We are regularly asked by association clients if it really matters how precisely meeting rules are followed. “Can’t we just vote on this proposal by e-mail?” “What’s the consequence if the meeting notice is not exactly right?” Without exception, our advice is always: FOLLOW THE RULES.
As an example of “what can happen?” comes the North Carolina appellate case of Willomere Community Association, Inc. and Nottingham Owners Association, Inc. v. City of Charlotte and Charlotte-Mecklenburg Housing Partnership, Inc. (November 1, 2016). The moral of the story is that procedural rules for meetings and voting when making decisions should be followed very carefully.
In Willomere, a rezoning of property next to a community association was approved and two associations filed a lawsuit challenging the rezoning. The appeal doesn’t actually involve the substance of the rezoning, but the procedural process by which the lawsuits were initiated. The NC Court of Appeals determined that both associations “failed to follow the requirements in their respective bylaws with regard to their decision to initiate this litigation,” which means the lawsuits were invalid.
One association admitted the decision to initiate the lawsuit was not taken at a formal meeting with a vote, but was decided by e-mail. While the Court noted the possibility that e-mail evidence would prove there was written unanimous consent of every director, which is permitted, the record before the Court simply did not show that such action was taken. As a result, the association’s decision to initiate litigation was improper.
The second association argued that its board authorized litigation during a telephone conversation. However, the testimony showed that the telephone discussion was not an officially noticed board meeting by teleconference with an official vote, but simply a phone “conversation.” The Court noted there was no proper notice of the “meeting,” there were no minutes of actions taken during the “meeting,” etc. As a result, the association’s decision to initiate litigation was improper.
Because the association boards didn’t follow their own bylaws (and state statutes) in making the decision to file the lawsuit, the Court held that the associations lacked “standing” to bring the actions, and the lawsuit was dismissed.
At times, it may seem that we as attorneys constantly nag about doing everything by the book and watching the details, whether that’s due to a specific state statute or Robert’s Rules of Order (also required generally by state statute). This case is a keen reminder that when it comes to board meetings and making formal decisions, do it right the first time.
Keep in mind that this was a North Carolina case that applies to North Carolina only, and because North Carolina and South Carolina statutes and documents vary, you can’t assume that what works in one state will work in the other. If you have specific questions about board meetings or how to make proper board decisions, feel free to give our firm a call. I’m proud to say we’re the only law firm in the country with two attorneys who are Professional Registered Parliamentarians (PRPs) with the National Association of Parliamentarians.
NOTE: The Willomere case was reversed by the NC Supreme Court on March 2, 2018 in this opinion.
Author: Jim Slaughter
Articles have been Reprinted with permission from Black, Slaughter, Black.
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