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Ohio Case Law Update: Resigned Member Refund and Facilities Use

Caley vs. Glenmoor Country Club, Court of Appeals of Ohio, Fifth District, Stark County (November 4, 2013)

Disputes between clubs and members who hold refundable memberships have become common in an environment in which clubs have long membership resale lists. In this case in which resigned members demanded an immediate refund of initiation fees and challenged being prohibited from facilities use after resignation, the court relied solely on the club governing documents and chose to ignore claims by members of verbal representations and a written policy outside the governing documents cited by the Club. A summary of how the court considered each issue follows:

1. Member Demand for Refund of Initiation Fee

The Bylaws provided for resigned members to receive after the Club resold their memberships from a waiting list the greater of 80% of then current value of initiation fee or 100% of member's initial investment. At the time of joining the club, plaintiff members signed an application that stated that they were bound by the Bylaws. They claimed, however, that they were not given a copy of the Bylaws and that the General Manager told them before they joined that they would receive their refund after resignation and did not say that they had to wait until their memberships were resold by the Club. The Bylaws also provided that resigned members were required to continue to pay dues until their memberships were reissued. The length of time members must wait on the list had been so long that most resigned members never received any refund because it was completely depleted before they reach the top of the waiting list.

The trial court held in favor of the members and awarded them the amount of their initiation fees. The Court of Appeals reversed the trial court decision and held:

  • The membership contract was not unconscionable. There was no evidence that the members lacked a meaningful choice, were in an unequal bargaining position or were pressured into signing the contract due to coercion or duress.

  • There was no oral contract based on alleged General Manager statements. The written contract addressed the timing of the refund and was unambiguous.

  • Members were bound by the Bylaws refund provisions notwithstanding that they claimed no knowledge of them. They signed the Application agreeing to be bound by them.

2. Validity of Policy Prohibiting Resigned Members from Facilities Use

The Code of Regulations provided that resigned members could use the facilities until their memberships were resold. The Club subsequently changed its policy to prohibit resigned members from using the Club after resignation and notified members of such change by letter.

The Court of Appeals ruled that the Club breached its membership contract by denying the Club members access to the facilities after resignation. The Court held that the Code of Regulations allowing resigned members to use the facilities before membership resale was controlling, noting that members did not vote on any amendment, as required by the Bylaws.

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About this Author

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

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