awarding HOA attorney fees and public policy

This Maryland Court of Appeals (equivalent to other states’ supreme court) case[i] discuses the topic of awarding reasonable HOA attorney fees,  public policy, and when exorbitant fees may be awarded.  “In each case, the Associations won affidavit judgments against the Residents in ‘largely uncontested’ proceedings. The Associations also sought attorneys’ fees from the Residents in those courts, calculated according to the ‘lodestar method.'” (Emphasis added).  Note the HOA’s arguments to justify their attorney’s fees.  

First, the generally accepted method to determine attorney fees is known as the Lodestar Method as set forth by the US Supreme Court:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

 

Second, there is the underlying premise, presumption, of “fee-shifting” that holds, as stated by the Court (emphasis added),

[T]hat the lodestar method of calculating attorneys’ fees was generally appropriate in the context of fee-shifting statutes. This holding is justified by the public policy underlying most statutes that allow for fee-shifting. Fee-shifting provisions frequently apply in “complex civil rights litigation involving numerous challenges to institutional practices or conditions.”

A court’s application of the lodestar method in these cases “is designed to reward counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that [other methods] would provide inadequate compensation.

 

However, the Court saw it as inappropriate, stating (emphasis added),

The policy considerations mentioned above do not apply here because these cases do not involve a fee-shifting statute . . . . It is by contract, not because of public policy, that the Residents are obligated to pay attorneys’ fees to the Associations.

 

But, the HOA responded with (emphasis added),

[These cases] are sufficiently related to advancing the public interest to justify use of the lodestar method in determining reasonable attorneys’ fees.  [And] that “[h]olding delinquent owners accountable for paying their share of association assessments supports social benefits that extend far beyond the association itself.” . . . [H]omeowners associations provide public services such as street maintenance and security, thus relieving local governments of those obligations.

 

The Court’s rebuttal said,

We are unpersuaded [sic] that any tangential benefit the Associations may provide to local government or to the public is sufficient to justify use of the lodestar method in awarding the fees for their attorneys. . . . The fact remains that this litigation arises from disputes between private parties over breaches of contract.

Our rejection of the lodestar approach does not mean that the time spent by the lawyers and a reasonable hourly rate should not be an important component of a court’s analysis.

Courts should use the factors set forth in Rule 1.5 [MD Rules of Professional Conduct on reasonable attorney fees] as the foundation for analysis of what constitutes a reasonable fee when the court awards fees based on a contract entered by the parties authorizing an award of fees

Rule 1.5 does not carry with it the notion that the importance of the right vindicated will justify an expenditure of attorney time that is hugely disproportionate to the dollar amount at issue in the case.

Trial courts are not bound by the monetary amounts in such contracts [that state an amount for the attorney fee] , however, and need not cleave to the contracts at all if they improperly influence the fee award.


[i] Monmouth Meadows HOA v.  Hamilton, Nos. 43, (Md, July 27, 2010). (Three consolidated  cases decided in this decision.)  See Leagle.com  http://www.leagle.com/unsecure/page.htm?shortname=inmdco20100727254.

Confederate Texas and HOA governments: de facto, unlawful governments

I have argued that HOAs are a second form of illegitimate and unlawful, de facto local political governments.  Randy Barnett, a constitutional scholar, wrote: “Only if it is legitimate can an existing constitutional system issue commands to the citizenry that bind individuals in conscience.”[i]   The HOA government legitimacy rests on just “laws” respecting the rights and privileges of the people without violating the rights of others; that their member’s acquiescence to obey these unjust laws and covenants cannot be misconstrued and interpreted as having consented in good conscience to have so agreed.                                                                                    

I have also argued that, under “government”, Black’s Law Dictionary offers the simple definition:  “The structure of principles and rules determining how a state or organization is regulated.” And, to clarify by what is meant by a “state”, Black’s speaks in the same terms of the differences in function that distinguishes an association from that of the state, and of the need to determine the “essential and characteristic” activities and purposes of a state. A state, according to Black, is a community of people established for “securing certain objectives  . . .  a system of order to carry out its objectives.” Nothing-new here, but Black’s then goes on to say: “Modern states are territorial; their governments exercise control over persons and things within their frontiers” (emphasis added).  And Black cautions not to confuse the “state” with other communities of people in other forms of organizations designed to accomplish other objectives.

What has come to light since these earlier Commentaries, is the US Supreme Court interpretations of “state” and “government” in a question of the legitimacy of the secessionist State of Texas, in regard to the sale of  bonds by Confederate Texas.)

The Court reasoned (emphasis added),

It [a state] describes sometimes a people or community of individuals united more or less closely in political relations, inhabiting temporarily or permanently the same country; often it denotes only the country or territorial region, inhabited by such a community . . . .

The people, in whatever territory dwelling, either temporarily or permanently, and whether organized under a regular government, or united by looser and less definite relations, constitute the state . . . . A state, in the ordinary sense of the Constitution, is a political community of free citizens, occupying a territory of defined boundaries, and organized under a government sanctioned and limited by a written constitution, and established by the consent of the governed.[ii]

This 142 year-old opinion supports Black’ definition and the essential characteristic that makes an entity a government:  a government is the person or group that controls and regulates the people within a territory.  While the functions and services provided by a government are shared with many other entities, such as businesses per se and nonprofit organizations, this definition “separates the chaff from the wheat.”[iii]  HOAs are the governing body of subdivisions that are subject to covenants;  subdivisions are territories, plain and simple.

The Supreme Court further held, with respect to lawful and legitimate actions by de facto governments, and  Confederate Texas was so considered,

It may be said, perhaps with sufficient accuracy, that acts necessary to peace and good order among citizens . . . which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual [de facto], though unlawful government; and that acts . . .  intended to defeat the just rights of citizens, and other acts of like nature, must, in general, be regarded as invalid and void.

 

In other words, the acts and actions by a de facto and unlawful HOA political government have validity to the HOA “citizens,” unless these acts and actions defeat the rights, freedoms, privileges and immunities of the people, the HOA members.  The people are still subject to the Constitution in spite of all those arguments that the Constitution is negated by private contracts.  This view is consistent with Barnett’s arguments for obedience in conscience.

Unfortunately for our “Modern Times,”  there is a great division within this country, not this time between the Blue and the Grey, but between the Blue and the Red — the major political parties.  This great division, this Second Civil War as author Brownstein titles his book[iv],  is a war of ideology and dogma — as in the case with HOA “true believers” —  coming before “for the good of the county” and the people.

Notes


[i] See The legitimacy of HOA boards and state legislatures, George K. Staropoli, citing Randy E. Barnett, Restoring the Lost Constitution: The Presumption of Liberty, Ch. 2 (Princeton University Press, 2004).

[ii] Texas v. White , 74 U.S. 700 (1868).

[iii] Government is defined by a “social contract”; HOAs by the new social contract, the CC&Rs, George K. Staropoli (included as Part III, “American Political Governments”, in The Foundations of HOAs and the New America.

[iv] Ronald Brownstein, The Second Civil War: How Extreme Partisanship Has Paralyzed Washington and Polarized America (Penguin Books 2007).