CA Ct Orders Owners to Pay $1.2M+ for HOA Attorney Fees/Costs in Dispute re Unmeritorious Action

UNPUBLISHED California Appellate Court decision (March 2, 2015).

In this case, three owners of two different properties that were part of a common interest development consisting of over 800 parcels of land brought suit against the homeowners association to challenge various regulations and fees that had been adopted by the association which impacted absentee owners such as the plaintiffs, who rented their homes out for short-term vacation rentals. The association defended the action and also filed a cross-complaint against the plaintiffs for unpaid fees owed to the association and for declaratory relief to compel compliance with the association’s rules and regulations.

The trial court found in favor of the association on both the complaint and the cross-complaint after determining that the association’s rules and regulations were reasonable and complied with both the association’s governing documents and the applicable law. Based on a statute that provides that the prevailing party in an action to enforce the governing documents “shall be awarded reasonable attorney’s fees and costs,” the trial court awarded the homeowners association $1,180,646.50 for defending the plaintiffs’ complaint and an additional $27,730.00 for the cost of pursuing the cross-complaint (the association had requested $250,000.00 in costs for pursing the cross-complaint, but the court found that amount to be excessive).

On appeal, the owners contended that the lower court erred in applying the “judicial deference rule,” which they contended only applied to ordinary maintenance decisions. The owners also contended that the award of attorney fees and costs was excessive. The appellate court affirmed the lower court judgment finding that the judicial deference rule is not limited to maintenance decisions and that the association’s board had the power and authority to adopt the rules that were being challenged. The appellate court also found that the award of attorney fees and costs was proper because the dispute involved the right of the association to enforce the governing documents and the lawsuit was initiated “in order to make a statement and create precedence.” The appellate court further commented that the award of the attorney fees and costs could have been avoided by not bringing the “unmeritorious” action and by paying the association the money it was properly owed.

See case decision: Watts_v._Oak_Shores_Cmty._As