Tag: Maryland

Columbia Association: the iconic HOA private government ploy to circumvent the Constitution

In the ExploreHoward.com letter to the editor, CA should not be exempted from Homeowners Association Act, the reader is told that this master, master HOA is seeking legislation to have it declared not to be an HOA.  The writer strenuously objects, saying,

The purpose of the proposed legislation is to immediately exempt CA [Columbia Association] from some of the protections afforded Columbia residents by the Consumer Protection Act, and to exempt CA from all future amendments to the HOAA [HOA act]. . . .  The real purpose of CA’s attempted subversion of the residents’ protections is based on CA’s refusal to disclose the annual compensation of all of its employees, as required by the Consumer Protection Act.

The CA attorney’s defense is, according to the letter, “that CA has enough protection for residents in its bylaws and other documents so that statutory protections are unnecessary.”  Didn’t we hear that in Twin Rivers where the NJ Supreme Court said homeowners were protected by the business judgment rule, so no need to get all riled about the loss of constitutional protections?

What is CA all about?  Howard County, MD contains the city of Columbia with its Columbia Association, a mega, mega, master association that resembles a large city rather than a subsection.  Its Pubic Information Guide refers to CA as

A nonprofit public benefit corporation” — which has no legal definition or standing — with “nine villages and Town Center are organized into 10 village community associations . . . . Each of Columbia’s nine villages and Town Center has a community association, which is an independent, incorporated, nonprofit civic association. 

 The Articles of Incorporation, along with the Covenants of the nine villages, provide CA with all of the rights, powers and authority it needs to carry out its purposes. The two documents empower CA to collect the annual charge and promulgate rules governing the use of facilities, the integrity of architecture and aesthetics, and so forth. The documents themselves can be consulted for further information. (Part II, How CA is Organized and How It Works).

 CA has a 2012 budget of over $67 million.

The way this private government works is that the HOAs are mandatory HOAs with covenants running with the land.  In their “Covenants,” CC&Rs for everybody else, there is the tie-in wording granting the non-profit corporation, CA, control over the HOA communities.  The HOAs elect representatives to the CA board.  It is similar to other master private governments.

Since all entities are private contractual arrangements, Columbia Association is an independent principality on the scale of the charter organizations of the 1600s through 1800s.  You may recall two of the most notable enterprises: The British East India Company (operating mainly in India) and the Dutch East India Company (controlled what is now known as Indonesia).

Here and now, CA makes use of the various subdivision HOA covenants running with the land, the CC&Rs, to entrap homeowners into bondage under their de facto but unrecognized private government.  And it has to resort to newspeak by referring to them as “villages” and the CC&Rs as “covenants.”

 

awarding HOA attorney fees and public policy

This Maryland Court of Appeals (equivalent to other states’ supreme court) case[i] discuses the topic of awarding reasonable HOA attorney fees,  public policy, and when exorbitant fees may be awarded.  “In each case, the Associations won affidavit judgments against the Residents in ‘largely uncontested’ proceedings. The Associations also sought attorneys’ fees from the Residents in those courts, calculated according to the ‘lodestar method.'” (Emphasis added).  Note the HOA’s arguments to justify their attorney’s fees.  

First, the generally accepted method to determine attorney fees is known as the Lodestar Method as set forth by the US Supreme Court:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

 

Second, there is the underlying premise, presumption, of “fee-shifting” that holds, as stated by the Court (emphasis added),

[T]hat the lodestar method of calculating attorneys’ fees was generally appropriate in the context of fee-shifting statutes. This holding is justified by the public policy underlying most statutes that allow for fee-shifting. Fee-shifting provisions frequently apply in “complex civil rights litigation involving numerous challenges to institutional practices or conditions.”

A court’s application of the lodestar method in these cases “is designed to reward counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that [other methods] would provide inadequate compensation.

 

However, the Court saw it as inappropriate, stating (emphasis added),

The policy considerations mentioned above do not apply here because these cases do not involve a fee-shifting statute . . . . It is by contract, not because of public policy, that the Residents are obligated to pay attorneys’ fees to the Associations.

 

But, the HOA responded with (emphasis added),

[These cases] are sufficiently related to advancing the public interest to justify use of the lodestar method in determining reasonable attorneys’ fees.  [And] that “[h]olding delinquent owners accountable for paying their share of association assessments supports social benefits that extend far beyond the association itself.” . . . [H]omeowners associations provide public services such as street maintenance and security, thus relieving local governments of those obligations.

 

The Court’s rebuttal said,

We are unpersuaded [sic] that any tangential benefit the Associations may provide to local government or to the public is sufficient to justify use of the lodestar method in awarding the fees for their attorneys. . . . The fact remains that this litigation arises from disputes between private parties over breaches of contract.

Our rejection of the lodestar approach does not mean that the time spent by the lawyers and a reasonable hourly rate should not be an important component of a court’s analysis.

Courts should use the factors set forth in Rule 1.5 [MD Rules of Professional Conduct on reasonable attorney fees] as the foundation for analysis of what constitutes a reasonable fee when the court awards fees based on a contract entered by the parties authorizing an award of fees

Rule 1.5 does not carry with it the notion that the importance of the right vindicated will justify an expenditure of attorney time that is hugely disproportionate to the dollar amount at issue in the case.

Trial courts are not bound by the monetary amounts in such contracts [that state an amount for the attorney fee] , however, and need not cleave to the contracts at all if they improperly influence the fee award.

[i] Monmouth Meadows HOA v.  Hamilton, Nos. 43, (Md, July 27, 2010). (Three consolidated  cases decided in this decision.)  See Leagle.com  http://www.leagle.com/unsecure/page.htm?shortname=inmdco20100727254.