DawnD1 (California)
Posts: 3
Posts: 3
Posted:
Here is an odd situation for which I would love to hear opinions. Personally identifiable information will not be used.
The HOA in question is a California common interest development -- also called a non-profit mutual benefit corporation.
California's Corporations Code and "Common Interest Developments" section of the Civil Code are the relevant statutes.
The HOA has 247 units. It's somewhat unusual because each unit is a single family home but the development is zoned condo.
A young couple purchases a home. They attend board meetings and realize there are financial, managerial and compliance issues. They start asking questions and requesting documents. Let me also state the issues are not minor "you forgot to dot your i here" things. These are issues with attached costs significantly, negatively impacting the HOA's approximately $200K budget.
The board fires the long-term management company and hires a management company based on a board member's statement she is friends with employees there. No bids are secured; in fact, there are two lawsuits pending against the new management company for breach of contract at the time the company is hired by the HOA.
The financial, compliance and managerial issues compound with the new management company. The couple discovers there is no equitable enforcement. One board member walks the community and cites members for alleged violations. Corporate documentation is poor and contains personally identifiable information about enforcement and delinquent assessments. Nasty comments about individual members are incorporated in the minutes. Votes are not recorded. It's never clear if financials were reviewed or if an agenda was followed -- or if there is an agenda. The first seven meetings run by the new management company are not properly noticed and two of those meetings are held without board quorum.
The board members interpret the couple's questions as personal attacks and start personally attacking the couple verbally and via email; for example, the couple asks why an improperly noticed meeting was being held, the response is "We're not anal retentive like you."
The husband runs for a board position and is elected. The wife continues requesting documents to assess the level of malfeasance. The other four board members regularly exclude the husband from board business and direct the management company to withhold corporate materials from the husband, an elected director. Personal attacks against the wife pervade email correspondence. The wife requests internal and then alternate dispute resolution several times and is ignored. The HOA directs counsel to send the wife intimidating letters which, interestingly enough, agree the HOA records will be produced -- although the records are not produced.
Suit is filed against the HOA for records production. The husband does not want to breach his duty to the HOA or his wife so he recuses himself from any discussion/vote/other regarding his wife and/or the law suit.
The wife persuades three people to run for the board. She collects proxies and her three people are elected. The new board requests internal dispute resolution. The wife agrees; an agreement is reached and the HOA then breaches the agreement. The conflict has now been ongoing for over a year.
The board hires new counsel. The HOA now says the wife does not have the right to documents because she is not on title. The HOA's governing documents provide a broad definition of membership that includes the developer and tenants. Obviously the governing documents should have been updated when the HOA was turned over by the developer. The wife is not on title due to lender requirements. The HOA has treated the wife as a member for over a year.
The new board commits the same managerial, financial and compliance issues although now legal fees are accumulating on both sides. The wife continues to offer to sit down with the board and review her research documenting the aforementioned issues. Liability exposure is a big concern. There are multiple health and safety issues in addition to the aforementioned issues. The board ignores her 51attempts.
The husband is not party to any of this to maintain his duties to both the HOA and his wife. He physically leaves any meeting where the suit is discussed. He receives redacted minutes.
Legal maneuvering occurs and the suit ends up in the Court of Appeal. The facts of the case are never litigated. The HOA demurred and that motion was sustained.
Now an attorney's fee award exists against the wife. California is a community property state.
The D&O carrier defended the suit. The insurer ALWAYS knew the husband was married to the plaintiff; in fact, the wife wrote three letters to the D&O carrier. Association counsel (both of them) knew the husband was married to the plaintiff at all times. The husband is an insured under the D&O policy.
My questions are:
Did association counsel have a duty to advise the husband of potential negative impact on him due to counsel's representation? Association counsel represents the board collectively but in California attorneys are supposed to avoid "interests adverse to a client." In the case of a volunteer board of directors, shouldn't counsel advise the husband of the obvious conflict of interest?
Is it a breach of fiduciary duty on the part of association counsel and the HOA to refuse all resolution attempts outside the judicial system? In California, there is a statute directing all parties to participate in some form of alternate dispute resolution. This HOA's CC&Rs have specific requirements when a civil suit is initiated to keep it out of the judicial system.
Did the insurer have a duty to appoint separate counsel for the husband (sometimes called Cumins counsel in California) to protect his interests? The insurer collectively and individually insures the board and its members.
It is bad faith on the part of the D&O carrier to refuse all resolution attempts outside the judicial system although one of their insured's interests is adversely affected.?
The HOA's governing documents indemnify board members as does the Corporations Code. Is it a breach of fiduciary duty on the part of the other four board members to refuse to follow the CC&Rs' requirements regarding civil suits? Is it a breach of fiduciary duty to refuse to resolve the case outside the judicial system, knowing the husband may incur damages?
If the other four board members ask association counsel to research spousal liability for a judgment, is it reasonable to call this direct action against the husband?
This is definitely a unique and assuredly odd situation. Thank you for your thoughts and opinions.
The HOA in question is a California common interest development -- also called a non-profit mutual benefit corporation.
California's Corporations Code and "Common Interest Developments" section of the Civil Code are the relevant statutes.
The HOA has 247 units. It's somewhat unusual because each unit is a single family home but the development is zoned condo.
A young couple purchases a home. They attend board meetings and realize there are financial, managerial and compliance issues. They start asking questions and requesting documents. Let me also state the issues are not minor "you forgot to dot your i here" things. These are issues with attached costs significantly, negatively impacting the HOA's approximately $200K budget.
The board fires the long-term management company and hires a management company based on a board member's statement she is friends with employees there. No bids are secured; in fact, there are two lawsuits pending against the new management company for breach of contract at the time the company is hired by the HOA.
The financial, compliance and managerial issues compound with the new management company. The couple discovers there is no equitable enforcement. One board member walks the community and cites members for alleged violations. Corporate documentation is poor and contains personally identifiable information about enforcement and delinquent assessments. Nasty comments about individual members are incorporated in the minutes. Votes are not recorded. It's never clear if financials were reviewed or if an agenda was followed -- or if there is an agenda. The first seven meetings run by the new management company are not properly noticed and two of those meetings are held without board quorum.
The board members interpret the couple's questions as personal attacks and start personally attacking the couple verbally and via email; for example, the couple asks why an improperly noticed meeting was being held, the response is "We're not anal retentive like you."
The husband runs for a board position and is elected. The wife continues requesting documents to assess the level of malfeasance. The other four board members regularly exclude the husband from board business and direct the management company to withhold corporate materials from the husband, an elected director. Personal attacks against the wife pervade email correspondence. The wife requests internal and then alternate dispute resolution several times and is ignored. The HOA directs counsel to send the wife intimidating letters which, interestingly enough, agree the HOA records will be produced -- although the records are not produced.
Suit is filed against the HOA for records production. The husband does not want to breach his duty to the HOA or his wife so he recuses himself from any discussion/vote/other regarding his wife and/or the law suit.
The wife persuades three people to run for the board. She collects proxies and her three people are elected. The new board requests internal dispute resolution. The wife agrees; an agreement is reached and the HOA then breaches the agreement. The conflict has now been ongoing for over a year.
The board hires new counsel. The HOA now says the wife does not have the right to documents because she is not on title. The HOA's governing documents provide a broad definition of membership that includes the developer and tenants. Obviously the governing documents should have been updated when the HOA was turned over by the developer. The wife is not on title due to lender requirements. The HOA has treated the wife as a member for over a year.
The new board commits the same managerial, financial and compliance issues although now legal fees are accumulating on both sides. The wife continues to offer to sit down with the board and review her research documenting the aforementioned issues. Liability exposure is a big concern. There are multiple health and safety issues in addition to the aforementioned issues. The board ignores her 51attempts.
The husband is not party to any of this to maintain his duties to both the HOA and his wife. He physically leaves any meeting where the suit is discussed. He receives redacted minutes.
Legal maneuvering occurs and the suit ends up in the Court of Appeal. The facts of the case are never litigated. The HOA demurred and that motion was sustained.
Now an attorney's fee award exists against the wife. California is a community property state.
The D&O carrier defended the suit. The insurer ALWAYS knew the husband was married to the plaintiff; in fact, the wife wrote three letters to the D&O carrier. Association counsel (both of them) knew the husband was married to the plaintiff at all times. The husband is an insured under the D&O policy.
My questions are:
Did association counsel have a duty to advise the husband of potential negative impact on him due to counsel's representation? Association counsel represents the board collectively but in California attorneys are supposed to avoid "interests adverse to a client." In the case of a volunteer board of directors, shouldn't counsel advise the husband of the obvious conflict of interest?
Is it a breach of fiduciary duty on the part of association counsel and the HOA to refuse all resolution attempts outside the judicial system? In California, there is a statute directing all parties to participate in some form of alternate dispute resolution. This HOA's CC&Rs have specific requirements when a civil suit is initiated to keep it out of the judicial system.
Did the insurer have a duty to appoint separate counsel for the husband (sometimes called Cumins counsel in California) to protect his interests? The insurer collectively and individually insures the board and its members.
It is bad faith on the part of the D&O carrier to refuse all resolution attempts outside the judicial system although one of their insured's interests is adversely affected.?
The HOA's governing documents indemnify board members as does the Corporations Code. Is it a breach of fiduciary duty on the part of the other four board members to refuse to follow the CC&Rs' requirements regarding civil suits? Is it a breach of fiduciary duty to refuse to resolve the case outside the judicial system, knowing the husband may incur damages?
If the other four board members ask association counsel to research spousal liability for a judgment, is it reasonable to call this direct action against the husband?
This is definitely a unique and assuredly odd situation. Thank you for your thoughts and opinions.
