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Subject: HOA losses in court couple questions
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Author Messages
GuyM1
(Ohio)

Posts:136


02/14/2018 8:37 AM  
Hi, All just a few questions about the procedure.

1-When should the Board notify the Association of the loss?
2-Should the Board call a meeting to talk to Association?
a-monies
b-assessments
3-Should the board tell the Association why they lost?
a-Show rulings.
b-Wrongdoings by a few board members.
4-Should the members be able to vote out wrongdoers at the meeting?


Should Association members start a class action suit against the wrongdoing board members personally for Breach of Contract?
MarkM31
(Washington)

Posts:247


02/14/2018 2:09 PM  
Posted By GuyM1 on 02/14/2018 8:37 AM
Hi, All just a few questions about the procedure.

1-When should the Board notify the Association of the loss?
2-Should the Board call a meeting to talk to Association?
a-monies
b-assessments
3-Should the board tell the Association why they lost?
a-Show rulings.
b-Wrongdoings by a few board members.
4-Should the members be able to vote out wrongdoers at the meeting?


Should Association members start a class action suit against the wrongdoing board members personally for Breach of Contract?




Didn't the association know of the lawsuit beforehand? And they aquesed at the least by not acting to stop this. You as a member certainly have a right to call a special meeting as your CC&R's allow, and to ask the board for an explanation.If you can't get enough votes for a special meeting it may be time to take a hint. Have you read your CC&R's? They contain the answer to 2,3 &4.

What would the basis of your lawsuit be?
MelissaP1
(Alabama)

Posts:7005


02/14/2018 3:36 PM  
If you have enough for a class action suit, then you have enough to make changes IN your HOA without going to court. That is enough to vote your current board out. That is enough to change the rules. Suing your HOA is suing yourself and your neighbors. It's a consequence. Would it not be better to avoid court if you all have the power without a court?

The HOA is to disclose the lawsuit. Maybe not all the details. The ruling and amount the HOA has to pay in damages/legal fees is something needs to be disclosed. Also the HOA insurance may be covering this. As for suing the individual board members? I wouldn't do that. Just vote them out.

Former HOA President
GuyM1
(Ohio)

Posts:136


02/14/2018 5:43 PM  
Hi Mark
To your first question, the members and the third board member didn't know that the other two Board members which one of those was the President went to the Attorney and filed the lawsuit. At the Annual Meeting, the board President told the members that they had to bring the lawsuit because of a previous lawsuit from 28 years ago by a member that sued for the board not following the Declarations. Our Annual Meeting is in April so not too far off and there is a court date in March for Attorney fees and damages so I think just wait until April. I have read all CC&R's and have learned a lot over this lawsuit and that is why I won the lawsuit. The two Board member broke the State Law by bringing the suit without a unanimous vote by the board or vote of the members. The President and Secretary said they had voted from a past board, which was a lie and wasn't the board at the time of bringing the suit.
GuyM1
(Ohio)

Posts:136


02/14/2018 5:56 PM  
Hi Melissa
To start off please re-read the last line it says sue the two members Personally which isn't suing yourself or other members but the two wrongdoers. The two board members should foot the bill for breaking State Law on a board must have a unanimous board vote to bring a suit or a member vote. HOA Insurance doesn't cover taking a member to court for a bylaw violation only if a suit is brought against the HOA or Board. Why should members pay thousands of dollars each for those two breaking the law and is a Breach of Contract? The two board members did this on their own and were found to be guilty of the violation by the judge in her ruling.
ArtL1
(Florida)

Posts:53


02/14/2018 6:17 PM  
Most court records are public record anyway, so the board likely can't keep the members in the dark for long. They may as well come clean and tell the members what happened, what went wrong, and what they plan to do next.
PaulB12
(Virginia)

Posts:28


02/15/2018 9:37 AM  
Posted By GuyM1 on 02/14/2018 5:43 PM
Hi Mark
To your first question, the members and the third board member didn't know that the other two Board members which one of those was the President went to the Attorney and filed the lawsuit. At the Annual Meeting, the board President told the members that they had to bring the lawsuit because of a previous lawsuit from 28 years ago by a member that sued for the board not following the Declarations. Our Annual Meeting is in April so not too far off and there is a court date in March for Attorney fees and damages so I think just wait until April. I have read all CC&R's and have learned a lot over this lawsuit and that is why I won the lawsuit. The two Board member broke the State Law by bringing the suit without a unanimous vote by the board or vote of the members. The President and Secretary said they had voted from a past board, which was a lie and wasn't the board at the time of bringing the suit.




Wow, all sorts of lack of transparency here. GuyM1, try not to put too many details about your situation, if you can, summarize. To get us on the same page just because these two Board members didn't tell the other board members, doesn't mean the other board members are off the hook. You must sue the HOA first, then the insurance kicks in. Then as the case proceeds, you can sue them individually. Most volunteers that join the HOA have umbrella insurance that is an additional to your home coverage, so that will kick in.

I'll try to answer a few questions:

1-When should the Board notify the Association of the loss?
answer, right away, and even if they don't, the lawsuit is always disclosed as new home-buyers come in, that is Law

2-Should the Board call a meeting to talk to Association?
answer, I highly doubt if they will call a meeting plus it would be in Executive anyway, if they haven't been transparent until this point, they definitely will not call a meeting, remember they are still in control

3-Should the board tell the Association why they lost?
answer,county records will show the amount of the judgement rewarded, remember the HOA doesn't have to pay anything, its just a judgement, warrant in debt, they don't have to pay it. Talk to your attorney in filing a judgement lien against the HOA, that will get their attention
a-Show rulings.
b-Wrongdoings by a few board members.
answer, no, people probably don't want to see that many details, the details will come out naturally

4-Should the members be able to vote out wrongdoers at the meeting?
most states its 2/3 membership vote to vote them out, very difficult to achieve this, sometimes suing is the only way...because if you vote them out...nothing will stop them from becoming board members again if no one else volunteer's for the position...voting them out is a temporary solution...lawsuits are on the record and permanent.

I don't think a class action requires a certain percentage of membership, I believe it becomes class action as soon as you have more than one person on the attorney's retainer. So it will say Group of Individuals vs. HOA.

Overall you must talk to your attorney on the next steps, I wouldn't put anything on this forum. Don't worry about the membership and informing them right now, if you have support enough to get others on the retainer, then run it by the attorney. Worry about your money and getting it back.

Mail them a government book from high school. They must understand how voting, transparency and check & balance works.
MarkM31
(Washington)

Posts:247


02/15/2018 10:10 AM  
How big was this lawsuit that was lost, and how many are in the HOA?
GuyM1
(Ohio)

Posts:136


02/15/2018 6:20 PM  
Plaintiffs Attorney put in his brief that they would exceed $18,600 plus court costs and Defendant Attorney fees around $15.000 plus, court costs and Damages. Thinking around $40,000 and there is only 9 units in the HOA.
BenA2
(Texas)

Posts:180


02/15/2018 7:07 PM  
Posted By GuyM1 on 02/14/2018 5:56 PM
Hi Melissa
To start off please re-read the last line it says sue the two members Personally which isn't suing yourself or other members but the two wrongdoers. The two board members should foot the bill for breaking State Law on a board must have a unanimous board vote to bring a suit or a member vote. HOA Insurance doesn't cover taking a member to court for a bylaw violation only if a suit is brought against the HOA or Board. Why should members pay thousands of dollars each for those two breaking the law and is a Breach of Contract? The two board members did this on their own and were found to be guilty of the violation by the judge in her ruling.



If the HOA has Directors and Officers insurance it would cover suits against individual board members. The cost of the suit to the association might be higher premiums and members refusing to serve on the board for fear of being sued.
GenoS
(Florida)

Posts:1822


02/16/2018 2:35 AM  
Do not forget to review the Indemnification clause, if you have one (most places do) in the governing documents. Those are often obscure but they can be real eye-openers.
TimB4
(Virginia)

Posts:15245


02/16/2018 3:52 AM  
Keep in mind that even if you sue an individual director. If that individual was acting on behalf of the Association with the Boards knowledge and approval, then they are typically indemnified by the Association. If the D&O insurance refuses to pay, then the Association has to pay directly (which means special assessments or increased assessments to pay those bills).

There simply wouldn't be volunteers if the the Association didn't indemnify.

You also must pierce the corporate shield to prove a case against an individual personally. This is often difficult to do.


If you were a party to the legal action, then sometimes it's best to count a win as a win or a lose as a lose and move on. There is a difference between being just and being vindictive.
AugustinD


Posts:675


02/16/2018 6:42 AM  
Guy,

A lawsuit by shareholders/HOA members against their own HOA is what is called a "derivative action." "Class action" does not apply.

Your HOA's Declaration, Bylaws and so on also subject you to contractual terms. Are you running for the Board? Why did you not run earlier? Have you read your governing documents to see how to remove a director? You posted elsewhere that your HOA has only nine units. Campaigning would be a cinch.

If I were the judge and saw you had filed a lawsuit (maybe with a few other HOA members), then I would be asking why you had not exhausted all your remedies under the Declaration and Bylaws before wasting precious court time and taxpayer resources on a lawsuit. This is one reason why typically, lawsuits such as the one you propose generally go nowhere and rightly incur the wrath of judges. The directors you want to sue as individuals are volunteers. The courts do not like deterring volunteers from stepping up via penalizing these volunteers with heavy court costs and damanges.
PaulB12
(Virginia)

Posts:28


02/16/2018 9:10 AM  
Posted By AugustinD on 02/16/2018 6:42 AM
Guy,

A lawsuit by shareholders/HOA members against their own HOA is what is called a "derivative action." "Class action" does not apply.

Your HOA's Declaration, Bylaws and so on also subject you to contractual terms. Are you running for the Board? Why did you not run earlier? Have you read your governing documents to see how to remove a director? You posted elsewhere that your HOA has only nine units. Campaigning would be a cinch.

If I were the judge and saw you had filed a lawsuit (maybe with a few other HOA members), then I would be asking why you had not exhausted all your remedies under the Declaration and Bylaws before wasting precious court time and taxpayer resources on a lawsuit. This is one reason why typically, lawsuits such as the one you propose generally go nowhere and rightly incur the wrath of judges. The directors you want to sue as individuals are volunteers. The courts do not like deterring volunteers from stepping up via penalizing these volunteers with heavy court costs and damanges.





Although I am in favor I making complaints about HOA actions this only works if the actions are not reckless but more of an oversight. An attorney can decide what can be corrected with a bit of paperwork or what needs to be litigated.

Plus a lawsuit accomplishes a lot more, most times the directors will correct their illegal actions and stay on the board. This is exactly the way it went down in a local case. The directors crossed every T and dotted every I after they lost in court. No need for others to step up and volunteer, they realized the mistake and had no choice to become transparent.

I don't believe that cases go nowhere if its already a case, if the attorney is well experienced, the attorney will know right away what needs to be litigated or if it can be solved through the complaint process, which most HOA don't even adopt.
GuyM1
(Ohio)

Posts:136


02/16/2018 9:33 AM  
Hi Paul
Special Meeting was called for next weekend and will be at Law firms office. A discussion of relevant circumstances will take place and the Board will seek input from the owners on how to proceed legally. Options to be considered will include attempted settlement. additional enforcement action, or appeal of the trial courts decision. Members only but the Law firm Attorney will be there but a homeowner can execute a proxy to have someone there for them. Isn't that a double negative? Hey did you write a book?

Thanks
CjC
(Maryland)

Posts:68


02/16/2018 9:38 AM  
Usually the proxy can only name another member. It can not be an outsider.
GuyM1
(Ohio)

Posts:136


02/16/2018 9:49 AM  
Hi CjC
I don't know that but will check it out. We always have let proxies be Family or friends. So I don't know if that works here or not, any thoughts?

Thanks
BenA2
(Texas)

Posts:180


02/16/2018 10:56 AM  
Posted By GuyM1 on 02/16/2018 9:49 AM
Hi CjC
I don't know that but will check it out. We always have let proxies be Family or friends. So I don't know if that works here or not, any thoughts?

Thanks



I think CjC is right about having to give the proxy to a member. More specifically, the general rule is that only a person with voting rights can be given a proxy. Of course, if your governing docs don't specify that proxies are allowed they should not be used.
GuyM1
(Ohio)

Posts:136


02/16/2018 11:38 AM  
Hi Ben
I don't think they do and will look again. Could this be a State law or a Bussiness rule? Well, they have allowed family members to act as long as they have Power of Attorney could this change things?

thanks
AugustinD


Posts:675


02/16/2018 11:54 AM  
Posted By PaulB12 on 02/16/2018 9:10 AM
a lawsuit accomplishes a lot more, most times the directors will correct their illegal actions and stay on the board. This is exactly the way it went down in a local case. The directors crossed every T and dotted every I after they lost in court. No need for others to step up and volunteer, they realized the mistake and had no choice to become transparent.
<

Particularly when the same incompetents achieve a majority time and again, and apathy rules the day, I agree a lawsuit can subsequently cause significant change, for the better, on all levels of board and manager operations.
PaulB12
(Virginia)

Posts:28


02/16/2018 2:47 PM  
Posted By GuyM1 on 02/16/2018 9:33 AM
Hi Paul
Special Meeting was called for next weekend and will be at Law firms office. A discussion of relevant circumstances will take place and the Board will seek input from the owners on how to proceed legally. Options to be considered will include attempted settlement. additional enforcement action, or appeal of the trial courts decision. Members only but the Law firm Attorney will be there but a homeowner can execute a proxy to have someone there for them. Isn't that a double negative? Hey did you write a book?

Thanks





I highly doubt they will decide to pay you back your money especially not in a meeting, nothing would be binding. At this meeting I wouldn't offer any information you have on them, let them volunteer and if possible record and write it down. This meeting may be risky and the opposition maybe trying to fish out information from you.

If nothing happens at this meeting, what you need to do is an attorney demand for records around the time where they said they voted on the suit. Once they refuse the records, which they will. Then you sue the HOA. The complaint will include details of the two board members that messed up and how they tried to cover their tracts. The remaining board member is still liable. So the Derivative suit notice will be for 2 or 3 board members, your attorney would know better.

About your proxy vote, it should be another member, not family or friends even with power of attorney. The court or even the attorney is not going to like that you tried to sway the vote by getting these types of proxies. Let each homeowner do the proxy or come to the meeting to vote. If they are so relaxed on proxy rules, then that needs to be fixed as it will work against you in other situations. Do it by the book, no shortcuts.





GuyM1
(Ohio)

Posts:136


02/16/2018 3:16 PM  
Paul
So the board members would give a proxy to their husband or wife? One board member is single the other two have spouses. The one board member that was on my side was replaced a few months after suit started. She was the one left out of the vote and testified to that in court which the judge ruled the board didn't give this board member a notice of the meeting and didn't have Unanimous vote to bring suit. Really don't think there was really a meeting at all, just think the two agreed to it. I also think I should record the meeting but worried they are going to say no video or recording of the meeting, being that it is at the Law firms office.

Thanks
PaulB12
(Virginia)

Posts:28


02/16/2018 3:30 PM  
Posted By GuyM1 on 02/16/2018 3:16 PM
Paul
So the board members would give a proxy to their husband or wife? One board member is single the other two have spouses. The one board member that was on my side was replaced a few months after suit started. She was the one left out of the vote and testified to that in court which the judge ruled the board didn't give this board member a notice of the meeting and didn't have Unanimous vote to bring suit. Really don't think there was really a meeting at all, just think the two agreed to it. I also think I should record the meeting but worried they are going to say no video or recording of the meeting, being that it is at the Law firms office.

Thanks




I'm not sure we're on the same page. The board member will get his/her single membership vote doesn't matter if they give it to their spouse, they will get one vote for that household. All your other details about bad governing will be in the suit. Your main goal right now is to make it to this meeting and see what happens. I don't see any issue with audio recording especially since it appears to be an open meeting of residents and its not executive session, they will object but try anyway otherwise you better take good notes. Perhaps you can change the venue so the attorney can't hide behind the no recording excuse.
BenA2
(Texas)

Posts:180


02/16/2018 3:44 PM  
Posted By GuyM1 on 02/16/2018 11:38 AM
Hi Ben
I don't think they do and will look again. Could this be a State law or a Bussiness rule? Well, they have allowed family members to act as long as they have Power of Attorney could this change things?

thanks



It is possible there could be something in the state law allowing for proxies but I think it would be unusual. Robert's Rules of Order says that you should not use proxies unless it is specifically authorized in your bylaws.
GuyM1
(Ohio)

Posts:136


02/16/2018 4:20 PM  
Heres what I found

Proxy is stated in the Quorum definition which states if a proxy can be used that the meeting can only be about business to be considered. A proxy holder couldn't vote only members can.



GuyM1
(Ohio)

Posts:136


02/16/2018 4:27 PM  
Just found this

Section 7. Proxies. Any member may be represented at a
meet1ng of members or vote thereat, and execute consents, waivers, and releases. and exercise any of his other rights by proxy or proxies appointed by a writing sig|ned by such Person
TimB4
(Virginia)

Posts:15245


02/17/2018 10:01 AM  
Posted By CjC on 02/16/2018 9:38 AM
Usually the proxy can only name another member. It can not be an outsider.




Completely depends on Statutes and governing documents.

In VA, we can name anyone we desire to be our proxy representative.
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