Addressing Harassment Issues in Community Associations

Community Association Board of Directors Powers:

As is well understood, Community Association Boards are elected to manage the property, affairs, and business of the Association. The Board has the power to enforce obligations of the unit owners and do what is necessary and proper for the management of the community. This includes enforcing the Association’s Governing Documents. If a violation occurs, the Board generally has the power to assess penalties.

Typical violations concern parking issues, storage of property in common areas, failure to comply with fireplace and dryer vent cleaning requirements, violation of pet restrictions, and similar issues.

However, sometimes unexpected egregious behavior, in the form of harassment, occurs. While unit owners and residents may express their opinions and communicate with Board members and Association representatives about community business, harassment has become a growing problem in community associations, with owners offensively addressing managers, board members, vendors, and other residents and owners. As a result, boards are more frequently establishing policies to address communications that constitute harassment. That policy can require that:

1. Communications are conducted in a manner that does not constitute harassment of the Association’s employees, property managers, vendors, directors, and related individuals.
2. Unit owners and residents do not exhibit conduct against Association representatives that constitute harassment whether at meetings, on site offices, on common property, or otherwise.

Boards should consider adopting or amending a Policy Resolution to address harassment. Such Resolution should address untoward, disruptive, and inappropriate communications between residents, unit owners and board members. Harassment can be defined so as to substantially mirror N.J.S.A. 2C:33-4 as follows:

A person commits a petty disorderly person’s offense if, with the purpose to harass another, he does any of the following:

1. Makes or causes to be made, a communication or communications anonymously or at extremely inconvenient hours, or in offensively course language, or any other manner likely to cause annoyance or alarm. Such communications may be deemed to have been made either at the place where it originated or at the place where it was received.
2. Subjects another to striking, kicking shoving or other offensive touching, or threatens to do so.
3. Engages in any other course of alarming conduct or of repeatedly committed acts with purpose to alarm or seriously annoy such other person.
4. Acts with a purpose to intimidate an individual or group of individuals because of race, color, religion, gender, handicap, sexual orientation or ethnicity.

Additionally, a unit owner or resident commits harassment by failing to come to order when requested at a Board or member meeting.

Certainly, the specifics of any policy, rules or regulations promulgated by an Association must comply with applicable federal, state, and local laws and regulations.

Additionally, procedures should be established to verify the incident and describe the steps to be taken to address alleged violations. The owner must be provided notice of the alleged violation as well as the consequences arising therefrom. Additionally, the alleged violator must be offered the opportunity to participate in the Association’s Alternative Dispute Resolution Procedure.

Lastly, Associations have frequently determined that harassment violations can, and often do, affect the health and safety of the Association as a whole. As such, Boards have been authorized to impose enhanced fines and sanctions, with such fines oftentimes far exceeding the fines levied for more routine violations. Sanctions have included suspension of membership privileges, restricting forms of communications by the resident to the Association, as well as the enhanced monetary sanctions mentioned above.

Of course, Boards should consider seeking legal advice in drafting an effective policy regarding harassment and establishing the procedures and consequences when addressing harassment allegations.

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Recent Lawsuit Shows Importance of Knowing Your Miranda Rights

It is a near certainty that you have heard the Miranda Rights being read before. It’s in almost every crime procedural that fills up primetime TV. It starts with “You have the right to remain silent, anything you say can and will be used against you in a court of law.” It’s part of the basic foundation on which all police interaction is based. Understanding the Miranda Rights is an incredibly important part of protecting yourself and your family. It means choosing what and when you say to help your cause. Often it means not saying anything until you have found legal representation. 

A Retreat From the Third Circuit’s Misguided Class Action Ascertainability Doctrine, and a Wise Concurrence by Judge Fuentes

City Select Auto Sales, Inc. v. BMW Bank of North America Inc., ___ F.3d ___ (3d Cir. 2017).  Judge Scirica, who wrote the Hayes and Carrera opinions that form the backbone of the Third Circuit’s ascertainability doctrine in class action cases, authored this opinion for the Third Circuit.  The case arose under the Telephone Consumer […]

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Municipal Planning and Zoning Boards Lack Power Over State University Development Proposals

Montclair State University v. County of Passaic, ___ N.J. Super. ___ (App. Div. 2017).  The Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., places responsibility for development applications within a particular municipality in the hands of a Planning Board and/or a Zoning Board of Adjustment.  There can also be a role for a County Planning […]

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You Can’t Disregard the Partnership Agreement When Valuing a Business

In 2014, I authored a post on this blog entitled Stern Revisited – Using the Shareholder Agreement to Determine Value.  I noted then that it seemed that after the Appellate Division’s decision in Brown v. Brown  which changed the landscape by doing away with discounts and essentially ushered in more of a value to the holder construct, that the consideration of an agreement was dead.  Rather, a myopic view of methodologies focused on income seemed to be the norm – disregarding all else.

This was the case even though there was New Jersey Supreme Court case law  (Stern v. Stern and Bowen v. Bowen to be precise ) that suggests the use of a “trustworthy” buy-sell agreement to establish value, noting that in some instances it may appropriately establish a presumptive value of a party’s interest.  Often the issue is what is a “trustworthy” buy-sell agreement?  What makes an agreement trustworthy?  It is updated frequently and routinely used when people enter and exit a business.  In my 2014 post, I blogged about the use of the buy-sell agreement in deciding the value of a medical practice where there had been 32 purchases or sales of interests in the practice in the recent past.  In the case cited in that blog, the Appellate Division noted “We find no error in the judge’s considered decision that the practice’s regularly updated corporate agreements were a better measure of value than plaintiff’s expert’s projection of cash flows through 2020, discounted by a rate chosen on the basis of U.S. Treasury bonds, augmented by selected risk premiums and reduced by an assumed long-term growth rate.”  Simply put, what the doctor would have received if he left the practice was used as the value.  Unlike many valuation calculations, there was no subjectivity to that number.  But this case was an unreported decision which means that it wasn’t precedential and there haven’t been many, if any, reported decision on the issue in some time.

That is, until August of 2017 when the Slutsky case was decided.  In that case, the husband was a partner at a major New Jersey law firm.  Though his income was substantial, he was not a rainmaker, and thus, worked on business generated by other attorneys at his firm.  In valuing the husband’s interest in the firm, the big issue was whether there was goodwill to be added to the amount that the husband would have been due under the firm’s partnership agreement.  The wife’s expert added goodwill; the husband’s expert did not.  The trial judge sided with the wife’s expert finding it “”incredible” the firm had no goodwill value. ”  The Appellate Division disagreed and reversed.

The Court noted that:

As Dugan instructs, the start of the examination of goodwill considers whether excess earnings exist. Dugan, supra, 92 N.J. at 439-40. This was a highly contested issue on which the experts used slightly different resources and offered greatly disparate opinions. Factual findings regarding this pivotal question were not provided.

Moreover, the court returned to Stern and the husband’s argument in that case regarding  “the propriety of considering his earning capacity as being a separately identified and distinct item of property” and pointed out the passage in Stern that held as follows:

[A] person’s earning capacity, even where its development has been aided and enhanced by the other spouse, as is here the case, should not be recognized as a separate, particular item of property within the meaning of N.J.S.A. 2A:34-23. Potential earning capacity is doubtless a factor to be considered by a trial judge in determining what distribution will be “equitable” and it is even more obviously relevant upon the issue of alimony. But it should not be deemed property as such within the meaning of the statute.

Of note, in this case the Appellate Division framed the real issue as follows:

Here, a nuanced valuation methodology is required because defendant is an equity partner in a large firm, who generally is not responsible for originations, and who is bound by the firm policies and a shareholder agreement.

In this case, the Appellate Division found that the formula in the firm’s agreement actually captured good will.  In addition, the court noted:

We believe the trial judge misunderstood Hoberman’s conclusion, as suggesting goodwill did not exist for the firm. Actually, Hoberman’s opinion asserted the TCA of each equity partner accounted for any goodwill. Further, plaintiff, who was not an originator but a worker in a highly specialized legal area, was actually paid what a similarly skilled lawyer would be paid. Thus, defendant’s compensation matched his earning capacity, nothing more. This view considered whether defendant’s “future earning capacity has been enhanced because reputation leads to probable future patronage from existing and potential clients” and concluded it did not. Accordingly, there was no additional component of goodwill. Id. at 433.

In this matter, any analysis of goodwill must evaluate the firm’s shareholder’s agreement to determine whether it is an appropriate measure of the total firm value, including goodwill. That formula computes an exiting partner’s interest, calculated as a portion of the firm’s excess earnings. See Levy, supra, 164 N.J. Super. at 534. The Court must discern the objectiveness and accuracy of the formula and calculations. When “it is established that the books of the firm are well kept and that the value of partners’ interests are in fact periodically and carefully reviewed, then the presumption to which we have referred should be subject to effective attack only upon the submission of clear and convincing proofs.” Stern, supra, 66 N.J. at 347.

The take away here is that Stern lives now for the same reasons that that it was originally decided.  If a regularly updated and followed agreement was disregarded, the titled spouse would be stuck getting only what the agreement allows, which the other spouse could wind up with a lot more, or less, if valuation methodologies with subjective components are used.  On the other hand, say that there are two similarly situated law firm partners with a similar book of business and making similar money, but one worked at a large firm with a regularly updated and followed shareholders agreement and the other at a smaller firm without a formal agreement, it seems like a safe bet that the values of their practices would be extremely different.  One other question to ponder.  Would the result have been different if the husband here was a major rainmaker?  Perhaps that will be addressed in a future case.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.

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Pharmaceutical Patent Antitrust Class Action Complaints Stated Plausible Claims for Relief, so the Third Circuit Reverses the Dismissal of Those Cases

In re Lipitor Antitrust Litig., ___ F.3d ___ (3d Cir. 2017).  It is evident that an appeal is a big one when, as here, the caption and counsel list consume the first seventeen pages of the Third Circuit’s opinion.  In this case, Chief Judge Smith wrote a 106-page opinion (including the caption and counsel list) […]

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When Are Federal and State Court Cases “Parallel Proceedings” for Declaratory Judgment Act Purposes?

Kelly v. Maxum Specialty Ins. Group, ___ F.3d ___ (3d Cir. 2017).  Judge Chagares began one of the early paragraphs of today’s opinion for the Third Circuit in this Declaratory Judgment Act, 28 U.S.C. §2201-2202 (“DJA”), case this way: “Whether a state action parallels a federal action– in which case a district court has significant […]

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