IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

November 20, 2014 Session

NATHAN B. OVERTON ET AL. v. WESTGATE RESORTS,

LTD., L.P. ET AL.

Appeal from the Chancery Court for Sevier County

No. 12-6-294 Telford E. Forgety, Jr., Chancellor

No. E2014-00303-COA-R3-CV-FILED-JANUARY 30, 2015

This case involves the propriety of an award of punitive damages in the amount of

$600,000. The plaintiffs sued the defendant timeshare developer, seeking to rescind a

contract for purchase of a timeshare interest. The plaintiffs alleged, inter alia, that the

defendant was guilty of fraud and misrepresentation, as well as violations of the

Tennessee Time-share Act and the Tennessee Consumer Protection Act. Following the

hearing, the trial court ruled in favor of the plaintiffs and allowed them to rescind the

contract, ordering repayment of their purchase money. The trial court found that the

defendant had violated the respective statutory provisions and was guilty of fraud and

misrepresentation. The trial court thus determined that an award of punitive damages was

proper, and following a second hearing regarding the amount of the punitive damage

award, set such award at $600,000. The defendant has appealed this award. While we

affirm the determination of the trial court that $600,000 represents a reasonable award of

punitive damages considering all applicable factors, we must order remittitur of that

award to $500,000 in accordance with the statutory cap found in Tennessee Code

Annotated § 29-39-104(a)(5).

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed as Modified; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL

SWINEY and JOHN W. MCCLARTY, JJ., joined.

Gregory C. Logue and Robert L. Vance, Knoxville, Tennessee, for the appellant,

Westgate Resorts, Ltd., L.P.

John O. Belcher and Curtis R. Harrington, Nashville, Tennessee, for the appellees,
Nathan B. Overton and Patricia A. Overton.

OPINION

I. Factual and Procedural Background

The plaintiffs, Nathan and Patricia Overton, filed the instant action against

Westgate Resorts, Ltd., L.P. (“Westgate”), seeking to rescind a contract for purchase of a

timeshare interest at the Westgate Resort in Gatlinburg. The Overtons alleged fraud,

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misrepresentation, breach of contract, and violations of the Tennessee Time-share Act,

Tennessee Code Annotated § 66-32-101, et seq., and the Tennessee Consumer Protection

Act, Tennessee Code Annotated § 47-18-101, et seq. The Overtons also sought awards of

compensatory damages, enhanced or punitive damages, and attorney’s fees.

At trial, the Overtons testified that they traveled to Gatlinburg in July 2011 to

search for a cabin or timeshare to purchase for family vacations. The Overtons desired to

purchase a property or timeshare with sufficient space to accommodate their extended

family for a trip every December to celebrate Christmas and their wedding anniversary.

While walking in downtown Gatlinburg on the morning of July 12, 2011, Ms. Overton

happened upon a Westgate booth. She was told that she and her husband could attend a

ninety-minute presentation regarding the purchase of a timeshare and that they would

receive certain gifts in return.

Ms. Overton shared this information with her husband, and the Overtons decided

to attend the presentation. They traveled to the Westgate Resort in Gatlinburg, where

they were met by Robert Brian Justice, a Westgate salesperson. Mr. Justice provided

them with information about the resort and accompanied them to tour different timeshare

units. At some point, Raymond Veverka, a Westgate sales manager, joined the Overtons

and Mr. Justice to discuss purchase prices for the units. The Overtons described their

dealings with Mr. Justice and Mr. Veverka as “high pressure,” with the Overtons

spending a total of almost eight hours in discussions with the salespersons on that day.

During the presentation, the Overtons found a suitable unit that would

accommodate the needs of their extended family. It was described as Unit 458. Satisfied

with their choice, the Overtons decided to purchase a Westgate timeshare interest for a

purchase price of $39,280. According to the Overtons, their decision to purchase was

based on certain assurances from the salespersons that (1) the Overtons would be able to

Plaintiffs also named Westgate salespersons, Raymond Veverka and Robert Brian Justice, as defendants;

1

however, Mr. Veverka and Mr. Justice are not parties to this appeal.

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request and obtain a reservation for Unit 458 for the same week in December each year;

(2) the Overtons would have the right to book unlimited additional nights at any Westgate

resort for $49 to $69 per night (“Owners’ Nights”); (3) Mr. Justice and Mr. Veverka

would personally refund part of their commissions on the sale to the Overtons, in the

amounts of $1,000 and $500 respectively; and (4) Mr. Justice and Mr. Veverka would

purchase a foosball table that would be kept at the resort for the Overtons’ use during

their stays there.

The promises regarding the foosball table and the commission refunds were put in

writing and signed by the salespersons. The alleged promises regarding unlimited

Owners’ Nights and the guaranteed use of Unit 458 every December, however, were not

made a part of any written documentation. Rather, the documents signed by the Overtons

at the closing, which took place at approximately 11:00 p.m. that evening, specifically

state that the timeshare interest is for a “floating” week and unit. Following the closing,

the Overtons were presented with a briefcase containing copies of all of their closing

documents as well as three CD-ROM discs.

Following their departure from the Westgate Resort in Gatlinburg, the Overtons

traveled home to Dickson, Tennessee, expecting a call from Mr. Veverka the next day to

confirm their reservation for Unit 458 for December 2011. The call did not come. When

the Overtons were able to reach Mr. Veverka by telephone a few days later, he reportedly

assured them that their reservation for Unit 458 was complete. According to the

Overtons, when they subsequently tried to confirm their reservation with the individual

whom Mr. Veverka had instructed them to contact, they were informed that there existed

no guarantee of booking Unit 458 and that units were not assigned more than a few days

in advance of arrival.

The Overtons attempted to contact Westgate customer service, speaking to various

individuals about this purported misrepresentation. Through the course of numerous

phone calls, the Overtons were informed that they did not have unlimited Owners’ Nights

and could not be guaranteed the use of the week or unit they preferred from year to year.

The Overtons in turn contacted counsel, who reviewed the documents and CD-ROMs

provided to the Overtons at closing. During this review, it was discovered that the

Overtons had not been provided with a current and complete copy of Westgate’s public

offering statement (“POS”) as required by Tennessee Code Annotated § 66-32-112 and

-114, relevant sections of the Tennessee Time-share Act. Rather, the Overtons had been

provided with CD-ROMs that, upon further analysis by a computer expert, were

determined to contain only a POS from 2006 and other files with illegible pages. The

CD-ROMs were also nearly impossible to navigate without the required serial number,

which had not been explained to the Overtons. Consequently, pursuant to Tennessee

Code Annotated § 66-32-114, the Overtons sought to rescind the contract. Written notice

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of their request to rescind was sent to Westgate’s corporate office in Florida on October

25, 2011.

Counsel for Westgate sent a response on November 28, 2011, denying the

Overtons’ request to rescind the contract. The Overtons subsequently filed the instant

action. Following a trial conducted on June 19 and 20, 2013, the court ruled in favor of

the Overtons. Finding that the Overtons were never provided a correct and current POS

by Westgate, the trial court granted a rescission of the contract, ordering Westgate to

refund the Overtons’ purchase money. The trial court further determined that Westgate

intentionally failed to provide the Overtons with an accurate POS and intentionally

refused to rescind the contract “despite overwhelming evidence” that rescission was

justified.

Regarding additional claims presented by the Overtons, the court found that the

Overtons were promised gifts of a foosball table and unlimited Owners’ Nights without

proper disclosure in violation of Tennessee Code Annotated § 66-32-133. These

violations of the Tennessee Time-share Act were determined to be willful. The court

further found that Westgate had engaged in deceptive practices in violation of the

Tennessee Consumer Protection Act, specifically Tennessee Code Annotated § 47-18-

104, and that Westgate was guilty of common law fraud and misrepresentation with

regard to the promise of unlimited Owners’ Nights. The court specifically found that

Westgate trained its salespersons to make such a promise and knew that its salespersons

were representing that such a program existed even though the written documents did not

mention it.

With respect to the relief granted, the trial court ruled that the Overtons were

entitled to punitive damages for common law fraud and/or misrepresentation, as well as

enhanced statutory damages and attorney’s fees pursuant to the Tennessee Consumer

Protection Act. A future hearing date for determination of the amount of punitive

damages, enhanced damages, and attorney’s fees was established. The court concluded

that the Overtons would be allowed to elect between the punitive or enhanced damages

once the amounts had been established.

The hearing was conducted on October 21, 2013, with the parties presenting

information regarding Westgate’s financial status. Following the hearing, the trial court

issued a memorandum opinion, reiterating that the Overtons had established their

entitlement to punitive damages by clear and convincing evidence. The court explained

that although punitive damages were designed to punish the wrongdoer, they should not

run afoul of constitutional considerations such as reprehensibility of conduct, disparity

between the punitive damage award and the losses incurred by the plaintiffs, and the

difference between the punitive damage award and statutory damages. The trial court

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carefully reviewed the application of the nine factors discussed in Hodges v. S.C. Toof &

Co., 833 S.W.2d 896, 901-902 (Tenn. 1992).

Upon consideration of all applicable factors, the trial court established the punitive

damage award at $600,000, finding the most significant factors to be Westgate’s financial

position and the reprehensibility of its conduct. The enhanced statutory damages were set

at $113,340, which represented the amount of compensatory damages trebled. The

Overtons elected to receive the $600,000 punitive damage award. They were also

awarded $117,082 in attorney’s fees and $19,198 in litigation expenses.

Westgate filed a motion to alter or amend the judgment, which was subsequently

denied by the trial court. The Overtons filed a motion seeking additional attorney’s fees,

which the trial court granted in the amount of $25,429. Westgate timely appealed.

II. Issues

Westgate presents the following issues for our review, which we have restated

slightly:

1. Whether the trial court erred in ruling that the Overtons were entitled

to punitive damages based on clear and convincing evidence that

Westgate acted maliciously, intentionally, fraudulently, or recklessly.

2. Whether the trial court erred in awarding the Overtons $600,000 in

punitive damages.

3. Whether the trial court erred in ruling that Westgate willfully

violated the Tennessee Time-share Act and the Tennessee Consumer

Protection Act.

4. Whether the trial court erred in failing to enforce the forum selection

provision contained in the contract.

The Overtons raise the following additional issue:

5. Whether the Overtons should receive an additional award of

attorney’s fees on appeal pursuant to the Tennessee Time-share Act

and the Tennessee Consumer Protection Act.

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III. Standard of Review

Our standard of review is de novo with a presumption of correctness as to the trial

court’s findings of fact unless the preponderance of the evidence is otherwise. Tenn. R.

App. P. 13(d); McCarty v. McCarty, 863 S.W.2d 716, 719 (Tenn. Ct. App. 1992). No

presumption of correctness attaches to the trial court’s legal conclusions. Union Carbide

Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).

As this Court has previously explained, the question of whether the record

demonstrates clear and convincing evidence to support the trial court’s decision to award

punitive damages is a question of law, reviewed on appeal by applying the following

standard:

Under [the clear and convincing] standard of proof, the appellate court must

“distinguish between the specific facts found by the trial court and the

combined weight of those facts.” The facts as found by the trial court are

reviewed de novo on the record, presuming those findings to be correct

unless the evidence preponderates otherwise. Findings of fact based on

witness credibility are given great deference and will not be disturbed

absent clear evidence to the contrary. Whether the combined weight of the

facts, either as found by the trial court or supported by a preponderance of

the evidence, establish clearly and convincingly that [punitive damages are

warranted] is a question of law, subject to de novo review with no

presumption of correctness.

White v. Empire Exp., Inc., 395 S.W.3d 696, 721 (Tenn. Ct. App. 2012) (quoting In re

Samaria S., 347 S.W.3d 188, 200 (Tenn. Ct. App. 2011)).

IV. Westgate’s Liability for Award of Punitive Damages

Westgate contends that the trial court erred in its determination that an award of

punitive damages was warranted. As Westgate points out, punitive damages are

available in Tennessee if the trial court finds that a defendant has acted (1) intentionally,

(2) fraudulently, (3) maliciously, or (4) recklessly. See Hodges, 833 S.W.2d at 901.

Further, the Tennessee Time-share Act provides that a timeshare developer may be

subjected to a punitive damages award for a willful violation of the Act. See Tenn. Code

Ann. § 66-32-118 (2004).

In the instant action, the trial court found that Westgate acted both intentionally

and fraudulently. As our Supreme Court has explained:

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A person acts intentionally when it is the person’s conscious objective or

desire to engage in the conduct or cause the result. A person acts

fraudulently when (1) the person intentionally misrepresents an existing,

material fact or produces a false impression, in order to mislead another or

to obtain an undue advantage, and (2) another is injured because of

reasonable reliance upon that representation.

Hodges, 833 S.W.2d at 901 (internal citations omitted). The trial court also found that

Westgate willfully violated the Tennessee Time-share Act by failing to provide the

Overtons with a current and complete POS.

In relevant portion, the Tennessee Time-share Act requires:

A public offering statement must be provided to each purchaser of a

time-share interval and must contain or fully and accurately disclose:

(1) The name of the developer and the principal address of the

developer and the time-share intervals offered in the

statement;

(2) A general description of the units including, without

limitation, the developer’s schedule of commencement and

completion of all buildings, units, and amenities or if

completed that they have been completed;

(3) As to all units offered by the developer in the same

time-share project:

(A) The types and number of units;

(B) Identification of units that are subject to

time-share intervals; and

(C) The estimated number of units that may

become subject to time-share intervals;

(4) A brief description of the project;

(5) If applicable, any current budget and a projected budget

for the time-share intervals for one (1) year after the date of

the first transfer to a purchaser. The budget must include,

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without limitation:

(A) A statement of the amount, or a statement

that there is no amount, included in the budget

as a reserve for repairs and replacement;

(B) The projected common expense liability, if

any, by category of expenditures for the

time-share intervals;

(C) The projected common expense liability for

all time-share intervals; and

(D) A statement of any services not reflected in

the budget that the developer provides, or

expenses that it pays;

(6) Any initial or special fee due from the purchaser at

closing, together with a description of the purpose and method

of calculating the fee;

(7) A description of any liens, defects, or encumbrances on or

affecting the title to the time-share interval;

(8) A description of any financing offered by the developer;

(9) A statement that within ten (10) days from the date of the

signing of the contract made by the purchaser, where the

purchaser shall have made an on-site inspection of the

time-share project prior to the signing of the contract of

purchase, and where the purchaser has not made an on-site

inspection of the time-share project prior to the signing of the

contract of purchase fifteen (15) days from the date of signing

of the contract, the purchaser may cancel any contract for the

purchase of a time-share interval from developer;

(10) A statement of any pending suits material to the

time-share intervals of which a developer has actual

knowledge;

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(11) Any restraints on alienation of any number of portion of

any time-share intervals;

(12) A description of the insurance coverage, or a statement

that there is no insurance coverage, provided for the benefit of

time-share interval owners;

(13) Any current or expected fees or charges to be paid by

time-share interval owners for the use of any facilities related

to the property;

(14) The extent to which financial arrangements have been

provided for completion of all promised improvements; and

(15) The extent to which a time-share unit may become

subject to a tax or other lien arising out of claims against other

owners of the same unit.

Tenn. Code Ann. § 66-32-112 (2004). The Act further provides:

“[b]efore transfer of a time-share interval and no later than the date of any

sales contract, the developer shall provide the intended transferee with a

copy of the public offering statement and any amendments and supplements

thereto. The contract is voidable by the purchaser until the purchaser has

received the public offering statement.”

Tenn. Code Ann. § 66-32-114 (2004).

We agree with the trial court’s finding that Westgate willfully violated Tennessee

Code Annotated §§ 66-32-112 and -114. Westgate clearly failed to provide the Overtons

with a current and complete copy of the POS. Although the Overtons requested a written

copy of the POS, they were never provided same. Mark Barton, executive director of

contract processing at Westgate’s corporate headquarters in Florida, testified that it was

Westgate’s policy at that time to provide purchasers with the outdated POS on CD-ROM

plus written copies of the amendments. The Overtons, however, never received such

written amendments until after this litigation was commenced, even though Mr. Barton

testified that all such written amendments had been transmitted to the Gatlinburg resort.

Amanda Green, the executive director of sales at Westgate’s Gatlinburg resort,

testified that at the time of the Overtons’ purchase, the POS was made available on CDROM. She testified that following this incident, she learned Westgate was supposed to

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provide the amendments in paper form. Further, it is undisputed that the two CD-ROMs

received by the Overtons contained only the outdated versions of the POS as well as other

scanned files. According to testimony presented by a computer expert, the electronic

information was arguably inaccessible and largely illegible. As the trial court found, the

proof demonstrated that by providing only the CD-ROMs, Westgate intentionally

delivered information to the Overtons that was basically unusable.

In addition, when it was brought to Westgate’s attention in October 2011 that the

Overtons had not received a current and complete POS and desired to rescind the contract

pursuant to Tennessee Code Annotated § 66-32-114, Westgate refused the request.

Although Westgate asserted that the Overtons had received at closing the CD-ROMs

containing the POS, Mr. Barton conceded that it was known within the company that the

CD-ROMs did not contain the post-2006 amendments to the POS and that paper copies of

the amendments had to be provided to the purchaser. This proof demonstrates a willful

violation of the Tennessee Time-share Act.

The trial court also found that the Overtons were offered gifts of Owners’ Nights

and a foosball table without the proper disclosure in violation of Tennessee Code

Annotated § 66-32-133. This statutory section provides:

The following unfair acts or practices undertaken by, or omissions of, any

person in the operation of any prize or gift promotional offer, by any means,

including, but not limited to, by mail, by telephone, by advertisement or in

person, for a time-share project are prohibited:

* * *

(5) Failing to clearly and conspicuously disclose next to

each prize, gift, or thing of value offered or any

product offered for sale through the promotional plan

the item’s approximate verifiable retail value, . . . .

It is undisputed that, with regard to the promise of a foosball table and unlimited Owners’

Nights, no disclosures were made that listed the respective values of these items.

Further, the trial court found that the promise regarding unlimited Owners’ Nights

was a fraudulent and intentional misrepresentation by Westgate. Mr. Justice and Mr.

Veverka testified that they had been trained to inform potential buyers of the Owners’

Nights, which they understood to be unlimited additional nights that could be booked by a

timeshare owner at any Westgate resort for $59 per night or more. Mr. Barton testified

that he was generally aware of such a program but that it was beyond his scope of specific

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knowledge. Ms. Green likewise confirmed that such a program did exist. All parties

conceded, however, that to their knowledge, this program was not addressed in any of the

documentation. Moreover, the letter sent by Westgate’s counsel in November 2011 states

that “these nights must be approved by a manager and are on a per night basis. . . . Mr.

and Mrs. Overton do not have any owner’s nights approved for them.” Thus, as the trial

court found, there is evidence to support the determination that Westgate intentionally

engaged in common law fraud and misrepresentation with regard to the promise of

Owners’ Nights.

As noted above, a defendant acts intentionally when proceeding with a “conscious

objective or desire to engage in the conduct or cause the result.” Hodges, 833 S.W.2d at

901. Further, a defendant “acts fraudulently when (1) the person intentionally

misrepresents an existing, material fact or produces a false impression, in order to mislead

another or to obtain an undue advantage, and (2) another is injured because of reasonable

reliance upon that representation.” Id. In this transaction, Westgate allowed its

salespersons to make promises regarding Owners’ Nights that were illusory. Westgate

obviously desired to engage in such conduct in order to sell more timeshares. This

promise was shown to be a misrepresentation of the facts and certainly produced a false

impression, which misled the Overtons into purchasing a timeshare ownership interest.

The Overtons made such purchase while believing they were receiving this additional

illusory benefit, thus acting to their detriment.

Based on all the proof adduced at trial, the Overtons demonstrated by clear and

convincing evidence that Westgate engaged in conduct with regard to this transaction that

was intentional and fraudulent, and that it willfully violated the provisions of the

Tennessee Time-share Act. For these reasons, we determine that the trial court did not err

in ruling that an award of punitive damages was warranted. Further, although the

Tennessee Consumer Protection Act does not provide for the remedy of punitive

damages, in response to Westgate’s third issue, we determine that the trial court correctly

ruled that Westgate willfully violated this Act as well.

As applicable to the case at bar, the Tennessee Consumer Protection Act provides:

(a) Unfair or deceptive acts or practices affecting the conduct of any trade

or commerce constitute unlawful acts or practices and are Class B

misdemeanors.

(b) The following unfair or deceptive acts or practices affecting the conduct

of any trade or commerce are declared to be unlawful and in violation of

this part:

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* * *

(5) Representing that goods or services have sponsorship,

approval, characteristics, ingredients, uses, benefits or

quantities that they do not have or that a person has a

sponsorship approval, status, affiliation or connection that

such person does not have;

* * *

(12) Representing that a consumer transaction confers or

involves rights, remedies or obligations that it does not have

or involve or which are prohibited by law; . . . .

Tenn. Code Ann. § 47-18-104 (2013).

The trial court found that Westgate had willfully violated these provisions of the

Tennessee Consumer Protection Act. We agree that Westgate violated Tennessee Code

Annotated § 47-18-104(b)(12). Westgate salespersons were trained to promise unlimited

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Owners’ Nights as a right that would be received by the purchaser along with the

timeshare interest. It is undisputed, however, that this promise was not documented in

written form. Further, when the Overtons’ counsel inquired about the Owners’ Nights

promised to the Overtons, Westgate’s counsel responded that the Overtons had not been

“approved” for same. It is clear that Westgate represented that the timeshare interest

transaction conferred rights that were not actually involved, thus violating Tennessee

Code Annotated § 47-18-104(b)(12).

Following a thorough review of the evidence in this matter, we affirm the trial

court’s findings that Westgate engaged in intentional and fraudulent conduct and that

Westgate willfully violated both the Tennessee Time-share Act and the Tennessee

Consumer Protection Act. We find no error in the trial court’s determination that an

award of punitive damages was warranted.

V. Amount of Award of Punitive Damages

Alternatively, Westgate asserts that the amount of the punitive damage award was

improper and excessive. As our Supreme Court has explained, once a defendant has been

Westgate did not violate Tennessee Code Annotated § 47-18-104(b)(5) because a timeshare interest is an

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estate in real property, see Tennessee Code Annotated § 66-32-103, and is not a good or service as defined in

Tennessee Code Annotated §§ 47-18-103(7) and (18).

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found liable for punitive damages, the amount of such damages shall be determined in a

separate proceeding. See Hodges, 833 S.W.2d at 901. When determining the proper

amount of a punitive damage award, the trial court shall consider the following factors

where relevant:

(1) The defendant’s financial affairs, financial condition, and net worth;

(2) The nature and reprehensibility of defendant’s wrongdoing, for example

(A) The impact of defendant’s conduct on the plaintiff, or

(B) The relationship of defendant to plaintiff;

(3) The defendant’s awareness of the amount of harm being caused and

defendant’s motivation in causing the harm;

(4) The duration of defendant’s misconduct and whether defendant

attempted to conceal the conduct;

(5) The expense plaintiff has borne in the attempt to recover the losses;

(6) Whether defendant profited from the activity, and if defendant did

profit, whether the punitive award should be in excess of the profit in order

to deter similar future behavior;

(7) Whether, and the extent to which, defendant has been subjected to

previous punitive damage awards based upon the same wrongful act;

(8) Whether, once the misconduct became known to defendant, defendant

took remedial action or attempted to make amends by offering a prompt and

fair settlement for actual harm caused; and

(9) Any other circumstances shown by the evidence that bear on

determining the proper amount of the punitive award.

Hodges, 833 S.W.2d at 901-02; see also Tenn. Code Ann. § 29-39-104. The primary

purpose of a punitive damage award is to deter misconduct. Id. at 902.

In addition, as this Court recognized in Wilson v. Americare Sys., Inc., No.

M2013-00690-COA-RM-CV, 2014 WL 791936 at *2-3 (Tenn. Ct. App. Feb. 25, 2014):

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After Hodges, another layer of analysis was added due to the United States

Supreme Court case of BMW of North America, Inc. v. Gore, 517 U.S. 559,

116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). As explained in Flax v.

DaimlerChrysler Corp., 272 S.W.3d 521 (Tenn. 2008):

The Court [in Gore] concluded that due process requires that

“a person receive fair notice not only of the conduct that will

subject him to punishment, but also of the severity of the

penalty that a State may impose.” Accordingly, the Court

adopted three guideposts for determining whether a defendant

has adequate notice of the magnitude of the sanction that may

be imposed. The first and most important guidepost is the

reprehensibility of the defendant’s conduct. The Court

indicated that the presence of violence, deceit, reckless

disregard for the safety of others, or repeated misconduct may

be aggravating factors that increase the reprehensibility of the

defendant’s conduct. The second guidepost is the ratio

between the punitive damage award and the actual harm

suffered by the plaintiff. Although the Court declined to

adopt any strict mathematical formula, it repeated the

suggestion from a previous case that “a punitive damages

award of ‘more than 4 times the amount of compensatory

damages’ might be ‘close to the line’” of constitutional

impropriety. The final guidepost requires courts to compare

the punitive damage award to civil or criminal penalties that

could be imposed for similar conduct. “[A] reviewing court

engaged in determining whether an award of punitive

damages is excessive should ‘accord “substantial deference”

to legislative judgments concerning appropriate sanctions for

the conduct at issue.’” These legislative judgments are

relevant because they provide defendants with notice of the

severity of the penalty that may be imposed upon them.

Id. at 537 (internal citations omitted). “When deciding whether a punitive

damages award is excessive to the point that it transgresses constitutional

due process standards, our review is de novo to ensure that the award is

based on an application of the law rather than the jury’s caprice.” Goff v.

Elmo Greer & Sons Constr. Co., 297 S.W.3d 175, 190 (Tenn. 2009) (citing

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct.

1513, 155 L.Ed.2d 585 (2003)).

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Wilson, 2014 WL 791936 at *2-3.

Upon a thorough review of the trial court’s memorandum opinion, we determine

that the trial court properly considered and applied the above-listed factors. With regard

to the nine factors set forth in Hodges, 833 S.W.2d at 901-02, the trial court examined

each factor in turn in accordance with the facts developed at trial. The court engaged in

substantial analysis of the first two factors regarding Westgate’s financial position and the

reprehensibility of the conduct, finding these factors to be the most significant. The trial

court opined that, with Westgate’s appreciable assets and income, it would “take[] a lot of

money to make them feel it.” The court noted that in 2011, Westgate generated income

of $545,568,329 while owning total assets of $1,389,788,000. In support of the punitive

damage award, the trial court observed, “How are you going to deter somebody with that

kind of income? It takes more than a slap on the wrist. What is a lot of money to you and

me is very little money to Westgate.” The court also determined that the conduct of

Westgate had a severe negative impact on the Overtons, that Westgate had engaged in

“high-pressure tactics,” and that Westgate made intentional misrepresentations regarding

the transaction.

The court next addressed factors three and four, determining that Westgate’s

motivation for its conduct was to sell timeshare interests. Furthermore, Westgate’s

misconduct continued long after the sale as Westgate refused to rescind the contract,

causing the Overtons to incur a greater loss of time and money. In applying factors five

and six, the court found that the Overtons had expended over $136,000 in attorney’s fees

and that Westgate profited from its conduct by making a sale. With regard to factor

seven, the trial court noted that there was no evidence that Westgate had been subjected to

a punitive damage award before. Finally, with reference to factor eight, the court found

that Westgate did not take remedial action or attempt to make amends once the

misconduct became known to it.

In further support of the award, the trial court discussed the factors elucidated by

the U.S. Supreme Court in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996).

Those considerations are (1) reprehensibility of the conduct, (2) the ratio between the

punitive damage award and the actual harm suffered by the plaintiff, and (3) a

comparison of the punitive damage award to civil penalties imposed in comparable cases.

Id. The High Court explained that “trickery and deceit” were examples of conduct

considered to be reprehensible. Id. at 576. As stated above, the trial court herein found

Westgate’s conduct to be exceedingly reprehensible, due to the fact that Westgate made

intentional misrepresentations to the Overtons, willfully violated the Tennessee Timeshare Act, and refused to rescind the contract despite statutory provisions supporting such

rescission.

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Westgate contends that the punitive damage award is unconstitutionally

disproportional inasmuch as it is approximately sixteen times the amount of the

compensatory damage award. As explained by the U.S. Supreme Court, however:

we have consistently rejected the notion that the constitutional line is

marked by a simple mathematical formula, even one that compares actual

and potential damages to the punitive award. Indeed, low awards of

compensatory damages may properly support a higher ratio than high

compensatory awards, if, for example, a particularly egregious act has

resulted in only a small amount of economic damages. A higher ratio may

also be justified in cases in which the injury is hard to detect or the

monetary value of noneconomic harm might have been difficult to

determine. It is appropriate, therefore, to reiterate our rejection of a

categorical approach. Once again, “we return to what we said ... in Haslip:

‘We need not, and indeed we cannot, draw a mathematical bright line

between the constitutionally acceptable and the constitutionally

unacceptable that would fit every case. We can say, however, that [a]

general concer[n] of reasonableness . . . properly enter[s] into the

constitutional calculus.’” In most cases, the ratio will be within a

constitutionally acceptable range, and remittitur will not be justified on this

basis. When the ratio is a breathtaking 500 to 1, however, the award must

surely “raise a suspicious judicial eyebrow.”

BMW, 517 U.S. at 582-83 (internal citations omitted). Further, in Wilson, this Court

affirmed a punitive damage award that was approximately seventeen times greater than

the compensatory damage award. 2014 WL 791936 at *7. This Court also pointed out

that in Goff v. Elmo Greer & Sons Constr. Co., 297 S.W.3d 175, 195 (Tenn. 2009), there

were noted “a number of decisions with higher ratios.” Wilson, 2014 WL 791936 at *7.

Based upon this precedent, we do not find the ratio of punitive damages to compensatory

damages in this case to run afoul of due process concerns.

Finally, BMW instructs that we must consider the difference between the punitive

damage award and the penalties imposed in comparable cases. 517 U.S. at 583. As

explained by the High Court:

Comparing the punitive damages award and the civil or criminal penalties

that could be imposed for comparable misconduct provides a third indicium

of excessiveness. As Justice O’CONNOR has correctly observed, a

reviewing court engaged in determining whether an award of punitive

damages is excessive should “accord ‘substantial deference’ to legislative

judgments concerning appropriate sanctions for the conduct at issue.”

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Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S., at

301, 109 S.Ct., at 2934 (opinion concurring in part and dissenting in part).

In Haslip, 499 U.S., at 23, 111 S.Ct., at 1046, the Court noted that although

the exemplary award was “much in excess of the fine that could be

imposed,” imprisonment was also authorized in the criminal context.

BMW, 517 U.S. at 583.

In the case at bar, the Tennessee Time-share Act authorizes a civil right of action

against a developer who violates the Act. See Tenn. Code Ann. § 66-32-118. It also

provides for the imposition of criminal penalties. See id. The Tennessee Consumer

Protection Act likewise authorizes a civil right of action, criminal penalties, and in certain

cases, treble damages. See Tenn. Code Ann. § 47-18-101, et seq. The trial court herein

found that the treble damage award would have been $113,340. We do not find the

punitive damage award of $600,000 to be excessive based on the civil penalties that could

have been awarded pursuant to the statutes, especially when coupled with the prospect of

criminal penalties as well. In any event, the initial two factors identified in BMW are

often afforded greater weight than the third. See Wilson, 2014 WL 791936 at *7. Upon

careful review, we therefore determine that the punitive damage award of $600,000 was

reasonable, based on applicable factors, and supported by a ratio within a constitutionally

acceptable range.

VI. Applicability of Tennessee Code Annotated § 29-39-104

Determining that the punitive damage award was reasonable based on the

applicable factors and constitutional considerations, however, does not end our inquiry.

As Westgate points out, the Tennessee Legislature enacted a statutory cap on punitive

damages in 2011, which is contained in Tennessee Code Annotated § 29-39-104. This

statute provides, in pertinent part:

(a) In a civil action in which punitive damages are sought:

* * *

(5) Punitive or exemplary damages shall not exceed an amount equal to the

greater of:

(A) Two (2) times the total amount of compensatory damages

awarded; or

(B) Five hundred thousand dollars ($500,000);

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(6) The limitation on the amount of punitive damages imposed by

subdivision (a)(5) shall not be disclosed to the jury, but shall be applied by

the court to any punitive damages verdict;

* * *

(b) Nothing in this section shall be construed as creating a right to an award

of punitive damages or to limit the duty of the court, or the appellate courts,

to scrutinize all punitive damage awards, ensure that all punitive damage

awards comply with applicable procedural, evidentiary and constitutional

requirements, and to order remittitur when appropriate.

Tenn. Code Ann. § 29-39-104 (2011).

Tennessee Code Annotated § 29-39-104 was enacted by Chapter 510 of the Public

Acts of 2011, which states: “This act shall take effect October 1, 2011, the public welfare

requiring it and shall apply to all liability actions for injuries, deaths and losses covered

by this act which accrue on or after such date.” Therefore, Tennessee Code Annotated §

29-39-104 will only apply to the case at bar if the Overtons’ injury or loss accrued on or

after October 1, 2011.

It is undisputed that the Overtons purchased the timeshare interest at issue on July

12, 2011. This was the date of the initial transaction and the date upon which the various

promises were made to the Overtons. It is also undisputed, however, that the Overtons

did not seek to rescind the contract until October 25, 2011, and their request to rescind

was denied by Westgate via letter dated November 28, 2011.

In a recent case involving a claim of fraud, this Court explained that: “Under the

discovery rule, a cause of action accrues ‘when a plaintiff discovers, or in the exercise of

reasonable care and diligence, should have discovered, his injury and the cause thereof.’”

See Berry v. Mort. Elec. Registration Sys., No. W2013-00474-COA-R3-CV, 2013 WL

5634472 at *6 (Tenn. Ct. App. Oct. 15, 2013) (quoting Russell v. Household Mort. Servs.,

No. M2008-01703-COA-R3-CV, 2012 WL 2054388 at *5 (Tenn. Ct. App. June 7, 2012).

Therefore, the Overtons’ injury based on Westgate’s fraud did not accrue until it was

discovered by the Overtons. Based on the fact that Westgate’s refusal of the Overtons’

request for rescission did not occur until November 28, 2011, we determine that their

injury did not fully accrue until after October 1, 2011, thus rendering Tennessee Code

Annotated § 29-39-104 applicable to this action.

Similarly, a claim under the Tennessee Consumer Protection Act accrues when a

plaintiff discovers the unlawful act or practice. See Tenn. Code Ann. § 47-18-110; see

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also Fortune v. Unum Life Ins. Co. of Am., 360 S.W.3d 390, 402 (Tenn. Ct. App. 2010).

In the case at bar, the Overtons’ claim did not accrue until they discovered that Westgate

was guilty of unlawful acts, and this was not made clear until receipt of the abovereferenced letter from Westgate’s counsel in November 2011, denying that the Overtons

were entitled to Owners’ Nights. Again, Tennessee Code Annotated § 29-39-104 should

have been applied by the trial court to the punitive damage award herein as the injury or

loss did not accrue until after October 1, 2011.

Pursuant to the language of Tennessee Code Annotated § 29-39-104 (a)(6), the

statutory cap on punitive damages “shall not be disclosed to the jury, but shall be applied

by the court to any punitive damages verdict.” In this case, where the punitive damage

award was set by the trial court after proper consideration of all factors, the court should

have then applied the statutory cap and reduced the punitive damage award to $500,000

in accordance with Tennessee Code Annotated § 29-39-104(a)(5). As stated in Tennessee

Code Annotated § 29-39-104(b), this Court must still scrutinize the punitive damage

award and ensure that it complies with all applicable requirements, as we have done.

Thus, while we find that the trial court properly awarded a reasonable amount of punitive

damages based on all applicable considerations, we must order remittitur of that award to

$500,000 in order to comply with the statutory cap. We therefore determine that the

punitive damage award should be reduced to $500,000 in accordance with Tennessee

Code Annotated § 29-39-104(a)(5).

VII. Forum Selection Clause

Westgate posits that the trial court erred in failing to enforce the forum selection

clause contained in the parties’ contract, which provided that any litigation arising

between the parties would take place in Orange County, Florida. The Overtons assert,

however, that an action brought pursuant to the Tennessee Consumer Protection Act is to

be brought “in the county where the alleged unfair or deceptive act took place.” Tenn.

Code Ann. § 47-18-109(a)(2) (2013).

The Tennessee Consumer Protection Act further provides:

(b) Any provision in any agreement or stipulation, verbal or written,

restricting jurisdiction or venue to a forum outside this state or requiring the

application of the laws of another state with respect to any claim arising

under or relating to the Tennessee Consumer Protection Act of 1977 and

related acts set forth in this title is void as a matter of public policy.

Tenn. Code Ann. § 47-18-113 (2013). Pursuant to this statutory provision, a contractual

forum selection clause “cannot defeat the ability of a Tennessee consumer to bring an

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action under the [Tennessee Consumer Protection Act] within the appropriate forum in

this state.” See Walker v. Frontier Leasing Corp., No. E2009-01445-COA-R3-CV, 2010

WL 1221413 at *5 (Tenn. Ct. App. Mar. 30, 2010).

Further, as Westgate concedes in its brief, the Overtons alleged in their complaint

that they were fraudulently induced into entering into the contract, and the trial court

found fraud in the transaction. As we have previously stated, “fraud in the underlying

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transaction renders a contract clause, such as the forum selection clause at issue here,

unenforceable.” Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct. App. 2000).

For these reasons, the trial court properly refused to enforce the forum selection clause

contained in this contract.

VIII. Attorney’s Fees

Finally, the Overtons request an additional award of attorney’s fees and expenses

on appeal. The Overtons assert that a plaintiff may be awarded reasonable attorney’s fees

incurred during an appeal on a claim brought under the Tennessee Consumer Protection

Act where one or more of the Tennessee Consumer Protection Act’s provisions has been

violated. See Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406, 410 (Tenn. 2006).

Given the sufficiency of the punitive damage award in this case, however, we do not find

it appropriate to grant an additional award of attorney’s fees on appeal.

IX. Conclusion

For the reasons stated above, we affirm the judgment of the trial court as modified,

reducing the punitive damage award to $500,000. We deny the Overtons’ request for an

award of attorney’s fees on appeal. Costs on appeal are taxed to the appellant, Westgate

Resorts, Ltd., L.P. This case is remanded to the trial court, pursuant to applicable law, for

collection of costs assessed below.

_________________________________

THOMAS R. FRIERSON, II, JUDGE

Westgate argues that the Overtons were required to show that they were fraudulently induced into

3

accepting the forum selection clause itself, rather than the contract as a whole, in order to invalidate the forum

selection clause, citing Chaffin v. Norwegian Cruise Line, Ltd., No. 02A01-9803-CH-00080, 1999 WL 188295 at

*13-14 (Tenn. Ct. App. Sept. 13, 1999). We find Chaffin to be inapplicable, however, because its holding was based

on federal maritime law.

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