Question: My board makes up forms, then tries to make them look "official." One official-looking fabricated form is called "Censure of Board Director." The form says we are a nonprofit mutual benefit corporation and have governing documents, covenants, conditions and restrictions. Then it states more obvious facts, that the association's "board of directors consists of volunteer members each of whom owe a number of fiduciary duties to protect and enhance the value of the association."
Following that litany of nonsense, the letter/form proceeds to list items that are libelous against me composed of vague exaggerations and accusations beyond description. It closes with: The board is concerned that my actions will: 1. make the association susceptible to litigation. 2. harm the association's ability to hire vendors to help manage and care for the association's property. 3. create dissension among the members of the association. 4. prevent the board from conducting business necessary to ensure the longtime validity of the association. Then it states I am "censored for my actions described herein."
This was made public in my community. Does censure apply to association board directors?
Answer: This type of hyperventilating causes waste of valuable association resources and subjects the association to liability. Psychological ploys like "censure" are meant to silence and embarrass vocal owners into submission, and worse, to neutralize board directors who don't follow the majority's rule. Stating you are "censored for my actions described herein" is not legally binding as censure cannot be imposed unilaterally, especially by using a fake document.
Censure does not pertain to homeowner association board directors, nor does it exist in the common interest development act. Unless your covenants, conditions and restrictions specifically define and expressly state that censure can be used against a director, it is an unlawful, if not void, document with no legal significance. The board's so-called concerns are all future tense, and damages have not yet occurred. This is nothing more than a flashy and inefficient show because the burden is on the board to prove that you're not motivated by legitimate business interests.
Nothing will get an association sued quicker than the items on that "censure form." That form and its implications make the association susceptible to litigation, if not for any other reason than the form itself is unsubstantiated by actual "legal authority" to impose a fabricated penalty consisting of "censure" upon a homeowner association board director. Additionally, it is devoid of the requisite notice and procedural due process requirements.
"Enhancing the value of the association" is a worthless catch phrase frequently unsupported by reliable evidence. Nothing in the common interest development act (Civil Code sections 4000 to 6130) defines such nebulous terms, let alone "fiduciary duties" to include "enhancing the value of the association" or "censure" against a board director.
What your board is saying is that owners are required to indemnify the association for any reduction in value to the association's property caused by an individual's behavior. Essentially, that unilaterally imposes the legal concept of "strict liability" onto owners for something that cannot be proved and that does not exist at law. Meaning, owners are responsible for potential damages without any intention to cause harm. Strict liability is usually restricted to "very dangerous" or inappropriate conduct.
Whether for regular board meetings, executive sessions or otherwise, directors and management personnel are not indemnified for slander and libel, and such actions are unacceptable breaches of fiduciary duty. Directors should be mindful that written "exaggerations and accusations" could also constitute libel.
The only thing "harming the association's ability to hire vendors to help manage and care for the association's property" is the board's unlawful actions. So too will its actions "create dissension among the members of the association." The board's transference of its liabilities onto one individual director is a transparent attempt to circumvent the other directors' bad faith through dirty dealings such as creating a bogus problem as substantiation for silencing another director.
The board can no more "ensure the longtime validity of the association" than an "Act of God" can.
Associations and their boards of directors must have clean hands when seeking actions against other directors and owners. When an association seeks to enforce provisions of its governing documents in order to compel an act by one of its titleholders, it is incumbent upon the board to show that it has followed not only its own standards and procedures but also the law. Before pursuing such remedies against owners, the directors must show that those procedures were fair and reasonable and that its substantive decision was also reasonable and made in good faith — not arbitrary or capricious. The law expects no less when it comes to treating fellow directors similarly situated.
Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or firstname.lastname@example.org.