Supreme Court says corporations cannot be used to evade Constitution

The recent non-HOA decision by the US Supreme Court in DOT v. Assn American Railroads[i] has a direct bearing on the constitutionality of the HOA legal scheme.   This case dealt with the legal status of AMTRAK — is it or is it not a government entity — and was there an unconstitutional delegation of legislative authority.  While I have argued that HOAs are de facto private governments based on their powers, authority and functions, I now make the argument that as a de jure (according to the law) private corporation, HOAs have been unconstitutionally delegated legislative powers. “[R]ecognizing that the power to fashion legally binding rules is legislative.”[ii]

Implicit delegations of legislative powers are described in The Restatement Servitudes[iii] and numerous state statutes carry implicit delegations of legislative powers.[iv]

With respect to violations of the Constitution, the Supreme Court decision in DOT  held 1) that private parties cannot draft agreements to circumvent the Constitution by declaring that an entity, specifically a corporation, is a private organization, 2) that such a determination is made by the courts based on the corporation’s functions, powers and authority, and 3) that in order for a private entity’s delegation of legislative authority to be constitutional, there must be control, supervision and accountability to the state.

I have presented my case that, in the absence of explicit enabling acts, there is implicit unconstitutional delegation of legislative power to private HOAs, particularly in regard to legally binding rules, without accountability.

Read the complete paper at Delegation.

[i] Dept. of Transportation v. Assn American Railroads, 135 S.Ct. 1225 (2015)

[ii] Supra 1, p. 17.

[iii] Restatement Third, Property (Servitudes), Susan F. French, Reporter, p. ix (American Law Institute 2000).

[iv] For a sample of implied rulemaking statutes by state, see:  Arizona: ARS 33-1803(A) and (B) for HOAs; 33-1242(A)(1) for condos. California: Civil Code §§ 4340-4370 (Part 5, Chapter 3, Article 5, Operating Rules). Florida HOAs:  Title XL, § 720 et seq. do not explicitly address rules per se, but speak to enforceable “guidelines” and “standards”; Florida Condos:  Title XL, § 718 et seq. (in particular, § 718.1035, the general statement on “association rules”). Nevada: “NRS 116.31065  Rules.  The rules adopted by an association” (with 5 “musts” imposed on the HOA).