2009 April 18
Last edit: 2009 May 12. See History for brief descriptions of changes and updates.
The title asks a very important and difficult question for members and board members of owners associations. Contrary to a common perception, legal opinions are not unique. A wide range of legal opinions can typically be written on a legal question depending upon the facts and documents provided and the direction from the agent of the client.
The title is not a criticism of attorneys. Rather, the post is an analysis of what attorneys do for clients and what that means for board members and individual members of owners associations. A principal conclusion is that members should be very skeptical of advocacy legal opinions by attorneys for owners associations.
The continuation of this post discusses the issues involved and provides recommendations.
Don Nordeen
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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Should a Legal Opinion be Believed? (continued)
Introduction
Suppose you have a dispute with Party B. If the attorney for Party B provides a legal opinion concerning the dispute, would you accept that opinion as correct? Of course not.
Now consider a legal opinion by the attorney for an owners association and that you are a member of that association. The legal opinion was likely obtained by the board with communication and direction to the attorney by the designated agent. Your view of the situation may be different from that of the board. Would you accept the legal opinion as correct?
Discussion
My view is that both individual members and board members should be very skeptical. Obtaining and using legal advice or legal opinions is one of the most difficult challenges for board members. It is even more difficult for individual members.
While the Association is the Client, the reality is that the client tends to be viewed as the board — both by the board and by the association's attorney. There is no bright line that defines whether the legal advice is based on the association being the client, or the board. So, even though the Michigan case law (at pdf p3 first full ¶) is specific that the Association is the client, it is difficult to know whether or not the legal opinion is consistent with that requirement.
(added 2009 May 12)>>> In representing the Association as a client, the attorney must represent the common interests of the members, who typically are the owners of restricted property in the CID. Where the legal advice affects both the Association and the common interest of the members, the attorney may have a conflict. How that conflict is resolved by the attorney must be part of the legal advice. <<<
The members should be represented through the Association by the CC&Rs, Bylaws and other governing documents. However, there are many reasons why this may not occur. To properly advise the Association, the attorney must have a working knowledge of the specific governing documents and any applicable laws. I am familiar with case law (limited and old) in Michigan that obligates boards to act in the common interests of its shareholders (members). But I have never seen that case quoted by any attorney for my association.
There is no such thing as a unique legal opinion. A unique and singular legal opinion is a myth. When a matter goes to court, one attorney argues one legal opinion or theory and the opposing attorney another theory. One of the two opinions or both turns out to be wrong in the opinion of the court which may advance another theory in deciding the case. One way to look at this is that over 50% of the time, an advocacy legal opinion is wrong.
Without having a clear description of the information and instructions to the attorney, one should not accept what the board represents as the attorney's opinion. Attorney's opinion regarding what? According to what standards? There is also the practical issue that the attorney is retained and paid by the board, albeit with members' money. In our imperfect world, the exhortation, "I know there is an attorney out there who can give me the opinion I want, and I hope it is you!" (or equivalent expressed in more subtle language) can produce what the board or the agent of the Association wants. In assessing the validity of an attorney’s opinion, one should also remember that when attorneys go to court, half of them advance a legal theory that is wrong. A singular legal opinion is a myth. You can get almost any opinion you want. That is what attorneys are paid to do: advocate for the client.
If a legal matter involves two independent parties, the advocacy representations by the two attorneys provide checks and balances and the resolution may evolve to the central legal theory. But those checks and balances do not exist with singular legal opinions by the Association’s attorney (added 2009 May 12)>>> where there may be a conflict between the interest of the Association and the common interest of the members.<<<
If a legal matter involves interpretation of governing documents that may affect the rights and obligations of individual owners/members, the checks and balances are typically lost. If one assumes that any singular legal opinion is wrong (or at least one should be skeptical of its validity), then one can understand how the board — or more specifically a board president acting as the agent to the attorney — might use legal advice to provide advocacy for the president's wishes and compromise the individual rights of owners/members. When acting as agent for the Association, a board president can make it clear what legal advice is wanted and can provide limited facts and background to support the advice wanted. The board president can then use the legal advice to justify the action, and can represent to the members that the board is only following legal advice. Since the costs to members to challenge the legal opinion and actions taken are large, challenges are generally not taken. Consequently, the president can effectively become a dictator on such issues because the only legal opinion available is the one from the association's attorney, and its quality may be unknown.
While most associations may not operate at the extreme described above, the discussion above shows how it can happen, and why it is important to be very skeptical of singular legal opinions by the Association's attorney.
The circumstances in the above two paragraphs are almost unique to owners associations with its mandatory membership and the purpose of the association to administer the affairs of the association. Typically, protecting the rights of individual members is not a stated obligation of the board.
Typically, board members are protected from personal liability if they act upon advice of counsel, if they resolve any doubts about the correctness of the advice and do not blindly follow the advice.
Recommendations
My recommendation is to include provisions in the governing document of the association concerning legal opinions.
- The standard for the legal advice is that which would likely be affirmed by a Court of AppealsFN1, FN2.
- (added 2009 Apr 27) Item 1 above requires that each likely opposing argument is examined by the attorney with analysis provided as to why each opposing argument is likely invalid.
- The direction to the attorney should be approved by the board for each opinion sought including the facts, documents and other information that the attorney must consider.
- The direction, facts, documents, other information and verbal communications to the attorney from the agent should be included in the attorney’s legal opinion.
- All of these documents must be available to members for inspection.
- Diligence (oversight) on the part of members to question any legal opinion provided by the board.
If the above exist, one may have confidence that the legal opinion is valid and is the basis for decision and action.
Statutory relief can only be limited. Both Virginia and Florida have requirements for the legal advice to be available to all members, which addresses Item 4 above. The documents should also include the instructions to the attorney, which should be approved by motion of the board so that all board members understand what is being asked for. Diligence by owners/members is essential.
My conclusion concerning additional statutory provisions is that legislation is needed to establish an office of ombudsman in the office of attorney general to render legal opinions on interpretation of the governing documents and the law and, specifically, regarding any compromise of the individual rights of owners/members. These are issues that typically exist between boards and the members. (added 2009 Apr 24)>>> This would allow members to get a "second opinion" on the legal opinion provided by the Association's attorney, or an opinion advanced by the board of directors. Since the full documentation for the Association's attorney's opinion should be available, it can be submitted along with the reasons for seeking a second opinion.<<< Both should be permitted to submit analyses for consideration by the ombudsman. In Michigan, opinions of the attorney general are binding unless overturned by a court. We should all be working with our legislators to enact such legislation. The office of ombudsman can be separately funded from owners associations with use gradually decreasing.FN3
Research
I have posted research at Organization is the Client. I have also posted my thoughts on a Letter of Engagement as a way for an Association to get better legal advice to serve the members. I would appreciate your comments on both.
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FN1 The principles involved in defining appropriate standards for legal opinions are much broader than just for legal opinions involving owners associations. Consider the interrogation methods used by the Bush Administration on some prisoners in the war on terror. The Justice Department provided detailed legal opinions that supported the interrogation methods used. The opinions provided a legal theory to support what was done. Or, what was done was consistent with the legal opinions provided. The standards for the legal theory were apparently not defined.
Now that the legal opinions are in the public domain, the constitutional scholars can apply their expertise to the constitution, laws, treaties, Geneva convention and other legal document to provide their views on what is permissible. Many of the actions, facts and conditions in those prior documents did not comprehend what is occurring in the war on terror. Moreover, there is likely not a bright line that defines what is torture and what is not. Hopefully a consensus will evolve on what is permissible under those documents based on a clear standard: what the Supreme Court would likely affirm.
Even with a consensus on what is permissible under the constitution and other documents, there still may not be agreement on what limits should be placed on the interrogation methods within the range of what is permissible. These are policy questions, not a constitutional one.
FN2 The same legal and policy questions are often involved in actions of owners associations. Consider actions to try to preserve property values that may not be authorized in the governing documents. Or, consider actions to collect unpaid dues and assessments as personal debts even though the CC&Rs do not state that unpaid dues and assessments are personal debts as well as running with the land.
FN3 The office of ombudsman can be funded by owners associations through a fee paid by the owners association for each property unit as part of its annual report and renewal of registration. Over time, the use of the ombudsman should decline because attorneys for owners associations will have the incentive to provide legal opinions that meet the same standards as used by the ombudsman. To ensure serious requests for "second opinions", a filing fee should be required and the necessary information should be defined and required with the request.
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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Copyright 2009 © Donald L. Nordeen. All Rights Reserved. See Copying Posts on This Weblog.
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