DUE PROCESS IN HOA DISCIPLINARY ACTIONS

Due Process Defined 

"An established course for judicial proceedings or other governmental activities designed to safeguard the legal rights of the individual." (American Heritage Dictionary.) Due process is broadly defined as fairness when it comes to imposing penalties. Associations cannot levy fines and suspend privileges for rules violations (including repeat violations) unless due process has been followed. Some elements of due process can be found in the Davis-Stirling Act and the Corporations Code, while others are found in case law.

Elements of HOA Due Process

"[A] private organization is required to proceed in its decision-making process in a manner that is both substantively rational and procedurally fair." (Kurz v. Federation of Petanque U.S.A.) There are two forms of due process:

Substantive Due Process. This form of due process requires that decisions be reasonable and not arbitrary or capricious. (Ironwood v. Solomon) The criteria for testing the reasonableness of an exercise of power by an association are (1) whether the reason is rationally related to the protection, preservation, or proper operation of the property and the purposes of the Association as outlined in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner. (Laguna Royale v. Darger)

Procedural Due Process. This form of due process requires that procedures used for determining violations and imposing penalties be fair. Elements of procedural due process include (1) giving the accused notice of the alleged violation, (2) providing a reasonable opportunity for them to defend themselves, and (3) allowing the accused to examine the evidence. (Civ. Code § 5855; Civ. Code § 4935(b).)

A.  Pre-Hearing Issues

Before hearings can occur, the Davis-Stirling Act imposes various requirements. In addition, questions regarding tenants and discovery often arise.

Notice of Rules. The association must first adopt and publish rules & regulations and its fine policy. In addition, a statement describing the association’s discipline policy, if any, including any schedule of penalties for violations of the governing documents, must be sent annually to all members. (Civ. Code § 5310(a)(8).)

Anonymous Complaints. Sometimes, a complaining witness wants to be anonymous to avoid a confrontation with the person who violated the rules. Holding a disciplinary hearing to discipline an owner based on anonymous testimony would violate the accused owner's due process rights. Without any evidence of a violation, disciplinary hearings cannot be held. Witnesses may remain anonymous, and hearings still be held if the association can independently verify the violation, i.e., through a security camera recording, an employee's first-hand report, a board member verifying the violation, etc. If an association can develop sufficient evidence on its own, then the neighbor's identity is no longer needed for the hearing and does not need to be revealed to the accused. If an employee, security officer, or managing agent is the "witness" to the violation, they need to be at the hearing to provide testimony of the violation.

Notice of Hearing. Boards must give notice of a disciplinary hearing and the alleged violation. The notice must be in writing and delivered in person or by individual delivery per Section 4040 at least 10 days before the meeting. (Civ. Code § 5855.) If the notice is by mail or overnight delivery, it must be addressed to the member at the address shown on the association books. (Civ. Code § 4040(a)(1).) The hearing should be held in executive session and must be noted on the posted agenda for the board meeting (Civ. Code § 4920(d).) (Civ. Code § 5855.) The notice must contain the following:

• The date, time, and place of the hearing,
• The nature of the alleged violation for which a member may be disciplined and
• A statement that the member has a right to attend the hearing and present evidence in his/her defense. (Civ. Code § 5855(b).)

Rules enforcement letters the association sends to an owner accusing the owner of rules violations are not grounds for a defamation action against an association. In Ruiz v. Harbor View Community Association, the association's attorney sent letters to an owner accusing the homeowner of stalking and harassing board members. The letters were not published to the membership; they went only to the owner. The owner sued, claiming defamation—the association defended by filing an anti-SLAPP motion. The court ruled that the letters were protected speech and not defamatory.

Request to Reschedule. Owners should request to reschedule their disciplinary hearing in writing. Boards should routinely honor the first rescheduling request. Thereafter, the request should have good cause; otherwise, the owner may try to delay the hearing indefinitely.

Tenants. There is no requirement that the association give notice to a tenant of a violation hearing. If the owner wants to notify the tenant, that is at the owner's discretion.

Pre-Hearing Discovery. There is no right to pre-hearing discovery, document production, interrogatories, requests for admissions, depositions, or the like. However, boards can adopt a "discovery" policy that discloses facts and documents relevant to the hearing so the accused can prepare a defense.

• Limited Pre-Hearing Discovery. Boards can allow relevant materials to be sent to the accused at least 24 hours before the hearing. Sometimes, the accused (or his/her lawyer) will demand the files of all other owners with similar violations. The board can decline such requests out of privacy considerations for other owners. At issue is whether the accused violated a rule, not whether others also violated the rule. This is no different than the practice followed by criminal courts--an accused does not have the right to demand the prosecution records of every other similar case in the state or county.
• Exchange Evidence at the Hearing. Boards can use the small claims procedure of exchanging evidence at the hearing a few minutes before the start of the hearing. The accused should bring two copies of any documents and pictures he/she intends to use at the hearing so that one set can be given to the board.

B.  Disciplinary Hearings

Disciplinary hearings are sometimes called "Show Cause" hearings. Disciplinary hearings do not have to be run like a court trial to satisfy due process considerations. As with small claims court hearings, the hearing and disposition of disciplinary actions should be informal, the object being to address rule violations promptly, fairly, and inexpensively. (See similar language for small claims actions at Code Civ. Proc. § 116.510.)

Executive Session. Hearings should always be held in executive session. Associations can hold disciplinary hearings in an open session meeting unless the disciplined member wants it held in executive session. (Civ. Code § 5855(b).) Allowing a member to choose and executive session meeting does not preclude the board from choosing it as well. So as to minimize potential claims for defamation, intentional infliction of emotional distress, negligent infliction of emotional distress, etc., most associations hold their hearings in executive session. If a member demands the hearing be held in an open meeting, the board can politely refuse. Members do not have a right to record disciplinary hearings. Boards have an obligation to keep disciplinary matters confidential, but disciplined members do not. A member can waive their right to confidentiality if they so choose and publicly disclose the outcome of their hearing.

Appearance at Hearing. 

• Appearance by a Friend. Sometimes the person will ask that a friend or relative appear in their place. The person may be sick or infirm or out of town and want someone to attend the hearing. Boards should be flexible on this issue and allow a stand-in when appropriate. The person could present evidence as to why the owner should not be disciplined. The representative should not be a lawyer. The person cannot disrupt the hearing or attack the board any more than he/she could disrupt proceedings or attack the judge in small claims court. If the person does, the board can end the hearing and dismiss the person from the room. The board can then make its decision based on the evidence presented.
• Appearance by Letter. Members may be unable or unwilling to attend a hearing. Whatever the reason might be, members should have the right to submit their defense in writing rather than appearing personally. "A procedure is fair and reasonable when it provides an opportunity for the member to be heard, orally or in writing . . ." (Corp. Code § 7341(c)(3).)
• Failure to Appear. Once proper hearing notice was given, a violation hearing may proceed against a member even if the member fails or refuses to attend the hearing. The board cannot levy penalties against the person simply because they failed to appear. The board must hold the hearing in the person's absence and review the evidence related to the violation. If the board finds that there is sufficient evidence that the member violated the rules, the board may, based on the evidence, levy appropriate penalties. The board must then give notice of its decision to the member.

Recording the Hearing. Members do not have a right to record the proceedings by bringing a stenographer, digital recorder, or video recorder to the hearing. See recording meetings for more information.

Evidence. As in small claims court hearings, the person subject to discipline has the opportunity to examine and refute evidence produced at the hearing. 

Witnesses. Witnesses can appear at the hearing, but this is not always necessary. 

• Swearing In Witnesses. There is no requirement that boards "swear in" witnesses at disciplinary hearings.
• No Cross-Examination. Rules violation hearings in an association are an administrative process, not a judicial one. As such, there is no right of cross-examination. (Doe v University of So. California (2016) 246 CA4th 221, 245.) Even though boards may allow cross-examination of witnesses, the process can be very intimidating and can turn the hearing into a shouting match. Instead, boards should adopt an alternative model, such as the one used by small claims courts, where each side directs their questions and comments to the judge. Accordingly, the parties attending a rules hearing should direct their questions and comments to the board, not to each other. The board can then, if the questions are appropriate, seek a response from the other side. This provides an orderly process without bickering and intimidation.
• Hearsay Evidence. There is no requirement that boards follow the "Rules of Evidence" used by California's court system. As a result, boards may receive hearsay evidence and make their own determination as to the weight to give such evidence.
• Quizzing the Board. At disciplinary hearings, parties and lawyers (if lawyers are allowed to attend) do not have the right to quiz the board and demand that the board answer their questions about other owners, other violations, etc. In a court hearing (whether superior or small claims), no one in the hearing (plaintiffs, defendants, witnesses or lawyers) have the right to quiz the judge and demand answers. Instead, each side presents their evidence. Once the evidence has been presented at a disciplinary hearing, the board deliberates and makes a decision about whether a violation occurred and what penalties to impose, if any.

Director Recusal. The accused should have the right to challenge any board member for cause, i.e., anyone who cannot be fair and impartial in the hearing. The challenged director may voluntarily recuse him/herself if he/she agrees there is a conflict. If the director does not believe there is a conflict, the other directors may vote on excluding the director from the hearing. In the event the excluded director is also a witness, he/she may testify on the matter but cannot join the other directors in their deliberations and vote.

Lawyers. Members do not have a right to bring a lawyer to the hearing or send one in their place. Boards can set their own policy about allowing or disallowing lawyers at disciplinary hearings. Boards can adopt one of the following models when it comes to hearings:

• Superior Court Model. Some associations adopt the superior court model and allow owners to have representation. The benefit is that owners feel their rights have been protected. The downside is that lawyers intimidate boards and drive up legal fees. Generally, boards want the HOA legal counsel to be present if the owner's lawyer is attending. Under this model, if an owner unexpectedly brings a lawyer, the board may continue the hearing to a later date so the association's lawyer can attend.
• Small Claims Model. In the alternative, associations can adopt the small claims model of prohibiting lawyers. This minimizes intimidation and reduces legal fees.

C.  Post-Hearing Requirements

The board's decision must be fair and reasonable, not arbitrary. The hearing and the board's decision should be geared toward modifying a person's behavior and not to punish.

Deliberation. Boards should not render their decisions on the spot. They should excuse the parties from the room and then discuss the matter, including the evidence presented by both sides and what penalties, if any, to impose. 

Minutes. The board must record its decision in the minutes of the meeting. Minutes are accepted by the courts as prima facie evidence of the matter (evidence that would, if uncontested, establish a fact, i.e., the board's decision regarding the violation). The board should make "findings" to support the board's decision regarding the alleged violation. (Ironwood v. Solomon.) The findings should show substantive due process by the association, i.e., the fine is reasonable and rationally related to the operations of the association. For example, the board records in its executive session minutes that: "Although Mr. Smith denied the allegation, based on the testimony of security guard Alex Mann and the picture he took of the violation, the board finds that Mr. Smith's car was parked next to a fire hydrant in violation of Rule 4(b) of the Association's Rules & Regulations. Because this is a safety violation and it is also the second violation by Mr. Smith (with no extenuating circumstances offered by Mr. Smith for his violation), the Board voted to impose a fine of $500 against Mr. Smith."

Notice of Decision. If the board imposes discipline on a member, notice of the disciplinary action must be given by personal delivery or first-class mail within 15 days following the action (unless the governing documents require a shorter notice). (Civ. Code § 5855(c); Corp. Code § 7341(c)(2).) The letter of decision should include the board's findings. (Ironwood v. Solomon) The letter should contain the following information:

• the date of the hearing;
• the specific provisions of the CC&Rs or Rules the owner violated;
• whether or not the owner was present at the hearing (or sent a representative);
• a summary of the events leading to the hearing;
• the evidence that the owner was in violation and the evidence, if any, presented by the owner in defense;
• the findings by the board (e.g., the owner's dog created a nuisance with its incessant barking; the owner modified his/her unit without architectural approval; the owner's tenant was speeding on the association's private streets, etc.)
• the discipline imposed by the board (a warning, a fine, suspension of privileges, etc.)

Homeowner Appeals and IDR

Depending on how the hearing was conducted, members may have a right of appeal. 

Committee Hearings. If the original hearing for a rules violation was before a rules committee (as often occurs in large associations), the committee's decision may be appealed to the board of directors. The board should establish an appeals policy that limits the manner and time period in which an appeal may be made, i.e., in writing within 15 days of the notice of the committee's decision. The member's request for appeal should state why he/she believes the rules committee made a wrong decision. The committee can then submit a letter to the board responding to the owner's claims. The board can either review the matter and make its decision on the disputed issue (similar to the Court of Appeal) or hear the matter de novo (the procedure followed by small claims appeals). If the board adopts the small claims model, the entire case is put on again before the board as if it were never heard by the rules committee.

Board Hearings. If the original hearing was by the board instead of a rules committee, there would be no appeal. However, the board should reconsider its decision if the member presents new or different facts not presented in the original hearing.

IDR Demand. If the owner makes a demand for internal dispute resolution, the board must designate a director to meet with the member. At that meeting the parties explain their positions in an effort to resolve the dispute. Any resolution must be in writing and signed by the parties. (See Internal Dispute Resolution.)

Architectural Issues. If an owner submits architectural plans that are disapproved, associations are required to establish a mechanism for reconsideration.

Board's Duty to Follow Procedures

An association must show that it followed its own standards and procedures prior to pursuing remedies, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious. (Ironwood v. Solomon.)

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