Mark M. Wiechnik

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Deborah S. Dunn practices in the Community Associations group where she concentrates her practice on advising community association boards and property managers on matters including the creation and enforcement of rules and regulations, developer transition, fair housing compliance, and litigation arising from construction defects and contractor service agreements.


Articles By This Author

What You Type May Be Used Against You

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Before sending any email, especially one associated with your role as a Board Member, answer this question: How would you feel if this email were projected onto a large screen in open court in the presence of a jury?  I suspect if more people asked themselves this simple question, the number of emails sent per day would decrease dramatically. 

   
With the proliferation of email as a preferred form of communication, Board Members are in a unique situation.  They become members of a Board of Trustees and their personal lives immediately become intermingled with the business of the Association.  They become fiduciaries to their neighbors and friends, all the while maintaining personal relationships with those people. Often times, the line is blurred between friendship and Association business and as a result communications that might not be professional in nature, or in line with their duties as Board Members, are sent to other Board Members or other persons in the Community.  Under current discovery rules, many, if not all, of those emails must be produced if litigation arises.  In our experience, there are numerous instances where Board Members have made harmful or derogatory statements about each other, the Developer, and/or other unit owners.  Those emails, while not directly harmful to the Association’s position, are likely to harm the credibility of the author Board Member and weaken the Association’s overall position.  An adversary may look to show a personal vendetta against their client, be it a fellow unit owner or maybe the Developer.  These emails give them the opportunity and evidence to prove that theory to the jury.  This presents a significant problem for those Board Members during their depositions and at trial should the litigation progress to that stage.

   
One way to prevent this from occurring is to completely segregate personal emails from those related to the Association.  Each Board Member could set up a free email account with a service such as Yahoo, Gmail or AOL.  Or the Association could develop its own website, which would provide each Board Member with an email address that is individualized to the Association.  That new account would be used solely for Association business and communications between Board Members related to Association issues.  Just like separate bank accounts prevent the commingling of funds, a new Board Member email account would prevent the blurring of the line between regular citizen and unit owner and a member of Board of Trustees.  It would also tend to save the Association money during litigation, as personal and irrelevant emails would be completely separate, and therefore, would not have to be sorted, copied, produced and/or reviewed by counsel for the Association.  The key would be a zero tolerance policy.  Any email related to Association business or related to the persons role as a member of the Board would have to come from the dedicated Association account.  Otherwise, the personal account may be fair game for discovery as well.

Board Member Liability

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In most New Jersey Community Associations it is difficult to find qualified and interested persons to serve on the Board of Trustees.  Volunteer Board Members must put in long hours for no pay and sometimes little appreciation.  Now, consider for a moment if members of Boards were exposed to personal judgments for their actions while serving as a member of a Board.  It is obvious that it would be nearly impossible to find anyone who would serve on a Board if they could be liable personally for reasonable decisions they make as a member of the Board.  In order to protect Board Members, and to encourage people to volunteer their time, New Jersey has created a system in which Board Members are protected during their service on the Board.  However, it is a common misconception that Board Members are immune from lawsuits in connection with their duties as members of a Board.  There is no such statute in New Jersey that renders a Board Member completely immune to suit for his or her actions.  It is a fact that a Board Member can be sued personally at any time for virtually any claim including a breach of their fiduciary duty.
 
   
This does not mean that Board Members are left without protection from lawsuits related to Association activities.  Generally as an agent of the Association, Board members are indemnified by the Association for their actions, or failures to act, while on the Board.  There is significant difference between immunity and indemnification and unfortunately most Board Members are not acquainted with the distinction.  In short, immunity eliminates a lawsuit entirely.  It prohibits a lawsuit from being filed or continuing against a certain individual.  The person does not have to endure months or years of litigation or worry about their personal assets being at risk should the Judge or a jury find in favor of the Plaintiff. 

  
 Indemnification, however, allows a lawsuit against a Board Member to continue, and at the end of the case, if a judgment is entered against the individual Board Member, the Association generally pays it.  Pursuant to New Jersey statutes, as well as most Association By-laws, the Association has the ability to indemnify an agent of the Association when the agent acts in good faith, and does not make decisions that are adverse to the interests of the Association.  Like anything else there are exceptions, and in New Jersey, the Association is not required to indemnify the Board Member in the event that the Board Member committed fraud, engaged in self-dealing, willful misconduct or in some instances acted grossly negligent.  If the Board Member satisfies this standard and is found to have acted in good faith and in the best interests of the Association, the Association will generally pay the Board Member’s legal bills and pay any money necessary to satisfy any judgment entered against that Board Member.  Typically, Plaintiffs sue both the Association and the individual Board Members.  Often times they will all be represented by the same attorney, the cost of which is borne by the Association.  This is preferable given that the Association and the Board usually have the same interests and is advisable in order to mount a successful joint defense to protect the interests and assets of the Association.  Further, in some instances, a defense will be provided by an insurance carrier for both the Association and the individual board members.

   
Prospective Board Members should know and understand the difference between immunity and indemnification long before they throw their hat into the ring.  Inevitably, legal issues arise in the course of governing a community and it is best to understand your duties and responsibilities before getting involved.

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