Donner v. Nicklaus
2015 U.S. App. LEXIS 2547
10th Cir.2015Background
- Mount Holly Club planned a luxury ski and golf resort in Utah marketed with Jack Nicklaus’s brand and promotional participation; developers issued marketing materials (press release and brochure) stating Nicklaus was a “founding charter member.”
- Jeffrey and Judee Donner paid $1.5 million for a charter membership after seeing the marketing and signed a charter membership agreement that issued an "estate lot certificate" redeemable for an identifiable lot only after platting.
- The developer’s parent company later declared bankruptcy; the Donners settled in the bankruptcy, receiving a lot and an option to trade for a development lot later; they then sued Jack Nicklaus and Jack Nicklaus Golf Club, LLC for intentional misrepresentation, negligent misrepresentation, and violations of the Interstate Land Sales Full Disclosure Act (ILSA).
- District court dismissed the complaint on Rule 12(b)(6) grounds and alternatively granted summary judgment, holding (1) ILSA did not apply because no "lot" was sold, (2) tort claims were insufficiently pleaded, (3) negligent misrepresentation barred by the economic loss doctrine, and (4) the Donners elected remedies via their bankruptcy settlement.
- The Tenth Circuit affirmed in part, reversed in part, and remanded: it affirmed dismissal of ILSA and most misrepresentation/negligent misrepresentation claims, reversed dismissal as to intentional misrepresentation based on Nicklaus’s claimed charter-membership statement, and reversed summary judgment on election-of-remedies grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of tort claims | Donners' claims timely (waived factual contest) | Claims barred by Utah 3-year fraud statute | Defendant waived timeliness defense in district court; appellate court did not decide merits (defense waived) |
| ILSA applicability ("lot") | Donners say charter membership related to a lot sale under ILSA | Defendants say purchase was for a membership/certificate, not a specific lot | ILSA does not apply: regulatory and statutory context require an identifiable, exclusive-use portion of land at time of misrepresentation; certificate was not a "lot" |
| Intentional misrepresentation — Nicklaus’s membership/payment | Donners say brochure implied Nicklaus paid $1.5M as a charter member and induced purchase | Defendants say statements were opinion/ honorary status, not factual representation | Reversed dismissal: Donners plausibly alleged false present fact (Nicklaus held out as charter member and implied he paid $1.5M) and reasonable reliance |
| Other intentional misrepresentations (development progress, title, executive’s criminal history) | Donners allege false statements/omissions induced purchase | Defendants point to express contract terms disclaiming completion dates, title delivery, and non-reliance; attenuated relationship for duty to disclose | Affirmed dismissal: plaintiffs failed to plead reasonable reliance on development-progress/title statements and failed to allege a duty to disclose criminal history |
| Negligent misrepresentation / Economic loss doctrine | Donners argue tort duty exists based on pre-contract statements and reliance on Nicklaus’s reputation | Defendants invoke economic loss doctrine: contract governs subject matter; no independent duty owed by defendants | Affirmed dismissal: agreement covers subject matter and Donners failed to allege a duty outside contract; economic loss doctrine bars negligent misrep claims |
| Election of remedies via bankruptcy settlement | Donners say settlement with debtor did not affirm/repudiate contract or release tort claims against third parties | Defendants claim settlement elected remedies and precludes tort recovery | Reversed summary judgment: settlement did not constitute affirmation or repudiation of charter agreement as to defendants; election-of-remedies not established |
Key Cases Cited
- Slater v. A.G. Edwards & Sons, Inc., 719 F.3d 1190 (10th Cir. 2013) (Rule 12(b)(6) plausibility standard cited)
- Sutton v. Utah State Sch. for Deaf and Blind, 173 F.3d 1226 (10th Cir. 1999) (de novo review of dismissal)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (U.S. 1984) (agency deference to reasonable regulatory interpretation)
- In re BDT Farms, Inc., 21 F.3d 1019 (10th Cir. 1994) (statutory context aids interpretation)
- Bodansky v. Fifth on Park Condo, LLC, 635 F.3d 75 (2d Cir. 2011) (ILSA exemption timing analyzed)
- Nahigian v. Juno-Loudon, LLC, 677 F.3d 579 (4th Cir. 2012) (ILSA lot-counting/exemption timing)
- Nickell v. Beau View of Biloxi, L.L.C., 636 F.3d 752 (5th Cir. 2011) (ILSA exemption and interpretation)
- Reighard v. Yates, 285 P.3d 1168 (Utah 2012) (economic loss doctrine and contract subject-matter rule)
- Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at Pilgrims Landing, LC, 221 P.3d 234 (Utah 2009) (independent duty analysis under economic loss doctrine)
- Price-Orem Inv. Co. v. Rollins, Brown & Gunnell, Inc., 713 P.2d 55 (Utah 1986) (negligent misrepresentation and privity discussion)