by Charles A. Rausch. Esquire
What can you do if you have an obnoxious, insulting and boorish individual on your Homeowners’ Association board? Not get the person removed by a judge under the Nonprofit Corporation Law [“NCL”] according to the Commonwealth Court. In A Pocono Country Place Property Owners Association, Inc. et al. v. Kowalski, 904 C.D. 2017 (Commonwealth Court, filed May 7, 2018), Kowalski was elected to the Board, and directed multiple insulting remarks at the female board members. The Board censured Kowalski and required him to attend a sensitivity training program, which Kowalski did. After the training, Kowalski continued to send insulting emails to the other directors, both male and female. Fed up, the other directors suspended Kowawlski and filed a petition to remove him and bar him from serving as a director under the NCL. At the hearing before the trial court, no claim was made that Kowalski committed any physical assault, violent conduct, illegal or dishonest acts, or financial misconduct. The trial court dismissed the petition because although Kowalski’s behavior was “boorish” and not in keeping with the Board’s Code of Conduct, his behavior did not create a hostile work environment that constituted gender discrimination. Under the NCL, a court can only remove a director for fraud, dishonesty, other financial misconduct or gross abuse of authority. Removing a director for incivility would penalize expression of opinion and interfere with the rights of the Association’s members to elect directors.
The Commonwealth Court agreed with the trial court. Under the NCL, a director can be removed in one of three ways: (1) by a vote of the members; (2) by the board of directors upon a judicial declaration of mental incompetence or a criminal conviction punishable by imprisonment for more than one year, or “for any other proper cause which the bylaws may specify”; and, (3) by a court for fraudulent or dishonest acts, or gross abuse of authority or discretion with reference to the corporation, or for any other proper cause, The Commonwealth Court noted that “proper cause” for a Board to remove a director is not the same “proper cause” for a court to remove a director. The type of conduct for which a Board can remove a director is broader than the conduct for which a court can remove a director. The latter still has to have some connection to fraud, dishonesty, gross mismanagement or some other type of ultra vires conduct (i.e., exceeding your authority).
The lesson here is to make sure your bylaws provide a means for the Board of Directors to remove an obnoxious and insulting director, especially if the Board has adopted a Code of Conduct with objective standards.