July 3, 2025

Subject: Litigation Update

Dear PBNA members:

This email provides a short update on the two on-going legal disputes as well as a new, third lawsuit filed last week.  We’ll start with the latter.

Lawsuit #3:  After an unsuccessful mediation during the first half of 2025, four Palmetto Bluff residents filed a lawsuit against the Palmetto Bluff Preservation Trust (Trust), which serves as our POA. The complaint focuses on alleged breach of fiduciary duty and conflict of interest by its governing Board of Stewards, that is controlled by South Street Partners (SSP) and is comprised of only SSP representatives.  This lawsuit focuses on two principal matters: 1) misuse of the Village Green and the associated fees paid by Montage clients for weddings and corporate events; and 2) misusing Trust funds to pay for defense costs of non-Trust entities in the other litigation.  The plaintiffs argue that our POA is effectively transferring profit out of the Trust to the Montage Hotel (owned by SSP) and misusing its funds by paying one-third of the legal defense cost while the Trust is only one of twelve in lawsuit #1 and is not party to lawsuit # 2.  Some of the complaints in this lawsuit were raised by members at the January 2025 Trust Board of Stewards meeting and in a letter from the plaintiffs to SSP on February 19, 2025.  The lawsuit raises concerns with respect to how the Trust is being managed.

The lawsuit is a public document, and you can download it from the Beaufort County Clerk of Court website, case # 2025CP0701551:  https://publicindex.sccourts.org/beaufort/publicindex/   

Lawsuit #1: This lawsuit was filed in 2022 by 14 residents on a range of issues, including short-term rental access (subsequently largely resolved), illegality of the PB Club legal structure and other issues.  SSP continues to pursue procedural matters, arguing that the dispute should be privately arbitrated vs. litigated in public court.   SSP lost in the initial court ruling and lost again at the SC Court of Appeals.  SSP subsequently petitioned the SC Supreme Court (SCSC) to accept a second (and final) appeal.  On June 25, the SCSC accepted the case, and we can expect this appeal to consume another 9 to 12 months.  This likely takes pressure off any settlement efforts that have been episodically pursued, unsuccessfully, for the last year by SSP/Henderson Park and the plaintiffs. 

Lawsuit #2: This lawsuit was in response to SSP’s May 2023 unilateral decision to make PB Club membership optional.  The legal authority to make such a dramatic change was challenged by five PB property owners.  This lawsuit argued that the controlling document has an amendment process requiring a majority of property owners to approve any substantive change, and this was not followed.  The property owners prevailed with a Special Referee who issued his ruling on March 14, 2025.  SSP responded in two ways.  First they have asked the Special Referee to rule on how to implement the recission; no decision has been rendered yet.  Second, SSP initiated a potential member vote on this matter, implicitly acknowledging the illegality of their unilateral 2023 waiver.  Following a series of small group meetings with members in June to solicit feedback and explain their rationale, to date SSP has not moved forward with a vote or provided information on if or when this might happen.

As always, feel free to reach out to any of the PBNA volunteers.

Regards,

PBNA Volunteers

Cathy MacKinnon, John Meltaus, Frank Riddick and Allen Roth