HOA ethics: vigorous performance or collusion?

Arizona attorney David Dodge raised the question of the extent to which overzealous attorneys can go without overstepping the line. (See Ethical obligations of attorneys to HOA members, and the Dodge article, Fiduciary). Referring to an Oregon appellate court opinion (Reynolds v. Schrock, 2005), Dodge writes,

However, the court said, the privilege of rendering professional services is not absolute, and lawyers should not be free to substantially assist their clients in committing tortious acts. The way to protect lawyers in these cases, the court suggested, was to strictly interpret the common law elements of aiding and abetting the alleged breach of a fiduciary duty, as found in the RESTATEMENT, which requires “substantial assistance or encouragement” by the lawyer.

In layman’s terms, Dodge is speaking about what I simply call “collusion”, or an agreement to get get around the law or the contractual obligations of the HOA board (See definition below). In terms of attorney ethical conduct, I am speaking about ethical rule 4.1. Truthfulness to Others, of the AZ Code of Professional Conduct, Rule 42, shown below. In these “real life” questionable situations, the attorney says that he is acting under the instructions of his client, the HOA board, while the board tell its members that it is acting, “upon the advice of our attorney.” When pushed, the attorney will say, “it’s my job to defend my client to the best of my ability.” It is instructional if I present an actual situation for your consideration as to questions of whether or not any illegal and/or unethical acts are involved.

The facts, as I know them:

1. The Terravita Community Assn in Scottsdale, AZ will vote for two amendments to their CC&Rs. The first is a sweeping rewrite of a 1993, 77 page Declaration, with some several hundred revisions. The second amounts to a number of revisions to a specific section(s) of the Declaration. Why these changes were singled out from all the others remains unanswered.
2. The members had a “redlined” version available for viewing on the Terravita webpage (available to members only), but, as it turned out, it was some intermediary version prepared by the HOA attorneys, the Ekmark & Ekmark law firm, in 1997. It was never adopted, yet was posted to the website. After being given notice, and the membership and Board were also informed, the attorneys said, in affect, “a clerical error”, and posted the correct, valid version of the Declaration.
3. The secret ballot only asked for a Yes/No vote on the two “proposed actions” indicated in (1) above. AZ statutes, ARS 33-1812, require that each proposed action be listed on the ballot, and that a Yes/No vote for each proposed action be contained on the ballot. This statute is quite specific, and its intent is quite clear, as I have presented in the prior sentence. Yet, the attorneys, also having been given notice, as had the HOA board, have not halted the vote or issued a ballot in compliance with state law.
4. The attorneys released a letter to the voters saying that they believe that the 2-choice ballot does not violate the law. No rational was provided. This is what can be called a “black letter” issue where the meaning and intent of the statute is quite unambiguous — quite clear. And there are numerous Arizona cases that have upheld the plain meaning of a statute or contract. What is the attorney’s rationale that the ballot conforms to the statute?
5. Based on a reliable homeowner’s statements, I was informed that the board was asked to obtain a “third-party” opinion from another attorney on the matter, but has refused to so. The board has also refused to halt the vote pending further review, saying that they are acting on the advice of their attorney.

You decide

Based on the above, what is your opinion? Have the attorneys gone too far? Are they just vigorously doing their job according to their client’s wishes? Has the Board acted in good faith, and as a prudent person would? Please read the linked materials and the ethics rules shown below, and then cast your vote in the poll.

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Collusion: (Black’s Law)
An agreement to defraud another or to obtain something forbidden by law.

AZ Code of Professional Conduct, R 42,
ER. 4.1 (relevant excerpts)

In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person; or
(b) fail to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by ER 1.6.

[E.R. 1.6(d), Confidentiality of Information, essentially states that lawyers are now permitted to disclose facts that will prevent or rectify harm done by their clients to others while using the lawyer’s services.]

Comments under the 4.1
[1] A lawyer is required to be truthful when dealing with others on a client’s behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. [This is why you must ask direct questions of the lawyer]. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false.
[3] Under ER 1.2(d), a lawyer is prohibited from counseling or assisting a client in conduct that the lawyer knows is criminal or fraudulent.

ER 1.13. Organization as Client
(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.
(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances, to the highest authority that can act on behalf of the organization as determined by applicable law.

Published in: on January 28, 2010 at 4:03 pm  Comments (11)  

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11 CommentsLeave a comment

  1. […] Dodge’s article regarding ethical considerations in aiding and abetting the clients (See HOA ethics: vigorous performance or collusion?).  He […]

  2. Hello, I have browsed most of your posts. This post is probably where I got the most useful information for my information gathering. Thanks for posting, maybe we can see more on this. I also like this layout can you tell me where to get it

  3. Hiya, nice day.. Your article is extremely impressive. I never considered that it was feasible to accomplish something like that until after I looked over your post. You certainly gave a great perception on exactly how this whole process works. I will make sure to return for more advice. Thanks

  4. If it will help, in the case of my HOA the attorney allowed the board to pass a CLEARLY illegal resolution which our ACLU attorney deemed ‘ultra vires.’ The moral of this is that the HOA attorneys clearly act in the interest of the board – not the homeowners. (yet the homeowners have to help PAY for the attorney who clearl is working against their interestws)

  5. Classic example of, “The ends justify the means.”

  6. […] rules, 4.3, Truthfulness to Others. (See my Commentary on this issue of attorney ethics at “HOA ethics: vigorous performance or collusion?”). It is unconscionable and unethical that the HOA attorney gave such half-truths. (Read my […]

  7. The two comments posted to the ethics case, shown below, raised an important concern: Has anyone ever seen any written advice from the attorney to the board? I know these attorneys will quickly jump up and shout, “attorney privilege” pertaining to “contemplated litigation”, and that’s the reason for not making their advice known to the membership. But, is is really confidential attorney-client privilege, or is it just a rationale not to release their advice for all to see.

    Can the HOA board refuse to make known the advice from their attorney, in writing, regarding everyday matters as to how to proceed with a decision, or to explain what the law means? Of course not! These are records of the corporation, and should be included in any board minutes ratifying the attorney advice. (Has the advice ever been rejected? I wonder). The rationale that it’s protected by “contemplated litigation” strongly reveals the HOA attorney, and board, attitude of “us against them” where every request for information and records by a homeowner must be viewed as pending litigation. What a way to live!!!

    When will homeowners wake up and recognize the fact that their board does not act in their best interests, but in their own under the advice of their attorneys? Why else are they afraid to release written attorney advice?

    And, by the way, it is not the attorney who has the right to invoke confidentiality, but the board’s, which they can refuse to do anytime in the name of transparency, integrity and good faith conduct.

  8. The HOA board’s collusion with the attorney reflects the symbiotic relationship between
    client and attorney which is unethical particularly in view of the violation of ARS33-182.
    If this situation is left unchallenged, the best interests of the HOA membership will
    be diminished in proportion to the refusal of the board to seek more truthful and informative
    disclosure via the Confidentiality of Information statute. Our HOA membership voted out the
    past HOA board due to the board’s failure to act reasonably upon the concerns of the membership and the board’s overzealous reliance on the attorney they hired.

  9. It is clear to us that the attorneys’ letter is a violation of ARS 33-1812. We too have been told on a number of occations that our HOA Board was acting on advice of their attorney. We have yet to see any written opinions. Could your posting be referring to a case of attorneys not wanting to bite the hand that feeds them?

  10. The board of directors, knowing the conduct is willfully unethical, embraces the “result” while seeking a safe-harbor based upon the strained rationale, “he (attorney) is acting under the instructions of his client” and “it (board) is acting upon the advice of our attorney.”

    The pot calling the kettle black?

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