By: Rob Harris

Recent developments at the former Orange Country Club in Middletown, New York bring sharply into focus the tenuous nature of the financial relationship that can exist between a country club and its members.

The club recently failed, with its assets being acquired by a new entity that is now operating the facility under the name West Hills Country Club.

Remaining unsettled, however, are the relationships that existed between Orange Country Club and former members. Some members are upset because the club has failed to repay ostensibly refundable deposits they made when joining the club. Reports indicate the funds may have been dissipated and not segregated as expected.

Other members find themselves defendants in lawsuits brought by the former club, alleging that the members failed to pay dues. The members argue that, because the club was required to repair all of its greens, the course was unplayable for the first part of 2011.

With the club’s financial viability dubious at best, the disputes with members highlights an issue we previously raised about the importance of a club’s governing documents. Club membership agreements and bylaws establish the legal rights and obligations of members. Here, if the documents required membership deposits to be segregated, the failure to do so conceivably could expose the officers and directors to personal liability.

This dispute also gives rise to another discussion point. Would golf clubs and/or their members benefit from an insurance policy that provides protection for initiation fees?