Q&A HOA board should seek expert advice hiring attorney, major expenditure
Los Angles Times
26 June 2016
Our association hired an attorney who promised that with his
representation we’d win a lawsuit that was filed against our
association, saying, “It’s a slam-dunk.” Board directors aren't
lawyers and understanding legal stuff isn't easy. At every meeting he
pushed his litigation strategy, which we didn’t understand. We figured
"he's the attorney, he should know what he's doing," so we capitulated
and agreed to what he proposed.
He explained the insurance company would pay for attorneys charging up
to $250 an hour; our association attorney's rate was $375 an hour. He
advised the board not to use the association’s insurance-provided
attorneys, and convinced the board to raise the HOA dues to cover his
additional $125-an-hour fee so he could litigate the case.
He did a terrible job, and his bill came to more than $155,000 – on top
of $309,000 our insurance company paid out to him – while the
owner who sued our association won $110,000. In total, our association
was left saddled with paying more than $265,000, including his fee and
the judgment. The board still doesn’t know where we went wrong. Is
there any way the board can get our money back from the association’s
attorney for giving us really bad advice?
While board directors may not fully understand litigation, they do not
check their common sense at the door just because they hired an
attorney. That’s why there’s more than one person on the board; other
directors are supposed to serve as a reality check during the
decision-making process. Since the homeowner association’s insurance
policy included paid legal representation, there should have been a
compelling and informed reason to justify the board’s expenditure in
lieu of the paid attorneys the insurance company provided.
Whether planning to undertake a lawsuit or extensive plumbing repairs,
any decisions involving big expenses or major risks affecting all
titleholders necessitates obtaining specialized knowledge. Directors
should not just accept at face value advice of advisors and experts. No
reputable lawyer would guarantee results in litigation when even
experienced trial lawyers say a "slam-dunk" case has a 20-30% chance of
being lost. Someone telling you otherwise is trying hard to make a sale
by not giving honest advice.
To rely on a single source with a vested interest, such as this
association’s attorney, also could undercut protections afforded to
board directors under the business judgment rule and insurance-policy
indemnification clauses. That could result in personal liability for
the directors. Decisions about specialized or professional issues
requires substantial research and possibly other expert opinions. Once
the research is completed, the board must continue to use caution and
Why your association lost the case against it could be for any number
of reasons The board may indeed have wronged the plaintiff in a way
that created a strong case against the association. Alternatively, the
plaintiff may not have had a very strong case, but your attorney was
inadequately prepared or too inexperienced to defend the association
effectively. But just because the attorney lost the case, or even made
some mistakes, does not mean the association can recover fees already
paid to him.
However, the board should still take steps to review the attorney’s
invoices to verify that everything the board paid for was reasonable
and that service was actually rendered. If not, the association can
institute a fee dispute with the California State Bar Assn. to recover
overpayments and frivolous billings. First consult an attorney who
handles fee disputes or malpractice claims. A brief review of your
invoices may cost little or nothing and help determine whether you are
due a significant refund or have a case for malpractice.
Zachary Levine, a partner at Wolk
& Levine, a business and intellectual property law firm, co-wrote
this column. Vanitzian is an arbitrator and mediator.
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