Rockery Wall Lawsuit – Authority to Proceed?

At the April 25th BOD Meeting under Agenda Item 7.a, “Unanimous Written Consent – Somersett Development Lawsuit”, the Somersett Owners Association (SOA) Board of Directors (the Board) approved continuing the rockery wall lawsuit per the following declaration contained within a previous SOA Board signed and executed “Unanimous Written Consent” document (Note: it was not unanimous as Board member Jason Roland has recused himself from all dealings with the lawsuit due to his wife’s employment with Somersett Development Company):

“WHEREAS, the Board made a good faith effort to obtain ratification of the filing of the lawsuit, per NRS116.31088. in which if the Association desires to bring a suit to protect the health, safety and welfare of the members. The Board received 953 ballots, 716 votes in favor, 205 votes opposed and 30 unusable, thus representing 77% in favor of pursuing the lawsuit.”

“WHEREAS, BE IT RESOLVED: In light of the cost to repair and/or replace the defective walls, it is within the Boards reasonable business judgement to pursue the lawsuit and therefore agrees to move forward and continue to pursue the lawsuit against the Somersett Developer and associated trade vendors”.

Unfortunately, the preceding does not accurately portray the NRS 116.31088 statute, which under Article 1 (e) reads as follows:

“To protect the health, safety and welfare of the members of the association. If a civil action is commenced pursuant to this paragraph without the required vote or agreement, the action must be ratified within 90 days after the commencement of the action by a vote or written agreement of the owners of the units to which at least a majority of votes of the members of the association are allocated. If the association, after making a good faith effort, cannot obtain the required vote or agreement to commence or ratify such a civil action, the association may thereafter seek to dismiss the action without prejudice for that reason only if a vote or written agreement of the owners of the units to which at least a majority of votes of the members of the association are allocated was obtained at the time the approval to commence or ratify the action was sought”.

What the Board’s consent document did not mention is that the 953 ballots received only represent about 31% of the total number of allocated Association members and the 716 in favor about 23%. Given this, it is clear that member ratification for the lawsuit was not obtained via a majority vote as required by the NRS statute. That is, of the approximately 3000 association members, 1501 yes votes would be required for ratification, of which the 716 votes in favor fell abundantly short.

Therefore, the Board’s decision to proceed with the litigation appears to be in violation of the NRS 116.31088 statute, which does not grant them the authority to proceed without a majority vote, only to “dismiss the action without prejudice”. The unresolved question here is why the Board feels it is O.K. to violate the Nevada Statute that they themselves referenced? Unfortunately, there was no discussion on this issue during the Board meeting, only an acknowledgement of the consent document.

Note that this website, in a previous post, was in favor of ratification. However, it must be accomplished legally and not unilaterally dictated by the Board. Hopefully, we are not being led down the primrose path by the Association’s legal counsel, who one must assume approved the Board’s action to proceed with the lawsuit based on some legal basis other than “by a vote or written agreement of the owners of the units to which at least a majority of votes of the members of the association are allocated“. Clearly an explanation is needed.

Given that to date the only litigation correspondence communicated to  Association members at large has been 1) the delayed publication of the vote count (after some prompting) and 2) the SDC and Q&D responses to the law suit (required by law). Also, why the “Unanimous Written Consent” approach (usually used for time sensitive or emergency issues) rather than discussion and approval at the regularly scheduled open Board meeting? Perhaps a little more transparency is in order here.