Use of Common Funds – Defamation Case Study

May 2, 2019

This case began when a former Board of Directors member questioned the source of money used by the current Board to make repairs of the common area. The unit owner alleged that the Board had used reserves when it should have used common funds because the work performed was actually an improvement and not a repair. The Board rejected the claim of the unit owner and he filed suit against the Board for violating the Declaration and By-Laws of the association.

The Directors and Officers insurance coverage in effect at the time did not provide coverage for the claim and the Board retained the services of Feniger & Uliasz to defend against the lawsuit. Through discovery and pre-trial motions the issues in the case were focused but shortly before trial the unit owner added additional claims against individual Board members for defamation arising out of an editorial they had written for the local newspaper. As it turned out the unit owner suing the Board was also seeking the position of an elected official and now claimed that the editorial written by the Board members had slandered him and ruined his chance to be elected. While one of the Board members was fortunate to have insurance coverage under a policy of homeowners insurance the other did not and because the statements made were not within the course and scope of their position as board members the Association policy did not offer coverage.

The entire defense was taken over by Feniger & Uliasz and an agreement was reached only days before trial whereby neither the board members nor the Association were required to pay anything to the disgruntled unit owner. Had the unit owner prevailed in his claim that the Board had misappropriated funds from reserves to pay for improvements versus repairs the Association members would have been specially assessed to cover the cost.

The result achieved by Feniger & Uliasz prevented any further costs to the Association members and allowed the Association to enjoy the value of the repairs that had made to the common area by the Board.

Of course, there are no guarantees in litigation but, with knowledge of the law, thorough investigation and determination the law firm of Feniger & Uliasz was able to achieve an excellent result for the client in this case.