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Subject: Filing a Case Over Business Judgment Rule
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NpB
(Arizona)

Posts:46


10/29/2019 4:54 PM  
Board voted unanimously via unanimous written consent to install a streetlight on common property between two lots. That action was ratified in person at the subsequent Board meeting by all members.

Trenching, conduit and pole hole have already been dug. Permits have been granted and fees paid. Awaiting delivery of streetlight by electric company soon.

Suppose at the next Board meeting, homeowner who lived adjacent to streetlight throws a temper tantrum about how it will negatively impact his quality of life etc.. Hypothetically, let's say no amount of rational, reasonable answers about how the majority of homeowners in past surveys and committee members want a streetlight will placate this person, but yet this homeowner somehow convinces the majority of the Board to vote to cancel the project.

In my opinion, cancelling the contract because of a temper tantrum from one or a few out of 50 homeowners is poor business judgment. Not to mention how much of a "sunk cost" the HOA will entail.

Would a homeowner or a Board member be permitted to file a case with the state's Department of Real Estate (which hears HOA disputes) over a decision that violates the "business judgment rule?"

NpS
(Pennsylvania)

Posts:3865


10/29/2019 5:42 PM  
Step 1: Your COMPLAINT against your BOD is that they would be violating their fiduciary responsibilities - wasting HOA money, ignoring safety needs, etc.

Step 2: In their ANSWER to your complaint, they would say that they are protected under the business judgment rule.

Step 3: You REPLY would then be that they are not entitled to the business judgment rule defense under the circumstances.

In other words, there is no such thing as a "violation" of the business judgment rule. The rule either applies or it doesn't apply. A judge would decide if they are entitled to that protection or not.

The COMPLAINT, ANSWER, and REPLY are formal steps in the litigation process.

If everything you say is true, then it's very likely that a judge would not grant them the protection they are seeking.

But - always remember - your complaint is about wasting HOA funds without justification and not addressing the safety needs of your community.


Sikubali jukumu. Read all posts at your own risk.
TimB4
(Virginia)

Posts:16542


10/29/2019 6:15 PM  
Lets define the "business judgement rule"

Per Cornell Law School:

In suits alleging a corporation's director violated his duty of care to the company, courts will evaluate the case based on the business judgment rule. Under this standard, a court will uphold the decisions of a director as long as they are made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation.


Per US Legal:

Business judgment rule is a legal principle that makes officers, directors, managers, and other agents of a corporation immune from liability to the corporation for loss incurred in corporate transactions that are within their authority and power to make when there is sufficient evidence to show that the transactions were made in good faith.



Hence, in my opinion, as long as there was a need and the street light was installed on common area, the Board would have acted in good faith in adding the street light.
AugustinD


Posts:1990


10/29/2019 7:56 PM  
Posted By NpB on 10/29/2019 4:54 PM
In my opinion, cancelling the contract because of a temper tantrum from one or a few out of 50 homeowners is poor business judgment. Not to mention how much of a "sunk cost" the HOA will entail.
I do not see this homeowner as just 'one or a few out of 50.' Nor do I see her or his objections as a "temper tantrum." She or he is the homeowner who is most directly and immediately affected by a massive amount of light at night. The Board's paying particular attention to her or him is at least a little rational. I could also see the streetlight, which heretofore had never existed on the common area, as a nuisance that the homeowner did not agree to when she or he bought her or his home. I could see a suit being filed over this. After all, the HOA is adding a new reserve component. Is this allowed by the covenants? Maybe, especially since the street light goes towards general safety. But maybe not.

Otherwise, that the board paid money towards installation of the streetlight, while the homeowner said nothing, is not cool. But governing bodies are allowed to change their minds.
SueW6
(Michigan)

Posts:608


10/30/2019 4:33 AM  
Let the homeowner file an injunction against the HOA about the streetlight. A judge can decide.

In the meantime, make sure the light power (brightness) is within reasonable level as to not be a nuisance.
SamE2
(New Jersey)

Posts:181


10/30/2019 5:12 AM  
How many street lights has the Association installed? Do they have a strategy and plan for installing street lights. If they are just installing one without a plan to make sure the whole community is protected by street lights I think the Association is probably wrong if they have a plan to cover the whole community they will probably prevail. Sounds like you want the street light but if others don't and convince the Board it was the wrong decision why can't the Board reverse themselves?
TimB4
(Virginia)

Posts:16542


10/30/2019 6:57 AM  
Posted By SamE2 on 10/30/2019 5:12 AM

why can't the Board reverse themselves?




Expenses already incurred.
It sounds like 90% of the project is done already.
NpB
(Arizona)

Posts:46


10/30/2019 12:45 PM  
Posted By AugustinD on 10/29/2019 7:56 PM
Posted By NpB on 10/29/2019 4:54 PM
In my opinion, cancelling the contract because of a temper tantrum from one or a few out of 50 homeowners is poor business judgment. Not to mention how much of a "sunk cost" the HOA will entail.
I do not see this homeowner as just 'one or a few out of 50.' Nor do I see her or his objections as a "temper tantrum." She or he is the homeowner who is most directly and immediately affected by a massive amount of light at night. The Board's paying particular attention to her or him is at least a little rational. I could also see the streetlight, which heretofore had never existed on the common area, as a nuisance that the homeowner did not agree to when she or he bought her or his home. I could see a suit being filed over this. After all, the HOA is adding a new reserve component. Is this allowed by the covenants? Maybe, especially since the street light goes towards general safety. But maybe not.

Otherwise, that the board paid money towards installation of the streetlight, while the homeowner said nothing, is not cool. But governing bodies are allowed to change their minds.





Majority of people want an additional streetlight in a certain dark area of neighborhood. This is documented in emails/surveys. The streetlight will be placed in the common area between one homeowner who has been advocating for a light for 15 years and one homeowner who has been adamant about not wanting a light for 15 years. Homeowner who didn't want light was able to persuade past Boards to not have a light installed, despite the majority of people in the HOA wanting one. Board determined that bollards would be too expensive to install because of trenching under driveways, running additional electric lines etc.., so streetlight was the next best option. Homeowner who didn't want light already threw a temper tantrum at immediate neighbor and Board member who has wanted light for 15 years. Owner might throw temper tantrum at next meeting and convince other Board members to nullify the contract, despite all the sunk costs, hence my question about business judgement rule.

CC&Rs state Board has complete jurisdiction over common area, where this will be installed.
JohnC46
(South Carolina)

Posts:8827


10/30/2019 12:49 PM  
I am often amazed at the concern some have when one owner throws a temper tantrum. When a disgruntled owner threatening legal action our reply is, we will see you in court. They go away.
NpB
(Arizona)

Posts:46


10/30/2019 12:51 PM  
Posted By SamE2 on 10/30/2019 5:12 AM
How many street lights has the Association installed? Do they have a strategy and plan for installing street lights. If they are just installing one without a plan to make sure the whole community is protected by street lights I think the Association is probably wrong if they have a plan to cover the whole community they will probably prevail. Sounds like you want the street light but if others don't and convince the Board it was the wrong decision why can't the Board reverse themselves?





Streetlights were installed strategically by the builder/developer at inception of community. For reason unknown, developer neglected to place streetlight on a specific street. Street is pitch black at night.
NpB
(Arizona)

Posts:46


10/30/2019 12:55 PM  
Posted By JohnC46 on 10/30/2019 12:49 PM
I am often amazed at the concern some have when one owner throws a temper tantrum. When a disgruntled owner threatening legal action our reply is, we will see you in court. They go away.





I am amazed too, but sadly am not surprised. So many Board members today will do anything not to offend to cause disharmony, even if it means maintaining a pseudo-harmony. Reversing fines, giving in on variances that were previously denied, etc..
NpB
(Arizona)

Posts:46


10/30/2019 12:58 PM  
Posted By TimB4 on 10/29/2019 6:15 PM
Lets define the "business judgement rule"

Per Cornell Law School:

In suits alleging a corporation's director violated his duty of care to the company, courts will evaluate the case based on the business judgment rule. Under this standard, a court will uphold the decisions of a director as long as they are made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation.


Per US Legal:

Business judgment rule is a legal principle that makes officers, directors, managers, and other agents of a corporation immune from liability to the corporation for loss incurred in corporate transactions that are within their authority and power to make when there is sufficient evidence to show that the transactions were made in good faith.



Hence, in my opinion, as long as there was a need and the street light was installed on common area, the Board would have acted in good faith in adding the street light.





Excellent definitions and based on them, I suppose a judge could also conclude that nullifying the contract violates the business rule.
GenoS
(Florida)

Posts:3328


10/30/2019 1:37 PM  
Posted By JohnC46 on 10/30/2019 12:49 PM
I am often amazed at the concern some have when one owner throws a temper tantrum. When a disgruntled owner threatening legal action our reply is, we will see you in court. They go away.

That's what we did earlier this year when we had to replace a lake fountain. The owner whose house backed up to the lake and was closest to the fountain threw a tantrum that the new fountain wasn't in the exact same location as the old one and his view was ruined. The horror! We explained there's no right to "have a view" in any of our documents. He started talking about suing. We told him, "See you in court". Haven't heard from him since.
ND
(PA)

Posts:366


10/31/2019 12:50 PM  
Posted By AugustinD on 10/29/2019 7:56 PM
Posted By NpB on 10/29/2019 4:54 PM
In my opinion, cancelling the contract because of a temper tantrum from one or a few out of 50 homeowners is poor business judgment. Not to mention how much of a "sunk cost" the HOA will entail.
I do not see this homeowner as just 'one or a few out of 50.' Nor do I see her or his objections as a "temper tantrum." She or he is the homeowner who is most directly and immediately affected by a massive amount of light at night. The Board's paying particular attention to her or him is at least a little rational. I could also see the streetlight, which heretofore had never existed on the common area, as a nuisance that the homeowner did not agree to when she or he bought her or his home. I could see a suit being filed over this. After all, the HOA is adding a new reserve component. Is this allowed by the covenants? Maybe, especially since the street light goes towards general safety. But maybe not.

Otherwise, that the board paid money towards installation of the streetlight, while the homeowner said nothing, is not cool. But governing bodies are allowed to change their minds.



I agree with Augustin here. Additionally, the repetitive reference to the neighbor's opposition to the project as a "temper tantrum" is an immature way itself to try and diminish and dismiss the neighbor's completely-understandable position on the project.

It sounds like your Board failed to consider all aspects/impacts of the project before it made decisions and money was committed. That's not this neighbor's fault. Simply because all Board Members agreed on the decision and much of the neighborhood supports the project, does not necessarily mean the decision was good or that it won't be opposed.

You said it yourself that "streetlights were installed strategically by the builder/developer at inception of community". One was not installed at this current location, perhaps strategically as well . . . something that this neighbor knew (and perhaps liked about the house he chose) and also something that all other neighbors could have known when they bought their homes. If I were this neighbor, I would likely put up the same fight if I didn't want the streetlight. Others do want the streetlight, so their support of the project is understandable, but the vast majority of them will benefit from the light it provides when they walk past it, but not be negatively impacted as the light shines all night into their bedroom windows.

We had a similar situation in my old neighborhood . . . in sections of the neighborhood that were dark, those neighbors wanted more light and proposed additional streetlights. Instead, we told them to turn on their house's outside lights (which would sufficiently illuminate their yards and the street in front of their home). Those that didn't want more light simply left their lights off. In the end, our solution resulted in no added installation costs, no future maintenance & replacement costs, and no overly-disgruntled homeowners.
GenoS
(Florida)

Posts:3328


10/31/2019 1:27 PM  
Posted By ND on 10/31/2019 12:50 PM
Simply because all Board Members agreed on the decision and much of the neighborhood supports the project, does not necessarily mean the decision was good or that it won't be opposed.

Sure it does. Board decides to do something the community needs and most homeowners support the project. That's the definition of a "good decision". Anyone buying into an HOA needs to understand that there's no guarantee that every little thing will never change. If the CC&Rs give owners the right to expect the nighttime "light environment" around their home will never change, that's one thing. It doesn't sound like that's the case.
NpB
(Arizona)

Posts:46


10/31/2019 1:38 PM  
Posted By ND on 10/31/2019 12:50 PM
Posted By AugustinD on 10/29/2019 7:56 PM
Posted By NpB on 10/29/2019 4:54 PM
In my opinion, cancelling the contract because of a temper tantrum from one or a few out of 50 homeowners is poor business judgment. Not to mention how much of a "sunk cost" the HOA will entail.
I do not see this homeowner as just 'one or a few out of 50.' Nor do I see her or his objections as a "temper tantrum." She or he is the homeowner who is most directly and immediately affected by a massive amount of light at night. The Board's paying particular attention to her or him is at least a little rational. I could also see the streetlight, which heretofore had never existed on the common area, as a nuisance that the homeowner did not agree to when she or he bought her or his home. I could see a suit being filed over this. After all, the HOA is adding a new reserve component. Is this allowed by the covenants? Maybe, especially since the street light goes towards general safety. But maybe not.

Otherwise, that the board paid money towards installation of the streetlight, while the homeowner said nothing, is not cool. But governing bodies are allowed to change their minds.



I agree with Augustin here. Additionally, the repetitive reference to the neighbor's opposition to the project as a "temper tantrum" is an immature way itself to try and diminish and dismiss the neighbor's completely-understandable position on the project.

It sounds like your Board failed to consider all aspects/impacts of the project before it made decisions and money was committed. That's not this neighbor's fault. Simply because all Board Members agreed on the decision and much of the neighborhood supports the project, does not necessarily mean the decision was good or that it won't be opposed.

You said it yourself that "streetlights were installed strategically by the builder/developer at inception of community". One was not installed at this current location, perhaps strategically as well . . . something that this neighbor knew (and perhaps liked about the house he chose) and also something that all other neighbors could have known when they bought their homes. If I were this neighbor, I would likely put up the same fight if I didn't want the streetlight. Others do want the streetlight, so their support of the project is understandable, but the vast majority of them will benefit from the light it provides when they walk past it, but not be negatively impacted as the light shines all night into their bedroom windows.

We had a similar situation in my old neighborhood . . . in sections of the neighborhood that were dark, those neighbors wanted more light and proposed additional streetlights. Instead, we told them to turn on their house's outside lights (which would sufficiently illuminate their yards and the street in front of their home). Those that didn't want more light simply left their lights off. In the end, our solution resulted in no added installation costs, no future maintenance & replacement costs, and no overly-disgruntled homeowners.





Yes, streetlights were installed strategically in other locations throughout the community, but it is obvious at night that the developer omitted (for reasons unknown, but cost savings is probably a good guess) to install one on the street in contention.

I was a witness to the temper tantrum and it was loud and unpleasant. The ranting could be heard inside the house. The person ranting could not accept that the Board unanimously voted for it.

I say majority rule!
JohnT38
(South Carolina)

Posts:122


10/31/2019 1:42 PM  
I agree with Geno. Provided there are no legal issues in installing the new light that's exactly what I'd do. The complaining owner can purchase some darkening shades and get over it. Living in an HOA community will sometimes mean you don't get your way if the majority of the community disagrees with you.
NpB
(Arizona)

Posts:46


10/31/2019 1:46 PM  
What's also ironic is that the location of the streetlight is away from the ranter's bedrooms and no light will enter the ranter's house. This is factual and evidenced by other streetlights positioned next to the same model house. The light is about as close to the curb as you can get. Furthermore, there are back shields available (though no streetlights in our community have them thus far).

I don't think the ranter is as astronomy enthusiast. The ranter rarely has the post/coach lights turned on and at night the inside of the house is pitch black from the street. Perhaps the ranter has a phobia for light. Who knows?
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