By Robert Meisner
One of the many problems that an Association Board and its legal counsel will face in pursuing any construction defect litigation is keeping the Co-owners advised of the progress of the claim and/or lawsuit and giving them enough information to have them appreciate the need to pursue the developer and other responsible parties, yet not undermine the viability of the claim by disclosing information which would be adverse to the interests of the Association.
It has always been my practice and the practice of most experienced Community Association lawyers in construction defect litigation to attempt to keep the Co-owners advised of the defects and deficiencies at the Condominium by having the engineer and/or architect who is assisting the Association in documenting the claims address the members of the Association and point out verbally and graphically the nature and extent of the problems. This is not a problem in terms of revealing any confidential information because typically the expert will prepare a report to be turned over to the developer and/or its counsel anyway. On the other hand, it is important that the confidentiality which rests with the Board of Directors in regard to trial strategy and settlement negotiations, by way of example, are kept confidential so as to not torpedo the ability of the Association, when appropriate, to negotiate an acceptable settlement. Unfortunately, there are several Community Association lawyers in our jurisdiction, who believe that it is reasonable and appropriate to “spill their guts” to the members in order to let them know the so-called strengths and weaknesses of the claim. I find that not only ill-advised, but potentially a basis for a malpractice claim given the fact that the Association would then potentially waive the attorney-client privilege by disclosing sensitive information to the Co-owners (who are not obligated to maintain confidentiality) and which would otherwise inhibit the ability of the Association and/or its legal counsel to negotiate from a position of strength. It is sort of like a poker player showing his cards to the other side even though he is betting more money in an attempt to bluff his opponent. It is inconceivable to me why attorneys would ever consider such a strategy other than to ingratiate themselves to the Co-owners but, at the same time, they are considerably impeding the ability of the Association to negotiate an effective settlement and/or proceed with the trial, if necessary.
The reason that I am writing this article is because this issue has come to play in recent litigation and it is important for Community Association practitioners as well as Boards to recognize that while they would like to pour their heart out, so to speak, to their members about all of the strengths and weaknesses of their case, those issues, questions and discussions must be left entirely within the confines of the Board of Directors, who, as fiduciaries, have a responsibility to maintain confidentiality when the disclosure of any such information could conceivably undermine the ability of the Association to negotiate a settlement. The best everyday example is the everyday collection matter. The Association would not want its attorney disclosing to the membership his or her “authority” for compromising on the amount owed on delinquent accounts. This would completely impair the attorney’s ability to negotiate settlements of those accounts, as the delinquent Co-owners would have advance knowledge of the Association’s “bottom line,” thereby totally undermining the attorney’s ability to minimize the Association’s recovery. Controlling the release of information is basic strategy that was learned in Negotiation 101.