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Investors in Failed Resort Can Sue Jack Nicklaus, 10th Cir. Says

By Casey C. Sullivan, Esq. on March 20, 2015 | Last updated on March 21, 2019

A Colorado couple can sue Jack Nicklaus for intentional misrepresentation over a failed luxury golf development, the Tenth Circuit has ruled. The couple, Jeffrey and Judee Donner, who invested $1.5 million in a luxury golf resort, did so at least in part because of claims that one of the greatest professional golfers of all time, Jack Nicklaus, would both design the course and have a house in the development.

When the $3 billion project went belly up, the Donners sued. The Tenth Circuit overturned the dismissal of their case in district court, allowing them to continue pursuing claims that Nicklaus and his company intentionally misrepresented the golfer's relationship with the development.

The Luxury Resort That Never Was

The proposed development, Mount Holly Club, was envisioned as an exclusive private ski and golf resort in rural Utah. The developer contracted with Nicklaus to use his brand to advertise and promote the club and issued the golf pro an "honorary Founder Membership." The developer's press materials, however, quoted Nicklaus as stating "I became a founding charter member" because he was so impressed with the club and its management, not that he was given an honorary membership as part of his contract with the development. A charter membership, which the Donners purchased, cost a reasonable $1.5 million.

You Say Tomato, I Say Founding Charter Member

In their suit, the Donners allege that the description of Nicklaus as a charter member, with the implication that he had paid $1.5 million to purchase the membership, was a tortious intentional misrepresentation under state law. According to the Donners, their purchase was directly connected to the belief that Nickalus also paid $1.5 million for the same type of membership.

Does it really matter if Nicklaus was an honorary founder and not a charter member? Potentially, the court ruled, rejecting Nicklaus's claims that there was no significant difference between the two. The difference between a charter memberships price tag and an "honorary" founding membership couldn't easily be ignored. The court also found that the Donners were not sophisticated investors who should have known better.

Of course, the appeal wasn't quite a hole-in-one for the couple. Their allegations that the developer breached their fiduciary duties, made negligent representations and violated the Interstate Land Sales Full Disclosure Act were all rejected as a matter of law.

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