BY JONATHAN S. GOLDSTEIN, ESQ – Community associations (condominiums and homeowners’ associations) should always attempt to obtain limitations on confidentiality agreements in settlements that permit the association to share the agreement with its members. These limitations should also insulate the association from responsibility if one of its members disseminates the agreement without the association’s approval. This issue affects many individuals and entities because of the prevalence of community association ownership and litigation.
A recently issued decision by the Florida 3rd District Court of Appeal, in the case of Gulliver Schools Inc. and School Mgmt. Systems Inc. v. Snay, 39 Fla. L. Weekly D457 (Fla. 3d DCA Feb. 26, 2014), illustrates the potential significance of confidentiality provisions in such settlements. The Gulliver Schools Inc. decision dealt with a confidential settlement agreement entered into by a school and one of its former teachers that prohibited the teacher from disclosing, directly or indirectly, the terms or existence of the settlement.
But days after the settlement was entered into, the teacher’s daughter posted an announcement of the settlement on Facebook — to more than 1,200 of her Facebook friends. The appellate court agreed with the school that the teacher should not be entitled to the full award agreed upon in the settlement because the teacher had breached a material term; namely, the confidentiality clause.
Community associations have unique confidentiality concerns. They can maintain and settle legal actions on behalf of their members regarding matters of “common interest,” and members have the right to access an association’s “official records,” subject to limited exceptions that do not include confidential settlement agreements. [See §§ 718.111(3), (12)(a) and (12)(c), Fla. Stat. (2014) (condominium associations); see also §§ 720.303(1) and (5), Fla. Stat. (2014) (homeowners’ associations).] Association members have an interest in knowing the contents of settlement agreements entered into by their associations and have a legal right to review same — whether “confidential” or not. This raises the issue of whether the Association members are within the definition of “parties” to the settlement agreement by virtue of their membership status and whether a communication by an Association member to a third party is considered a breach of the confidentiality provisions.
Yacht Club Southeastern Inc. and third parties
In Yacht Club Southeastern Inc. v. Sunset Harbour North Condominium Assn. Inc., involving mediation between an association and a developer, the developer disseminated privileged mediation communications to the entire membership, despite the opposing association being the only other party in the case. [See 843 So.2d 917 (Fla. 3d DCA 2003)].When the association argued that this violated mediation confidentiality, the court held that this was not improper disclosure because the case was brought on the members’ behalf.
A separate question is whether an indirect disclosure by a member of the association to a third party is a breach of confidentiality imputed to the association, if the association was the source of the member’s knowledge. The reasoning of Yacht Club Southeastern Inc., suggests a court may impute such communication to the association because each member was considered a party.
However, the Condominium Act states that an association can only act through its authorized board of directors and officers, because no unit owner has the authority to act for the association. [See 718.111(1)(a), (c), Fla. Stat. (2014).] Even if actions of the members are not considered actions of the association, such a situation could still be analogized to the widespread disclosure by the non-party daughter in Gulliver Schools.
To avoid litigating these issues, community associations should always strive to avoid confidentiality provisions completely or limit confidentiality clauses solely to any communications authorized by board members to third parties, excluding Board Members’ communications to the members. Associations should also remove exposure relating to communications by the members to third parties. While disclosures required by court order are frequently excluded in confidentiality clauses, this is an inadequate safeguard for associations because associations are subject to statutory damages in relation to the failure to provide records on a timely basis after a request for same; therefore, by the time a Court Order requires disclosure it is too late. Accordingly, good-faith disclosures of the contents of a settlement by the Association to a member upon receipt of an official records request by a member should be exempt from confidentiality provisions.
Jonathan S. Goldstein is an associate attorney at the Law Offices of David B. Haber, P.A. His practice areas include commercial litigation, construction litigation, as well as condominium and homeowners association (HOA) law. Jonathan can be reached at firstname.lastname@example.org.