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__A one-page undated yellow insert entitled, Re: Nordeen v MOA, was included with the 2008 May Business Review on the Nordeen v MOA lawsuit. "Signed" by the board or directors, it doesn't even have many of the counts properly described. The Complaint in the lawsuit speaks for itself. The document is available on the
__This is another example of the board not providing full and accurate information to the members. Providing full and accurate information requires an understanding of the issues.
__The continuation of this post provides my discussion of the lawsuit followed by the text from the Board's yellow paper with my comments added. Please call for a confidential discussion.
Don Nordeen
(989) 939-8240
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Click Continue for Post Continuation plus Comments.
- Key Words:_ access; access to records; accounting; Accounting Principles; accounting standards; AICPA; AICPA Audit & Accounting Guide; AICPA Audit & Accounting Guide for Common Interest Reality Associations; Attorney Issues; breach of fiduciary duty; business judgment rule; case law; CC&Rs; CI/DR Dues; closed session; complaint; consolidated financial statement; Covenants Conditions and Restrictions; duty of care; duty of loyalty; duty of obedience; duty to act; executive session; fiduciary duty; lawsuit; Members' Motion; members' rights; Michaywé; Michaywe; Michaywé Owners Association; Michaywe Owners Association; open meetings; organization as client; planned unit development; prudent person; PUD; restrictive covenant; roles and responsibilities
Document From MOA Board Re Nordeen v MOA (continued)
2008 July 27
To: MOA Members
Re: Board’s Document entitled, Re: Nordeen v Michaywé Owners Association
From: Don Nordeen
INTRODUCTION BY PLAINTIFF
2008 July 27
__In the 2008 May Business Review, the board provided an undated yellow insert entitled, Re: Nordeen v Michaywé Owners Association. I find that it misrepresents the lawsuit, the reasons for the lawsuit, and the facts related to the lawsuit. No wonder problems can't get solved when the board doesn't understand. I presume the document was prepared with the advice an attorney. But, which attorney? Apparently, the attorney doesn't understand either. Or maybe, the statements are intended.
__Do you believe that MOA is obligated to adhere to the law and our governing documents in managing the affairs of MOA? Do you believe the board should make a diligent effort to ensure that its actions adhere to the law and our governing documents? If your answer is yes to the two questions, we share the same view. A federal appeals court has referred to the adherence as the duty of obedience. That is a great word to use because it conveys the superiority of the law and the governing documents, and that the board and the members are subordinate and subservient to the law and our governing documents. If we believe the governing documents are not consistent with the general welfare of MOA and its members, then propose an amendment for the members to vote up or down. But until amended, the duty of obedience is to the law and our governing documents as written. That helps to ensure stability and predictability for everyone.
__So, what should be done when the actions of the board don’t appear to adhere to the law and our governing documents? The first step is to ask the board to research the issue further and reconsider the decision or action. If the board ignores the request, and even second and third requests, and doesn’t even place the subject on the board agenda, then what action should be taken?
__I have gone through those steps with the results from board(s) as described. The next decision was a choice to (1) just live with the actions and inactions of the board(s), or (2) to seek redress in circuit court.
__The analysis below reproduces the board's document and inserts my comments (identified as DLN Comments) immediately after the words and/or statements which I believe to be incorrect and/or to have omitted material and relevant information. The analysis also provides a side-by-side comparison between the characterization of the twelve counts in the complaint and my description in lay terms.
__Of course, people may have honest disagreements on the conclusions and opinions. As Senator Moynihan has said, "Everyone is entitled to his/her own opinions, but not to his/her own facts.
NO COMMITMENT TO PROVIDE
FULL AND ACCURATE INFORMATION
__Many of the problems in MOA stem from a lack of policy to provide full and accurate information. The board has full control (monopoly) over communications to members paid with MOA funds. It is a given that monopolies work for the benefit of the monopoly holder — the board of directors. Absent a clear standard to provide full and accurate information, communications from the board are likely to be self serving — providing only what the board wants the members to hear.
__The board has the obligation to act in the common interest of all members. With regard to information, any bias would represent the interest of the bias. Any communication that is not full and accurate would not serve the common interest of all members. Full and accurate information means no omissions of time, material and relevant information that could made the information misleading and deceptive. It is an easy concept— just tell the whole story. Enforcement of full and accurate is up to the members. Members get the governance the deserve.
__The problem of no commitment and the boards’ track records of communications should make everyone weary about taking board communications at face value. Are you satisfied that the members have gotten timely, full and accurate information from the board on financial status? In violation of the requirements, financial reports for 2007 were not included in the notice of the annual meeting. Again! Have you received any information on alternatives for addressing MOA’s deteriorating financial condition? Are the members given straight answers when year after year, there are significant operating losses. But the published budgets are always balanced? Does to board tell the members what the balanced budget requirement in the bylaws means?
__It is against this backdrop that I have prepared comments to the board’s document, Re: Nordeen v Michaywé Owners Association.
__If you have any questions or comments, please add them in the comment section at the end of this post, or give me a call for a confidential conversation. Thanks.
Don Nordeen
(989) 939-8240
Re: Nordeen v Michaywé Owners Association Last Edit: 2008 July 21 1310
Below is Undated Document from the MOA Board (Included in 2008 May Business Review)
Regular Text in Black by MOA Board Italics Text in Red by Plaintiff
Re: Nordeen v Michaywé Owners Association
Case No. 07-12425-CH
Dear Michaywé Members,
__The purpose of this letter is to inform you of the current status of the lawsuit filed against Michaywé Owners Association (MOA) by one of its members. The Plaintiff in this suit has claimed [DLN Comment: “stated” would be a better word] that this is a "friendly lawsuit" only intended to correct alleged errors [DLN Comment: All counts listed below allege decisions and/or actions that do not adhere to the law and/or our governing documents.] made by past boards of directors of the association. [DLN Comment: Some of the actions were by the Association; others by members; and still others by unknown person or persons.] [DLN Comment: The board’s document does not state that these concerns were brought to the board’s attention numerous times. The concerns were never placed on the agenda of any board meeting, to my knowledge. The lawsuit merely takes the issues to a venue (the court) that the board cannot ignore.] The repercussions if the Plaintiff were to win the suit and get his way1 [DLN Comment: Pejorative choice of words. Shouldn’t the board be objective in its assessment? The court will provide an independent objective decision based on the law.] are anything but friendly. [DLN Comment: I believe board members are obligated to conduct the affairs of MOA in adherence to the law and our governing documents. Why is that not beneficial to MOA and its members?] As of the date of this letter, this lawsuit has cost MOA in excess of $15,000 of your money. [DLN Comment: The board has stated that MOA’s liability insurance policy provides a $10,000 deductible. So, why more that $10,000? Is this another example of omission of material and relevant information to create a misleading impression?]
__Representing himself in pro per, [DLN Comment: Because the cost for paying an attorney would be prohibitive for an individual member.] The Plaintiff is requesting the Court to micromanage the actions of the Board. [DLN Comment: The statement is blatantly false. The counts in the Complaint seek corrections to decisions and actions of the Association that did not conform to the law and our governing documents. The board confuses in-depth analysis of fundamental matters — obedience to the law and governing documents — with step-by-by step and procedural analysis of details. The law and the governing documents are the most general of all governance.] The Plaintiff admits [DLN Comment: “states” would be a better word] that the purpose of the suit is to correct actions of the board and the Association. [DLN Comment: Prior actions as well as inactions of more recent boards.] The Plaintiff's ten (10) count Complaint includes:
| Description by MOA’s Board of Directors | Description by PlaintiffUnderlined phrase is the title of each count. A brief description in lay terms then follows. |
| 1. The Plaintiff claims that Article IX of the MOA bylaws was improperly removed. | 1. Invalid Amendment of MOA’s Bylaws. The board repealed an article in MOA’s bylaws — an action that was beyond the scope of the board’s authority as stated in the Bylaws. As stated in the Bylaws, the bylaws can only be amended by the members voting on a properly-noticed proposed amendment, which the members did in 2001 to adopt Article IX. |
| 2. The Plaintiff claims that the Board comingled restricted funds. | 2. Invalid Use of Restricted Funds. The board uses the Debt Reduction / Capital Improvement Dues in violation of the motion approved by members in 1997 which authorized the dues and restricted its use and has not be rescinded by the members. |
| 3. The Plaintiff claims that the two (2) corporations, Pine Community Corp. and Pines Club Corp., did not meet the requirements of the Liquor Control Commission. | 3. Invalid Bylaws for Wholly-Owned Business Corporations and Practices Related Thereto. The board created two subsidiary corporations without making them subject to MOA’s governing documents — an action that was beyond the scope of the board’s authority. |
| 4. The Plaintiff claims that the approval of restricted property deed restrictions was improper. | 4. Invalid Declaration of Master Covenants, Conditions and Restrictions (DMCCR) for the Michaywé Planned Unit Development. The Declaration, defined and authorized by court order, does not conform to that court order in five specific areas. |
| 5. The Plaintiff claims that that even though the members approved amendments to the restricted property deed restrictions there needed to be a unanimous approval. | 5. Invalid First Amended Declaration of Master Covenants, Conditions and Restrictions for the Michaywé Planned Unit Development. The number of votes obtained for the various amendments did not meet the requirement in case law, which requires approval by a majority or higher percentage of all owners. |
| 6. The Plaintiff claims that the lot consolidation program is an invalid amendment to the restricted property deed restrictions. | 6. Invalid Amendment on Consolidation of Lots. This amendment creates non-uniform dues — most lots pay $400, but some only pay $200. Case law requires non-uniform amendments to be approved by all owners. |
| 7. The Plaintiff claims that the Board has failed to assess and collect dues on all lots. | 7. Failure to Assess and Collect Dues on All Lots. The deed restrictions require dues and assessments on all lots. It is a fact that the board approved a motion to not bill dues on some lots. The board acted beyond its scope of authority. |
| 8. The Plaintiff claims that the Board invoked a late fee for delinquent dues in violation of the restricted property deed restrictions. | 8. Invalid Late Fee for Delinquent Dues. Currently, the board assesses a blanket late fee on delinquent dues and assessments. There is no authorization for such charges in the DMCCR or subsequent (invalid) amendment. The board acted beyond its scope of authority. |
| 9. The Plaintiff claims that the Defendant approved and recorded the common property deed restrictions without the owners' approval. | 9. Invalid Declaration of Covenants, Conditions, and Restrictions for the Michaywé Common Properties. This purported Covenant encumbers the property of each owner in the Michaywé PUD without the approval of the owners. The board acted beyond its scope of authority. New covenants can only be created by you — the owners of lots (units) in Michaywé. |
| 10. The Plaintiff claims that because the common property deed restrictions are invalid, the first amended common property deed restrictions are also invalid. | 10. Invalid First Amended Declaration of Covenants, Conditions, and Restrictions for the Michaywé Common Properties. This covenant is invalid for two reasons: (1) its antecedent covenant is invalid in Count IX; and (2) if the antecedent covenant is valid, then amendments require approval by a majority or higher percentage of owners according to case law. 00Several provisions in the amended covenant are major contentions. The covenant “require[s] a two-thirds affirmative vote with a quorum of at least one-third of the Members in good standing.” to sell or lease any of the recreational facilities. Maybe the owners/members want this requirement, but such should be by your vote as owners/members, not by a board that was acting beyond the scope of its authority. |
__On April 9, 2008, both Defendant Michaywé Owners Association and Defendant Interveners presented extensive oral arguments on their Motions for Summary Disposition. The Court was extremely receptive to our Motion for Summary Disposition and disagreed with the Plaintiff at many times throughout oral arguments. [DLN Comment: The Court’s Opinion and Order speaks for itself. See Comments in next paragraph.]
__On or around April 25, 2008, Judge Murphy granted Michaywé Owners Association's Motion for Summary Disposition, along with the Intervener's Motion. The Judge issued an opinion stating that the Plaintiff challenged the actions of MOA, claiming the actions were outside of the scope of the power possessed by MOA. We argued, amongst other things, that the Board actions are protected by the Business Judgment Rule. The Plaintiff had not provided the court with any documents that defined and/or limited the power of MOA. The Court stated that, in the absence of such documentation, Plaintiff's complaints were based on Plaintiff's own simple dissatisfaction with the way that MOA has been run. As such, the Plaintiff failed to state a claim and summary disposition was granted. [DLN Comment: The Court’s Opinion and Order speaks for itself. Three of the four paragraphs in the Order are favorable to the Plaintiff. The fourth gave the Plaintiff 21 days to file an Amended Complaint to address the court’s conclusions that the Complaint lacked specificity with regard to specific actions and specific provisions of the law and/or our governing documents that were not adhered to. In its opinion, the Court also stated that the business judgment rule does not shield ultra vires acts (acts beyond the scope of authority), which was argued by the Plaintiff and opposed by the Defendant and the Intervenors2.]
__The Plaintiff was allowed [DLN Comment: It is a right of Plaintiff under the court rules.] to file an Amended Complaint within 21 days, and has done so. Included in the amended complaint are the original ten counts with the addition of two new counts. The additional counts are:
| Description by MOA’s Board of Directors | Description by PlaintiffUnderlined phrase is the title of each count. A brief description in lay terms then follows. |
| 11. The Plaintiff claims that the MOA Board abused their discretion when holding a special member's meeting in January of 2005 to vote on amendments to the MOA bylaws. | 11. Abuse of Discretion and Fraudulent Misrepresentation in the Board’s Proposed Amendment of MOA’s Bylaws at a Special Members’ Meeting on January 29, 2005. This is a complex issue and involves the way in which the board developed the proposed amendments to the bylaws. The fraudulent misrepresentation is the rationale and explanation provided by the board with the notice. The rationale omitted material and relevant information which made the rationale (representation) misleading and deceptive. 00The remedy being sought is to declare the amendment null and void and never valid. More important is the remedy by court order that information from the board and the Association to members shall be full and accurate. 00Members are entitled to full and accurate information from the board so they can make informed decisions in their voting. |
| 12. The Plaintiff claims that the MOA Board abused their discretion when reinstating Article IX of the bylaws in 2007. | 12. Abuse of Discretion in Reinstatement of Article IX of MOA’s Bylaws. Contrary to the board’s assertion, Article IX was not reinstated. There was no vote of the board for reinstatement. The board acts through its motions. Reading a statement does not make a valid action. 00Even if the reinstatement were valid, the actions required by Article IX did not occur. Upon reinstatement, the board was obligated to ensure election or appointment of co-chairs. It did neither. Further, the board did not allow candidates for co-chairs to be on the ballot for the 2008 Annual Meeting as required by Article IX. 00 This is an example of the problems and difficulties that occur when the board is not diligent in ensuring that its actions conform to the law and our governing documents. When the board or the Association acts beyond its authority, the only reliable and credible corrective action is by the court. |
__MOA counsel is in the process of answering the complaint and intends to file another motion for summary disposition. The next hearing will take place in early July of 2008. We will keep you updated to the best of our ability as this case progresses. [DLN Comment: Much has occurred since the date of the board’s document and will be covered by other papers and comments.]
Sincerely,
MOA Board
_____________
1 Think about the implications of this statement by the board. The board seems to be saying that there would be major repercussions if the court rules that prior actions of the Association were not in conformance with the law and governing documents.
2 In its 2008 April 23 Opinion and Order, the court stated, “Again, this court finds the reasoning both persuasive and applicable to the instant case, and this court therefore holds that ultra vires acts are not protected by the BJR.[business judgment rule]” as the Plaintiff argued and presented case law in support. The Defendant and Intervenors provided no case law in rebuttal.
- History:
- 2008 Jul 27 — Initial Post
- 2008 Aug 13 — Internet link to Board's Document added in Introduction
- Links: Document From MOA Board Re Nordeen v MOA; [http://swagmanmwpoa.blogspot.com/2008/07/document-from-moa-board-re-nordeen-v_27.html]
••• End of Post •••
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