312 So.3d 962
Fla. Dist. Ct. App.2021Background
- Broken Sound Club is a not-for-profit private club whose membership purchase agreement (2004) incorporated and bound members to the Club Bylaws. The Bylaws gave the Board broad authority to set dues, expend funds, and amend the Bylaws.
- In 2007 the Board adopted the "Shelly Rule": annual budget increases would be allocated equally across all membership categories while retaining different base dues by class.
- In 2015 the Board amended the Bylaws to incorporate the Shelly Rule, stating it applied beginning with the 2007–2008 fiscal year.
- In 2016–2017 the Board adopted a "New Membership Plan" that restructured membership categories and dues (parity), expanded facility access, and eliminated special Old Course capital assessments (the outstanding Old Course debt was paid from club reserves/home-sale proceeds).
- Marla Share (a Social member) stopped paying dues; the Club sued to collect unpaid dues. Share counterclaimed alleging ultra vires acts and breach of the implied covenant of good faith and fair dealing, arguing the Board’s actions improperly shifted costs to Social members to benefit Old Course/Master members. The trial court granted summary judgment for the Club; the Fourth District affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the implied covenant of good faith can be used to challenge the Board’s dues/amendment decisions | Share: Board breached the implied covenant by amending Bylaws and exercising discretion to disadvantage her | Club: Bylaws and Agreement grant discretionary authority; Board acted reasonably; covenant cannot vary express contract terms | Court: Covenant cannot override express contract terms; Board acted within discretion and no breach shown |
| Whether the 2007 implementation of the Shelly Rule and the 2015 Bylaw amendment were ultra vires | Share: Shelly Rule and retroactive Bylaw amendment were unauthorized and shifted costs unfairly | Club: Board had express authority to set dues and to amend Bylaws; 2015 amendment merely codified practice | Court: Not ultra vires; Board authority and business-judgment rule apply; 2015 amendment’s retroactivity immaterial because Board could set dues |
| Whether the New Membership Plan (parity, sharing, elimination of Old Course assessments, use of reserves) was arbitrary, capricious, or breached Bylaws | Share: Plan improperly shifted capital/operating costs to Social members and misused reserve funds | Club: Plan adopted after consultant review and counsel; elimination of assessments exchanged for broader access; reserves expended within authority | Court: Plan was reasonable, within authority; business-judgment rule protects these operational decisions |
| Whether Share is bound by later Bylaw amendments despite her Agreement’s language | Share: Her Agreement lacks an explicit clause binding her to future amendments | Club: Agreement incorporated the Bylaws by reference and Bylaws expressly permit amendment, so members are bound | Court: Share is bound; incorporation by reference makes amendments applicable |
Key Cases Cited
- Hosp. Corp. of Am. v. Fla. Med. Ctr., Inc., 710 So.2d 573 (Fla. 4th DCA 1998) (implied covenant claim must be tied to performance of an express contract term)
- Sepe v. City of Safety Harbor, 761 So.2d 1182 (Fla. 2d DCA 2000) (limits on discretion where implied covenant applies)
- Publix Super Markets, Inc. v. Wilder Corp. of Delaware, 876 So.2d 652 (Fla. 2d DCA 2004) (treatment of discretionary contractual powers and good-faith constraints)
- Hollywood Towers Condo. Assoc., Inc. v. Hampton, 40 So.3d 784 (Fla. 4th DCA 2010) (business-judgment rule defers to association decisions if within authority and reasonable)
- Miller v. Homeland Prop. Owners Ass'n, Inc., 284 So.3d 534 (Fla. 4th DCA 2019) (test for applying business-judgment rule to property associations: authority + reasonableness)
- Liberty Counsel v. Fla. Bar Bd. of Governors, 12 So.3d 183 (Fla. 2009) (definition of ultra vires acts as beyond corporate power)
- Yarnall Warehouse & Transfer, Inc. v. Three Ivory Bros. Moving Co., 226 So.2d 887 (Fla. 2d DCA 1969) (business-judgment rule applies to ultra vires claims against corporations)
- OBS Co., Inc. v. Pace Const. Corp., 558 So.2d 404 (Fla. 1990) (incorporation by reference principle for contract interpretation)
- Kloha v. Duda, 246 F. Supp. 2d 1237 (M.D. Fla. 2003) (presumption that corporate directors act in good faith)