Three members of Rehoboth Beach Country Club have gone to court, alleging that the current leadership of the club’s board is retaliating against them for raising concerns about the club’s financial management.
Plaintiffs Thomas Cariota, Robert Dathe and Denis O’Toole have filed a Delaware Court of Chancery lawsuit against Board of Governors President Daniel Krausz and board Director Richard Berl Jr.
The club is run by a board of directors, which has the authority, by majority vote, to suspend or terminate membership. In court documents, Cariota, Dathe and O’Toole’s attorney, Allyson Baker, said O’Toole’s membership was suspended for one year in September 2018, Dathe’s was suspended in October 2018 and Cariota’s was terminated on Jan. 10. Baker said plaintiffs have filed the suit because of mismanagement and unprofessional conduct by Berl and Krausz. She said the plaintiffs are concerned the club, which was considering a $12 million capital improvement plan could become financially insolvent.
When the three plaintiffs raised alarms about transparency and fiscal soundness to the board, they say Berl and Krausz tried to silence them by instigating disciplinary action, first through suspension, and in Cariota’s case, termination of membership. The suit alleges that Krausz made an offer that if Dathe resigned from the board, his suspended privileges would be reinstated. When Dathe wanted that offer in writing, the suit says that request was refused, and Dathe was suspended for a year.
Among the plaintiffs’ accusations in their court filings are that Krausz dismantled an audit committee, which included Cariota and Dathe, that reported on issues with the club’s internal operations, and that Berl violated a conflict-of- interest policy instituted by the board.
O’Toole, Dathe and Cariota are seeking monetary damages for breach of contract, breach of implied covenant of good faith and fair dealing, as well as for their stockholder memberships to be restored and for Krausz and Berl to be removed from the board. A jury trial has been requested.
Baker said she hopes her clients have their membership privileges restored and that Krausz and Berl are removed from the board.
Berl said he was disappointed the suit was filed and that the board considers an attack on the two members as an attack on the whole.
“We intend to defend ourselves vigorously,” he said.