Country Club Membership

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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.”

 

By: Rob Harris

Sometimes I struggle to find an appropriate post for the blog. Occasionally, a story drops like candy from the sky.

Sharing today’s candy, which comes to us from Australia’s Royal Sydney Golf Club, and begins as follows:

“A member of an exclusive Sydney golf club had his membership suspended after his girlfriend was caught sun-baking topless by the lap pool.The Royal Sydney Golf Club in Rose Bay took an unnamed player’s membership off him for three months after the incident which apparently shocked onlookers.”

By: Rob Harris

Certain members of Michigan’s recently closed Maple Hill Golf Club have brought suit against the two men in purchased the club in late 2014, alleging, essentially, that the purchasers effected a bait and switch on the members.

The members, joined in their complaint by another prospective purchaser, allege that the defendants convinced the members to select them as the purchasers based on unconditional promises that they would reopen the club. According to the complaint, the defendants’ intentions all along were to liquidate the club’s assets, harvest the sod and sell or redevelop the land.

The defendant owners dispute the claims, asserting that they failed to generate sufficient new memberships to make the club viable. They further deny that the documents memorializing the purchase transaction contain anything that constitutes a commitment to continue operating the golf club.

By: Rob Harris

In 2006, James Doroshow forked over $100,000 for a “full equity membership” in a California country club that the California Court of Appeal has chosen not to identify in an opinion released earlier this month.

According to the court, in January 2012, Mr. Doroshow was expelled from the unnamed club “by a [board of directors] vote of 11-0, with one abstention.” The club arranged for the sale of Mr. Doroshow’s membership at a reduced price, and he received $10,000.

Mr. Doroshow brought suit against the members of the board, asserting that the club’s actions constituted a host of claims, including conversion, defamation, intentional and negligent infliction of emotional distress, trespass to personal property, negligence, and intentional and negligent interference with contractual relations.

The trial court ruled in favor of the board members, holding, without the benefit of a trial, that “the process for expelling Plaintiff from the Club ‘does not have to be perfect; it has to be fair and the court finds that it was.’” The trial court’s decision has been reversed on appeal, with the Court of Appeal holding that there are disputed issues of material fact that will need to be sorted out at trial.

Among the factual claims are the following, as set forth by the court in its opinion:

Three alleged rule violations preceded Plaintiff’s expulsion from the Club. In July 2011, Plaintiff was involved in an altercation with another member, Drew Grey. The incident began on the golf course and spilled over to the Club patio, where Grey continued to verbally assault Plaintiff and his guests while they dined. After repeatedly asking Grey to stop, Plaintiff momentarily held Grey against a wall with his hand on Grey’s chest. Grey filed a complaint with the Club, which the rules committee investigated. After completing its investigation, the committee notified Plaintiff that it would hold a hearing concerning the alleged incident. The committee did not provide Plaintiff with a copy of Grey’s written complaint. Plaintiff nevertheless attended the hearing and had an opportunity to present evidence. Both Plaintiff and Grey received 90-day suspensions for the incident.

Following the Grey incident, Defendants took a secret vote to expel Plaintiff from the Club. At the time, Defendants concluded they did not have “a sufficient ‘paper record’ ” to take the desired action. Plaintiff maintains Defendants thereafter conspired to “fabricate reasons” to justify his expulsion.

In December 2011, another member, Michael Prince, submitted a written complaint to the rules committee alleging that Plaintiff intentionally hit a golf ball in his direction, endangering his personal safety. Plaintiff and other members stated Prince hit an errant shot from the fourth fairway onto the fifth fairway where Plaintiff and his group were playing. Before Plaintiff saw Prince, who was several hundred yards away attempting to retrieve his ball, Plaintiff hit a shot from the fifth tee. Though Plaintiff had no intention of endangering Prince, Plaintiff’s shot landed near him.

The committee investigated the incident, interviewed witnesses and reviewed Plaintiff’s written statement concerning the matter. The committee then notified Plaintiff that it had scheduled a hearing to address Prince’s complaint. Plaintiff did not receive a copy of Prince’s written complaint in advance of the hearing.

Despite notifying Plaintiff that the hearing would be limited to the Prince incident,the rules committee also questioned Plaintiff concerning his alleged violations of the Club’s rules regarding the use of cell phones. Plaintiff explained to the committee that,due to the recent untimely death of his wife, the Club’s general manager had given him permission to use his cell phone in emergencies to speak with his children.Notwithstanding the accommodation, and Plaintiff’s subsequent showing that the triggering phone call had been from his son concerning a car accident, the committee suspended Plaintiff for a total of 120 days for the Prince incident and cell phone violations.

On January 17, 2012, the rules committee submitted a memorandum to the board of directors detailing the foregoing rule violations and recommending Plaintiff’s expulsion from the Club. Plaintiff received a copy of the memorandum and written notice that the board would consider his expulsion at a subsequent hearing. The notice advised Plaintiff that he was “invited to appear [at the hearing] to present any evidence or reasons as to why [he] should not be expelled.”

In advance of the hearing, Plaintiff submitted a written statement and petition by several Club members opposing his expulsion. In communications preceding the hearing, Defendants called Plaintiff a “liar” and referred to him as a “poster boy” for cellphone violations, notwithstanding the accommodation the Club’s general manager had granted to Plaintiff.

Mr. Doroshow claims that he was unfairly expelled, especially when his conduct is compared to two members who “deliberately struck a golf ball at another member’s wife,” but received only a thirty day suspension due to their friendship with a member of the board.

By: Rob Harris

Jeffrey and Judee Donner claim that Jack Nicklaus hoodwinked them into spending $1.5 million to  become charter members in an anticipated golf course development that went bankrupt. Perhaps wanting to “be like Mike” (I mean Jack) or to “keep up with the Joneses” (I mean Nicklauses), Mr. and Ms. Donner allegedly bought into the development on the strength of the following statements attributed to Nicklaus in a press release and a marketing brochure:

  • “When I walked Mt. Holly Club, I was so captured by its potential [that] I thought through all 18 holes. In fact, I have been so impressed with the club and its management team that I became a founding charter member.”
  • “Mt. Holly Club enjoys the ideal alpine setting. I knew from my first visit there that we had been given a canvas on which to design a truly spectacular golf course. I am so impressed with the Mt. Holly Club and its management team that I became a founding charter member. I look forward to seeing you there.”

Mr. and Ms. Donner alleged that, by virtue of these statements, they reasonably believed that Jack, too, had paid $1.5 million for a charter membership.

According to the complaint, however, Jack was not $1.5 million poorer and one charter membership richer. Instead, he was the owner of an “honorary Founder Membership” for which he paid nothing.

In upholding the Donners’ right to pursue this claim of intentional misrepresentation, the three judge appellate court explained that, “[t]he golf course would be designed by legendary golfer Jack Nicklaus, who would have a house in the development and serve as a member. Mr. Nicklaus joined the developer to solicit investors, lending his name in exchange for millions of dollars.”

As the court’s opinion addressed only a preliminary motion to dismiss the claims, Mr. and Ms. Donner still must prove to a judge or jury that their claims of intentional misrepresentation are meritorious and that, but for the statements attributed to Jack, they would have opted not to invest in the Mt. Holly Club.

By: Rob Harris

Financial obligations between private golf clubs and their members typically are matters of corporate governance and contract. New members ordinarily enter into a membership agreement with the club that will set forth many of the rights and obligations of members. The agreements often will specify that the club’s bylaws govern, and that the bylaws may be amended.

Scottsdale (Arizona’s) Desert Mountain Club recently filed suit against former–and potentially current–members Thomas and Barbara Clark. The club claims that the Clarks’ purported termination violates the club rules as set forth in their membership agreement and the club’s bylaws, as amended. The club asserts that the Clarks are subjected to a surrender list, and that they maintain the obligation to pay dues and a substantial surrender fee to extricate themselves from their obligations. The complaint sets forth a series of bylaw revisions over the years, and asks as its first claim of relief that the court declare the club’s interpretation of these governing documents to be as it contends.

A website maintained by former member Gary Moselle presents a competing version of the club’s interpretation of the various documents. The website also includes a February 10, 2015 letter from a law firm to Mr. and Ms. Clark, purporting to outline the defense to the litigation that the Clarks can mount. The letter suggests that, under Arizona law, the club may have difficulty convincing a court to subject members to onerous surrender terms based upon bylaws that were amended subsequent to the execution of the membership agreement.

By: Rob Harris

Christopher Walsh and his wife have sued Florida’s Boca Raton Resort & Club, seeking refund of their membership fees and  the return of “several items that they say were left in their club locker at the time they were kicked out: a set of golf clubs, various clothing items, and ’2 pairs [of] flip-flops,’ among other belongings.”

The basis for their suit? As reported, he alleges that the club

“served him ‘excessive amounts of alcohol … over a relatively short amount of time’ despite his history of alcoholism.     The staff had seen Walsh drinking too much in the past, and they should have put limits on how much he could be served…     Instead, …he drank to his heart’s desire and ‘suffered impaired judgment and loss of self control.’     Fed up with Walsh’s drunken behavior, the resort terminated his club membership in October 2013,..”

Walsh claims the resort’s staff “should have known” he was “a habitual drunkard.”

Sigh.

As reported in the New York Post:

“Sheri Astrachan slapped her estranged real-estate-exec hubby, Matthew, with a $20 million defamation suit after he allegedly cut off her access to the tony Old Westbury Golf & Country Club and various credit cards.The move triggered a golf-club rule that Sheri’s name — and even the amount of her debt — be listed in its public places, including in its men’s and women’s locker rooms, “proclaiming for all to see that she had not paid her bills to the club,” says the spurned wife’s Manhattan Supreme Court suit.”

The full story can be found here.

By: Rob Harris

Two Richmond, Virginia area country clubs–Meadowbrook and Lake Chesdin–merged in early 2013. Now, with the ink on the pre-nup barely dry, they have announced the end to their marriage.

According to a published report, the disagreement that pushed the two toward their divorce was Lake Chesdin’s unhappiness at the fees that Meadowbrook was charging for providing Lake Chesdin with accounting services.

So, the two clubs, each reportedly unprofitable, separately head back to the inhospitable club environment.

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