A group of homeowners represented by SBEMP has prevailed on a Motion for Summary Adjudication against Morningside County Club (“Morningside”), a common-interest development in Rancho Mirage, California, which asked the court to void the results of an election which imposed a $250 monthly fee (“Proprietary Fee”) on all homeowners to support The Club at Morningside (“Club”), a private Golf and Tennis Club at Morningside, regardless of whether a homeowner was a member of the Club. Concurrent with the adoption of the Proprietary Fee, the Club gave its members a credit against their monthly dues in the same amount as the Proprietary Fee. Thus, in effect, non-Club members were required to pay the fee to subsidize the Club without obtaining any privileges at the Club. The court further held that Plaintiffs were entitled to restitution (reimbursement) of all amounts paid on the Proprietary Fee.
In 2015, SBEMP filed a lawsuit on behalf of 23 non-Club member homeowners against Morningside, the Club, the law firm of Peters & Freedman LLP (which acted as the Inspector of Elections), as well as various individual members of the governing boards of Morningside and the Club, challenging the validity of the Proprietary Fee under the Davis-Stirling Act. The lawsuit alleged that the Proprietary Fee was an impermissible unequal assessment and exceeded the amount necessary to defray the costs for which it was levied, both in violation of the Davis-Stirling Act. The lawsuit also alleged that Defendants engaged in election fraud by using information secretly obtained from the Inspector of Elections during the course of the election regarding who had voted. Defendants then used that information to tally the vote and determine who to contact in order to increase the number of votes in favor of the Proprietary Fee.
The court held that the undisputed facts showed that there were clear election violations which justified voiding the election results. Relying on provisions of the Davis-Stirling Act governing HOA elections (Civil Code section 5100 et seq .), the court concluded that the Inspector of Elections’ actions in providing Defendants ongoing updates of who had voted violated the principle of the secret ballot and the Inspector’s duty of fairness and impartiality to all homeowners primarily because the information was useful only to those in favor of the Proprietary Fee. The court further found that the Proprietary Fee disproportionately affected non-Club members (was “grievous and unjust” to them), which weighed heavily in favor of the court exercising its discretion in voiding the election and ordering restitution for Plaintiffs.
The ruling is particularly significant in that, like Morningside, several common interest developments with private golf clubs have also been looking for ways to shift a portion of the cost of supporting such clubs to non-club members. In light of the ruling in favor of SBEMP’s clients, they will likely now be wary of trying to do this by the means attempted by Morningside.
Charles L. Gallagher
The Motion for Summary Adjudication was prepared by Charles L. Gallagher, who has litigated this case with fellow SBEMP attorneys Shaun M. Murphy and David A. Smith. Mr. Gallagher is a litigation attorney and senior counsel with Slovak Baron Empey Murphy & Pinkney LLP. Currently, Mr. Gallagher’s practice is primarily complex civil litigation (real estate, eminent domain, contracts, municipal law/compliance and probate litigation), Federal Native American law, and appellate work. In the last five years, Mr. Gallagher has successfully prosecuted and defended actions on behalf of several commercial clients in a broad range of actions including breach of contract, fraud, land use and regulatory compliance. He has also represented municipalities in connection with the wind down of California’s Redevelopment Agencies and related litigation.
Shaun M. Murphy
Mr. Murphy is a Martindale-Hubbell AV-rated trial attorney and partner with Slovak Baron Empey Murphy & Pinkney LLP. Currently, Shaun’s practice is primarily complex civil litigation (contract, real estate and land use, trade secrets and intellectual property) and plaintiff’s personal injury. Shaun has experience in a broad range of issues, including employment claims, unfair competition, multi-jurisdictional product liability/recall actions, public and private construction disputes featuring delay/disruption/acceleration claims, and professional liability claims. He has also successfully defended several commercial clients in a broad range of claims including architectural copyright infringement, trademark infringement and breach of contract. He has extensive mediation and arbitration experience and has tried cases in both state and federal courts.
David A. Smith
Mr. Smith is a Corporate, Commercial, and Business Litigation Attorney who has represented several major creditor institutions, including Bank of America, Wells Fargo Bank, Chase Bank, Union Bank and numerous others. Mr. Smith has served as an American Arbitration Panel Judge specializing in Business Contract Transactions and related Partnership disputes in Orange County California. He has extensive background in HOA litigation and issues arising under the Davis-Stirling Act. Mr. Smith has also provided legal counsel to numerous professional sports athletes and various franchises while serving as General Counsel for both Athletes for Youth and Professional Sports Authenticators. In 2001 he was designated as an Expert in Sports Contracts and related issues and has participated in the arbitration and resolution of various contract disputes.
SBEMP Litigation Department
Slovak Baron Empey Murphy & Pinkney LLP’s civil litigation practice group offers a wide range of specialized litigation services for private sector companies, public agencies and individuals. Our litigators represent clients in an array of civil disputes, including:
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With locations in Palm Springs, CA, New Jersey, NJ, and Manhattan, NY, SBEMP’S Litigation practice group offers a wide range of specialized litigation services for private sector companies, public agencies and individuals. Our litigators represent clients in an array of civil disputes, including: intellectual property, personal injury, complex business and real estate, trusts and estate, construction defect, owner, contractor/sub-contractor disputes, eminent domain and condemnation, homeowners’ association and hospitality, partnership disputes, tribal, healthcare, first amendment, and defamation.
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