By Janet L. Bozeman, Esq.
Hirsch v. Jupiter Golf Club
LLC,
No. 13-80456-CIV (S.D. Fla. Feb. 1. 2017), provides a cautionary tale for clubs
looking to restructure their membership options: tread lightly on existing members' rights. It is possible to restructure a membership
program, but care must be taken not to breach existing membership
agreements. Where the club owner does
not have the right to alter existing membership rights, members may be offered
incentives in exchange for giving up membership rights, but a change in
membership rights cannot be forced on the members.
Norman Hirsch, Matthew Dwyer and Ralph Willard (collectively, "Plaintiffs") acquired refundable memberships in the Ritz-Carlton Golf Club & Spa Jupiter, n/k/a Trump National Golf Club Jupiter ("Club") in Jupiter, Florida. Each Plaintiff paid a membership deposit and entered into a membership agreement with the Club, which granted the Plaintiff a revocable license to use the Club facilities in accordance with the Club's membership plan and rules.
The
membership plan obligated Club members to pay regular dues as well as fees and
charges to use particular facilities or services based on actual usage or
consumption (e.g., cart and caddie
fees and food and beverage charges). The
membership agreement also provided that members with refundable memberships
would be entitled to a return of the membership deposit paid within 30 days
after recall of the membership by the Club, among other circumstances.
Under
the membership plan, a member could provide written notice to the Club of his
or her desire to resign. However, the
member remained obligated to pay dues, fees and other charges until the
membership was reissued. The member
would be placed on a resignation waiting list until there was an interested
buyer. As long as the Club had unissued
memberships in a particular category, every fifth membership issued in that
category would come from the resignation waiting list.
The
Plaintiffs notified the Club of their desire to resign and went on the waiting
list. In the meantime, they continued to
use the Club facilities and pay dues, fees and other charges, as had always
been the Club's practice. The
resignation waiting list was lengthy, and it could take 10 years or more to
reach the top of the list. A frequent
problem for clubs with lengthy resignation waiting lists is to have members who
"ride the list" by getting on the list without having any present
intention to resign. The thought is that
they might want to resign in 10 years or so, and they don't want to be at the bottom
of a list when that day comes. Often, when
the member reaches the top of the list, if he or she does not want to resign at
that time, he or she can elect not to resign and move to the bottom of the
list.
In
2012, Jupiter Golf Club, LLC d/b/a Trump National Golf Club Jupiter ("Trump
Golf") purchased the Club and sought to make numerous changes in an effort
to turn around the struggling club. It
can be very difficult to entice new members to buy into a club with such a long
resignation waiting list.
On
December 17, 2012, Trump Golf sent a letter to all members on the resignation
waiting list. They were given until
December 31, 2012 to select one of three options: opt-in, opt-out or remain on the resignation
waiting list.
Members
who opted in were given reduced Club dues for three years and reciprocal use
rights in other Trump-owned clubs in exchange for the members forfeiting their
rights to membership deposit refunds.
Members who opted out kept their refund rights, but they could not remain
on the resignation waiting list and would pay the regular dues rate, with no
cap on dues increases. The Plaintiffs
chose the third option – to remain on the resignation waiting list.
Trump
Golf's letter clearly stated, "if you choose to remain on the resignation
list, you're out." The letter
indicated that Trump Golf did not want members on the resignation waiting list
to utilize the club and did not want their dues. Beginning January 1, 2013, the Plaintiffs
were denied access to the Club. However,
in February 2013, Trump Golf charged the Plaintiffs dues, even though they were
still denied access to the Club.
The
Plaintiffs filed a class action lawsuit on behalf of themselves and other
similarly situated Club members. The
United States District Court for the Southern District of Florida certified a
class of 65 identified members ("Class Members"), including the
Plaintiffs.
The
membership plan clearly provided that a member on the resignation list must
continue to pay dues, fees and other charges until the membership is reissued,
but it did not specifically indicate whether the member was entitled to
continue to use the Club facilities. The
court determined that intent was that members on the resignation waiting list
retained active memberships affording them continued Club access. Since fees and charges were based on actual
usage and consumption, the obligation of a member on the resignation waiting
list to continue to pay fees and charges must mean that the member has use
rights. It would be impossible to incur
fees and charges if the member was prohibited from using the Club, and such an
interpretation would render the payment obligation in the Membership Plan
superfluous.
Moreover,
prior to Trump Golf buying the Club, the Club had always allowed members on the
resigned waiting list to use the Club so long as they remained current on dues,
fees and other charges due to the Club. Courts
can give considerable weight to the parties' long-standing interpretation of a
contract's terms.
The
court next examined whether Trump Golf recalled the Class Members' memberships
by denying Club access. The membership agreement
expressly allowed the Club, in its discretion, to recall memberships "at
any time for any or no reason whatever."
The court found that Trump Golf and its management consistently and
clearly delivered the message that those members who chose to remain on the
resignation waiting list would no longer be Club members.
The
court ruled that, when Trump Golf cut off the Class Members' access rights, it
effectively recalled the Class Members' memberships. "[W]ithout a right to Club access, no
membership would exist and this essential purpose of the membership contract
would be nullified."
Accordingly,
under the terms of the membership Agreements, the Class Members were entitled
to refunds of their membership deposits by January 30, 2013. Since Trump Golf refused to issue any
refunds, the court held that Trump Golf materially breached the membership agreements. Trump Golf was ordered to pay the Class
Members refunds of their membership deposits totaling $4,849,000 and $925,010
in prejudgment interest, for a total of $5,744,010, plus post-judgment interest
until payment is made.
Hyatt & Stubblefield,
P.C. counsels clients on creating, operating and restructuring club membership
programs.
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