Dear PBNA Members,

This newsletter is an update to our February 2024 email regarding on-going disputes, which have now broadened out to include community-wide emails and a recent petition effort by several property owners. 

The three separate dispute streams are:

• ST Rental/PBCA Litigation.  As you may recall, litigation was initiated in 2022 between the group known as PB Community Advocates (comprised partly of, but not exclusively of, owners of properties in the short-term rental areas).   This litigation continues, and given the nature of the litigation, little new information is publicly available.  Two key pillars of this lawsuit may already be moot (e.g., amenity access by short term renters, and mandatory membership in a for profit club) but a third key pillar involves the governance and structure of what is now referred to as the “base” Palmetto Bluff Club.  The PBCA has circulated community wide emails articulating their arguments and points.

• Mandatory Membership Waiver.  Last July, a group of property owners submitted a formal complaint regarding SSP’s unilateral announcement last May to make PB Club membership optional.  Per our governing documents, this was the first step in a formal dispute.  The heart of this complaint is that SSP, in making such a fundamental change to PB Club membership, was required to use the amendment process, outlined in section 4.2 of the Recreational Covenant, and obtain a majority vote by the property owners.  This was not done.

• Petition effort.  As many of you may know, a third group of PB homeowners is circulating a petition and holding meetings amongst PB property owners who have expressed an interest in learning more about the first lawsuit and its potential consequences.  The leaders of this effort (Jim Grant and Julia Butler) plan to send a community wide communication to share with the balance of the community what was discussed in the neighborhood meetings.  They are advocating for settlement or withdrawal of the PBCA-backed litigation.   Further, their petition is intended to thwart the plaintiffs’ attempt, down the road, to have its lawsuit certified as a class action.  More on this below.

Lots of points and counterpoints are being asserted and we will not attempt to address each one.  Please remember that many points and arguments are being expressed by the interested parties in a manner which best supports their goals.  Consequently, there is a risk of more heat and smoke but not a lot of light and clarity.  In our earnest effort to shed some light, here are some points which may be helpful:

• Despite all the handwringing about how the disputes are hurting property values, there are no data to confirm this assertion.   All of us receive real estate transaction updates from PB Real Estate as well as from independent brokers which continue to show record prices on virtually all metrics.  Of course, if conflicts continue and/or amplify, and with increasing publicity in the newspapers about the lawsuits, this risk no doubt exists.  It is worth noting that lawsuits in planned communities are not uncommon, here in SC and across the US, so Palmetto Bluff is not notable in this regard.
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• The market, and not the absence of litigation, will likely be the biggest driver of new amenity construction.   SSP has approximately 2,300 lots yet to be developed, platted, and sold.  The only way they will continue to transform raw forest land into million dollar lots is through easy to access top tier amenities.  This is evidenced by the construction of the second 18-hole golf course and the Anson Marina.  Regardless of the litigation, SSP may choose to make any new amenities separate from the base PB Club, much like they did with Crossroads.  SSP has a fiduciary responsibility to their investors to make the decision they believe to be in their best economic interest.

• The second legal action involving the waiver of mandatory membership will likely be resolved by the end of summer or early Fall.  As the property owners and SSP have agreed to a streamlined legal process whereby a special referee (already chosen by both SSP and the property owners) will rule on this question.  If the special referee rules in favor of the property owners, SSP’s waiver will be reversed.  SSP will then have the option to either 1) restore the mandatory membership requirement; and/or, 2) seek the written consent of a majority of PB property owners.  SSP also could appeal, as they have done in the other lawsuit, which would prolong the matter. 

• The lawsuit brought by PBCA seeks to be a class action but is NOT a class action yet.  The plaintiffs’ complaint alleges that they are “representatives” of the “Property Owners Class,” defined as “all owners, including former Owners, of residential property units…within the past twenty years…”  There may come a time—unclear when but could be two to three years hence—when a judge (not yet appointed…) could be asked to certify the lawsuit as a class action.  If the judge certifies the case as a class action, then at that time, each property owner would have a choice to remain in the class or to opt out. 
• Remember, this lawsuit is still in a procedural stage (court vs. arbitration) and nothing has been argued or discussed in court yet on the merits of the plaintiffs’ arguments. The potentiality of the current lawsuit turning into a class action is a significant (and uncertain) financial cloud over SSP.  This cloud, we would imagine, would be an incentive for SSP to settle.    
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Where will this end?  We don’t know but some current thoughts:

• While they disagree, arguably PBCA has already “won” two key points in their dispute—short term renter access and the allegedly “illegal” structure of a for profit club being mandatory (which may be reversed).  Their key remaining arguments revolve around PB Base Club structure (for profit vs. nonprofit), governance, and such.  The “bid-ask” spread between the plaintiffs and SSP is immense, and we don’t see any easy solution short of constructive compromise.  Apparently, this has been tried several times and has failed.  While we are not sanguine that this will change easily or quickly, we hope we are wrong.

• Nonetheless, we firmly believe that settling the PBCA backed lawsuit is in the best interests of the Palmetto Bluff community and hope that the defendants and plaintiffs can find a way to do so.
• As with the other recent “grassroots” efforts (e.g., Grace Club, Moreland cell tower) to keep Palmetto Bluff a special place, we are grateful that our neighbors continue to step up to work together as a community.