Derivative Action and Tree Removal

By Michael J. Gelfand, Esq. / Published August 2019

C

ourt Tosses Condominium Owner’s Claim to Force Association to Enforce Restrictions and Force Directors to Pay Damages

Can an individual association member sue a Florida association on behalf of the members for breach of fiduciary duty? What if the suing member has personal motivations that are contrary to the interests of the other members? A court may not look too kindly on this type of action.

The difficulty for a member of a Florida not-for-profit community association corporation to prosecute the claims on behalf of the association and the association’s members was illustrated in the recent case of Cornfeld v. Plaza of the Americas Club Inc., 44 Fla. L. Weekly D 1157 (Fla. 3rd DCA, May 1, 2019). Cornfeld owned a unit within the Plaza of the Americas Condominium, and he was also the owner/manager of a privately held, family-owned real estate investment and management company which owned a hotel across the street from the condominium. The Cornfeld hotel needed parking spaces.

Cornfeld sued the Club and its directors alleging breach of fiduciary duty to the owners, alleging that the Club wrongfully refused to accept an offer of $2.5 million to purchase a parcel of Club property and refused to assert a claim against the shopping center adjacent to the condominium for failing to repair damages to a sewer main.

Bringing a lawsuit on behalf of your community association is a special type of claim called a derivative action. The Legislature requires that a member’s claim against their association be subject to independent review because there is frequently an issue as to whether the member is really suing for the member’s self-interest or whether the lawsuit furthers the association’s interests.

Given the option on how to proceed with derivative claims, the Club chose the appointment of an independent person by the court to determine whether maintenance of the derivative action was in the best interest of the Club. The investigator spent five months reviewing the allegations and recommended that the case be dismissed because of the following:

• Cornfeld does not adequately represent the interests of the Club’s unit owners because of his personal motivation for filing the suit, which is contrary to the interest of the Club membership generally;
• The board members’ decisions were reasonable, were guided by legal advice throughout, and are protected by the business judgment rule, and the board members are thus immune from the lawsuit; and
• The litigation is barred because Cornfeld failed to serve a statutorily required pre-suit demand on the board.

     The trial court adopted the findings of the investigator and dismissed the lawsuit. The Florida appellate court agreed with the trial court’s decision to adopt the conclusion of the investigator that the derivative lawsuit was not in the Club’s best interest.

The court also dismissed claims asserting that the individual directors did not file suit to enforce the restrictions. The investigation found that the directors were relying on the recommendations of counsel. Though counsel’s advice was conservative, that is not a justification to force the directors to have a new meeting. Note that the court did not have to address the potential selective enforcement problem that follows when an association consciously fails to enforce the restrictions!

This decision brings to the surface some of the more significant issues facing members filing derivative claims purportedly on behalf of an association’s members. A plaintiff member’s personal motivations may have to be evaluated by a court-appointed investigator. The investigation process may require significant expense.

Trees Planted in Common Area Without Association Approval Must Be Removed

What happens when a homeowner plants trees without association approval? Does it matter if the trees are planted on the owner’s property or on common property? Apparently not.

Recently, a Florida appellate court ruled that a homeowner must not only remove trees planted on his own property without association approval, but he must also remove trees planted on common property. The facts in McIntosh v. Myers, 44 Fla. L. Weekly D 1167 (Fla. 1st DCA, May 2, 2019), indicate that without association approval, the Myerses planted 21 cypress trees within their property, nine of which were in the common area next to the property owned by the McIntoshes. The association’s restrictions specifically required prior approval for landscaping.

The McIntoshes sued the Myerses to enforce the association’s restrictions, seeking an injunction requiring removal of the trees. The trial court held that the trees were in fact planted without association approval in violation of the association’s restrictions. Because the Myerses had removed the trees from their property, the trial court issued an injunction prohibiting the Myerses from planting any other trees on their property without approval. However, the trial court did not provide any relief as to the trees planted on common property.

The Florida appellate court agreed with the trial court that the trees were planted in violation of the association’s restrictions. Further, the appellate court noted that Florida law allows homeowners to bring actions against other homeowners to force them to comply with their governing documents. “[Florida law] does not set forth any limitation on this right as it relates to common areas,” the court stated. “More importantly, the covenants governing the subdivision clearly provide for individual owners to seek enforcement of the covenants in law or equity.”

Had the association enforced its own restrictions, this case would not have resulted in neighbor versus neighbor dispute. Not only is it important for an association to enforce its restrictions to keep the community looking good, which keeps up the market value of all homes, but it helps to prevent neighbor versus neighbor battles and helps to avoid a selective enforcement situation.

Michael J. Gelfand, Esq.

Senior Partner, Gelfand & Arpe, P.A.

Michael J. Gelfand, Esq., the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a dual Florida Bar Board Certified lawyer in Condominium and Planned Development Law and in Real Estate Law, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is a past Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at ga@gelfandarpe.com or (561) 655-6224.