Document for ROLLYSON, MIKEL vs. CCC D.R., L.L.C.

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                                Filing # 97624784 E-Filed 10/21/2019 04:56:24 PM



                      IN THE CIRCUIT COURT OF THE TWENTIETH JUDICIAL CIRCUIT
                               IN AND FOR CHARLOTTE COUNTY, FLORIDA


         MIKEL ROLLYSON, BILL BARNETT,
         BILL DECAMP, WILLIAM TOMPKINS,
         BOB HINKLE, CHUCK MCMICHAEL,
         RAYMOND FLISCHEL, DEAN
         PETITPREN, TERRY SMITH, DOUGLAS
         HYDE, DOUG SCHUEMANN, GARY
         SLIGAR, JERRY SNIDER, WENDY
         MELVIN, KEN MILLER, JOHN EHLERT,
         MICHAEL CALAHAN, DAVID HAYES,
         RON OLIVER, and BRETTA ARTHUR,

                 Plaintiffs,
                                                                             Case No. 18000010CA
         Vv.


         CCC D.R., L.L.C., and CCC O.P., L.L.C., each
         limited liability companies d/b/a CORAL
         CREEK CLUB,

                 Defendants.



                                   DEFENDANTS’        CLOSING ARGUMENT

                                                INTRODUCTION

                 This is a contract case with 20 Plaintiffs, each of whom   signed an “Admission

         Agreement” that incorporated by reference the “Coral Creek Club Plan” thereby acquiring

         Certificate Memberships in the Coral Creek Club.     The counterparty to each of the Admission

         Agreements was Defendant CCC O.P., LLC, and the Plan provided that it was also binding on

         the other remaining Defendant, CCC D.R., LLC.       Putative Defendants “UK Trust” and

         “Landon Capital Partners, LLC” were dropped as parties before trial, and Defendants Michael

         Zmetrovich and ELV Associates, Inc., were dismissed from the case by summary judgment

         orders before trial.
The Admission Agreements were amendable as between each member individually and

the Club, (Plt. Ex. 214) while the Plan was amendable as between the Club and its entire

membership by means of a procedure laid out in the Plan. (Plt. Ex. 52). The Plan was amended

pursuant to that procedure in 2007, 2009 and 2018.      Asserting what they claimed to be “vested

rights” under the 2009 version of the Plan, the Complaint in this case was filed about six weeks

before the 2018 amendment.       This Court has previously held that the Plaintiffs have no vested

rights under the 2009 Plan because of the provision allowing it to be amended. See Order on

Defendants’ Motion for Final Summary Judgment. Thus, all of the Plaintiffs’ claims under the

2009 Plan are moot unless the Court finds that the 2018 amendment was void, or that one or

more of the Plaintiffs established by the greater weight of the evidence that he or she was

damaged by a breach before the effective date of the amendment.

          The greater weight of the evidence shows that the 2018 amendments to the 2009 Plan

were validly adopted under the law applicable to such amendments in that the 2018

amendment was accomplished in accordance with the procedure set forth in the Plan.

Moreover, no Plaintiff established damage flowing from a breach of the Plan preceding the

amendment.      Therefore, Defendants are entitled to judgment in their favor and the costs of this

action.

                                            ARGUMENT

I         The 2018 Plan was Validly Adopted

    A. The Procedural Requirements for Amendments Under the 2009 Plan Wer
       Followed

          The law is clear that in a club setting, where the formative documents accepted as part of

membership include provisions permitting amendment of those documents, the terms of the

documents may properly be amended so long as the procedures set forth in them are followed.
Reynolds v. The Surf Club, 473 So. 2d 1327, 1335 (Fla. 3d DCA 1985) (“Of course the power to

make such [by-laws] carries with it the power to alter and amend them in the manner prescribed.

Voluntary acceptance of membership . .     necessarily involves and implies the assent of each

member to every amendment to the by-laws the substance of which is the proper subject of such

law and which has been formerly and regularly adopted.”) (emphasis in original). Plaintiffs have

not offered any evidence that any provision in the Plan regarding voting procedures was not

followed by the Club.

       The 2009 Plan confirms its own amendability and sets forth the procedures necessary to

make amendments.     The Definitions set forth on Exhibit A to the Plan define the Plan to “mean

and refer to this document entitled Coral Creek Club Plan, as such Plan shall be amended from

time to time.” Article XI of the Plan provides “No amendments shall be made to this Plan

without the prior written vote or consent of a majority of a Voting Quorum of all Certificate

Members and with the written approval of the Club.” (Plt. Ex. 52, Article XI). Certificate

Members are defined in Exhibit A. The term “Voting Quorum” is defined there to mean “the

presence in person or participation by consent or proxy of more than fifty percent (50%) of the

Certificate Members, at any meeting of the Golf Certificate Members or in any action requiring a

vote of Certificate Members shall constitute a Voting Quorum for such meeting or action.” (Plt.

Ex. 52, at Exhibit ”A”). The Plan also provides that the Club can set a special meeting for such a

vote as follows: “Written notice of the date, time and place of such meeting shall be sent to each

Member’s address as it appears in the records of the Club . . . not less than twenty (20) days, and

not more than sixty (60) days, prior to the scheduled meeting date.” (Plt. Ex. 52, at Article IX).

There is no dispute that the specified procedure was followed in connection with the 2018 vote.

(Plt. Ex. 134; Tr. 105:15 — 106:16, 620:19 — 621:4).
Faced with the incontrovertible fact that the vote occurred in compliance with the

specified procedures in the Plan, Plaintiffs are left to make conclusory arguments suggesting that

compliance with the contractually specified voting procedure should be ignored because the

absence of unprecedented financial disclosures and the absence of security procedures not

specified in the Plan and never previously used caused the procedure to be “skewed in

Ownership’s favor.” None of those arguments has been proven.

       All of the iterations of the Plan have allowed for voting by proxy. (Plt. Ex. 39 and 52,

Deft. Ex. B and D, at Exhibit “A”). In order to call a special meeting for a vote, the Club must

send written notice of the date, time and place of the meeting to each member’s address as it

appears in the records of the Club not less than twenty (20) and not more than sixty (60) days

prior to the scheduled meeting date. (Plt. Ex. 52, at Article IX.C).

       The notice and voting procedures for amending the Plan in 2018 were in compliance with

the provisions contained in the 2009 Plan. On January 23, 2018, at least 20 days and not more

than 60 days prior to the scheduled Special Meeting for the vote, a package was mailed to all

current members and people on the redemptions list eligible to vote at the address listed in the

records of the Club. (Plt. Ex. 134; Tr. 105:15 — 106:16, 620:19 — 621:4). The package was also

emailed to members and people on the redemption list. (/d.). The package included a letter to

current and former members from ownership and management of the Club and the Advisory

Committee approving the proposed amendments, written notice of the Special Meeting on

February 12, 2018, the proposed amendments to the Plan, and a proxy containing instructions for

returning and voting if the individual was not voting in person at the scheduled meeting. (Plt. Ex.

134; Tr. 625:10-25).
The designated proxy was John Payne, a member of the Advisory Committee, and the

backup proxy was Zayra Calderon, also a member of the Advisory Committee. (/d.). John Payne

received proxies directly via the proxy email address listed on the proxy form. (Plt. Ex. 134; Tr.

625:10-25, 627:3-18). Members and people on the Redemption List could choose to either vote

by proxy or vote in person at the scheduled meeting by ballot. (Plt. Ex. 134).

       The Advisory Committee hosted a meeting on February 2, 2018 to discuss the proposed

amendments and the report of the financial review committee without the Club management

present. (Deft. Ex. CC; Tr. 611:15 — 612:19, 631:3 — 632:15). John Payne served as the chair of

the Advisory Committee at that meeting and testified that Members and people on the

redemption list were able to and did ask many questions of the Advisory Committee and of the

financial review committee. (/d.; Tr. 624:15-25). John Payne testified that the members were

generally pleased with the presentation. (/d.). The Club held an informational/Q&A session on

February 6, 2018 to discuss the proposed amendments and provided a call-in number for those

not able to come in person. (Deft. Ex. FF).

       A reminder of the special meeting for the vote was sent out on February 9, 2018. (Deft.

Ex. HH). The vote took place on February 12, 2018. (Tr. 625:10-13). The total number of votes

submitted either by ballot or proxy were 171, establishing a voting quorum. (Deft. Ex. LL and

MM). The vote was 91 in favor and 80 against, establishing a majority of the voting quorum.

(/d.). John Payne, Zayra Calderon and Steve Iovino recorded the vote on February 12, 2018 and

signed the final vote tally. (Deft. Ex. LL; Tr. 625:10-25, 628:8-12).

       There is no evidence that the procedures required by the 2009 Plan were not followed in

conducting the vote in 2018 nor is there evidence that the procedures were improper.
B       The 2018 Vote Was Proper and Not Skewed

       Plaintiffs argue that there were misrepresentations, concealments and manipulations of

the system that improperly influenced members and skewed the vote. There is no such evidence.

The reason for the amendment in 2018 was because Club was approaching the cap as defined by

the 2009 Plan and facing a move to the | to 1 redemption ratio, but the Club did not have enough

dues-paying members to support a move to the 1 to 1 redemption ratio because the 2009 Plan

allowed for certain members to resign and not continue to pay dues while awaiting a redemption.

(Tr. 156:18 — 157:3, 490:24 — 491:10, 544:16-24, 570:24 — 571:3, 825:8 — 826:2, 827:1-24). If

the Club hit the cap of 225 Certificate Members, the Club would be forced to sell the 50 Non-

Certificate Memberships allowed under the 2009 Plan, which would halt redemptions and

change the culture of the Club. (/d.). The proposed amendments to the 2009 Plan were a

compromise. (/d.).

       Collin Carrico, a member of the Advisory Committee at the time of the proposed

amendments, testified that the Club worked with the Advisory Committee to negotiate the

proposed amendments to attempt to balance the desires of current members, people on the

redemption list, and ownership and management. (Plt. Ex. 109; Tr. 547:1-6, 327:5-22). Michael

Zmerovich testified that he had numerous meetings with the Advisory Committee concerning the

proposed amendments. (Tr. 489:7-13).

       The Club sent out potential proposed amendments to the 2009 Plan on November 20,

2017 along with an FAQ and two cash flow projections, but did not schedule a special meeting

or send out notice to vote on those proposed amendments. (Plt. Ex. 109). Since that proposed

amendment was withdrawn, the material submitted in support of it is irrelevant to the vote on the

2018 amendment.      Moreover, the FAQ contained a disclaimer stating that the “Frequently Asked

Questions are for general informational purposes only and are summary in nature. They should
not be relied upon as a basis for a vote one way or the other.” (/d.). Furthermore, the cash flow

projections included one based on the 2009 Plan that was currently in effect and one based on the

proposed amendments as they were at that time, which included an amendment exchanging the

50 Non-Certificate Memberships for 50 Certificate Memberships which would raise the capacity

of the Club from 225 to 275 Certificate Members. (/d.). Similarly, the cash flow projections

contained a disclaimer, “DRAFT     FOR DISCUSSION PURPOSES            ONLY.” (/d.). Thus, no one

could reasonably claim to have relied upon that information in deciding how to vote in 2018.

Even if one assumed that those draft projections were properly relied upon, the clear message

that they convey, by comparing the projection related to the 2009 Plan and the projection related

to the proposed amendment, was that without the amendment in 2018 the Club would be forced

to sell the Non-Certificate Memberships and there would be no redemptions of Certificate

Membership interests for at least 4 years. The evidence clearly showed this was true. Thus, the

projections conveyed accurate information.

        The Club withdrew those potential proposed amendments to the Plan after receiving

feedback from the members of their concerns. (Plt. Ex. 126; Tr. 97:6-15, 301:13-24, 379:13-17).

The Club continued working with the Advisory Committee to revise the proposed amendments.

(Id.; Tr. 489:7-13).
        Additionally, in response to the concern of members, the Club agreed to allow a

committee of three members, Tom Cross, Bob Der, and Phil Urban, with financial backgrounds

to review the financial information of the Club and provide a report on their findings. (Plt. Ex.

128 and 139; Tr. 97:20-25, 607:14-23). This was a joint proposal between the Advisory

Committee and the Club as a compromise to create a way for financial information to be shared

with people prior to the vote. (Tr. 643:22 — 644:10). Tom Cross testified that the financial review
committee was provided all of the information it requested from the Club and was allowed to

investigate as thoroughly as they saw fit. (Tr. 647: - 648:8). The committee did not find any

ambiguities or anomalies in the financial information reviewed, and Mr. Cross testified that he

was impressed by the level of sophistication in which the Club appeared to be managed. (Plt. Ex.

139; Tr. 648:12-24). The report of the financial review committee was sent out on January 30,

2018. (Pit. Ex. 139).

        Before the Club sent out the revised proposed amendments on January 23, 2018, the

Advisory Committee had the opportunity to review and comment on the proposed letter that was

included in the package of materials. (Deft. Ex. WW). The chairman of the Advisory Committee,

George Tucker, testified that he approved of the letter on behalf of the Advisory Committee,

which included a statement that the Advisory Committee was in unanimous support of the

proposed amendments. (Deft. Ex. U; Tr. 595:9 — 596:21, 597:1-3, 602:1-18). He testified that he

believed there was unanimous support from the Advisory Committee at that time. (/d.). Mr.

Tucker testified that he had no reason to think Mr. Zmetrovich would have said the Advisory

Committee was unanimous if it was not true. (Tr. 596:16-21). Further, Mr. Tucker was clear that

the Advisory Committee would have objected at the time to the “unanimous” language had it not

been true. (Tr. 597:1-3).

        Plaintiffs will likely argue that two members of the Advisory Committee,    John Payne and

Collin Carrico, voted against the amendment.   However, while there is no doubt that those two

members of the Advisory Committee voted against the amendments on February 12, 2018,

neither Mr. Payne nor Mr. Carrico testified unequivocally that he advised Mr. Tucker of that fact

at the time the January 23rd letter was approved. (Tr. 556:19 — 557:10, 617:4-13). Indeed, both

Mr. Payne and Mr. Carrico testified that the Advisory Committee may have been in unanimous
support at the time of the letter, but were not unanimous at the time of the actual vote. (/d.). Mr.

Carrico testified that while he did not vote in favor of the proposed amendments at the actual

vote, he did support the need to have a vote to attempt to get a new Plan in place. (Tr. 553:7-11).

Importantly, when shown an email dated February 10, 2018 circulated by Rayner Hamilton, Mr.

Carrico specifically remembered that February 10 was the day that he told the Advisory

Committee that he was not in support of the proposed amendments and did not want the

“unanimous” language in a letter going out to the members. (Tr. 557:17 — 559:14). He also

testified that he wasn’t sure whether he knew prior to the actual vote how John Payne planned on

voting. (Tr. 555:9-13). Thus, the greater weight of the evidence shows that the statements in the

January 23, 2018 letter and notice of the February 12, 2018 vote were accurate and did not skew

the voting procedure.

       The prospective voters were also provided with additional information to insure that they

could understand the matters at issue in the vote.   Two meetings were held prior to the vote on

February 2, 2018 and February 6, 2018 in which people could ask questions or address their

concerns. (Deft. Ex. CC and FF).    The Advisory Committee members told people to review the

proposed amendments, ask questions, and make up their own minds. (Tr. 555:20-21 and 632:2-

15). Members were generally pleased with the financial review committees’ report and follow up

members-only meeting. (Tr. 611:15 — 612:19).

       In addition to the two meetings held prior to the vote, Plaintiffs and members of the Club

had access to an email address list that permitted them to communicate with each other about the

proposed amendments. (Deft. Ex. YY; Tr. 405:11 — 406:13, 407:1-27). Current and resigned

members had membership directories with contact information. (/d.). One current member,

Rayner Hamilton, testified that he created an email list of all current and resigned members that
he was confident reached more than 90% of them and allowed anyone to use it to disseminate

information or opinions on the proposed amendments and that many members took advantage of

it to disseminate information both for and against the amendment. (/d.). He estimated that his list

was about 90% complete. (/d.).

        Importantly, no one testified that any of the information received in advance of the vote

deceived them in such a way as to change their votes one way or the other. There is no other

evidence that anyone was misled or improperly influenced by any information sent out by the

Club. None of the Plaintiffs were misled or improperly influenced into voting in favor of the

proposed amendments. (Tr. 732:5-22). Thus, the greater weight of the evidence shows that the

voting procedure was not skewed by the information published or by any information that was

withheld.

        Based on the allegations of paragraph 80 of the SAC, Plaintiffs will likely argue that the

Club’s use of proxies was improper notwithstanding their failure to present any evidence of any

harm flowing from the practice. The Plan has always allowed for members to vote by proxy and

there is no evidence that the Club mishandled proxies or improperly canvassed members after

viewing their proxies. Also, there’s no evidence that the Club used an independent third party to

collect and tally the votes for any prior amendments. (Tr. 353:18 — 355:12). In fact, the vote to

amend the Plan in 2007 was tallied by Plaintiff Mikel Rollyson at a meeting in which people

simply raised their hands. (/d.). Members and people on the Redemption List had the option to

attend the meeting and vote in person by ballot. Yet, Plaintiffs William Barnett, Bill DeCamp,

Raymond Flischel, Bob Hinkle, Doug Hyde, Chuck McMichael, Wendy Melvin, Mikel

Rollyson, Doug Schuemann, Gary Sligar, Terry Smith, Jerry Snider, and Bill Tompkins all voted

by proxy. (/d.). Only three Plaintiffs voted in person by ballot. (Deft. Ex. LL). Plaintiffs Michael
Calahan, Ron Oliver, John Ehlert and Dean Petitpren did not submit a ballot or a proxy for the

vote at all. (Deft. Ex. LL). Of course, Plaintiff Ehlert had been expelled from the Club by then

and Petitpren was on the verge of being redeemed. (Plt. Ex. 199 and 200).

        There is no evidence that the Club misled, forced or pressured anyone into changing his

or her vote through the use of any information it might have had access to during the course of

the collection of the proxies.   Thus, the greater weight of the evidence shows that the use of the

proxy system established for the 2018 vote did not skew the voting procedure in favor of the

Club.

        In sum, Plaintiffs have failed to establish that the voting procedures leading up to and

during the proposed amendments in 2018 were flawed or improper.

        Cc      The Implied Covenant of Good Faith and Fair Dealing Is Not Implicatted

        The result cannot be changed by reliance on the so-called “implied covenant of good faith

and fair dealing.” “The implied obligation of good faith cannot be used to vary the terms of an

express contract.” City of Riviera Beach v. John’s Towing, 691 So. 2d 519, 521 (Fla. 4th DCA

1997). “Because the implied covenant is not a stated contractual term, to operate it attaches to the

performance of a specific or express contractual provision. There can be no cause of action for a

breach of the implied covenant absent an allegation that an express term of the contract has been

breached.” Snow v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 896 So. 2d 787, 791-92

(Fla. 2d DCA 2005)(internal citations and quotations omitted). “[T]he duty of good faith

performance does not exist until a plaintiff can establish a term of the contract the other party

was obligated to perform and did not.” Jd. at 792.

        Plaintiffs do not claim that any provision of the 2009 Plan relating to amendments was

breached. Instead, Plaintiffs claim that other provisions of the 2009 Plan relating to the operation
of the Club were breached and that somehow skewed the vote. However, Plaintiffs misapply the

law because the alleged breaches are in no way related to the requirements under the Plan for

amendments. Further, as explained, supra, Plaintiffs failed to establish that the Club breached

any provisions of the 2009 Plan, and, without a breach of an express term of the contract, a claim

of breach of the implied covenant of good faith and fair dealing fails.

Il.    Plaintiffs’ Breach of Contract Claims Fail

      Plaintiffs’ cause of action for Breach of Contract fails for several reasons. First and

foremost, the alleged breaches are contradicted by the testimony and evidence presented.

Second, Plaintiffs failed to present sufficient competent evidence of damages accruing to

themselves that would naturally result from the alleged breaches; they tacitly admit as much by

seeking relief for the Club, which they have no standing to represent. Third, Plaintiffs’ claims are

barred by the applicable statute of limitations. Finally, because the Plan has been properly

amended, many of Plaintiffs’ claims are moot.

       A.      The Breaches Alleged are Contradicted by the Evidence

               1.      The Club Did Not Fail to Disclose Financial Information

       Plaintiffs’ first argument with respect to breach of the Plan is based on the alleged failure

of the Club to disclose all of the Club’s and its owners’ financial information if requested by

active members or resigned members on the Redemption List. In the context of discovery in this

case, this Court has previously held that the Plan did not require the Club or its owners to

disclose their financial information. Neither the admission agreement nor the Club Plan requires

the Club to disclose its financial information to the members. (Plt. Ex. 52). Nowhere in the Plan

or its incorporated documents does it state that the Club must disclose any financial information

to all members. (Plt. Ex. 52 and 214). Plaintiffs cite to Article VIIIA of the Plan which provides,
“the Club will prepare budgets for each subsequent membership year to project Club revenues

and operating expenses (including a management fee not in excess of 10% of normal operating

expenses excluding capital expenditures) based on the prior year’s expenses.” (Plt. Ex. 52,

Article VILA). While Article VIIA contemplates that the Club will prepare budgets! it does

not make any mention of providing those budgets or other financial disclosures to members, and

certainly not to resigned members on the redemption list.

       Article VII.H states, “once per calendar year the Advisory Committee may request, and

upon receipt of such request the Club shall provide, a statement of the amount of Senior

Mortgage Debt as of the last day of the Club’s prior fiscal year, (a Senior Debt Statement).” (Plt.

Ex. 52). This is the only language in the Plan that requires the Club to provide any sort of

financial information’, and it only requires the Club to provide such information, which notably

does not include budgets, to the Advisory Committee, not all of the members or resigned

members. Thus, Defendants did not breach any obligation to provide financial disclosures.

       If the Club were a not-for-profit corporate entity with members in the position of

stockholder as is the case in many member-owned clubs, the situation would be different, as

there are statutory provisions requiring the disclosure of information to stockholders. E.g.,

§§617.1602 et seq., Fla. Stat. (2017). However, the members here are not in the position of

stockholders. (Plt. Ex. 214; Trial Transcript (“Tr.”), 820:5-12). They are licensees of a property

owner and have no right to information about the property owner’s finances. (/d.).


' And there was uncontradicted evidence that the Club, in fact, prepared budgets to set dues. (Tr.
126:2-18).
? Article VIILB of the Plan, which discusses assessments against members, contemplates that
“{iJ]n the event an assessment is sought, the Club shall provide all Certificate Members with a
description of the facility enhancements to be funded from the assessments. All of the revenue
generated by any assessment shall be restricted for use solely for the specified purpose.” (Plt. Ex.
52). While the Club is obligated to provide Certificate Members a description of the purpose for
the assessment, the Club has no obligation to provide or disclose any financial information.
Therefore, plaintiffs claim that defendants breached the 2009 Plan by failing to make

certain financial disclosures purportedly mandated by Article VIIA of the 2009 Plan fails.

               2.      The Club Did Not Violate Article VIII.A of the 2009 Plan

         Plaintiffs argued the Club breached Article VIII.A of the 2009 Plan by paying

management fees in excess of 10% of normal operating expenses excluding capital expenditures.

There is no evidence of this alleged breach.

       To the contrary, a financial review committee established jointly by the Advisory

Committee and the Club to review and report on the financial information of the Club

investigated the combined management fees paid to ELV Associates and Michael Zmetrovich’s

management company and found that they were “well under 8 percent.” (Plt. Ex. 139 and 128;

Tr. 645:3-5, 660:22 — 661:6, 662:13-17). One of the members of the financial review committee,

Tom Cross, testified that the committee did not encounter any ambiguities or anomalies in the

financial information and that everything they saw seemed reasonable. (Tr. 659:23 — 670:4,

658:24 — 659:1). Mr. Cross further testified that he was impressed with the people at the Club’s

understanding of details of the Club’s operations and “surprised the Club was managed in as

sophisticated of a way as it appeared to be at an operational level.” (Tr. 648:12-24).

       Furthermore, Article VIII.A does not mandate that the Club shall not pay management

fees in excess of 10% of normal operating expenses. Rather, Article VIII.A requires the Club to

prepare a budget for each Membership Year to project operating expenses and part of those

projected operating expenses includes a management fee not in excess of 10% of normal

operating expenses excluding capital expenditures. (Plt. Ex. 52, at Article VIII.A).

       Plaintiffs will argue that the financial review committee did not adequately investigate or

were not permitted to adequately investigate the finances of the Club. However, there’s no

evidence of that in the record. The financial review committee members were provided all of the
information they requested and were “allowed to drill down to any level of detail [they] chose to

see.” (Tr. 647:12 — 648:8). The financial review committee met with management and the Club’s

controller to ask questions and get further information. (Tr. 647:12 — 648:12). Mr. Cross testified

that the Club’s financial statements showed operating expenses by category and the committee

drilled down any categories that were more general to make sure they understood what was

included in those categories. (Tr. 658:3-20). Everything they saw seemed reasonable. (Tr.,

658:24 — 659:1). Finally, while the Club’s financials were unaudited, this is normal for private

clubs. (Tr. 650:4-9).

        Because the evidence shows that the management fees were well under 8% and the 2009

Plan did not mandate a certain cap for management fees, Plaintiffs’ claim that the Club paid

management fees in excess of the 10% cap set forth in Article VIII.A must fail.

                3.      The Club Did Not Improperly Use Membership Deposits

        Plaintiffs second breach of contract argument is that Defendants breached Article VIII

by using membership deposits to repay equity to owners in the amount of $1.3 million without

first funding an operating or capital improvement reserve of up to $2.5 million. However, there

was no evidence of misuse of membership deposits in violation of Article VIII of the 2009 Plan.

        Article VIII of the 2009 Plan mandates a sequence for the use of membership deposits.

(Plt. Ex. 52). Specifically, Article VII.I provides:

        All membership deposits shall be applied in the following order: (i) first, to pay
        accrued operating deficits and current operating expenses and liabilities of the
        Club, to the extent dues paid by members are not sufficient for such purposes; (ii)
        second, to fund and maintain a reasonable operating and/or capital improvement
        reserve not in excess of $2,500,000; (iii) and third, to reduce senior mortgage debt
        and to repay equity (inclusive of a return thereon) to the ownership or its
        principals provided that no more than one dollar ($1.00) of repayment of equity
        (inclusive of a return thereon) shall be made to ownership or its principals for
        each two dollar ($2.00) of debt reduction.

This provision is a waterfall in which available membership deposits first go (i) to pay accrued
operating deficits and current operating expenses and liabilities of the Club before moving on to

(ii) or (iii).   The evidence does not establish any violation of this provision.

          First, there is no evidence that the Club does not have a capital improvement reserve.

Subsection (ii) does not require that the Club have a separate account dedicated to the reserve. In

fact, the 2009 Plan specifically states that membership deposits “may be co-mingled with other

funds of the Club and will not be set aside in separate accounts or otherwise segregated from the

operating assets of the Club.” (Plt. 52, at Article VII.C).

          Second, the $1.3 million of “capital” paid to ownership* was not a repayment of “equity. »

The report of the financial review committee established that as of 2018 the Club recorded a net

loss from operations for the last ten years. (Plt. Ex. 139). After utilizing membership deposits

less redemptions to cover operational deficits and expenses, the Club was cash flow positive for

the last seven years. (/d.). That leaves three years at the beginning of the current ownership’s

tenure that there were operating losses that membership deposits did not cover. (/d.). In those

first three years, the Club had to borrow an aggregate of over $2 million from the owners to

cover the annual operating deficits and expenses. (Tr. 140:16-25, 141:13- 142:10, 174:3-4, 451:2

— 453:16). Over several years, prior to the Club’s annual meeting in 2017, the Club had partially

repaid the owners in the amount of $1.3 million for the operating deficits and expenses the

owners covered in those three years. (/d.). Thus, far from repaying the “equity” invested, the

Club merely pared down the liability owed for advances to cover the first three years’ operating

deficits from $2 million to $700,000.

          Subsection (i) of Article VIII requires the Club to use membership deposits to first pay

accrued operating deficits and current operating expenses and liabilities of the Club. The

repayment of the loan from the owners would constitute either payment for accrued operating

* See Pit. Ex. 69 (describing in a PowerPoint slide $1.3 million paid to owners as a return of capital).
deficits or payment of a liability of the Club. Either way, the $1.3 million was not a payment of

equity to the owners in violation of Article VII.I. Additionally, because there is no evidence that

the loan in the amount of over $2 million from the owners to the Club to cover operating deficits

and expenses has been fully repaid, membership deposits did not trickle down to subsection (ii)

of Article VIII which requires the Club to fund and maintain an operating and/or capital

improvement reserve only after all accrued operating deficits and liabilities have been paid.

       Therefore, Plaintiffs have failed to establish that the Club breached Article VILI of the

2009 Plan.

               4       The Club Did Not Breach the Plan by Expelling Members for Non-
                       Payment of Annual Due:

       Plaintiffs next argue that defendants breached the 2009 Plan by creating and adopting an

“ad hoc membership redemption program” not found in the redemption provisions of the Plan.

However, general principles of contract law, as well as the admission agreement, establish that

the Club can expel, or terminate, members for being in default of their dues.

       “The rule is quite clear that a contracting party, faced with a material breach by the other

party, may treat the contract as totally breached and stop performance.” Cty. Of Miami Beach v.

Carner, 579 So. 2d 248, 251 (Fla. 3d DCA     1991); Hamilton v. Suntrust Mortgage, Inc., 6 F.

Supp. 3d 1300, 1309 (S.D. Fla. 2014) (“It is a fundamental principle of Florida contract law that

a material breach by one party excuses the performance by the other.”). “The same holds true

when one party to an agreement commits an anticipatory breach. If such a breach occurs, then

the nondefaulting party is relieved of its obligations under the contract.” Ryan v. Landsource

Holding Co., LLC, 127 So. 3d 764, 767-68 (Fla 2d DCA 2013). “An anticipatory breach of

contract occurs before the time has come when there is a present duty to perform as the result of

words or acts evincing an intention to refuse performance in the future.” A/varez v. Rendon, 953
So. 2d 702, 709 (Fla. Sth DCA 2007).

        Thus, when a member either fails to pay his or her annual dues when they become due or

definitively expresses his or her intent to never pay annual dues when they become due, the Club

may treat the member’s contract as breached and is relieved of any further performance under

the contract.

        Moreover, the admission agreement, which every Plaintiff signed as a condition of

becoming a certificate member, clearly states:

        The applicant agrees to pay the dues, fees and charges applicable to the Certificate
        Membership as determined by the Club from time to time. The Applicant
        acknowledges that if any amounts charged to the applicant’s account are not paid
        when due, the Club may take disciplinary action, which may include without
        limitation, suspension of membership rights or expulsion from the Club.

(Pit. Ex. 52, at Exhibit “E”; Plt. Ex. 214) (emphasis added).

        The Plan does not say the Club has to consult the Advisory Committee prior to expelling

a member for nonpayment’. (d.; Tr. 543:4-12, 551:8-10, 576:12-20, and 463:3-6). George

Tucker, who was the chairman of the Advisory Committee in 2017 and 2018 testified at trial by

deposition that it was not the Advisory Committee’s position to provide input or opinion on

whether to expel members from the Club. (Tr. 576:12-20). Collin Carrico, another member of the

Advisory Committee during 2017 and 2018, testified at trial by deposition that Michael

Zmetrovich “was within his rights” to expel members from the Club who were not in good


‘ Plaintiffs argue that Article X of the 2009 Plan requires the Club to consult with the Advisory
Committee prior to expelling a member. Article X deals with the adoption, implementation and
enforcement of rules and regulations for the proper conduct, or behavior, of Members “with
respect to Club facilities.” (Plt. Ex. 52, at Article X). This provision requires the Club to seek
input from the Advisory Committee when imposing disciplinary actions for bad behavior at the
Club with respect to the Club facilities. This provision does not deal with a Member’s agreement
to pay annual dues, which is separate and apart from Article X. Tellingly, paragraph 9 of the
Admission Agreement contains the language of Article X, which is clearly separate from
paragraph 3 which deals with expulsion for nonpayment of annual dues. (Plt. Ex. 52, at Exhibit
“B”),
standing and that the Club did not need to consult the Advisory Committee. (Tr. 550:12-25,

551:8-10). The Advisory Committee does not have any authority to govern or take action and is

strictly an advisory function of the Club. (Tr. 463:3-6, 543:4-12).

       A total of eight members have been expelled from the Club between 2009 and 2018. (Tr.

804:4 — 806:12). When a member is expelled, he or she is no longer a member and no longer

entitled to a redemption. (Tr. 460:14-18). There is no evidence that any person expelled from the

Club was not in default of his or her payment obligations. While some were more in arrears than

others, all had demonstrated the futility of continuing to carry them on the roster.

        Five members, one member on March 11, 2017 and four members on July 4, 2017° were

expelled in accordance with the Admission Agreement signed by each member for being in

default of their payment of dues. (Plt. Ex. 86°; Deft. Ex. G; Tr., 269:11-12, 270:7-9, 457:15-18,

and 804:4 — 806:12). The Club was authorized to expel those five members sooner, but, in

abundance of caution, waited until the member’s balance owed to the Club exceeded any

reasonable amount of redemption he or she would ever receive. (Tr., 497:7-16).

        Plaintiff John Ehlert was among those expelled on July 4, 2017. (Plt. Ex. 86; Deft. Ex.

G). Plaintiff Ehlert attempted to resign on October 29, 2012, but his resignation was not accepted

or deemed effective because he was obligated and failed to pay dues on October 1, 2012. (Deft.

Ex. G). On November 29, 2012, he was suspended from the Club and warned that failure to

bring his account current could result in expulsion from the Club. (/d.). On March 14, 2014, he

was again informed of his status as a suspended member not in good standing when he attempted


5 July 4th is the date that the Club closes for the season. (Tr. 495:4-5). Plaintiffs will argue that
the Club expelled these members in bad faith on certain dates solely to avoid reaching the cap,
but the evidence does not establish such nefarious insinuations. The four members were expelled
on the same date because that is the date that the Club closes for the season.
® The Club believed the 1.5% interest charged per month was authorized by the State of Florida
pursuant to the 18% maximum amount that can be charged for interest. (Tr. 496:1-9).
but was not permitted to join a current member on the golf course as a guest. (/d.). Once his

balance owed to the Club exceeded any reasonable amount of his potential redemption, he was

expelled from the Club. (Plt. Ex. 86 and 200).

         Three members, one member in august 2015 and two members in November 2017 were

expelled in accordance with their admission agreement and the general principles of contract law

for definitively expressing their intent to never pay dues in the future and surrender’ their

certificate membership interest. (Plt. Ex. 108 and 201; Tr. 505:14-25, 507:12-22, 753:18-25,

780:4 — 781:2, and 804:4 — 806:12).

         Additionally, the Admission Agreement states that it can be amended or modified by an

instrument in writing executed by the Club and the Applicant. (Plt. Ex. 52, at Exhibit “E”; Plt.

Ex. 214). In fact, Plaintiff Kenneth Miller modified his Admission Agreement with his

handwritten notes to paragraph 4. (Plt. Ex. 214, at pgs. 52-54). Thus, members were permitted to

modify their individual admission agreements with the Club, including their agreement to pay

dues and their privilege to receive a refund in redemption of the Certificate Membership

interest.®



7 Plaintiffs will likely attempt to grasp at straws to make a connection between the three
members who were expelled when they expressed their intent to never pay dues again and the
Club’s proposed amendment in 2007. Mr. Hamilton testified at trial regarding a specific
proposed amendment to the Plan in 2007 which would require all current and future members to
continue paying dues after they resigned. (Tr. 352:2-8). This proposed amendment also
contained a forfeiture provision for members who resigned but did not want to continue paying
dues. (/d.). This proposed amendment did not pass in 2007. (Tr. 354:23). In 2009, the Club
proposed a similar, but less stringent, amendment that did pass because it was forward-looking
and only required future members joining after 2009 to continue paying dues while on the
Redemption List. (Tr., 356:2-14). Clearly, the problem was not with the forfeiture provision, but
rather was that current members did not want to be on the hook for dues while on the
Redemption List.
’ Plaintiffs implied at trial that it was improper for Michael Zmetrovich to have been a Certificate
Member but not pay dues. However, clearly the provision in the Admission Agreement he would
have been required to sign allows such arrangements.
Finally, even if Plaintiffs’ sleight of hand regarding the membership count are to be

believed, the evidence is clear that had the Club reached capacity as defined in the 2009 Plan, it

would have stopped selling Certificate Memberships and started selling the fifty Non-Certificate

Memberships instead. (Tr. 156:18 — 157:3, 425:1-5, 490:24 — 491:10, 570:24 — 571:3, 750:2-18,

825:8 — 826:2, 827:1-24). Michael Zmetrovich, Angie Mills, Karen Conroy, George Tucker,

Rayner Hamilton, and Defendants’ expert Michelle Tanzer all testified that the Club would have

been forced to sell the fifty non-certificate memberships had the Club in fact reached the cap of

225 Certificate Members. (/d.). Had the Club sold the fifty Non-Certificate Memberships, the

redemption ratio would not come into play at all because the Non-Certificate Memberships do

not trigger redemptions of Certificate Membership interests. (/d.; Tr. 827:17-24). There was no

restriction on the amount at which the Club could sell Non-Certificate Memberships. (Tr. 751:2-

6). Those sales would not count towards redemptions and the Club could use the deposits from

those sales for any purpose. (Tr. 751:7 — 752:21). The 2018 Plan converted the 50 Non-

Certificate Memberships to Certificate Memberships. (Tr. 752:1-15).

        The expulsion of defaulting members, pursuant to the terms of the Admission Agreement,

is not an “ad hoc membership redemption program” and is not a breach of the contracts between

the Club and the Plaintiffs.   A membership can only be redeemed if it is in good standing and it is

on the redemption list. (Tr. 460:11-12). The actions of the Club are wholly within its rights under

the contract between the Club and the individual members. Thus, Plaintiffs’ claim of breach of

contract by expelling delinquent members fails.

                5.      Defendants Did Not Breach the Plan by Failing to Apply a 1 to 1
                        Redemption Ratio
        The 2009 Plan, Article VII.E, governs the application of the 1:1 redemption ratio:

        Certificate membership shall be deemed “at capacity” when there are 225
        Certificate Members . . . . If the effective date of a resigning Certificate Member's
resignation occurs any time that Certificate Membership is not at capacity, then
       Certificate Membership interests will be redeemed at a rate of one (1) redemption
       for every four (4) new Certificate Memberships that are enrolled by the Club,
       such redemptions to be made in chronological order form the earliest to most
       recent entries on the redemption list. At any time that the Certificate Membership
       is at capacity, then Certificate Membership interests will be redeemed at a rate of
       one (1) redemption for each new Certificate Membership that is enrolled at the
       Club, in chronological order from the earliest to most recent entries on the
       redemption list.

(Plt. Ex. 52) (emphasis added). The proper interpretation of this provision is that the only

resigning members who are afforded the 1 to 1 redemption ratio are those that resign and are

placed on the redemption list when the Club is “at capacity.” Since none of the plaintiffs can

possibly allege that they resigned and were placed on the redemption list when the Club was “at

capacity,” none of them are entitled to the 1 to 1 redemption ratio and their claim fails.

       Even if the court determines that this is not the proper interpretation of Article VILE,

plaintiffs’ claim still fails because the Club has never been “at capacity” under either the 2009

Plan or the 2018 Plan. (Tr., 156:18 — 157:3, 255:20-22, 756:22 — 759:14). At least three people

testified directly that the Club has never reached the cap of 225 Certificate Members, including

(1) the Club’s Controller, Angie Mills, who is responsible for maintaining the Club’s roster, (2)

the Club’s former General Manager and Membership Director, Karen Conroy, and the Club’s

former Managing Partner, Michael Zmetrovich. (/d.). Neither Karen Conroy nor Michael

Zmetrovich have any reason to lie or defend the Club. Neither of them is a party to the lawsuit.

Neither of them works for the Club. Neither have any interest in the Club anymore. And Angie

Mills testified that she did not particularly like working with or for Michael Zmetrovich, so she

has no reason to cover up any alleged manipulation he was responsible for while he was the

Managing Partner at the Club. (Tr. 142:25 — 143:6).

       Despite the absence of any direct testimony or evidence at trial that the Club reached

capacity, Plaintiffs will argue that the Club did reach capacity of 225 Certificate Members at
some point in time prior to the enactment of the 2018 Plan. Surely, in their closing arguments,

Plaintiffs will try to persuade the Court that by considering various exhibits? and applying

“simple arithmetic” the Court can find a way to conclude that the Club reached 225 Certificate

Members. Yet, no amount of maneuvering or manipulation of the documents in evidence will

give the Court a reasonable basis for determining that issue.

       Plaintiffs attempted at trial to show that Plaintiffs’ Exhibit   212 together with various

items of correspondence or Club publications could be interpreted in such a way to show that the

Club reached 225 Certificate Members at some point in 2014. However, Plaintiffs’ Exhibit 212 is

problematic for a few reasons. First and foremost, it does not show or factor the eight members

who were expelled. It only shows membership sales, activations of inactive memberships, and

redemptions. (Tr. 478:5-7). This document cannot be relied upon to establish the number of

Certificate Members in the Club on a given date without factoring in the expulsions and

terminations about which Mr. Zmetrovich testified. From Plaintiffs’ Exhibit 212 alone, it is not

possible to determine how many members there are in the Club on any particular day because it

does not have the complete information. (Tr. 755:2-14). Even if someone took a separate

document that says the Club had “x” number of members on a particular day and compared it to

Plaintiffs’ Exhibit 212, it would not be possible to determine how many members are in the Club

on a particular day because (a) Plaintiffs’ Exhibit 212 does not factor expulsions and (b) it is

impossible to know whether the other documents used in their calculations included.        This, it is

impossible to know what is included in the “x” number. (Tr. 755:18 — 756:7).

       Second, the author of this document did not testify at trial. While Michael Zmetrovich

testified that he updated this document from time to time, he did not prepare it originally. (Tr.


° Plaintiffs’ Exhibit 195, which is not dated, is titled, “Current, Resigned and Non-Good
Standing,” and clearly does not include inactive memberships. (Tr. 797:3-7).
478:18-20). Nonetheless, Mr. Zmetrovich testified that there is a designation in the right column.

for activations of inactive memberships. (Tr. 479:5-10). The dates in the far left column

correspond to redemptions, specifically when the redemption check cleared. (Tr. 479:11-20).

Although there are dates next to redemptions o