Can an HOA Owner be Banned from Board or Committee Service?

Short Answer: Yes.

On Tuesday, October 8, 2019, I attended a Stakeholder’s Meeting commissioned by Gov. Jared Polis requiring the legislature to examine the issues surrounding the inadequacies of CCIOA. The focus of this particular meeting (the 4th of 4 such meetings) was Homeowner Rights. I made this question central to my testimonial comments before the legislators, and followed up with thoughtful discourse after the comment period. There was universal support for removal of bad actors, and acknowledgement that it is far too difficult to enforce CCIOA by any party under current conditions to the point it is rarely done.

I was compelled to attend and speak because, even though our community at Poudre Overlook HOA had successfully used the provisions in C.R.S. 7-128-108 to remove the entire Board of Directors on August 27, 2019, there remained open issues about the conduct of persons serving on the Board and ACC Committees that I felt had risen to the standards of the next sequential statute, C.R.S. 7-128-109.

§ 7-128-109. Removal of directors by judicial proceeding

(1) A director may be removed by the district court for the county in this state in which the address of the nonprofit corporation’s principal office is located or, if the nonprofit corporation has no principal office in this state, by the district court for the county in which the street address of its registered agent is located, or, if the nonprofit corporation has no registered agent, by the district court for the city and county of Denver, in a proceeding commenced either by the nonprofit corporation or by voting members holding at least ten percent of the votes entitled to be cast in the election of such director’s successor, if the court finds that the director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the nonprofit corporation, or a final judgment has been entered finding that the director has violated a duty set forth in part 4 of this article, and that removal is in the best interests of the nonprofit corporation.

(2) The court that removes a director may bar the director from reelection for a period prescribed by the court.

https://law.justia.com/codes/colorado/2016/title-7/corporations-continued/article-128/part-1/section-7-128-109/

The standard is fairly direct: If someone is engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the nonprofit corporation, then they can be removed as a Director by the Court.

However, paragraph 2 of this statute also makes clear the Court has an additional power – to bar the director from reelection for a period prescribed by the Court.

At the August 27, 2019 Special Meeting, which can be viewed here, the Poudre Overlook HOA owners used the 7-128-108 statute to remove the entire board. It is my understanding that the choice to remove the entire board vs. singling out any specific board member behavior was a choice to lessen the burden on the community to adjudicate the matters raised by myself in my formal complaint report submitted on May 15th 2019.

The hope and/or assumption of the Recall Committee, as stated by their members, was that the removal would end the controversies, and allow the community to move forward in peace. Instead, there is a group of approximately 20-25 owners who have advocated a rather peculiar point of view – that “healing” of the community hinges upon the Board having precisely 9 members, and that 4 of those 9 be part of their group. The stated reason for this inclusion is “representation of their side”, which demonstrates an underlying thinking that there are two distinct sides to all issues for the community, and that without such representation, the Board would regularly and consistently decide against this group’s interests.

The group has been led by three individuals, in particular: Irve Denenberg, Walker Flanary, and Buck Hammond.

It has been my opinion, documented in emails weeks and months prior to the Special Meeting, that Irve and Walker, in particular, acted in a manner that violated the C.R.S. 7-128-109 statute. Specifically, they were engaged in fraudulent or dishonest conduct in regards to relaying information from the HOA Attorney, Pete Dauster. In the effort to bring the issue to the attention of the remaining Board of Directors, both Walker Flanary and Maryann Goyn (with support from Buck Hammond) engaged in gross abuse of authority in preventing the Secretary from obtaining documents from the HOA Attorney – a classic cover-up.

In fact, this was a specific point made in my May 30, 2019 email to Pete Dauster entitled: Legal Notice: Violation of Duty to Act Within Scope of Authority & CCIOA Executive Board Members Powers and Duties

I said:

“The level of effort expended to avoid simply turn over documents appears to be consciousness of guilt. And, combined with the possible use of false documents leads to a review of the statutes that govern removal of board members for conduct that meets at least 4 standards of the statute.
I believe CRS 7-128-109 is the appropriate citation, and the criteria for fact-finding to apply this statute is:

“fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the nonprofit corporation, or a final judgment has been entered finding that the director has violated a duty set forth in part 4 of this article, and that removal is in the best interests of the nonprofit corporation.”

Given the evidence we can see thus far, and the obstruction to obtaining other key documents from you, it seems that without cooperation from you, it may leave me no choice but to seek resolution through a Larimer County Court in order to return order to our association. I do not wish to take this path, and am seeking resolution akin to the proposal by Buck Hammond. However, I am no longer getting responses from any of the parties involved, and the matter is ripe for consideration and action as all other attempts to resolve the matter are now exhausted with a fast-approaching statute of limitations on the matter, which may toll as early as June 30th.”

Excerpt 5/30/19 Legal Notice to Pete Dauster

The response from Pete Dauster, as we now know, was to send the documents I had requested and to simultaneously terminate representation of the HOA. This move, which was characterized as “harassment” of the attorney, was actually a recognition of Federal Rule 3.7, which states that an attorney cannot be both an advocate and a witness. In other words, because Pete Dauster recognized that he was now a witness to a violation of C.R.S. 7-128-109 in the form of fraudulent and/or dishonest conduct, he would no longer be able to be an advocate for the HOA anticipating the potential litigation under that statute.

While the successful removal of Walker from the Board of Directors could be argued to be the end of the story, the fact that Walker, and his co-conspirators (Irve and Buck), have aggressively pursued the agenda of the group we are affectionately referring to as the Niners including, at the very least, verbal abuse, it is worth examining their past actions to consider whether or not the community itself needs to apply the remedy of C.R.S. 7-128-109 (2) which bars such persons from participation in an HOA’s governance.

Since the HOA Bylaws, CCRs, and Policies are silent on the matter regarding barring someone from future service, the board should contemplate a policy which would carry the same effect without the cost-prohibitive expenses of a case in County Court, which is estimated to take $20-30k per Robinson and Henry, a lawfirm specializing in such matters.

The necessity of going through the burden of even considering such a matter hinges upon whether or not there is concrete evidence of fraudulent or dishonest behavior, and fortunately, Irve Denenberg voluntarily offered up what the prior board refused to review or consider: A confession.

Yes, Irve stood up on August 27th, and finally answered a question I had posed to him several times between May and August: What advice, if any, did you get from Pete Dauster on October 24th, 2018?

I will examine this topic in detail, and I urge all Poudre Overlook owners to consider the evidence prior to consideration of any motions or elections at the upcoming Annual Meeting in November. I will post the analysis of one specific example, but everyone should know that it’s merely the strongest evidence among several examples.

And, I welcome Irve, Walker, or Buck to respond in writing to any of this. I will commit to publishing their unedited comments within this forum should they choose to respond.