Cobb v. Ironwood Country Club
Annotate this CaseIronwood Country Club appealed an order that denied its motion to compel arbitration of the declaratory relief action brought by plaintiffs William S. Cobb, Jr., and Elizabeth Richards, who were former members of Ironwood, and Patrick J. Keeley and Helen Riedstra, who were then-current members. The motion to compel was based on an arbitration provision Ironwood incorporated into its bylaws four months after plaintiffs' complaint was filed. In 1999, the Club entered into an agreement with each of its 588 members, whereby each member loaned the club $25,500 to fund the Club's purchase of additional land. The members were given the option of paying the funds in a lump sum or by making payments over a period of 20 years into a "Land Purchase Account." In connection with the loans, the Club represented that if any member sold his or her membership before the loan was repaid, the Club would be "absolutely obligated to pay the Selling Member the entire amount then standing in the Member's Land Purchase Account." Moreover, any new member would be required to pay, in addition to the regular initiation fee, an amount equal to the hypothetical balance in a Land Purchase Account, as well as the "remaining unamortized portion of the Land Purchase Assessment." In reliance on the Club's representations, the members voted to approve the land purchase and enter into the loan agreements. Three of the plaintiffs paid the lump sum, and one plaintiff elected to make monthly payments into a Land Purchase Account. In April 2012, Ironwood represented that it had repaid the $25,500 Land Purchase Assessment to 10 resigned members whose memberships were subsequently purchased by new members, since 2003. However, plaintiffs alleged that despite the Club's initial description of how the funds would be generated to reimburse resigning members, it "inexplicably failed" to require new members to pay the equivalent of the Land Purchase Assessment when they joined. The trial court held that Ironwood's subsequent amendment of its bylaws was insufficient to demonstrate that any of these plaintiffs agreed to arbitrate this dispute, and that if Ironwood's basic premise were accepted, it would render the agreement illusory. Ironwood argued: (1) that its new arbitration provision was fully applicable to this previously filed lawsuit because the lawsuit concerned a dispute which was "ongoing" between the parties; and (2) that its right to amend its bylaws meant that any such amendment would be binding on both current and former members. The Court of Appeal agreed with the trial court's conclusions, and affirmed the order.
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