Sunday, September 22, 2013

Condominium Association Could Pay Price for Failing to Comply with Division's Discovery Demands

The Division of Florida Condominiums, Timeshares and Mobile Homes began investigating the Heritage Circle Condominium Association, Inc. as a result of the association's failure to prepare annual financial statements and its failure to fund reserves. Unfortunately, the association continually failed to produce all of the documents requested by the Division throughout the course of its investigation which resulted in the Division filing a petition to compel compliance. 

The Division later amended its initial complaint to seek statutory penalties from the association. The Division's discovery requests were never fully met and finally, the trial court entered a default judgment, without a hearing, against the association. The Division requested and received liquidated damages in the amount of $25,000 and attorney's fees of $4,647.89.

The condominium association appealed and the Fourth District Court of Appeals reversed and remanded the case on September 18, 2013.  Whether or not the sanctions will stand remains to be seen. Still, this case clearly demonstrates how frustrated the trial court must have been with the condominium association as the striking of pleadings is a severe penalty which is used only in extreme circumstances. It is not an unfair question to ask why this association felt that failing to cooperate with the Division's discovery requests was the best strategic move. 

Sometimes the old advice to "stand up and face the music" are the words a wayward association needs to hear before making its errors even more complicated and more costly. There is simply no reason to believe that a regulatory agency is not serious about enforcing its requests and if a fellow board member, manager or lawyer tells you otherwise, get a second opinion!

1 comment:

  1. The only reason the 4th DCA reversed is because a default order as a discovery sanction must articulate certain findings that are "prong" of a test. As Donna suggested, such a default is an extraordinary measure. I obtained one, and it was an extraordinary measure, and the trial judge did include the specific required findings in her order.

    Even if the discovery sanction of default does not stand (although it may still), the association is still in deep trouble. Why on earth would an association refuse to comply not just with the Division's inquiry but also the Rules of Civil Procedures? One can only wonder.

    I cannot think of one good reason to stonewall in these circumstances. Unfortunately, this association would not be the first and likely will not be the last.

    This kind of conduct will only harm the association in the end. Every homeowner will end up paying for this attorney and/or board's flaunting of the law. It is disgraceful.