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Kenneth M. Meiselman, Brian Rothman, Greg Silvershein, Larry v. Hamilton Farm Golf Club LLC

August 29, 2011


The opinion of the court was delivered by: Thompson, U.S.D.J.



This matter has come before the Court upon the Motion to Dismiss filed by Defendants Hamilton Farm Golf Club, LLC ("HFGC") and HF Business Trust ("HFBT") [docket # 16]. Plaintiffs oppose the motion [25]. The Court has decided the motion upon the submissions of the parties and without oral argument, pursuant to Fed. R. Civ. P. 78(b). For the reasons stated below, the Defendants' motion is granted in part and denied in part, and Plaintiffs' breach of contract claim is dismissed.


This case arises out of Defendant Hamilton Farm Golf Club, LLC's ("HFGC" or the "Club") refusal to refund Plaintiffs' membership deposits after Plaintiffs' resignation from Defendant's golf club. Between May 2002 and December 2003, Plaintiffs each paid total deposits in the range of $200,000 to $275,000 in order to obtain an Individual Golf Membership ("IGM") or to upgrade to a Family Golf Membership ("FGM").*fn2 At the time Plaintiffs joined the club, the Club had distributed to the Plaintiffs a Hamilton Farm Golf Club Membership Plan (the "Plan"). (See Am. Compl. ¶ 20); (id. Ex. B, Plan). Additionally, upon joining the club, all Plaintiffs signed substantially similar Membership Agreements ("MA"), whereby they agreed to be bound by the Plan. (Mem. in Supp. 4); (see also Christopher Tomlin Certification Ex. 3, Silvershein MA, at 2).*fn3

The Plan mentions four categories of membership: IGMs, FGMs, Cottage Memberships, and Founder Memberships. (Plan 2--3.) The Plan provides that a combined total of no more than 350 IGMs and FGMs will be issued. (Am. Compl. ¶ 22.); (Plan 4). The Plan and the MA state that resigning members may have their deposits refunded after thirty years. (Plan 5); (Silvershein MA, at 2). These documents also state that a member who resigns before the thirty-year period lapses may have his or her deposit refunded "within thirty days of the issuance of the membership by the Club to a new member." (Plan 6); (Silvershein MA 2). The Plan specifically explains that resigned memberships are placed on a waiting list, and one in four memberships issued prior to the exhaustion of all 350 memberships will come from that waiting list.*fn4 (Plan 6.) Additionally, the Plan provides a "downgrade" option whereby a resigned FGM member at the top of the list may opt to receive a prospective IGM member's deposit; conversely, a resigned IGM member at the top of the list will receive a refund from a prospective FGM member's deposit "provided the Club is then issuing new [FGMs]." (Id. at 6--7.)

The MA signed by each of the Plaintiffs upon joining the Club states: "The Member hereby acknowledges receipt of the Hamilton Farm Golf Club Membership Plan and Rules and Regulations and that the Member has read and understands them, and agrees to be bound by the terms and conditions thereof as the same may be amended from time to time by the Club." (Silvershein MA 3.) The MA also provides that memberships will be reissued by the Club to new members "in accordance with the reissuance provisions of the Membership Plan . . . ." (Id. at 2.) Finally, the MA includes a section entitled "Acknowledgment of Membership Rights," which states in part:

The Club reserves the right to modify the Membership Plan Documents in its sole discretion to reserve memberships, to sell, lease or otherwise dispose of the Club Facilities in any manner whatsoever and to any person whomever, subject to the right of first offer provided to the members in the Membership Plan, to add, issue or modify any type or category of membership, to recall any membership or membership or memberships at any time for any reason or no reason whatsoever, to convert the Club into a member-owned club, and to make any other changes in the terms and conditions of membership or in the Club Facilities available for use by members. . . . (Silvershein MA 2.)

All of the Plaintiffs have resigned their memberships at various times since 2006 and have accordingly been placed on the waiting list. Defendants have since issued New Golf Memberships ("NGM") not previously described in the Plan or any other documents given to the Plaintiffs when they joined the club. (Am. Compl. ¶ 39.) Although these NGMS require lower membership deposits-namely, $50,000 up front and $50,000 eight years later-they allegedly include member privileges identical to those offered under FGMs and IGMs. (Id. at ¶ 40.) Plaintiffs have demanded that refunds be issued out of the sales of every fourth NGM sold by the Club, but the Club has refused. (Id. at ¶ 42.)

Defendants assert that refunds have not been paid because new members have not signed up for a traditional FGM or IGM. (Mem. in Supp. 8.) The Defendants attribute this to the opening of several other golf clubs in the Somerset County region before the recent economic collapse, as well as the diminished demand for high-end golf club memberships after the collapse. (Id. at 7.) Plaintiffs, perhaps rightly, point out that the NGMs have rendered FGMs and IGMs unsalable, given that no prospective member would choose a more expensive membership with privileges identical to those offered under the cheaper alternative. (Br. in Opp'n.)

Plaintiffs filed their initial complaint in New Jersey Superior Court on December 10, 2010. (See generally Notice of Removal Ex. 1, Compl.) On February 4, 2011, Defendant HFGC properly removed the action to this Court based on diversity jurisdiction [1]. Plaintiffs subsequently filed an Amended Complaint on March 10, 2011 [12]. The Complaint alleges that HFGC committed a breach of contract and a breach of the implied covenant of good faith and fair dealing, and that HFGC's mortgage agreement with HF Business Trust ("HFBT") constituted a fraudulent conveyance. (See Am. Compl. ¶¶ 38--64) [6-1].


A.Legal Standard for Motion to Dismiss

Under Fed. R. Civ. P. 12(b)(6), the defendant bears the burden of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). A district court must accept as true all of a plaintiff's factual allegations, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief. Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). To survive a motion to dismiss, a complaint must contain sufficient factual matter to state a claim that is facially plausible. Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (citing Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Facial plausibility exists where the facts pled allow the court reasonably to infer that "the defendant is liable for the misconduct alleged." Id. (quoting Iqbal, 129 S. Ct. at 193). Facts suggesting the "mere possibility of misconduct" fail to show that the plaintiff is entitled to relief. Id. (quoting Iqbal, 129 S. Ct. at 195).

B.Collateral Estoppel

Plaintiffs argue that Defendants are collaterally estopped from raising their arguments regarding the breach of contract claim because this Court previously allowed similar breach of contract claims to go forward in the actions brought against HFGC by John Bava and Joseph Matina. See Bava v. Hamilton Farm Golf Club, et al., Civ. No. 08-5473; Matina v. Hamilton Farm Golf Club, et al., Civ. No. 08-5725.*fn5

Courts typically require the presence of four elements in order to apply collateral estoppel: "(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; (3) the previous determination was necessary to the decision; and (4) the party being precluded from relitigating the issue was fully represented in the prior action." Howard Hess Dental Labs, Inc. v. Dentsply Int'l, Inc., 602 F.3d 237, 247 (3d Cir. 2010) (citation omitted). A collateral estoppel argument is best characterized as "non-mutual offensive collateral estoppel" where "a plaintiff seeks to foreclose a defendant from relitigating an issue the defendant previously litigated unsuccessfully in an action with another party." Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 330--31 (1979). The Supreme Court has held that non-mutual offensive collateral estoppel "presents a unique potential for unfairness[,]" and does not promote judicial economy like defensive collateral estoppel because a plaintiff can "adopt a ‗wait and see' attitude, in the hope that the first action by another plaintiff will result in a favorable judgment." Id. at 329--30. Accordingly, district courts have "broad discretion to determine when to apply non-mutual offensive collateral estoppel," Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 248 (3d Cir. 2006) (citing Parklane, 439 U.S. at 330, 331), andmay apply "‗an overriding fairness determination,'" Hall v. AT&T Mobility LLC, 608 F. Supp. 2d 592, 600 (D.N.J. 2009) (citing Burlington N. R.R. Co. v. Hyundai Merch. Marine Co., Ltd., 63 F.3d 1227, 1232 (3d Cir. 1995)).

Here, because Plaintiffs were not parties to the previous lawsuits and because they seek to prevent Defendants from arguing for dismissal of the breach of contract claim, Plaintiffs' argument is best characterized as non-mutual offensive collateral estoppel, and the Court therefore has broad discretion. We find that at least four reasons weigh against applying collateral estoppel. First, the previous determination in the Bava / Matina consolidated action was a denial of a motion to dismiss the plaintiffs' breach of contract claim. In denying that motion, the Court stated:

I've seen your papers . . . and it seems to me that you may have a legitimate and substantive breach of contract claim. I don't know. And I think that discovery should be granted so that you can go ahead and find out whatever you need to know about the qualifications or conditions which would allow for the return of your deposit money. Maybe it will be there, maybe it won't. (Bruce A. Schoenberg Decl. Ex. 4, June 22, 2009 Hr'g Tr. 42). The denial of the motion to dismiss was clearly expressed as a tentative ruling in order to allow discovery to go forward, and did not have the trappings of finality regarding whether Plaintiffs' claims were meritorious. See Kay-R Ele. Corp. v. Stone & Webster Const. Co., Inc., 23 F.3d 55, 59 (2d Cir. 1994) (stating that "preclusion would be folly[] as to decisions that are merely tentative and contemplate further proceedings") (quoting Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Fed. Prac. & Proc. § 4432 at 299 (1981))). Second, although the Third Circuit does not appear to have addressed the present procedural posture, other Circuits have held that collateral estoppel need not be applied where a court has denied a motion to dismiss and left the issue to be decided at a later stage. See, e.g., Drake v. Whaley, 355 F. App'x 315, 317 (11th Cir. 2009) (finding that district court did not err by not applying collateral estoppel to claim on which another court had denied a motion to dismiss). Third, the Amended Complaint here differs in significant respects from the complaints in Bava and Matina: in this case, the breach of contract claim is more specific, and the breach of implied covenant of good faith and fair dealing claim more concretely describes the NGMs. Finally, we note our concern that the Plaintiffs in this action might have chosen to opportunistically "wait and see" what the outcome of other disputes against Defendant HFGC would be.

Thus, we will not apply non-mutual offensive collateral estoppel in this case.

C.Breach of Contract

Plaintiffs allege that Defendant HFGC committed a breach of contract in the following ways: (1) issuing new categories of membership not provided for in the Membership Plan, (Am. Compl. ¶ 44); (2) not using the proceeds of every fourth NGM to refund the deposits of resigned IGMs or FGMs, (id. at ¶ 45); (3) not offering resigned IGM and FGM members the opportunity to "downgrade" and thereby exchange their resigned memberships for the deposit paid for every fourth NGM, (id. at ¶ 46); and (4) preferentially repurchasing IGMs and FGMs from resigned members lower down on the waiting list, including memberships formerly held by John Bava, Joseph Matina, and David Baum, ...

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