Remove a director with cause

I don't have an answer to your question because I have no idea what the arrest was over.

It may not have been board related, but, unfortunately, it's not that easy to compartmentalize your life and activities, especially if you are in a high profile position.

Larry Craig wasn't arrested for anything he did in Congress, but still . . .

And I find it naive to ask that the gossip just "blow over" for the next couple months.

Of course it won't. If he wants this to just go away, then the thing to do would be to simply turn off the spigot. (Yes, that means resign.)

Rick,

Your interpretation of what "with cause" means is what I would think also. However, who knows what spin an attorney could put on it -- they can think of all sorts of things for which us laypeople haven't a clue!

If he is charged with a retail theft then I would be leary to let him handle assn funds -- thievery is thievery. Of course he may be innocent of the charges too. However, the members aren't thinking of that. I would think he should do the right thing by resigning. He only wants to save face by waiting until the elections.

John,

I did say "of course he may be innocent of the charges too".

Hahahaha....maybe...who knows!

This is what is in our bylaws:
_______

9. Any or all of the directors may be removed for cause by ninety (90) percent of eligible homeowners or by action of the board. Directors may be removed without cause only by a ninety (90) percent vote of eligible homeowners.

_______

I've been trying to find out the meaning of the legal phrases "with cause" and "without cause". Also, is the phrase, "or by action of the board", open to interpretation? Most other HOA bylaws I've read stated what the action of the board could be for removal with cause (majority vote or 2/3s vote).

What do you make of that?

Rick,

Have you checked state statutes? Even if there are no HOA statutes, or they don't address this issue, the nonprofit corp statutes most likely do. I would think those statutes would require a vote of the members anytime an elected board member is to be removed. This would negate the "action of the board" as described above.

I agree with John. If there has not been a conviction, I would think that there is no legal cause. If you pursue this legally it is doubtful that it will be resolved within two months, at which time his term would be up anyway. I think it would be a waste of money and could come back to bite you in the form of a counter suit if the charges are dropped or he is found not guilty.

Thanks for all the replies and opinions. He's giving his answer about resigning by Friday evening. So at that point I'll know what is going on for sure. As far as the legal status of the charge, I'm not exactly sure. He told me he's been to court and made a deal and does not go back for sentencing until May - at which time the charge is dropped or reduced due to the deal. So I don't know exactly what that means regarding convicted, etc.

But anyway, I seem to be leaning that this occurred well over 6 months ago and the guy has done a good job on the board and has gotten things done and performed his duties. So I personally do not see that he broke his fiduciary responsibilities or broken the trust of anyone in the neighborhood. None of us swore an oath or agreed to conduct our lives in any fashion in order to serve on the board. What if someone on the board got a DUI? Would they be asked to step down even though it has nothing to do with their board responsibilities? I just think that this will set a bad precedent if he's asked to step down.

I also do not agree the the president's interpretation of the bylaw stating how a director may be removed. I just fail to see what the "cause" could be with regards to upholding the bylaws and CCR that we are to uphold. Just seems like this isn't board business even if neighbors are talking about it. I'd hate to see HOA money wasted on a lawyer too because we just do not have the money to spare and there will most likely be a legal battle this summer over temporary pools.

Thanks!

Robert,

History says that scoundrels are usually just that. For him to do the best thing for the association would probably not be in his capacity to figure out. A simple letter to the Board is all that is required, no embarrasment, just slip away into the shadows. Will this be his route? I highly doubt it so the Board can request him to resign or deal with him until April. A recall would be a good route IF it were not so close to re election but that process takes some time and can cause some divisiveness amoung the community. As a Board member, I would introduce a motion to reposition the Board officers and Directors. Make him an "At Large" member and watch his every move to keep him in a straight line. It's only 3 months until April.

My Dear Friend Robert,

Who is ever absolutely right? This is just what my gut tells me to do so as to save the entire association lots of expense and not chastising the thief in front of everyone (if indeed he is convicted and his case probably is way past election time ).

Sounds proper to me. Excellent post.

Michelle,
That's supposed to be a wink

Ok, here's an update on this situation. The VP (who is being asked to resign or the board will vote to remove with cause) emailed the Pres. stating to go ahead an schedule a special meeting. Here's the email that he sent to the board memebers:

"I'd like an opportunity to discuss this matter with the board members
and hear their opinions. So it's fine to schedule a special board
meeting to discuss this matter. At that meeting I will make my
decision to either resign or stay on the board for the final 2 months
of the term. I'd like the chance to clear up the rumors and gossip
and I do not feel that resigning without clearing up this issue first
is what I want to do."

________________________________________________

Here's the President's reply:

"Apparently you have lost or misinterpreted the rules of engagement with
respect to my string of e-mails below. I conveyed that you had until
Thursday AM (you asked to have until Friday COB and I said fine) to "decide"
whether you would resign or not, not defer that decision until you hear the
opinions of the Board members. That hasn't changed and when we have a Board
meeting next week you will be allowed to address the Board as a whole, once
you address the Board we will hold a secret vote on whether you stay in
office or not. It will be a one way dialogue where you have the floor to
explain yourself and your situation and I will not allow it to turn into
your inquisition of the Board members. So, I will send out an e-mail for
Special Board meeting next week but these are the ground rules and it isn't
open for debate. This is the final e-mail on this topic from me."

_____________________________________________

The VP has already indicated to me that he'd resign at the meeting, but if the board acted like "assholes" by trying to vote him out without following the bylaws, then he will sue. He's already spoken to an attorney and is setting up the President. The glaring problem already? The President states above that there will be a board meeting next week. Our bylaws state that special meetings require 2 weeks notice and outlines how board members are to be notified. Also, a "secret vote"? To me that sounds like trouble, since shouldn't this board meeting be presided over like any other meeting? Shouldn't someone have to make a motion to have the VP removed and then have it seconded, followed by a vote?

So, the board will try to remove the VP "with cause", yet I don't feel the President has a legit "cause". Then the the VP will not appear at the meeting since the bylaws weren't followed with regards to scheduling and notification. Then if the board votes him out, right there he has enough ammo for a lawsuit.

This is looking to be WAY more trouble than it will be worth. I'm going to try to talk to the Pres today when everyone is together watching football. Any advice I can pass along?

Thanks!

No, I'm a board member and at least I wasn't conferred with. I've been doing more research this morning on someone's suggestion in this thread to look up the non-profit corp state statutes. Here are the pertinent statues. So according to the conduct and liability, they do not appear to apply to the the VP's legal situation. I believe I posted the HOA's bylaw section regarding removal of a director. Not sure exactly how the following statue applies or doesn't apply though. Below seems to state that all homeowners (members) should be allowed to vote on the removal and not solely the board since the homeowners elected him and he was not appointed by the board.

Obviously I'm no lawyer, but I hope to show either the Pres or Secretary today (maybe she can talk sense in to him), that attempting to remove him may not be in the best interest of the HOA if a lawsuit will be the end result.

§31E-8-809. Removal of directors by members or directors.
(a) The members entitled to vote for the election of directors or, if there are no members entitled to vote for the election of directors, the directors, may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

(b) If a director is elected by a class of members only the members of that class may participate in the vote to remove him or her.

(c) If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove him or her exceeds the number of votes cast not to remove him or her.

(d) A director may be removed by the members entitled to vote for directors or, if there are no members entitled to vote for directors, the directors, only at a meeting called for the purpose of removing him or her and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

PART 3. DIRECTORS.
§31E-8-830. Standards of conduct for directors.
(a) Each member of the board of directors, when discharging the duties of a director, shall act: (1) In good faith; and (2) in a manner the director reasonably believes to be in the best interests of the corporation.

(b) The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.

(c) In discharging board or committee duties a director, who does not have knowledge that makes reliance unwarranted, is entitled to rely on the performance by any of the persons specified in subdivisions (1) or (3), subsection (e) of this section to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board's functions that are delegable under applicable law.

(d) In discharging board or committee duties a director, who does not have knowledge that makes reliance unwarranted, is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (e) of this section.

(e) A director is entitled to rely, in accordance with subsection (c) or (d) of this section, on:

(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports or statements provided;

(2) Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters: (A) Within the particular person's professional or expert competence; or (B) as to which the particular person merits confidence; or

(3) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

§31E-8-831. Standards of liability for directors.
(a) A director is not liable to the corporation or its members for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:

(1) Any provision in the articles of incorporation authorized by subdivision (4), subsection (b), section two hundred two, article two of this chapter or the protections afforded by section eight hundred sixty of this article or article seven-c, chapter fifty-five of this code, if interposed as a bar to the proceeding by the director, does not preclude liability; and

(2) The challenged conduct consisted or was the result of:

(A) Action not in good faith; or

(B) A decision: (i) Which the director did not reasonably believe to be in the best interests of the corporation; or (ii) as to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or

(C) A lack of objectivity due to the director's familial, financial or business relationship with, or a lack of independence due to the director's domination or control by, another person having a material interest in the challenged conduct: (i) Which relationship or which domination or control could reasonably be expected to have affected the director's judgment respecting the challenged conduct in a manner adverse to the corporation; and (ii) after a reasonable expectation has been established, the director does not establish that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation; or

(D) A sustained failure of the director to devote attention to ongoing oversight of the affairs of the corporation, or a failure to devote timely attention, by making or causing to be made appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need to make inquiry; or

(E) Receipt of a financial benefit to which the director was not entitled or any other breach of the director's duties to deal fairly with the corporation and its members that is actionable under applicable law.

(b) The party seeking to hold the director liable:

(1) For money damages, has the burden of establishing that:

(A) Harm to the corporation or its members has been suffered; and

(B) The harm suffered was proximately caused by the director's challenged conduct; or

(2) For other money payment under a legal remedy, including compensation for the unauthorized use of corporate assets, has whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or

(3) For other money payment under an equitable remedy, including profit recovery by or disgorgement to the corporation, has whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.

(c) Nothing contained in this section may: (1) In any instance where fairness is at issue, including consideration of the fairness of a transaction to the corporation under section eight hundred sixty of this article, alter the burden of proving the fact or lack of fairness otherwise applicable; (2) alter the fact or lack of liability of a director under another section of this chapter, including the provisions governing the consequences of an unlawful distribution under section eight hundred thirty-three of this article or a transactional interest under section eight hundred sixty of this article; or (3) affect any rights to which the corporation or a member may be entitled under another provision of this code or the United States code.

Ok, I suppose this would be the question to have the answer to. What would take precedence in court? The state statue for non-profit corporations, or our HOA bylaw?

§31E-8-809. Removal of directors by members or directors.

(a) The members entitled to vote for the election of directors or, if there are no members entitled to vote for the election of directors, the directors, may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

(b) If a director is elected by a class of members only the members of that class may participate in the vote to remove him or her.

(c) If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove him or her exceeds the number of votes cast not to remove him or her.

(d) A director may be removed by the members entitled to vote for directors or, if there are no members entitled to vote for directors, the directors, only at a meeting called for the purpose of removing him or her and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

____________________

Bylaw:
9. Any or all of the directors may be removed for cause by ninety (90) percent of eligible homeowners or by action of the board. Directors may be removed without cause only by a ninety (90) percent vote of eligible homeowners.

____________________

Rick,

I would say state law takes precedence unless that state law specifically defers to your community documents.

Admittedly, Iam not on top of this thread, but this is not a new subject and you will find tons of stuff on the search feature upper right this page.

How did a Special meeting get called to have anything to do with a directors elected position. That should be handled by a recall meeting and as far as I know is the only way to remove a director unless it is for criminal reasons or civil disobediance.

Under special conditions and special Board Actions the Board can elect not to seat a fellow member but best be careful here. To clarify, I do not believe a Board can call a Recall meeting, but the are certainly qualifed to vote for a recall meeting and vote individually to recall a board member.

I see this as some kind of blank space in some Board members that assume the Boards are the only ones that can conduct the associations business.

A recall meeting has no requirement that it must be conducted by the Board and as far as I can see, neither does a Annual Meeting. It may be more effecient and orderly, or it may not, but, required, I don't think so.

Mary,
I am sure this is a repeat and since I don't know if a definitive answer would apply to all states, I would certainly recognize the logic of your reasoning. And, of course still ask the same question.

If it is the intent for the PRESIDENT to preside at all meetings, who presides when the President (or any Board Member) is being recalled. I go with, at the start of the meeting a signer of the recall notice, stands up and makes the suggestion the meeeting be conducted by an outside member and name that member and ask for the approval of those attending. If the recall was done well the votes will be there to approve this action. This member will have to know how to call and conduct a meeting and minutes must be taken and decorum insured and that could be in place if it was felt necessary. By nature a recall of any member of the Board can be contentious, especially the President. Fairness have decorum must be maintained.

Robert,

I certainly do understand what you're saying and what you're getting at. I've know of a number of recalls that have been held here in AZ. Our statute on recalls says the petition must be presented to the board and the board must call a meeting w/i a certain period of time. I don't know of any recall meetings that were conducted by the membership. It's just standard procedure for the board to conduct all meetings and the Pres. to preside. Now, if I were a board Pres being recalled, I certainly would ask the V.P. to preside over the meeting. I think it's wise to do this if only to portray an image of no irregularities being conducted. If all board members were being recalled, I guess the Pres. could ask a member of the assn to preside over the meeting, but it would be the board's resp. to notice and set up the meeting.

RickO,
I suppose if the BOD can show adequate cause they could cover this, but it may backfire.........big time. I hope the action they took has signatures of records or reasons written down somewhere. I guess I would advise to double back and clean up any loose threads hanging around and attempt to solidify there position. If this VP decides to go legal that would not help. Maybe he is just whistling in the dark. It may also help help to have a lawyer in the wings to field any legal stuff.

RickO,
Wait a minute, I thought this had been discussed so set me straight.

You are talking a vote by the Board to remove a director from the Board. I don't know how this got off track but, it most cases (all maybe) the Board elects the President and approves selection of all officers of the Board. Therefore, the Board has complete authority to remove the VP from his job. That's #1.

#2 Remove any director from the Board. That's a member responsibility done by recall according to documents. If you just want this guy out of the operation of the Board, the board votes him off as a director, the President selects a new VP, and doesn't give this guy a job. That should work, then at annual meeting let the folks vote him off and if he has a criminal background your board can either not allow him on ballot or inform members of public record.

Rick,

Yes, the board must follow the community docs and state law. If the board has not done this and the guy does take them to court, then they will be in deep doo doo! Until the court papers are filed it's not too late to meet with this guy and try to work something out.