MEISELMAN et al v. HAMILTON FARM GOLF CLUB, LLC et al
Filing
81
OPINION filed. Signed by Judge Anne E. Thompson on 10/23/2013. (jjc)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Kenneth M. Mieselman, et al.,
Plaintiffs,
Civ. No. 11-653
v.
OPINION
Hamilton Farm Golf Club, LLC, et. al.,
Defendants.
THOMPSON, U.S.D.J.
This matter appears before the Court on the motion of Defendants Hamilton Farm Golf
Club, LLC and others (“Defendants”) for partial summary judgment pursuant to Federal Rule of
Civil Procedure 56 with respect to Count One. The Court has issued the Opinion below based
upon the written submissions of the parties and without oral argument pursuant to Federal Rule
of Civil Procedure 78(b). For the reasons stated herein, the Court denies Defendants’ motion.
DISCUSSION
This case arises out of Defendants’ refusal to refund deposits paid by Plaintiff Kenneth
M. Mieselman and others (“Plaintiffs”) as part of a golf membership program. Between May
2002 and December 2003, Plaintiffs each paid a deposit ranging from $200,000 to $275,000 in
order to obtain an Individual Golf Membership (“IGM) or the upgraded Family Golf
Membership (“FGM”). (Doc. No. 45).
The membership plan contained a “Refund of Membership Deposit” provision that stated
“[i]f the member resigns before the end of the 30-year period, membership deposit paid by the
member or the amount of the membership then charged for membership, whichever is the less,
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will be refunded, without interest, within 30 days after the issuance of the membership by the
Club to a new member.” (Doc. No. 45). Plaintiffs were also told that “the proceeds of every
fourth membership sold by Defendant HFGC would be available to repay the membership
deposits of resigned members, and that resigned members would have their membership deposits
repaid in accordance with their priority on the waiting list.” (Doc. No. 45).
However, Plaintiffs contend that prior to their retirement from membership, Defendants
“created one or more new classes of membership in the Club . . . which were not provided for in
the Membership Plan or contemplated in the FAQ distributed to induce them to join the Club.”
(Doc. No. 45). These memberships created Club “privileges identical to those provided for in
the Plaintiffs’” IGMs and FGMs at a substantially lower cost. (Doc. No. 45). Plaintiff alleges
that Defendants “knew or should have known that the offering of these New Golf Memberships
would have the effect of rendering Plaintiffs’ resigned [IGMs and FGMs] unsalable, as no
perspective member would be interested in purchasing” the more expensive options when they
could have “substantially identical New Golf Membership at a lower cost.” (Doc. No. 45).
Specifically, in Count I Plaintiffs allege that Defendants breached the covenant of good faith and
fair dealing when they made these new memberships for the sole purpose of locking in current
members. Defendants move for partial summary judgment with respect to the Count I.
1. Legal Standard
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(c)(2). The Court must construe all facts and inferences in the light most favorable
to the nonmoving party. Boyle v. City of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir.
1998). The nonmoving party must come forward with specific facts showing a genuine issue for
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trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)
(citations omitted). “A factual dispute is ‘genuine’ and . . . warrants trial ‘if the evidence is such
that a reasonable jury could return a verdict for the nonmoving party.’” Brightwell v. Lehman,
637 F.3d 187, 194 (3d Cir. 2011) (citations omitted).
“Credibility determinations, the weighing of the evidence, and the drawing of legitimate
inferences from the facts are jury functions, not those of a judge.” Anderson v. Liberty Lobby,
477 U.S. 242, 255 (1986). If a civil defendant moves for summary judgment on the basis that
plaintiff has failed to establish a material fact, the judge must inquire not as to “whether [s]he
thinks the evidence unmistakably favors one side or the other but[,] whether a fair-minded jury
could return a verdict for the plaintiff on the evidence presented.” Id. at 252. A mere “scintilla
of evidence in support of the plaintiff's position will be insufficient; there must be evidence on
which the jury could reasonably find for the plaintiff.” Id.
2. Analysis
Here, the Court finds that sufficient admissible evidence exists to raise an issue of
material fact with respect to the covenant of good faith and fair dealing. The Court will examine
the applicable standard for good faith and fair dealing claims before turning to the remaining
issues of material fact.
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.
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2001). “Such risks clearly would be beyond the expectations of the parties at the formation of a
contract when parties reasonably intend their business relationships to be mutually beneficial.”
Id. “Bad motive or intention is essential” to a court’s consideration of this claim. Id.
Evidence of bad motive can be shown through circumstantial evidence. “[I]t has been
recognized that one’s state of mind is seldom capable of direct proof and ordinarily must be
inferred from the circumstances properly presented and capable of being considered by the
court.” Wilson, 773 A.2d at 1132 (Amerada Hess Corp. v. Quinn, 143 N.J. Super. 237, 249 (Law
Div. 1976)). A party’s intentions “need not be proved from what he said, but they may be
inferred from all that he did and said, and from the surrounding circumstances of the situation
under investigation.” Id. (citing Mayflower Indus. V. Thor Corp., 15 N.J. Super. 139, 162 (Ch.
Div. 1951)). Therefore, where “motive and interest are relevant to a claim, summary judgment
should be granted with great caution.” Marietta v. Cities Service Oil Co., 414 F. Supp. 1029,
1038 fn. 6 (D.N.J. 1976) (citations omitted); see also F.D.I.C. v. National Union Fire Ins. Co. of
Pittsburgh, P.A., 146 F. Supp. 2d 541, 549 (D.N.J. 2001) (“[w]hen a question of intent is
material to a cause of action, as it is here, resolution on a summary judgment basis is generally
improper.”).
Here, the Court finds that a dispute of material fact exists such that a reasonable jury
could find that Defendants acted in bad faith. Defendant was contractually authorized to add
new membership categories; however, as the Court observed in its previous Opinion on the
matter, “for the Club to create a new membership category nearly identical to IGMs and FGMs
in all respects except price is unsettling, particularly in light of the various inducements in the
Plan suggesting that resigned membership will be reissued as new members joined.” (Doc. No.
28); see also Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1443 (7th Cir. 1992) (a
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controlling party must exercise discretion reasonably and with proper motive). Though
Defendants put forward a set of reasons that, if accepted by the jury, could defeat Plaintiffs’
claim, a jury viewing the facts in the light most favorable to Plaintiff could find for Plaintiff.
The Court examines two issues upon which a jury’s determination is essential: (1) the
materiality of the contract differences and (2) the Parties’ reasonable expectations under the
agreement.
First, the Court finds that there remains an issue of material fact with respect to the
similarity of the Local Memberships and the Limited Memberships. See EP Medosystem, Inc. v.
Ecocath, 235 F.3d 865, 875 (3d Cir. 2000) (“materiality is a mixed question of law and fact, and
the delicate assessments of the inferences a reasonable [person] would draw from a given set of
facts are peculiarly for the trier of fact.”). Defendants have shown that the memberships are not
only different prices, but also that they have different terms, including different statuses upon
reaching maturity, rights upon first sale, membership capacities, and effective terms. However,
as Plaintiff points out, the privileges of membership are the same in terms of club use and
enjoyment.
The mere fact that the memberships have some differences is insufficient on its own. To
hold otherwise would mean that a party can avoid the implied covenant by making new
memberships that have only minor or technical differences. For instance, if Defendants were to
create new memberships that required a 31-year period before maturity instead of a 30-year
period that membership would be different and less desirable; however, it is unlikely that such a
difference would be material. Having viewed the benefits and privileges available under each
contract, the court finds that a reasonable jury could find these differences immaterial. Both
sides have submitted reasonable arguments supported by admissible evidence concerning
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materiality. Since the evaluation and weighing of evidence is the jury’s function and Plaintiff
has shown adequate and admissible evidence contesting the materiality of the differences, the
Court finds an issue of material fact.
In addition to the materiality of contract differences, there remains a question of material
fact with respect to the Parties’ expectations under the agreement. Defendants submitted
evidence that during the economic downturn high-end golf clubs were struggling financially and
needed to increase revenue. The decision to implement the action at issue was allegedly the
product of careful deliberation. Plaintiffs counter that many other routes were available to
increase revenue.
While the implied covenant does not require Defendant to take the best route possible,
the party with discretion can still breach the implied covenant if it “uses its discretion for a
reason outside the contemplated range – a reason beyond the risks assumed by the party claiming
the breach.” Wilson, 168 N.J. at 236. Plaintiffs admit that, based on the contract’s language,
they assumed the risk that, if prices of memberships decline over time, they might receive less
than a full refund when they resigned. (Doc. No. 79, 26) (Members resigning before the end of
the 30-year period will receive “whichever is less” of the membership deposit paid by that
member or the amount charged for membership at the time of retirement). However, Plaintiffs
contend that they did not assume the risk that Defendants would create a new class of
memberships with identical rights and privileges. Plaintiffs support this contention by showing
that Defendants enticed them to purchase their Membership by touting the refundability of
membership deposits. In light of the Defendants’ enticements, the fact that these new
memberships could effectively freeze the other memberships appears to be a substantial
alteration and one not clearly within the Parties’ contemplation at the time of contract formation.
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However, it is possible that a jury could find that the parties agreed that the economic climate
was a risk contemplated in the contract. Viewing the facts in the light most favorable to the
nonmoving party, a reasonable jury could find that the freezing of memberships falls outside the
scope of the risk contemplated by the parties.
CONCLUSION
For the foregoing reasons, the Motion for Partial Summary Judgment is denied.
/s/ Anne E. Thompson
ANNE E. THOMPSON, U.S.D.J.
Dated: 10/23/2013
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