How legislative Rules committees abort democratic HOA reform bills

In the interest of public education on the functioning of state legislatures, this paper presents information on the rules governing state legislatures — using Arizona as a representative example — that affect passing bills into law.  I focus on the Rules committee’s powers to obstruct the voice of the people, and how it can prevent — kill — HOA reform bills by the actions of the political party leaders.

The powers of the Rules committee are undemocratic and authoritarian  in nature designed to thwart, apparently, the folly of the voice of the people.  We see the same undemocratic, authoritarian powers granted to HOA boards to an even greater extent,  The national lobbying group’s promotion of the “business judgment rule,” and acceptance by the courts, is a prime example.[1]

Exhibit 1 details the Rules powers that can prevent HOA reform bills, and any other bill not liked by the powers that be, from a hearing and vote by the full chamber — by the people’s representatives. As I wrote earlier[2], Arizona’s HB 2052, a bill that has in reality been killed in the Rules committee after unanimous approval by the House and Senate government committees, is a prime example of this misuse of authority.

The Senate Fact Sheet “intro” paragraph misrepresents the content of the bill:

“Expands statutory restrictions on condominium unit owners’ association and planned community association (HOA) regulation of political signs to include signs related to certain community activity. Prohibits an HOA from prohibiting door-to-door community activity”.

Of the 8 listed “Provisions,” 2 are technical, 2 relate to political signs, and 4 — given a short sentence in the “intro” —  expand on HOA restrictions and prohibition’s protecting free political speech and expression, in the HOA public forum,[3] as curtained in my earlier “Senate Protects” posting.[4]

. . . .

The Arizona Legislature, and each and every state legislature, is  not a sovereign that can do no wrong, but has duties and obligations sworn to under oath “to establish justice . . . and secure the blessings of liberty” for the people of its state. It cannot demand respect but must earn it through good deeds.  Passing HB 2052 into law would be a sign of good faith that would earn the respect of the people.

Exhibit 1.  Arizona Legislative Council publications

“In the Senate, bills are usually not “held” in the Rules Committee for partisan or political purposes; bills which go into the Rules Committee are almost always reported out. In the House, the Chairman of the Rules Committee can “hold” (read “kill”) a bill simply by not giving it a hearing. (p. 52).

“The options of the committee chairman are a) Hear the bill and vote on it, b) Hear the bill but take no action, c) Assign the bill to subcommittee, d) Not hear the bill.  (p. 39-40).”

“The Role of the Rules Committee,”  State Senator Randall Gnant, From Idea to Bill to Law (2000). (As of April 2021).

“Each measure is assigned to the Rules Committee of the house through which it is progressing . . . . The Rules Committees assess the constitutionality of the proposed legislation. Unless they are withdrawn or discharged, all bills must pass the Rules Committee before they are heard on the floor. (p.41-42).

“An Active Calendar of the Committee of the Whole (so called in both houses) consisting of bills the Speaker or President selects for consideration by the respective Committee of the Whole (COW).

“A calendar consisting of all bills and other measures that have been reported from the committees. In the House this is called the “House Calendar.”  In the Senate it is called the “Calendar of the Committee of the Whole.” These calendars are simply a list of bills and other measures that are ready for further action by the full chamber.” (p.42-43).

Arizona Legislative Manual 2003 Edition, Arizona Legislative Council (2003). (As of April 2021).

Notes


[1] See, Reorienting the HOA board: business judgment rule (2020).

[2] See, AZ Senate protects HOA misconduct rejecting HB 2052; Arizona HB 2052 restores homeowner constitutional speech protections.

[3] See court holdings: Calif. holds HOA elections as protected free speech public elections (2019); NV supreme court upholds HOAs as public forums (2021).

[4] Supra n. 2, AZ Senate Protects.

Reorienting the HOA board – fair elections

Mentoring: Reorienting the HOA board – fair elections

I cannot overstate the profound damaging effect of the boilerplate CC&Rs covenants – the HOA-Land fair elections doctrine — that define the highly inadequate process and procedures alleged to be fair elections and approved by the member. In a democracy, the fair elections doctrine is the means for the expression of the will of the people and the consent to be governed by the HOA’s members. It is the fundamental basis for a valid consent to be governed. Unjust BOD biased election procedures deny the legitimacy of the HOA-Land doctrine.

In Dublirer the NJ Supreme Court held,

Dublirer’s expressional activity was ‘political-like speech’ because it related to the management and governance of the common-interest community. . . . [Dublirer’s] message was akin to and should be treated as political speech, which is entitled to the highest level of protection in our society. . . . If anything, speech about matters of public interest, and about the qualifications of people who hold positions of trust, lies at the heart of our societal values. . . . We therefore find that the Board’s House Rule violates the free speech guarantee in New Jersey’s Constitution.[1]

In California the appellate court held,

A homeowners association board is in effect ‘a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government’ (citing Cohen v. Kite Hill Community Assn).”[2]

Democracy Web[3] clarifies the importance of fair elections in a democracy.[4]

If consent of the governed is the most fundamental concept of democracy, its most essential right is that of citizens to choose their leaders in free, fair, and regular elections. Other rights are necessary to democracy; elections by themselves are insufficient. Yet the right to freely elect one’s representatives and to influence the political direction of one’s government is democracy’s indispensable political foundation.

Without free elections, there is neither the possibility for citizens to express their will nor the opportunity for citizens to change their leaders, approve policies for the country, address wrongs, or protest the limitation of their rights. Elections establish the citizenry’s and the individual’s political rights. They are the ongoing representation of the consent of the governed

As it stands HOAs cannot be described as a democracy, or a democratic business as CAI’s Tom Skiba(CEO) alleged,[5] so long as the current fair elections doctrine remains in place.

Community associations are not governments — many years of legislation and court rulings have established that fact beyond a reasonable doubt. Yet they are clearly democratic in their operations, electing their leadership from among the homeowners on a periodic basis.

In an unbelievable doubletalk and excellent example of the pot calling the kettle black and Orwell’s DoubleSpeak, Skiba asserts,[6]

The solution to that problem is not to replace democracy with tyranny, royalty, or some other form of government, but to work to make the democratic process better and to hold those elected accountable. . . .

I for one prefer the democratic principles that have served this country for more than 230 years, as frustrating as the process can sometimes be, rather than the various failed alternatives washed up on history’s shores.

In addition, while the appellate court upheld California’s HOA fair elections statutes,[7] the California CAI Legislative Action Committee opposed the decision in support of democratic functions in HOAs.[8]  And not unexpectedly, this “front-line” position is in conflict with the CAI policy:

Community associations are one of the most representative and responsive forms of democracy in America today. Residents of a community freely elect neighbors to serve on the board of directors of the community. Numerous other owners or residents  serve on committees and help with special tasks as they arise.”[9]

Simply unbelievable! Believable!

State legislation to reform HOA fair elections

I am well aware, and you may raise the fact, that state laws and CC&Rs vary quite a bit in regard to voting and director elections. Some say very little except quorum requirements and secret or mail-in ballots; some require independent elections committees and vote counters, or the right to view the ballots, etc. but they all hold true to the Handbook that places strong control within the hands of the BOD. This is especially true when the BOD must approve candidates or propose amendments or rules without real member participation and voice.

Attempts to correct these injustices are found in many states. I am pleased to see that 2 legislators (Assemblyman Bob Andrzejczak and Bruce Land) in the NJ Assembly understand HOA constitutional issues and have sponsored a bill, A-3163 (2013), accordingly. The Cape May County Herald[10] reports,

Homeowner’s Associations must operate under similar rules and procedures as other governing bodies,” Andrzejczak said.  “A resident’s interest and right to approve and elect board members must be preserved. And setting clearer, more fair and unified set of rules for board elections and a clarifying a resident’s ability to recall will help to do just that.

Homeowners living in developments are still consumers and must be protected under the law,” said Land. “Ensuring their right to fair elections and protecting their right to choose board members, who will make decisions on their behalf, is a measure of consumer protection that they simply deserve as property owners.

California’s SB 323 (2019) fair elections bill was made law stating, in part,

A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by the association. . . . Section (b) is modified to read, “A member who prevails in a civil action to enforce the member’s rights . . . the court may impose a civil penalty of up to five hundred dollars ($500) for each violation.”

Arizona’s SB 1412, making progress at the legislature, also seeks political content protections in HOA politics. It seeks to prohibit HOAs and condos from restricting political free speech. Members are permitted to associate, meet, discuss, show signs regarding political activity.  Key wording:

“AN INDIVIDUAL MEMBER OR GROUP OF MEMBERS MAY ORGANIZE TO DISCUSS OR ADDRESS PLANNED COMMUNITY BUSINESS, INCLUDING BOARD ELECTIONS OR RECALLS, POTENTIAL OR ACTUAL BALLOT ISSUES . . . .”

Why are these unjust and unconstitutional covenants, conditions and restrictions allowed to stand?   The misguided mission and vision statements meant to deceive; the failure to act in the interest of the members; the failure to reject the business judgment rule[11] that serves to protect the BODs over the rights of the members; and the employment of the inequitable HOA fair elections doctrine that deny a genuine consent of the governed.

The answer is obvious to those willing and able to handle the truth. The vast majority of the members have lost their freedom of mind.[12] They appear to be RWA followers[13] of the authoritarian[14] BOD. They have been thoroughly indoctrinated into the teachings of the CAI School of HOA Governance[15] where real estate attorneys provide advice on how to run the HOA and what’s good for the community.

All the more reason for this seminal position paper, Restructuring the HOA Model of Governance. All the more reason for a restructuring of the HOA model and a reorienting of HOA directors and officers to return lost constitutional principles.

 

Notes

[1] Dublirer v. 2000 Linwood Avenue Owners NO. 2011 069154 (N.J. 2014).

[2] Damon v. Ocean Hills, 102 Cal.Rptr.2d 205 (2000).

[3] Democracy Web emerged from the longstanding effort of the Albert Shanker Institute (ASI) and its founding organization, the American Federation of Teachers (AFT), to foster education for democracy in America’s schools. (Scroll down to About).

[4] Democracy Web,  scroll down to Essential Principles.

[5] Tom Skiba, Community Associations Institute Blog, Ungated, April 2, 2008.

[6] Id.

[7] Wittenberg v. Beachwalk HOA,  NO. G046891 (Cal. App. 4th Dist. June 26, 2013).

[8]Appeals Court Ensures Equal Access During Elections”, Blog of the Community Associations Institute California Legislative Action Committee, July 9, 2013.

[9] Section 8 in An Introduction to Community Association Living (2006),

[10] Herald.com (Cape May County NJ, Dec. 8, 2016).

[11] See Reorienting the HOA board: business judgment rule in the Plan.

[12] See “Cultural Dynamics of HOA-Land,” The HOA-Land Nation Within America (2019); HOA Social Dynamics — Freedom of mind pt. 1 (2020) George K. Staropoli.

[13] Robert Altemeyer, The Authoritarians, (2007).

[14] See HOA political dynamics: totalitarian democracy, George K. Staropoli (2019). “Followers submit too much to the leaders, trust them too much, and give them too much leeway to do whatever they want–which often is something undemocratic, tyrannical and brutal.” See survey on HOA authorianism,

[15] The foundation and principles of the School can be traced back to CAI’s Public Policies, The CAI Manifesto (its 2016 “white paper”), its numerous seminars and conferences, its Factbooks and surveys, its amicus briefs to the courts, and its advisories, letters, emails, newsletters, blogs etc. I have designated these foundations and principles collectively as the CAI School of HOA Governance.

Reorienting the HOA board: business judgment rule

Mentoring: Reorienting HOA board – business judgment

consulting SIG image1HOAs love business judgment rule (BJR) that can be found in too many court opinions including, as a prime example, the infamous NJ Supreme court opinion in Twin Rivers.

First, the business judgment rule protects members from arbitrary decision-making. . . . Our Appellate Division has uniformly invoked the business judgment rule in cases involving homeowners’ associations.[1]

In CAI’s amicus brief in the above case, argued that “the settled legal principles” of the business judgment rule

permit community association trustees to fulfill their fiduciary duties and to exercise judgment in balancing the needs and obligations of the community as a whole with those of individual homeowners and residents, without undue judicial interference.[2]

As can be noted, the CAI brief equates the HOA interests with the members’ interests and that it is acting in the best interests of the members subject to “the needs and obligations of the community.” Sort of confusing doubletalk me thinks.

Wayne Hyatt is quoted (p. 9) that the business judgment rule

defends the procedure under which the board has acted and the right of the board to be the sole arbiter of the issue involved. The result is that if the procedure is valid, the court will not second guess the substance of a board’s action. Consequently, the court upholds the decision without subjecting the wisdom of the board’s action to judicial scrutiny.[3]

In California’s Lamden v. La Jolla,

[A] hallmark of the business judgment rule is that, when the rule’s requirements are met, a court will not substitute its judgment for that of the corporation’s board of directors. . . . [A]nyone who buys a unit in a common interest development with knowledge of its owners association’s discretionary power accepts ‘the risk that the power may be used in a way that benefits the commonality but harms the individual.’ “[4]

I cannot overstate the profound damaging effect by the courts as they continue to ignore HOAs as de facto governments and treat them as a pure real estate corporation. The School has performed an excellent job in creating a supportive mindset. Their demonstrable ignorance can only stem from the thorough indoctrination by the CAI School of HOA Governance that flows from the HOA “bible,” The Homes Association Handbook (cover page link).[5]

The BJR serves to protect the BOD from member lawsuits where the issues center on the BOD’s broad discretionary powers. Essentially the basis of BJR presumes that the BOD knows better about managing the HOA than the judge and, after all, the members chose the directors. In a cop-out not me attitude the judge simply goes along with the BOD’s position. YOU LOSE!

It is a very effective argument, tactic, because the homeowner and his attorney do not challenge this view that the BOD knows best. There is no rebuttal arguing that the BOD is practicing bad management, or is acting inconsistent with their obligation to act in members best interest – not in the best interest of the HOA. There is the presumption that the members’ interests are totally found in the governing documents and none other exist. It is an attitude in contrast to our Bill of Rights, Amendments 9 (enumeration clause) and 10 (rights delegated to the people).   Under the HOA “constitution,” any non- specified prohibitions or rights belong to the HOA and not its members.

Once again I’m touching upon a defect in the HOA legal scheme. Under corporation law the BOD is responsible to the HOA association. True! But the CC&Rs override that law. Why?  Let’s not forget that we have a PRIVATE contract agreed to by the members requiring the BOD to function in the best interest of the members.[6]  The private contract defense works for the members and not the BOD What’s fair is fair! Right?

In order to move past many of the persistent HOA problems and issues the BOD, as well as the legislators and courts, must adjust their views and mindset with respect to the HOA scheme. To restore equality before the law HOAs must be viewed as another form of local public government. The reorientation of the BOD comes first. There are ample materials, courses, seminars and public education, a substantial precedents and history on how to function as a public government and still protect and retain the private nature HOA community.

Notes

[1] CBTR v. Twin Rivers, 929 A.2d 1060, II, (N.J. 2007).

[2] CAI amicus brief, CBTR v. Twin Rivers (N.J. Super. App. Div. Docket C-121-00 2004).

[3] Id.

[4] Lamden v. La Jolla, 980 P.2d 940, Calif. 1999).

[5] The Homes Association Handbook, MARYJO CORNISH, Editor, Urban Land Institute, TB#50 (1964). Its Foreword omits any concern about the homeowners or constitutional government. See cover pages that provide evidence of lack of local government concern as part of the purpose of TB50. See Analysis of The Homes Association Handbook.

[6] See “HOA contractual mission” in Restructuring HOAs – intents and purposes.

The intent of the HOA “bible”, the Homes Association Handbook

I have quite often made reference to the 424 page Homes Association Handbook of 1964 as the HOA “bible.” It provided the fundamental basis for the mass marketing of HOAs and as the legal basis for the common place boilerplate CC&Rs.  It has everything for everyone except the HOA lot owners, the mandatory members.

The following is an excerpt from its Foreword by the ULI president says it all.

It is our firm belief that the information and recommendations contained in the handbook will be of major value to land developers, planners, home builders, appraisers, mortgage lenders, realtors, attorneys, association officers, and public officials concerned with the planning, development, and operation of stable and attractive residential areas for the home owner and the community.

See the cover pages here.

As can be noted from the above, the CAI brief equates the HOA interests with the members’ interests and that it is acting in the best interests of the members subject to “the needs and obligations of the community.” Sort of confusing doubletalk me thinks. Once again I’m touching upon a defect in the HOA legal scheme. Under corporation law the BOD is responsible to the HOA association, but we have a PRIVATE contract agreed to by the members that the BOD functions on the best interest of the members.

 

 

 

 

HOA attorney seeks homeowner arrest for not attending attorney fee meeting

In this instance, how does the court, in its obligation to do justice, determine if there has been dishonesty or grossly negligent behavior without an opportunity for the homeowner to examine the HOA’s affidavit?  Here, both judges protected the HOA as incapable of doing any evil, sua sponte (on its own).

Essentially, in my view, failing to allow the homeowner to question the signed affidavit of an HOA manager is not conducive to homeowner justice.  The liberal interpretation of the business judgment rule taken here is that, as I’ve indicated elsewhere, the board can do no wrong because average people become angels when they become an HOA board member.[1]

In order to understand the events in this situation leading to the request for the arrest of the homeowner for failing to attend a meeting, you need to understand the background of the case.  It’s lengthy, but needs to be read through.

Case History

The Arizona ALJ (Brian Brendan Tully) at OAH granted summary judgment (October 2012) for Terravita in regard to a request for minutes to an alleged executive meeting.[2] The order further states that the judge “concludes that . . . there are no issues contained in the Petition that require an evidentiary hearing.”  However, without an evidentiary hearing, where the homeowner could contest the allegation that it was indeed an executive meeting, the judge essentially took the word of the HOA’s attorney, the CAI member, Curtis Ekmark. In his discussion, the judge once again assumes the validity of Ekmark’s assertion that it was indeed an executive meeting, and argues that the homeowner did not show he had a legal right to executive minutes.

In Arizona, the court operates on a notice basis, that is, just give sufficient information that the complaint is valid, and then present your detailed evidence before the court.  That was not allowed in this case.

Homeowner filed superior court appeal[3] contesting the ALJ’s decision as “contrary to law, an abuse of discretion, arbitrary and capricious.”  

6. Administrative Law Judge Brian Brendan Tully’s October 4, 2012 Decision in 12F -H 12120 14-BFS, based exclusively upon certain “statements, claims and contentions (sic)” made by Respondent, Terravita Community Association, Inc., in its pleadings, denied Petitioner (Plaintiff) a hearing which would have brought forward the facts of the contested matter based upon evidence, witnesses’ sworn testimony and argument upon the merits of the matter’s facts and the planned community statutes relevant to those facts, instead, Tully vacated the matter from the calendar of the Office of Administrative Hearings.

 The homeowner further argued

 Plaintiff [homeowner] will timely request this Court hold an evidentiary hearing that will adduce evidence, present sworn witness testimony and offer argument in furtherance of the Court reversing the decision in 12F-H1212014-BFS and the agency’s action based upon the Court’s reviewing the administrative record (no hearing/no transcript) and evidence to be presented at an evidentiary hearing denied Petitioner at the OAH

Terravita’s relevant Answer was a reliance on the business judgment rule, which states that the court will defer the judgment of a corporation’s board as they know more than the judge.  In its reply to a request for an evidentiary hearing, Ekmark says homeowner must show the evidence that was already rejected by the ALJ as irrelevant.  (Remember the issue was a declaration that the meeting was an executive meeting and the ALJ didn’t want to hear anymore).   Ekmark concludes with, “Mr. Brown [homeowner] has had ample opportunities to present facts contrary to the Association’s position; yet, he has completely failed to do so.”  Did he???

Brown’s reply, beyond a criticism of Ekmark’s arguments about new evidence and failure to show evidence, got to the obvious legal question of the faithful acceptance of a statement without the right to a hearing on the validity of the statement:

[T]he presentation of evidence is necessary to the Court’s findings of fact and conclusions of law in furtherance of a just decision to include, but not limited to, the veracity of the affiant’s affidavit, an affidavit prepared under the supervision of  the Defendant-Appellee’s attorney, submitted with the Defendant-Appellee’s Answer (Pollock, a credentialed community manager, PCAM, CAAM, attended the March 27, 2012 meetings [Executive Session and Regular Meeting] of the board of directors and knew, or should have known, the “e-session” violated the planned community statutes).

However, the superior court appeal found no error and upheld the ALJ’s summary judgment decision.  “TCA has provided to this Court authorities and arguments in support of its position. This Court concludes the authorities and arguments provided by TCA are well-taken, and this Court adopts those authorities and arguments in support of its decision.”  (Judge McClennen of 11-22-2013). The judge apparently, like the ALJ, ignored the homeowner’s allegations.

Under R  Civ. P. 43(a), an affidavit is a written statement by a witness in lieu of the witness appearing in court in person. The opposing party must stipulate to the acceptance of an affidavit to be accepted by the court as evidence.  Rules of Evidence, Rule 609, allows for the impeachment of a witness. This did not allowed to occur here.

An appeal was filed by Brown on 7-14-2014, CA-CV14-0455, Div.1.

Arrest Warrant

Apparently, the HOA attorney firm of Ekmark & Ekmark wants their fees paid as per the court ruling. On August 8, 2014 it filed several documents with Judge McClennen for contempt of court for failing to submit to a subpoena to attend a debtor’s meeting (to discover how the attorney would collect its fees), and the arrest of Mr. Brown for contempt.  All over a question of the legitimacy of an executive board meeting.

According to the homeowner, who apparently did get access the Terravita’s financials and moneys spent on attorney fees for this litigation, the attorney fees amounted to $57,344.10.  Of course, the HOA has no cause for alarm since it won the case and does not have to pay this amount.  But, if it loses in the appellate court, what then?  HOA litigation is a gamble in favor of the HOA, and joy to the attorneys cause they get paid win or lose.

BTW, Judge McClennen washed his hands of jurisdiction on August 11, 2014 after receiving the filings from Ekmark.  “This Court no longer has jurisdiction and will take no further action in this matter.”

References

[1] Business judgment rule misinterpretation. In my commentary on the business judgment rule, Illinois appellate court awards punitive damages for reckless indifference by condo, I quoted the court’s reminder about what this rule means:

 “The rule protects directors who have been careful and diligent in performing their duties from being subjected to liability for honest mistakes of judgment. . . . [But where there is] evidence of bad faith, fraud, illegality, or gross overreaching, courts are . . . at liberty to interfere with the exercise of business judgment by corporate directors.”

 [2] Brown v. Terravita, No. 12F-H1212014-BFS, Administrative Law Judge Decision, Office of Administrative Hearings, October 4, 2012.

[3] Brown v. Terravita, LC2012-000699, Maricopa County.