Country Club Membership

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By: Rob Harris

Perhaps my chickens are coming home to roost. Having written this blog for 5+ years, I find myself an unwitting participant in an emerging golf dispute that threatens my golf playing equilibrium.

I have been fortunate to play at the Yale golf course for many years. Yale, a product of Charles Blair MacDonald and Seth Raynor, is viewed by many as one of the best classic courses in America. Carved from a 750 acre land grant to the university almost 100 years ago, its rolling topography, large greens, massive bunkers, provide a four hour experience with no houses or cars to be seen. Democratic with a small “d”, a chairman of an academic department and a dispatcher in the facilities group can expect to be treated the same.

A couple of miles from Yale lies the former Woodbridge Country Club, renamed as the Country Club of Woodbridge after the town was effectively required to acquire the course seven years ago when the privately owned club went bankrupt. Even with outsourced management, the town has struggled with an unprofitable facility, and has explored the various options clubs around the country have considered, e.g. real estate developing, recreation lands, keeping 9 holes of the course.

Enter Roland Betts, college buddy of George W. Bush, developer of New York’s Chelsea Piers andformer Senior Fellow of the Yale Corporation.

Betts has put forth a proposal that would dramatically alter the Yale golf experience. He seeks to lease the Yale course, acquire the Country Club of Woodbridge, and build a hotel, turning the area into a golf destination. Plans call for Gil Hanse to take on the Woodbridge facility to “transform existing course, parking and clubhouse areas to create a new design.” Hanse would also”restore and renovate [Yale] to its full potential.”

The anxiety-of-the-unknown already is taking hold. Public disclosures and surrounding rumors have Yale being taken from its current membership, student and faculty constituencies and turned over to outside destination visitors willing to pay big bucks to play the course. Loyal and long serving pro shop and grounds staff worry about the loss of their jobs.

Betts still needs to jump through hoops–approval by Woodbridge, by the Yale corporation, and potential legal challenges. He will face issues surrounding the right of access to the course by university students, faculty members, and members who paid initiation fees. The unions to whom Yale employees belong will have a voice.

This emerging dispute will provide a fertile vehicle for dialogue and potentially more formal mediation.

My personal interests aside, it will be interesting to watch it unfold.

 

 

By: Rob Harris

Over the past several years we have discussed many lawsuits involving golf course owners’ desires to transform the use of the property into something that will generate better returns (or avoid losses). Frequently, there is pushback from neighbors, from members, and from local governments.

I commend to those interested an article by Pat Clark at Bloomberg that discusses the issues raised by these disputes and market forces. As Clark explains:

“More than 800 golf courses have closed nationwide in the last decade, as operators grapple with declining interest in the sport and a glut of competition. Many of those shuttered courses were built on land proscribed from redevelopment by local zoning codes seeking to preserve open space—or…by deed restrictions intended to protect homeowners who had paid a premium to live near a golf course.

“That leaves some golf course owners with the real estate equivalent of an unplayable lie: They can’t make money running the course, and they can’t recoup their investment by selling it….

“In the face of declining interest and competition driven by oversupply, course owners have gone searching for ways out. Some have donated golf course land to nature trusts and local parks, taking a tax break in return for preserving the open space. Others have inked deals with homebuilders—though those deals are often contingent on winning approval from homeowner associations or local governments.”

The full article is available here.

By: Rob Harris

“Republican presidential nominee Donald Trump says his words shouldn’t always be taken at face value because sometimes he’s just negotiating.”

So begins a Bloomberg article on the commencement of the lawsuit brought by members of the Jupiter Golf Club who have sued to recoup their initiation fees.

The article reports that “a scheduled three-day trial got under way in West Palm Beach, Florida, Monday with a video deposition from Trump explaining why he told members who resigned that they would no longer be allowed to use any of the facilities at Trump National Golf Club Jupiter, although their contract said they could until they were paid back their deposits.

“’The letter said that, yes,’ Trump said in the video, played to the judge. Later in the deposition he said: ‘It’s called negotiation.’”

The full article can be found here, and a great background piece on the dispute authored by the New York Times’ Joe Nocera is available here.

By: Rob Harris

For a number of years, many golf clubs have faced challenges in maintaining a strong and vibrant membership base. Without a steady stream of new members, clubs have confronted holes in operating budgets and have had to resort to contractual rights and remedies to maintain revenues.

Sometimes, governing documents will permit departing members to recoup initiation fees only upon the entry of replacement members. Arguably even more draconian, certain clubs prohibit members from resigning until new members join. In those circumstances, recalcitrant members are faced with demands from clubs that they continue to pay dues.

Such is the situation at South Carolina’s Callawassie Island Club, where a South Carolina trial court in 2014 held that the club’s governing documents unambiguously required members to make such payments.

However, with a decision last week, the South Carolina Court of Appeals has reversed the lower court’s ruling, holding that. in fact, there is ambiguity in the documents, which must be sorted out in a full trial.

The Court noted that the 1994 governing club documents provide as follows:

“Any member may terminate membership in the Club by delivering to the Club’s Secretary written notice of termination in accordance with the By-laws. Notwithstanding termination, the member shall remain liable for any unpaid club account, membership dues and charges (including any food and beverage minimums).”

However, the court also noted the existence of other documents, including a 1994 Plan and Bylaws, which provide resigned members are obligated to continue to pay dues until their memberships are reissued. Further ambiguity is found is in the 2009 [governing club documents], which provide that members who have terminated their club memberships remain liable for unpaid dues until their membership is sold. The term ‘unpaid’ is not defined in the documents. It is unclear whether the language relating to unpaid dues refers to unpaid dues owed at the time of resignation or unpaid dues accruing before and after resignation. Thus, we find the evidence relating to the issue of whether Appellants were obligated to pay dues post-resignation, viewed in the light most favorable to Appellants, leaves a genuine issue of material fact for trial and, thus, precludes judgment for Callawassie as a matter of law.”

The court also found that a trial was warranted as to whether a resigning member’s dues obligation should cease after four months, pointing to this language in the governing documents:

“Any member whose account is delinquent for sixty (60) days from the statement date may be suspended by the Board of Directors. . . . Any member whose account is not settled within the four (4) months’ period following suspension shall be expelled from the Club.”

Acknowledging that expulsion does not necessarily correlate to a voluntary resignation, the court found there to be sufficient ambiguity to warrant a trial on this issue.

By: Rob Harris

Last Spring, we discussed a federal appellate court’s opinion that determined a claim for fraud could be asserted against Jack Nicklaus by a couple who lost $1.5 million in a golf course development that went bust. Although the real “evil doer” was the developer, the couple alleged that Nicklaus should be held accountable based upon statements in promotional literature that he was “so impressed with the club and its management team that I became a founding charter member.” The plaintiffs alleged that this statement was false in that it failed to reveal that Nicklaus’ received his founding membership gratis.

Armed with the preliminary decision that it could assert the claim, the plaintiffs returned to the federal trial court, where they were met with a motion for summary judgment which asserted that plaintiffs claims should be dismissed as untimely, in that they waited more than three years to assert them. On July 18, 2016, the court granted the motion, entering judgment in favor of Nicklaus. As the court observed,

on January 11, 2008, eleven days after investing $1.5 million in the project, [plaintiffs] discovered that Marc Jenson, known to them at the time as a “principal” of the Mount Holly Club”’was a “fraudster” with a “checkered criminal past.” …They also admit that on this date they were shocked to learn that Jenson had “past bankruptcies, civil cases, criminal cases, and a pending criminal case,” and became concerned that they had been “duped” into investing in a “fraudulent project.” … Plaintiffs admit that this discovery caused them to begin a further investigation into their investment in the Mount Holly Club. …  Based on these admissions, it is undisputed that the Donners discovered another misrepresentation or omission alleged in their cause of action for fraud against defendants by January 11, 2008; it is further undisputed that on this date, the Donners actually began investigating their investment.

Against this background, the court concluded that plaintiffs’ subsequent discovery of Nicklaus’ statements about being a founding member of the club would not afford them a reprieve of the requirement that they assert their fraud claim within three years. Accordingly, the court entered judgment in favor of Nicklaus, with no need to explore the substantive merits of the plaintiffs’ claim.

By: Rob Harris

Those who have followed Golf Dispute Resolution for any length of time know that, on a slow golf news day, there’s always Donald Trump. Mr. Trump has provided far more than a pro rata share of low hanging fruit for this site.

The temptation thus is to jump all over the story that trial has been scheduled for August in the class action brought by members of Florida’s Trump National against the club.

The trial schedule follows the court’s denial of Trump’s motion to dismiss the lawsuit.

As one report describes the genesis of the dispute, shortly after Trump’s 2012 purchase of the club, “Trump sent members a letter saying they had three choices: give up their refundable membership fee, which in some cases was over $100,000, and enjoy a 10 percent discount on dues for three years; keep the refundable membership clause but have dues raised 20 percent, or, if they had already sent a resignation letter and still wanted out – just get out.”

The members claimed that Trump’s actions violated the terms of their membership agreements.

Trump’s rationale, according to the notification letter he sent to members, was that “he is making Trump National into one of the world’s best clubs, and the ‘antiquated membership documents do not allow for the club’s success under ultra-luxurious operation.’”

The trial will provide an opportunity for the facts to fully develop, and they very well may show this to be an example of overreach and contract violation. However, putting aside for the moment the fact that Trump is involved, the underlying issues of club governance and the owner’s rights to modify membership terms is very much a “hot” issue that has been percolating in recent years. With members eager to exit clubs and recoup substantial deposits, and clubs lacking the resources and membership replenishment to fund the exits, clubs have embarked on strategies that effectively hold unwilling members captive.

This trial, and the likely appeals, may serve to further develop the law in this area.

 

By: Rob Harris

As reported in a local Florida NBC website, “former members of [Florida's] Riverwood Golf Club are celebrating a judge’s decision to give the deposit back to a former member who sued the golf club.”

According to the report, the plaintiffs “resigned their membership after they could no longer play golf. They said the owners refused to give them their deposit back, claiming that a clause in the contract allowed them to change the terms without prior approval from members.”

I have been unable so far to locate the actual court decision, and eagerly look forward to seeing the court’s analysis.

Thanks to Harvey Weiner, and the Club Advisory Council Internationale LinkedIn Group he hosts through Search America for making us aware of this decision.

By: Rob Harris

Too cute by half. That’s the sentiment underlying a New York appellate court’s refusal to grant summary judgment in favor of the entity that acquired the unpaid debt on New York’s Westport Country Club.

The golf club, unable to make monthly payments on a $1,500,000 loan to First Niagra Funding, Inc., entered into a forbearance agreement with the lender which was designed to buy the club time to market the club for sale.

Surreptitiously, certain members of the club created a new entity and orchestrated purchase of the debt from First Niagra for a substantially discounted purchase price of $825,000. Then, when the club tendered the monthly payment under the forbearance agreement, the new owners said “not so fast,” you’re in default of the loan documents and commenced an action to foreclose on the property.

The court disturbed with the “conduct …. of its members – and the manner in which it declared a default,” refused to grant summary judgment in favor of the new owners. As the court held,

Robert Hall and Hall-Butzer formed plaintiff, which went on to purchase the subject notes from First Niagara at a significantly discounted rate; that plaintiff subsequently rejected the timely September 2013 payment under the forbearance agreement; and that, shortly after rejecting that payment, plaintiff commenced this action to foreclose on the Country Club. The validity of the forbearance agreement is not in dispute, and plaintiff concedes that it is bound by its terms as successor-in-interest to the mortgage and loan documents. While plaintiff accurately points out that, under the terms of the forbearance agreement, First Niagara reserved all of its rights under the mortgage instrument, the express purpose of the forbearance agreement was to provide Westport with a period of time to market the mortgaged property in the hopes of consummating a negotiated (as opposed to a forced) sale, while, at the same time, requiring it to make specified payments on the note. Under these circumstances, it is for a jury to conclude whether plaintiff breached its obligation to act in good faith by surreptitiously purchasing Westport’s debt, rejecting Westport’s September 2013 payment and claiming a default despite Westport’s undisputed compliance with the foreclosure agreement.

Thus, whether the purchasing members will be deemed to be shrewd investors or sneaky turncoats undeserving of a windfall, must await a full trial on the merits.

By: Rob Harris

A fundamental tenet, understood but too often ignored by golfers, is to not make matters worse. Bite the bullet, get out of trouble, don’t go for the miracle shot.

Perhaps Australian doctor Bing Michael Oei should have followed that strategy after he found himself expelled from the Australian Golf Club for cheating. As reported:

“In March this year, the Australian Golf Club board found Dr Oei’s cheating to be ‘unbecoming conduct’ and expelled him after a disciplinary hearing,

“This came after club members reported seeing Dr Oei handling his ball to improve his position, out of sight from his playing partners.

“It was alleged that, in July last year, he picked up his golf ball and threw it underarm three metres in an attempt to improve his position.

“Dr Oei denied that he had done anything in a dishonest fashion…

“In November, it was alleged he moved his ball one metre alongside the fairway bunker.”

Instead of taking his medicine and moving on, Dr. Oei “claimed there would be ‘serious consequences’ if he lost his Australian Golf Club membership, including ‘loss of enjoyment of club amenities’ and ‘damage to his reputation.’”

“If the club did not give his membership back, he wanted compensation for his loss.”

The club said no, and Dr. Oei carried through on his threat and sued the club. To no avail. Now, Dr. Oei not only has the stigma of expulsion, but the publicity of an adverse court decision that recently issued, and has been widely reported, including the following:

“On Thursday, Justice John Sackar found there was  no ‘legitimate basis’for the courts to interfere with the club’s decision to expel Dr Oei. As Judge Sackar further held, “But when pressed further as to what his attitude to the charges was, [Dr. Oei"s] response was that he may have erred in throwing the ball rather than dropping it.”

“The board was entitled to reject the Plaintiff’s account and find reasonably that he deliberately flouted the rules again to place himself in a more advantageous position,” Justice Sackar said.

Dr Oei also tried to argue that his actions did not fall within the definitions of “unbecoming conduct” but Justice Sackar disagreed.

“It seems to me that a deliberate flouting of the rules would reasonably be in context regarded as conduct unbecoming.”

 

By: Rob Harris

USGA Rule of Golf 6-8 addresses discontinuance of play. Here’s what it says:

The player must not discontinue play unless: (i) the Committee has suspended play; (ii) he believes there is danger from lightning; (iii) he is seeking a decision from the Committee on a doubtful or disputed point… or (iv) there is some other good reason such as sudden illness. Bad weather is not of itself a good reason for discontinuing play.

Nearby lightning strikes usually qualify.

Well, golfers at Springfield (Missouri) Golf & Country Club recently had a more unusual opportunity to potentially invoke Rule 6-8.

Reportedly, club member Donald Weber was packing more than 14 clubs when he purchased a bucket of range balls and rented a golf cart before heading off to the maintenance building. Apparently, Mr. Weber is also a former employee of the club, having lost his job a number of months ago. Upset with his former boss, Weber confronted him with a gun. Fortunately, no shots were fired before police arrived and chased Weber down.

In the meantime, the “golf course had to pull golfers off the course.” Reports don’t indicate that a tournament was in progress, but presumably “man with a gun” would qualify as a reason equally compelling as lighning or sudden illness to warrant discontinuance of play.

Unless, of course, the tournament officials preferred to first review the video tape with the contestants at the end of their round.

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