Black Rock golf club members lose suit over membership fees
Former members of a luxury golf club on Lake Coeur d’Alene have lost a class-action lawsuit seeking millions of dollars in membership refunds after the club was surrendered to a Spokane-based bank in 2010.
The plaintiffs sued Washington Trust Bank and subsidiary West Sprague Avenue Holdings LLC, arguing that they were entitled to almost $29 million in club initiation fees paid to The Club at Black Rock LLC. They also sought $15 million in interest and other damages.
Following a two-week trial in U.S. District Court in Coeur d’Alene, a jury on Monday decided the defendants were not responsible for refunding fees to about 300 former members of the club, built by developer Marshall Chesrown between 2000 and 2003.
The recession and credit crunch of 2008 killed new sales at Black Rock, an exclusive golf community with 382 home sites overlooking Rockford Bay. The club began to default on $12.5 million in loans from Washington Trust Bank, and the bank forgave that debt in exchange for ownership of the property that August.
The country club closed on Oct. 31, 2010, terminating all memberships. The bank then negotiated the sale of the club from West Sprague to a homeowners’ investment group for $6 million. The property reopened as The Golf Club at Black Rock LLC, and the new owners sold buyback memberships for $25,000 each.
The plaintiffs argued that their club deposits, ranging from $40,000 to $125,000, were to be refunded in full under terms of their membership contracts. The initiation fees were in addition to annual or monthly club dues.
They also argued that Washington Trust Bank assumed responsibility for their membership contracts under the bill of sale conveying the golf club’s personal property to the bank.
“The bank stepped into those shoes” of honoring the membership agreements, attorney Adam Springel told the seven-member jury. “The LLC was out and the bank was in.”
The bank’s attorneys countered that the plaintiffs were never guaranteed the initiation fees would be held in escrow, available to be refunded. They further argued that the plaintiffs had agreed that their rights were subordinate to the club’s secured creditors, including the bank.
Spokane attorney Bob Dunn, representing the bank, told jurors the plaintiffs simply refused to accept responsibility for their “own failed money decisions” and would not recognize that Washington Trust Bank was not at fault for the failure of the golf club.
“These country club golfers, in fact, are suing the very business that made it possible for them to continue enjoying the private, super-exclusive luxury golf course that they wanted to play on,” Dunn said.
The exclusive club features a 31,000-square-foot clubhouse with formal and casual dining, swimming pool and pool bar, spa, fitness center, tennis court, private beach on the lake and access to a marina.
Chesrown, whose development empire included Kendall Yards near downtown Spokane and Legacy Ridge in Liberty Lake, filed a $72 million personal bankruptcy in 2013.
Lead plaintiffs in the suit were Nevada residents Robert Cayne, Phyllis Cayne, David T. Kuo, Bess Lee Chang, Ronnie Rivera and Sean Rivera, and Arizona residents Ken McElroy and Laura McElroy.