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.

7 thoughts on “Rockery Wall Lawsuit – Authority to Proceed?

  1. Transparency ? The same Transparency that was utilized to remove the Del Webb signage that was done between the two board Presidents in March of 2017 through amendment ?

    Sent from my iPhone

    >

  2. It seems to me that having the Board decided to illegally pursue the lawsuit, two options the owners have is 1) to refuse to pay any fees imposed by the Board relative to the costs related to this lawsuit and rockwalls construction, and 2) hire an attorney to fight the Board for any attempts to evict owners and take over houses for nonpayment of fees.

    1. Ivonne,

      Another option is to go the Nevada Real Estate Division (NRED) Ombudsman Approach. That is, file an Intervention Affidavit with the NRED’s Office of the Ombudsman alleging: 1) BOD violation of Nevada Law, 2) Damages resulting from the violation, and 3) Proposed corrective actions. However, before filing the Intervention Affidavit one must first notify the BOD of the allegation, and if still unresolved, proceed with submittal of the NRED’s Intervention Affidavit Form.

      Herein the fun begins. NRED may schedule a conference, wherein the parties attempt to resolve their differences, or if the issue involves a violation of state law, it may be referred to the Compliance Section. Once referred to the Compliance Section, an investigator is assigned to look into the matter, and if the violation is substantiated, the case is then referred to the Nevada Attorney General’s office for potential disciplinary action.

      Although cost effective, this process can be very time consuming, and even if the final result is in your favor, the damage (in this case illegal expenditure of legal fees) has already been done. However, there may be some satisfaction in knowing you were right all along!

  3. We are not in Del Webb, but I wonder if there is a State or County Elder Abuse Division which would be willing to take a look at how all this litigation (without proper input from the homeowners) can have a devastating impact on senior citizens on fixed incomes.

    Additionally, were I a board member, I would be a bit concerned about possibly being held liable for the attorneys’ fees authorized without proper input from the homeowners.

    1. Deb,
      Unfortunately, under NRS 116.31037, Board members are indemnified by the Association for actions under taken as a member of the Board, unless it can be proven that the Board member “acted with willful or wanton misfeasance or with gross negligence”, a difficult proposition to prove.

  4. We had a March 10, 2018 Saturday town hall meeting on the rockery wall litigation – where the SOA attorneys told us that the SOA had to comply to the NRS 116.21088 and achieve a 50% + 1 affirmative vote. They also told us is that NOT VOTING – was the same as a No vote.

    Tardiness (?) in mailing the ballots – slowness of the Postal service – many of the owners do not live here, and many other owners go to Mexico, Arizona, California to escape the Reno winters…disenfranchised (?) these owners … However, owners on being told that a Not Voting was the same as a NO vote – did not feel the need to vote at all.

    The SOA told me that votes submitted after 3/28/18 would not be counted (in response to non-resident queries directly to me).

    Time to move into the 21st century! Lets have secure on-line voting for all community issues. Many professional organizations have on-line balloting – eg American Chemical Society. American Academy Advancement of Science, Society of Cosmetic Chemists, etc.

    Background From a January Post…

    “It has been confirmed by the SOA that the requirements of NRS 116.31088 “Meetings regarding civil actions; requirements for commencing or ratifying certain civil actions ….”, will apply to the SOA’s Rockery Wall civil action process (see previous post of February 5th entitled “Rockery Wall Defect Litigation”).
    This NRS 116.31088 statute (paraphrased) requires the following:
    That the SOA provide notification of and conduct an owner meeting to discuss the proposed civil action,
    That the proposed civil action be ratified via majority owner vote or written agreement.
    That prior to ratification, the Association provide a written statement to owners that includes a cost estimate for the civil action, including attorney fees, and an explanation of the benefits and/or adverse consequences of the civil action.
    That once settled, a disclosure of the terms and conditions of the settlement at the next BOD meeting.
    In consideration of the above, the SOA BOD intends to schedule a meeting for late February and the sending out of ballots for owner approval.”

  5. Another option is to recall one or more board members.

    NRS 116.31036  Removal of member of executive board.

    1.  Notwithstanding any provision of the declaration or bylaws to the contrary, any member of the executive board, other than a member appointed by the declarant, may be removed from the executive board, with or without cause, if at a removal election held pursuant to this section, the number of votes cast in favor of removal constitutes:

    (a) At least 35 percent of the total number of voting members of the association; and

    (b) At least a majority of all votes cast in that removal election.

    2.  A removal election may be called by units’ owners constituting at least 10 percent, or any lower percentage specified in the bylaws, of the total number of voting members of the association. To call a removal election, the units’ owners must submit a written petition which is signed by the required percentage of the total number of voting members of the association pursuant to this subsection and which is mailed, return receipt requested, or served by a process server to the executive board or the community manager for the association. If a removal election is called pursuant to this subsection and:

    (a) The voting rights of the units’ owners will be exercised through the use of secret written ballots pursuant to this section:

    (1) The secret written ballots for the removal election must be sent in the manner required by this section not less than 15 days or more than 60 days after the date on which the petition is received; and

    (2) The executive board shall set the date for the meeting to open and count the secret written ballots so that the meeting is held not more than 15 days after the deadline for returning the secret written ballots and not later than 90 days after the date on which the petition was received.

    (b) The voting rights of the owners of time shares will be exercised by delegates or representatives as set forth in NRS 116.31105, the executive board shall set the date for the removal election so that the removal election is held not less than 15 days or more than 90 days after the date on which the petition is received.

    Ê The association shall not adopt any rule or regulation which prevents or unreasonably interferes with the collection of the required percentage of signatures for a petition pursuant to this subsection.

    3.  Except as otherwise provided in NRS 116.31105, the removal of any member of the executive board must be conducted by secret written ballot in the following manner:

    (a) The secretary or other officer specified in the bylaws of the association shall cause a secret ballot and a return envelope to be sent, prepaid by United States mail, to the mailing address of each unit within the common-interest community or to any other mailing address designated in writing by the unit’s owner.

    (b) Each unit’s owner must be provided with at least 15 days after the date the secret written ballot is mailed to the unit’s owner to return the secret written ballot to the association.

    (c) Only the secret written ballots that are returned to the association may be counted to determine the outcome.

    (d) The secret written ballots must be opened and counted at a meeting of the association. A quorum is not required to be present when the secret written ballots are opened and counted at the meeting.

    (e) The incumbent members of the executive board, including, without limitation, the member who is subject to the removal, may not possess, be given access to or participate in the opening or counting of the secret written ballots that are returned to the association before those secret written ballots have been opened and counted at a meeting of the association.

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