TONTO LAWSUIT-JUST THE FACTS 

The recent Arizona Republic article about the lawsuit brought by two surrendered members of the Golf Club has a number of misstatements that are in need of clarification.  For instance:

The article says that Mr. Cole believes his contract “stated that he should be refunded his $40,000.”  There is no contract making that statement.  In fact, the only “contract” is Mr. Coles’ Application for Membership, signed by his wife and him , as well as the Nedzas, which says that they “agree to be bound by the Bylaws and Rules and Regulations of the Club now in effect or hereafter adopted.”  That sounds like they are subject to all bylaw amendments, including the 2007 amendment that changed the bylaws to say that surrendered members got the initiation fee being charged at the time their memberships are resold, not to exceed the amount they initially paid.

The article says that the Coles and Nedzas claim they were not allowed to vote  on the 2007 bylaw change.  The fact is that they did vote, and the additional fact is that if everyone on the surrender list at that time had voted “no” to the proposed bylaw change, it would still have passed by a comfortable margin.  Equally as important, Messrs. Cole and Nedza are the only two still on the surrender list who surrendered before the 2007 bylaw amendment.

The article says that the suit alleges that the Club sold 10 memberships between July 2010 and July 2011 at $40,000 each.  Not only does the lawsuit not say that, it is not true that those memberships were sold.  In fact the Developer controlled Club sold very few memberships during that period because the $40,000 seemed to be out of line with market conditions.

The article says that the Cole and Nedza memberships were sold in July 2011 for $10,000.  The fact is that 30 memberships were sold in July 2011, and the Coles and Nedzas declined their opportunity to receive $10,000 for their equity.  They will continue to be offered to accept the current initiation fees as memberships sell and initiation fees increase in the future.

The article says that Mr. Cole believes the 146 members on the surrender list would be due a refund, and the writer says that as a result there could be a much higher payout if the Club has to refund the original value of all memberships.  The inference is that the Club faces a multimillion dollar liability, when in fact all it faces is the obligation to repay the amount collected from every other new initiation fee received.  And, as indicated above, Messrs Cole and Nedza are the only two still on the surrender list who surrendered before the 2007 bylaw amendment, so it’s hard to imagine any basis for “a much higher payout”.