Country Club Membership

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By: Rob Harris

A number of months ago, we discussed a lawsuit brought by Arizona’s Desert Mountain Club against members who had purported to withdraw.

The club claimed that the members’ purported withdrawal was ineffective and that they remained liable for the ongoing payment of their dues, until such time as their names were reached on a membership surrender list and they paid a surrender fee. The club’s argument was based on bylaws that had been adopted over the years.

The legal question that seemed potentially interesting was whether members could be held responsible for membership termination conditions that were embodied in bylaws adopted AFTER they had joined the club. Arguably, such provisions would be a unilateral alteration of the contractual terms to which they agreed at the time they joined.

Recently, an Arizona court ruled in favor of the club. As the court’s opinion explains:

Plaintiff [the club] points out that the bylaws contain no provision allowing an equity member to simply “resign” and stop paying dues. It further argues that the bylaws’ provisions are unambiguous with respect to transfers of memberships, and regardless of whether the word “resign,” “transfer,” or “surrender” is used, it is clear that the only way an equity member in Defendants’ positioncan divest themselves of their membership is through the Club, and until a sale or reissuance occurs, they must continue to pay dues.

Under Arizona law, a trial court should read a contract “in light of the parties’ intentions as reflected by their language and in view of all the circumstances,” and if their intention “is clear from such a reading,” the contract is unambiguous. Smith v. Melson, Inc., 135 Ariz. 119,121, 659 P.2d 1264, 1266 (1983). It must also construe a contract “to give effect to all its provisions and to prevent any of the provisions from being rendered meaningless.” Scholten v. Blackhawk Partners, 184 Ariz. 326, 329, 909 P.2d 393, 396 (App. 1995).

Reading the bylaws as a whole, it is clear that Club equity memberships are not simplya greements to pay for the use of facilities, such as a membership at a gym. They have no contractual time periods or expiration dates. Payment of the Membership Contribution procures the equity member an ownership interest in the Club. The membership can be bought and sold on the market (albeit only through the procedures set forth in the bylaws). In addition, equity members are entitled to vote, and if dissolution and liquidation were to occur, they are entitled to a pro rata share of remaining assets. In contrast, non-equity members have no vote and may not hold office or participate in any share of liquidation proceeds.

Further, the Club has established a certain number of equity memberships and relies on the dues, fees and assessments paid by those members to maintain the Club. If equity members were permitted to simply “resign” and stop paying their dues, the viability of the Club would be jeopardized. Permitting such resignations would therefore be contrary to any reasonable business objective of the Club…

In short, the bylaws contain comprehensive provisions regarding the divestiture of memberships, and those provisions unambiguously require the member to surrender or submi this membership to the Club for resale or reissuance, and to continue to pay dues until that is accomplished. The Court declines to engraft a new provision allowing equity members to resignand stop paying dues, when such a provision is nowhere suggested in the bylaws and wouldundermine the purpose of the equity membership program.

The court’s opinion must be read as an emphatic protection of the entity at the expense of individual members’ desires. While the business logic underlying the decision is clear and, in the minds of many, warranted, the opinion is notable in that it did not even address the legal significance of the fact that the bylaws at issue were adopted after the members joined the club. While it may be true that the original membership documents provided that members would be subject to subsequently adopted restrictions, one might have expected to see a discussion of that point in the court’s opinion.


By: Rob Harris

There certainly is no shortage of stories today about Golf fraud. Of course, almost all of them are discussing Volkswagen emissions software.

Buried among the golf fraud stories, however, is one that may be of more interest to some of you.

Apparently, the Singapore High Court has issued an injunction freezing almost $20 million of assets of a long time insider of Singapore’s premier Keppel Club, together with two accomplices.

As reported, a “probe had detected ‘irregularities’ in more than 1,300 membership transfers at the club spanning a decade from 2004. Among other things, some membership files contained only the records of payment of the food and beverage deposit to the club, not the membership transfer fees.”

By: Rob Harris

A class action federal jury trial is scheduled to begin shortly in which members of a high end Idaho golf club seek to recoup their big dollar initiation fees from the bank that acquired ownership of the club before flipping it to a new purchaser.

As reported:

“According to court documents, the question a jury will answer is whether the bank took responsibility for the members’ deposit funds when it became the owner of the club. There were approximately 300 members.

“Along with the estimated $29 million in deposits, the plaintiffs believe they are due interest of 12 percent since 2010, totaling approximately $15 million. They also want punitive damages.

“Those who wanted to be part of the club overlooking Lake Coeur d’Alene bought property surrounding the golf course and paid a “membership deposit,” which ranged from tens of thousands of dollars to $125,000. The price increased over time.

“Washington Trust Bank purchased the club…after it fell into financial distress.

“The bank sold the club to a small group of investors, which has been operating it under the slightly different name of The Golf Club at Black Rock. The group collected new membership deposits.”

The case heads for trial in light of the court’s refusal to grant summary judgment to either side. The court’s decision can be found here.

By: Rob Harris

West Virginia’s Preston Country Club finds itself defending a federal lawsuit arising out of allegations that a participant in the Tri-State Golf Tournament was subjected to “racial epithets, derogatory language and intimidation” by a club board member.

The complaint alleges that the statements created “an atmosphere where the plaintiff feared for his life and had to leave the golf course, not finishing the tournament.” The complaint asserts that the board member hit the plaintiff’s golf cart with his own and said to plaintiff, “I’ve put more money in this place than your black … (expletive).”

The suit against the club is based upon claims that the club “clearly did not take sufficient steps to prevent the hostile environment from arising and persisting until the Plaintiff’s departure.”

The suit also alleges the club “did not take sufficient steps to prevent the hostile environment, did not take adequate measures (i.e. proper training) to prevent the incident to begin with, and there was no follow-up from the country club to apologize and to correct the problem.”

By: Rob Harris

The governing boards of golf clubs sometimes are called upon to discipline members for actions deemed in violation of rules or otherwise inappropriate.

Britain’s Whetstone Golf Club recently suspended three female members, including Ladies’ Captain Pam Nutting, competition secretary Lesley Bailey and a third member, Janet Morris, for what has been characterized as “unbecoming behavior.”

And what was this “unbecoming behavior”?  Blatant cheating in a club tournament? Unruly conduct at the holiday social? Not exactly….

Reportedly, after completing their round, the three golfers headed for the club dining room, where they encountered a group of mothers and children, including one mother engaged in breast feeding.  One of the offenders was heard commenting, “gosh, are we running a crèche?” The comment that may have broke the club board’s back, however, may have been the one stating that the breastfeeding mom was putting them “right off their food.”

Following these comments, the three members found themselves on the receiving end of a club suspension. Two of the members subsequently resigned in protest, with the third having opted to challenge her suspension.

All in a day’s work for a club board.


By: Rob Harris

Those harboring the fantasy of building a home in a designer golf community in South Carolina’s Lowcountry apparently have an opportunity to pick the land up on the cheap. An informative article published at says that at least 26 lots are on the market for $1, with dozens more available for less than $10,000.

The catch? Ownership carries with it the obligation to assume mandatory memberships in the golf courses.

The economic decline of a few years ago, together with a reduction in golf popularity, has driven many residents to seek to escape their golf club membership obligations. With a shortage of purchasers eager to assume the memberships, they find themselves forced to give away the land.

The optimists–real estate agents and community officials–claim the market will turn. Said one agent, “if you’re looking to buy, you just hit the lottery.”

On the other hand, others claim the diminished property values are inextricably tied to the rules that force property owners to be club members.

Members at one club, Callawassie Island, are challenging these rules in a federal court action filed last year. (See our prior post here.)

So, for those looking for golf community bargains, with the desire and ability to front membership fees, take a look. But, as always, buyer beware.


By: Rob Harris

Who would have thought that the Bruce / Caitlyn Jenner news would have a golf angle? But it does. As reported today:

“Caitlyn Jenner has some tricky day-to-day changes in store, including where she eats, drinks and changes clothes … at the country club which has become her home away from home.

“Bruce Jenner became a member of Sherwood Country Club in Thousand Oaks, CA 15 years ago. He golfed there almost every day and established close relationships with his golfing buddies. It’s a very exclusive, ritzy club with an initiation fee ranging between $150,000 and $300,000.

“But now that Bruce is Caitlyn, the rules partially segregate her from the male members.

“For starters, there’s a grill in the locker room that is male only. The women’s locker room has its own eating area which is way more scaled down.

“Our Sherwood sources say the board will enforce the rules, which means the camaraderie Bruce shared with the other members will be impeded now that she’s Caitlyn.

“But we’re also told the board is open to an appeal by Caitlyn herself. She can attempt to make a case that she can keep the same privileges she had when she was Bruce.

“The club is closed for renovations until December, which means there’s time to sort things out.”

While it’s easy to posit all the rules contortions that Sherwood Country Club and Caitlynn Jenner may need to navigate, doesn’t his transition tee up the more important question of what role gender should play at private clubs in this day and age?
A person who is unwelcome in one eating area on Monday but an invited guest on Tuesday ….. hmmmm


By: Rob Harris

Diamante is a residential golf development in Arkansas whose governing documents require homeowners to be dues paying members of the golf club. Several years ago, Gary and Linda Dye brought suit against the club, challenging the enforceability of this membership requirement. The club attempted to derail the litigation by invoking an arbitration provision. The courts rejected the club’s effort, claiming that it waited too long to raise the arbitration issue (“Dilly-Dallying Club Loses Right To Arbitrate Member Dispute“).

In the meantime, Mr. and Ms. Dye opted to attempt to convert their claim into a class action, thereby purporting to assert on behalf of all 450 members of the association that they could not be forced to maintain paid membership in the golf club.

The club challenged the class action effort, claiming that, even though the club could not require Mr. and Ms. Dye to arbitrate their claims against the club, the claims of the other members were subject to arbitration. The club’s right to have the members’ disputes arbitrated would be undermined by a class action.

The trial court rejected the club’s argument, and trial proceeded. Last week, after the evidence was presented, but before the trial court issued a decision, the Arkansas Supreme Court held that the club is entitled to a new hearing on its arbitration claim. As the court explained, the lower court–while deciding the issue of the arbitrability of the claims brought by Mr. and Ms. Dye–has not decided the issue of whether the other 450 class members are subject to an enforceable arbitration provision.

One justice, however, offered a lone dissenting voice, having none of the club’s argument about arbitration. As he explained:

“This case is an example of what is happening around the country from the United States Supreme Court’s rulings on the enforcement of arbitration agreements under federal law. Courts everywhere are trying to reason through the legal morass of class action law when confronted with arbitration agreements. This issue will not go away any time in the near future unless and until Congress makes changes to the forced arbitration requirements.In the instant case, there are approximately 450 purchasers of land on a golf course whose original contracts did not contain an arbitration clause but had a provision that the purchasers would be subject to by-laws of the golf course even as amended in the future. After the original purchase agreement, the by-laws were amended to contain an arbitration clause…

“The bottom line in this case is this—if the Appellant obtains the relief that it desires on the motion to compel arbitration of the unnamed class members, all of the class members other than the class representatives will be required to arbitrate and there will be no class action even though it has already been certified as a class action…

“One of the prime objectives of arbitration is to achieve ‘streamlined proceedings and expeditious results.’…  Arbitrations for the 450 individual land owners is not as streamlined nor expeditious as a class action which has already been certified.”


By: Rob Harris

With over 95 per cent of civil lawsuits never being tried to conclusion, litigation primarily is an effort at generating bargaining chips to be opportunely played by a party as it pursued an optimal settlement.

A great example of this is presented by the dispute between the owner of California’s Ridgemark Golf & Country Club and the Board of Directors of the homeowners’ association where the club is situated.

Last year, the course owner closed 18 of the facility’s 36 holes, indicating plans to turn the real estate into housing. That precipitated a lawsuit by the homeowner’s association, who alleged that the club owner’s easement over the roadways would not extend to such a real estate development. The course owner counterclaimed.

The resulting litigation, according to a published report, imperils the course owner’s contract to sell the remaining 18 holes to a third party purchaser. If the sale were to fall through, the owner has hinted it will close the remaining eighteen holes as early as this summer.

Entering the fray are the home owners themselves, many of whom are members of the golf club, and who also are concerned about their property values should the course close.

As the constituents of the homeowners association Board of Directors, a number of the home owners are upset that the Board commenced the litigation without taking a vote of the members. Thus, the Board finds itself in the uncomfortable position of either losing the litigation or ostensibly driving off the contract purchaser of the golf course, and then having to rationalize the result to the home owners. Thus, the Board has announced that, before it will settle the litigation, it will seek the approval of the home owners.

Meanwhile, the contract purchaser holds the legal right to abandon the project if the litigation is not settled by May 15, with this right providing the purchaser with leverage to negotiate better terms, if it chooses to do so.

The presence of so many diverse, yet intertwined, interests is fertile territory for settlement and the parties are saying the right things. According to the attorney for the homeowners’ association, “there have been some meetings and potential settlement discussions between the parties in the last couple of months.Unfortunately, as  of this point in time, we have not been able to resolve the case. However, [the association] remains optimistic that a mutually beneficial resolution to this matter that ensures the long term health of the Ridgemark Estates community can be reached.”

The golf course owner echoed these sentiments in referring to the settlement negotiations: ”It’s ongoing. Knowing that a buyer is trying to step in and wanting to move forward, there seems to be an effort to work something out.”

In all likelihood, there will be a settlement within days. If not, and if the buyer walks, the litigation will be long, messy and expensive.


By: Rob Harris

Nine Palm Beach County (Florida) country clubs unsuccessfully challenged their property tax assessments last week.

The clubs’ argument focused on the fact that membership was limited to those homeowners who live in the golf community. Thus, according to the clubs, the homeowners’ were being doubly taxed. Why?

Well, as the argument went, the homeowners’ property values reflect the benefits of their golf course location, resulting in them paying higher taxes.

Thus, according to the clubs, the property taxes for the golf course property–which get passed onto the club members through usage fees–should be reduced. Otherwise, the members/home owners are doubly taxed for the value of the golf course–once on their homes and once through the club’s usage fees.

The Palm Beach County Value Adjustment Board rejected this argument, with one of the magistrates explaining, “if you were to sever the ownership from being only open to the members of the community, and make it a private golf course for outside owners, you would still have the enhanced value for these homes by virtue of being on the golf course.”


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