Can I sue my HOA for overreaching or self-dealing?

Hello I Am Suing You Name Tag Sticker Lawsuit Defendent SueTime for another article that answers a frequent HOA question.

The Trump versus Clinton campaign had nothing on HOA battles. Potential clients call or email wanting to sue their HOA Board members because they don’t like the flowers they planted in the common areas. They believe that every decision must be put to a vote. They are convinced that the board members are all pocketing money and favoring themselves over the other members. Often the caller’s frustration comes from the fact that the Board, or an individual board member, is making unauthorized expenditures.

Can I sue my HOA?

So the ultimate question is, can a member sue the HOA and/or Board Members for overreaching and self-dealing? To answer that broad question, let’s create a typical scenario and then analyze it.

In our hypothetical, you are a free spirit, and every morning you sing the theme song of your life, Signs by Five Man Electrical Band, which includes the lyric:

And the sign said anybody caught trespassin’, will be shot on sight.
So I jumped on the fence and-a yelled at the house,
“Hey! What gives you the right?”
“To put up a fence to keep me out or to keep mother nature in.”
“If God was here he’d tell you to your face, Man, you’re some kinda sinner!”

You are therefore shocked and aghast when you see that your HOA put up a gate while you were on a cruise to Aruba, making your neighborhood one of those sanctimonious gated communities you have long railed against. You decide to make it your mission to eliminate that gate.

Your research soon reveals that the gate was never put to a vote by the HOA members. And while it was approved by the Board, the minutes from the meeting where the vote was held, show that the total cost was anticipated to be $10,000, when in fact the HOA ended up spending $20,000. Making matters worse, the project was completed by the HOA president’s brother, who owns a construction company. There is no sign that there were any competitive bids, and the brother failed to obtain worker’s comp insurance for the project. Had one of the workers been injured, it could have meant huge liability for the HOA.

You call me, saying you don’t care what it costs, you want to sue to get that gate removed. After all, what gives them the right to keep people out or to keep mother nature in? Man, they are some kind of sinners.

Here is what I would tell you (after explaining that I am not your attorney, so nothing I say should be taken as legal advice):

The Business Judgment Rule

The HOA’s governing body is protected by what is called the “Business Judgment Rule”, which is codified at section 7231 of the Corporation Code. It provides that “[a] director shall perform the duties of a director . . . in good faith, in a manner such director believes to be in the best interests of the corporation and with such care . . . as an ordinarily, prudent person in a like position would use under similar circumstances.” Subdivision (b) provides that the director is entitled to rely on information, opinions, and reports presented by certain specified persons. Subdivision (c) then provides, “[a] person who performs the duties of a director in accordance with subdivisions (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director . . . .” The rule provides further: “no cause of action for damages shall arise against, any volunteer director . . . based upon any alleged failure to discharge the person’s duties as a director” of a nonprofit organization if that person: (1) performs the duties of office in good faith; (2) performs the duties of office in a manner believed to be in the best interests of the corporation; and (3) performs the duties of office with such care, including reasonable inquiry, as an ordinary prudent person in a like position would use under similar circumstances.” (Corp. Code § 7231.5, subd. (a).) The business judgment rule “sets up a presumption that directors’ decisions are based on sound business judgment. This presumption can be rebutted only by a factual showing of fraud, bad faith or gross overreaching.”

The Wall of Wrong

You now know the applicable law. When analyzing the viability of a case, I tell potential clients to use what I have deemed to be the “wall of wrong” approach. You take each issue you deem to be a wrong, put it up on the shelves on the wall of wrong, and take down each item one at a time to determine if it will support a claim. Each claim must stand on its own; you can’t use non-claims to support legitimate claims.

As we take down and inspect the individual perceived wrongs from the wall of wrong, keep the last sentence of my legal summary above firmly in mind. The Business Judgment Rule, “can be rebutted only by a factual showing of fraud, bad faith or gross overreaching.”

So let’s begin with the decision to build the gate. Unless the governing documents of the HOA somehow provide otherwise, the gate project probably did not need approval. That would without question fall under the Business Judgment Rule. You may not agree with the decision, but the elected Board decided that a gate would be in the best interests of the members. So the decision to build the gate was protected. Take it down from the wall of wrong and never speak of it again.

The fact that the project went over budget would also not likely create an action. If the planned cost was $10,000, and the Board then spent $100,000, and had to draw money from contingency funds in order to pay for the gate, then you might be able to argue that was a breach of their fiduciary duties, but it would need to be extreme if you are going to argue that it constituted bad faith or gross overreaching. The difference between $10,000 and $20,000 would not, in my opinion, satisfy that requirement.

The fact that the gate project was undertaken without bids and was given to a family member of one of the board members is problematic, but that brings about another reality that many potential clients and even some attorneys fail to understand. To sue, you normally need to be able to show damages. OK, the board hired the president’s brother, but that may or may not be a bad thing. If you have evidence that the gate could have been built for $5,000, then you have the makings of a breach of fiduciary duty claim since the Board paid a family member far more than that amount. But perhaps the brother was hired specifically because he was willing to do it for far less than anyone else. Perhaps the Board members never obtained any formal bids because they had asked around and were told by other communities that a gate would cost $100,000. When the brother offered to do it for $10,000, they knew that getting bids would be a waste of time. And perhaps they aren’t particularly upset that the gate ended up costing $20,000, because that is still one-fifth the cost of what the gate would have cost with anyone else.

The same analysis applies to the brother’s failure to obtain worker’s comp insurance. That is a Romper Room no no, but what is the damage? A damage is something with a dollar sign in front. “He is required to have worker’s comp insurance” is not a damage. “We could have been sued if his worker was injured” is not a damage.

One final point to consider is the very conceptual nature of suing your HOA, and the finances involved. When you sue your HOA or its Board members, who pays for the attorney who defends the HOA or Board members against your suit? You do. It may be that the HOA will tender the claim to its insurer, so the insurer will pay for the defense counsel, but you and the other HOA members pay for the insurances, so it’s kind of a distinction without a difference.

Who pays for your legal action against the HOA or its Board members? You do. True, if you win you may be able to recover your attorney fees, but if you lose you pay all of the HOA’s attorney fees.

If you have a genuine beef against your HOA, that can meet the criteria of the Business Judgment Rule, then you can’t do better than Morris & Stone to pursue such a claim. But make sure the suit you are anticipating goes beyond just being unhappy with the decisions the Board is making.

Posted in HOA Law | Leave a comment

Can Your Employer Have You Followed to Prove You Are Not Hurt?

Private investigator stakeout photo documentation

Yet another cautionary tale about how the things you post on Facebook can come back to haunt you.

On Friday I received a call from a prospective client, wanting to sue her employer. The caller had filed a workers compensation claim, and she was convinced that her employer was having her followed. I explained to her that, assuming she is not just imagining that she is being followed, such conduct is not unusual. Many a workers compensation claim, personal injury claim, and disability claim has been defeated by videos showing the plaintiff engaging in activities he or she claimed were prevented by their injuries.

The caller was shocked by such an invasion of privacy, and asked if it is legal. In response to that question, allow me to introduce the case of Xiong v. Knight Trans, out of the 10th Circuit.

A woman by the name of Pahoua Xiong suffered a back injury when her vehicle collided with a Knight Transportation truck. Xiong successfully sued for her injuries, with a jury finding that she was 40% liable for the injury, and Knight was liable for the remaining 60%. She was awarded $499,200.

Knight then moved for a new trial, on two grounds. First, Knight argued that there was insufficient evidence to support the damages awarded, and second because there was new evidence, found after the trial, proving that Xiong had committed a fraud on the court.

What was this new evidence? Well, given the opening paragraph of this article, you probably figured out that it was something Xiong posted on Facebook. Indeed, after the trial, a member of Knight’s legal team happened across pictures of Xiong on Facebook, showing her partying with friends and family, seemingly pain free, despite her claims that she was in such severe pain that she was taking five or six Percocet every day.

Based on the photos, Knight conducted more discovery on social media, and then hired a private investigator to follow Xiong and record her as she went about her days.

In Federal court, to successfully argue for a new trial based on the post-trial discovery of evidence, the party must show a number of factors, the most important for this discussion being that the party was diligent prior to trial in seeking out the evidence. So Knight showed the evidence obtained on Facebook and what the private investigator uncovered, but the trial court denied the motion for new trial, holding that the evidence could have been discovered earlier with more diligence.

Knight appealed, but the 10th Circuit came to the same conclusion. That appellate court concluded that the same steps that were taken after the trial, that revealed the evidence, could have been taken before the trial. Although Knight apparently did search social media prior to the trial, its efforts failed to turn up the photos of Xiong due to a misspelling of her name. As to what the private investigator uncovered, he could have been hired just as easily prior to the trial.

So, in answer to the caller’s question about whether it is legal to have someone followed in the hope of refuting their injury claims, according to the 10th Circuit, doing so is necessary part of the investigation in order to show due diligence.

Posted in Employment, Wrongful Termination | Tagged | Leave a comment

What you can do when your HOA’s Architectural Committee denies your request

White colonial house with a porch and plants

Last week I wrote an article that responds to the question, “Can an HOA reduce the amount of unpaid fees that I owe?” I have already been able to refer callers to that article for a detailed response to the question.

Today I received an email asking the second most common HOA question I get, namely, “Can the architectural committee reject a change I want to make to my property, when other homeowners previously made the same change?” Or sometimes the question is in the broader form of, “Can the architectural committee demand that I remove the completely reasonable changes that I made to my property?”

Although this article will deal with decisions (or lack thereof) by the architectural committee, the same reasoning applies the the HOA board of directors and the decisions the directors make. As with last week’s article, again the answer to these questions is apparent if you have the proper mindset about the nature of an HOA.

An HOA is a form of government. The reason that HOAs are formed, and the reason that people buy homes in HOA neighborhoods, is so that there will be an administrative body that keeps the neighborhood looking good, and prevents that weirdo across the street from painting his house purple. When you move into an HOA, you agree to live by he laws of the HOA and to subject yourself to future regulations that will be imposed by the Board.

As with any government, administrations come and go, and decisions and priorities can change with various administrations. For example, the regulations of an HOA will usually contain a color palette, dictating acceptable colors for the exterior and trims of the homes. One HOA board may decide that black shutters are beautiful and acceptable, but the next administration may ban them. Neither administration is right or wrong, it’s simply the preference of that particular board.

It’s no different than the federal government. At one time, the federal government decided that alcohol should be illegal. Citizens couldn’t simply ignore the new law, claiming it was unfair because people had been permitted to consume alcohol prior to the ban; it was the law. Then along came a new administration, that decided consuming alcohol was just fine.

Thus, the fact that 50% of the homes in the neighborhood have black shutters is no guarantee that the architectural committee must approve your black shutters. The architectural committee may have any number of reasons for reaching its conclusion. It may conclude that while black shutters are fine on a limited basis, the neighborhood now just has too many damn black shutters.

And so it is with the change you want to make, which you feel is entirely reasonable. It could be that the architectural committee has decided that given the location of your home, the change is not in the best interest of the neighborhood. It could even be that the architectural committee just feels that your requested change is too aggressive and would take too long to complete, thereby disturbing the neighbors.

So, just understand that when you moved into the HOA, in exchange for the promise that the HOA would not allow the guy across the street to paint his house purple, you gave the HOA the same sort of authority over you, in case you are the one who turns out to be the weirdo.

The HOA’s governing body is protected by what is called the “Business Judgment Rule”, which is codified at section 7231 of the Corporation Code. It provides that “[a] director shall perform the duties of a director . . . in good faith, in a manner such director believes to be in the best interests of the corporation and with such care . . . as an ordinarily, prudent person in a like position would use under similar circumstances.” Subdivision (b) provides that the director is entitled to rely on information, opinions, and reports presented by certain specified persons. Subdivision (c)  then provides, “[a] person who performs the duties of a director in accordance with subdivisions (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director . . . .” The rule provides further: “no cause of action for damages shall arise against, any volunteer director . . . based upon any alleged failure to discharge the person’s duties as a director” of a nonprofit organization if that person: (1) performs the duties of office in good faith; (2) performs the duties of office in a manner believed to be in the best interests of the corporation; and (3) performs the duties of office with such care, including reasonable inquiry, as an ordinary prudent person in a like position would use under similar circumstances.” (Corp. Code § 7231.5, subd. (a).) The business judgment rule “sets up a presumption that directors’ decisions are based on sound business judgment. This presumption can be rebutted only by a factual showing of fraud, bad faith or gross overreaching.”

Let’s say your CC&Rs permit the construction of pools, complete with permissible dimensions, and you submit a plan that completely complies with the CC&Rs, only to have it denied because your neighbor is the president of the HOA, and he doesn’t want to have to deal with the construction. Under that scenario, you would have a good case to force the HOA to permit your pool, since the HOA is acting in an arbitrary and self-interested manner; it is acting in bad faith.

If you have that type of fact pattern, then call me, because I can help under those facts. But with anything short of such a fact pattern you are better served by working with the architectural committee to figure out what would make your proposal acceptable. If you feel that the architectural committee is being unjustifiably restrictive, then start a movement to remove the board so that a new architectural committee can be created. That’s how democracy works.

I get calls from homeowners who grow frustrated with me because I won’t agree to take their case. My reluctance is from years of experience, and because at least twice a week I get calls that go something like this:

Please help me. My request to paint my shutters black was denied by the architectural committee, but I went ahead and painted them anyway, because it wasn’t fair since other people in the neighborhood have black shutters. The HOA sued me, and I lost. Today, they went to court on a motion for attorney fees, and the court awarded the HOA $250,000. I’m going to have to sell my house to pay the $250,000 in fees. I don’t want to lose my home.

Shutters are a big one for some reason. Installing hardwood floors in condos is another popular one. It’s very sobering to see people losing their homes over the color of their shutters or the flooring they install, or because they think the palm trees they planted look just fine, or because they didn’t really think they could be compelled to park their car in the garage and not on the street. In any HOA litigation, the prevailing party is entitled to recover their attorney fees. I used $250,000 in the above example because that seems to be the typical amount of fees sought by the HOA. It isn’t always that much, but sometimes it is much higher. I recently received a call from a homeowner who was hit with $1.9 million in fees after a battle with his HOA.

If you want to go to the mat over a denial by the architectural committee, you’d better be very certain that the judge will agree with your assessment that the committee’s decision exceeds its authority. Just know that no court will substitute its opinion of what should be permitted by an HOA, over the opinion of that HOA that was elected by the members to make those sort of decisions.

Know also that even if you win, you can lose. Say you put up a gazebo in your backyard without approval by the architectural committee, and you get a letter from the board demanding the immediate removal of the gazebo. But you’re an American, dang it, and no one is going to tell you you can’t put a gazebo in your backyard, especially since it’s not even visible to the neighbors, and everyone else has an identical gazebo. So you tell the HOA to pound sand, and you reject the requests to participate in ADR. Since the HOA Board has a fiduciary duty to enforce the CC&Rs, the HOA sues you for building a gazebo without architectural committee approval.

In California, it takes no less than a year for a matter to go to trial, affording the attorneys on both sides the opportunity to get into all kinds of mischief, with lots of discovery and motions. You’ll probably pay $30,000 to $60,000 to an attorney from a small firm for all the pre-trial work, or if you decided that you really needed to show the HOA who’s boss and brought in a big firm, the fees will easily be in the six figures. The firm that works for the HOA will run up a far higher bill, because the HOA isn’t particularly concerned about the costs.

But luck is on your side. You catch the judge on a good day, and she decides you were 100% right that demanding the removal of the HOA was unreasonable. But you did build the gazebo without architectural committee approval, so the resolution she orders is that you must submit the plans to the architectural committee, and that the committee is not to deny your plans without good cause. Thus, you will likely get to keep your gazebo, but the HOA will be the prevailing party because it successfully compelled you to submit plans for architectural committee approval. The HOA thus brings a motion for attorney fees, and is awarded the aforesaid $250,000.

I’m intentionally adding a cynical tone, because I really want you to take this to heart. I’m not talking about you, of course, but let’s just say that sometimes people just get too full of themselves when it comes to people telling them what they can and cannot do with their property, and they don’t want to hear or consider the other side. They get lost in the minutia, and lose the forest for the trees (and a lot of my cases involve trees). They want to talk about how beautiful their wood floors are, how the only reason the HOA is demanding removal of the wood floors is because their child beat the president’s child at a science fair three years ago, how the HOA is denying approval under the wrong section of the CC&Rs, etc., etc. Never mind that their condo is on the second floor, and the noise has made the unit below unlivable. Even if you convince a court that the wood floors are permissible, it may still find that you were required to seek permission to install them. You may win the battle over the floors, but it will be a Pyrrhic victory.

Posted in HOA Law | Leave a comment

What you can do when you are behind on your HOA dues

woman uses magnifying glass to check contract
I get calls with this question a couple of times a week, so I decided it was time to post an article in order to help people with this scenario.

The caller lives in a homeowners association (HOA), and for whatever reason fell behind in their association dues. Eventually, they owe more than they can pay, so they contact the HOA or go to an HOA meeting and nicely asked for a reduction of the total amount owed. Alternatively, they might be willing to pay the full amount, but request that the HOA permits payments.

In some cases the caller may be especially upset because in addition to the unpaid dues, the HOA has slapped on significant late fees. In the worst cases, the HOA has turned the matter over to their attorney, who has initiated a foreclosure process and added thousands of dollars in attorney fees to the amount owed.

The caller needs help. The want to hire me to take one or more of the following actions:

1. Force the HOA to accept payments.

2. Sue the HOA, seeking to remove the amounts the callers deems to be unfair, such as the late fees.

3. Defend against the foreclosure action, and in doing so get the amount owed reduced.

To determine if any of these actions are viable, you need to have the proper point of reference.

To keep the math simple, let’s assume an HOA has 100 members, and it costs $100,000 per year to do all of the things the HOA must do. Doing the math, each member therefore must pay $1,000 per year to keep the HOA going.

Now comes along a member who because of a stretch of bad economic luck cannot pay their dues for a given year. He goes to the HOA, tells the board members that he’s struggling, and asks if they would consider reducing the unpaid dues to $500.

If the kindly board members agree to the reduction, that means each of the remaining 99 members have to pay extra to make up for the loss. For that reason, the board members should NEVER agree to a reduction in the amount owed. Arguably, they violate their fidicuary duty to the other members if they do so.

OK, but what about late fees and attorney fees?

Late fees provide a little wiggle room, because they aren’t actual expenses. The board could agree to waive any late fees, but that raises the slippery slope issue. If they accept one member’s hard luck story and waive the late fees, what do they do with the next member who fails to pay? If they create a situation where no one is paying their dues on time because they all know the board will waive any late fees, that is a problem.

Attorney fees are differnent. Again, those are a real cost. If they pay an attorney $2,500 to commence legal action against you, those are real dollars that must be reimbursed. Just as with agreeing to reduce the outstanding balance and making the other members make up the difference, it is not appropriate make the other members pay out of their pockets because you were unable to keep current on your dues.

OK, so now that you have the proper mindset, let’s go through the list of actions the callers want me to take.

1. Force the HOA to accept payments.

The HOA is free to accept reasonable payments, since no one has to make up the total amount owed. But the HOA is not required to accept payments.

Some callers are really frustrated because they were actually presenting payments, and the HOA was refusing them. HOAs sometimes do this out of fear that if they accept a partial payment, the member will claim the HOA was agreeing to payments. No attorney can force an HOA to accept payments.

2. Sue the HOA, seeking to remove the amounts the callers deems to be unfair, such as the late fees.

Here is the problem with any potential lawsuit. THE CALLER OWES THE MONEY! Even if I go to court and convince a judge that the late fees were unnecessary or inappropriate, the caller is going to lose the case as to the unpaid fees. That will make the HOA the prevailing party, and the member will have to pay all the attorney fees incurred by the HOA.

Conceivably, the member could bring what is called a declaratory relief action, seeking a judcial determination only as to the late fees. But it is unlikely that the economics of such an action would ever work.

3. Defend against the foreclosure action, and in doing so get the amount owed reduced.

See number 2. The member can’t prevail on the action, because the dues are owed.

There is one method I have sometimes seen work under these circumstances, where the member seeks only to have the late fees or attorney fees reduced.

As stated, you can sue for what is called declaratory relief, but that can only be done in Superior Court (not small claims), and it will cost you thousands of dollars if you hire an attorney. This traditional approach is just not very practical because of the amount involved.

But here is my patented Small Claims Court procedure that can solve the problem for about $50. Pay the amount under protest, and then sue to get it back. Small Claims Court is not a court of equity, it can only award damages. This means that you cannot go to Small Claims Court to declare that you do not owe the money. But you can accomplish the same thing by paying the money under protest and then suing to get it back. The judge will then have to make the determination that you never owed the late fees.

The way this scenario usually arises is when the member is talking to the HOA, trying to work something out. In the midst of the discussions, the HOA hires an attorney and files legal action. The member justifiably feels that this action was unwarranted, and therefore the attorney fees were unnecessarily incurred.

Go ahead and run it past a judge in Small Claims Court. Show the judge that the HOA unneccsarily pulled the trigger on the lawsuit. If you are persuasive, the judge may disallow the attorney fees and award them back to you.

Be forewarned, however. This approach is too sophisticated for some judges. With these judges, the conversation will go something like this:

“Your Honor, I’m seeking reimbursement of the $2,500 I paid to the HOA for the attorney fees they added to my dues assessment, which I paid under protest.”

“But didn’t you owe the money to the HOA?”

“No, your Honor, that’s the point. On April 1, 2016, I attended the HOA meeting and presented a check for the full amount of my past due HOA dues. The board members said they have no mechanism to accept a check in person, and asked me to mail it to the management company. Three days later I did just that, but in the interim the attorney for the HOA placed a lien on my property, and the HOA added the $2,500 in attorney fees to my outstanding balance. It was a clear problem with communication between the Board and the management company, which really does not make sense because a representative of the management company was present at the meeting. There was no reason for the HOA attorney to lien my property, when I had attempted to tender the full amount that was owed. I never owed the money to the HOA, but I paid it under protest so that I could sue in Small Claims Court to get it back. Otherwise, there is no simple mechanism to have a court determine that the amount is not owed.”

“Why would you pay the money if you didn’t owe the money?”

“Because, again, there is no other realistic mechanism. I could have filed a declaratory relief action, but that would cost far more to prosecute than the amount in controversy here. I don’t have the thousands of dollars it would take to sue in Superior Court to have the matter decided, so paying the money under protest and then suing to get it back affords a very streamlined approach and saves judicial resourses. It’s certainly better to have the matter decided here in just a few minutes than to take a valuable docket spot in a Superior Court for a year or more.”

“So you paid the money to defendant, just so you could turn around and sue to get it back? That’s the craziest thing I ever heard.”

“It was suggested to me by an attorney, who has written extensively on utilizing this streamlined process. A judge sitting in Small Claims Court has no equitable power, but under these circumstances, the matter can be decided simply by ordering the return of the money.”

“Well I doubt any attorney would recommend anything so crazy. I’m awarding judgment for the HOA, and don’t ever waste my time like that again.”

All you can do is hope you don’t get one of those judges.

I hope this helped. Of course, none of this can be taken as legal advice, because while I am an attorney, I am not your attorney, and an article cannot devine the particulars of your situation.

Posted in Case Results, HOA Law | Leave a comment

The Girl in the Red Bikini — A Facebook Tale

I present now a fascinating case that serves to illustrate a couple of points about Internet defamation. We’ll call this one the Girl in the Red Bikini.

Enter the Fayette County School District in Georgia. School District administrators decided it would be a good idea to warn their high school students about the dangers of posting photographs on social sites such as Facebook. They came up with a presentation with the theme, “once it’s there, its there to stay.” A perfectly valid message to teach the high schoolers.

But then they did something strange. They decided that to really drive home the point, the presentation needed embarrassing photos posted by current students. They snooped around on their students’ Facebook pages to find what they considered illustrative examples of the poor choices being made by their students.

One photo they decided was a good illustration was a photo of student Chelsea Chaney. Ms. Chaney had dared to post a picture of her standing beside a cardboard cut-out of the artist formerly know as Snoop Dogg (he now goes by Snoop Lion in case you missed the memo). Snoop (or, rather, his cardboard cut-out) is holding a can of something. I really can’t identify it from the photo. It could be a beer but it could just as easily be an energy drink. Worse, though, in the minds of the Fayette County School District, Ms, Chaney was wearing a bikini. Put those facts together, and you have what is obviously a very embarrassing photo that never should have been posted, apparently because it shows public drunkeness and promiscuity, at least in the warped minds of the District.

In reality, the photo was entirely innocent and implied nothing. (Obviously Ms. Chaney was not happy that the photo was posted so I won’t republish it, but it is already published here.) But imagine the shock of Chaney, seeing her photo come up on the screen at a school assembly, used as an example of poor choices. She didn’t think that was very cool, and is now suing the school district.

So what are the takeaways from this case (aside from not going to school in Fayette County)? The school district was idiotic to create this presentation, but it does serve to illustrate that the photos you post can have very unforeseen consequences, even if they aren’t inappropriate. Also, this is yet another example of the Barbara Streisand Effect. Chaney was justifiably embarrassed and angry that the photo was posted, but whereas before only her schoolmates saw it, now she has made it a topic of discussion all over the Internet. That may be a price she is willing to pay in order to combat this behavior, but just be aware that any action can fan the very flames you were hoping to extinguish.

Posted in Facebook, Internet Defamation | Tagged | Leave a comment

Jury Gets it Right – AEG Live Not Responsible for Michael Jackson’s Death

A Los Angeles jury just decided that Dr. Conrad Murray was hired by AEG Live, but that the company has no responsibility for any negligence by Dr. Murray that led to the death of Michael Jackson.

Attorneys for the plaintiffs had hoped that if they could convince the jurors that AEG Live hired Murray, they would hold AEG liable for Jackson’s death due to the negligence of Murray.

Sometimes in big cases like this, attorneys lose sight of basic legal principles. If decided properly, this case was properly unwinnable. In the first place, even if AEG did hire Murray, it would only be liable if it was negligent in some way. For example, if Murray was a quack and AEG was aware of that fact, it could be liable under a theory of negligent hiring. However, Murray had no history of negligence. There was no reason for AEG to suspect that Murray would be a risk to Jackson. The best plaintiffs’ counsel could do in that regard was to argue that Murray had financial problems. From there, they were hoping that the jurors would make the leap in logic that if Murray had financial problems, he might do anything to keep Jackson happy to keep his job, even if it was not good medicine.

The jurors rejected that logic. They did find that AEG Live had hired Murray, but that’s as far as they would go. They rejected all of the claims that would have supported an award of damages.

Additionally, even if the jury had found a basis for damages (plaintiffs were seeking between one and two billion dollars in damages), since the claim was for negligence, any award would have to be reduced by Jackson’s own contributory negligence. What is the percentage of Jackson’s culpability when he was the one demanding that Murray give him the drug that caused his death. Some would hold him only partially responsible, reasoning that the doctor should have intervened, while others would hold him entirely responsible, reasoning that people should be responsible for their own decision. Plaintiffs’ counsel suggested that any award should be reduced by 20% to account for Jackson’s contributory negligence.

This case was at best a Hail Mary, and with the benefit of my always perfect 20-20 hindsight, should never have been brought.

Posted in Cases | Tagged , , , | Leave a comment

Defamation is Bad, but it Doesn’t Justify Chilling Free Speech

Blocked in Canada

Our neighbors to the North are very American-like, until you get to issues of free speech. Most view Canada as the “least protective of free speech in the English-speaking world.” Reasonable minds can differ on some of Canada’s laws, such as prohibiting the media from identifying criminals until they have been convicted, but most of the law is still based on policies designed to prevent any criticism of the government. Canadians can be held liable by English-Canadian courts for comments on public affairs, about public figures, which are factually true, and which are broadly believed.

A recent parody video posted on You Tube illustrates just how lacking the concept of free speech is in Canada. The video is a fake cable company ad posted by Extremely Decent Films. It does not mention any cable company by name, and indeed it is specifically directed at American cable companies. Nonetheless, someone lodged a complaint in Canada, and that was sufficient to scare You Tube into removing the video, given the vagaries of Canada’s libel laws (although the video has since been reposted in response to articles such as this one).

Posted in Article, Cases, Communications Decency Act, Defamation, Internet Defamation, Law, Libel | Tagged , , | Leave a comment

Anti-SLAPP Victory: Reality Television is Free Speech

storage warsThe reality show “Storage Wars” has created a case that offers some important anti-SLAPP (and litigation) lessons.

In December, David Hester filed a lawsuit against A&E Television Networks alleging that producers of Storage Wars rigged the reality-television series by salting storage lockers with valuable items before they were auctioned off to buyers. The producers deny the claim, pointing out that they have no access to the lockers before they are sold, but it could be that they are adding the items with the assistance of the buyers, after the purchase, to make the show more entertaining. After all, if the show was nothing but lockers full of expired National Geographic magazines, that would get boring fast. But I digress.

According to his lawsuit, Hester was told that his contract would be renewed for season four, but after complaining about the “fraud” that was being perpetrated on the viewers, he was told his services would no longer be required. He sued A&E and another entity for wrongful termination (huh?), breach of contract, breach of the covenant of good faith, unfair business practices, and declaratory relief.

Lesson 1:  For every wrong, there is not necessarily a remedy.

Some attorneys just never get this. If I hire you for my television show, and I have the contractual right not to renew that contract at some point in the future, and you do something I don’t like, such as telling me you don’t like the way I am running the show that I’m paying you $750,000 to be on, then I just may decide not to keep you around. You are not some bastion for the public, given the task of making sure my show is pure. All reality shows are faked to some extent, and the viewers all know they are faked (although, incredibly, I did once run into a guy who thinks Ghost Hunters is totally legit).

It may stink that Hester got “fired” for wanting to keep the show honest, but if he wanted to make sure he never got fired for criticizing the show, the he should have added a “you may not fire me when I tell you your show stinks” clause to his contract.

Lesson 2:  A faked reality show is an expression of free speech.

Can you sue Stephen King when you find out Pet Sematary [sic] is not based on reality? Then why did Hester and his counsel think they could sue A&E for its fictional Storage Wars? Not surprisingly, A&E’s attorneys asked the same question in the form of an anti-SLAPP motion. The motion was a no-brainer, because it involves a free speech issue of public interest, bringing it within the anti-SLAPP statute, and there was zero chance of Hester prevailing on at least one or more of his causes of action, so the second element was a lock. As I have explained many times here, a SLAPP suit will often make no mention of defamation or any other obviously SLAPPable claim, but nonetheless will be a SLAPP.

Lesson 3:  Betting wrong on a SLAPP can be very expensive since some courts continue to rubber-stamp huge fee applications.

There is case authority for the proposition that if a court finds that a fee application on an anti-SLAPP motion was inflated, it can deny fees altogether, but I have yet to see a court follow the rule. In one case, I was brought in to challenge a fee application, and persuaded the court to knock off about 40% of the hours that were requested by the attorney who had successfully brought the anti-SLAPP motion. When the court stated in was reducing the fees by that amount, I reminded it of the authority that it could deny the fees altogether since defense counsel had been caught padding the bill. The judge responded, “Padding, what padding? I did not see any padding.” Well your honor, if the hours were all legitimate, then you should have awarded the full amount. But since you agreed with me that 40% of the time was inappropriate, then I would describe that as padding.

I have not reviewed the invoices for the anti-SLAPP motion in this case, nor do I know what other activities if any followed the original anti-SLAPP motion (for example, the plaintiff will sometimes request permission to conduct discovery following the motion and that takes time), so I offer no opinion on whether the time spent was appropriate. In the end, even after reducing the attorney fees requested by defense counsel, the attorney fees awarded still exceeded $120,000.

Posted in anti-SLAPP Motion, Case Results, Defamation | Tagged , , , | 2 Comments

Women Can be Fired for Being Too Attractive, Says Iowa Supreme Court

dental-assistantA seemingly horrible decision out of Iowa provides an extreme example of how discrimination is only actionable if it involves a protected class.

In a very rare move, the Iowa Supreme Court had already issued a ruling in this case but withdrew its own ruling to give it more consideration. On Friday it reissued the ruling, standing by it decision that a dentist acted legally when he fired an assistant because he found her too attractive.

The dentist fired the employee because he felt she was a threat to his marriage, and the court ruled that is permitted, even if the employee has not done anything to lead the boss to believe he would ever have a shot at a relationship. The court held that a firing under these circumstance does not amount to illegal sex discrimination because it is the result of feelings, not gender.

The court upheld the ruling of the trial judge, who dismissed a discrimination lawsuit filed against dentist James Knight, who fired his assistant Melissa Nelson, even though he admitted he always agreed that she had been a great employee for ten years she worked for him. The trial judge and the appeal court did not see the termination as having anything to do with gender, because Nelson was replaced by another woman, and Knight’s entire staff consists of women.

Posted in Case Results, Wrongful Termination | Tagged | Leave a comment

Chink in Armor of Communications Decency Act?

Sarah Jones

Former Cincinnati Bengals cheerleader Sarah Jones won her defamation lawsuit against the gossip website TheDirty.com on Thursday in federal court, winning an award of $338,000. Whether she will ever collect any money is a different issue, but some see the decision as groundbreaking since the Plaintiff got around the Communications Decency Act.

Jones, 28, sued in 2009 after TheDirty.com published comments alleging she had slept with all of the Bengals, and had sexually transmitted diseases. The first trial ended in a deadlock, when the jurors were unable to unanimously agree whether the posts about Jones having sex with all the Bengals players and likely having sexually transmitted diseases were substantially false.

The case caught the attention of defamation attorneys after U.S. District Judge William Bertelsman ruled the website was not shielded from liability by the Communications Decency Act (CDA) of 1996. Many thought the ruling was a departure from all other rulings protecting website operators who use third-party content, and no doubt you will see this case reported as the first chink in the CDA’s armor, but I’ll explain why it is nothing new.

Whomever posts a defamatory comment on a website is always liable for the posting. The CDA protects a website operator from liability for third-party postings, but the website operator is still liable for his own postings, and that was the case here. The “shtick” of TheDirty is for visitors to post horrible comments about people, and the host, Nik Richie, then throws in his two cents worth. It was Richie who commented that Jones had slept with every player on the team, so of course he can be held liable for his own comments.

As evidenced by the first mistrial, on a different day with a different jury, the result could have been very different, and this could very well be reversed on appeal. As I have stated here many times, context is everything. A statement is only defamatory if it is offered as a true fact as opposed to being a joke or satire. When Richie makes the claim that Jones has slept with every player on the team, how would he be in a position to know that, and can it really be taken as a true statement that she slept with EVERY player on the team?

Complicating the matter is Jones’ history. I wrote here about the cannibal who sued because he was called a thief. It’s hard to argue that you have lost reputation for being falsely accused of being a thief when you are an admitted cannibal. Here, plaintiff is same Sarah Jones who gained national attention as a teacher for her dalliances with an under-aged student, for which she was sentenced to two years in prison (suspended).

Posted in Case Results, Defamation, SLAPP | Tagged , , , | Leave a comment