law – Page 20 – HOA Constitutional Government

As word of manager UPL conduct spreads, where were the HOA attorneys?

Adrian Adams, a California CAI member attorney has spread the word about HOA manager UPL activities. And the word will continue to be spread to all states since they all has UPL rules. This blog entry follows just a week after my Commentary, Final Order: HOA management firm engaged in unauthorized practice of law, was published.

In the June 24, 2012 of the Davis-Stirling.com eNewsletter, “Managers Practicing Law.” Adams offers the following advice to HOA boards,

Directors will have difficulty convincing a jury that seeking legal advice from a manager was prudent. . . . When asked for legal advice, a manager should always recommend that the board seek legal counsel. Doing so protects both the manager and the board.

Let’s step outside the box! UPL supreme court rules have been around for many, many years in all states. During all this time, where were and what were the CAI self-proclaimed HOA legal experts doing? Did these experts not know about state supreme court rules on UPL? Well, that’s no excuse, if true.

If homeowners can be held accountable under CC&Rs that need only be recorded at the county clerk’s office, sight unseen and without an explicit buyer signature, why should these attorneys escape accountability for negligence to their HOA clients?

CAI is the national lobbying entity, whose members have repeatedly gone before state legislatures to propose statutes governing HOAs on behalf of all the HOAs and homeowners. (CAI has a miniscule number of homeowners as members, at most 30,000 of some 25,000,000 HOA families). And CAI attorneys often take the word of the HOA manager with respect to the validity of legal action, without the independent review required by civil court rules that the action is based on facts and the law (Rule 11(a), Signing of Pleadings).

The CAI attorney silence is disgraceful and violates the rules of civil procedure and professional code of conduct. Ethical rule 3.1, Organization as Client, of the code of professional conduct, specifically relates to the attorney’s awareness of illegal conduct by the client or “other person associated with the organization,” and 2.1, Advisor, whereby candid advice on moral and ethical issues may be rendered to the client.

I wonder what the reaction is from those 9 states that use CAI to license managers: Alaska, California, Connecticut, District of Columbia, Florida, Georgia, Illinois, Nevada, and Virginia. Or from those towns, like in Arizona, who sponsor CAI seminars on good governance.

This egregious conduct is another solid example of the true nature of CAI’s involvement in the HOA governance industry. It is unquestionably in the self-interest of its members, both its attorney and its management firm members.

Complaint filed with NJ Supreme Court for CAI lack of “candor to the tribunal”

A complaint was filed with the NJ Supreme Court against CAI for a lack of “candor to the tribunal” with respect to statements made in CAI-NJ’s amicus curiae brief in Mazdabrook v. Khan. Excerpts from the complaint letter follow.

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Two attorneys for the Community Associations Institute (CAI) NJ Chapter, Karpoff and Macysyn, sought and received permission to file an amicus brief and to make oral arguments. They signed certifications as to the truth of the statements made and content of their brief.

I submit that the arguments to file a brief and to make oral arguments contained misrepresentations and false and misleading statements as to the true nature and purpose of CAI. These misrepresentations lead the Court, and amicus readers, to believe that CAI is not in a conflict of interest position as its true interests, which oppose the interests of the homeowners associations and the of HOA member homeowners.

The Macysin certification says the brief is brought on behalf of CAI itself, as a friend of the court to help it in its decision. Yet, throughout the certification one is confused as for whom CAI is representing: CAI itself, the HOAs, or the homeowners. These are conflicting representations.

In the 24 paragraph certification, Macysin fails to inform the Court of the legal tax exempt status of CAI as a 501(c)6 tax-exempt organization as of 1992. CAI chose the vendors and became a trade group so it could avoid the limitations of an educational organization and become actively involved in lobbying in all the states. (The usual course of action is for the consumer group, which is seeking assistance, to set up its own nonprofit educational organization. It then would invite the vendors as affiliate or associate, second-class, members).

It should be clearly understood that the production of harmonious and vibrant communities is juxtaposed to the true interests of the CAI members. Rather, the best interest of its true members is to keep the HOA heavily dependent upon the services of its attorney and management members, to foster adversarial relations, hostility and divisiveness, and to deny democratic reforms under the state and US Constitutions. The CAI record before state legislators and in the courts, including here in New Jersey, speaks for itself.

The CAI-NJ prepared HOA board resolution (Appendix B, page 6), gives the impression that the HOA board’s decision to join CAI is a valid act. What this resolution accomplishes is to allow the HOA board to address homeowner concerns about a conflict of interest. It provides the board with a reasonable justification for joining CAI — education for the benefit of the HOA.

However, the basis for a board to sign-off is that CAI is the “Great Educator” and that CAI has no conflict of interest as a business trade group whose tax-exempt grant is to help its members, not consumer HOAs. The resolution does not state that CAI is a 501(c)6 trade group or that since it was created in 1973 to solve problems with HOAs it has failed to do so for the past 39 years, or that it has repeatedly opposed constitutional protections for homeowners.

Sanctions were sought against these CAI attorneys.

Final Order: HOA management firm engaged in unauthorized practice of law

Every state has rules regarding the unauthorized practice of law governing what activities constitute acting like a lawyer. The certified Legal Document Preparer Board of the Arizona Supreme Court found AAM, LLC, both a CAI and Arizona Association of Community Managers (AACM) member, had engaged in such activities, which are commonly found in many other HOAs and with many other management firms/managers. (In Arizona, it’s Supreme Court Rule 31).

In regard to AAM, many of the State Bar’s Hearing Officer findings were dismissed and overturned in the Board’s May 24, 2012 Findings of Fact and Conclusions of Law (LDP-NFC –09-L094 and LDP-NFC-10-L026, not to be found on the State Bar or Supreme Court websites). The Board found AAM had exceeded its authority as a certified document preparer and violated Rule 31 in that, among other things,

represented the HOA in violation of Rule 31, including signing and submitting lien documents as such were not incidental to its regular business activities;
submitted documents that it had prepared to third-parties, such as collection letters, and filing court motions and complaints;
represented HOAs in small claims court;
although there existed a contract between AAM and the HOA to act as a representative of the HOA, such a contractual arrangement is subject to Rule 31, which cannot be overridden by private agreements;
offered legal advice when it gave, through newsletter statements, made statements about “possible legal rights, remedies, defenses, options or strategies;”
through its offers to “coordinate payment plans” debt payment plans, AAM was not giving general information but was offering to negotiate with the HOA on behalf of the homeowner;
“offered to negotiate homeowners” legal rights, remedies, defenses, options or strategies;”

It is interesting to note that former Arizona Supreme Court Chief Justice Zlaket was called as a witness by AAM. He stated that “the purpose of the certified legal document preparer rules as protection of the public from charlatans who didn’t know what they were doing, from document prepares who were harming customers by preparing the wrong documents.”

The full, detailed, 55 page Board document can be found at Legal Document

Judicial misconduct complaint filed for sealing records in AZ case against HOA attorney

A complaint was filed against a Pinal County, AZ judge for the sealing of records in this civil case in violation of the Arizona Rules of the Supreme Court, Rule 123(d) that requires a statement to be made giving the reasons for the sealing of case records. The case involved charges of aiding and abetting and disgorgement, among others, filed by a court appointed Receiver looking for some missing $650,000 in HOA funds. The charges were against a well-known CAI member attorney.

There is no record of this case on the Pinal County Superior Court official public website, not even an entry that the case was sealed, and not even an entry that the case was dismissed. This very disturbing act recalls the secret proceedings of Star Chamber justice with its own version of doing justice. A motion asking the judge to unseal the records was denied by the county clerk, leading to this complaint of judicial misconduct.

The complaint of judicial misconduct was two-fold: a black-letter violation of law in regard to Rule 123(d), which simple states, “Upon closing any record the court shall state the reason for the action, including a reference to the statute, case, rule or administrative order relied upon;” and a complaint that the entire record of this case has been denied public access.

The judicial complaint set forth grounds for unsealing the records.

On behalf of the American public, and in light of the public’s strong interest in the judicial treatment of homeowner association attorneys and the longstanding public policy in favor of open access to judicial records, the undersigned, George K. Staropoli, hereby moves the Court to unseal all court records in this case.

Staropoli has operated two nonprofit internet websites to provide nationwide information, news, legal actions, and commentary on events, incidents and developments pertaining to homeowners associations for over twelve years. They are a blog, HOA Constitutional Government, and an informational site, Citizens for Constitutional Local Government, in support of homeowner rights and in opposition to the inequities of the existing HOA legal scheme. Staropoli has been acknowledged in several legal texts and treatises, and quoted in other books and in the news media.

And in further support of public access,

Rule 123(c), Public Access to the Judicial Records of the State of Arizona, of the Arizona Rules of the Supreme Court pertaining to Judicial Conduct, states that all court records are presumed to be open to the public, except “some court records” for confidentiality, privacy or if in the best interests of the state. Rule 123(d) requires the court to show cause for sealing “some court records,” including the legal basis for such action.

The Arizona Rules of Judicial Conduct, Rule 81, emphasizes that “an independent, fair, and impartial judiciary is indispensable to our system of justice” and that the judiciary is to preserve the “principles of justice and the rule of law.” Judges “should aspire at all times to conduct that ensures the greatest possible public confidence.” It is inconceivable as to what state interests exist that would overwhelmingly override these precepts, and not to inform the public accordingly.

It was then argued that the attorney, Charles Maxwell, comes with unclean hands having been subject to serious sanctions regarding “fraud upon the court” and filing a frivolous suit. And it was also argued that Maxwell is a public persona as a result of providing seminars and classes in the law to the public regarding HOAs, and as a highly respected member of CAI and its College of Community Association Lawyers.

Speaking in judicial lingo, the heavy burden falls to the party seeking to hide the records to overcome all of the above.

The Arizona Commission on Judicial Conduct will conduct an investigation of the complaint, No. 12-148, in due order.

For more reading, see,

1. Allegations filed against AZ HOA attorneys in sealed case

2. What happened to the AZ lawsuit against HOA attorney for aiding & abetting missing $650,000?

Traitors and turncoats: HOA directors as CAI members

In every state HOA directors have a fiduciary duty to the HOA, to act in good faith, and as a prudent person would (as he would spend his own money). Why then, are HOA directors also CAI members? CAI is a vendor, a business trade organization formed to support the business interests of its members, mainly attorneys and managers. To say that the vendors and the consumers share the same goals is to question the speaker’s mental state.

It’s understandable for consumers to seek assistance from vendors, as happens in many different industries, but to join and support a vendor organization? The usual procedure is for the vendors to become associate or affiliate members of the consumer organization, which in our case would be an HOA organization. (Those HOA associations of associations, like ECHO in California and SCOHA in Arizona, are just fronts for a CAI controlled entity.)

How and why did this occur? It began at the very start with the initial 1974 composition of CAI that had HOAs as a member category, although not quite explicitly stated. Each of the 5 categories was to be equally represented in governing CAI: 1) builders and developers, 2) homeowner leaders of associations, 3) association managers, 4) public officials, and 5) other vendors.[i] At that time, CAI was a 501(c)3 educational organization and not a trade group. But this changed in the period of 1989 – 1993.

At the 1989 CAI retreat, controversy emerged on just who CAI represented given the fact that HOAs were consumers, not vendors. According to the CAI “historian” Donald R. Stabile, “One participant commented that the CAI . . . builder and developer group viewed CAI as a consumer organization teaching consumers how to sue the builders” to which another responded, “CAI is a professional organization and not a consumer group; that it was never intended to be a consumer group”. [ii]

Stabile continues discussing this important turnabout period in CAI history when it felt the need to become a business trade group, yet still retain the homeowners as members. In regard to homebuyers and residents, “To be sure, getting them interested in CAs [HOAS] was an important element in enhancing the popularity of this new form of housing” [read, mass marketing of HOAs]; and, “The advice they [the buyers] received from CAI was consistent with what [CAI developers and managers] needed consumers to be hearing”.[iii]

As to the thoughts of the 1973 Founders of CAI at this juncture, Stabile adds that they “deemed it important for attaining legitimacy for the CAI as a voice for the entire industry” [iv] and to relate “positive aspects to the public especially regarding public policy issues”.[v] (They have since dropped that line). Concern centered that a “more consumer-oriented organization” would supplant CAI, and that “other citizens’ associations, which were consumer motivated, might become the national representative.” [vi]

It seems that the roots of a great con started in that 1993 period that altered the purpose and mission of CAI, when lobbying for their members predominated under the guise of promoting vibrant and harmonious communities. In 2005, some 13 years later, CAI finally dropped the façade of representing HOAs – HOAs were no longer members. All through this period CAI, and many of its attorney members, had addressed legislatures saying that they represented homeowners and HOAs. And still today this claim appears quite frequently in CAI public statements.

What we have today is the faithful follower Team Players and the dogmatic True Believers (see The HOA Privatization Scale) simply denying reality like the Emperor in the fairytale, The Emperor’s New Clothes.[vii] When a little boy cried, “He has no clothes,” the Emperor realized that he had been duped. Yet, he continued to believe in his delusion since he could not admit having being wronged by con men.

For whom does the HOA director – CAI member serve? Isn’t this an outright conflict of interest? Does he serve as a “patriot” for the HOA, under legal requirements and dictates? Or, for the CAI business trade group as a “turncoat” to his HOA? HOA members must reject board memberships in CAI that are paid for by member assessments. These directors/officers are traitors, turncoats, and fifth columnists, all believing that they are doing good for the HOA.

Further reading:

For a detailed, non-CAI history of HOAs and CAI, see The Foundations of Homeowners Associations and the New America.

Notes

[i] Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, Donald R. Stabile, (Greenwood Press 2000) p. 117.

[iii] Id, p. 133.

[iv] Id.

[v] Id, p.131.

[vi] Id., p. 129.

[vii] The Emperor’s New Clothes, Mindfully.org (http://www.mindfully.org/Reform/Emperors-New-Clothes.htm), June 7, 2012.