Judge denies Palmetto Bluff’s motion to dismiss lawsuit filed against it by private homeowners
A judge has issued an order on several motions in the class-action lawsuit against Palmetto Bluff, siding mostly in favor of the plaintiffs.
Circuit Judge R. Ferrell Cothran of the Third Judicial Circuit in South Carolina, denied a motion to compel arbitration and a motion to dismiss the suit filed by the defendants — Palmetto Bluff and 11 other entities including the Palmetto Bluff Club and South Street Partners.
The lawsuit filed in April alleges that South Street Partners, owners of Palmetto Bluff, “have a business plan to flip Palmetto Bluff within eight years ... after ringing from it as much profit as they can manufacture” among other concerns, such as overcrowded amenities, forced paid memberships in the Palmetto Bluff Club and “an attack on short-term rentals,” according to the suit.
“The lawsuit is about the illegal actions of the developer of Palmetto Bluff, which is working with the other Defendants to carry out a deceptive and costly hoax on Palmetto Bluff property owners,” the lawsuit alleges.
Arbitration is an alternative to court that resolves a dispute in private and which keeps information about the case confidential. Cothran denied the motion because there is no agreement between numerous parties to arbitrate, the order says.
“Defendants have not produced any contract in which any Plaintiff has agreed to arbitrate any dispute,” the order says. “This Court cannot enforce contracts that do not exist, and nor will it require parties to surrender access to the courts when they have never agreed to do so.”
Only one defendant, the Palmetto Bluff Club, was able to provide any alleged agreement to arbitrate, but only seven of the 21 plaintiffs have signed the document, according to the order.
By denying the defendants’ motion, it keeps the lawsuit in the public courts.
“The court’s rulings are a significant victory, and a big step toward justice for the residents of Palmetto Bluff,” Ford Wallace Thomson LLC, which represent the plaintiffs, said in a statement. “The court found that the developer’s purported arbitration agreements are “unconscionable” and “oppressive” and improperly attempted to strip homeowners of their rights.
“With the case now headed to court, development owners face possible liability for triple and punitive damages. The case will go forward in a public forum instead of behind closed doors, and the outcome could have far-reaching impacts for South Carolina homeowners in planned developments such as Palmetto Bluff — and beyond.”
The motion to dismiss was primarily based on the defendants’ claim that an identical case was pending with the American Arbitration Association. But, with the motion to compel arbitration being denied, so was the motion to dismiss.
“Plaintiffs have reserved and preserved all rights to pursue their claims in court,” the order says. “Only later did Defendants bring demands in arbitration. The arbitration proceeding, which involves different parties and claims, is not identical to this civil action.”
“These are simply rulings on procedural matters that have no effect on the substantive issues in the case,” South Street Partners said in a statement. “The Order is under review by counsel, who will take appropriate action. We are confident that we will ultimately prevail in our efforts to keep Palmetto Bluff a special place that works for the entire community.”
Cothran also found two motions from the plaintiffs “not ripe for determination at this time.”
One was a motion for partial summary judgment. The plaintiffs argued that summary judgment should be granted on the following grounds:
▪ The question of whether the covenants within certain Defendants’ documents, requiring Plaintiffs to pay fees to a for-profit endeavor as part of the real estate transfer, violate South Carolina’s statutory prohibition against transfer fee covenants.
▪ The question of whether the covenants’ requirement of mandatory membership in a for-profit Club is unlawful.
▪ The question of whether the Club’s unrecorded governing documents are unlawful and unconscionable.
▪ The question of whether the for-profit Club is nonetheless subject to the South Carolina Homeowners’ Association Act.
The other motion was to disqualify Nexsen Pruet, LLC, a Hilton Head law firm, as counsel for the defendants. Nexsen Pruet served as both the closing attorneys and counsel for Palmetto Bluff, which the plaintiffs believe is a conflict of interest.
Both motions were denied without prejudice, leaving the plaintiffs the ability to refile the motions later.
Palmetto Bluff, a gated waterfront community, is Bluffton’s largest private residential community featuring amenities like a golf club and resort, swimming pool, fitness centers, dining venues, a five-star hotel and spa, Montage Palmetto Bluff.
Residents, according to their suit, say hotel guests and events receive “preferential treatment,” often leaving homeowners without access to amenities that influenced them to live in Palmetto Bluff.
This story was originally published September 21, 2022 at 3:31 PM.
