The Fiduciary Relationship

Best interests is completely subjective.

Your example is almost impossible to answer

I.E... I am looking for opinions that match my own and if not will make you have to quote some kind of internet law search reference to justify it... Seen this a million times...

The reality is that no one is perfect and not going to be for you. You want something done right, you do it yourself or get out of the way. Your board sucks? Then get enough people together to vote them out. They don't do what you want? You get your butt off the whining parade and put your name on a ballot. Can't make it more simple than that.

You asked for opinions and you got one. My opinion is that you have a personal agenda that is going to overshadow any advice anyone here has to offer. I read your other posts and it seemed to all to have the same theme. You don't like some board members and think they are doing a bad job. You want them out. The advice is not nor going to ever change. Either you do the work to gather votes/support to vote them out, decide to run for a position yourself, or just wait till they are up for election again.

Your question addresses the issue as to the why we are

The REBUBLIC of the United States of America

and NOT a democracy.

To paraphrase Thomas Jefferson:

Gentlemen, I give you the Republic; pray that you may keep her.

A republic has a constitution with INALIENABLE rights.

A democracy proceeds with the ABSOLUTE will of the majority.

HOAs, like most incorporated businesses, are democracies.

However, the Fiduciary Duty is towards the HOA and should not be directed to any 'short term' goals which would cause injury 'down the road', such as (knowingly) underfunding reserves to maintain (artificially) low dues.

ps.

even for president we do NOT directly elect based on the majority vote, rather we elect via the electoral college

Thanks everybody.


I am shocked by the lack of case law that you can find looking on Google. I'm from the UK and whilst you can't always find actual case decisions online there is plenty of discussion by both lawyers and laypeople and authoritative cases are normally summarised.

I'd be interested to know why this is. We Brits always regard the USA as litigious.

Is there no way of suing the directors individually? FS 720.303 - the officers and directors of an association have a fiduciary relationship to the members who are served by the association.

Imagine the scenario where the BOD are looking after the majority of members and these members know that the BOD are looking after them so continue to vote for them. You can't vote them out if in the minority.

Yet, the actions of the BOD is on the whole not in the best interest of members (for the sake of argument), just the majority of them (see my example above).

Yes, you may be able to sue the Directors individually in the case of fraud, crimes and gross negligence. What is the back-story here? The courts are unlikely to allow any suit because some merely disagree with a majority

The problem I see with your example is it's no really an example at all. All you said is that 60% vote for something that benefits them to the detriment of the other 40%. What were they voting on? And if your answer is it doesn't matter, I completely disagree.

I gave 2 examples: In one I said the majority cannot override individual rights; I the other I said they could. Different rights = different protections and obligations.

Re your question about suing directors individually - Sure you can. But the UK is different than the US. Under the English Rule, the winning party collects his legal fees from the other side - Much less litigation because higher risk if you lose. Under the American Rule, each side usually pays their own legal costs - so different incentive on whether or not to sue.

You should read up on the Business Judgment Rule - In general, issue of "good faith" does not depend on what YOU think, it depends on how the board members think and act.

From my own dealings with multiple lawyers... nothing makes them more irritated than their client quoting "Case law" to them. Last time I checked, they were the professionals and ones to know the law. Lawyers will do whatever you tell them and you should be an informed client. However, going to a lawyer's office or cited it to your Board/HOA is a big no-no. The lawyer will eat your lunch and the HOA will go running to a lawyer for advice raising your bill. Suing your HOA is suing yourself and your neighbors... So you may want to choose working with you neighbors instead of suing them...

Personally, I am a lot more litigious than most Brits.

John

I think some of us have figured that out....LOL

John

Thanks NpS.

I am just trying to establish whether the BOD can claim that they are acting in the best interests of members if more than 50% agree with them. I get the feeling a lot of people believe this. I was hoping there was some case law from a high court where the Judge(s) discuss this.



I don't know how it works in Florida but I do know a fair bit about awarding costs in the UK. You very rarely get all of your costs, even if you win. We have 3 different tracks. Cases with a value of less than $15,000 are "no costs" cases. Then there is another threshold (I'm not sure how high but it's pretty high) where cost awards are limited to about $750. Then there are the really big cases where I don't think there's a limit. However, if there is a contract between parties, which determines how costs are to be paid in case of dispute, then that applies, however typically only 'reasonable' costs are awarded. The other factor which can override the costs limits of the 3 tracks is if a party behaves badly.

If I did litigate in Florida I would need to research this but I do notice that the Declaration states that the losing party pays all reasonable costs. Is this void?


I did have a quick look at this. Although there is a lot of overlap with Fudiciary Responsibility I didn't get the feeling it was the same thing. In fact I got the feeling that there had to be a fair amount of evidence that the BOD had acted reasonably and that the burden of proof was not on the person suing the director/BOD.

See https://www.linkedin.com/groups/Business-Judgement-Rule-Condos-HOAs-2718918.S.5851131542780260354

This suggests there needs to be a paper trail and experts need to be consulted. The courts expect there to be evidence that the BOD acted reasonably.

Perhaps if I looked further I'd have come across differing opinions but I don't think from what I have seen that the Business Judgement Rule is a license for people to do what they want just because they are not paid.

Has nothing to do with majority. I would guess a majority would be happy if dues were never raised to fund reserves, but that is not in the association's best interest.

Great example. Well done.

JohnL, you wrote:
"I am just trying to establish whether the BOD can claim that they are acting in the best interests of members if more than 50% agree with them. I get the feeling a lot of people believe this."

Three or four of us who replied said we don not think that giving H/Os what a majority desire has anything whatsoever to do with a director's fiduciary obligation. Doing what best for the community and doing what's most popular to the majority of H/Os are two very different things.

Why do you think that the wants of the majority matter in an HOA, JohnL??

there are, as you know, JohnL., items that require a vote of H/Os, but not under discussion here, correct?

Fiduciary: A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profit.

Duty:a moral or legal obligation; a responsibility. a task or action that someone is required to perform.

Fiduciary Duty: A fiduciary duty is a legal duty to act solely in another party's interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals' express informed consent. They also have a duty to avoid any conflicts of interest between themselves and their principals or between their principals and the fiduciaries' other clients. A fiduciary duty is the strictest duty of care recognized by the US legal system.

in the best interests of the members of the association:

A director must discharge his or her duties in good faith and in the best interests of the members of the association and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.

In carrying out a director’s duties and responsibilities, a director should seek to know, understand, and follow the governing documents of the association:

A director should exercise reasonable care and place the interests of the association over the director’s own interests.

A director should act in a positive manner for the betterment of the community in accordance with the mission of the association.

A director should fulfill his or her duties of loyalty and care to the association, and not usurp any corporate opportunities that rightfully belong to the association.

A director should exercise due care and diligence when acting for the association, and act within the scope of his or her authority.

A director should not take any actions without proper authorization from either or both, the board of directors and the association’s membership, as a whole, respectively.

A director should, within the scope of his or her duties, diligently and honestly administer the affairs of the association, and not knowingly violate, or willingly permit to be violated, any applicable statutes, covenants, restrictions, or rules or regulations.

A director should endeavor to learn of changes in statutes, regulations, restrictions, covenants, rules, regulations, and policies of the association which affect the director’s duties, responsibilities, or obligations.

Finally, a director should not engage in actions that are or appear to be a conflict of interest between the director as an individual, and the director, as a member of the Board of Directors.

I gave some examples of the type of things that a judge might find in your favor on. Then I said "... If it's just that there is a bad board ..." In other words, if you can't come up with something that the board has done that rises to the level of the examples I gave, then a judge is going to send you on your way.

In response, you say that a judge would say this in every case - as if I never gave you examples of where a judge could find in your favor. Honestly, I don't get it.

Re your comment that voting the board out is beyond your control. Many here have done it. It can take years. One replacement this year. Maybe 2 replacements next year. Until the new board members can assert enough influence to turn things around.

But you seem to want a quick fix. As many here will tell you, there's no such thing.

1. Maybe the first step for this year is not to get a change on the board. Maybe your best bet is to get an amendment passed that will get you staggered terms. I think that 3 year terms that all come up at once is a stumbling block that you need to get rid of if you can. Of course, it's easier to do once you have control of the board, but you have what you have.

2. If there's no election procedure in the HOA docs, then the FL statute should be the default rules. I am not from FL - so maybe someone from FL can weigh in on this for you.

I may have posted the info. However, the actual information came from the links provided in the posting.

Ok - So let's create a real world hypothetical.

100 unit HOA.
60 want to hold a pool party with food. They think it will enhance the social atmosphere of the community.
40 don't want to hold a pool party. They think that HOA dues shouldn't be spent for frivolous parties because they think the HOA can't afford it.
Board decides to hold the party because the majority want it.

Ok - So I guess the question is whether the board violated it's fiduciary responsibility to the 40 by approving what the majority wanted. Anyone want to take a shot at answering this real-world hypothetical?

Many thanks. I'll hunt it down.

I too think you have answered the question. But the OP seems to never acknowledge the point that you and others have made. In truth, I got tired of all the ABSTRACT discussion about majority-minority without having a specific set of FACTS to work with. So since the OP never provided one, I created one myself.

I guess I'm showing my frustration a little. I posted early on that it depends on the FACTS. You too have asked for SPECIFICS. But none have been forthcoming. I think we are both trying to help, but it seems to we never get past generalities.

I would like to hear how the OP would apply his point of view to the hypothetical facts I presented. Your answer is clear to me. His is not.

I understand and respect your concerns John. The problem with your request is that appellate decisions are fact specific. Rules that are applied in one set of circumstances may not apply in another. If you read an opinion, you will often find the court differentiate it's decision from a similar ruling because the facts of the case are different.

Remember this. It is for the legislature to create general rules. The court's job is to fill the gaps by making a decision about a particular set of facts and circumstances. A court cannot make prospective rules like a legislature can.

JohnL26 (Florida)

If what you are looking for includes 'PRIMARY' law - raw legal judgments themselves , not the condo nor HOA nor NFP statutes themselves - you may find that your state is "very sensitive" to the state bar.

You will have to work a lot harder to find that Florida-only stuff than you would back in Britain or its ex-colony northside. I expect that one reason for such is to deter the pro-se / S.R.L. self-represented litigants who also congest courts / postpone well-earned ( ? ! ) legal billings in the frequent carnage later. Many lawyers have fought & died for the right of every American to litigate until every last dollar is spent.

1-Without much searching I found PART of the Florida judgement data base at

Florida Supreme Court http://www.floridasupremecourt.org/decisions/index.shtml
( you will have to search for other possible Florida data bases and recognize that lots may /may not not get online eg summary decisions of a small claims nature. Unlike our system there is a dual US tier of parallel courts rendering judgments . . )

Worth checking is the US Supreme Court site at http://www.scotusblog.com/ which is outstanding for its linking to Briefs from parties & intervenors along with the actual judgments. ( Again, you will have to search for U.S. lower court bases but the SCOTUS site does link to the lower court decisions being specifically under appeal. Again there is a dual tier of parallel courts rendering judgments . . )

2- Deference may be given in degrees to judicial approaches taken in decisions from OTHER states, requiring you to aware of what might be going on there as well where Florida law and precedent may seem lacking.

3 What research MODEL ( eg FREE online /no subscription ) would have been friendlier, cheaper and more tempting to D.I.Y. self-researchers ?

AS TO THE HYPOTHETICAL MODEL ONLY : several other countries have them :

Canadian Legal Information Index
http://www.canlii.org/en/index.html

"CanLII is a non-profit organization managed by the Federation of Law Societies of Canada. CanLII's goal is to make Canadian law accessible for free on the Internet. This website provides access to court judgments, tribunal decisions, statutes and regulations from all Canadian jurisdictions."

British and Irish Legal Information Institute
http://www.bailii.org/
More about BAILII : http://www.bailii.org/bailii/

justia.com

JohnC reminds me, JohnL, that there are special meetings of the members and special meetings of the board. Wtihout going back over this thread, i'm sure you know it's meeting of members, yes?

In Florida, every appellate court has a website and it can be searched for opinions. For example, you can search 'homeowners association' and find lots of cases. They are interesting to read, you can learn a lot, and you might find the answers you are looking for. I am not sure if this link will work http://tinyurl.com/ku7hvyc