A homeowner, Lois Brenner, sued her association and the management company
for negligence and also sued the individual board members for breach of
fiduciary duty because of alleged failure to maintain the common areas,
which allegedly resulted in airborne mold. She requested the association
make the repairs to both the common area and her damaged separate interest.
“The association refused to repair the damage and disclaimed responsibility.”
The trial court did not permit Ms. Brenner to pursue her suit against the
individual board members, however it did permit her to continue the suit
against the association and management company. She appealed the trial
court’s refusal to permit the action to proceed against the individual
board members. The appellate court upheld the trial court’s decision.
The appellate court used the business judgment rule to uphold the decision.
This rule provides protections to the board members when they act in good
faith, in the best interests of the association, and with reasonable investigation
of the issue. Thus, the court held that Ms. Brenner had to prove “fraud,
bad faith, overreaching or unreasonable failure to investigate material
facts. Conclusory allegations of improper notice are not sufficient, nor
is it enough to generally allege a failure to conduct an investigation.”
Ms. Brenner could not show such misconduct by the individual board members;
therefore, she had no case against the individual board members for breach
of fiduciary duty. Associations should be mindful that had she stated
the required facts, the court would have permitted to the case against
the board members to continue.
This case provides a good example of the protections applied to the volunteer
board members. It also, however, shows how a board’s actions or
omissions can result in a lawsuit against the association. Thus, while
individual board members may enjoy liability protections, the association
can still be found negligent for those acts or omission, which may cost
the association (and thus the members) legal fees, costs, and damages.
The best course of action is to be proactive, comply with all duties required
by the law and governing documents, contact the proper professions to
consult and obtain opinions before the issue turns into a larger problem,
keep up with maintenance of common areas, and look out for the best interests
of the members.
Brenner v. Peet-Thompson (2015) 2015 WL 8038845, *1 (unpublished).