Trump Wins While Losing in Florida Golf Club Dispute
It's a time-honored tradition: When you've got bad news to release, you put it out late on Friday, hoping no one will notice. Thus it was that at 6:27 p.m. last Friday, a short Bloomberg News dispatch disclosed that President Donald Trump's golf club in Jupiter, Florida, had agreed to pay 65 former members $5.45 million to settle their legal claim that Trump tried to cheat them out of refundable deposits they were owed when he took over the club in 2012.
The news didn't get a whole lot of pickup — that's the point of a Friday night release! — but I think it's worth lingering over a bit before we move on to whatever bigger, badder Trump news tomorrow hands us. It is a useful reminder of how Trump did business, and of how this is reflected in his presidency.
When I last checked in on this lawsuit, a few weeks after Trump's inauguration, he had just lost at the district court level. U.S. District Judge Kenneth Marra had ordered the Trump National Golf Club in Jupiter to pay $5.8 million to the plaintiffs, including nearly $1 million in interest. Naturally, Trump's lawyers vowed to appeal, since the president has often bragged about how he "never settles" lawsuits.
Yeah, right. Remember when Trump settled a lawsuit against Trump University for $25 million? Back then, just 15 months ago, he did so to avoid having to air Trump U.'s sleazy tactics in court.
In the Jupiter golf club case, the dirty laundry was already in evidence, thanks to the trial, so that wasn't the issue. Instead, it seems clear, Trump settled because he had no chance of overturning Marra's decision, which made it unambiguously clear that the plaintiffs were owed money by Trump. The fact that Trump agreed to pay 94 percent of the original judgment would indicate the hopelessness of his situation. 1
What makes the whole affair so insane is that if Trump had just acted like a normal businessman, he would have avoided the lawsuit while still holding on to those refundable deposits. But that is exactly what he's not capable of doing.
To quickly recap: When Trump bought the club from the Ritz-Carlton six years ago, it was losing about $1 million a year. Though he got it for a song — the purchase price was $5 million — he also assumed a $41 million liability in the form of the members' refundable deposits. They ranged from $35,000 to $200,000.
Under club rules, if a member wanted to resign and recoup his deposit, he went on a resignation list and then had to wait for new members to join. After the new deposits were in hand, a resigning member was refunded his deposit. 2 This process took years, but during the wait, the members could still use the club so long as they paid their dues.
Trump, however, wanted to make the Jupiter club "ultra-luxurious" and "ultra-prestigious," as he put it in a letter he sent to the members days after buying it, and to help pay for the upgrade 3 he wanted those deposits. So he changed the membership rules. Members who gave their refundable deposits to Trump got three years of dues reduction and the right to play at Trump's other golf courses.
But those on the resignation list — some 150 members, or half the club — would henceforth lose their access to the club. Yet they would still have to wait years to get their deposits back. As Trump put it in that letter, "If you choose to remain on the resignation list, you're out."
Is it any wonder that the resigning members sued? Indeed, it came out at the trial that even though they were barred from the club, Trump Jupiter was still dunning them $20,000 or more in annual dues! The trial revolved around whether Trump's treatment of the resigning members gave them the contractual right to demand a refund of their deposits within 30 days. In his February 2017 ruling, Judge Marra concluded that it had. It was a slam dunk.
(The highlight of the trial was Eric Trump's day on the stand. Referring to the Jupiter club, he declared, "We made it great again.")
There are a handful of conclusions to be drawn from this fiasco.
First, just as with the many controversies Trump has sparked as president, Trump could have avoided paying $5.4 million just by being a little, you know, judicious. If he hadn't insisted on punishing the members on the resignation list, he would have continued to get their dues, and could still have used their deposits to spruce up the club, since no one was going to get a refund until new members showed up. So point one: His tactic in dealing with his new members was dumb.
Point two: Cheating the members out of their deposits was baked into Trump's business model for the club, something Eric Trump essentially confirmed during his deposition. This, too, is classic Trump: For him to win, you have to lose. And so is litigating after he reneges on a deal or a promise.
The sad part is, it works. In the end, although Trump will wind up paying between $10 million and $15 million to settle the litigation over the deposits, he will have avoided more than half the liability he was responsible for upon buying the club. Yes, the class-action plaintiffs will get $5.4 million, but many other members who also sued wound up settling for 50 cents on the dollar or less once they came face to face with the cost of litigation.
Three: One of the things that constantly amazes me is what a small-timer Trump is, at least financially speaking. He doubles the dues at Mar-a-Lago to squeeze an extra $100,000 out of its members. He charges the Republican National Committee $37,000 a month in rent. It's all so rinky-dink. What real billionaire needs to squeeze a few hundred thousand dollars out of members of his golf club?
Only Trump. Assuming he is, in fact, a real billionaire.
I emailed Alan Garten, the Trump Organization's chief legal officer, to ask him for his interpretation of the settlement. He has not responded. However, Trump's Miami counsel has said that it should not be construed "as an admission of any wrongdoing or liability whatsoever."
Jupiter required two new members to join to release the deposit of a resigning member.
Trump claims to have spent $25 million upgrading the club.
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Jonathan Landman at email@example.com