Country Club Membership

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By: Rob Harris

As reported, “government attorneys allege four Nicklaus-owned entities filled close to an acre of wetlands [on Florida's The Bear's Club] in 2010 without permission from the U.S. Army Corps of Engineers in order to relocate a tee box, improve golfing conditions on the club’s 15th hole and make room for the development of five residential lots.”

The attorney for the Nicklaus organization disputes the allegations, asserting that the easement to the property authorizes the state, not the federal government, to address the wetlands issue.

The Justice Department takes issue with that assertion, contending that the Army Corps of Engineers has “jurisdiction over the wetlands under the Clean Water Act. The Bear’s Club violated the easement agreement by filling wetlands that were ‘not to be disturbed by any dredging, filling, land clearing, agricultural activities, or any other construction whatsoever.’”

By: Rob Harris

Here is an overview of golf legal disputes percolating in the past week:

 

By: Rob Harris

“Long-time members of Wentworth, a hallowed golf club in the affluent county of Surrey just west of London, accuse the new Chinese owners of using an eye-watering fee hike to get rid of them and turn the club into a preserve of the global ultra-rich.” Reuters offers this interesting take on the golf club cleansing we discussed last month.

 

By: Rob Harris

Rancho Mirage, California’s Morningside club has a homeowners’ association that finds itself the target of a lawsuit by 29 residents.

As described in an extremely well written article in The Desert Sun, “their case asks a question on many country clubs’ collective minds: How should neighborhoods relate to golf courses, which are literally intertwined with their homes but owned and managed separately?”

I commend this article to those interested in this dynamic between residents–who, having purchased homes for proximity to golf course amenities, face negative impact to values when the clubs fail–the associations who are there to protect all residents, and the clubs.

By: Rob Harris

The interconnectedness of the golf industry is encapsulated by this week’s announcement of a settlement reached between Rye Golf Club and Tessenderlo Kerley Inc. TKI allegedly provided a contaminated fungicide to the club, which killed its greens, precluding their use for three months during the recent golf season.

The $2,500,000 settlement amply covers the restoration costs ($115,000) and lost revenues ($283,000).

What remains unresolved, however, are the harms allegedly suffered by others. Certain members have filed suit, and the club reportedly will use the funds to address these claims and to provide retention incentives to the membership.

In addition, the outsourced provider of the club’s restaurant and pro shot has asserted claims for its loss of business.

Kudos to the parties for expeditiously resolving the issue without the need for costly and likely unproductive litigation.

By: Rob Harris

For me, a nice byproduct of maintaining the Golf Dispute Resolution website is the opportunity to learn.

Today, courtesy of an article in Golf Club Management that was brought to my attention by golf architect Rick Baril, I learned about Sheriff Courts. A vestige of the Scottish monarchy, Sheriff Courts no longer exist to “exercise and preserve the King’s authority against the rival powers of the local lords.” Today, Sheriff Courts rank somewhat about Justices of the Peace, addressing relatively minor criminal offenses.

One such judicial officer, Sheriff Kevin Drummond, recently found himself responsible for passing judgment on Barry Miller, the former treasurer of  Royal Musselburgh Golf Club It seems that 11,000 pounds went missing during Mr. Miller’s stewardship. Mr. Miller offered various explanations. At one point, he claimed he had invested the cash on behalf of the club. At another point, he claimed his father was watching over it.

At the day of reckoning in the Sheriff Court, however, Mr. Miller ”represented himself, refused to give evidence to the court and did not call any defence witnesses.”

Convicted of embezzlement, Sheriff Drummond nonetheless declined to sentence Mr. Miller to prison. Instead, describing him as “something of a fantasist,”  Judge Drummond ordered Mr. Miller to perform 300 hours of community service.

One can only wonder, if the victim had been the Scottish king instead of a golf club, whether the Sheriff Court would have been so understanding.

 

By: Rob Harris

Lord Grabiner holds a pedigree that I, lacking any meaningful understanding of British nobility, do not fully appreciate. However, I do know a bit about golf and about the practice of law, and I venture to say that Lord Grabiner might be having difficulty securing a spot in a foursome these days at England’s tony Wentworth Club.

Lord Grabiner, a well-regarded commercial barrister and master of Cambridge’s Clare College, holds an honorary membership at Wentworth,

Last year, the club was sold to a Chinese company, which has embarked on an initiative to reduce the club’s membership from 4000 to 800. All members will be booted from the club, and will need to apply to rejoin. And, if deemed club-worthy, they will need to fork over a 100,000 pound ($150,000) initiation fee.

And to whom did the new club owner turn for legal advice regarding this strategy? Yep…. Lord Grabiner. According to reports, his Lordship’s involvement came to light only when club officials were provided with a copy of his opinion by the new owner.

I’m doubtful that the Wentworth membership have ventured their observations via Twitter. But they have found ways to express their displeasure:

“Michael Fleming, Wentworth’s captain, said: ‘I feel stabbed in the back by Lord Grabiner. You don’t expect an honorary member to draw up legal advice to evict all the members who have provided everything for him.’

“Nigel Moss, who is leading a campaign against the changes, said: ‘He has given the legal underpinning to evict all 4,000 members. They will have to re-apply for 800 memberships and pay £100,000 as an unsecured loan for the privilege.’”

In defense, Lord Grabiner has done what lawyers often do, separate work from pleasure: “I was just giving professional advice. My personal views are not relevant. They [the members] just don’t like the advice and I understand that.”

Good luck finding a Sunday four ball, Lord Grabiner.

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.

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