IL: Appellate Court opinion upholds rights of condo, HOA residents

In Illinois, First Amendment protections cannot be denied by governing documents
By Deborah Goonan, Independent American Communities

 

Justice P. Scott Neville, Illinois Appellate Court (First District, Second Division) recently overturned a Cook County Circuit Court ruling against a condominium owner, and issued a court Opinion that acknowledges First Amendment rights of residents in condo associations.

The case, Michael Boucher vs. 111 East Chestnut Condominium Association, Inc. and its board of directors, continues a trend toward curbing abuse of power by some boards of association-governed communities.

Background story

Michael Boucher is a condo owner and former board member at 111 East Chestnut Condominium in Chicago. Boucher is a New Jersey native, politely described by some of his neighbors as outspoken. In a 2017 Chicago Tribune article summarizing internal conflict at 111 East Chestnut, a current board member refers to Boucher as “crude” and his behavior as “obnoxious.”

Boucher was fined $500 in 2013, for using insulting and vulgar language while criticizing some staff members about the quality of their services. The condo association has a rule against “offensive or obnoxious activity,” which they used as the basis for imposing a fine.

But the condo owner has maintained that he has a right to free speech, guaranteed under the First Amendment of the U.S. and state Constitutions. Thus, Boucher refused to pay the fine, and has been embroiled in litigation with his condo association, and its board members at the time, ever since.

 

Depositions in the protracted litigation, according to court records, include allegations that Boucher called a female door attendant a “cocky bitch” and that he once exposed his scrotum during a meeting with the board.

Boucher denies those claims.

Before the condo association fined Boucher, the owner requested evidence of his supposed “obnoxious” behavior. But the board refused to provide such evidence, making it impossible for the owner to explain or defend his actions at the violation hearing. Boucher likened the internal proceeding to kangaroo court.

As is typical of many disputes in association-governed communities, personality conflicts and egos often get in the way of objective judgment. Thus, internal disciplinary hearings become more like popularity contests, based upon innuendo and, sometimes, “facts” that are either grossly exaggerated or completely made up.

Nevertheless, a Circuit Court Judge ruled in favor of the condo association’s right to impose a fine against Boucher.

As outlined in the Appellate Court’s Opinion reversing the Circuit Court ruling, Boucher appealed on three grounds:

..(i) board members violated the Condominium Property Act (Act) (765 ILCS 605/1 et seq. (West 2012)) by penalizing him for expressing his opinions about condominium management, (ii) board members violated the Act by refusing Boucher’s request for a copy of the recording of the meeting at which the board considered misconduct charges brought against Boucher, and (iii) the condominium association and the board members violated their fiduciary duties by withholding from Boucher evidence brought against him.

 

The most significant portion of the ruling is the Court’s judgment that condominium associations must follow Illinois statute, which prohibits boards from enacting or enforcing rules, restrictions, or policies that impede First Amendment rights:

We hold that section 18.4(h) “forbids a board from ‘impair[ing] any rights guaranteed by the First Amendment,’ not from violating the Amendment itself.” Goldberg v. 400 East Ohio Condominium Ass’n, 12 F. Supp. 2d 820, 824 (N.D. Ill. 1998) (quoting 765 ILCS 605/18.4(h) (West 1998)). Under section 18.4(h), condominium boards must not adopt or enforce any rules that prohibit the free exercise of religion, abridge the freedom of speech, or abridge the right to peaceably assemble. See U.S. Const., amend. I.

US Constitution (pixabay.com)

The Court recognizes the faulty logic of the Circuit Court, long promoted by the HOA and condominium management industry’s trade group: that the powers of the governing board of private organizations such as condominium associations need not be constrained by the U.S. Constitution.

To agree with that assumption simply opens the door for any condo or HOA board to shut down all speech or public opinion with which it disagrees.

Additionally, the condo association argued that the recording of its misconduct hearing with Boucher did not count as “meeting minutes,” and that the confidential hearing itself was not a “board meeting.”

But the Court disagreed, because a quorum of board members was present at the hearing, and the board failed to record written minutes, as required by the Illinois Condominium Act.

The defendants contend that the video recording cannot count as minutes because the recording is not written. They cite Black’s Law Dictionary, which, using the meaning of the term from Scots law, defines minutes as “[w]ritten forms for preserving evidence.” Black’s Law Dictionary (7th ed. 1999). Illinois courts have held that minutes serve as evidence of a board or agency’s actions. O’Malley v. Village of Palos Park, 346 Ill. App. 3d 567, 581-82 (2004). The video and audio recording here serves as the only evidence of the board’s acts at the meeting, as the defendants have neither presented nor alleged that they maintained any written record of the October 4 meeting. Because the board has met its statutory duty of keeping and maintaining a record of the October 4 meeting only by making the video and audio recording of that meeting, the recording counts as the minutes of the meeting. When a board has made a video and audio recording of its proceedings, the recording serves the purpose of minutes, by preserving evidence of the board’s actions. See O’Malley, 346 Ill. App. 3d at 581-82.

 

(Pixabay.com free image)

 

And, with regard to the board’s failure to fulfill its fiduciary duties, the Court blew the “business judgment rule” defense out of the water:

The business judgment rule permits a trier of fact to presume that a corporate board made its decisions “on an informed basis, in good faith and in an honest belief that the actions taken are in the best interest of the company.” (Internal quotation marks omitted.) Spillyards v. Abboud, 278 Ill. App. 3d 663, 676 (1996). A plaintiff may overcome the presumption by presenting evidence that the defendants failed “to inform themselves, prior to making the business decision, of all material information reasonably available to them.” Spillyards, 278 Ill. App. 3d at 681-82.
Here, Boucher showed that the board members withheld from him the video of the elevator incident and the employee’s letter concerning the key card incident, thereby depriving themselves of readily available information as to how Boucher would respond to the evidence.

 

The most significant statement with regard to a board’s fiduciary duty, is the Court’s clarification that a board’s fiduciary obligations increase in proportion to its power over the members of the association. (Emphasis added in bold.)

While the declaration may limit liability for business decisions made in good faith, it cannot limit liability for violations of the duties of honesty, candor, full disclosure, loyalty, and good faith. See Sherman v. Ryan, 392 Ill. App. 3d 712, 730 (2009). If directors of a condominium seek to reduce their fiduciary duties or their liability for breach of those duties, the directors must reduce the extent to which the unit owners must trust them. See Burdett, 957 F.2d at 1381. The board cannot maintain both (1) that the unit owners must trust them to a very high degree with power over their homes and (2) that they have essentially no potential liability for breach of the fiduciary duties that result from their power over the unit owners.

 

Wow. That’s a game changer.

This Opinion says that the more power bestowed upon the association, the higher the standard of accountability.

How refreshing!

In summary, the Appellate Court agreed, 3 to 1, with all three complaints filed by Boucher’s Attorney, Norman Lerum. The full 33-page opinion, including a summary by dissenting Judge Mary Anne Mason (linked below), arrived at the following Conclusions:

 

CONCLUSION
Boucher sufficiently alleged a violation of section 18.4(h) of the Act by alleging that the board fined him for expressing his opinions about the management of the condominium. The Act requires the board to maintain minutes recording board actions at every meeting, including closed meetings. Because the board kept no record of the October 4 meeting other than a video and audio recording, the board’s recording constitutes the minutes of the meeting. Boucher presented sufficient evidence to create an issue of fact as to whether the board violated section 19 of the Act by refusing his request for the minutes of the meeting. Boucher presented sufficient evidence to create an issue of fact as to whether the association and the board members violated their fiduciary duties to Boucher when they withheld from him the evidence that provided the basis for their decision to fine him. Defendants Del Monico, Jansen, and Gajderowicz presented uncontested evidence that they did not take part in the decision to deny Boucher’s request for the minutes of the October 4 meeting. Accordingly, we affirm the decision to grant Del Monico, Jansen, and Gajderowicz’s motion for summary judgment on count II of Boucher’s complaint. In all other respects, we reverse the trial court’s judgment and remand for further proceedings.
Affirmed in part; reversed and remanded in part.

 

 

Highlights of Judge Neville’s Response to dissent by Judge Mason

Judge Mason offers the standard HOA industry rhetoric in defense of a board’s right to exert considerable power with very limited accountability: that the Court opens Pandora’s Box by getting involved in the internal affairs of an association.

But the Appellate Court disagrees. Here’s what they have to say about that: (Emphasis added)

The dissenter fears that if the court enforces the Act as written, courts will “become embroiled in the internal affairs of condominium associations.” Infra ¶ 82. When the legislature adopts legislation that may require judicial enforcement, the legislature effectively directs the court to become embroiled in resolution of the problem the legislature has addressed. The Act here will almost certainly not embroil the courts in frequent lawsuits over board members’ breaches of fiduciary duties or violations of sections 18.4(h) and 19 of the Act. Only foolhardy persons, or persons deeply aggrieved by intolerable misconduct, file lawsuits against persons who have unfettered access to their homes.

The legislature wrote the Act in a way that discourages abuse of the position of extreme trust that all members of condominium boards hold. The dissent would rewrite the Act to undo the legislature’s work and instead leave unpunishable breaches of fiduciary duty and other abuses of power by board members. The business judgment rule protects the business judgments made by board members. But board members have fiduciary duties of honesty and full disclosure to all residents and owners of the condominiums they manage—even if the residents or owners are consistently rude, arrogant, and obnoxious. Persons who cannot bring themselves to disclose honestly to any owner all that they find out about the owner and the owner’s unit should not take on positions of extreme trust. They should not have unlimited access to the homes of the owners and residents. They should not serve as board members.

 

Well said, Justice Neville. Well said.

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