IGNORING LEGAL ADVICE

IGNORING LEGAL ADVICE

QUESTION: If the association sought and paid for a legal opinion, is the board violating their fiduciary duty if they ignore the opinion?

ANSWER: If board members stick their fingers in their ears and refuse to listen to legal counsel, that's a problem. But, if they listen to the attorney's advice, weigh it against other factors and reach a different conclusion, they are not in breach of their fiduciary duties.
Independent Decision. Boards are not required to let experts and lawyers make decisions for them. For example, an attorney and a termite expert might both advise a board to tent their condo buildings to stop a termite infestation. After taking into account the cost of tenting, the financial condition of the association, and the disruption to members who must be moved out of their buildings, the board can decide to spot-treat even though tenting is the superior method.
Business Judgment. This was the scenario in a case that made it all the way to the California Supreme Court. The Court sided with the board and held that, 

...where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion...to select among means for discharging an obligation to maintain and repair a development's common areas, courts should defer to the board's authority and presumed expertise. (Lamden v. La Jolla Shores; Corp. Code §7231(a).)

Bad Advice. A second scenario under which boards can deviate from legal advice is when they believe the attorney is not knowledgeable or reliable in the issues presented. For example, if a divorce lawyer offers legal advice about HOA corporate matters, the board can (and should) disregard the advice. Instead, they should seek counsel from an experienced corporate attorney with expertise in community association law.

RECOMMENDATION: Boards should be cautious about discounting competent legal counsel. If directors are uncertain about the advice given, they should get a second opinion.