Court Finds Association Directors Breached Fiduciary Duties for Violation of Business Judgment Rule Relative to Election of Directors

This case involved a dispute between an association member (“Owner”), who was a candidate for election to the association’s board of directors, and her homeowner’s association (“Association”) over the validity of an election of directors. The Association, which has 703 units, has a board of directors that consists of 48 unit owners who serve two year terms that are staggered so that 24 directors are elected each year.

Owner served on Association’s board from 2015 to 2017, and ran for re-election in 2017. On the evening of the election Owner delivered approximately 25 ballots to the location where the ballots were being counted. After delivering the ballots to the designated “Election Judge,” owner was denied her request to observe the computer screen of the Election Judge who was tabulating the votes. Also, one of the ballots that Owner had delivered purported to be from the owner of a unit that was owned by a land trust but, because the Election Judge was not able to verify the beneficial owner of the land trust, the vote on that ballot was not counted without any attempt being made to contact the unit owner to clarify whether he was the beneficial owner of the trust. Had the vote of the owner of the unit owned by the land trust been counted, Owner would have been re-elected to the board of directors, but because the vote was not counted, Owner did not get re-elected as a director.

In 2019, Owner again ran for election to the board of directors. On the morning of the election, one of the other candidates for election as a director died. Because 85 to 90% of the votes had been cast prior to the election day, it turned out that the candidate that had died on the day of the election was one of the 24 people elected as a new director. Owner placed 25^th in the voting and argued: