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Subject: Board President Sueing
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RebaL1
(Oregon)

Posts:2


05/16/2021 9:44 AM  
Our newly elected HOA Board President is filing a law suit against the HOA for denying him a height variance on a house he is building. He is also asking for compensation for his cost going up. Is it even ethical or legal for him to be serving on the board he is suing?
AugustinD


Posts:1901


05/16/2021 9:49 AM  
Posted By RebaL1 on 05/16/2021 9:44 AM
Our newly elected HOA Board President is filing a law suit against the HOA for denying him a height variance on a house he is building. He is also asking for compensation for his cost going up. Is it even ethical or legal for him to be serving on the board he is suing?
-- First, be aware that it is the directors who elect the Board President. The directors also have the right to replace the board president.

-- With the board president suing the association on a particular issue, the HOA attorney should be advising the Board to not discuss the suit with the board president absent. When the board needs to discuss the lawsuit, it will have to do so in executive session and with, say, the VP presiding.

-- Even if this person is removed as president and remains as director, legally working around him is difficult.

-- The Board should consult the HOA attorney, without the Board president present.

-- AFAIC, ethics only count to the extent they are enforceable by law. Focus on the legalities and practicalities here.

-- If I were on this Board, I would instantly vote to remove this director as president. I would not want him on the board at all, but chances are, he can only be removed by a recall vote of the membership.
AugustinD


Posts:1901


05/16/2021 9:50 AM  
Posted By AugustinD on 05/16/2021 9:49 AM

-- With the board president suing the association on a particular issue, the HOA attorney should be advising the Board to not discuss the suit with the board president absent.
Correction: With the Board president-director absent, the HOA attorney should advise the remaining directors about how to proceed.
CathyA3
(Ohio)

Posts:2588


05/16/2021 10:32 AM  
I believe that the board president should resign from the board. Directors have a fiduciary duty to the HOA and must act in its best interest. He can't fulfill this duty while actively suing the association.

The other directors could remove him from his officer position (president) but that doesn't remove him from the board.

If Mr. Lawsuit was elected by the membership, typically they're the only ones who can remove him from the board via a recall election (unless your bylaws or state laws say something different). If he was appointed to the board to fill an open director position, it's possible that the board could remove him (check your bylaws and state law again).

Recall elections aren't always successful. But in this case, I expect that the majority of homeowners will want to remove him once they find out he's costing them money.

The VP should contact the association's attorney about how to proceed, and all directors should only discuss the details of the lawsuit in executive session with the rest of the board (lest they breach attorney-client privilege).
JohnC46
(South Carolina)

Posts:11659


05/16/2021 11:25 AM  
This caused me to go looking at my own Bylaws. Until I looked, I would have said one could not be a Member of the BOD if they are party to any legal action against the BOD or Association. I was wrong. No such limitation in our Bylaws.
AugustinD


Posts:1901


05/16/2021 11:43 AM  
Posted By CathyA3 on 05/16/2021 10:32 AM
I believe that the board president should resign from the board. Directors have a fiduciary duty to the HOA and must act in its best interest. He can't fulfill this duty while actively suing the association.
Just saying: Hypothetically a director could be suing the association because the board is not complying with the Bylaws or Declaration. For example, suppose the Bylaws require open Board meetings at least once a quarter. But instead, the meetings that are happening are closed to members and once a year. Arguably such a suit is in the HOA's best interests. A competent HOA attorney is obliged to take direction from the Board majority, but only to the extent that the HOA attorney feels the Board majority is acting in the HOA's best interests.

On the other hand, and at least so far, a director suing because the board denied a height variance to the director sure sounds not in the best interests of the HOA to me.

On the third hand, why did the Board elect this guy President?
CathyA3
(Ohio)

Posts:2588


05/16/2021 12:31 PM  
Posted By JohnC46 on 05/16/2021 11:25 AM
This caused me to go looking at my own Bylaws. Until I looked, I would have said one could not be a Member of the BOD if they are party to any legal action against the BOD or Association. I was wrong. No such limitation in our Bylaws.



That actually makes sense. Directors don't lose their rights as homeowners when they're elected, and one of those rights is suing the HOA. So it will depend on the reason for the lawsuit. As Augustin noted, trying to get a rogue board to comply with the bylaws is a good reason. But in the OP's case, it sounds like the president wants something contrary to the governing documents.

Interesting hypothetical: what if he's suing because similar variances have been approved? That also may be justified and not a conflict with his fiduciary duty. However, if I were in the president's position, I would resign anyway - I'd assume that the lawsuit would burn too many bridges, meaning I could no longer be an effective director.
AugustinD


Posts:1901


05/16/2021 12:57 PM  
Posted By CathyA3 on 05/16/2021 12:31 PM
Interesting hypothetical: what if he's suing because similar variances have been approved? That also may be justified and not a conflict with his fiduciary duty.
I agree. Further: What if the whole reason he was elected because the board had issued such height variances right and left in the past and has now stopped doing so? Could there be a faction that wants these height variances approved, and this is why this gentleman is president now?

I want more facts.

Possibly related aside: I do see the word "variance" used in governing documents now and then. But when the word "variance" is not in the governing documents, I also think the word is often used by less-than-thoughtful boards and ACCs in the grossly mistaken belief that the law allows the Board/ACC to decree that violations of the architectural standards in the covenants are not violations, because of a Board-created fiction called a "variance."

However, if I were in the president's position, I would resign anyway - I'd assume that the lawsuit would burn too many bridges, meaning I could no longer be an effective director.
I agree. Given all the additional work such a situation adds to everyone's plate (by way of how meetings are conducted; who can be present and who cannot; which directors can vote on an ACC issue and which cannnot; and so on), I think resigning may be the honorable thing to do.
JohnC46
(South Carolina)

Posts:11659


05/16/2021 1:21 PM  
Adding on to an earlier post. The more I though about it, I recall Bylaws where one could not run for the BOD if hey were involved in an legal action against the association.
RebaL1
(Oregon)

Posts:2


05/17/2021 6:55 AM  
Thank you all for your thoughts and information. Our HOA was started in the 60’s and CCR’s are very antiquated and By-laws are not much better. We will see what happens because I think ethics have left the building.
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