Trojan Horses and Master Association Authority

By Michael J. Gelfand, Esq. / Published October 2023

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mails and Texting: Trojan Horses Undermining Your “Business”

     In this day and age we regularly communicate by email and/or texting. But can these communication modes be used against an association if an association is sued? The answer is, “Yes.” Perhaps harkening back to the old Dragnet television series, your emails and texts “can and will be used against you in a court of law!”

     Recently a Florida appellate court ruled that punitive damages could be awarded against former employees and a competing business. Emails and texts between the defendants showed the defendants were plotting to steal the plaintiff’s business without paying for it. In Werner Enterprises, Inc. v. Mendez, 48 Fla. L. Weekly D 1121 (Fla. 5th DCA, June 2, 2023), the facts show that Werner Enterprises sued Mendez and Stallings, two former employees, and AJC Logistics, one of Werner’s competitors, alleging that the former employees conspired with AJC to induce the Werner employees to resign and work for AJC, bringing Werner’s clients with them to AJC.

     In other words, Werner asserted that AJC would obtain Werner’s business without having to pay for the business. Werner alleged this plan was called “Project Satellite.”

     Werner moved to amend its complaint to seek punitive damages. The evidence included numerous email and text message conversations involving Mendez, Stallings, and senior AJC officers. One email sent by Stallings to AJC’s controller said he looked forward to talking with AJC more as “‘Project Satellite’ continues to develop.” A memo sent by AJC’s controller to AJC’s president said that by hiring a team of experienced Werner employees, AJC could “potentially double” its transportation division “with minimal risk and upfront investment.”

     Within one month of Mendez and Stallings’ resignations, Werner closed its Jacksonville office. Werner argued that the defendants launched Project Satellite to obtain Werner’s Jacksonville office without having to pay any money to Werner. The trial court denied Werner’s motion to amend its complaint to seek punitive damages.

The Florida appellate court reversed the decision of the trial court. The court explained that to add punitive damages to a complaint, the plaintiff must make “a reasonable showing” of having “a reasonable basis” for the recovery of punitive damages. Punitive damages are reserved for cases in which a defendant is “personally guilty of intentional misconduct or gross negligence.”

     The court concluded that the evidence showed that Werner made a “reasonable showing” of having a “reasonable basis” for recovering punitive damages. “Project Satellite was a trojan horse operation to transfer Werner’s Jacksonville office into AJC property without payments to Werner,” the court stated. “[T]his transformation occurred because two of Werner’s employees, secretly working in concert with AJC’s executive officers and board of directors, provided AJC with sensitive information about Werner’s customers and induced key Werner employees to resign their employment and work for AJC.”

     This case is a warning to association directors and officers to watch what you say when communicating electronically. Emails and texts, valued because of their qualities of speed and informality, may be dangerous just because of those qualities. Senders type messages without thinking through what they are writing or contemplating the potential impacts of the message. Adding to the danger of speedy messaging, “deleted” emails and text messages frequently can be recovered, and they can be used against you in a lawsuit!

Assessments for a maintenance beyond community boundries: Yes, the basis of a lien foreclosure!

     Many Florida communities consist of a master association with numerous subassociations. The master association often provides services such as landscaping and then bills the various subassociations. Can a Florida master association assess owners for services on property that the master association does not own? It’s time to check the association’s documents!

     A Florida appellate court recently ruled that broad powers in a master declaration permitted the master association to assess a subassociation for landscape maintenance on the subassociation common areas that the master association did not own. The facts in Grovehurst Homeowners’ Association, Inc. v. Stone Crest Master Association, Inc., 48 Fla. L. Weekly D 1167 (Fla. 6th DCA, June 9, 2023) indicate that Stone Crest consisted of a master association with five subassociations.

     In 2011 Stone Crest contracted to perform landscape maintenance with four of the five associations. Grovehurst elected to do its own landscaping. Nonetheless, Stone Crest assessed Grovehurst for its pro rata share of the work Stone Crest performed for the other four subassociations. Grovehurst sued the master association, alleging that Stone Crest did not have the right to assess Grovehurst for providing landscaping on common areas Stone Crest did not own. The trial court granted summary judgment for Stone Crest.

     The Florida appellate court affirmed the trial court’s decision, finding that the broad powers contained in the master declaration permitted the master association to assess for maintenance on property it does not own. The court noted that the master declaration dictated that the annual assessment “must be used exclusively to promote the recreation, health, safety, and welfare of the owners” and that it provides for “all other general activities and expenses of” the master association.

     The appellate court concluded that the assessments promote lot owners’ recreation and welfare in two ways: First, the assessments provide for a safe and enjoyable experience in using the neighborhoods’ walking paths, lakes, fountains, and ponds. Second, the assessments enhance the overall value and desirability of the entire property by providing a common plan.

     In other words, an association may have the authority to assess for services performed on property the association does not own. It all depends on whether the association’s declaration provides the master association with the power to assess for these services. Questions? Contact your association’s counsel.

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, a certified circuit and county civil court mediator, a 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.