When Does Unaccompanied Nonmember use of Private Club Facilities Risk Loss of Private Status?[1]

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When Does Unaccompanied Nonmember use of Private Club Facilities Risk Loss of Private Status?[1]

          Allowing the unaccompanied (by a member) use of a private club’s golf course by non-members is an encroachment upon the club’s private status and tax exempt status and could persuade a court to hold the club is not truly private. This is true whether or not the non-members belong to a “reciprocating” private club whether by prior agreement or otherwise. For tax purposes, income from reciprocal club members is classified as unrelated business income. If a 501(c)(7) qualified club allows excessive[1] unaccompanied non-member use of the club’s facilities, it also risks loss of its tax exempt status. While the tests for what is permitted a 501(c)(7) private club and for distinctly or truly private clubs are similar, the “excessive use” test for tax purposes is more lenient than the tests employed for whether a club is truly or distinctly private.

          Some private clubs  attempt to circumvent the unaccompanied guest use from encroaching on their private status by entering into so-called “reciprocal” agreements with other private clubs. City clubs looking to supplement their revenue are prone to engage in reciprocal agreements especially with private clubs in other areas of the country. Noteworthy is at least one state tax authority (North Carolina) which addresses this practice.[2]  For example, It has long been the practice of private clubs in some localities to provide for ad hoc reciprocity. However, I don’t know of any legal precedent allowing for an exception to the distinctly private criterion of denial of the use of a private club’s facilities by unaccompanied nonmembers on a regular basis.

“Regular” or “indiscriminate use” of an establishment’s facilities “by nonmembers . . . contradicts private status.”[3]. However,-

A private club, which is an exempt facility under 42 U.S.C. §§ 12182 and 12187[4], is not converted into a public accommodation under the ADA because it is occasionally used by the general public. [citing Kelsey v. University Club of Orlando[5]]. A private club with a “limited guest policy,” in which guests are not permitted “unfettered use of facilities,” is not a public accommodation for purposes of the ADA, despite evidence of “isolated incidents” in which the limited guest policy was not followed. [citing Kelsey at 1530]. Jankey v. Twentieth Century Fox Film Corporation.[6]  

          Thus, an “acid test” may be postulated as to whether the nonmember use is “occasional” versus “regular”, “isolated” or “unfettered” for purposes of determining whether the club is acting like and to be held to be a public accommodation. The difficult question is what is meant by “occasional”, “regular”, “isolated” or “unfettered” use. Each of these terms is susceptible of different degrees of what is perceived as acceptable by different judges. That is, whether or not a club is truly private for purposes of Titles II, III and VII of the Civil Rights Act is an issue decided as a matter of law.

          We are reminded the rules for what constitutes a “public accommodation” under Title III ADA are substantially the same as what constitutes a “public accommodation” under Titles II and VII of the Civil Rights Act and other similar anti-discrimination state and federal laws.

          In Jankey[7] it was determined the occurrence of thirty-eight [non-member] events over the course of several [i.e., 6] years” does not “rise to the level of ‘regular’ or ‘indiscriminate’ use” by non-members. Jankey was cited in Lobel v. Woodland Golf Club of Auburndale.[8] In Lobel, the court found non-members have no access to the club unless invited and accompanied by a member. Such restrictions on nonmember access are generally indicative of private-club status.

          In Bennett v. Tupelo Country Club[9], the court determined disputed issues of fact primarily consisting of the extent to which non-members are permitted to use the club’s facilities without the involvement of an active member precluded summary judgment. This interim finding brings to mind an occasion when I was offered the opportunity to play a prestigious country club through the auspices of one of the club’s senior members contacted by our club’s golf professional. The host club would only allow my playing its golf course if accompanied by the senior member.

While regular use of the facility by nonmembers contradicts private status, allowing owners to bring guests onto the property does not strip Defendants of their ADA exemption as a private establishment.[11]  (“[a] private club with a ‘limited guest policy,’ in which guests are not permitted ‘unfettered use of facilities,’ is not a public accommodation for purposes of the ADA”).[12] Courts have found that establishments that allow guests ‘unfettered’ use of their facilities are not private[13] (suggesting the Tupelo Country Club was not private if it allowed non-members to use the Club in a similar capacity to members).

The Court also cited EEOC v. University Club of Chicago[14], (holding the University Club of Chicago was not private because non-members were allowed essentially the same privileges as members regardless of whether or not the guest is accompanied by a member).

          Lobel compares Chicago Club[15], (finding a social club where “non-members are allowed access to the Club only as authorized guests of members” to be a private club) and Wright vs. Cork Club[16], (finding a social club where the “facilities are regularly used by nonmembers who are not bona fide guests” is not a private club). Lobel at 26.

          In Lobel, the Club’s guest policy requires members to pay a guest fee, cover all charges incurred by the guest, and accompany the guest during his or her time at the club. Courts regularly find that clubs where members must pay a guest fee and accompany guests within the club are private and thus exempt from the ADA.[17]

          Likewise in Lobel, the Club’s guest policy also limits how many guests may play golf at any given time, the times and days when guests are allowed to golf, and how often any one guest can golf at the club in a month. Clubs that place limits on the number of guests that can be admitted are also generally consider to retain their private status despite the admission of some guests on a limited basis. (citing Reimer[18]). Therefore, in Lobel, the club’s limited guest policy favored a finding of private-club status.

          Thus, while some structuring may be possible to protect a club’s distinctly private status when , e.g., allowing for reciprocal privileges, in our judgment, it is only possible when the club has in place restrictions similar to those present in the Lobel case, the most recent of the cases discussing this issue.

          Perhaps the Lobel example if carefully followed gives an expectation that reciprocity can be effectuated without running afoul of the privacy criteria. The Lobel standards include, (1) allowing access to the Club only as authorized guests of members; (2) requiring members to pay a guest fee, cover all charges incurred by the guest, and accompany the guest during his or her time at the club; (3) limit how many guests may play golf at any given time; (4) limit the times and days when guests are allowed to golf; and (5) how often any one guest can golf at the club in a month.  

          Also, it may be preferable as a matter of prophylactics, to add three more criteria, (6) require verification from the reciprocated club in advance that designated members are members in good standing of that club; (7) require the reciprocated members to sign a short agreement they have been furnished with the host club’s rules and agree to abide by them; and (8) limit the use of the host club’s facilities to less than all of the facilities. This last recommendation contradicts a potential claim the guest use right is unfettered and the same as a members. Thus, if the prime motive of the request for non-member guest privileges, reciprocal or otherwise,  is for the use of the host club’s golf course, the privilege should be withheld respecting other facilities, e.g., wellness, dining and racquet sports.

          In conclusion, the question of whether a club’s conduct respecting unaccompanied nonmember guests fails the private status criterion of not allowing regular, indiscriminate or unfettered use of its facilities is determined by the facts as judicially interpreted. The burden is always on the club to establish its right to be deemed truly private. The cost of failure to do so may result in substantial legal and civil judgments or penalties which may be avoided by paying particular attention to the case law.  

[1] This blog is designed for general information only. The information presented at this site should not be construed to be formal legal advice or the formation of a lawyer/client relationship. The author of this blog is not certified by any state agencies or boards of legal specialization. This blog may constitute attorney advertising in some jurisdictions.

[2] North Carolina ABC regulation 04 NCAC 02S .0235 PRIVATE CLUBS; RECIPROCAL MEMBERSHIPS. A private club permittee may offer reciprocal memberships to bona fide members of other private clubs under the following conditions: (1) Reciprocity may extend only to members of private clubs holding Mixed Beverages or Brown bagging permits issued by the Commission. (2) All clubs participating in reciprocal membership arrangements shall enter into a written agreement setting forth the terms of their arrangement, and each club shall adopt rules governing the use of their facilities by reciprocal members. The agreement and rules shall be filed with the Commission and made a part of the permittees’ files. (3) Private clubs entering into such agreements shall be located in different counties. 4) A member of another club who is granted a reciprocal membership shall be required to show a valid membership card indicating he is a bona fide member of the reciprocal club each time he enters the facility. Failure to abide by this regulation potentially jeopardizes the club’s ABC licenses. [Underlining supplied for emphasis].

[3] Jankey, 14 F. Supp. 2d 1174 at 1179 (C.D. Cal. 1998) aff’d, 212 F.3d 1159 (9th Cir.2000) [citing U.S. v. Lansdowne Swim Club, 713 F.Supp. 785 at 804 (E.D.Pa.1989)

[4] The cited section cross references 42 U.S.C. 2000–a(e) Private establishments. The provisions of this subchapter shall not apply to a private club or other establishment not in fact open to the public, except to the extent that the facilities of such establishment are made available to the customers or patrons of an establishment within the scope of subsection (b).

[5] 845 F.Supp. 1526, 1529 (M.D.Fla.1994).

7 14 F.Supp.2d 1174 at 1179 (D. C.D. California 1998).

[7] Id.

[8] Civil Action No. 15-13803-FDS D.Mass. May 31, 2017.

[9] Case No. 1:04CV312-M-D. (N.D. Miss. Jan. 5, 2006); 2006 U.S. Dist. LEXIS 1624, at *6, 2006 WL 37310, at *2–3 (N.D.Miss. Jan. 5, 2006)

[10] 110 F. Supp.3rd 1017 at 1024 (E.D. Cal. 2015)

[11] Citing Jankey, 14 F.Supp.2d at 1178.

[12] Citing Kelsey, 845 F.Supp. at 1530.

[13] Citing Bennett v. Tupelo Country Club.

[14] 763 F.Supp. 985, 987–88 (N.D.Ill.1991)

[15] 86 F.3d at 1435

[16] 315 F. Supp. 1143 at 1154 (S.D. Tex. 1970)

[17] See, e.g., Kelsey, 845 F. Supp. at 1527, 1530; Reimer, 2013 WL 1501522, at *3; Bommarito, 2007 WL 925791, at *7, 10.

[18] 2013 WL 1501522, at *3; Bommarito, 2007 WL 925791, at *6.