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Spikes v. Hamilton Farm Golf Club, LLC

United States District Court, Third Circuit

January 24, 2014

Anthony Spikes, et al., Plaintiffs,
v.
Hamilton Farm Golf Club, LLC, et al., Defendants.

OPINION

ANNE E. THOMPSON, District Judge.

This matter appears before the Court on a motion to dismiss brought by Defendants Hamilton Farm Golf Club, LLC ("HFGC"), Hamilton Farm Golf Club ("the Club"), and HF Business Trust (collectively, "Defendants"). The Court has issued the Opinion below based upon the written submissions of the parties and oral arguments held on January 6, 2013. For the reasons stated herein, the Court grants the motion to dismiss in part and denies in part.

BACKGROUND

This case arises out of Defendants' refusal to refund deposits paid by Plaintiff Anthony Spikes and others ("Plaintiffs") as part of a golf club membership program.[1] Plaintiffs each paid a deposit ranging from $160, 000 to $212, 000 to obtain an Individual Golf Membership or the upgraded Family Golf Membership. (Doc. No. 1). The Membership Agreements contained a "Refund of Membership Deposit, " stating "[i]f the member resigns before the end of the 30-year period, the membership deposit paid by the member or the amount of the membership then charged for membership, whichever is the less, will be refunded, [...] after the issuance of the membership by the Club to a new member." (Doc. No. 1). Under the Membership Agreement, the "Club also reserve[d] the right to modify this Membership Plan [...] and to add, issue or modify any type or category of membership." (Doc. No. 1).

Plaintiffs contend that Defendants created another type of membership that offered identical rights at a lower cost for the sole purpose of avoiding repayment of the deposits owed to Plaintiffs. (Doc. No. 1). Plaintiffs further allege that HFGC attempted to keep HFGC's assets away from Plaintiffs by entering into an agreement, wherein HFGC granted HF Business Trust a security interest in all of its assets. (Doc. No. 1).

Plaintiffs brought a seven-count complaint in June of 2013. However, counsel for Plaintiffs withdrew several counts during oral arguments.[2] The remaining claims are as follows: Breach of Contract; Breach of the Covenant of Good Faith and Fair Dealing; and Fraudulent Conveyance under the Uniform Fraudulent Transfer Act.

DISCUSSION

1. Legal Standard

A motion under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). 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). When considering a Rule 12(b)(6) motion, a district court should conduct a three-part analysis. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must take note of the elements a plaintiff must plead to state a claim.'" Id. (quoting Ashcroft v. Iqbal, 56 U.S. 662, 675 (2009)). Second, the court must accept as true all of a plaintiff's wellpleaded factual allegations and construe the complaint in the light most favorable to the plaintiff. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). The court may disregard any conclusory legal allegations. Id. Finally, the court must determine whether the "facts are sufficient to show that plaintiff has a plausible claim for relief.'" Id. at 211 (quoting Iqbal, 556 U.S. at 679). Such a claim requires more than a mere allegation of an entitlement to relief or demonstration of the "mere possibility of misconduct;" the facts must allow a court reasonably to infer "that the defendant is liable for the misconduct alleged." Id. at 210, 211 (quoting Iqbal, 556 U.S. 678-79).

2. Analysis

This Court must examine three claims: Breach of Contract; Breach of the Covenant of Good Faith and Fair Dealing; and Fraudulent Conveyance.

a. Breach of Contract

"To establish a breach of contract claim, a plaintiff has the burden to show that the parties entered into a valid contract, that the defendant failed to perform his obligations under the contract and that the plaintiff sustained damages as a result." Peck v. Donovan, 12-1213, 2012 WL 6131055 (3d Cir. Dec. 11, 2012) (citations omitted); see also Frederico v. Home Depot, 507 F.3d 188, 203 (3d Cir. 2007).

Here, each member is contractually entitled to refunds upon either the completion of the 30-year period or the issuance of that member's membership to a third party. Plaintiffs have not alleged that either event has occurred. Instead, Plaintiffs allege that Defendants breached the Membership Agreement through the creation of the new membership plans. However, under the Membership Agreement, "[t]he Club reserves the right to [...] add, issue or modify any type or category of membership." (Doc. No. 1). Since Defendants were "contractually entitled to engage in the alleged conduct, " Plaintiffs cannot obtain relief under a breach of contract claim. See Meiselman v. Hamilton Farm Golf Club LLC, CIV. 11-0653 AET, 2011 WL 3859846 (D.N.J. Sept. 1, 2011).

b. Good Faith and Fair Dealing

Under New Jersey law, "[e]very party to a contract... is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract." Elliot & Frantz, Inc. v. Ingersoll-Rand Co., 457 F.3d 312, 328 (3d Cir. 2006). A party "breaches the duty of good faith and fair dealing if that party exercises its discretionary authority arbitrarily, unreasonably, or capriciously, with the objective of preventing the other party from receiving its reasonably expected fruits under the contract." Wilson v. Amerada Hess Corp., 773 A.2d 1121, 1130 (N.J. 2001). "Such risks clearly would be beyond the expectations of the parties at the formation of a contract when ...


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