Circle C Neighbors

Election Lawsuit! Part 2

Mar 31, 2003

There are two other candidates for the position:?  Jeff Niemeyer and Carl Kernodle.?  Both are members of the CCHOA and residents in Circle C Ranch subdivision.?  Mr. Niemeyer is listed on the official ballot of the CCHOA.?  Mr. Kernodle is not.?  Mr. Kernodle has actively campaigned by making numerous public appearances and by publishing and disseminating campaign literature setting forth his views.?  Dozens of member-residents have actively assisted him in his campaign.?  He has collected hundreds of proxies from members who support him.? ?  He has been openly criticized by the Board for his efforts.
? ? ? ? ?  7.? ? ? ? ?  CONDUCT OF UPCOMING ELECTION FOR BOARD OF DIRECTORS ?–
? ? ? ? ? ? ? ? ? ?  a.?  ? ? ? ? ? ? ? ? ? ? ?  Plaintiff says that the Board has engaged in numerous illegal activities designed to influence the outcome of the election and ensure that Bartlett maintains his position on the Board.?  It has failed and refused to follow the dictates of the Governing Documents and to obey Texas law.?  The actions of the CCHOA and Board are in violation of, inter alia, Tex. Rev. Civ. Stat. Art. 13.96-2.11B.?  Despite numerous requests by Plaintiff and other CCHOA members to view a list of the voting members and the number of votes each member is entitled to cast at the meeting, those requests have been denied.?  In fact, Rigsbee and O?’Reilly openly stated to a group of CCHOA homeowner members on March 22, 2003 that no such list has been prepared and that when it is prepared it will not be made available for inspection at the CCHOA principal office despite the demands from Plaintiff and others that such refusal violates the Texas NonprofitCorporation Act.?  See the affidavit attached hereto as Exhibit 4.?  On March 25, 2003, the Board sent out a message by e-mail (attached to Exhibit 4) to some of the members that a voting list was available.?  That list does not comply with the law.
b.? ? ? ? ?  Plaintiff says that the Board has failed and refused to follow Declaration Article II, Section 2, which states that ?“members shall be entitled to one vote for each one hundred dollars ($100.00) or fraction thereof of value of that portion of The Properties owned by each such member as assessed by the Travis County Appraisal District for ad valorem tax purposes for the preceding year.?”?  The Board, however, has stated on at least one occasion that each member will get one vote (see attached exhibit 5, a letter from the Board sent by e-mail in response to Plaintiff?’s inquiry), and now, by letter of March 21, 2003 and by e-mail on March 23, that ?“each member who is paying the full assessment is entitled to 1,740 votes, and all other members with less property value will be allotted one vote per $100.00 valuation of property.?”? ?  See Exhibit 6 attached hereto.?  Also, Article V, Section 2 of the By-Laws states, ?“the members or their proxies may cast, in respect to each vacancy, as many votes as they are entitled to exercise under the provisions of the Declaration.?”?  Plaintiff says that the Board does not have the authority to alter the voting rights of its members as it is attempting to do.

c.? ? ? ? ?  ? Plaintiff says that the Board has acted in bad faith and without authority in failing and refusing to recognize a qualified member as a nominee for election to the Board and place his name on the official ballot.?  Article V, Section 1 of the By-Laws states that ?“Nomination for election to the Board of Directors shall be made by a Nominating Committee.?”?  The nominating committee for CCHOA consists of one Board member and two other members of the association.?  As such, pursuant to Tex. Rev. Civ. Stat. Art. 13.96-2.18, the nominating committee cannot exercise the full authority of the board of directors. Further, pursuant to Tex. Rev. Civ. Stat. Art. 13.96-9.10, any action taken by the committee without a meeting can only legally occur if a ?“consent in writing setting forth the action to be taken by the committee?” is signed by all the members of the committee.?  No such consent appears among the books and records of CCHOA, which books and records are required to be kept pursuant to Tex. Rev. Civ. Stat. Art. 13.96-2.23.?  Plaintiff says that February 10, 2003 was allegedly selected by the nominating committee as the cutoff date for nominations to be received by the committee.?  Notice of this date was not sent by mail to the members, but was admittedly sent by e-mail to only a portion of the total membership (approximately 1300 of over 2700 homeowners).?  There is no record of any meeting of the nominating committee prior to February 10, 2003, nor is there any record among the minutes of the meetings of the Board of Directors (which are kept on display at the Information Center) that the Board adopted this date, therefore the date cannot operate as a cutoff date for receipt of the nominations by the committee.?  Any insistence that Carl Kernodle be excluded from the ballot as a result of the application of this date is in bad faith.?  Plaintiff says that the nominating committee has admitted that Carl Kernodle?’s name was submitted to them for nomination to the Board in conformity with the By-Laws. The Board has refused to place his name on the ballot although such failure is in violation of the By-Laws and Texas law.

d.? ? ? ? ?  Plaintiff says that the Board is misusing the resources of the CCHOA in order to exercise unfair advantage against Carl Kernodle who has mounted a campaign for election to the Board despite the unlawful and unauthorized actions of the CCHOA Board members Rigsbee and O?’Reilly who have actively and openly campaigned for Bartlett.?  Not only are Rigsbee and O?’Reilly listed as the first two supporters of Bartlett on his campaign literature (see attached exhibit 7), but they have used CCHOA funds to distribute campaign literature and libelous attacks on Mr. Kernodle and his supporters and asking homeowners to vote for either Bartlett or Jeff Neimeyer, a new CCHOA member who was allegedly nominated by the committee.? ?  See attached exhibit 8.?  The Board has further used the e-mail list of the CCHOA to disseminate the same political message while claiming that the list is only to be used for ?“official purposes.?”?  See attached exhibit 9.?  Plaintiff says that the Board?’s actions in so using the resources of the CCHOA are illegal and unauthorized by the Association or Texas law.
e.? ? ? ? ?  CCHOA and the Board have contended that any proxy other than the one that was sent out to some of the members is invalid and will not be honored.?  Plaintiff says that such claims are without basis in law and without support in the by-laws, articles of incorporation or Declaration, and that a valid proxy need not be on any particular form.

8.?  ?  FAILURE TO MAINTAIN ADEQUATE BOOKS AND RECORDS OF THE CORPORATION AND TO ALLOW INSPECTION THEREOF -
a.? ? ? ? ? ?  Plaintiff says that the CCHOA and the Board have failed and refused to maintain such records as are required by the Texas Non-Profit Corporation Act and to allow inspection and copying of those records as required by that Act and by the By-Laws of CCHOA.?  Pursuant to Tex. Rev. Civ. Stat. Art. 13.96-2.11B and 2.23, the CCHOA ?“shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its members, board of directors, and committees having any authority of the board of directors and shall keep at its registered office or principal office in this State a record of the names and addresses of its members entitled to vote.?  A member of a corporation, on written demand stating the purpose of the demand, has the right to examine and copy, in person or by agent, accountant, or attorney, at any reasonable time, for any proper purpose, the books and records of the corporation relevant to that purpose, at the expense of the member.?”?  Further, pursuant to Article X of the CCHOA By-Laws, ?“The books, records and papers of the Association shall at all times, during reasonable business hours, be subject to inspection by any member.?”?  Plaintiff says that although he and other members have made numerous attempts to view and copy the books, records and papers of the CCHOA, such attempts have been routinely thwarted by the Board or the CCHOA.?  See attached Exhibit 10.? 

b.? ? ? ? ?  Plaintiff says that he has been refused permission to copy even those records which the Board has belatedly placed at the Circle C Ranch Information Center, a location owned and operated by a third party.?  When he attempted to copy the records by making a videotape of them he was ordered to turn off the camera and to leave the premises.?  Plaintiff says that copying the records by means of videotape is his preferred method of doing so and that he is legally entitled to make copies by way of such method.

c.? ? ? ? ? ?  Plaintiff says that the Board does not have the authority to deny him the right to copy any of the books, records and papers of the Association, including the CCHOA e-mail list, the log of homeowner communications, and all documents between the CCHOA the Board and any attorney employed by the CCHOA or Board.?  Plaintiff has made numerous demands for access to the e-mail list as well as access to the books and records kept in electronic format to make copies thereof.?  All such requests have been denied.? 

d.? ? ? ? ?  Plaintiff says that he was specifically asked by Rigsbee and O?’Reilly during a specially called Board meeting to serve as Chairman of an Ad Hoc Internal Operation Audit Committee composed of CCHOA members to review all operations and financials of the CCHOA with the objective of finding ways to reduce cost and to reduce any exposure to losses, waste, or abuse.?  Plaintiff says that his efforts are being thwarted by the very Board that sought his assistance.

e.? ? ? ? ? ?  Plaintiff says that the CCHOA and Board are willfully interfering with his rights to inspect and copy the CCHOA books and records.?  He says that this interference also takes the form not only of refusal to allow him to copy the materials himself and insisting that copying be done by the CCHOA or its employees or agents, but also of imposing upon him unreasonable charges and unreasonable processing time for such copying in violation of Tex. Rev. Civ. Stat. Art. 1396-2.23A.?  See attached Exhibit 11.

8.? ? ? ? ? ? ? ? ? ? ?  CALCULATION OF HOMEOWNER FEES AND ASSESSMENTS

a.? ? ? ? ? ?  Plaintiff says that CCHOA is making unauthorized and illegal assessments against the property of some of the members and is illegally placing liens upon the property of, and refusing access to common areas by, homeowners who refuse to pay the amounts in excess of the amount authorized pursuant to the Declaration.?  Article III, Section 3 of the Declaration states:?  ?“Each owner of any part of The Properties shall pay to the Association an annual assessment of $0.25 for each one hundred dollars ($100.00), or fraction thereof, of value of that portion of The Properties so owned, as assessed by the Travis County Appraisal District for ad valorem tax purposes for the preceding year.?”?  Plaintiff says that the CCHOA is using the market value of the Properties to determine the amount of the assessments instead of the value assessed by Travis County for tax purposes.?  This results in significant overcharges to those property owners whose property is less than the $174,000 cap imposed on values by the Board.

b.? ? ? ? ?  Plaintiff says that the Board has levied unauthorized special assessments upon the members in violation of Article III, Section 5 of the Declaration.?  Special assessments which have been levied by the board (see the letter from CCHOA attorney, Patrice Arnold, attached as Exhibit 12) without receiving the required two-thirds of the eligible votes of each class of membership voting in a meeting duly called for such purpose as required by the Declaration are unauthorized actions.?  Plaintiff says that any such special assessments are illegal and unenforceable and that no such future special assessments can be levied without the required voting.

9.? ? ? ? ? ? ? ? ? ? ?  BREACH OF THE DUTY OF GOOD FAITH

Plaintiff says that the Board has a duty to act in good faith when conducting the affairs of the CCHOA and to act in the best interest of the CCHOA and its members.?  Pursuant to Tex. Rev. Civ. Stat. Art. 13.96-2.28(C), ?“A director is not relying in good faith, within the meaning of this article, if the director has knowledge concerning a matter in question that makes reliance otherwise permitted by this article unwarranted.?” ? As pointed out above, the Board has actual knowledge of their requirements to maintain complete sets of books and records and to permit inspection of them.?  Plaintiff has informed the Board of the specific Texas statute that requires that voting lists be maintained, but the Board has nonetheless failed and refused to do so.?  No voting list, to the knowledge of Plaintiff, has ever been compiled by the CCHOA which complies with Texas law, which failure constitutes a crime (Class B Misdemeanor).?  Further, the Board has intentionally failed to disclose to the members information of which it was aware that directly impacts members?’ health, safety and welfare.?  See attached Exhibit 13. Plaintiff says that the Board has a duty to disclose all information to the members that affects them and that knowing failure to do so is a breach of their duty to the members.

10.? ? ? ? ? ? ? ? ? ? ?  PLAINTIFF?’S RIGHT TO ENFORCE THE DECLARATION COVENANTS

? ? ? ? ? ? ? ? ? ? ?  Pursuant to Article VIII, Section 3, of the Declaration, ?“Any Owner shall have the right to enforce ?… any of the covenants and restrictions set out in this Declaration.?  Enforcement of the covenants and restrictions shall be by any proceeding at law or in equity against any person or persons violating or attempting to violate any covenant or restriction, either to restrain violation or to recover damages ?…?”?  Plaintiff says that he is an Owner, as that term is defined under Article I, Section 1 (g) of the Declaration and therefore has standing to bring this action.?  As such, he seeks the following relief:

A.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A temporary restraining order enjoining Defendant CCHOA from conducting the CCHOA election currently scheduled for 6:00 p.m., March 26, 2003 to elect a member of the Board of Directors or to conduct any CCHOA business which involves voting by the members;

B.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A temporary restraining order enjoining Defendant CCHOA from interfering with the efforts of Plaintiff to view, inspect and copy the books, records and papers of the Circle C Homeowners Association, Inc. by any non-destructive means he chooses to do so, including inspection and copying of such documents as are kept in electronic form in computers, on computer disks or any other storage media.? 

C.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the proposed voting scheme as disseminated by the Board is not authorized by the Declaration, Articles or By-Laws and is therefore illegal and that the method of calculating the votes set forth in the Declaration is the correct and legally binding method;

D.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the Board is obligated to prepare and maintain such books and records as are required by the Texas Non-Profit Corporation Act, including complete voter lists and to make them available as required by the Act;

E.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that Carl Kernodle is a duly qualified and eligible nominee to run for a seat on the Board of Directors of the CCHOA and that failure to include him on the ballot is illegal;

F.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that a proxy need not be on any form promulgated by the CCHOA in order to be valid;

G.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the Board has misused its power, position and authority in sending out political messages, the obvious purposes of which are to isolate and ostracize dissenting CCHOA members and to influence the membership to vote in a specific manner through the use of CCHOA funds;

H.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that all members are entitled to view and copy all the books, records and papers of the CCHOA and may use whatever method of copying that they choose, including, without limitation, photographing, scanning, copying via copy machine, videotaping or any other method of non-destructive copying they choose;

I.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the CCHOA is not entitled to insist that only it or its agents or employees copy such records as CCHOA members or members of the public seek to have copied, and further that such charges currently posted by the CCHOA for copying records are unreasonable and unauthorized in any amount in excess of $0.10/page;

J.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that Plaintiff?’s rights to copy documents and all other members?’ rights include also their entitlement to view, inspect and copy the CCHOA e-mail list, the log of homeowner communications, and all documents between the CCHOA the Board and any attorney employed by the CCHOA or Board;

K.? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the homeowner fees and assessments as currently calculated are incorrectly based upon the market value of the Properties against which such assessments are made and that the proper, and only method of calculation of the assessments is by using the Travis County ad valorem tax values;

L.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the special assessments which have been levied by the CCHOA in the past without documentation of the required two-thirds vote of the members, as established by the published voting lists, are unauthorized and illegal and that all special assessments can only be levied in accordance with the Declaration;

M.? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the failure of the CCHOA and its Board to maintain the books and records required under the Texas Non-Profit Corporation Act constitutes a crime, to wit, a Class B Misdemeanor against each of the board members who have failed to record their dissenting votes against such failure in the minutes of the meetings of the CCHOA;

N.? ? ? ? ? ? ? ? ? ? ? ? ? ? ?  A declaration that the failure to disclose information to the members of the CCHOA which is known to, or reasonably may, affect either the health, safety and/or welfare of any member or is counter to the purposes set forth by the CCHOA articles of incorporation, by-laws and Declaration is not an action in good faith and therefore full disclosure is required.

WHEREFORE, PREMISES CONSIDERED, Plaintiff asks that Defendants be cited to appear and answer herein and that the Court:
1.? ? ? ? ? ? ? ?  Issue and immediate temporary restraining order issue enjoining Defendant from:
a.? ? ? ? ? ?  conducting the CCHOA election currently scheduled for 6:00 p.m., March 26, 2003 to elect a member of the Board of Directors or to conduct any CCHOA business which involves voting by the members, and;
b.? ? ? ? ?  interfering with the efforts of Plaintiff to view, inspect and copy the books, records and papers of the Circle C Homeowners Association, Inc. by any non-destructive means he chooses to do so, including inspection and copying of such documents as are kept in electronic form in computers, on computer disks or any other storage media pending resolution of Plaintiff?’s motion for a temporary injunction.? 

2.? ? ? ? ? ? ? ?  Set a hearing on his Motion for a Temporary Injunction within two weeks of this date, and that upon that hearing issue a Temporary Injunction to remain in place until final judgment is entered in this case or until otherwise ordered by the Court, enjoining Defendant CCHOA from:

a.? ? ? ? ? ?  conducting an election to elect a member of the Board of Directors or to conduct any CCHOA business which involves voting by the members until such time as application has been made to the Court which is either agreed to by the parties to this litigation or, failing agreement, after notice and a hearing on such application and a ruling from the Court that the election may proceed under such conditions as the Court may determine, and;

b.? ? ? ? ?  interfering with the efforts of Plaintiff to view, inspect and copy the books, records and papers of the Circle C Homeowners Association, Inc. by any non-destructive means he chooses to do so, including inspection and copying of such documents as are kept in electronic form in computers, on computer disks or any other storage media.

3.? ? ? ? ? ? ? ?  Plaintiff further requests that upon final hearing he have judgment against Defendants and that the court grant the following relief:

a.? ? ? ? ? ?  A declaration that the proposed voting scheme as disseminated by the Board is not authorized by the Declaration, Articles or By-Laws and is therefore illegal and that the method of calculating the votes set forth in the Declaration is the correct and legally binding method;

b.? ? ? ? ?  A declaration that the Board is obligated to prepare and maintain such books and records as are required by the Texas Non-Profit Corporation Act, including complete voter lists and to make them available as required by the Act;

c.? ? ? ? ? ?  A declaration that Carl Kernodle is a duly qualified and eligible nominee to run for a seat on the Board of Directors of the CCHOA and that failure to include him on the ballot is illegal;

d.? ? ? ? ?  A declaration that a proxy need not be on any form promulgated by the CCHOA in order to be valid;

e.? ? ? ? ? ?  A declaration that the Board has misused its power, position and authority in sending out political messages, the obvious purposes of which are to isolate and ostracize dissenting CCHOA members and to influence the membership to vote in a specific manner through the use of CCHOA funds;

f.? ? ? ? ? ? ?  A declaration that all members are entitled to view and copy all the books, records and papers of the CCHOA and may use whatever method of copying that they choose, including, without limitation, photographing, scanning, copying via copy machine, videotaping or any other method of non-destructive copying they choose;

g.? ? ? ? ? ?  A declaration that the CCHOA is not entitled to insist that only it or its agents or employees copy such records as CCHOA members or members of the public seek to have copied, and further that such charges currently posted by the CCHOA for copying records are unreasonable and unauthorized in any amount in excess of $0.10/page;

h.? ? ? ? ? ?  A declaration that Plaintiff?’s rights to copy documents and all other members?’ rights include also their entitlement to view, inspect and copy the CCHOA e-mail list, the log of homeowner communications, and all documents between the CCHOA the Board and any attorney employed by the CCHOA or Board;

i.? ? ? ? ? ? ? ?  A declaration that the homeowner fees and assessments as currently calculated are incorrectly based upon the market value of the Properties against which such assessments are made and that the proper, and only method of calculation of the assessments is by using the Travis County ad valorem tax values;

j.? ? ? ? ? ? ?  A declaration that the special assessments which have been levied by the CCHOA in the past without documentation of the required two-thirds vote of the members, as established by the published voting lists, are unauthorized and illegal and that all special assessments can only be levied in accordance with the Declaration;

k.? ? ? ? ?  A declaration that the failure of the CCHOA and its Board to maintain the books and records required under the Texas Non-Profit Corporation Act constitutes a crime, to wit, a Class B Misdemeanor against each of the board members who have failed to record their dissenting votes against such failure in the minutes of the meetings of the CCHOA;

l.? ? ? ? ? ? ? ?  A declaration that the failure to disclose information to the members of the CCHOA which is known to, or reasonably may, affect either the health, safety and/or welfare of any member or is counter to the purposes set forth by the CCHOA articles of incorporation, by-laws and Declaration is not an action in good faith and therefore full disclosure is required.

Plaintiff also asks to recover his costs of court, and such other and further relief, general and special, legal and equitable, to which Plaintiff may show himself justly entitled by this pleading or any amendment thereto.

Respectfully submitted,? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 
LAW OFFICE OF WILLIAM B. GAMMON
1119 West Ninth Street
Austin, Texas 78703