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McNally v. Sun Lakes Homeowners Association #1, Inc.

Court of Appeals of Arizona, First Division

October 13, 2016

COLETTE MCNALLY, an individual, Plaintiff/Appellant,
SUN LAKES HOMEOWNERS ASSOCIATION #1, INC., an Arizona nonprofit corporation, Defendant/Appellee.

         Appeal from the Superior Court in Maricopa County No. CV2014-009496 The Honorable James T. Blomo, Judge

          Cheifetz Iannitelli Marcolini PC, Phoenix By Steven W. Cheifetz and Jacob A. Kubert Counsel for Plaintiff/Appellant

          Grasso Law Firm PC, Chandler By Robert Grasso, Jr. and Stephanie L. Samuelson Counsel for Defendant/Appellee

          Presiding Judge Andrew W. Gould delivered the opinion of the Court, in which Judge Peter B. Swann and Judge Patricia A. Orozco joined.


          GOULD, Judge:

         ¶1 In September 2013, the Board of Directors of Sun Lakes Homeowners Association #1 (the "Association") passed a motion excluding Colette McNally, a duly-elected member of the Board, from attending the Board's executive sessions. McNally filed an application for a preliminary injunction seeking to compel the Board to allow her to attend its executive sessions. The superior court denied McNally's application. We conclude the Board lacked authority to exclude McNally from its executive sessions, and therefore reverse.


         ¶2 The Association is a non-profit corporation that maintains and operates a community restaurant, golf course, and other facilities for the residents of Sun Lakes. The Association is managed by a seven-member Board. Members of the Board are elected by Association homeowners for three-year terms. The Board's meetings are open to residents, with the exception of its executive sessions, which are closed to residents.

         ¶3 In 2011, McNally was elected to a three-year term on the Board. In August 2013, Jeannie Martens, a former Association employee, sent McNally and three non-Board members an e-mail. In her e-mail, Martens accused Association General Manager Clint Warrell and Human Resources Manager Roberta Laird of misconduct. The next day, McNally forwarded Martens' e-mail to Rick Schwartz, Board President. McNally also sent an e-mail to Schwartz alleging additional misconduct by Warrell and Laird; she demanded they resign or be dismissed.

         ¶4 The Board met in two special executive sessions to discuss Martens' email and McNally's allegations. At both sessions, Schwartz advised the Board that he had discussed Martens' e-mail with Charles Maxwell, the Association's attorney. According to Schwartz, Maxwell recommended the Board (1) take no action on Martens' e-mail, and (2) avoid any further publication of the e-mail. As a result, during the September 4, 2013, executive session, the Board adopted a resolution disavowing "any approval of or responsibility for any of [] McNally's emails maligning Clint Warrell, " and stating that if Warrell sued the Board or the Association, "the [Association will make the resolution available to the judicial system to reduce or eliminate liability and place it upon the responsible party."

         ¶5 Following the September 4 executive session, the Board reconvened in open session. During the open session, McNally began reading Martens' e-mail to the Association members in attendance. Schwartz asked McNally to stop reading the e-mail, but when she refused, he abruptly adjourned the meeting.

         ¶6 A week later, the Association's attorney sent McNally a letter stating that her conduct during the September 4 open session violated her duties of confidentiality and loyalty to the Association. The attorney also stated he was recommending the Association exclude McNally from participating in future executive sessions.

         ¶7 On September 20, 2013, the Board approved a motion banning McNally from all executive sessions for the balance of her term. McNally's term ended in February 2014, but she was re-elected to a second term expiring in February 2017. After McNally's re-election, the Board offered to allow McNally to participate in executive sessions if she agreed to keep matters discussed in executive sessions confidential; she refused.[1]

         ¶8 Following her re-election, McNally filed a lawsuit against the Association, asserting claims for declaratory/injunctive relief, breach of contract, defamation, false light, and punitive damages. In her prayer for injunctive relief, McNally sought an order compelling the Association to comply with applicable open meeting laws and allow her to participate in executive sessions. See Ariz. Rev. Stat. ("A.R.S.") section ...

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