PUBLISHED OCTOBER 30, 2003
This is a malpractice lawsuit brought by a community association against its former legal counsel, Wean & Malchow, P.A.
It started in October 2001 with an agreement to hold a special meeting to oust the seated board and to install a new board. After a huge court battle, so far it has ended with an Appeals Court decision in favor of the new board.
In a decision of the lower court, the Honorable Sprinkel recognized that the expense generated by the former board represented an "unnecessary defiant expense." The court made it clear that the former board had a "non-judiciable issue of law or fact," and that upon the motion of the HOA it would entertain the association's request that the individuals of the former board be held financially responsible for the court expenses.
The law firm of Wean & Malchow is well known in the Orlando area. The senior partner, Paul Wean, is the Vice Chair of the CAI-FLA, the Legislative Action Committee of the Community Association Institute, and a member of the Legislative Committee of OCHA, the Orange County Homeowners Association.
With the help of this lawsuit, the homeowners try to recover the huge legal expenses created by this lawsuit. Hopefully, this will end the lengthy battle over ousting a board of a homeowners' association.
As you read through the lawsuit, you will see that it does not seem to be very easy to oust a board, even if the wide majority of homeowners are in agreement.
Hopefully this will end the lengthy battle over ousting a board of a homeowners' association.
SOUTHCHASE PARCEL 45 )
COMMUNITY ASSOCIATION, INC., a )
Florida not-for-profit corporation, )
WEAN & MALCHOW, P.A., a Florida )
professional service corporation, )
1. This is an action for damages in excess of $15,000.00, exclusive of interest, costs, and attorneys’ fees.
2. As more fully stated herein, venue is proper in this Court.
3. SOUTHCHASE is a not-for-profit Florida corporation responsible for the operation and administration of the subdivisions of Southchase Parcel 45 (collectively the “Subdivision”), which Subdivision is located in Orange County, Florida.
4. The Subdivision is subject to the Declaration of Protective Covenants and Restrictions for Southchase Parcel 45 Community Association (the “Declaration) recorded in the Public Records of Orange County, Florida, in official Records Book 4276, at Page 3326, et. seq., as amended and supplemented. A true and correct copy of the Declaration is attached as Exhibit “A”.
5. SOUTHCHASE is subject to and governed by the Articles of Incorporation of Southchase Parcel 45 Community Association, Inc. (the “Articles”), as amended and supplemented. A true and correct copy of the Articles is attached as Exhibit “B”.
6. SOUTHCHASE is subject to and governed by the Bylaws of Southchase Parcel 45 Community Association, Inc. (the “Bylaws”), as amended and supplemented. A true and correct copy of the Bylaws is attached as Exhibit “C”.
7. The WEAN FIRM holds itself out as a law firm that specializes in representing homeowners’ and condominium associations in the State of Florida.
8. Venue is proper in this court because the actions required and breaches herein described occurred in Orange County, Florida, and because the WEAN FIRM maintains it’s principal and only place of business in Orange County, Florida.
9. All conditions precedent to this action have occurred, or alternatively, have been waived.
10. For many years prior to November 19, 2001, the WEAN FIRM served as legal counsel for SOUTHCHASE. The WEAN FIRM assigned an associate attorney employed by that firm, James E. Olsen (“OLSEN”), to serve as its assigned legal counsel for SOUTHCHASE. At all times that the WEAN FIRM served as legal counsel for SOUTHCHASE, Attorney OLSEN was acting within the course and scope of his employment relationship with the WEAN FIRM as an associate attorney.
11. At all relevant times in the year 2001 but prior to November 19, 2001, SOUTHCHASE’s Board of Directors was Steven Berube, Phyllis Beach, Amy Jones, Donald Spero, and Gail Stuart (the “FORMER BOARD”).
12. Steven Berube served as the President of the Board and was the principal liaison to OLSEN and the WEAN FIRM in connection with all SOUTHCHASE legal matters. Steven Berube also served as Treasurer, and Phyllis Beach served as Secretary.
13. Prior to October 22, 2001, certain members of SOUTHCHASE decided that a change in the governance of SOUTHCHASE was needed for the benefit of all members. To accomplish this change, a special meeting was held on October 22, 2001, for the purpose of removing the FORMER BOARD and replacing them with successors elected by the membership at that meeting.
14. The SOUTHCHASE Subdivision consists of 798 homes and therefore has 798 members.
15. Pursuant to Article IV, Section 6 of the Declaration and Article 5, Section 5.4 of the Articles, there is one voting interest for each lot in SOUTHCHASE. Accordingly, there are 798 total voting interests in SOUTHCHASE. Pursuant to the Bylaws, a minimum of 400 votes is required to constitute a quorum at a special meeting of SOUTHCHASE. Furthermore, any action taken at a meeting in which a quorum is present is binding on all members of SOUTHCHASE if approved by a majority vote of all votes present at that meeting.
pursuant to Fla. Stat. §720.306, only a minimum of 240 votes is required
to constitute a quorum at a special meeting of the members of SOUTHCHASE.
Specifically, Fla. Stat. § 720.306, in pertinent part, provides:
17. Furthermore, both the Bylaws and Fla. Stat. §720.306(6) authorize voting by proxy.
18. On October 22, 2001, a vote was taken to recall the FORMER BOARD. At this same meeting, a vote was also taken to elect Judith Ann Garcia, Mark Mace, Valerie M. Rutherford, Roger T. Ellis, and Stephen Cluney as their successors.
19. Soon after the meeting, and on October 25, 2001, the FORMER BOARD, through its legal counsel OLSEN and the WEAN FIRM, caused SOUTHCHASE to file suit against these successors in a case styled as: Southchase Parcel 45 Community Association, Inc. v. Judith Ann Garcia, et al., Case No. CIO-01-8975, in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida (“SOUTHCHASE I”). A true and correct copy of the Complaint and Motion for Temporary Injunction is attached as Composite Exhibit “D.”
20. In SOUTHCHASE I, the WEAN FIRM, acting as attorneys of record for SOUTHCHASE, took the position that Fla. Stat. §720.306 and the Bylaws govern the quorum and majority vote requirements of special meetings, and that the proxies used in the October 22, 2001, special meeting were materially defective and invalid because the proxies did not comply with Fla. Stat. §720.306(6), notwithstanding the fact that these same proxies were used by the FORMER BOARD for past membership meetings. Thus, because the necessary quorum was met using allegedly defective and invalid proxies, it was claimed in SOUTHCHASE I that the FORMER BOARD had not been removed as Directors of SOUTHCHASE.
21. In SOUTHCHASE I, the WEAN FIRM did not claim that Fla. Stat. §617.0808 governed SOUTHCHASE with respect to the removal and replacement of the Directors by its membership.
22. On or about October 30, 2001, the parties in SOUTHCHASE I entered into a stipulation that was memorialized and confirmed in a letter written by OLSEN to Neal McCulloch, the attorney for the defendants in that case (the “Stipulation”). The Stipulation provided that a new special recall meeting would be held, set forth the procedure for that meeting, and provided that, in exchange, the suit would be dismissed upon conclusion of the meeting, with each side bearing their respective fees and costs. A true and correct copy of the Stipulation is attached as Exhibit “E.” Again, it was OLSEN, on behalf of the WEAN FIRM, who drafted the Stipulation that set forth the procedures for the November 19, 2001, recall election, including what constituted a quorum for the transaction of business at that meeting.
23. Consistent with OLSEN’s pleaded position, the Stipulation prepared by OLSEN specifically provided that the new meeting would be held in accordance with the provision of Fla. Stat. §720.306 requiring that only 30% of the members of SOUTHCHASE need to be present, in person or by proxy, in order to properly hold a special meeting of the members and to vote on the recall of the FORMER BOARD.
24. On November 19, 2001, the special meeting contemplated by the Stipulation was held in compliance with the requirements of the Declaration, the Articles, the Bylaws, the Florida Statutes, and the Stipulation. At this meeting, the FORMER BOARD was properly removed as Directors of SOUTHCHASE and replaced by five new Directors; namely: Stephen Cluney, Valerie Rutherford, Judith Ann Garcia, Roger T. Ellis, and Kathleen Ghanem (the “SUCCESSOR BOARD”). Mark Mace, who was a board candidate at the October 22, 2001, meeting, and a defendant in SOUTHCHASE I, did not seek election to the board at the November 19, 2001, meeting. Instead, Kathleen Ghanem ran for and was elected to the board on November 19, 2001.
25. At the November 19, 2001, special meeting, the total number of voting members of SOUTHCHASE present either in person or by proxy was 423. This number satisfied the quorum requirements of Fla. Stat. §720.306, as well as the stricter requirements of the Bylaws. Furthermore, 324 of these members voted in favor of removing the FORMER BOARD and replacing them with the SUCCESSOR BOARD. Only 58 members voted to retain the FORMER BOARD. A true and correct copy of the facsimile from Leland Management, Inc., stating all votes counted, is attached as Exhibit “F.”
26. Further, it was OLSEN who presided over the November 19, 2001 meeting, as counsel for SOUTHCHASE, with David Furlow, the President of Leland Management, Inc., SOUTHCHASE’s management company.
27. A videotape of this meeting was recorded by a SOUTHCHASE member.
28. This videotape shows OLSEN acting in a manner entirely consistent with the Stipulation. The videotape, in pertinent part, shows the following:
(a) When referring to the tabulation of the recall vote, David Furlow, on behalf of Leland Management, announces: “Both parties agree to the methodology used here.”
(b) Taking charge of the recall and subsequent election, OLSEN, on behalf of SOUTHCHASE, then announces: “The Board has been recalled… The Board has been recalled. Now they have to be replaced.”
(c) OLSEN subsequently instructs the members of SOUTHCHASE present at the meeting that: “You have no board . . . so what we need to do is replace the board.”
(d) OLSEN then moves forward with voting for the replacement board, and asks: “Now, all those in favor of filling the five directorships with those people nominated?”
(e) After a majority of the members present, in person or by proxy, voted in favor of doing so, OLSEN proceeds to announce: “Motion carries; you now have five new board members.” At that point, the meeting is concluded.
29. Consistent with his actions and pronouncements on the videotape and with the Stipulation, on November 20, 2001, the day after the meeting, OLSEN voluntarily dismissed SOUTHCHASE I and in the notice stated that dismissal was made “in accordance with Rule 1.420(9), Fla. R. Civ. P. and the Memorandum of Settlement attached hereto as Exhibit ‘A’.” The stipulation attached as Exhibit ‘A’ to the Notice of Voluntary Dismissal he filed with the Court is the October 30, 2001, Stipulation. OLSEN also filed a Final Disposition Form with the Notice of Voluntary Dismissal. A true and correct copy of the Final Disposition Form, Notice of Voluntary Dismissal and its attachments is attached as composite Exhibit “G.”
30. Notwithstanding the Stipulation, the November 19, 2001 special meeting removing the FORMER BOARD as Directors of SOUTHCHASE, and the dismissal by OLSEN of SOUTHCHASE I, OLSEN, claiming to act on behalf of SOUTHCHASE, improperly, wrongfully, and in bad faith and/or negligently caused a new lawsuit to be filed in the name of SOUTHCHASE. In this new lawsuit, OLSEN asserted that the removal of the FORMER BOARD and the election of the SUCCESSOR BOARD was void because the meeting violated Fla. Stat. §617.0808; even though OLSEN himself knew about but did not follow that statute at the November 19, 2001, meeting. In this new lawsuit, OLSEN even sued Mark Mace, who did not participate in the November 19, 2001, meeting as a candidate for the SUCCESSOR BOARD. However, OLSEN did not sue Kathleen Ghanem, who was elected to the SUCCESSOR BOARD on November 19, 2001. OLSEN simply named the same defendants sued in SOUTHCHASE I in the SOUTHCHASE II complaint. A copy of the SOUTHCHASE II complaint and Motion for Temporary Injunction are attached to this Complaint, as composite Exhibit “H” (“SOUTHCHASE II”).
31. On December 6, 2001, OLSEN presented arguments on his Motion For Temporary Injunction in SOUTHCHASE II to the trial court. A true and correct copy of the transcript of the December 6, 2001 hearing is attached as Exhibit “I”.
32. At the conclusion of the December 6, 2001, hearing, the trial court ruled: (1) that there was no justiciable issue of fact or law in the lawsuit OLSEN initiated; (2) that the November 19, 2001, special member recall meeting was held in full compliance with the Bylaws, the provisions of Fla. Stat. §720.306, and the Stipulation; and, (3) that the five new Board members, Stephen Cluney, Valerie Rutherford, Judith Ann Garcia, Roger T. Ellis, and Kathleen Ghanem, were duly elected the Directors of SOUTHCHASE on November 19, 2001.
33. The trial court also ruled that the failure to raise the issue of Fla. Stat. §617.0808 in the first lawsuit and Stipulation constituted a waiver of this after-the-fact argument in SOUTHCHASE II. Furthermore, the Court ruled that the filing and prosecution of SOUTHCHASE II defiantly exposed SOUTHCHASE to unnecessary litigation and expense. The Court determined that Fla. Stat. §617.0808 is wholly inapplicable and that Fla. Stat. §720.306, because it is specific to homeowners’ associations, is clearly the controlling statute in this situation. A true and correct copy of the trial court’s Order is attached as Exhibit “J”.
Not to be deterred, OLSEN filed an Appeal with the Fifth District Court
of Appeals challenging the trial court’s Order. The Fifth District
Court of Appeals affirmed the trial court’s Order in its entirety, and
in a published opinion held, in pertinent part:
35. After the opinion issued, OLSEN filed a Motion for Rehearing with the
Fifth District Court of Appeals. That motion was denied.
36. Plaintiff SOUTHCHASE realleges and reincorporates paragraphs 1 through 35, as if fully set forth herein.
37. This is an action for damages in excess of fifteen thousand dollars ($15,000.00) for legal malpractice against the law firm of WEAN & MALCHOW, P.A.
38. Plaintiff SOUTHCHASE retained the WEAN FIRM to represent it in connection with negotiating and resolving the procedures to be utilized in the recall election of November 19, 2001.
39. The WEAN FIRM accepted the engagement and represented SOUTHCHASE exclusively with respect to negotiating, preparing, and implementing the October 30, 2001, Stipulation reached in SOUTHCHASE I, and with respect to the oversight of the November 19, 2001, recall election. As such, the WEAN FIRM owed a duty to SOUTHCHASE to undertake the performance of those services with the skill, care, and diligence that is to be expected of attorneys that specialize in homeowners’ association law and litigation.
40. The WEAN FIRM breached its duty to SOUTHCHASE by its actions which include, but are not limited to:
(a) As a law firm that devotes a substantial portion of its practice to the representation of community associations and owners, including that firm’s active involvement in a national community association trade group known as The Community Associations Institute, the WEAN FIRM was well aware of, or should have been well aware of, the existence of Fla. Stat. §617.0808. This was also not the first time that the WEAN FIRM had served as lawyers in connection with recall elections for community associations. Thus, the WEAN FIRM certainly knew, or should have known, of the existence of Fla. Stat. §617.0808 when the WEAN FIRM prepared the pleadings and filed suit in SOUTHCHASE I. The WEAN FIRM also certainly knew, or should have known, of the existence of Fla. Stat. §617.0808 when OLSEN negotiated and wrote the Stipulation, and, of course, the WEAN FIRM knew or should have known about Fla. Stat. §617.0808 when it presided over the November 19, 2001, recall meeting. Thus, the WEAN FIRM knew, or should have known, that the pleadings in SOUTHCHASE I, combined with the Stipulation written by OLSEN and the subsequent implementation by OLSEN of the procedures pursuant to the Stipulation at the November 19, 2001, meeting, fully and completely resolved the issue of whether Fla. Stat. §617.0808 applied to the recall meeting. Such a conclusion is objectively manifest in the language of the stipulation itself, OLSEN’s conduct at the November 19, 2001 recall meeting, and the fact that OLSEN, on behalf of SOUTHCHASE, filed the Notice of Voluntary Dismissal and Final Disposition Form in SOUTHCHASE I in accordance with the Stipulation, the day after that meeting. Notwithstanding the foregoing facts, the WEAN FIRM, through OLSEN, negligently filed a whole new lawsuit, SOUTHCHASE II, and an appeal, that attacked and challenged the very Stipulation negotiated and authored by the WEAN FIRM on behalf of SOUTHCHASE;
(b) At the November 19, 2001, recall election, the WEAN FIRM, represented at that meeting by OLSEN, presided over the actual recall, and the subsequent election of the SUCCESSOR BOARD. In doing so, OLSEN, on behalf of SOUTHCHASE, negotiated and agreed that all of the election procedures between the “two camps” had been agreed upon at that meeting and before the recall vote took place. Fla. Stat. §617.0808 was not a part of that agreement. OLSEN also instructed the membership on the proper recall procedure, handled the recall itself, announced the fact of recall, instructed the members on the election of the SUCCESSOR BOARD, and handled that election as well. OLSEN also announced that the SUCCESSOR BOARD was elected as SOUTHCHASE Board of Directors. The very next day, OLSEN, on behalf of SOUTHCHASE, dismissed SOUTHCHASE I “in accordance with the [Stipulation]”. Following dismissal of SOUTHCHASE I, OLSEN negligently filed a new lawsuit (“SOUTHCHASE II”) one week later, and then filed an appeal of SOUTHCHASE II, which alleged that the procedures that OLSEN had agreed to, approved, wrote, announced, and implemented at the November 19, 2001, recall election were invalid, even though in truth and in fact they were not. After the dismissal of the SOUTHCHASE I lawsuit, SOUTHCHASE was thus substantially injured as a result of the actions of OLSEN and the WEAN FIRM.
(c) Assuming, arguendo, that Fla. Stat. §617.0808, and not Fla. Stat. §720.306, may have applied to the November 19, 2001, meeting, as was later alleged in SOUTHCHASE II and the corresponding appeal by the WEAN FIRM, the WEAN FIRM, failed to address and resolve that issue in the pleadings filed in SOUTHCHASE I, in the corresponding Stipulation authored by the WEAN FIRM, and in the recall and election procedures utilized and implemented by OLSEN at the November 19, 2001, meeting. Both at the trial court and on appeal, the WEAN FIRM, through OLSEN, in a most bizarre twist of events, asserted that the Stipulation, which the WEAN FIRM had authorized, was ambiguous, deficient and incomplete because it did not address the application of Fla. Stat. §617.0808. Even though, OLSEN, on behalf of the WEAN FIRM, and as legal counsel for SOUTHCHASE, nonetheless proceeded forward with the implementation of that Stipulation at the November 19, 2001, recall meeting, presided over the recall of the FORMER BOARD, and presided over the election of the SUCCESSOR BOARD. Incredibly, OLSEN then concluded that meeting notwithstanding his knowledge that the recall was supported by less than an absolute majority of the members of SOUTHCHASE present in person or by proxy. Thus, OLSEN and the WEAN FIRM, as the astute community association legal experts employed by SOUTHCHASE, knew, or should have known, that the number of tabulated votes in favor of the recall did not meet or exceed the number of votes required under Fla. Stat. §617.0808 at the time the votes were tabulated on that issue but instead continued forward at that meeting and announced the fact of recall and then proceeded to elect the SUCCESSOR BOARD pursuant to Fla. Stat. §720.306. Therefore, and by virtue of the WEAN FIRM’s own admissions in SOUTHCHAE II and in the appeal, the WEAN FIRM has acknowledged it negligently failed to properly resolve the issue in the Stipulation and at the November 19, 2001 recall meeting.
41. As the result of the WEAN FIRM’s various breaches, SOUTHCHASE has suffered
damages including, but not limited to, being charged or otherwise paying
the WEAN FIRM for services that were of no value or were incompetently
performed, and the additional costs and fees incurred by or otherwise charged
to SOUTHCHASE in defending the integrity of the election process, which
was set up and implemented by OLSEN, and was later attacked by him in both
the Trial and Appellate Courts. The WEAN FIRM is also responsible
for the increase in Directors and Officers liability insurance premiums
resulting from that firm’s malpractice.
41. Plaintiff SOUTHCHASE realleges and reincorporates paragraphs 1 through 35, and paragraphs 38 and 41 of Count I, as if fully set forth herein.
42. This is an action for damages in excess of fifteen thousand dollars ($15,000.00) for breach of fiduciary duty, brought by SOUTHCHASE against the WEAN FIRM based on its representation of SOUTHCHASE in connection with the November 19, 2001; recall election and its initiation of the ensuing litigation.
43. Notwithstanding the fact that OLSEN negotiated and drafted the language used in the October 30, 2001, Stipulation, and agreed upon and presided over the procedures for the recall of the FORMER BOARD and the election of the SUCCESSOR BOARD at the November 19, 2001, meeting, and the next day filed a Notice of Voluntary Dismissal and Final Disposition Form in accordance with that Stipulation in SOUTHCHASE I, the WEAN FIRM breached its fiduciary duty to SOUTHCHASE by conspiring with the FORMER BOARD to challenge the very process that OLSEN and the WEAN FIRM had devised, presided over, and implemented to conclusion.
44. OLSEN and the WEAN FIRM knew, or should have known, that doing so was a direct violation of their fiduciary obligation, was a breach of the Stipulation, and was intentionally done to retain control over SOUTHCHASE through the FORMER BOARD so that the WEAN FIRM would continue to serve as its attorneys. The trial court determined that the initiation and prosecution of SOUTHCHASE II was “unnecessary and defiant” and that the issues raised in SOUTHCHASE II should have been raised in SOUTHCHASE I prior to its dismissal. See Exhibit “J”. Moreover, the Fifth District Court of Appeal also determined that the issues should have been raised in SOUTHCHASE I, but that they were not and therefore SOUTHCHASE was “estopped from taking a position inconsistent with the position taken by SOUTHCHASE in the SOUTHCHASE I lawsuit.” See 844 So.2d at 652.
45. The actions of the WEAN FIRM were solely designed so that they could retain the attorney/client relationship with SOUTHCHASE, a large mandatory membership association. Indeed, the trial court, in its Order which was affirmed in its entirety on appeal, determined that the expense to SOUTHCHASE was “unnecessary” and that the issues raised in SOUTHCHASE II were “non-judiciable issues of fact and law that created additional expense for the homeowners association.” See, Exhibit “J”.
46. The WEAN FIRM’s principal motivation in filing SOUTHCHASE II was to keep SOUTHCHASE as a client so that it could continue billing it. SOUTHCHASE is a large community, as mentioned above, of 798 homes.
47. As the result of the WEAN FIRM’s breaches of fiduciary duty, SOUTHCHASE
has suffered damages including, but not limited to, being charged by or
otherwise paying the WEAN FIRM for services that were of no value or were
designed solely to benefit the WEAN FIRM at the expense of the interests
of its client, the additional attorneys’ fees and costs incurred in defending
the litigation initiated by the WEAN FIRM, both at the trial court and
on appeal. The WEAN FIRM is also responsible for the increase in
Directors and officers liability insurance premiums resulting from that
firm’s breach of fiduciary duty.
WHEFEFORE, Plaintiff, SOUTHCHASE PARCEL 45 COMMUNICATION SOUTHCHASE, INC.,
demands judgment against WEAN & MALCHOW, P. A. for damages, including
pre and post judgment interest, costs, and such other and further relief
as this Court deems just and proper.
SOUTHCHASE hereby reserves the right,
pursuant to Fla. Stat. §768.72 and applicable law to seek punitive
damages against the defendant herein.