Question: I serve on a Board of a condominium. Without getting into too much detail, recently, the Board members were sued by a resident who claims the budget we passed last year was somehow inappropriate. I was under the impression Board members were immune from lawsuits like this. – RK, Fort Pierce
Answer: First, I would not panic about being sued. Unfortunately, it is a fairly common occurrence that Board members are brought into lawsuits as defendants. As a Board member, your association should have insurance to cover such claims. The insurance carrier should step in and provide you with an attorney to represent you in the lawsuit. Second, as a Board member, you do have a fair amount of protection for holding you liable under most circumstances.
Board members of a condominium and homeowner’s associations owe the association a fiduciary duty, just as if you were on a board of a corporation. I do not know the specific issues in the lawsuit you are dealing with, but the resident suing you must prove you breached your fiduciary duty. Under Florida law, breach of fiduciary duty requires the existence of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff’s damages. Suing a director for breach of fiduciary duty requires something more than alleging the director had a fiduciary duty that was breached, as the law starts with the presumption that a director is immune from liability. In order to be subject to liability, the director must have not only breached his or her duties as a director, but that breach also must rise to the level of criminal activity, fraud, self-dealing, unjust enrichment or other improper personal benefit. It also is well-settled absent evidence of the foregoing behavior, directors of condominium associations are not personally liable for the decisions they make in their capacity as directors.
Florida law requires directors of a condominium association discharge their duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner they reasonably believe to be in the best interests of the corporation (i.e., the Association). This is known as the “business judgment rule,” which is a standard originally created to determine if a director of a corporation breached his or her fiduciary duty to the stockholders. Under this rule, corporate directors and officers generally do not violate their fiduciary duty, absent actual wrongdoing in the form of fraud, self-dealing or unjust enrichment. To determine if a director’s actions fall under the business judgment rule, Florida Courts look at (1) whether the association has the contractual or statutory authority to perform the relevant act and (2) the decision is reasonable.
I hope this helps you, but without knowing more about the particular allegations being made against you, I cannot give you any specific advice. I would speak to your attorney about the details of the lawsuit and what specifically is being alleged against the Board members in your case.
The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, PLLC or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.
Editor’s note: Attorneys at Goede, Adamczyk, DeBoest & Cross, PLLC., respond to questions about Florida community association law. The firm represents community associations throughout Florida and focuses on condominium and homeowner association law, real estate law, litigation, estate planning and business law.
Copyright © 2018 Journal Media Group, Harris B. Katz is managing partner of the law firm Goede, Adamczyk, DeBoest & Cross, PLLC.
