Country Club Membership

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By: Rob Harris

Attention casual readers: This entry may be destined for the “Best Of Golf Dispute Resolution”:

Free on $250,000 bail, Dr. James Simon has been charged with attempted manslaughter and assault with a firearm, after shooting William Osenton twice in the abdomen.

Here’s how a local news source described the incident:

“The shooting occurred July 17 on the 5100 block of Paradise Drive near Robin Drive. Police said both men were driving on Paradise Drive when a traffic conflict broke out.

“Police said Simon pulled into his driveway off Paradise Drive and into his garage, with Osenton trailing behind him. As the garage door closed, it struck Osenton’s Mercedes.

“Simon allegedly retrieved a .357-caliber revolver, fired one warning shot into the hillside across from his home, then shot Osenton two times in the abdomen.

“Police subsequently seized 50 guns, 200 boxes of ammunition and numerous magazines from Simon’s home. The items remain in police custody, as does Osenton’s car, which is being held pending examination by the defense.”

So, what does this unseemly example of road rage have to do with golf?

Apparently, Mr. Osenton is a golfer and is a member of the Meadow Club, described in the aforementioned news report as “Marin County’s most exclusive golf club.”

According to Dr. Simon’s defense attorney, Mr. Osenton is reputed to have quite a temper, which he believes he has displayed at the Meadow Club. Apparently seeking to bolster a claim that Dr. Simon acted in self-defense when he shot Mr. Osenton, defense counsel sought to require the club to produce records regarding Mr. Osenton:

“Seeking to discredit Osenton, Simon’s defense attorney subpoenaed Osenton’s records at the Meadow Club… The defense attorney, Charles Dresow, said he had information that Osenton, a 69-year-old Tiburon resident, has a history of aggressively confronting other members and damaging club property in ‘fits of rage.’”

The club objected, the judge reviewed the records privately, and determined they contained nothing relevant.

However, according to GHIN, Mr. Osenton, carrying a 10.7 handicap index, indeed may have been injured fairly seriously. He has entered no scores since July.

By: Rob Harris

I’m not sure if Waccabuc Country Club has a waiting list. If so, it’s likely one person shorter.

Local news reports that, “authorities say Bronxville (NY) lawyer Timothy Griffin lived large — and stole over $1 million from his clients to help pay for it.”

“According to the state Attorney General’s Office, between April 2009 and February 2014, he stashed the cash in his personal bank account and used it to pay for a membership at the Waccabuc Country Club, a BMW, a Lexus, expensive jewelry and other personal items.”

 

By: Rob Harris

There is a fascinating article about the legal dispute between Westchester’s famed Quaker Ridge Golf Club and neighbor who is upset about the golf balls ending up on his property. The dispute–about which we first commented three months agohas resulted in the entry of a preliminary injunction requiring the club to prevent the golf ball onslaught. The club has attempted to comply by installing netting and by moving the second tee 115 yards forward.

This week, an appellate panel refused to grant the club’s motion for reargument. Next steps–the case will return to the trial court for consideration of damages issues. Only then, will the club be able to take a full appeal of all issues.

Meanwhile, according to online local news outlet Lohud, the case is creating concerns among courses throughout metropolitan New York and beyond. What makes the Quaker Ridge case particularly troublesome is that the homeowner built and moved into his home almost ninety years after the course was established. Nonetheless, the courts to date have found in favor of the newcomer, finding that it’s the club’s responsiblity to take action to prevent the golf ball incursion.

The distinct possibility that the club will need to permanently redesign the A.W. Tillinghast course to accommodate the neighbor strikes some as highly inappropriate. As the article quotes one:

“Quaker Ridge is one of Tillinghast’s most famous designs,” said Bob Trebus, a member of Baltusrol Golf Club in New Jersey and president of The Tillinghast Association. “It would be a shame to alter his design. … That’s like painting a mustache on the Mona Lisa.”

By: Rob Harris

You have to love the cash management strategy followed by Harris Golf Co., which owns or manages ten golf courses in Maine.

Claiming that it is protesting abusively high tax assessments on its courses, Harris Golf has adopted a corporate policy of permitting tax liens to be filed on its courses, and paying the overdue taxes before the expiration of the 18 month period the government must wait before it can foreclose.

According to Harris Golf’s president, “We believe that we’re being overcharged. If you look back at the history since we bought it, it’s a pattern. We always pay the taxes before the liens mature. For us, it’s the normal course of action. It’s how we run our business.”

Choosing to vote with its wallet, president Jeff Harris proclaims: “That is the only way we can get a vote — by dollars — holding them back. It is what it is, and the only thing you can do [to object] is withhold the money. It’s a very sore subject for me because we feel like we’re being abused.”

 

‘When you dish out illegal stock tips at the golf course, there are no mulligans.”

So begins the interesting and informative article by Patrick Temple-West in Politico discussing two insider trading cases recently brought by the Securities and Exchange Commission “that center on the relationships between golfing buddies and how their chitchat in the tee box or at the 19th hole turned into lucrative and illegal trading bonanzas.”

According to a former official in the SEC’s enforcement division, quoted by Temple-Best, “[g]olf is becoming a recurring theme in insider trading cases.”

Golf Dispute Resolution’s posts about the two cases discussed by Temple-West can be found here and here.

By: Rob Harris

Although sometimes attributed to Abraham Lincoln, others question the origin of the proverb: “He who is his own lawyer has a fool for a client.” My vote for likely candidate is an attorney marketing trade group.

Whatever its origins, the Appellate Division of the New Jersey Superior Court recently provided at least temporary relief to a member of The Ridge at Back Brook who initially undertook to represent himself in court proceedings challenging his obligation to pay dues and associated country club costs totaling approximately $87,000, which liability, with finance charges, had by the time of judgment grown to more than $250,000.

The member’s substantive defense apparently was that his dues “were improperly utilized for capital and debt service, contrary to the terms of the membership agreement, which provided it was to be utilized, if at all, exclusively for operational expenses” As the court explained, “Defendant asserted that plaintiff took this course because ;the project was millions of dollars over budget’ even though plaintiff ‘affirmatively advised’ at the contract’s formation that ‘there was no debt and construction was within budget.’”

The trial court, however, refused to entertain the member’s arguments, finding that he failed to present them timely and in accordance with the court’s rules and procedures.

The appellate court, however, showed some empathy. As its opinion states:

We … hold that a pro se litigant is entitled to nothing less than that to which a litigant is entitled when represented by a negligent attorney. That is, … pro se litigants are not entitled to greater rights than litigants who are represented by counsel. But we also [have] recognized…– in concluding that a self-represented litigant was deprived of a meaningful opportunity to be heard due to a lack of understanding of motion practice – that it is ”fundamental that the court system . . . protect the procedural rights of all litigants and to accord procedural due process to all litigants.”

Consequently, the appellate court sent the case back “for further consideration of defendant’s motion to be relieved of the consequences of his failure to adequately represent himself.”

 

 

By: Rob Harris

As if changing demographics and an economic downturn weren’t obstacles enough. Now, country clubs are facing targeting by the Securities and Exchange Commission.

Last month, we noted that the SEC had charged seven golf buddies with insider trading.

Now, the federal government has announced that civil and criminal charges have been brought against the senior vice president of a bank for tipping off a “fellow golfer with whom he socialized at a local country club” about his employer’s plans to acquire another banking institution. The tippee–charged civilly by the SEC, but not criminally–allegedly parlayed the inside information into a $300,000 profit.

For those who view the government’s golf-related actions as aberrations, wrong. The official press release issued by the SEC provides as follows:

“Country clubs or similar venues may give people a false sense of security that leads them to think they can get away with trading on unlawful stock tips,” said Paul G. Levenson, director of the SEC’s Boston Regional Office. “But as in any social setting, people who trade securities based on confidential information they receive are taking a huge risk that their illegal tipping and trading will be identified by the SEC.”

Those who always had an urge to read an SEC insider trading complaint now have their opportunity to do so.

Thanks to Bob Carlson, lawschool friend and author of the Retirement Watch financial newsletter, for alerting me to this hot-off-the-press item.

By: Rob Harris

A Texas court recently issued a decision that may be of interest to those holding memberships in financially shaky clubs.

As the court explained, the owner of Golf Club at Castle Hills “entered into contracts with appellants that granted appellants lifetime memberships at the golf club, which included free greens fees and other golf-related benefits.”

After several years of financial difficulties, an entity known as Castle Hills Golf Course Company obtained through foreclosure the right to operate the golf course. The new operator refused to honor the lifetime golf contracts.

The members, upset, seized upon language in the membership agreements that provided as follows: “In the event of a transfer of ownership of the [Golf Club at Castle Hills], the membership may continue under the new ownership or may be terminated with a prorated refund to the Applicant as follows: up to ten (10) years 100% and after ten (10) years, 50% of the Lifetime Fee will be refunded.”

With eight years having passed since the golfers had been granted their lifetime membership agreements, they sued for refunds in accordance with their agreements.

The court, however, rejected the members’ claims. According to the court, absent evidence of ratification of the agreements, the foreclosure proceeding served to provide the new operator with the ability to proceed, unencumbered by contractual obligations provided to the lifetime members by the predecessor entity.

 


By: Rob Harris

Massachusetts’ Indian Ridge Country Club is seeking new members. According to its website, there’s a “special one time membership offer for 2014,” and you can “join today with no initiation fee!”

Still might not be a good investment.

The club is owned by the Market Basket supermarket company, a 71 store food powerhouse in Massachusetts and New Hampshire. The company’s success is a triumph of business, given that its owners remain engaged in a decades long family feud that has spawned a boatload of litigation.

Earlier this week, the family dispute transcended the dairy aisle, reaching Indian Ridge.  Here’s an informational, and entertaining, story describing how family disagreements, unleashed, can impact the harmony of a golf club experience.

 

By: Rob Harris

This week, a New Jersey appellate court issued an interesting decision on an issue that has become increasingly litigated as private clubs lose members: how and when can a departing member obtain refund of an initiation fee when he is in the back of a long line of exiting members?

Robert Passero resigned from North Jersey Country Club in December 2011. Eight months later, 44 former members were ahead of him in line, waiting for payment, and 21 had joined the line behind him.

While the club did not dispute its obligation to pay Mr. Passero for his $14,900 debenture bond, the club argued–successfully–that the contractual documents and bylaws did not specify when payment need be made.

The appellate court decided that the issue was one of “reasonableness”, and that a court would need to entertain all the relevant evidence to determine what constituted a “reasonable” time for payment.

The court’s decision advanced observations that may be of interest to those involved with club governance issues:

  • The court acknowledged that, in a pure contractual scenario, the law requires that, unless the contract provides otherwise, money owed be paid immediately. However, the court found that “those narrow principles of contract law are not controlling” in the context of a club-member relationship. According to the court, “this is not a straight commercial contract between strangers, … but a condition of membership in a private club which granted plaintiff all of the rights and privileges of a Class A member, which he enjoyed for the next twenty years. The rights and obligations of the parties in these circumstances requires a deeper analysis [than contract law].”
  • Instead, the court determined that the payment issue would be governed by “the business judgment rule.” As the court explained, “the business judgment rule has its roots in corporate law as a means of shielding internal business decisions from second-guessing guessing by the courts.”  According to the court, “we are dealing here with a country club, a private association, and neither the nature of the association, nor the dispute involved in this case, implicate any public interest or concern. Under these circumstances, courts should be extremely reluctant to interfere with internal disputes.”
  • At the same time, the court was unwilling to give the Board a blank check not to issue a check: “ The discretion that accompanies the Board’s authority cannot be exercised in a manner that is unfair to a former member, who is now a bona fide creditor.”

The test, therefore, becomes one of reasonableness. In teeing up the issue for a subsequent evidentiary proceeding, the court raised the following questions:

“Is it reasonably sufficient for the Club to take a laissez faire, take-it-as-it-comes approach, seeing how much money is available from annual net operating profits to pay off these loans? Should the rule of reasonableness require the Club to take a more proactive approach by, for example, setting an outer limit of perhaps one or two years for payment once a member resigns?”

According to the court, “there must be a balance struck between the right of a retiring member to obtain repayment of his or her interest-free loan and the legitimate needs of the Club to maintain viability and sustainability in its operation.”

Takeaways?

Is it appropriate that one who contracts with a club should not be able to enforce her rights in the same manner as if contracting with another person or entity? Stay tuned as to this issue. I suspect that other courts may have something to contribute to this discussion.

Whatever legal standard ultimately emerges, clubs should review their governance documents with an eye toward ensuring clarity as to redemption times and procedures.

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