Berding | Weil - Attorneys At Law

First Thing We Do, Let's Ban All the Bloggers!

All speech is not necessarily objective or persuasive—merely posting something on the Internet does not make it right, or even important.

Anyone who surfs the web for useful stuff about community associations has seen three kinds of information posted there--the good, the bad, and the ugly. “Good” information provides accurate facts and useful advice related to those facts. “Bad” information, while often inadvertent, provides neither accurate facts nor useful advice and is usually the result of carelessness or lack of experience. “Ugly” information, on the other hand, is accurate facts used as a cover for bias that either intentionally misleads or is simply invective—or both. The facts used, true as far as they go, are nevertheless intended to disguise or “beard” a political or social agenda. To illustrate “ugly” information, assume that the following is a blog post. It is reproduced here in its entirety as it appears in the blog—all of the emphasis is in the original. You tell me into which category this “information” falls:

“HOA boards can be sued and not covered by insurance

Much of the abuse by boards, the management firms, and attorneys are tortious acts that are illegal and also constitute a fraud upon the members. You will not hear this at pro-HOA seminars sponsored by local governments and/or taught by CAI attorneys.

“D & O” means “directors and officers.”

“Most, if not all, D&O policies contain a provision that excludes intentional criminal and fraudulent acts committed by board members,” says Collins. “However, [our policy] will continue to defend the directors and/or officers until such time that a criminal action can be proven. The policy will then cease to provide any further protection once it is determined that a board member knowingly committed a criminal or fraudulent act.”

D&O coverage also doesn't indemnify a board or board member against decisions madein bad faith,” or with illegal intent. If a board is found to have acted in an illegal manner—deliberately discriminating against a prospective buyer, for example—and are hit with punitive damages, members are on their own when it comes to paying them.

The reason for pursuing these actions acts of bad faith is to force the homeowner into court, where the attorney gets his fees and the HOA gets a free ride, most of the time.  Directors and officers are legally bound to act in good faith toward their members.

Yes it's ugly, but let's analyze why. The title is an accurate statement of fact—boards can be sued and not be covered by insurance. But the implication is that somehow this headline is “news.” It's not new or especially informative. Anyone can be sued, and in many cases there will be no insurance coverage—either because no policy exists, or because it is not intended to cover the loss complained of. The title misleads the reader into thinking that something important is about to follow.

The choice of words in the first sentence of the opening paragraph lays bare the intent of the writer, and it has nothing to do with the benefits of obtaining insurance. The blog poster asserts that boards of directors of homeowner associations, their managers and counsel abuse the members. Not only do they abuse them, they do it tortiously, illegally and fraudulently (emphasis mine.) There is no support provided--it's simply a statement loaded with the author's belief—what a prosecutor (and doesn't that really describe the blog's author?) would call a “charging allegation.” In a courtroom, however, such allegations would have to be backed up with evidence or the case would be dismissed--and worse, the prosecutor could face court sanctions.

It also says that informational seminars taught by attorneys who are members of a particular organization, CAI1 are “pro-HOA” so we would have to assume that the blog author's position is contrary, or “anti-HOA.” What that means is unclear, but the blog poster suggests that supporting homeowners associations is not good. This is neither advice nor argument nor does it make any particular sense. This is “ugly” information—actually not “information” at all, just invective—a “rant” if you will. It seeks to co-opt the reader before the meat of the blog is even read, by dangling otherwise accurate facts as bait. So far we don't have much in that blog that's worth reading about.

The definition of “D&O” in the next paragraph is accurate. The sentences that follow in the third paragraph, however, are misleading. They are excerpts from a much longer and generally informative article on why a community association should carry “Directors and Officers” insurance coverage.2 The quotes from that D&O insurance article (and the emphasis that has been supplied by the blog's author) are taken out of context. They are not used to educate the reader on the benefits of D&O coverage as the longer article intends, but rather to convey the author's own message, literally underscored by the author, that board members are in fact committing fraudulent or criminal acts. And, that D&O insurance won't cover such acts. That D&O policies don't cover intentional fraud or crimes committed by board members is true. But using that fact to imply that such acts are actually being committed, without offering any independent evidence is misleading. The otherwise accurate facts are co-opted by the author's apparent bias.3

The blog post's fourth paragraph contains more of the same. An accurate statement of fact (that D&O policies do not protect board members who act in bad faith) is used to support an opinion that lacks foundation. The blogger emphasizes certain words and phrases to get the reader to believe that board members routinely act in bad faith or with illegal intent, or worse, to serve as a threat to board members who may make decisions of which the blog's author disapproves.

Skeptics who still doubt the intent of the blog post above will be converted when they read the last paragraph of the blog:

The reason for pursuing these actions acts of bad faith is to force the homeowner into court, where the attorney gets his fees and the HOA gets a free ride, most of the time.  Directors and officers are legally bound to act in good faith toward their members.

This is punditry of the worst sort. Here the blog's author drops all pretense of objectivity, ignores the intent of the article on D&O coverage, and what was previously mere innuendo becomes an outright allegation of wrongdoing. He accuses board members of “pursuing these actions” which he cites as “acts of bad faith” to force owners into court where they can be preyed upon by attorneys (who of course get a fee) and the association. He polishes off this allegation with an admonition that implies that boards are routinely ignoring their duty. This isn't a “discussion” or even an educated opinion—it is simply invective. Character assassination to further a personal political agenda is counter productive and cowardly.

Many legislatures, including California's have recognized the need to protect volunteer directors and immunize them from the consequences of unintentional acts.4 But few acts of board members can be characterized as intentional or taken in “bad faith” notwithstanding the broad allegations of the blog's author.5

The problem with blog posts like the one above, aside from the fact that they don't contribute much that is useful to their chosen subject, is that they pander to less experienced readers who have difficulty separating otherwise accurate facts from the misleading “conclusions” that the poster supplies. Lack of objectivity coupled with emotion does not lead to clarity. Blog posts, email, and social networks are an inexpensive and widely available means of communicating with large numbers of people and make it easy for pundits of every stripe to be heard. It's up to the reader to exercise caution and to separate the useful information from that which is bad, or simply ugly. That's not always easy.

A blogger is not accountable for what he or she writes. In the battle of ideas that is sometimes waged on the Internet, it is good to remember that bloggers can sit on the sidelines, complaining, making specious arguments and at the same time, offering only unrealistic solutions, or no solutions at all. Directors, on the other hand, are on the front lines, charged with the duties of loyalty, inquiry and good judgment. They have to work in the community's best interest and must defend their decisions. That also is not easy.

Evaluate the information, consider the facts and you make the call; don't let anyone make it for you.

1 Community Associations Institute

2 The ABC's of D&O

3 Full disclosure: We certainly have biases. We are attorneys who get paid to represent hundreds of community associations. Associations can only act through their elected boards of directors who we do not represent. We like to think, however, that our bias is toward the practical needs of these boards and the managers who are responsible for billions of dollars in other people's real estate. They didn't create the statutes, rules, and recorded documents that govern the operation of community associations; they inherited them and are bound by them just like every other owner. We try to provide practical solutions intended to keep these associations operating in the face of often very serious funding problems—sometimes we succeed and sometimes we don't—but our intent, as well as our job, is to make them work. A board's job is difficult and criticizing those rare volunteers willing to be stuck with management of a community association is a fool's errand.

4 California Civil Code Section 1365.7

5 Directors can make judgments that prove incorrect. This can be because they didn't get good advice, weren't experienced enough in analyzing that advice, or because a situation evolved beyond what they anticipated or could have anticipated. The law doesn't expect perfection, only that directors act with "due diligence" and try to make decisions that are in the best interest of the association. When they do, even if they are wrong and, in fact, sometimes even if their decisions turn out to be unlawful, in most cases they will be entitled to immunity and indemnity.

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