Ultimate Escapes and Quintess Lock Horns Over Membership Offer

By: Destination Club News
Date: September 21, 2010

The Ultimate Escapes bankruptcy story likely won't conclude for years to come as the fate of the club's properties, membership deposits, and other matters makes its way into the legal realm. Tomorrow, many points will be addressed during the first day's motions, including a dispute between Ultimate Escapes and Quintess about the Ultimate Escapes membership base.

Ultimate Escapes, the world's second largest destination club, and Quintess, the world's third largest destination club, had been in talks for the past six months to "create a solution with UE management and their creditors" to preserve the travel experience for members. Last week, Quintess made an offer to select Ultimate Escapes members involving an option to join the club by paying a "Transfer Fee" and annual dues. Ultimate Escapes quickly reacted by saying that the offer was not authorized by the club and have filed a complaint to assure that Quintess doesn't continue to offer the option to members as Ultimate Escapes continues to evaluate other alternatives.

According to the complaint, on September 16, 2010, Ultimate Escapes sent a letter to the President of Club Holdings and its General Counsel requesting that Club Holdings "cease and desist from using Member Information and soliciting Ultimate Escapes' members."

"Ultimate has become aware that Club Holdings, LLC ("CH") has used Ultimate's member lists and related member data ("Member Information") to solicit Ultimate's members ("Ultimate Members") as CH's members," the letter read in part. "Member Information is an important and valuable asset, and further constitutes highly-sensitive, commercial, and proprietary information that Ultimate maintains in strict confidence. As you are further aware, Ultimate has a financing arrangement with CapitalSource Bank, and as has been made clear to you by our lender, this confidential information serves as valuable collateral securing Ultimate's loan obligations."

The note from Jeffrey Wolf at Greenberg Traurig also stated that Club Holdings should immediately cease and desist:

• from the aforementioned unauthorized use of the Member Information;
• from contacting, soliciting, or otherwise communicating with Ultimate Escapes Members; and
• from otherwise acting in a manner that misappropriates Ultimate's proprietary rights and interests, and constitutes unfair competition, interference with contract and prospective economic advantage, and other tortious conduct.

Situations like this aren't new to the destination club industry. Following the Tanner & Haley bankruptcy, many clubs actively pursued their members. Private Escapes, now part of Ultimate Escapes, went through a virtually identical situation when they crafted a membership option for Tanner & Haley members shortly after the club's bankruptcy announcement. Following a cease and desist complaint, Private Escapes sent out an overnight package to each member rescinding the offer, so the members on the Ultimate Escapes executive team have been on both sides of this situation.

Tomorrow should be yet another newsworthy day in the destination club industry. Exclusive Resorts has made an offer to Ultimate Escapes members. Quintess has introduced their own offer. Other clubs that we have spoken to also are crafting custom opportunities for the Ultimate Escapes member base. In a story that has been non-stop for nearly two weeks, now may be the time for members to take a deep breath and wait to consider the various options that are, and will be, introduced to them. To learn more about each, please continue to check back in as more information becomes available.