January 31, 2023

Volume XIII, Number 31

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January 31, 2023

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January 30, 2023

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Country Clubs Face Resigned Member Lawsuits Over Deposit Refunds

As the COVID-19 pandemic continues to disrupt country club operations, clubs face increasing financial pressures. Members who paid refundable payments to acquire their memberships are resigning and may demand immediate payment of their refundable joining payments, notwithstanding the terms of their membership agreements. This GT Alert discusses this trend and provides general guidance for clubs facing resigned member payment demands.

Resigned Member Deposits

Many country clubs require a membership deposit, capital, or equity to be paid for acceptance. Upon member resignation, clubs may allow for a refund of a portion of the membership deposit and joining payment when a certain number of new members in the same membership class join. The ratio of resigned members to new members varies from 1:1 to 5:1. Assuming that the number of resigned members exceeds the number of new members, clubs employ a resigned list that ranks resigned members according to their resignation dates. In many cases, as the number of resigned members far exceeds the required number of new members, resigned members may sit for many years before their refunds are paid. As resigned members age, they will apply greater pressure to immediately receive their refunds.

Law Firms Court Resigned Members

A number of plaintiff’s law firms actively solicit resigned members for class action and individual lawsuits. Recently, Hawk Pointe Golf Club in New Jersey settled a class action suit, while other cases are pending. 

Clubs Need to Avoid Missteps

Clubs should consider that changes to their refund policies may create an opening for plaintiff’s law firms to try to exploit. Some courts have held that changes that reduce or delay a resigned member’s right to a refund payment are unlawful, even if the membership agreement allows changes in the discretion of the club. Resigned members have argued that any changes, even if beneficial to some club members, may not be lawfully implemented. Clubs that fail to accurately maintain their waiting lists or enter into side deals with some members may find themselves facing fraud, breach of contract, and consumer protection lawsuits.

Before making any changes to a club’s refund policy or responding to an attorney’s or resigned member’s request for information, clubs should carefully review their membership documents with an attorney that routinely drafts club documents and defends club litigation. Amendments to club documents or mistakes in communication may expose the club to an expensive class action suit. 

©2023 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 50
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About this Author

Dennis W. Hillier Corporate & Real Estate Attorney Greenberg Traurig West Palm Beach, FL
Shareholder

Dennis W. Hillier, founding partner of the law firm Hillier & Associates, P.A., concentrates his practice on corporate and real estate law, with emphasis on the design of club membership programs. Dennis is recognized as the pioneer in the industry of equity club conversions and membership programs. During the past 30 years, he has designed more than 1,800 membership programs throughout the United States, Caribbean, Europe and the Pacific Rim. Dennis has designed these programs for a wide variety of developments encompassing a broad range of amenities and target markets, including golf...

561-650-7980
Stephen A. Mendelsohn, Greenberg Traurig Law Firm, Boca Raton, Litigation Attorney
Shareholder

Stephen A. Mendelsohn concentrates on all aspects of commercial litigation through trial and appeals, with an emphasis on financial institutions, securities and real estate. He represents broker-dealers, registered investment advisors, hedge funds and private equity funds in securities litigation, and he defends officers and employees in Securities and Exchange Commission investigations of public companies.

Stephen also counsels manufacturers, restaurant chains, retailers, nonprofits and contractors, among others, on all facets of employment law...

561-955-7629
Glenn Gerena, Greeberg Traurig Law Firm, Boca Raton, Real Estate and Hospitality Attorney
Shareholder

Glenn A. Gerena is a community development and hospitality attorney, whose practice focuses on structuring and documentation for recreational club membership programs and community governance. Glenn has significant experience in a variety of transactions and agreements involving recreational facilities, resorts and residential and mixed use communities.

Concentrations

  • Club, marina and resort

  • Community development

561-955-7617
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