by Michael Rosenbaum, attorney at Fischel Kahn
This summer, the legal case Boucher v. 111 E. Chestnut shook up Illinois community associations with an unexpected twist. During the hearing, the judge determined that the board acted unlawfully by refusing to provide a recording of the executive session where they discussed the defendant’s behavior and resulting fine. The judge considered the recording to be “minutes” of the closed hearing.
This case involved the uncivil actions of an owner, and the Association’s actions in fining him for those actions. The owner alleged that the Association refused to provide him with the evidence on the allegations against him (or a recording of the fine hearing itself), and that the Board’s handling of the matter was a breach of fiduciary duty.
This case raises several important points for associations in handling rule violation situations:
- Never record (audio or video) a closed meeting or hearing. Open meetings can be recorded by an owner (subject to association rules) or the association. But there is no statutory right to record a closed session of the Board. See Condo Act, Section 18(a)(9)(C). And if a Board records a closed meeting, this case now stands for the proposition that, at least in the absence of written minutes, such recording is subject to Section 19 of the Act. Besides, a recording results in an actual transcript of what was said/done. Minutes are never a transcript.
- Even for closed sessions of the Board, it is important to keep minutes of the meeting. Remember that a Board cannot take any action (i.e. vote) in a closed session. All votes must be in open session. Act, Section 18(a)(9)(A). But minutes are required to be taken of all “meetings”. So assuming a quorum of the Board attends the closed session, minutes must be taken. However, I believe that since no action can be taken at a closed session of the Board, the purpose of minutes of a closed session is slightly different from the purpose of minutes at an open session. Minutes of a closed session are needed to show that the session took place, who attended and the reason for the session. So, for example, because Section 18(a)(9)(A) limits the reasons why a Board may meet in closed session, it is important to have a minute that evidences that the meeting falls within the scope of reasons for closed meetings.
- If an owner is alleged to have violated the Dec, Bylaws or Rules, the Board must tell the owner what provisions are alleged to have been violated, and at least offer to provide a copy of the complaint or other evidence submitted to the Board. After all, the owner cannot defend himself if he doesn’t know the facts supporting the charge against him/her.
- Don’t rule against an owner based on prior events not part of the then-present complaint. The fact that the owner may have acted badly in the past (but no complaint was filed or no fine assessed) cannot be the basis of finding the owner in violation of the then-current issue. Prior findings against an owner may, however, go to punishment (an increased fine for repeat violations).
- All owners have first amendment rights. If the alleged violation is for profane or abusive conduct, such conduct maybe fined (under appropriate rules or the Dec. or Bylaws). But to the extent the conduct or speech relates to the operation of the association, such conduct or speech may have more protection than otherwise.
- Keeping a correct record of which directors vote for and against any particular matter is important. Here, although all the Board members were sued, several alleged they did not “participate in the decision” to fine the owner. It is not clear from the opinion if those directors were not present at the meeting where the vote took place or were present and voted against the fine. I believe that if a Board takes action that is later determined to be wrongful, directors who were on record as voting against the action will have a defense to any claim against them. Minutes should not simply say “the vote was 4-1”. It should say “the vote was 4-1 (X voting against)”.
One oddity of the case is that the directors raised as a defense vs breach of fiduciary duty a standard provision of many declarations that the directors were not to be liable for anything except, essentially, gross negligence or fraud. The court said that provision could not so limit the directors’ liability. That it only applied to business judgment matters. The odd part is that in a 1985 Illinois Supreme Court case (Kelley v Astor Investors, Inc., 106 IL 2d 505 (1985), the Illinois Supreme Court held that such a provision could, in fact, limit the directors’ fiduciary duties to owners. The Kelley case is not mentioned in the Boucher case. That leads me to believe the Kelley case was not argued to the court. As a result, I think the Boucher court’s opinion on this issue is highly questionable as precedent. After all, the Illinois Supreme Court’s rulings take precedence over the Appellate Court’s ruling.