A cautionary tale regarding volunteers

Started by MatthewW4 • 16 replies • 1588 views

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MatthewW4 (Arizona)
Posts: 500

Posted:

The online forum for my property owners association has been buzzing lately as our annual elections near. One person posted a story about volunteers and liability, even though there is no real issue that I am aware of that this subject matter would apply to. Nonetheless, since many HOA's rely on volunteers they should be aware of the potential liablities imposed.

This comes from a 1982 US Supreme Court case, AMERICAN SOCIETY OF MECHANICAL ENGINEERS, INC. v. HYDROLEVEL CORPORATION. (The full text is available online at http://openjurist.org/456/us/556/american-society-of-mechanical-engineers-inc-v-hydrolevel-corporation.)

ASME is a trade organization that helps develop industrial standards in the US and Canada. It relies heavily on volunteers. One such volunteer was a Mr. James, who was the president of a company that manufactured boiler safety equipment and was dominant in its field. James was also the chairman of one the many committees that ASME had formed. When a rival company, Hydrolevel, brought out a new device that competed with James' products, James used his position to manipulate others in ASME to make it appear that the society had found fault with Hydrolevel's product and issued an opinion letter. Throughout the process, James concealed his role. James armed his salesmen with the ASME "opinion" and effectively put the competition out of business. Hydrolevel later learned of James' activities and sued under federal anti-trust laws, winning a treble-damages judgment against ASME.

This is a pretty extreme case of a volunteer using an association's resources for his own personal gain, but it does show that there is a need to keep an eye on volunteers. In the ASME case, the volunteer found a way to evade the society's safeguards. While HOA's are unlikely to be sued under federal anti-trust lawsuits, they may find themselves sued for the actions of volunteers. In the ASME case, the court found that the association was unaware of James' activities and would not have approved of them if they had known but nonetheless held the society liable for its failure to properly supervise it volunteer employee.

I often find myself beating the drum for HOA boards to delegate their authority. The ASME case does not change my mind but it certainly shows there is a difference between delegating authority and abandoning responsibility.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Typically the worst thing that could happen with volunteers is someone getting physically injured. As the baby boomers get older, this risk will increase.

JeanneK3 (Maryland)
Posts: 562

Posted:

The above tirade has nothing to do with volunteers and is a personal attack on "Mr. James." It should be removed from this Forum.
Jeanne

JonD1
Posts: 2,350

Posted:

How this might relate to the operations of an HOA is beyond me. And to now point out one case of some form of abuse back from 1982 and hold it up as a cautionary tale in reagrds to HOA Boards is a stretch at best nonsense at worst.

I have to wonder if we looked might there be one case where volunteers who acted properly since 1982? Yes, when you have an agenda and point of view you can dig up supposed support even if it requires you going back more than 30 years.............

Lets all just move along..........

KevinK7 (Florida)
Posts: 1,343

Posted:

I don't see this as an "attack" on Mr. James, especially if there was plenty of evidence and a ruling against him, and I could definitely see how abuse could exist in a HOA from the volunteers.

I have seen real estate agents who were also homeowners try to use their positions in the HOA or their "volunteer" status to try and gain a competitive edge. One got on the board in one neighborhood and would contribute to newsletters advising people to sell their homes while lying about his business record. He also would offer neighborhood "grants" to plant grass and shrubbery around his homes and the board members in exchange for free advertising in the HOA newsletters. He also used his role as a HOA volunteer to petition the county to create a special taxing district to plant and maintain flowering trees by the neighborhoods where he owned and represented many properties.

Another real estate agent would host the HOA board to hold restricted board meetings in their office. When a homeowner notified the realty company because they were denied entrance the agency put the kibosh on the plans.

I had also seen volunteers misuse their notary stamps and stamp their own papers to try and meet their goals.

While these cases may not be the norm it is something to consider.

MatthewW4 (Arizona)
Posts: 500

Posted:

Jeanne: Sorry but the facts I cited were taken from an opinion issued by the United States Supreme Court. It was they who laid the blame on Mr. James and that is a matter of public record. If you feel that Mr. James' reputation has been tarnished by their decision, feel free to take that issue up with the Court.

Jon: I am sorry if you were confused by that 1982 date. Once the Supreme Court issues an opinion it becomes the law of the land forever or until overturned by a later opinion or negated by an act of congress. It's not Wal-Mart; there is no expiration date on common law.

To everyone else:

Lost in translation is the point that an association cannot evade liability for the acts of its volunteers even when the association does not know exactly what the volunteer has done and would not have approved of his actions had they known. The fact that the person was not paid for his work for the association is not a defense against liability.

Most HOA's rely on volunteer boards, volunteer officers, and volunteer committees. A volunteer who misuses his position subjects the entire association to liability claims. A volunteer who causes unintentional harm to another subjects the entire association to liability claims.

KevinK7 (Florida)
Posts: 1,343

Posted:

In my neighborhood where the board filed paperwork to rewrite the covenants and a homeowner is suing the HOA for clouding his title, he is not only suing the HOA but all the members individually who signed those documents. The volunteers of the HOA told the neighborhood not to worry and that they would take care of the entire thing. Only one homeowner was smart enough to settle with the plaintiff at the beginning. The other homeowners have now become party to a huge lawsuit because of the acts of the volunteers and will surely be out thousands.

While my neighborhood may be an extreme circumstance it is certainly possible to occur elsewhere.

Another thought. My other neighborhood had the C+Rs expire. They insist they still exist and are still asking homeowners to pay and they still offer services, like lawn care for the individually owned homes. Since the covenants don't exist and there are no restrictions granting them access to the yards and sending a check without there being an official contract or agreement on record I see a potentially big liabilty issue. What if one of the HOA goes to fix a sprinkler line but hits a gas line by mistake?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KevinK7 on 05/06/2013 4:41 AM

My other neighborhood had the C+Rs expire. They insist they still exist and are still asking homeowners to pay and they still offer services, like lawn care for the individually owned homes. Since the covenants don't exist and there are no restrictions granting them access to the yards and sending a check without there being an official contract or agreement on record I see a potentially big liabilty issue. What if one of the HOA goes to fix a sprinkler line but hits a gas line by mistake?

Actually in this case, the Corporation known as HOA, Inc. would still exist. The Authority granted to the Corporation by the CC&Rs would no longer exist. However, in my laypersons opinion, any contracts the Corporation initially entered into on behalf of the HOA when they had that authority would likely still be allowed to run it's course.

I suspect that since the corporation would still have members that it would be up to each member to terminate membership and thus terminate any services received by the Corporation.

If the Corporation is providing specific services that can not be severed, like water/sewage or even street lights, that a court would still require the owner (be they a member of the corporation or not) to be required to pay for those services.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MatthewW4 on 05/05/2013 9:59 PM

Lost in translation is the point that an association cannot evade liability for the acts of its volunteers even when the association does not know exactly what the volunteer has done and would not have approved of his actions had they known.

This goes back to my statement in another thread, you may delegate tasks but you can not delegate the responsibility associated with that task.

MatthewW4 (Arizona)
Posts: 500

Posted:

Quote:

Posted By TimB4 on 05/06/2013 6:28 AM

This goes back to my statement in another thread, you may delegate tasks but you can not delegate the responsibility associated with that task.

The ASME case was almost inevitable as that association assigned volunteers to head up committees knowing that thoes people had conflicts of interest. Mr. James was known to be president of a manufacturing company that used an established technology but the society placed him in a position where he was able to pass judgment on his rival's product and technology.

In an HOA, you could have an analogous situation by appointing a local building products retailer to your ARC. It's almost inevitable that those who purchase their paint and shutters from him will pass inspection and those who buy elsewhere will fail.

I think one solution is to keep the number of volunteers and committees to a minimum as each volunteer (as well as a paid employee) is a potential lawsuit waiting to happen. More important, however, is removing the volunteer from his position if there is any hint of a potential problem. Potential problems might include not only conflicts of interest but also things such as reckless driving. (Headline: "Grandmother mowed down in crosswalk by HOA volunteer racing to hardware store.") No one wants to be the bad guy but sometimes you just gotta tell someone that their contributions to your HOA are not worth the risks that they present.

I think it is also important that the HOA establish a time and place where committee work should be done. In my legal research years ago I found that one test as to whether a person is acting as an employee is whether he is doing his work at the time and place designated for such work. Allowing volunteers to decide when and where to meet leaves too many doors open. If the BOD dictates that picnic committee meets in the clubhouse on Tuesday night at 7:00PM, the HOA should have no liability if one of the committee members is involved in an auto accident across town on Thursday morning.

In fact, all voluteer work should have a designated time and place to begin and end. The Martin/Zimmerman case arose in part because the HOA failed to establish under what circumstances the neighborhood watch could operate. Had the HOA established rules that prohibited NW volunteers from patrolling the streets or working alone, they might have escaped liability.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MatthewW4 on 05/06/2013 9:04 AM

In fact, all voluteer work should have a designated time and place to begin and end. The Martin/Zimmerman case arose in part because the HOA failed to establish under what circumstances the neighborhood watch could operate. Had the HOA established rules that prohibited NW volunteers from patrolling the streets or working alone, they might have escaped liability.

Actually, they probably would have had legal action filed against them anyway as they were seen as the party with the deep pockets and most intelligent attorneys will file action against anyone who might have a smidgen of liability and let the courts determine how much.

In this case, the Association settled as it was more cost effective to settle (even if there was zero liability) then to incur expenses defending themselves. The decision to settle instead of fight is, of course, what the intelligent attorney hopes for when they file legal action against everyone.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Part of our HOA insurance policy covers volunteers (and onsite paid staff) driving to get stuff. This typically applies to members of our social committee and of our landscape committee. The insurance, though, doesn't cover if they climb on ladders--to decorate for parties, for instance.

We, as a board, certainly would think twice about appointing a committee member who had a conflict of interest, e.g., a landscape comm. member who owns a nursery.

We appreciate our committees and don't at all see the need to dictate where/when they meet. They are, however, required to submit minutes and reports to the Board. We wouldn't hesitate to disband a committee or dismiss a member, but haven't needed to in the 6-1/2 years I've been on the board, nor in the several years prior to my service.

Our bylaws specify a minimum number of board meetings per year and one annual meeting. It does not specify where we meet and in our HOAs early days, the board sometimes met at very nearby restaurants. Some HOAs do not have meeting places on their premises that would accommodate owners and I've seen many meeting sites listed over time on this forum, e.g., libraries, churches, etc.

IMO, Matthew, your suggestions feel too draconian and rigid. But that's just me . . .

SharonH9 (Virginia)
Posts: 216

Posted:

Wouldn't this include board members not just committees members? Board members are volunteers as well. I believe the original poster meant this as a cautionary tale to all HOA volunteers (including board members)but I may have misinterpreted that.

IMO it becomes a common sense approach to volunteering because we would all just stay in our houses and never come out if we constantly worried about getting sued. Any interaction with other people can result in litigation of some sort.

MatthewW4 (Arizona)
Posts: 500

Posted:

Quote:

Posted By CarolR11 on 05/06/2013 11:00 AM
We appreciate our committees and don't at all see the need to dictate where/when they meet.

My advice to do that was based on an Arizona decision from several decades ago. This is all from memory, but the incident that led to the case was a training accident at a police academy where one trainee accidentally killed another. The city he worked for tried to deny liability.

The court adopted a multi-step test for whether a person is on the job or not. What I recall is that the person must be performing the kind of work he was hired to do, he must be working for what he believes is the benefit of the employer, and he must be doing it at the time and place where the work is normally done.

By narrowing the scope of the job by a issuing a description of what it entails and restricting where and when it will be done, an employer can lessen his potential liability.

By allowing the volunteer employees to set their own meeting times and places there is always the risk that the meeting will be held at the local fern bar where someone gets drunk and crashes into a school bus full of kids on the way home. Since they were meeting at the bar to discuss condo business, your association would find itself liable.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Matthew wrote: "By allowing the volunteer employees to set their own meeting times and places there is always the risk that the meeting will be held at the local fern bar where someone gets drunk and crashes into a school bus full of kids on the way home."

We haven't had "fern bars" in CA for years & years. My understanding is that there's no such thing as "volunteer employees."

There are 30 bar/restaurants within 5 blocks of our HOA. If the Social Comm. did meet at one, they'd walk as we all do to drink & dine. After its walkabouts, the Landscp. Comm. often goes to the next door coffee shop for discussion. I'm sure there's some risk to that too.

There are risks to all kinds of daily life. Most people do not lock themselves in their house out of fear.

In fact, there are several owners here who live on the 6th floor or lower because fire fighters' ladders cannot reach higher than that. We're taking our chances that our steel & concrete bldg. won't burst into flames & traded off extreme cautiousness for the sweeping water views from our 17th floor unit that we'd wanted for years.

MatthewW4 (Arizona)
Posts: 500

Posted:

Quote:

Posted By CarolR11 on 05/06/2013 5:32 PM
My understanding is that there's no such thing as "volunteer employees."

From a liability standpoint, there is no distinction between volunteers and paid employees. That was the gist of the ASME case.

KevinK7 (Florida)
Posts: 1,343

Posted:

Quote:

Posted By TimB4 on 05/06/2013 6:25 AM

While HOA, Inc. would still be around, I would think an argument could be made that it was their fiduciary duty to extend the C&Rs for the membership and them failing to do so could be viewed as a breach of contract of sorts. Not only that, without the C&Rs, HOA, Inc.'s ability to fine or assess would be extremely limited and if a volunteer were to be injured after expiration HOA, Inc. would have some liability issues and they would not be able to assess the membership. It would be a death blow.

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