On June 11, 2019, the California Attorney General filed a Complaint in the Superior Court of California, County of San Francisco (CGC-19-576620), alleging that ClubCorp violated California’s False Claims Act (CFCA) and the California Unclaimed Property and Unfair Competition laws when it knowingly omitted in its unclaimed property reports approximately $10 million in unclaimed initiation deposits due to over 9,000 California members or former members.
ClubCorp, reported to be the largest owner and operator of private golf and country clubs in the country, has been in operation for over 60 years and while based in Dallas, Texas, has over 20 affiliated clubs located in California (also parties to the action). Under its membership agreements, ClubCorp is contractually obligated to return a member’s initiation deposit after 30 years. As of June 13, 2017, ClubCorp was due to return approximately $178,086,000 to current and former members, $10 million of which was owed to Californians.
The Complaint alleges that ClubCorp knowingly submitted or caused to be submitted unclaimed property reports that omitted the initiation deposits due for return and filed false reports by knowingly omitting the obligation to pay or transfer the funds to the state, in violation of California’s Unclaimed Property Law, CCFA and Unfair Competition Law. The state asserts that ClubCorp was obligated to either return the funds to its members or escheat the funds upon the expiration of the 3-year dormancy period, and that the failure to escheat the funds harmed California “by depriving it of the use of the funds that should have been escheated.”
The state seeks restitution, civil penalties, injunctive relief and treble damages.
Patty Verde, ClubCorp’s Communications Manager, maintains that ClubCorp treats members of all ages “fairly, equally and in full compliance with its obligations, and “believe[s] that the agreements our members accept, which are consistent with practices throughout our industry, fully comply with the law.”
California joins Texas as the second state to sue ClubCorp. The Texas Attorney General alleged in its petition filed on January 7, 2019 in the District Court of Travis County, Texas, that ClubCorp kept the initiation deposits of its members and former members in violation of Texas’ unclaimed property law. The state is seeking a judgement that would require ClubCorp to: allow the state to audit ClubCorp’s books and records, file all statutorily required unclaimed property reports, deliver all of the unclaimed property it holds to Texas, including the unclaimed membership deposits belonging to former Texas members in an amount estimated to be over $53 million, and pay penalties, interest and attorney fees.
See https://www.nbcsandiego.com/news/local/Country-Club-Company-Sued-Membership-Fees-California-ClubCorp-511294771.html for additional information on the California case, which also contains a link to the Complaint, and https://www.courthousenews.com/wp-content/uploads/2019/01/Texas-sues.pdf) for the petition filed in Texas.