Q&A. There is a director on our board that is sharing information from executive session with other owners that are not on the board. What do we do?

A: Initially, sharing such confidential information may qualify as a breach of the director’s fiduciary duty, subjecting that director to personal liability. Often a letter from association’s legal counsel reminding the director of his/her fiduciary duty can have an impact on the director’s future behavior. If you have recently restated your bylaws, they may provide that under such circumstances the board has the ability to remove the director from the board without a member vote. If you do not have this option, the board may be able to remove the violating director from a position as an officer (as president, secretary, etc.) if the individual is an officer and the bylaws allow for such removal. While removing a director from an officer position does not remove the director from the board, it does make a statement that the person may not serve in a position of greater responsibility.
The board may also censure the director. A censure is a statement of reprimand, criticism, and/or disapproval of a director. Again, while this will not remove the director from the board, it often acts as a strong reminder to the director that the board takes such matters seriously. If the board has adequate evidence that the director has indeed shared executive session information and the risk of the director continuing to share such information is great, the board could form an executive committee consisting of two or more directors (other than the director at issue) to address certain executive session subjects. If such a committee is formed, it should be set forth in a detailed written resolution outlining the purpose of the committee, the reason why it is being formed, and the scope of authority of the committee. – Carrie M. Timko, Esq.

Moldy Misdemeanor: SB655

By Carrie M. Timko, Esq.

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You have probably been hearing a lot of discussion on the recent adoption of Senate Bill 655, which amended the law to include “visible mold growth” as a condition that would render housing “substandard.” This discussion includes the question “does this new law affect community associations?” To the extent an association maintains portions of a building’s structure, where the existence of mold could have an impact on living units in that building (generally, condominium associations), this law appears to apply. Despite the change in law, associations should always make it a practice to investigate and act promptly in response to reports of mold in areas for which the Association is responsible.

SB 655 amended section 17920.3 of the California Health and Safety Code and added section 1941.7 to the Civil Code. Under Health and Safety Code section 17920.3, “visible mold growth” was added to a list of conditions (including lack of a bathroom, lack of heating or proper ventilation, and infestation of insects or rodents) that would render housing “substandard.” The statute makes an exception for “the presence of mold that is minor and found on surfaces that can accumulate moisture as part of their properly functioning and intended use.”  Legislative analysis equates this to mold that can be abated through regular household cleaning, such as mold that accumulates in showers or sinks. The determination as to whether “visible mold growth” exists is made by a heath or code enforcement officer.  The law provides that violation of these provisions is a misdemeanor punishable by a fine not exceeding $1,000 or by imprisonment not exceeding six months, or by both a fine and imprisonment.

Civil Code section 1941.7 provides that a lessor of residential property is not obligated to make a repair related to mold until he or she has notice of it, or if the tenant is in violation of certain statutorily specified obligations that substantially contribute to the mold problem or interfere with the lessor’s ability to fix it.

Health and Safety Code section 17920.3 applies to any building or portion of a building that includes a dwelling unit, which could include condominium projects.  Therefore, if “visible mold growth” is discovered in a unit, and such mold originates from the common area or is caused by a common area source (or an area or item for which the association is responsible), it appears the association could be found in violation of this provision.  Because this law is new, we will keep you informed of any developments that might add more insight into how these changes will impact associations.

Civil Code section 1941.7, which requires notice of the existence of mold before action is required, is specific to lessors of property.  Although an association generally would not fall under the category of a “lessor” (unless renting out a foreclosed unit), presumably under general legal principles an association would also require notice of mold growth before it could be found in violation of Health and Safety Code section 17920.3.

Even if SB 655 had not been adopted, prompt action should be taken by boards to investigate and address mold claims involving association-maintained areas. Because this is now part of the law, it is even more imperative that mold claims and water intrusion claims that could result in mold are addressed in a timely manner.

AED Requirements Under California Common Law

By Carrie M. Timko, Esq.

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Verdugo v. Target Corp. (2014) 59 Cal.4th 312

The provision and use of automated external defibrillators (“AEDs”) in community associations has been a topic of interest for managers and boards since Health and Safety Code § 104113 required every “health studio” to acquire and maintain an AED onsite and to train personnel in the use of the AED. It is not clear whether community associations with fitness facilities are subject to the requirement to have an AED onsite. The Attorney General’s office issued an opinion that community associations are not subject to the requirement but this area of the law remains unsettled. If you have questions about the requirements for any particular fitness facilities, please contact the association’s legal counsel.

In the recent case of Verdugo v. Target Corp. (2014) 59 Cal.4th 312, the California Supreme Court clarified a corporation’s common law (as opposed to statutory) duty to its customers with regard to the provision and availability of an AED. While this case dealt specifically with a for-profit business’ duty to its customers and does not directly deal with a common interest development’s duties under California law (nor does it change the statutory requirement for AEDs in health studios), it provides a reading of the general temperature of the California Supreme Court with regard to the common law duty to provide AEDs to the public when not required to do so under statute.

In Verdugo, the California Supreme Court considered the question of whether the common law duty of reasonable care that Target owed to business customers includes an obligation to obtain and make available an AED for use in a medical emergency. The Court concluded that it does not.

In this case, Verdugo, age 49, was shopping at a Target store when she suffered a sudden cardiac arrest. Target employees contacted 911, and paramedics were on scene several minutes later; it took them an additional few minutes to locate Verdugo inside the store. Paramedics were unable to revive Verdugo, and she died. There was no AED in the store. Verdugo’s mother and brother, who were with her at the store, sued Target alleging that Target breached its duty of care to Verdugo, its customer, by failing to have an AED at the store. Plaintiffs claimed that an AED was essential life-saving first aid item and Target was obligated to provide one for its customers.

In reaching its decision, the Court considered the current law on AEDs: Civil Code § 1714.21, which provides immunity to persons who render emergency care by use of an AED and to persons or entities who acquire an AED for emergency use, and Health and Safety Code § 1797.196, which sets forth a number of prerequisites for persons or entities who acquire AEDs to qualify for the immunity afforded under the Civil Code.

Target argued that Health and Safety Code § 1797.196 expressly provides that nothing in either that statute or in the Civil Code may be construed to require a building owner or manager to acquire or install an AED in the building. (Note, however, under Health and Safety Code § 104113, every “health studio” is required to acquire and maintain an AED onsite and to train personnel in the use of the AED.) While the Court acknowledged the statutory limitation set forth in Health and Safety Code § 1797.196, it found that the statute did not limit a potential duty to provide an AED under common law.

Nevertheless, the Court found that even under common law, Target did not have a duty to provide an AED to its customers. While all parties agreed that Target has a common law duty to provide at least some assistance to a patron in medical need, they disagreed as to the scope of that duty. In deciding whether Target had a duty to take the precautionary step of providing an AED in advance of a medical emergency, the court considered 2 factors: (1) the degree of foreseeability of the danger, and (2) the burden of providing the precautionary measure. The Court found that with the regular maintenance and training required to maintain an AED on the premises, the burden on a business was not minor or minimal. Additionally, the Court found that there was no greater foreseeablilty that a cardiac arrest would occur in a Target store than anywhere else open to the public. Moreover, the Legislature has not imposed a statutory duty to provide AEDs on any other type of business or facility other than health studios. The Court felt the Legislature was in the best position to create such a requirement and it had not done so. Therefore, the Court found that Target had no common law duty to provide an AED to its customers as a precautionary measure.

For community associations not currently required to maintain an AED under Health and Safety Code § 104113, this case would appear to support the position that an AED is not required as a precautionary measure under common law. While the duties of a commercial entity such as Target are no doubt different from the duties owed to residents and their guests by a community association in many respects, it is wise to understand where the law generally stands on important topics such as AEDs.

Enforcement Action: An Insider’s Perspective on the Case of the Very Expensive Windows

By: Carrie M. Timko, Esq.

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The case of Chapala Management Corporation v. Stanton (2010) 186 Cal.App.4th 1532, started out like most other enforcement actions. I received a call from the manager of Chapala Management Corporation asking for help in dealing with owners who installed two windows on the front of their condominium unit in disregard of several denials from the Association’s Architectural Review Committee (“ARC”). Although the type and style of the windows were acceptable to the ARC, the color was not. The Stantons insisted on installing “sandtone” colored windows (which is a light taupe color), although every other similarly-situated window in the community was darker brown. Anyone driving by the Stanton property (which was conveniently located by the front gate of the community) could see that these windows were inconsistent with the architectural style of the development.

The Association offered mediation to the Stantons in an effort to resolve the matter without litigation, but the Stantons refused to participate. The Association even tried to resolve the matter informally, but to no avail. Worried that allowing such a departure in window color would open the proverbial flood gates for others to have inconsistent window color, the Association decided to proceed with an enforcement action against the Stantons in the San Diego County Superior Court, represented by me and EG&H attorney Rian W. Jones.

It is important to note that this dispute could have been resolved by simply painting the windows a darker brown, which would have cost about $300. The Association had a self-help provision in its CC&Rs that provided the Association with the right to remedy an architectural violation and charge the cost back to the member. However, the dispute with the Stantons over window color was about eight years in the making, and ultimately the Stantons had defied the Association by installing the windows without authorization. As a result, self-help did not seem to be a viable option that would have permanently resolved the matter. Moreover, the Association had demanded that the Stantons paint their windows on several occasions, and the Stantons refused to do so. Given the circumstances, painting the windows without permission would certainly have resulted in a lawsuit, so the Association decided it was best to file an enforcement action first to force the Stantons to bring the windows into compliance with the Association’s color standards.

About a year after the lawsuit was filed, the case went to trial. After spending around $80,000 in attorney’s fees (thanks mostly to the unnecessary litigation tactics of the opposing attorney), the Association prevailed at trial. Based on well-established law and the provisions of the Association’s governing documents, the trial court ruled that the Association had the right to restrict the color of windows to preserve the aesthetics of the community, and that the Stantons had breached the CC&Rs by installing the windows despite the ARC’s multiple denials. The Stantons were ordered to either replace or repaint the windows in accordance with ARC standards, and were further ordered to pay the majority of the Association’s attorney’s fees and costs.

But the Stantons really wanted sandtone windows. They appealed the trial court’s decision. After another year on appeal, and after forcing the Association to incur thousands more in attorney’s fees and costs, the court of appeal confirmed the trial court’s decision. Interestingly, part of the Stanton’s argument on appeal was that the Association should have exercised its right to self-help and just painted the windows rather than filing a lawsuit. As disingenuous as this argument was (if the Stantons were willing to have the windows repainted, why did they fight this case all the way to the court of appeal?), the court of appeal ruled that the CC&Rs allowed the Association to either exercise the right to self-help or file an enforcement action. These options were not mutually exclusive. The court of appeal, however, was not pleased with the fact that a dispute that could have been resolved for $300 ended up costing the parties over six-figures in attorney’s fees and costs. The Association agreed with the court on this point; however, in dealing with homeowners who were so intent on breaching the CC&Rs, there was little choice but to litigate.

There are (at least) two morals to this story: (1) while “sandtone” may be an attractive color for replacement windows, it may not be worth the additional cost if it’s not a color approved by the association, and (2) boards should do their best to resolve enforcement matters informally or through internal enforcement measures before resorting to court intervention, which can be very expensive and time consuming. However, sometimes an association has no other choice than to sue an owner to enforce the provisions of the governing documents. If violation notices and fines are not working to bring an owner into compliance with the governing documents, consult the association’s attorney to see what other legal enforcement options are available.

Electronic Discovery: Preserving Electronically Stored Information

By: Carrie M. Timko, Esq.

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Advances in technology have caused significant changes in the way civil discovery is conducted. Before the advent of the computer age, most documentation was easily identified as paper. Today, however, documentation is more likely to take the form of an email, text message, or computer file. Just as society’s method of communication has evolved, so has the law. California’s Electronic Discovery Act (Code of Civ. Pro. § 2016.010 et seq.) allows litigants to obtain electronically stored information (“ESI”) through the discovery process. As a result, when a party reasonably anticipates litigation (whether by filing a lawsuit or by being sued) there is a duty to preserve all ESI that may be discoverable.

What is “ESI”?

ESI should be defined as broadly as possible. ESI includes any information stored electronically, magnetically, digitally, or optically, such as email, voicemail, instant messages, text messages, sound or video recordings, word processed documents, spreadsheets, and other similar electronic media. Devices used to store, produce, and transmit ESI include computers, laptops, servers, cellular phones, handheld wireless devices, and the like. ESI also includes information about electronic data called “metadata.” Metadata is a hidden recorded history about an electronic file’s creation, modification, location, and size, which can be vital to a document’s significance in litigation.

When does the duty to preserve ESI arise?  

The duty to preserve ESI arises when a party reasonably anticipates litigation. Since there is no bright-line rule as to when litigation can be “reasonably” anticipated, it is best to preserve ESI at the time a dispute arises, whether a lawsuit has been threatened or not.

Who does the duty to preserve ESI extend to? 

In the case of a common interest development (homeowners associations, planned developments, condominium projects, community associations, maintenance associations, etc.), directors, officers, committee members, managers, agents, and employees all have a duty to preserve ESI once litigation is anticipated. Additionally, any vendor, consultant, or other third party who may have ESI related to the dispute has a duty to preserve that ESI. For example, if the dispute is over financial expenditures, the association should notify its accountant in writing to preserve ESI in his or her posses­sion that is related to the dispute. The same applies to other vendors, depending on the nature of the dispute. If a director utilizes his work email account, computer, or cellular phone to conduct association business, his employer would also be subject to the duty to preserve ESI under its control. Extending this preservation duty to the director’s employer as a result of communications outside the scope of the director’s employ­ment can have negative implications for the director as well as the association if the ESI is not properly preserved. Therefore, directors and committee members should be careful from where they send and receive email, and from what account. Directors should consider setting up a separate email account solely for association business. Associations may also consider creating their own domain name and supplying email addresses to its directors and committee members.

What do I need to do to preserve ESI? 

Once litigation is anticipated, refrain from deleting or destroying any ESI that exists. Enact procedures to prevent future deletion or destruction of ESI and ensure that all automatic computer operations that delete ESI by age, capacity, or other criteria are turned off. Do not overwrite or erase any back-up media and do not use any defragmenting or compression programs, or metadata scrubbers. Note that when ESI is “deleted” it can still be recovered. Therefore, be careful to preserve all ESI at the appropriate time. The penalties for failing to preserve ESI can be significant, and the penalties for purposely deleting or destroying ESI can be even worse.

How do I properly dispose of ESI when litigation is not anticipated? 

The association should implement a policy on ESI destruc­tion and deletion for use during times when litigation is not anticipated. If the association has such a policy in place (for example, ESI will be purged after five years if no litigation is anticipated), it will be harder for a challenging party to claim that evidence has been improperly destroyed than if ESI is randomly deleted.

In a time where email and text messages are often a more common means of communication than speaking face-to-face, associations must be aware where the duty to preserve ESI arises and to whom it extends. Every time you push the send button, you are creating a potentially discoverable document. Protect your association from potential discovery challenges and penalties by enacting proper policies on the use and storage of electronic information.

Dover Village Association v. Jennison: Making the Determination of Maintenance Responsibility for Sewage Pipes Less Messy

By Carrie M. Timko, Esq.

Consider the following facts: a sewage pipe is leaking under the slab floor of a unit located in a condominium association.  As a result of the leak, sewage seeps up through the floor of the unit causing about $15,000 in damage.  The association hires a plumber to repair the leaky pipe.   The plumber determines that the leaky pipe only serves one unit and connects the unit to the sewer main line.  The association, having determined that the leaky sewage pipe is “exclusive use common area” pursuant to Civil Code § 1351(i), assesses the owner of the unit the cost of repair, as it is entitled to do under the CC&Rs.  If the association’s CC&Rs do not specifically assign maintenance responsibility for the sewage pipe to either the association or the owner, is the association correct in determining that the sewage pipe is exclusive use common area under Civil Code § 1351(i)?

While the answer to this question may have previously been the subject of debate, the recent case of Dover Village Association v. Jennison1 provides a clear answer: no – sewage pipes will not automatically be deemed “exclusive use common area” pursuant to Civil Code § 1351(i).  Based upon the court’s reasoning, unless theCC&Rs provide otherwise, by either clearly defining sewage pipes servicing only one unit as “exclusive use common area” or specifically assigning maintenance of such sewage pipes to the owner, a sewage pipe that connects a unit’s plumbing to a main sewer line is common area for which the association has maintenance responsibility.

Civil Code § 1364 provides that an association is responsible for maintaining and repairing the common area, and the owner of each separate interest is responsible for maintaining the separate interest and the appurtenant exclusive use common areas. Civil Code § 1351(i) defines “exclusive use common area” as “a portion of the common areas designated by the declaration for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests.”  Section 1351(i) goes on to provide under subsection (1) that unless the declaration provides otherwise, any fixtures, such as patios, awnings, ordoor frames, that are designed to serve a single separate interest, but are located outside the boundaries of the separate interest, are exclusive use common areas. Based on these statutes, it could have been previously argued that if a sewage pipe exclusively services one unit, it should be the owner’s responsibility to maintain. However, the court in Dover Village rejected this argument.

In Dover Village, the association’s CC&Rs provided that “pipes” and “other utility installations” were not part of the unit.  Even though it was argued that the portion of pipe that needed repair “exclusively serviced” the unit, the court found that this interpretation was unreasonable.  First, the CC&Rs specified that garages and patios were exclusive use common area.   The court reasoned that because the CC&Rs provided  specific  examples  of  what  constituted  exclusive  use  common  area,  the absence of a component from the list meant it was not part of the exclusive use common area.  Because sewage pipes were not included in that definition, they were excluded.  Second, the court determined that because a sewage pipe is interconnected to a network of other pipes that run to the main sewer line, it cannot be differentiated as “exclusive use” common area.  (However, the court did note that a drain pipe designed to serve a single interest can be considered an “exclusive use” fixture).

Lastly, the court held that it was not within the board’s discretion to make determinations regarding legal conclusions in the application of the CC&Rs.  Although boards will be afforded deference to determine the method of maintenance for the common areas,2  it does not have the discretion to determine what is common area or separate interest under the CC&Rs.  This is a legal determination, which Dover Villageholds should not be subject to a board’s discretion.

Boards should be careful when evaluating whether utility pipes are the association’s or the owner’s responsibility to maintain and repair.  While Dover Village addressed sewage pipes, a similar argument can be made for water lines.   If the CC&Rs do not specifically make owners responsible for water and sewage lines that exclusively service their units, then there is a good chance under the Dover Villageanalysis that they will be the association’s responsibility to maintain and repair.

Due Process Rights: To Each His Own (Quail Lakes v. Kozina)

By Carrie M. Timko, Esq.

In the recent case of Quail Lakes Owners Association v. Kozina (2012) 204Cal.App.4th 1132, the Third District Court of Appeal found that a single member of a community  association  cannot  assert  the  due  process  rights  of  other  association members resulting from insufficient notice of a court proceeding to obtain approval for a CC&R amendment.

In Quail Lakes, the Association filed a petition with the court for approval of an amendment to its CC&Rs in accordance with Civil Code § 1356 (“Section 1356”). Section1356 allows an association to obtain approval for an amendment to its CC&Rs with majority approval where its CC&Rs require supermajority approval.  In addition to the majority approval requirement, Section 1356 requires associations seeking a court- ordered amendment of their CC&Rs to meet other requirements, including the requirement to provide the association’s membership with 15 days notice of the court hearing on the petition.  Such notice allows members who oppose the amendment to present their objections to the court.

After failing on its first attempt to gain court approval of a CC&R amendment, the Association was allowed to file a second petition to address certain deficiencies in the first filing.  Homeowner Vladimir Kozina, who opposed the first petition, filed opposition to the second petition claiming that the Association failed to provide sufficient notice of the hearing on the petition to the membership.  Kozina’s opposition included declarations of three members who claimed to not have received sufficient notice.  The court granted the Association’s petition, and Kozina appealed.

On appeal, Kozina argued that the hearing on the second petition violated due process because the notice allowed only four days from the mailing of the notice until the date members were required to file opposition.  Kozina pointed out that those four days included a weekend.  The court noted that Kozina had no difficulty filing his opposition within the timeframe provided, and was therefore not prejudiced.   However, Kozina argued that other owners were also prejudiced by the timing of the notice.   The court ruled that Kozina did not have standing to assert the due process rights of any other association members.  The court further ruled that a party to a lawsuit may not representthe interests of third persons who are not involved in the case.

First, Kozina argued that he was entitled to represent the interests of the othermembers based on associational standing; however, the court pointed out that the Association is the de facto representative of its members, and Kozina was not claiming to represent any subgroup within the Association.  Rather, he was attempting to assert the rights of members who may or may not have opposed the petition if they were provided with earlier notice.  The court noted that any members who fell into that category could have achieved standing for themselves by moving to vacate the court’s order granting the petition.

Second, Kozina compared his representation of other members’ interests to a shareholder derivative lawsuit.  A derivative lawsuit is one where a shareholder brings a lawsuit on behalf of the corporation when the corporation itself fails to so.  The court rejected this argument on the basis that Kozina was only challenging the court’s order granting the petition – not any act or omission by the Association.

Third, Kozina also challenged the order granting the petition because the trial court failed to make factual findings within the order itself.   The court found that the court’s order granting the petition sufficiently detailed each of the requirements for granting a petition pursuant to Section 1356, and that nothing in Section 1356 required the court to recite the evidence supporting each finding.

Given the number of community associations subject to supermajority approval requirements to amend their CC&Rs, petitions filed pursuant to Section 1356 have become more commonplace.  Due to the contentious nature of these petitions when they are opposed, it is important to be aware of all decisions that may impact an association’s success in obtaining an order to amend its CC&Rs.  Decisions such as Quail Lakes continue to define the legal requirements for petitioning the court for approval of a CC&R amendment.