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Hart v. CF Arcis VII LLC

United States District Court, W.D. Washington, Seattle

August 2, 2018

LAWRENCE HART, et al., Plaintiffs,
v.
CF ARCIS VII LLC d/b/a THE CLUB AT SNOQUALMIE RIDGE d/b/a TPC AT SNOQUALMIE RIDGE and d/b/a SNOQUALMIE RIDGE GOLF CLUB, et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

          RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This matter comes before the Court on Defendants' Motion to Dismiss. Dkt. #20. Defendants argue that Plaintiffs' claims should be dismissed in their entirety, with prejudice, because Plaintiffs fail to state any claim upon which relief may be granted. Id. Plaintiffs oppose the motion. Dkt. #23. For the reasons discussed below, Plaintiffs' claims will be dismissed in part as discussed below.

         II. BACKGROUND

         This matter was initially filed in King County Superior Court on or around December 8, 2017. Dkt. #1. Defendants removed the matter to this Court on December 28, 2017, pursuant to the Class Action Fairness Act (“CAFA”), and, in the alternative, on the basis of diversity jurisdiction. Id. Since the removal of this matter, Plaintiffs have file a Second Amended Complaint. Dkt. #18. Plaintiffs allege as follows:

4.1 Home to the only Jack Nicklaus Signature Course in Washington, the Club [at Snoqualmie Ridge] is a membership-only golf and country club located in Snoqualmie, Washington.
4.2 From its founding to the present, the Club has offered Refundable Memberships for sale to the general public. Those who purchase Refundable Memberships pay a large, onetime membership fee in the tens of thousands of dollars (“Membership Fee”), and pay dues each month afterward.
4.3 To become Club members, applicants must also complete and agree to abide by a Membership Agreement and the Club's Membership and Operating Policies (the “Rules”).
4.4 Defendant Brightstar owned and operated the Club through July 2013 when it sold the Club to the Club Operator, Defendant CF Arcis VII.
4.5 Brightstar advertised Refundable Memberships on its public website and included the Refundable Memberships in form contracts.
4.6 In concert with Defendants CF Arcis VII, Arcis Equity, Arcis Golf, and Mr. Walker, the Club Operator expressly and impliedly assumed the obligations of Defendant Brightstar with respect to current and former members, except with respect to the obligations under the Rules.
4.7 Plaintiffs purchased their Refundable Memberships prior to the 2013 sale of the Club. The Rules in existence prior to 2013 give members the right to voluntarily resign and receive a refund of a portion of the Membership Fee paid to join the Club. These Rules entitle resigning members to receive refunds once their memberships are re-issued to new members, with the refund amounting to 70 percent of the of the Membership Fee published at the time the Club Operator re-issues the membership. While they wait for their memberships to be reissued, resigning members are placed on a waiting list that the Club Operator maintains (“Waiting List”).
4.8 In May 2013, several months before the Arcis Defendants purchased the Club, they colluded with Brightstar to surreptitiously change the Rules (the “Revised Rules”) without telling the members they had done so. A true and correct copy of the Revised Rules is attached as Exhibit A.
4.9 The Revised Rules changed Club procedures in two significant ways. First, they altered the refund procedure. The new refund procedure increased the number of Refundable Memberships that needed to be sold before a former member could receive a refund. Prior to 2013, for every three new golf memberships sold, the former member at the top of the Waiting List would receive their refund. Under the Revised Rules, a golf membership was refunded for every four new golf memberships issued.
4.10 Second, the Revised Rules also authorized - for the first time in Club history - the sale of non-refundable golf memberships (“Non-Refundable Memberships”). These Non-Refundable Memberships are approximately half the price of Refundable Memberships. Except for the difference in price and refundability, the Non-Refundable Memberships are indistinguishable from the Refundable Memberships purchased by Plaintiffs and class members. See http://www.clubatsnoqualmieridge.com/membership (last visited August 3, 2017).
4.11 Plaintiffs did not see the Revised Rules, and therefore did not learn of the material and adverse revisions contained within, until August 2015 when the Club Operator provided a copy.
4.12 The Club Operator has since generated millions from the sale of Non-Refundable Memberships. Meanwhile, on information and belief, the sale of Refundable Memberships has all but ceased since the Non-Refundable Memberships became available for purchase. As a result, the refundability of the Refundable Memberships is merely illusory.
4.13 The Rules in place prior to 2013 required that members receive notice of potential Rule amendments by mail or hand-delivery. To ensure compliance, the Rules also prohibited Rule amendments from becoming effective unless members received such notice.
4.14 In addition, the Rules in place prior to 2013 required two-thirds of the Club's members to approve Rule amendments that would materially adversely affect the rights of members. Amendments that make it more difficult for members to receive refunds of their Refundable Membership Fees materially adversely affect the rights of members.
4.15 When Defendants changed the Rules in 2013, they did not mail or hand-deliver to members the Revised Rules, which materially adversely affected the ability of Club members to receive refunds of their Refundable Memberships. Nor did Defendants seek or obtain the approval of two-thirds of the members. As a result, the Revised Rules are not valid.
4.16 On information and belief, Defendants drafted the Revised Rules to prevent members from receiving refunds of their Refundable Membership Fees.
4.17 Moreover, because Defendants drafted and adopted the Revised Rules in secret and without notice to Plaintiffs and proposed class members, Plaintiffs and proposed Class members could not take advantage of a provision in the Rules that allows Club members to resign, avoid the Waiting List procedure, and ...

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