Will AZ Supreme Court address broad HOA issues of constitutionality?

As we approach an October 5th decision to decide to hear the Tarter v. Bendt defamation case[i] that raises free speech and limited- purpose public figure issues, I am hoping that the Court will address the real-world widespread misinformation regarding conditions and the legal status of homeowner associations statutes. This investigation by the Court is essential for a just and fair decision in the defamation lawsuit by an HOA president and attorney. Questions of failing to act in good faith and an abuse of the law by the plaintiff attorney with respect to filing a strategic lawsuit against public participation (SLAPP) was raised in my amicus brief.

This is not an ordinary defamation lawsuit but one involving the actions and conduct by the plaintiff in his capacity as the HOA president  and in the context of matters of HOA governance. In the recent Nevada Supreme Court opinion in Kosor,[ii] the Court held that “HOAs as public forums and the president as a limited-purpose public figure” and further held that an HOA “is a quasi-government entity ‘paralleling in almost every case the powers, duties, and responsibilities of a municipal government.’”

The decision by the Arizona Court will have widespread repercussions and consequences not only for Arizona, but for HOAs  nationwide affecting  statutes in every state. The legitimacy of a democratic country rests on just and fair laws for the people, as Professor Randy Barnett wrote,

A constitution that lacks adequate procedures to ensure the justice of valid laws is illegitimate even if it was consented to by a majority …. A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the HOA amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just.^[iii]

Since the context of the lawsuit relates to the legal status  and constitutionality of the HOA model of government, and to the statutes and CC&Rs “constitution” creating private contractual governments, did Bendt receive justice with a $500,000 award for the HOA president’s “pain and suffering? As applied to HOA statutes and Acts, will this Court heed US Supreme Court Justice Sotomayor’s dissent on the failure to uphold the Constitution?[iv]

“Presented with an application to enjoin a flagrantly unconstitutional law engineered to prohibit women from exercising their constitutional rights and evade judicial scrutiny . . . . Because the Court’s failure to act rewards tactics designed to avoid judicial review . . . . 

“To circumvent it [the Constitution], the [Texas] Legislature took the extraordinary step of enlisting private citizens to do what the State could not . . . .  It cannot be the case that a State can evade federal judicial scrutiny by outsourcing the enforcement of unconstitutional laws to its citizenry . . . .”

This case must be remanded to the trial court for consideration of the impact of HOA bias on the decision against Bendt.

Notes

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[i] See HOA limited-purpose public directors and officers; The continuing saga of Bendt and public speech in HOAs; Pro Se Bendt amicus brief accepted by AZ Supreme Court.

[ii]  Kosor v. Olympia Companies, NV No, 75669 (Dec. 31, 2020).

[iii]  Randy Barnett, Restoring the Lost Constitution, Princeton Univ. Press, (2004).

[iv]  Whole Woman’s v. Austion Reeve Jackson, 594 U. S. ____ (2021) Sotomayor R, J., dissenting, Supreme Court of the United States, No. 21A24 [September 1, 2021]. (Abortion case).

In Kosor the NV appellate court upholds HOAs as public forums

In January of this year I posted the Nevada Supreme Court’s opinion on HOAs as public forums and the president as a limited-purpose public figure (NV supreme court upholds HOAs as public forums).  Last month on an appeal (Olympia v. Kosor, No. A-17-765257-C (Nev. Ct. App. 2021) from the remand, to  let the trial court hear the case on above issues, the appellate Court upheld the supreme courts findings and opinion.

The tremendous constitutional question of free political speech on issues of HOA governance was upheld. Finally! In doing so, the Court also held, citing several cases that [note 1],

• [the HOA]  “is a quasi-government entity ‘paralleling in almost every case the powers, duties, and responsibilities of a municipal government.’”

• the Nevada Supreme Court has found the [the HOA] Board to be in the nature of a quasi-government entity largely paralleling the powers, duties, and responsibilities of a municipal entity and its meetings similar in function to a governmental body.

• homeowners’ associations open meetings are public forums as such associations play ’a critical role in making and enforcing rules affecting the daily lives of [community] residents.’”  

• “the HOA meetings at which Kosor made certain of the statements at issue were ‘public forums’ … because the meetings were ‘open to all interested parties, and … a place where members could communicate their ideas. Further, the…meetings served a function similar to that of a governmental body.”

• In deciding this Motion, this Court also concludes Plaintiffs at least constitute limited-purpose public figures.

• The test for determining whether someone is a limited public figure includes examining whether a person’s role in a matter of public concern is voluntary and prominent.” [as is the case with HOA boards and presidents]

• the issues Defendant raised involve efforts to encourage homeowner participation in and oversight of the governance of Southern Highlands, “an inherently political question of vital importance to each individual and to the community as a whole.”

. . . .

Your HOA cannot stop your free speech if you argue Kosor! Just be careful about making harsh, accusatory statements that violate elements of defamation that will  defeat your free speech.

NOTE 1. Damon v. Ocean Hills Journalism Club, 102 Cal. Rptr. 2d 205, 214 (2000); Cohen v. Kite Hill Cmty. Ass’n, 191 Cal. Rptr. 209, 214 (1983); Pegasus v. Reno Newspapers, Inc., 57 P.3d 82, 91 (2002).

Who’s in charge of the larger HOA? The BOD or CAI?

Over the years I’ve come to believe that the CAI member HOA attorney are really in charge and run HOAs, especially the larger ones where the money really is.  Its influence runs the gamut from its CAI School of HOA Governance,[1] to pervasive lobbying state legislatures, and its CAI Manifesto.[2] The manifesto is its “white paper,” 2020 and beyond, in which it advises its followers to influence state legislators and the courts.

QUOTE “Most legislators do not thoroughly understand common-interest communities or who their patchwork legislation is actually protecting. Legislators too often shoot from the hip, passing laws that ricochet and cause collateral damage. And they will continue to do so in the future unless the CIC interests undertake vigorous lobbying and education programs and awareness campaigns to enhance their understanding.“[p. 7][emphasis added]. UNQUOTE

In 2016 CAI published its survey[3] of large-scale associations (LSA) that revealed some insights into the strength and dominance CAI attorneys who are involved with the policies and operations of LSA HOAs. CAI  defines these associations as having more than 1,000 lots with an operating budget  of $2,000,000 or more, and that “provide municipal type services.”

QUOTE “CAI’s Large-Scale Managers (LSM) Committee . . . provides input on education curriculum, best practices, public policies related to management or operations of large-scale community associations, or identifying what is of value to the large-scale manager membership” [p. 2]. UNQUOTE

By “municipal type services,” CAI explains,

QUOTE “Many municipal governments viewed this new community housing concept as a means to transfer various public works and recreational responsibilities to a third party, which possessed the ability to assess property owners for the administration of these varied services.” UNQUOTE

The facts revealed

You may ask, so what has CAI really done or is this mere words? Based on CAI’s own data in the 2016 LSA survey, with only 94 respondents, readers can see the extent of CAI’s presence in these large scale HOAs — these master planned communities and these active-adult and retirement communities.  Reworking the data, the study revealed that 83.5% use an HOA attorney, which is not surprising for HOAs that can have as many as 9,000 homes or more and revenues that can reach upwards to $20,000,000.

Also not so surprising is that 92.5% of the HOA’s top leaders – president, CAM/COO — are CAI members in a strong case for conflict of interests.  As for senior staff, 64.9% are CAI members, and just 44.7% are on the BOD.  Understand that an HOA can have one or all three categories at the same time.

Consequences

I ask again, who runs the HOA, and where does the BOD’s advice come from if not from the teachings of the CAI School of HOA Governance? I suspect that the smaller the HOA the lower the percentages using an attorney or having CAI member HOA officials. The money isn’t there! 

This translates into follow the money that focuses legislators, the media, the political scientists, and the constitutional law think tanks on the LSA HOAs, treating the smaller HOAs as local nuisances. This is one good reason for failures in obtaining meaningful HOA reforms and even daily operational reforms.

References

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[1] 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.

[2]  Community Next: 2020 and Beyond (May 5, 2016).

[3] Large Scale Associations CAI study, 2016.

Lost HOA Constitution webinar complete videos

This post allows access to 3 webinar videos on Restoring the Constitution to HOA-Land. The quality improves as I go on — it’s the content, the material, that’s important to learn and understand.

For best viewing press the ‘expand’ icon (lower right) for full screen viewing. Place cursor over video to select menu.

Restructuring HOAs: “benefit of the member” pt. 1

Mentoring: “inure to the benefit of the member”

Government of the members

Continuing my discussion of the Declaration’s intent and purpose[1] as expressed by “shall inure to the benefit of the member, ” the question arises as to how does the BOD accomplish this task when it has a contractual obligation to many owners. How can the BOD represent the individual interests of the buyer with those of all existing members? Must we accept the interpretation of “member” in the Declaration to really mean “members”? Really!

This concern is of importance and not a mundane, trivial concern because it involves concepts and principles of representative democracy, as claimed by HOA proponents, the will of the people doctrine, vote of the majority, and obedience in conscience. It is relevant because the HOA is not subject to municipal law or the Constitution, but under a binding, private contractual agreement. HOAs are allowed to exist as outlaw governments, operating and functioning outside the laws of this democracy.

Much too often the courts and legislatures have treated the HOA as if it were a municipal government, ignoring the CC&Rs contract and misapplying municipal doctrine and precedent; without applying those aspects of the laws that protect the member’s constitutional rights. For example: allowing the HOA to tax its members — called assessments — with a right of draconian foreclosure, but providing a laughable “due process” known as “a right to a hearing” where the judges are the accusers and judicial civil procedure is an unknown.

Ask yourself: Is this the benefit being provided in the best interests of the members? I think not! And the legislatures do not have clean hands in this matter, not at all!

Maintaining an orderly HOA

The philosophical theory, simply stated, behind a democracy as a direct democracy is the voice of the people. But what does that really mean? First, it means each person gets to have his voice heard in the governance of his community or society along with all others. And that combined, aggregated voice is measured not so much as by shouting but by a vote of the hands or a ballot. Second, our US representative democracy the people elect representatives to speak their voice. In HOA governments members choose a board of directors to govern the HOA as their elected representatives, or their voice.

In both cases the practical application of the voice of the people has been reduced to a vote of the majority and the majority rule doctrine.[2] These were issues that the political philosophers of the Age of Enlightenment — Rousseau, Montesquieu, Voltaire, Adam Smith — had to contend with as necessary for an orderly society even though it was not a true, direct vote of the people. But what about the minority, those who disagreed with the majority position? Well, they had to obey the general will of the people represented by the majority even though they were on the losing side.[3] However, they may not agree in conscience especially if they firmly believe the law is unjust and not fair.

Former AG Meese wrote,

Through deliberation, debate, and compromise, a public consensus is formed about what constitutes the public good. It is this consensus on fundamental principles that knits individuals into a community of citizens.^[4]

Where is the consensus of the HOA members to constitute the public good? To knit individuals into a true community? Surely not by a hand-me-down contract that the buyer must accept as is without any give and take.

Randy Barnett, Director of the Georgetown Center for the Constitution, wrote,

A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the HOA amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just.[5]

With respect to the courts and legislatures upholding tacit (implied) consent, Keith Wittington, Prof. Politics at Princeton, wrote,

Tacit consent purports to provide a rationale for obligating those of us who, by chance or choice, have not made their approval of the government explicit. . . . Perhaps most significantly, we are taken to have consented tacitly to government action if we continue to vote for government.[6]

Understand that when your HOA says the majority rules maintaining that it represents the voice of the owners just remember it’s just a means to maintain an orderly society and to grant the board the authority to govern. What about a member’s agreement in conscience?

This topic continues with Restructuring HOAs: “CAI influence on member benefits” pt. 2 with the CAI School to be posted soon.

Notes

[1] See “Restructuring HOAs – intents and purposes,” George K. Staropoli, HOA Constitutional Government (Feb 2020).

[2] State laws governing corporations provide the legal basis for BOD authority and powers. Robert’s Rules provides widely accepted procedures based on majority rule.

[3] For a summary of the will of the people see my Commentary, HOA consent to agree vs. “the will of the majority”. For a detailed discussion of agreement in conscience and consent to agree see Randy Barnett, Restoring the Lost Constitution, Princeton Univ. Press, (2004); Keith E. Whittingham, “Chapter 5, Popular Sovereignty and Originalism,” Constitutional Interpretation, Univ. Press of Kansas (1999); Edwin Meese III, “What the Constitution Means,” The Heritage Guide to the Constitution (2005).

[4] Id, Meese.

[5] Supra n. 3, Barnett.

[6] Supra n. 3, Whittington.