Harmelin v. Silverleaf Club LLC ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 William E. Harmelin, No. CV-19-05431-PHX-JJT 10 Plaintiff, ORDER 11 v. 12 Silverleaf Club LLC, 13 Defendant. 14 15 At issue is Plaintiff’s Motion for Judgment on the Pleadings (Doc. 27, Mot.), to 16 which Defendant filed a Response (Doc. 28, Resp.) and Plaintiff filed a Reply (Doc. 29). 17 For the following reasons, the Court denies Plaintiff’s Motion. 18 I. BACKGROUND 19 Defendant, also referred to throughout as the “Club,” is a high-end, invitation-only 20 golf and country club in Scottsdale. (Doc. 1, Compl. ¶ 5; Doc. 14, Answer ¶ 5.) In March 21 2010, Plaintiff and his wife joined the Club and paid a $100,000 deposit for a golf 22 membership. (Compl. ¶¶ 6–7.) Three documents govern Plaintiff’s membership: Plaintiff’s 23 Membership Agreement (Compl. Ex. 1, “Agreement”); the Membership Plan (Compl. 24 Ex. 2, “Plan”); and the Club’s Rules and Regulations (Compl. Ex. 3, “Rules”) (collectively, 25 the “Governing Documents”). Only the Agreement is signed.1 26 27 1 Plaintiff signed the membership Agreement as “Member” and his Wife signed it as “Member Spouse.” Defendant contends in its Answer that Plaintiff’s wife, who is not 28 part of this suit, is an indispensable party. However, the Court declines to address that issue at present as it has not been formally raised. 1 In September 2019, Plaintiff’s membership was terminated after he allegedly 2 committed repeated acts of misconduct and harassment of the Club’s staff and employees. 3 The underlying reasons for the membership termination are not at issue (see Mot. at 6 n.1), 4 but the nature of the termination is. The Governing Documents appear to make a distinction 5 between a recall of a membership and an expulsion of a Club member. Whether Plaintiff’s 6 membership was recalled or whether he was expelled from the Club may have bearing on 7 his entitlement to a refund of his $100,000 membership deposit. Plaintiff brought this single 8 count breach of contract action seeking the return of his deposit and now moves for 9 judgment on the pleadings. 10 A. Language of the Governing Documents 11 The Court will summarize the portions of the Governing Documents related to the 12 membership deposit and its refundability. Pursuant to the Acknowledgment of 13 Membership Rights section of the Agreement, the Club has the power to recall a member’s 14 membership at any time, and for any or no reason. (Agreement at 4.) “In the event of recall 15 of a membership, the affected member(s) each will be entitled to a refund of the 16 Membership Deposit actually paid by that member within 30 days after the recall.” 17 (Agreement at 4.) 18 The Plan mentions refundability of the deposit in several places. The Plan Overview 19 states the deposit is refundable “as further provided for in this Membership Plan.” The 20 Membership Deposit section provides the deposit is “refundable only in accordance with 21 this Membership Plan, the Rules and Regulations of the Club and the Membership 22 Agreement.” (Plan at 6.) The next sentence states that the “Club’s obligation to refund any 23 portion of the membership deposit to a member shall be as set forth in the Agreement 24 executed” by Plaintiff. Later, the Acknowledgement of Membership Rights section 25 contains language mirroring the Membership Agreement: the Club can recall a membership 26 at any time for any or no reason, and in the event of recall, the Club will refund the 27 membership deposit within 30 days. (Plan at 10.) 28 1 The Plan also has an Enforcement section which permits the Club to levy sanctions 2 against a member for cause, including for a member’s misconduct or delinquency in paying 3 dues or fees. Sanctions may include reprimands, expulsion, fines, reimbursement of 4 expenses that the Club has incurred, and suspension of membership privileges. A member 5 is—for the most part—entitled to notice and hearing before a sanction is levied. The 6 Enforcement Section provides that “[a]ny person whom the Club has expelled shall 7 immediately and automatically forfeit all membership privileges, including the refund of 8 any Membership Deposit and all rights to sue the Club.” (Plan at 11.) 9 Lastly, the Rules contain a general rule that “violation of any Club Rules or conduct 10 in a manner prejudicial to the best interest of the Club will subject the person in violation 11 to disciplinary action by the Club in accordance with the Club Rules.” (Rules at 6.) The 12 Discipline Section provides: 13 1. Any member whose . . . conduct shall be deemed by the Club to be likely 14 to endanger the welfare, safety, harmony or good reputation of the Club 15 or its members or is otherwise improper, may be reprimanded, fined, suspended or expelled from the Club and have all privileges associated 16 with the membership suspended or terminated by the Club. 17 . . . 18 19 2. Any member accused of improper conduct shall be notified of the Club’s proposed disciplinary action and shall be given an opportunity to be heard 20 by the Club to show cause why he or she should not be disciplined. If 21 such member desires to be heard, the Club shall set a time and date (not less than ten days thereafter) for a hearing. 22 23 . . . 24 4. Any membership that has been terminated hereunder shall be placed on the waiting list for re-issuance and the member’s membership deposit 25 refund due to the member, less any outstanding balance owed the Club, 26 shall be returned to the member upon re-issuance of the membership pursuant to the Membership Plan. 27 28 (Rules at 7.) 1 B. Parties’ Arguments 2 Plaintiff’s argument is as follows. The Agreement is controlling as to the refund of 3 the deposit because it is the only document signed by the parties, and because the Plan 4 contains the following language: “[t]he Club’s obligation to refund any portion of the 5 membership deposit to a member shall be as set forth in the Membership Agreement 6 executed by the member.” (Mot. at 5, quoting Plan at 6.) The Agreement, which Plaintiff 7 argues controls, provides that a membership can be recalled for any reason or for no reason, 8 and the member is entitled to a refund of the deposit within 30 days of a recall. Plaintiff 9 submits his membership was recalled but that he did not receive his deposit within 30 days, 10 and still has not. Accordingly, he is entitled to judgment on the pleadings. 11 Defendant contends the Plan’s Refund of Membership Deposit section, which states 12 the Club’s “obligation to refund any portion of the membership deposit to a member shall 13 be as set forth in the [] Agreement,” must be read in conjunction and harmony with all of 14 the Governing Documents—and in particular, with the Plan’s Enforcement section. 15 Defendant asserts the Governing Documents address two different situations: the 16 Membership Deposit provision of the Plan articulates the general policy (which is to 17 provide a refund in the event of recall) and the Enforcement provision controls the specific 18 instance where a member is expelled for sanctionable conduct and therefore, by agreement, 19 forfeits his deposit. (Resp. at 4.) Defendant argues Plaintiff was expelled pursuant to the 20 Enforcement provision, and therefore forfeited his deposit. 21 II. LEGAL STANDARD 22 Under Federal Rule of Civil Procedure 12(c), “a party may move for judgment on 23 the pleadings” after the pleadings are closed “but early enough not to delay trial.” The legal 24 standards governing Rules 12(c) and 12(b)(6) are “functionally identical,” as both permit 25 challenges directed at the legal sufficiency of the other party’s allegations. Cafasso, U.S. 26 ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011). A judgment 27 on the pleadings is proper only when there are no issues of material fact, and the moving 28 party is entitled to judgment as a matter of law. Gen. Conference Corp. of Seventh–Day 1 Adventists v. Seventh–Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir. 2 1989). Stated another way, a motion for judgment on the pleadings will not be granted 3 unless it appears “beyond doubt that the [non-moving party] can prove no set of facts in 4 support of his claim which would entitle him to relief.” Enron Oil Trading & Transp. Co. 5 v. Walbrook Ins. Co., 132 F.3d 526, 529 (9th Cir. 1997). 6 In assessing a motion for judgment on the pleadings, all allegations of fact by the 7 party opposing the motion are accepted as true and are construed in the light most favorable 8 to that party. Seventh–Day Adventists, 887 F.2d at 230. “As a result, a plaintiff is not 9 entitled to judgment on the pleadings when the answer raises issues of fact that, if proved, 10 would defeat recovery.” Id. A plaintiff’s uncontested allegations, to which the defendant 11 had an opportunity to respond, are also taken as true. United States v. Brown, No. CV-18- 12 04213-PHX-DLR, 2019 WL 5549174, at *2 (D. Ariz. Oct. 28, 2019). Finally, a plaintiff’s 13 motion for judgment on the pleadings may be granted only if all defenses raised in the 14 answer are legally insufficient. Qwest Commc’ns Corp. v. City of Berkeley, 208 F.R.D. 15 288, 291 (N.D. Cal. 2002). 16 III. ANALYSIS 17 The issue central to resolution of Plaintiff’s Motion is whether the Enforcement 18 provision is potentially applicable to Plaintiff’s situation. If it is, judgment on the pleadings 19 is premature, because a fact question exists as to whether Plaintiff’s membership was 20 recalled or whether he was expelled from the Club. If there is no possibility that the 21 Enforcement section applies, Plaintiff is entitled judgment on the pleadings. 22 A. Incorporation by Reference 23 Plaintiff makes much of the fact that he signed only the Agreement, not the Plan or 24 the Rules. (See Mot. at 3, 5, 7; Reply at 4.) However, directly above his signature was a 25 section titled Membership Plan Documents, containing the following statement: 26 I hereby acknowledge receipt of the Silverleaf Membership Plan and Rules 27 and Regulations (the “Club Documents”) and that I have read and understand 28 them, and agree to be bound by the terms and conditions thereto as the same 1 may be amended from time to time by the Club. I have had the opportunity to review the Club Documents and to seek professional advice to assist me 2 in evaluating the rights and responsibilities related to purchasing a 3 membership. I have made my decision to purchase a membership without reliance upon any information or representations other than as set forth in the 4 Club Documents. 5 (Agreement at 6–7.) 6 Under Arizona law, this is a clear and unambiguous incorporation by reference and 7 a specific agreement to be bound by all three Governing Documents, not just the 8 Agreement. See Weatherguard Roofing Co. v. D.R. Ward Const. Co., 152 P.3d 1227, 1229– 9 30 (Ariz. Ct. App. 2007). Thus, although not explicitly argued by Plaintiff, the Court rejects 10 the following propositions: (1) that Plaintiff is not subject to the Plan or Rules because he 11 did not sign either, or (2) that the Agreement is placed on a higher footing than the Plan or 12 the Rules because that is the only document he signed. See id. at 1234. Accordingly, as a 13 general matter, Plaintiff is bound by the terms and conditions of all three Governing 14 Documents. 15 B. Interpretation of the Governing Documents 16 As noted, Plaintiff relies on a section of the Plan titled Refund of Membership 17 Deposit, which states the “Club’s obligation to refund . . . the membership deposit shall be 18 as set forth in the [] Agreement executed by the member.” (Plan at 6.) He contends that 19 section makes clear that the Agreement, not the Plan or the Rules, controls as to issues 20 pertaining to Plaintiff’s deposit refund. The Agreement itself obligates the Club to refund 21 the deposit within 30 days of recall. 22 Courts applying Arizona law are to construe a contract “in its entirety and in such a 23 way that every part is given effect.” Cardon v. Cotton Lane Holdings, Inc., 841 P.2d 198, 24 202 (Ariz. 1992). Courts should also avoid interpretation of one provision of a contract in 25 a way that renders another provision meaningless. Norman v. Recreation Ctrs. of Sun City, 26 Inc., 752 P.2d 514, 517 (Ariz. Ct. App. 1988). When there is an inconsistency between two 27 provisions in a contract, the more specific provision qualifies the more general provision. 28 Id. 1 Plaintiff requests the Court hold, at this early stage and on the limited record before 2 it, that only the recall and 30-day refund provisions of the Agreement apply, no matter the 3 circumstances surrounding Plaintiff’s membership termination. The Court disagrees with 4 this oversimplified interpretation because it renders meaningless two entire provisions of 5 the Governing Documents by which Plaintiff agreed to be bound: the Plan’s Enforcement 6 provision and the Rules’ Discipline section. And regarding another maxim of contract 7 interpretation, both the Enforcement and Discipline provisions appear to envision a more 8 specific situation than, or caveat to, the general recall rule. In other words, the portions that 9 Plaintiff points to certainly suggest that when the Club is obligated to refund the deposit, it 10 must do so within 30 days. But the Governing Documents as a whole call into question 11 whether that obligation is always triggered. The Court must apply the rules of contract 12 interpretation and attempt to give all provisions of the Governing Documents meaning. It 13 now turns to those provisions mentioned.2 14 The Plan’s Enforcement section contemplates a circumstance in which the Club may 15 sanction a member for cause. Sanctionable conduct includes, inter alia, conduct 16 determined by the Club to be “likely to endanger the welfare, safety, harmony or good 17 reputation of the Club or its Members.” The sanctions may include reprimands, fines, 18 suspension, and expulsion. A member is generally entitled to notice and a hearing within 19 15 days before the Club can assess sanctions. However, the Club can impose immediate 20 sanctions upon the General Manager’s finding that the member’s conduct, “if repeated or 21 continued, would pose a threat to the welfare and safety of the Club or its Members.” 22 According to the Enforcement provision, a member who has been expelled “shall 23 immediately and automatically forfeit all membership privileges, including the refund of 24 any Membership Deposit.” 25 26 2 The Court also declines to adopt Plaintiff’s interpretation at this time because, although the Plan states the Club’s obligation to refund the deposit shall be as set forth in 27 the Agreement, the Plan also states (1) the deposit is refundable “as further provided for in this Membership Plan,” and (2) the deposit is “refundable only in accordance with this 28 Membership Plan, the Rules and Regulations of the Club and the Membership Agreement.” (Plan at 6.) Plaintiff did not address these potential inconsistencies in his Motion. 1 The Discipline section is very similar, but contains a material distinction. Any 2 member whose conduct “shall be deemed by the Club to be likely to endanger the welfare, 3 safety, harmony or good reputation of the Club or its members” may be reprimanded, fined, 4 suspended, or expelled from the Club. A member accused of improper conduct shall 5 receive notice and may request a hearing, which the Club must provide within ten days. 6 However, the Club can immediately suspend all privileges prior to a hearing if the General 7 Manager believes the member’s conduct, if “repeated or continued, would pose a threat to 8 the welfare or safety of the Club or its members.” Finally, and critically, it states, “Any 9 membership that has been terminated hereunder shall be placed on the waiting list for re- 10 issuance and the member’s membership deposit refund due to the member, less any 11 outstanding balance owed the Club, shall be returned to the member upon re-issuance of 12 the membership pursuant to the Membership Plan.” 13 A contract is ambiguous if it can reasonably be construed to have more than one 14 meaning, and one “construction cannot be determined within the four corners of the 15 instrument.” Univ. Realty & Dev. Co. v. Omid-Gaf, Inc., 508 P.2d 747, 750 (Ariz. 1973); 16 In re Estate of Lamparella, 109 P.3d 959, 963 (Ariz. Ct. App. 2005). Ambiguity may exist 17 when two contractual provisions are in conflict with each other. See Williston on Contracts 18 4th (2020) § 30:4. Here, the Enforcement and Discipline sections are clearly intended to 19 address the same circumstances: a member’s misconduct and the Club’s power to deal with 20 that misconduct. They both vest the Club with discretion to determine what conduct is 21 improper or injurious; mandate notice and a hearing before measures are taken against a 22 member, but permit sanctions without a hearing upon a finding that repeated conduct would 23 threaten the safety of members; and specify the same range of possible penalties. Yet, one 24 section provides that the deposit is forfeited upon “expulsion,” and the other states the 25 deposit will be returned—albeit perhaps with some delay—upon “termination.” This case, 26 potentially, hinges on resolution of this ambiguity. 27 The ultimate goal in interpreting any contract, including when resolving an 28 ambiguity, is to ascertain the parties’ intent as reflected by the contract’s language and in □□ view of all circumstances. See In re Estate of Lamparella, 109 P.3d at 963. At this early □□ stage motion and on this scant record, the Court lacks sufficient evidence to discern the || parties’ intent. 4 For starters, the parties did not substantively acknowledge the ambiguity or brief its 5 || effect on the contract as whole. Naturally, because the ambiguity was not addressed, no || evidence was presented to attempt to resolve the ambiguity, such as testimony from the 7\| drafter of the Governing Documents, the extent of the bargaining process between the 8 || parties, or whether the Plan and Rules materially changed between 2010 until 2019. Even 9|| if the Court were able to resolve the interpretation issues, factual questions remain, such as 10 || whether Plaintiff was expelled or his membership recalled (the termination email and letter 11 || from the General Manager to Plaintiff allude to both (see Compl. Ex. 4)), and whether Plaintiff was afforded any process in that determination. While Plaintiff contends all of this 13 || is irrelevant because the Agreement requires a refund within 30 days under all circumstances, the Court—at least for now—disagrees. Simply put, there are too many 15 || missing pieces and unsettled issues to grant Plaintiff judgment on the pleadings. 16 IT IS THEREFORE ORDERED denying Plaintiff's Motion for Judgment on the || Pleadings (Doc. 27). 18 Dated this 30th day of June, 2020. CN 20 Unifgd State#District Judge 21 22 23 24 25 26 27 28 -9-