Fountains Residents Network

April 22

Thank you for being here.

When 16 homeowners in the Fountains met for the first time on March 31, 2014, and formed the Fountains Concerned Residents Network, we didn’t know that less than a month later we would be launching this blog. Neither did we guess that over 80 owners would receive an invitation to join us. 

We did know that we needed more answers regarding mandatory membership, primarily, as well as other developments in the Fountains. We also knew we were not experts, but that if we worked together as a community we would find among us others who had part or full answers that could help us all.

So, welcome! Let the sharing begin.

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                                         MANDATORY MEMBERSHIP 

June 24

From Albert King

After re-reading the FCC member’s following comments, I was compelled to share my interpretations of these statements:

Member’s Comment: “The predicament we are in was caused years ago when the THEN board lied about our financial status. As with everything here the false rumors are destructive and tarnish our reputation. This is a wonderful club and your negativity only further deters new members from joining the club. We all knew that a PRIVATE country club should be mandatory membership when we moved here and voted for mandatory membership. Let’s point out the many positives and stop the club bashing.”

This is my interpretation of this member’s comment – The FCC Board Of Directors’ lies created a $17,000,000+ bank loan that today is being shouldered and repaid by us, the existing club members.  This cost is a whopping burden to us, the existing members, because membership has declined due to attrition, and new membership has not developed, in part due to increased membership cost, and overall, the decline in private club membership in general.

However, we do know that comparable private country club membership in Palm Beach county is expensive and actually costs much, much more, but we do not want to pay such dreadful, buoyant rates. However, instead of tightening our collective belts, demanding less,  reducing and controlling expenditures, we want non-member Fountains residents to share this FCC BOD imposed country club financial burden.

Although non-member residents have elected to not contribute to FCC financially, and decline to participate in FCC activities, nonetheless their involuntary contributions are wanted, as they will lighten the financial demand on us, the current FCC members, and their participation in club activities is not wanted anyway – they should just send money.

You see, those of us that purchased homes prior to 2003 had the guaranteed option to join or not join the FCC. That was B.T.F.L. – BEFORE THE FCC LIES.

The FCC BOD lies about Mandatory Membership enhancing housing values caused depressed sales and severe stress in the community leading to many units being rented.

Non-FCC member residents are now relying on the 2002 and 2003 FCC letters provided by the then FCC President stating, “Mandatory Membership Withdrawal Would Be Honored”. But today, we the existing FCC members are hoping to ignore his written word of honor because we do not want to continue to pay the attendant  country club cost equivalent to and consistent with other private country clubs in the Palm Beach County area.

We want to maintain our exclusive, expensive club and need help, including renters – we don’t care – to shoulder some of the cost.

Albert King

 

Following are the two 1-page re-typed letters from the FCC club president Leo Wurtzel which authorizes all courts to vote out mandatory membership.

These were used to encourage courts to vote for mandatory membership in 2003 by promising that it could be reversed. They are now a key part of the lawsuit brought by the 7 North courts who voted out the mandatory membership requirement.

“MEMORANDUM

TO: All Interested Residents of the Fountains

FROM: Leo Wurtzel

President, F.C.C. Board of Directors

DATE:            August 27, 2002

We have been advised by our attorney, Sachs, Sax & Klein, represented by Larry Glickman, Esq., that any court that voted in favor of mandatory membership can at any time in the future reverse their vote by the same procedure, a vote of the residents of that court that was used to adopt mandatory membership.

Signed by Leo Wurtzel, President F.C.C.

——————————————————————————————————————–

MEMORANDUM

DATE:  June 2, 2003

TO:      The Fountains of Palm Beach Condominium, Inc.  #1 (Gefion Court)

Samuel N. Grundfast, President

FROM: Leo Wurtzel, President

F.C.C. Board of Directors

Please be advised that if The Fountains of Palm Beach Condominium, Inc. #1, (Gefion Court) votes to approve the amendment to its Declaration creating mandatory membership with the Club, then the Court can at any time in the future reverse that vote and repeal the amendment by the same procedure and vote of the residents of the Court that was used to adopt the mandatory membership amendment.

Furthermore, in the event a lawsuit is commenced or claim made against the Court as a result of mandatory membership, then the Club will pay all insurance deductibles, legal fees, and damage awards in excess of the Court’s insurance and Umbrella Policy Coverage, provided the lawyers selected have been approved by their insurance company.  In the event insurance coverage is denied the Court, then the Club shall indemnify the Court for all its legal fees and damage award.

This indemnification will only be binding on the Fountains Country Club, Inc. if, at the time a claim is made, the F.C.O. and your association maintain and have in force General Liability, Excess Liability and Errors and Omission insurance policies comparable to the policies in force at this time.

Leo Wurtzel, President”

Please click on the link below to read the 2 original copies:

LEO WURTZEL

June 13

HOW TO SPEND FIFTEEN MILLION DOLLARS A YEAR

Attached herewith the Auditors Footnotes to the Fountains Country Club, Inc 2013 financial statements

The FOUNTAINS COUNTRY CLUB annual expenditures for calendar year 2013 amounted to Fifteen Million Dollars. See below, the FCC April 29, 2014 certified 2013 Financial Report which is available to all members upon request. In fact, the FCC expenditures for the last five years were, $15.5, $11.02, $11.0, $13.0, and $12.3 million dollars for 2013, 2012, 2011, 2010 and 2009 respectively. (NOTE  # 8 – ASSESSMENTS, page 12)

This report confirms that in addition to 2013 membership dues payments of $5,042,895, FCC members were assessed and paid an additional $2.7 million dollars  ( $1,700,535 and $974,400 ) in member special assessments during calendar 2013. WOW!  

The report shows that In 2012 FCC members paid membership dues of $5,447,205 and special assessments totaling $1,801,977 ($1,391,387, $257,465 and $153,125 ).

And they want more money to spend. If you are a non-member owner, they want a portion of your income, retirement funds, savings, etc in the form of membership or quasi membership dues and assessments to add to their sovereignty and spending campaign. Yes, non-member northern court residents defeated MANDATORY MEMBERSHIP and the so called RECREATIONAL PACKAGE offer.  But, the FCC establishment is expected to initiate other such attacks.  SEE NOTE # 10 – COMMITMENTS and CONTINGENCIES, (page 13, 2ND to last paragraph),

“THE PARTIES CONTINUE TO EXPLORE THE POTENTIAL FOR SETTLEMENT AND MIGHT REOPEN NEGOTIATIONS IN THE FUTURE”.

The FCC’s known and stated goal is to forcibly saddle the northern courts with FCC financial obligation support. Not only do they want your contract or commitment to pay fees, they really want the obligatory contractual liability that automatically attaches (your property) enabling them to obtain a judgment  against you if necessary,  guaranteeing that you and your heirs will make the compulsory continuous payments for years and years to come.

QUESTION. Can FCC obtain a judgment against you, or your heirs, or a buyer, once you sign up for FCC membership, or a FCC contractual package, due to non-payment of their fees because you want to terminate the services?  SEE NOTE # 10 – LITIGATION.

The report confirms law suits were filed against various FCC members who are delinquent on dues and assessment payments. It is important to note that FCC membership and/or any other FCC contractual commitment package is really the equivalent of a SECOND MORTGAGE on your Fountains residence, other homes, bank accounts and personal property. ( THE ONLY  EXCEPTION – A FLORIDA RESIDENTS PRIMARY HOME IN FLORIDA IS EXEMPT). FCC can and will obtain and execute judgments, which transfer to liens and levies against your resources to secure continuous payment of membership, fees and other assessed  commitments.

NOTE # 1 – INCOME TAXES (page 8).  The Fountains Country Club operation is a Federal/State approved 501 ( c ) ( 7 ) NOT-FOR-PROFIT organization required to adhere to certain specific disciplined rules and regulations to avoid income tax assessment.  This explains the structure of the FCO Cost Sharing agreement, renewed March 1, 2014.

NOTE # 7 – RELATED PARTY AGREEMENTS,  further explain how FCC transfers certain costs (reducing FCC expenses) directly to the FCO avoiding receipt of income subject to taxation.

It should be noted that while membership dues are no longer tax deductible, certain other qualified Country Club expenditures are in fact deductible for individual income tax purposes.

Overall the FCC financials remain unchanged from previous years and are in reasonably good health as long as membership levels are maintained, and the governing council is willing to issue and pay the special assessments needed to maintain current spending levels . The audit report confirms the Wells mortgage and Line of credit account balances are reduced at December 31, 2013 to $10,754,719 and $272,462 respectively, and the net 2013 operating result, after a $974,400 deficit assessment, shows an excess of revenue over expenses of $840,105 for the year.

The 2013 report discloses a Designated Capital and Debt Service fund with a $1,009,614 balance at Dec 31, 2013 and $1,037,912  Dec 31, 2012.

I urge all to read the complete report below.

Albert King

FCC Dec 31 2013 Financials

—–

June 6

What’s happened recently – 

LEGAL DEFENSE INSURANCE

The President of Fountains Country Club (FCC ) indicated the club has LEGAL DEFENSE INSURANCE to deal with the Fountains Mandatory Membership Class Action type law suit. When questioned, Paul McGinn did not comment further about the particulars of the FCC legal Defense coverage and here is why.

 The right to a defense under a general liability insurance policy is not a Solution or Remedy to all ills.

A general liability policy, which is part of any typical business insurance policy or commercial insurance policy coverage, can be of various designs but has two distinct obligations: first, it is designed to protect against a legal obligation to pay others because of caused harm or damage; second, it defends against claims or lawsuits. In other words, besides paying for claims or suits, a liability policy also pays for their related legal costs and court fees.  It can be provided as part of the business insurance policy’s liability limit or as a separate coverage

What Is Covered Under an Insurance Policy Defense Costs?

Defense costs generally include:

·       Attorney fees (including cost of legal staff and expenses)

·       Court costs of the applicable jurisdiction

·       Costs of filing necessary legal papers

·       If applicable, costs of expert witnesses

·       Costs associated with investigation, etc.

How Are Defense Costs Handled?

A basic Legal Defense policy would provide indemnification for covered sustained legal cost related to the defense of an organization or its Directors or Officers.  A general liability or Umbrella liability policy may, by design, provide legal defense Counsel and take  control of settlement or other disposition of the legal issues.

General features of a legal Defense policy are:

1.     The face amount of the policy ( maximum coverage amount )

2.     Policy retention – Deductible

3.     Annual premium derived from  the above factors

4.     Typical policy  Exclusions  ( just to list a few )

a.     Illegal Acts

b.     Dishonest Acts

c.     Intentional Misconduct

d.     Punitive Damages

e.     Contract Claims

f.      Bad Faith

To initiate a claim, the insurer has much more to do than just call the insurance company and send them the legal bills.  Insurer must:

5.     Timely notify carrier of the law suit particulars

6.     Carrier review determines if and what coverage applies to insurers law suit

7.     If subject to coverage or partial coverage, Carrier will issue a coverage determination letter

One of the most important components of commercial liability insurance is the coverage provided for the defense of claims (including lawsuits) against the insured. A key element of liability insurance policies (which cover liabilities owed to third parties), defense coverage typically provides either an actual defense (whether “supplemental” or eroding policy limits) or reimbursement for the cost of defense

The policy also contains a duty to defend that may or may not erode the limit of liability. Once the limit of liability has been paid out in settlements or judgments, however, the duty to defend comes to an end.

Insurance policies most often contain a duty to reimburse defense costs. Under those types of policies, defense costs typically erode the limit of liability. For example, if the defense of a covered claim costs $750,000 and the limits of liability are $1 million with 10% retention, $150,000 in limits remain ( $ 1 million less Insured retention of $100,000, less $750,000 ) to satisfy a settlement or judgment. Increasingly, however, general liability insurance policies also contain terms intended to limit or place qualifications on the scope of the duty to defend. Such defense-limiting terms (such as a duty to defend that applies against coverage limits) requires that Policyholders understand and review their coverage position.

The insurer faces significant potential exposure from the duty to defend, defense-related issues (e.g., the selection of counsel, the control of defense and the acceptance of settlement proposals) are among the most frequent sources of disagreement between insurers and policyholders. For any business that has found itself in a dispute with its insurance company over the control of a defense, that fight can be as frustrating as being sued in the first place. The types of disputes that arise between insurers and policyholders concerning the duty to defend are virtually limitless, and a comprehensive overview of the judicial rulings that have defined the outlines of these recurring disputes would be extensive.

The following scenarios, however, illustrate some of the common pressure points concerning the duty to defend:

Insured is entitled to a Defense: But Who Calls the Shots?

The Insurance Company ( Carrier ) could decide that defending the lawsuits—even though it agrees that Policyholder likely will not be found liable—will cost far more than it would to offer its policy limits in settlement and walks away free of any further duty to defend. Policyholder may object vociferously to Insurer’s intention. What rights does Policyholder have in this situation? Does it make a difference if defense costs are applied against the limits of liability? What if the tables are turned and Policyholder believes that the claims can be settled for the $1 million limit of the insurance policy, but Carrier would rather continue to litigate? Although the answers to these basic questions will have dramatic economic consequences for Policyholder, they will vary depending on the particular terms of the relevant insurance policy and the state law under which that insurance policy is interpreted.

 Who Represents Whom?

Unfair trade practice claims were filed against the Insured. Insured promptly tenders the lawsuit to its general liability insurer carrier, and demands that it undertake the defense of the lawsuit. Carrier believes that the unfair trade practice claim is clearly subject to a number of exclusions. Nonetheless, Carrier decides to defend the insured subject to a reservation of rights. In its initial coverage determination letter Carrier informs that it is appointing ABC LAW FIRM to conduct the defense. Is this permissible? Would it make a difference if,  instead of containing a duty to defend, the policy only provided for the reimbursement of defense costs? Given the reservation of rights, does the insured have a right to select its own counsel?  Would it have made a difference if Carrier had reserved its rights because the insurer’s notice was untimely, rather than because of the possible applicability of a substantive exclusion? Can Carrier require that Insurer select so-called independent counsel from a list of pre-approved lawyers? What if Carrier objects to the counsel selected by Insurer?

 Ultimately, the litigation does not settle and the jury returns a verdict for the plaintiffs, finding that Insured intentionally and knowingly conducted unfair trade pratices. The jury also awards punitive damages. Carrier informs Insured that, given the jury’s verdict, the litigation was not covered under policy provisions and requests that Insured repay the costs of defense. Under what circumstances is Carrier entitled to the repayment of defense costs? Once again, this scenario addresses a series of common areas of disagreement. But the answers to our questions, may have widely divergent consequences for Insurer’s rights depending on the particular policy terms and the applicable state law.

Who Said Anything About Being Reasonable?

Carrier informs Insured that he is entitled to select independent counsel. In the reservation of rights determination letter, Carrier states that it will pay for reasonable costs of defense provided in accord with its guidelines for retained-counsel litigation and subject to prevailing local billing rates. Five months after the first defense bill is forwarded to Carrier, Insured receives a letter informing him that the hourly billing rate of $550 an hour is inconsistent with the prevailing local standards of $175 an hour, that the retention of private investigators was unnecessary and that the litigation guidelines do not permit spending more than five hours preparing a motion to dismiss without obtaining the insurance company’s prior approval. Out of a total defense invoice of $ many dollars, Carrier approves less than $1/4 of the billing. Assuming that the insurance policy does not contain the same conditions set forth in the reservation of rights letter, can Carrier impose these conditions? Should Insured have objected to Carrier’s reservation of rights letter? Does it make a difference if the insurance policy states that independent counsel is expected to comply with Carrier’s litigation guidelines in a conflict situation? Does Carrier’s delay in reviewing the bills have any effect on its right to reduce the billings?

The fact patterns provided in these scenarios may seem to be exceedingly simple, and the questions raised in the scenarios occur quite frequently. But the answers to these common questions vary depending on the applicable state law and the terms of the relevant insurance policies—factors that are too often taken for granted by policyholders. It is a simple lesson, but one that cannot be over-emphasized:

 “The right to a defense under a general liability insurance policy is not a solution or remedy for all ills”.

Albert King

—————————–

May 24

Some updates from our May 7 edition:

We understand that Gene Lipscher is the lead litigator for the 7 Northern Courts and he is being seconded by George Ord and Rod Tennyson;

Re bringing together new owners who have been sued by the FCC after Mandatory Membership was voted out, we have put 4 in touch with one another; we found 1 who doesn’t want to be connected; 1 who has re-sold and gone; 1 who has not responded, and 1 who was sued by the FCC but doesn’t exist. We also found that the FCC has many active lawsuits for other reasons like long-term members attempting to resign, non-payment of dues, etc.

Depositions usually do not directly involve the court. The process is initiated and supervised by the parties. Usually, the only persons present at a deposition are the deponent, attorneys for all interested parties, and a person qualified to administer oaths. Sometimes depositions are recorded by a stenographer, although electronic recordings are increasingly common. At the deposition, all parties may question the witness. Lawyers may not coach their clients’ testimony, and their ability to object to deposition questions is usually limited.

Depositions are usually hearsay and are thus inadmissible at trial. There are, however, three exceptions to the hearsay rule that are particularly relevant to deposition testimony. The first is when a party admits something in a deposition that is against his or her interest. The second is when a witness’s testimony at trial contradicts their deposition. The third is when a witness is unavailable at trial. (http://www.law.cornell.edu/wex/deposition)

Finally, for now, if you haven’t read what Susan wrote on May 20 in Recent Comments, we urge you to do so.

May 7

April 22

It is pretty common knowledge that the recreation/mediation agreement offered by the Country Club this January-February, 2014, was voted down in all seven of the north courts. And, it is also known that In March 2013 the same seven north courts voted against the continuation of mandatory membership in the FCC as a condition of purchase. And everyone knows there is a court case.

However, to clearly understand what is going on is another matter. Among us reading these words now, there are likely a number of owners who can and will provide much more information as we proceed. Seeking that information can take many paths. We look forward to hearing of them. Here’s what the Esedra Court team has done recently.

 Besides attending monthly Board meetings, it has asked formally to be on the Agenda. For example the following*:

To:  Alan Diamond, Secretary, the Esedra Court Board

From:  David Goldman

For Your Information

For anyone who is not familiar with the terms of the FCC offer and how much would have been required to pay for 25 years, the Esedra version of the offer is attached below this line. We’d be interested in seeing other versions for comparison.

FCC MM OFFER

The court will not set a date for trial until Sept 2014 at the earliest and we are under a Continuance. There is an attachment below called TRIAL CONTINUANCE. Click to open and see this information.

TRIAL CONTINUANCE

ARCHIVES – Meeting Minutes for Courts

April 2014 Esedra Court Board Meeting Notes

May 24 – No new post.

May 7

April 18

The following link is the cost sharing agreement recently agreed to between the Fountains Condominium Operations, representing all homeowners, and the Fountains Country Club.

This agreement covers how expenses and rent are paid for in the community for

• security and gates
  
• roads and lighting
  
• landscaping
• fountains
• golf cart paths
• perimeter fencing and walls
• tree root damage
• Craft Hall, Fountains Hall and the FCO Office among other items.

Please read the link below to see what the community is paying for versus what the FCC is paying for.

Fountains Community Mgt & Facilities Agreement

The following link is the 2-page “Letter of Intent of Mutual Cooperation” between the Fountains Condominium Operations, representing all homeowners, and the Fountains Country Club signed on March 26, 2014.

FCO_FCC Letter of Intent of Mutual Cooperation