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Who Pays the Bill? When you can Recover Attorneys’ Fees and Costs in Enforcement Actions

Hannah I. Hughes, Esq.

Attorney

858.527.0111
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Practice: Civil Litigation

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Although there are numerous factors a board of directors of a community association should consider before filing a lawsuit, one of the biggest factors is whether or not the association can recover its attorneys’ fees and costs. The standard rule is that absent a statutory or contractual provision providing for otherwise, the “American Rule” is that each side covers its own fees and costs.

Participating in a lawsuit, regardless of whether you are the plaintiff or defendant, can quickly become costly. Court motions, hearings, and discovery, can be very time intensive and your attorneys’ fees bill may quickly add up. Can a community association ever recover the attorneys’ fees and costs incurred in filing or defending a lawsuit to enforce its governing documents?

The short answer is: yes, a community association can recover attorneys’ fees and costs when enforcing its governing documents or the Davis-Stirling Common Interest Development Act (the “Davis-Stirling Act”). When a party enforces the governing documents or the Davis-Stirling Act against a member, the prevailing party is statutorily entitled to an award of attorneys’ fees and costs. (See California Civil Code section 5975(c)).

In addition to certain statutory rights for a prevailing party to recover attorneys’ fees and costs, most governing documents will include language stating that a prevailing party in a lawsuit to enforce the governing documents is entitled to recover the attorneys’ fees and costs incurred in doing so. However, be aware that both statutory and contracted recovery of attorneys’ fees and costs are reciprocal—meaning if the other party is determined by the court to be the prevailing party, the community association will have to pay the other side’s attorneys’ fees and costs.

In California, a “prevailing party” is defined as “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court…” (California Code of Civil Procedure section 1032). Importantly, the prevailing party is entitled to reasonable attorneys’ fees and costs calculated from the prelitigation Alternative Dispute Resolution. (Grossman v. Park Fort Washington Assn. (2012) 212 Cal.App.4th 1128). Ultimately, while a “prevailing party” is entitled to its reasonable attorneys’ fees and costs, the Court retains the ultimate discretion in the amount to award the prevailing party.

Although a community association’s right to recover attorneys’ fees and costs as a prevailing party in an enforcement action may be statutorily or contractually protected, there are several other actions a community association can take to ensure it is protected in recovering attorneys’ fees and costs. For example, if your governing documents have not been restated in several years and do not include an attorneys’ fees provision, we recommend you consult with an attorney at Epsten, APC who can assist you in restating your governing documents. Additionally, having your attorney draft an attorneys’ fees provision in any contracts you may use.

You’ve Been Served – An Article to Supplement Epsten, APC’s Litigation Checklist

Hannah I. Hughes, Esq.

Attorney

858.527.0111
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Practice: Civil Litigation

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“You’ve been served” are three little words that no one wants to hear. But what exactly does that mean and what should you do when you are served with a lawsuit?

Our firm has created a checklist for when you have been served with a lawsuit, which can be located here: https://www.epsten.com/youve-been-served-lawsuits-checklist/. This article is intended to serve as a supplemental article to that checklist.

If you are served with a lawsuit, it is important to note the time, date, and method of how the lawsuit was served on you. It is important to immediately provide this information to your legal counsel, along with copies of all documents that were served on you, so that they can determine first whether service was proper and second when a response to the lawsuit is due. For example, documents served in-person have a thirty (30) day deadline to file a response while documents served via mail will provide you with an additional two (2) days to respond. If the Association does not respond by the deadline, they may not be able to protect their interests in the lawsuit.

Once you have provided your legal counsel with a copy of the documents and a detailed explanation of the date, time, and method of service, you should also provide the same to your insurance carrier. Your insurance carrier is the only one that can determine whether there is insurance coverage for the claim. Among the benefits of tendering the lawsuit to your insurance carrier is that they could accept the claim and provide defense counsel for the Association. This means that the association’s legal fees and costs would be covered by your insurance carrier.

After providing your legal counsel and your insurance carrier with a copy of the documents that you were served with, along with a detailed explanation of the date, time, and method of service, it is important that you preserve potential evidence related to the lawsuit. The Board of Directors, the Community Association Manager, and any and all employees have a duty to preserve related evidence once a lawsuit is filed. This means that you cannot delete, remove, or otherwise destroy related evidence including, but not limited to, emails, Board Meeting Minutes, Invoices, letters, photographs, video, etc. Your attorney likely will send a letter to notify affected parties of their duty to preserve evidence.

In addition to preserving potential evidence, you must also preserve the attorney-client privilege. The attorney-client privilege serves to protect client communication to or from their attorney. This includes oral or written communications whether in person, over the phone, or via email. However, the privilege only applies if it is a communication to or from your attorney. That means you should not forward any emails, documents, or other correspondence from your attorney to anyone who is not the Community Association Manager or a member of the Board of Directors. Additionally, you should not discuss the case with anyone who is not a member of the Board of Directors or your Community Association Manager. Remember, the client holds the privilege; this means the client can waive that privilege by sharing information with a third party. It is important that you do not waive this privilege by including a third party who is not subject to the privilege.

Finally, some owners within the association may request notice or information regarding the lawsuit so that they can determine whether they need to inform or notify any potential buyers or other third parties. Although the association is not required to provide this information, your attorneys can prepare a letter to the membership regarding the litigation that is informative but does not waive the attorney-client privilege.

While the three little words “you’ve been served” may not be as sweet as “I love you”, they should be taken just as seriously. Be sure to utilize the checklist we have provided to assist you if you ever hear those three little words.

Navigating a Small Claims Lawsuit: A Guide to Defending the Case

Hannah I. Hughes, Esq.

Attorney

858.527.0111
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Practice: Civil Litigation

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Any board member or manager within a community association can tell you about their experience with an unhappy association member. But what happens when that member takes legal action against the association in Small Claims Court?

The first thing a community association needs to know is the differences between a Small Claims Court claim and a civil action in Superior Court. It is often said that the advantages of Small Claims Court are that it is cheaper and faster than a limited or unlimited action in Superior Court. Here are some ways in which Small Claims Court differs from Superior Court:

      • Litigants must represent themselves, and they cannot be represented by an attorney (subject to specific exceptions);
      • As of January 1, 2024, the jurisdictional limit for cases brought by an individual is $12,500, while corporations can only seek up to $6,250;
      • The filing fee for a San Diego Small Claims complaint is generally $30-$100 as opposed to $435 in Superior Court;
      • If the plaintiff loses, they cannot appeal the case (unless the defendant counterclaims and wins), but a defendant who loses can appeal the case;
      • Generally, litigants may receive a Small Claims hearing date sooner than in Superior Court.

When a community association is served with a Small Claims complaint, the association may need to act quickly. Below is a helpful checklist of steps to consider taking when a community association is served with a Small Claims complaint:

      • Contact the association’s legal counsel and provide them with a copy of the Small Claims complaint;
      • Submit a copy of the complaint to the community association’s insurance carrier(s);
      • Review the complaint and all attachments carefully;
      • Schedule and notice a special board meeting to discuss the complaint and the association’s response, or, depending on the Small Claims hearing date, add the complaint to the agenda for the next meeting. Depending on the timing and circumstances, holding an emergency board meeting may be necessary;
      • Calendar all applicable deadlines and due dates, including the date of the hearing, as failing to comply with applicable deadlines can result in an adverse judgment against the association;
      • Look at the date, time, and location of the hearing. If no association representatives are available to attend the hearing, the association may need to request to postpone the hearing;
      • Review what the aggrieved member, referred to as the “plaintiff,” is asking the Court for and consider whether to offer a settlement to the member in exchange for a dismissal of the complaint;
      • Prepare the community association’s response, including substantive arguments to respond to the Small Claims complaint. Be sure to submit all exhibits that support the association’s defense in advance of any applicable deadlines. While the Association’s legal counsel cannot appear at the hearing, counsel can help review and prepare the Association representatives to defend the Association in Small Claims Court.

Additionally, because the community association is not a person, it is important for the community association to complete and file an “Authorization to Appear on Behalf of Party” form, commonly known as an SC-109 form, with the Small Claims Court. This form must be completed by the board member or manager who intends to represent the association at the hearing.

Finally, it is important to remember that although a community association may have a good defense strategy, Small Claims Court sometimes favors member plaintiffs (the underdogs). Therefore, it is important to ensure that the community association is prepared and has a well-crafted response to a member’s Small Claims complaint. Helpful resources and more information can be found on the Judicial Branch of California’s website or by contacting a Small Claims advisor at (858) 634-1777 for San Diego County, (951) 274-4499 for Riverside County, or (213) 974-9759 for Los Angeles County. And remember that your friendly community association counsel is only a call away.

CHRO or WVRO? So Many Letters, so Little Understanding

Restraining Orders in a Nutshell

By Hannah I. Hughes, Esq.

Concerned about the behavior of a board member towards other members during meetings? Has a homeowner been harassing your association’s management? In this article, we discuss the two types of restraining orders available in California for these situations and the process for obtaining one.

What is a CHRO?

A Civil Harassment Restraining Order (“CHRO”) provides protection to a person who has suffered harassment from someone who is not a close family member or of domestic relation. (Code of Civil Procedure 527.6). This means the person can be a director, volunteer, or other committee member. The conduct must cause a reasonable person to suffer substantial emotional distress and must also cause the victim to suffer substantial emotional distress.

This restraining order is filed in civil court, however, the evidentiary standard is quasi criminal in nature, meaning the petitioner must prove the harassment under the higher standard of clear and convincing evidence. (Code of Civil Procedure 527.6(i)). The general civil evidentiary standard is a preponderance of the evidence, which is anything that tips the scale to 51% probability whereas clear and convincing is closer to 75% probability. In other words, strong evidence will be required, and a “he said, she said” situation will not generally suffice.

What is a WVRO?

A Workplace Violence Restraining Order (“WVRO”) protects employees who have suffered unlawful violence or a credible threat of violence from any individual, that can reasonably be construed to be carried out or to have been carried out at the workplace. (Code of Civil Procedure 527.8). The association, as an employer, can apply for the WVRO to protect its employee(s) against an individual. This restraining order is also filed in civil court and requires the same heightened “clear and convincing” evidentiary standard.

Which restraining order should I apply for?

Whether you obtain a CHRO or WVRO, your situation will differ

Although both the restraining orders listed above prevent unwanted contact, they differ based on the relationship between the parties.

For example, the following situations may apply to a CHRO:

  • An owner is harassing a director on the association’s board,
  • A director on the board is harassing management.

Generally, an association may be able to hire its own legal counsel to file a CHRO on behalf of a director, volunteer (such as a committee member), management, or even an independent contractor. But you should consult your legal counsel to determine if this will be feasible in your particular circumstance.

The following situations may apply to a WVRO:

  • A homeowner has threatened violence or been violent towards all board members,
  • A board member has repeated outbursts and exhibited violent behaviors towards other board members and management personnel during meetings.

The main difference between a CHRO and the WVRO is that the association is named as the petitioner for a WVRO and the individual is named as a petitioner for a CHRO. Additionally, a CHRO has an attorney’s fee provision, meaning the petitioner could possibly recover their attorney’s fees for the CHRO while a WVRO does not contain any such provision.

In both cases, you will apply to the court for a restraining order, serve the other side (personal service is required), and attend a hearing to put on evidence and have the court determine whether a restraining order has been granted. While the case is pending, the judge may find that the facts support entering a temporary restraining order to protect the party until the hearing. When a temporary restraining order is in place, or once a permanent restraining order has been granted, the other side may face criminal charges if they violate the order. The police may also be called when an order is violated.

If you are experiencing threats of violence, or are concerned for your safety, call 911. If you would like more information on how to best protect your association, please contact us.