Vol. XVII No. 1

CONSTRUCTION: DIGGING AWAY

You will never strike ATexas crude@ in Florida; however, associations and contractors have struck lots of expensive things under communities. If it has been underground it has been hit!

Who pays for the damage? Unfortunately, many Florida community associations have been stuck with the bill. In the end, members assessments have paid to repair damage even though the association was not doing the digging.

This seemingly innocuous result follows from Florida=s AUnderground Facility Damage Prevention and Safety Act.@ This law, amended again in the 2006 Florida legislative session, is found in Florida Statutes Chapter 556. The little colorful flags in the grass and paint strips on pavement which mark underground pipes and lines are the result of this law!

The law intends to allow contractors quick access to excavate, avoiding delays, and transferring to the property owner or community association the duty of notifying the contractor of any underground facilities. The Acatch@ to the law is that failure to comply with the law=s registration provisions shifts the expense of repair to the property owner or community association. There are exceptions to the law for certain excavations on single family lots and when the digging is less than 18 inches.

How do Florida associations reduce the potential of property being damaged and being stuck with the bill? The first step is to follow the law and register as a member with AOne Call of Florida.@ The process is simple and relatively inexpensive. Forms are located at www.callsunshine.com.

The second step occurs when a contractor contacts One Call. A contractor should notify One Call of excavation work not less than two full business days before beginning work. One Call is then to contact the registered Amember@ association or owner. This allows the owner or association to properly mark underground facilities.

Save time and money, avoid aggravation and litigation, by registering with One Call of Florida.

CORPORATIONS: IGNORING CORPORATE POLICY IS A NO-NO

What happens if a corporation issues a policy that you as a director do not like? Think you can simply ignore the policy? If you do, you may end facing personal liability for losses the corporation sustains as a result of your actions.

A Florida appellate court recently ruled a director who violated a corporate directive could not escape liability by hiding behind the Abusiness judgment rule.@ While the facts of the particular case involved a for-profit business, the court=s rational could easily apply to condominium and homeowners= associations. The Abusiness judgment rule@ protects directors from liability by presuming their decisions are correct. In Aerospace Accessory Service, Inc. v. Abiseid, 31 Fla. L. Weekly D2841 (Fla. 3^rd DCA, November 15, 2006), the president of a company issued specific instructions not to extend additional credit to a customer who was behind in its payments to the company.

Despite his knowledge of these specific instructions, a director who was also an officer and salesperson for the company, extended an additional $65,000 credit to the customer. The customer filed for bankruptcy and the company suffered an additional financial loss. The company sued the director for breach of fiduciary duties, seeking recovery of the money lost when the customer filed bankruptcy.

The director argued he was not liable under the Abusiness judgment rule@ because he did not receive any benefit from not complying with the president=s instructions. The trial court granted judgment in favor of the director.

The Florida appellate court disagreed with the decision of the trial court. The appellate court pointed out the Abusiness judgment rule@ did not protect the unilateral decision of the director who violated a corporate decision but rather it protected the decision of the president and board of directors who directed personnel not to extend additional credit to the customer.

AIf we accepted Abiseid=s argument we would be granting an individual director the authority to veto corporate policy,@ the court stated. ACorporate chaos would be the result, as each director could act on his own whim.@

This decision likely will be relied upon to extend corporate director and individual liability. It is important for directors of associations to remember they may not be able to escape personal liability if they ignore established corporate policy.

In observance of state and national holidays, the firm=s offices will be closed on Monday, January 1, 2007 and Monday, January 15, 2007.

This information is provided for general information purposes only, may no be relied upon and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general comment of recent legal changes. This information is not legal advice, representation counsel or opinion. The changes in the law may not have been reviewed by Florida courts and may be subject to further challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are protected.