The Third Chamber of the Brazilian Superior Court decided that the hotel operator Blue Tree should not be a defendant in a lawsuit filed by a condominium-hotel unit buyer who claimed the right to cancel a transaction due to the temporary suspension of the construction works of a real estate project in São Carlos, São Paulo state.

The plaintiff filed a revocation and indemnification lawsuit requiring the termination of a commitment to purchase and sale, plus restitution of funds paid to the real estate developer and compensation for moral damages.

The joint liability claim presented by the plaintiff against both the hotel brand and the developer as defendants was based on these arguments: (i) the project branding was a strong motivation for the plaintiff to acquire the real estate, as it led to an expectation of the project’s success; (ii) interpretation of Articles 7, 18 and 30 of the Brazilian Consumer Defense Code, which establish that the service renderer or supplier that associates a trademark to a service or product should be liable for marketing expectation damages; and (iii) the good faith principle that rules contractual relationships.

The decision partially granted the plaintiff’s claim to terminate the commitment to purchase and sale, as well as ordering restitution of the entire amount of money paid by the plaintiff, plus interest, but denying the claim for moral damages and excluding Blue Tree as a defendant.

In view of the plaintiff’s appeal, the Seventh São Paulo Appellate Court had partially granted the plaintiff’s claim, acknowledging that Blue Tree had assumed joint liability towards the developer, considering that its brand was included in the enterprise’s marketing material, which stated that condominium management would be carried out by the hotel operator further to the completion of the works, but denying moral damages.

The appellate court decision was partially reversed on February 19, 2019 in the Superior Court’s Third Chamber, in the Special Appeal REsp 1.785.802 judgement, based on the report judge’s (Judge Ricardo Vilas Bôas Cuevas) vote; the unanimous decision held that the hotel operator’s main liability would be for post-opening services and that Blue Tree had no participation in the commercialization of the units.

In its opinion, the court considered that Blue Tree should not be a defendant in the lawsuit because (i) the hotel brand’s role was adequately publicized in the marketing material; (ii) the purchaser was an investor (the flat was to be included in a rental pool) and not the final consumer of Blue Tree services, so that the Consumer Defense Code does not apply; and (iii) as an investor, Blue Tree, as the hotel operator, was also frustrated in its business goals when construction was suspended.

It is important to point out that this change of position is in line with CVM Instruction 602/2018, which regulates the public offer of distribution of condominium-hotel collective investment agreements, as well as the most recent CVM administrative judgments regarding the matter, in the sense that the hotel operator is not considered an offeror unless it acts in the securities’ distribution.