outstanding timeshare mortgage debt.”
The State relied on advertisements like this to argue that Reed Hein is a debt adjuster. According to the State, Reed Hein regularly represents to consumers that it has the capacity to resolve a consumer’s debt to timeshare developers.
- Dkt. 165 – Response to Motion for Summary Judgment (Debt Adjusting Act), filed by Reed Hein on March 15, 2021.
- Dkt. 173 – Reply on Motion for Partial Summary Judgment (Debt Adjusting Act), filed by the State on March 22, 2021.
The State began its reply brief by agreeing with Reed Hein. The State cited to a brief that Reed Hein had submitted in litigation against Westgate Resorts. In that case, Reed Hein had made the following argument: “Reed Hein is no different than any of the multitude of financial advisers who enable consumers to negotiate, reduce, or even eliminate debt.”
Exactly, the State argued. That is precisely why Reed Hein is a debt adjuster.
- Dkt. 207 – Order Denying Motion for Partial Summary Judgment (Debt Adjusting Act), signed by Judge Wiggs-Martin on May 5, 2021.
The Court denied the State’s motion without explanation.
Motion for Partial Summary Judgment (Reed Hein As Timeshare Seller)
The States’s motion asked the Court to declare that Reed Hein commits a deceptive trade practice by claiming that it isn’t a “listing company” that sells timeshares, when in fact Reed Hein regularly refers cases to a company that sells timeshares.
- Dkt. 217 – Motion for Partial Summary Judgment (Advertising), filed by the State on May 7, 2021.
The State’s motion focused on Reed Hein advertisements. According to the State, Reed Hein regularly advertised that it had the capacity to force a timeshare developer to take back a consumer’s timeshare. Reed Hein’s advertisements regularly criticized “listing companies” that terminate a consumer’s timeshare obligations by selling the timeshare to a different consumer.
In reality, the State argued, Reed Hein regularly referred customers’ timeshares to a listing company named Standard Timeshare Timeshares, a.k.a. “Sunday.” According to the State, Reed Hein referred virtually all customer matters to outside vendors — often without the customer’s knowledge or permission.
Relying on web advertisements like this, the State argued that Reed Hein regularly deceived consumers by representing that it doesn’t sell timeshares. In fact, the State demonstrated, Reed Hein regularly refers cases to a listing company named Standard Timeshare Transfers.
- Dkt. 167 – Response to Motion for Partial Summary Judgment (Advertising), filed by Reed Hein on March 15, 2021.
- Dkt. 166 – Declaration of former executive.
Reed Hein’s response brief acknowledged that it regularly refers cases to a company that transfers ownership of a consumer’s timeshare to a different timeshare. According to Reed Hein, its advertising is nonetheless truthful, because Standard Timeshare Transfers is a transfer company and not a listing company.
Relying on the testimony of Jeffrey Brown, Reed Hein also argued that it began referring cases to Standard Timeshare Transfers in 2017.
Jeffrey Brown is the founder and chief executive office of Standard Timeshare Transfers. Reed Hein relied on his testimony to oppose the State’s motion for summary judgment. According to the State, Reed Hein thereby relied on testimony that it knew to be untruthful.
- Dkt. 221 – Reply on Motion for Partial Summary Judgment (Advertising), filed by the State on May 7, 2021.
The State’s reply brief accuses Reed Hein of intentionally misrepresenting the facts in a court filing: “Witnesses may misremember, but it is shocking for a party to advance testimony it knows is inaccurate.”
According to the State, Reed Hein knew that the company had started referring cases to Standard Timeshare Transfers as early as 2013. Reed Hein had even produced a spreadsheet giving Standard Timeshare Transfers credit for more than one hundred “timeshare exits” completed before the end of 2014.
- Dkt. 206 – Order Denying Motion for Partial Summary Judgment (Advertising), signed by Judge Wiggs-Martin on May 5, 2021.
The Court denied the State’s motion without explanation.
Motion for Partial Summary Judgment (Reed Hein As Credit-Repair Specialist)
The Washington State Credit Services Organization Act forbids any “credit service organization” from accepting payment before it has delivered “full and complete performance of the services the credit services organization has agreed to perform for the buyer.”
The Act defines a “credit service organization” as a company that represents to consumers that it can “improve, save, or preserve a [consumer’s] credit record, history, or rating,” or that it can “stop, prevent, or delay the foreclosure of a deed of trust, mortgage, or other security agreement.”
The State’s motion asks the Court to declare that Reed Hein is a credit service organization because it regularly promised to provide credit repair to its customers.
- Dkt. 256 – Motion for Partial Summary Judgment (Credit Services Organization Act), filed by the State on June 7, 2021.
The State’s motion begins with a summary of its argument: “For approximately five years, every single customer who sat through Reed Hein’s sales pitch was promised that, if Reed Hein’s services damaged their credit, Reed Hein would see to it that their credit was repaired.”
Relying in part on Reed Hein’s web advertising, the State argued that Reed Hein has unlawfully offered credit-repair services for years.
The State also provided the Court with examples of the scripts that Reed Hein sales agents use with prospective customers. According to the scripts, sales agents regularly promise prospective customers that Reed Hein has the capacity to repair damaged credit.
- Dkt. 267 – Response to Motion for Partial Summary Judgment (Credit Services Organization Act), filed by Reed Hein on July 26, 2021.
Reed Hein argued that it isn’t a credit service organization because employee Tiffany Vela described the company’s sales scripts as “outlines” rather than “scripts.”
Vela is the sister of Brandon Reed — Reed Hein’s founder and chief executive officer. She has worked at Reed Hein for years.
Reed Hein also submitted the deposition testimony of long-time employee Kelli Vasquez.
According to Ms. Vasquez, Reed Hein isn’t a credit-repair company because when a customer calls to complaint that his or her credit was harmed by Reed Hein’s “services,” Ms. Vasquez offers only empathy.
- Dkt. 285 – Reply on Motion for Partial Summary Judgment (Credit Services Organizations Act), filed by the State on August 2, 2021.
- Dkt. 286 – Declaration of Aaron Fickes.
In its reply brief, the State relied on a June 2018 email message that Reed Hein’s chief operating officer Thomas Parenteau sent to multiple company employees. In the email message, Parenteau announced a “change.” He told employees that Reed Hein would no longer “sell nor offer credit repair with [its] timeshare exit services.”
The State argued that this email message is clear evidence that Reed Hein regularly violated the Credit Services Organizations Act through June 2018.
Motion for Partial Summary Judgment (Sussman Methods)
The State’s motion asks the Court to declare the timeshare-exit methods of lawyer Mitchell Sussman to be an unfair or deceptive trade practice. According to the State, Sussman regularly employed methods that “proved to be financially damaging, legally invalid, or even non-existent.”
The Court has yet to rule on this motion. A hearing was held on the motion on August 6, 2021.
- Dkt. 258 – Motion for Partial Summary Judgment (Sussman Methods), filed by the State on June 7, 2021.
Reed Hein referred more than eight thousand customers to lawyer Mitchell Sussman
In 2015, customer Timothy Bong paid Reed Hein approximately $6,000 to terminate his financial obligations to his timeshare developer. In exchange, Reed Hein paid lawyer Mitchell Sussman to write a letter to the developer, announcing Mr. Bong’s “resignation.”
Sussman’s letter cited two Supreme Court cases. In Booster Lodge v. NLRB, the Court held that federal courts properly refuse to enforce fines levied by labor unions against former union members who participated in strike-breaking activities. In NLRB v. Granite State, the Court held that a union cannot levy fines against members who have resigned from the union. Neither case has anything to do with timeshare ownership.
A few months after Sussman mailed his letter to the timeshare developer, Mr. Bong received a letter from a Reed Hein employee, congratulating him for “officially exiting” his timeshare.
Sussman’s efforts were ineffective, and the employee’s letter was meaningless. Today, a debt-collection company named Meridian Financial Services persists in its attempts to collect more than $14,000 from Mr. Bong.
- Dkt. 268 – Response to Motion for Partial Summary Judgment (Sussman Methods), filed by Reed Hein on July 26, 2021.
Reed Hein’s motion argues that the company successfully terminated Timothy Bong’s obligations to his timeshare company. According to Reed Hein, Mr. Bong was “out of his timeshare” because he was only receiving bills and collection notices from a debt-collection company. Reed Hein claimed to have successfully delivered a timeshare exit because Mr. Bong was no longer receiving bills from his timeshare developer.
Reed Hein apparently takes the position that Timothy Bong should thank the company for its efforts — even though a debt collector has reported more than $14,000 in unpaid obligations to the major credit bureaus, and even though Mr. Bong continues to receive collection notices relating to his timeshare obligations.
Reed Hein argued to the Court that it successfully secured a “timeshare exit” for Timothy Bong. Incredibly, Reed Hein submitted this debt-collection notice as evidence to support its argument.
Reed Hein designated Catherine Cerbone as an expert on its “timeshare-exit process.” Ms. Cerbone isn’t a lawyer, and she has never received any formal training on timeshare law.
Ms. Cerbone testified that she knows how to sell a timeshare on ebay.com, and that she trained other Reed Hein employees on how to track a timeshare’s “chain of title.”
Ms. Cerbone learned about timeshare law in two ways. (1) She studied “the internet.” (2) She worked at a different “timeshare-exit” company named Resort Release. The company declared bankruptcy in 2019.
Reed Hein’s expert on the “timeshare-exit process” learned about timeshare law while an employee of Resort Release — a different “timeshare-exit company.”
Like Reed Hein, Resort Release offered a “one-hundred-percent money-back guarantee.” In 2019, Resort Release declared bankruptcy, leaving hundreds of dissatisfied customers holding the bag.
- Dkt. 283 – Reply on Motion for Partial Summary Judgment (Sussman Methods), filed by the State on August 2, 2021.
- Dkt. 284 – Declaration of Mary Elizabeth Howe.
In its reply brief, the State pointed to deposition testimony of Mitchell Sussman himself. Sussman acknowledged that timeshare developers regularly reject the methods that he employs, and that his methods risk damage to a consumer’s credit score.