STATE OF MAINE BUSINESS AND CONSUMER COURT
Cumberland, ss. Docket No BFD-CV-1 1-41 jt N\ H- Cvt'")- 7.. :Ju"'( ::J,ol L
VITORINO AMERICA individually and on behalf of SUNSPRAY CONDOMINIUM ASSOCIATION
Plaintiff
v.
ROBERT YAMARTINO et als.
Defendants
ORDER ON DEFENDANTS' MOTION TO DISMISS
Before the court is the Motion to Dismiss filed pursuant to M.R. Civ. P. 12(b )( 6) by
Defendants Robert Yamartino, Robert Parent, Roger Smith, Reno Levesque, Michael Molloy,.
and Sunspray Condominium Association, in response to the Verified Amended Complaint filed
against them by PlaintiffVitorino America, individually and on behalf of Suns pray
Condominium Association.
The motion seeks dismissal of all ofPlaintiffs claims, which fall into two general
categories.
One set of claims seeks relief for what Plaintiff describes as an "intentional failure" on
the part of Defendants to enforce a condominium association rule prohibiting smoking ("the
smoking ban") anywhere in the Sunspray condominium complex in which Plaintiff owns a unit.
There is no allegation that the alleged failure to enforce the smoking ban has caused
cognizable, actionable harm (meaning in this context physical illness or injury) to Plaintiff or
anyone else. Whether or not and how to enforce a smoking ban is a discretionary
determination falling well within the prerogative of the Defendant Association and its board of
1 directors under the business judgment rule, and is not prescribed by any provision of applicable
statute, or the Sunspray Declaration or Association bylaws.
Count XI of the Amended Complaint makes it clear that the Plaintiff seeks a mandatory
injunction dictating how the Association and its board must enforce the smoking ban. The
award of injunctive relief is always discretionary, meaning that injunctive relief can be withheld
even if a plaintiffproves all the elements of an equitable claim. Mandatory injunctions are
disfavored in comparison to prohibitory injunctions, and a mandatory injunction dictating how
to enforce a smoking ban would ensnarl the court in the day-to-day operations of the Sunspray
condominium to an inappropriate and unworkable degree. For that practical reason and based
on the more detailed analysis set forth hereinafter, Plaintiffs smoking ban claims will be
dismissed.
The Plaintiffs other category of claims, however, has to do with the procedures for
election of directors to the condominium association's board of directors. Because of the
integral significance of valid elections to the proper governance of a condominium association,
and because applicable provisions oflaw, as well as portions of the condominium declaration
and association bylaws, do impose requirements regarding the conduct of elections, the court
declines to dismiss most of the Plaintiffs election-based claims on a Rule 12(b)(6) motion, for
reasons also explained in detail below.
BACKGROUND
The following factual summary is based on the allegations of the Plaintiffs Verified
Amended Complaint, which must be taken as true for purposes of the Defendants' Rule 12(b)(6)
motion to dismiss: 1
1 The Defendants dispute many or most of the Plaintiffs factual allegations. They deny that they have
been unresponsive to Plaintiffs concerns. They assert that there have been substantial efforts to enforce the smoking ban, but enforcement to the extent sought by the Plaintiff has already proved unduly
2 PlaintiffVitorino America owns a condominium unit at the Sunspray condominium
complex in Old Orchard Beach. As a unit owner, he is a voting member of the Sunspray
Condominium Association, which is in overall charge of operating the condominium complex.2
His amended complaint is against the Association and five named individuals. Four of the
individual Defendants, Robert Yamartino, Roger Smith, Robert Parent and Reno Levesque, are
unit owners and members ofthe Board ofDirectors. The fifth individual Defendant, Michael
Molloy, is a unit owner and was chair of the nominating committee appointed for the July 2011
election at issue in the case.
In August of 2009, a ban on smoking in all common areas went into effect at the
Sunspray condominium complex, and in February of2010, the ban was expanded to prohibit
smoking anywhere within the complex. The total ban was instituted because the design and
configuration ofthe Sunspray condominium complex is such that smoke in one condominium
unit, as well as in the common areas, migrates into other units. Plaintiff claims that
enforcement ofthe smoking ban at Sunspray has been ineffectual and lax. Plaintiff America
cannot go to or from his unit without encountering exhaust air from another unit in which
tobacco is being smoked in violation of the smoking ban. He states that the named individual
Defendant officers and directors have intentionally failed to enforce the smoking ban.
In July of2011, there was an election to fill three open seats on the Association's board
of directors at Sunspray. A nominating committee oftwo owners as required by the
Association by-laws, was appointed by the board of directors. This committee was comprised
expensive and divisive. They assert that the September S election corrected any shortcomings in the July 2011 election, and deny any wrongdoing in either election. In essence, their position is that Plaintiff has brought issues that ought to be handled within the Association into the courthouse because he cannot get his way. As explained herein, the court cannot consider the Defendants' position on the merits in addressing their Rule 12(b)(6) motion to dismiss without converting the motion into one for summary judgment, which the court declines to do. 2 Although the Verified Amended Complaint does not say so, Defendants say Plaintiff America also is a member of the Board of Directors of the Association, along with all of the individual Defendants except Defendant Molloy.
3 of Michael Molloy and Jessica Healey. Their duties included notifying the members of the
election, tallying votes at the general election and collecting and counting absentee ballots.
The practice of previous nominating committees was to circulate a letter advising
Association members of declared candidates for election to the Board and soliciting candidates.
However, the nominating committee for the July 2011 election failed to circulate such a letter.
Four candidates ran for the three open seats, but two of the four--Jessica Healey and Norman
Barry, both of whom oppose the smoking ban-were never properly nominated. The name of
candidate Antonio Salvador, who supports the smoking ban, was not listed on absentee ballots.
The three candidates with the most votes were Jessica Healey, Norman Barry and Defendant
Robert Parent.
After Plaintiff America and others objected to these irregularities, Defendant
Yamartino, as president of the Board of Directors, sent a letter to unit owners in August 2011
declaring a "special meeting" on September 3, 2011, essentially to re-do the election. The
Sunspray Association bylaws require elections for directors to be held at the annual meeting,
which was July 9, 2011.
No new nominating committee was appointed with respect to the election scheduled for
September 3, 2011. At the special meeting, Healey and Barry were nominated on the day of the
election. Additionally two more candidates were nominated on the day ofthe election: August
Favazza and Joe Leandro. Plaintiff objected to the counting of absentee ballots, because they
did not include Favazza and Leandro's names. His objections were unheeded and the election
process was declared valid, despite the absence of a quorum of 50% of the Association members
as required by the bylaws. Candidates Healey, Barry and Parent again received the highest
number ofvotes.
4 Plaintiff contends that the September election process, like the July election process,
was conducted by the individual Defendants in bad faith, because some of the individual
Defendants oppose the smoking ban and none of them is willing to enforce it as it should be
enforced.
DISCUSSION
I. Standard of Review
A motion to dismiss pursuant to M.R. Civ. P. 12(b)(6) "tests the legal sufficiency of the
complaint and, on such a challenge, the material allegations ofthe complaint must be taken as
admitted." Shaw v. S. Aroostook Comm. Sch. Dist., 683 A.2d 502, 503 (Me. 1996) (quotation marks
omitted). When reviewing a motion to dismiss, this court examines "the complaint in the light
most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or
alleges facts that would entitle the plaintiff to reliefpursuant to some legal theory." !d. A
dismissal under M.R. Civ. P. 12(b)(6) will be granted only "when it appears beyond a doubt that
the plaintiffis entitled to no relief under any set of facts that he might prove in support of his
claim." !d. (quotation marks omitted). See also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) ("a plaintiffs obligation to provide the 'grounds' of his 'entitle[ment] to relief requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do . . . . Factual allegations must be enough to raise a right to relief above the
speculative level .... ") (alteration in original) (citations omitted).
In connection with their motion to dismiss, Defendants have based their arguments on
extensive material outside the pleadings. When materials outside the pleadings are
incorporated or referred to in a Rule 12(b)(6) motion, the court must decide whether to
consider or exclude the additional materials, and ifthey are considered, the motion to dismiss is
ordinarily converted into a motion for summary judgment. See Beaucage v. City of Rockland,
5 2000 ME 184, ~ 5, 760 A.2d 1054, 1056; In re Magro, 655 A.2d 341, 342 (Me. 1995). See also
M.R. Civ. P. 12(b) ("If, on a motion asserting the defense numbered (6) to dismiss for failure of
the pleading to state a claim upon which relief can be granted, matters outside the pleading are
presented to and not excluded by the court, the motion shall be treated as one for summary
. d gment ..... JU ")
However, the Law Court has recognized an exception to this general rule, covering
three types ofmaterial outside the pleadings: "[O]fficial public documents, documents that are
central to the plaintiffs claim, and documents referred to in the complaint [can be considered]
without converting a motion to dismiss into a motion for a summary judgment when the
authenticity of such documents is not challenged." See Moody v. State Liquor and Lottery
Commission, 2004 ME 20, ~ 10, 843 A.2d 43, 48. The focus of these exceptions is on documents
relevant to the plaintijj's position ("central to the plaintiffs claim", "referred to in the
complaint"), consistent with the principle that a Rule 12(b )( 6) motion requires the complaint to
which it is directed to be viewed in a light most favorable to the plaintiff.
Much of the material submitted by the Defendants falls outside the three types of
extrinsic material that can be considered without converting the motion. The court elects not
to convert the motion-indeed, to do so would be difficult because there are no statements of
material facts before the court and the parties have not framed their arguments in summary
judgment terms. Thus, the court is not going to consider extrinsic material other than the
Declaration and Bylaws, both ofwhich are "central" to the Plaintiffs claims and also referred to
in the Verified Amended Complaint. Copies were attached as exhibits to the original complaint,
and are referred to in the original and Amended Complaint. The court will also consider the
Association's rules and regulations, which are also referred to in the Amended Complaint.
6 Thus, the question before the court is whether the Plaintiffs various claims are
cognizable under the law in light of the Declarations and Bylaws, not whether they are
meritorious or can withstand summary judgment.
2. The Threshold Derivative Issue
Plaintiff America asserts 13 counts against the Defendants: breach of fiduciary duty
(Counts I-II), violations of the Maine Nonprofit Corporation Act (Counts III-IV), violations of
the Maine Condominium Act (Counts V-VI), breach of contract (Counts VII-VIII), intentional
misrepresentation (Count IX), negligence (Count X), injunctive relief (Count XI-XII), and the
appointment of a receiver (Count XIII).
His amended complaint asserts that all of his claims are brought individually and
derivatively. The Defendants deny that he has any ground on which to bring a derivative
claim under either the Maine Condominium Act, 33 M.R.S. §§1601-101 to 1601-118 (2011), or
the Maine Nonprofit Corporation Act 13-B M.R.S. §§ 101-1406 (2011). 3 Because the issue
whether the law permits the Plaintiff to sue derivatively cuts across all ofhis claims, it needs to
be addressed initially.
The Maine Business Corporation Act (MBCA) explicitly permits shareholders offor-
profit corporations to bring derivative actions, meaning actions in which the claimed harm or
loss is to the corporation rather than to the shareholder. See 13-C M.R.S. §§ 7 51 et seq.
(derivative action provisions of the Maine Business Corporation Act). "In a shareholder
derivative action, a shareholder brings an action on behalf of the corporation that seeks to
recover damages from the other stockholders or corporate management for fraud, breach of
fiduciary duty, or a breach ofthe duty of good faith and fair dealing." Voisine v. Berube, 2011
3 In their reply memorandum, the Defendants suggest that Plaintiff has conceded in his Objection that
he is not pursuing derivative claims. The court does not interpret Plaintiffs Objection to withdraw his derivative claims-rather his Objection says that, should the court conclude that he cannot assert any derivative claim, he "would then argue" that he has suffered a particularized injury.
7 ME 137, ~ 4, 2011 Me. LEXIS 134. In Forbes v. lFells Beach Casino, Inc., the Maine Law Court
said:
The derivative action is distinguished from an individual's action which is brought by a stockholder for a loss separate and distinct from that suffered by the other stockholders. The right of a stockholder to sue on behalf of a corporation to protect or restore the assets of the corporation from ultra vires actions and other acts of mismanagement developed in equity. In theory the action is one to protect the corporation itself against acts from which its management is unwilling or unable to protect it. The wrong complained ofis one to the corporation and the shareholder is a nominal plaintiff.
307 A.2d 210, 221-22 (Me. 1973).
A Maine condominium association is governed by the Maine Condominium Act (MCA),
33 M.R.S. §§ 1601-101 et seq., section 1603-101 of which provides that such associations are to
be organized under the Maine Nonprofit Corporation Act (MNCA). 13-B M.R.S. §§ 101 et seq.,
not the MBCA. Unlike the MBCA, its counterpart for for-profit corporations, the MNCA does
not include provisions authorizing shareholder derivative actions. The omission may be
deliberate, because the model act on which it is based, the Model Nonprofit Corporation Act,
allows for derivative suits brought by "any member of members having five percent or more of
the voting power or by fifty members, whichever is less." Model Nonprofit Corporation Act§
6.30(a)(i).
However, in a section titled "Defense of Ultra Vires", the MNCA does allow members to
bring claims against the corporation and directors or officers to enjoin unauthorized acts or
acts in excess of authority. See 13-B M.R.S. § 203( 1)(A) ("proceeding by a member or a director
against the corporation to enjoin the doing or continuation of unauthorized acts"); id. §
203(1)(B) ("proceeding by the corporation, whether acting directly or through ... members in a
representative suit, against the officers or directors of the corporation for exceeding their
authority"). The proviso for "representative suit[s]," coupled with the omission of the Model
8 Act derivative provisions, argues against implying shareholder derivative action provisions into
the Maine Nonprofit Corporation Act.
The Maine Condominium Act provides: "If a declarant or any other person subject to
this Act fails to comply with any provision hereof or any provision of the declaration or bylaws,
any person or class of persons adversely affected by that failure has a claim for appropriate
relief" ss M.R.S. § 1604-116 (emphasis added)4". While not phrased in derivative terms, this
provision on its face authorizes a condominium unit owner to bring an action against "any
person subject to this Act" if the claim is based on a failure to comply with the Act or the
declaration or the bylaws." In requiring that the claimant be "adversely affected by" the alleged
failure to comply, the MCA imports a particularized standing requirement that is absent from
the MNCA provision permitting "representative suit[s]" by members on behalfofthe
corporation against officers or directors. Compare 1S-B M.R.S. § 20S(l)(B) with SS M.R.S.
§ 1604-116.
The Sunspray Declaration includes a provision as follows: "An aggrieved unit owner
shall have a right of action against the Association for failure to comply with or to enforce the
Declaration, the By-Laws, any rules and regulations duly adopted or any requirements imposed
by the Act." Complaint Exhibit A (Declaration), sec. 11, at 11. The Declaration cannot confer
standing to bring a court action in the absence of a justiciable controversy, so the reference to
"aggrieved unit owner", like the reference to "persons adversely affected" in the MCA, has to be
construed to require particularized injury, meaning that the aggrieved owner must allege and if
necessary, establish, that he or she has suffered particularized injury as a result of the acts or
omissions at issue. In this case, the Plaintiffmust allege and, if necessary, establish that the
~· The MCA also provides that "every contract or duty governed by this Act imposes an obligation of good faith in its performance and enactment," SS M.R.S § 1601-113, and that "any right or obligation declared by this act is enforceable by judicial proceeding." id. §1601-114.
9 Defendants' alleged failure to enforce the smoking ban has "operated prejudicially and directly
upon [the Plaintiffs] property, pecuniary or personal rights." Nelson v. Bayroot, LLC, 2008 ME
91, ~10, 953 A.2d 378,382.
Another section of the MCA provides for other bodies oflaw to supplement the
provisions of the MCA and the MNCA:
The principles oflaw and equity, including the law of corporations and unincorporated associations, the law of real property and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance or other validated or invalidating cause supplement the provisions of this Act, except to the extent inconsistent with this Act.
33 M.R.S. § 1601-108.
To summarize, the Plaintiff does not have the right to bring a "shareholder derivative
action" per se under the Maine Condominium Act and the Maine Nonprofit Corporation Act,
because neither act provides for such a remedy (and the court declines to imply it into either
statute). 5 On the other hand, the MNCA explicitly authorizes actions by members in a
representative capacity, at least in some contexts, and the MCA and the Declaration can be
interpreted to authorize claims by members who are "adversely affected" and/or "aggrieved."
In light of this framework, the inquiry turns to the counts of the Plaintiffs amended
complaint and focuses on whether each ofthem states a claim
3. The Counts ofPlaintiffs Amended Complaint
As discussed initially, Plaintiffs substantive claims lie in two categories. Counts I, III,
V, VII and X all relate to the smoking ban. Counts II, IV, VI, VIII and IX relate to the
elections. Counts XI, XII and XII all relate to remedies for the causes of action pleaded in
previous counts, and do not purport to state independent, freestanding causes of action.
5 Because the Plaintiff lacks a legal basis for commencing a "shareholder derivative action" per se, it is unnecessary to address the Defendants' argument that he has failed to comply with the procedural requirements for maintaining that type of action, see M.R. Civ. P. 2SA.
10 The Smoking Ban Counts
A crucial aspect of the Amended Complaint is that it does not allege that the asserted
failure to enforce the smoking ban has caused harm-at least legally cognizable injury-to the
Plaintiff individually. The reason why this point is crucial is that condominium unit owners
clearly do have viable causes of action under a variety of theories if they suffer harm or injury
that gives rise to a claim. A unit owner or invitee who slips and falls in a negligently
maintained common area can bring a negligence claim against the condominium association
responsible for common area maintenance, for example.
The allegation in the Amended Complaint that comes closest to alleging that the failure
to enforce the smoking ban has had any direct, particularized impact on Plaintiff individually is
in paragraph 17, which asserts that "Plaintiff cannot enter or leave his unit without passing the
exhaust of a unit in which tobacco is being smoked in violation of the Smoking Ban." This
assertion, even if true, does not give rise to any cause of action because there is no allegation of
a legally cognizable injury sufficient to support a claim. Accordingly, his smoking ban claims
have to be analyzed solely in terms whether they state claims in a representative capacity.
Count !-Breach ifFiduciary Duty: Plaintiffs breach of fiduciary duty claim6 based on the
smoking ban fails as to both the individual Defendants and the Association Defendant. It fails
as to the Association because the Plaintiff has not alleged a cognizable individual claim, as
G A claim for breach of fiduciary duty in the corporate context requires proof that a defendant corporate
director: I) did not "act with that degree of diligence, care and skill which ordinarily prudent persons would exercise under similar circumstances in like positions"; 2) did not "discharge the duties affecting their relationship in good faith with a view to furthering the interests of one another as to the matters within the scope of the relationship"; 3) "disclose[d or withheld] relevant information affecting the status and affairs of the relationship"; or 4) "use[d] their position, influence or knowledge respecting the affairs and organization that are subject to the relationship to gain any special privilege or advantage over the other person or persons involved in the relationship." Rosenthal v. Rosentha~ 543 A.2d 348, 352 (Me. 1988).
II noted above, and because his representative claim must be on behalf if the Association, not
against it.
Count I fails to state a claim as to the individual Defendants for two reasons. First,
nothing in the declarations or bylaws, or in either the MCA or the MNCA establishes a duty on
the part of any individual unit owner, officer or director to act so as to enforce the smoking ban.
If there is a duty to cause the ban to be enforced, it lies with the entire board of directors of the
Association, but the Plaintiff has not named the board of directors, either as an entity or by
naming all of its individual members solely in their capacity as board members. In other words,
Plaintiff cannot selectively sue individual board members with regard to the smoking ban
because none of them has any authority or duty as an individual unit owner or board member,
to do anything about the smoking ban.
A separate ground for dismissing Plaintiffs claims against the individual Defendants is
the "business judgment rule." Even had the Plaintiff named all of the Association's officers and
directors as defendants, his breach of fiduciary duty as to the smoking ban fails in the face of the
business judgment rule. Like the law regarding the fiduciary duty of officers and directors, the
"business judgment rule" is an integral element of "the law of corporations" that is made
applicable to this case by virtue of section 160 1-108 of the Maine Condomini urn Act.
The "business judgment rule" traditionally applies to business corporations, but it is
also the standard under which decisions of the officers and directors of any nonprofit
corporation board, including but not limited to condominium association, are to be judged. 7
Under the business judgment rule, "business decisions made by directors of a corporation are
7 The question whether the business judgment rule applies to the actions of condominium association directors appears to be an open question in Maine. Elsewhere, courts have adopted the business judgment rule as applicable to condominium association officers and directors. See Oberbillig v. W. Grand Towers Condo. Ass'n, 807 N.W.2d 14.3, 155 and cases cited therein. Given that the officers and directors of condominium associations and other not-for-profit corporations are usually volunteers, there are compelling reasons to afford their acts and omissions as officers and directors at least the same protection as that afforded to directors of business corporations, if not more protection.
12 not subject to judicial review, unless they are the result of fraud or bad faith." Shostak v.
Shostak, 2004 ME 75, ~ 22, 851 A.2d 515 (citing Rosenthal v: Rosenthal, 543 A.2d 34, 353 (Me.
1988)). In some instances, application of the business judgment rule must await development of
the facts, and should not result in dismissal of claims on the face of the pleadings. See, e.g., In re
Southeast Banking Corp., 827 F. Supp. 742, 754-55 (S.D. Fla.1993), rev'd in part on other grounds,
69 F.3d 1539 (11th Cir.1995) ("[T]he fact-based Business Judgment Rule defense should not be
considered on a Motion to Dismiss") (citations omitted)).
This case, however, is different. The Plaintiffs breach of fiduciary duty claim fails
because a board's discretionary determinations regarding whether and how to enforce a
smoking ban is simply not a subject on which a court is going to police a condominium board,
at least in the absence oflegally cognizable harm to a person, none of which is alleged in the
Amended Complaint. The fact that some unit owners want the smoking ban enforced in
particular ways while others do not does not justify court intervention.
Perhaps in an effort to avoid application of the business judgment rule, Plaintiff in his
Amended Complaint has made references to bad faith, essentially to the effect that some or all
of the individual Defendants are acting in bad faith because they do not agree with the smoking
ban and therefore do not want to enforce it. Plaintiffs allegations, even iftrue, do not
constitute bad faith sufficient to overcome the business judgment rule. A condominium
association director's opposition to enforcing a smoking ban, or opposition to a smoking ban, is
simply not bad faith. 8
This is not to say that the Plaintiff or any other Sunspray unit owner lack any remedy
for actual physical injury or illness resulting from tobacco smoke. Were a unit owner to suffer
8 Defendant asserts and Plaintiff agrees that Defendant Molloy was only involved in the 2011 elections as a member of the nominating committee and therefore has nothing to do with the enforcement or lack thereof of the smoking ban. Plaintiff concedes this point and has indicated that he intends not to pursue the smoking ban causes of actions against Defendant Molloy.
13 cognizable personal injury as a result of smoke-for example, were migrant second-hand
tobacco smoke causing a unit owner to suffer physical illness or harm, he or she might well be
able to assert a claim against the smoker and conceivably the Association, but it would be an
individual claim, not a representative claim. Plaintiff has not alleged anything of that nature.
For these reasons, Defendants' motion will be granted as to Count I.
Count III-Violation if the Maine Condominium Act: In Count III, Plaintiff asserts that the
Defendants' failure to enforce the smoking ban violates the duty of good faith imposed by the
Maine Condominium Act. See SS M.R.S. § 1601-113. As noted above, the MCA confers a right
of action as follows: "If a declarant or any other person subject to this Act fails to comply with
any provision hereof or any provision of the declaration or bylaws, any person or class of
persons adversely affected by that failure has a claim for appropriate relief" ss M.R.S.
§ 1604-116 (emphasis added).
For several reasons, Plaintiffs claim under Count III is legally insufficient. Although
the Declaration does give an "aggrieved unit owner" a right of action against the Association
for failing to enforce a rule or regulation, nothing in the Declaration (and nothing in the
applicable statutes or the Association bylaws) imposes a duty on the Association to enforce the
rules and regulations. Plaintiffs assertions oflack of"good faith" do not avail him, ifthere is
no duty. Also, Plaintiff has not shown that the failure to enforce the smoking ban "adversely
affected" him in the manner that the court interprets the MCA to require. As noted above, this
court interprets the term "adversely affected" as used in section 1604-116 to import a standing
requirement, meaning that the Plaintiff must allege and establish particularized injury, which
he has not done-having to walk by an air exhaust in going to or from his unit is not enough. 9
v The Amended Complaint does not specifically invoke the Declaration provision that "[a]n aggrieved unit owner shall have a right of action against the Association for failure to comply with or to enforce the Declaration, the By-Laws, any rules and regulations duly adopted or any requirements imposed by
14 Third, the business judgment rule applies to actions against directors under the MCA, just as it
applies to the fiduciary duty claims.
Count III will be dismissed.
Count V-Violation of the Maine Nonprrifi't Corporation Act: Count V asserts that the
individual Defendants, as officers and/ or directors of the Association, are liable under sections
717 and 720 of the Maine Nonprofit Corporation Act for "intentionally failing to enforce the
duly enacted Smoking Ban and the Governing Documents" (meaning the Declarations and
Bylaws). As noted above, provisions ofthe MNCA authorize members to sue the corporation
"to enjoin the doing or continuation of unauthorized acts," and also authorize representative
suits by members "against the officers or directors of the corporation for exceeding their
authority." 13-B M.R.S. § 20S(1)(A)-(B). Failing to enforce a smoking ban is neither an
"unauthorized act" nor an act in excess of authority. Nothing in the Declarations or Bylaws
imposes a duty on the Association officers and directors to enforce the smoking ban, or even to
have a smoking ban. Moreover, the business judgment rule analysis applicable to Count I also
applies here.
Count V of the Amended Complaint will also be dismissed.
Count VII-Breach ofContract: Count VII asserts that the rules and regulations of the
Association comprise an enforceable contract, and that the Defendants' failure to enforce the
smoking ban is a breach of the contract. Here he presumably would be proceeding under the
provision of the Declaration providing "[a]n aggrieved unit owner ... a right of action against
the Association for failure to comply with or to enforce the Declaration, the By-Laws, any rules
and regulations duly adopted or any requirements imposed by the Act." Complaint Exhibit A
the Act." Complaint Exhibit A (Declaration), sec. 11, at 11. However, the court interprets the term "aggrieved" to impose a requirement ofparticularized injury, so the absence of any allegation of particularized injury would defeat any claim under that provision.
15 (Declaration), sec. 11, at 11. The absence of particularized injury due to the alleged breach
means that Plaintiffis not an "aggrieved unit owner" for purposes of this provision. Plaintiff
has no individual or direct claim.
As to a representative claim, there is no such cause of action as a representative claim by
a condominium unit owner for breach of contract.
As to both individual and representative claims under this theory, the absence of
anything in the Declaration imposing a duty on the Association to take any particular
enforcement action, coupled with the protection of the business judgment rule, would likely
preclude reliefin the form of a mandatory injunction compelling enforcement.
Count VII will be dismissed.
Count X: Negligence As noted above, because the Amended Complaint contains no
allegations ofparticularized, cognizable harm to Plaintiffresulting from the alleged failure to
enforce the smoking ban, Plaintiffs smoking ban claims are cognizable only to the extent he
purports to be bringing them in a representative capacity. The court has not identified any
basis in law under which the Plaintiff can maintain a representative or derivative negligence
claim. In addition and in the alternative, as Defendants point out, the type of"harm" the
Plaintiff does allege, even if were particular to him, might well cause his negligence claim to fail
under the "economic loss" doctrine. See Oceanside at Pine Point Condominium Owners Assoc. v.
Peachtree Doors, Inc., 659 A.2d 267, 270 n.4 (Me. 1995). Thus, Plaintiffs negligence claim in
Count X must be dismissed because he has not alleged any cognizable harm as a result of the
alleged negligent failure to enforce.
Count X will be dismissed.
16 The Election Counts
As to the election claims, the analysis is different. Whereas the applicable statutes, the
Declaration and the bylaws are silent on whether and how the Association's board is to enforce
a smoking ban, they are not silent on the conduct of elections. Also, as noted at the outset, the
election claims relate directly to governance of the Association, and few responsibilities of the
Association's Board are more important than properly conducting Board elections. Moreover,
the business judgment rule does not shield the conduct of condominium association elections to
the extent it does enforcing a smoking ban. The Association board has wide latitude on
enforcing the ban, but not such latitude in conducting board elections.
As explained below, Plaintiffs allegations plainly are sufficient for purposes of at least
two ofhis election-related counts to state claims for relief, although it must be emphasized that
those allegations have yet to be proved. The court's previously noted decision not to convert
their Rule 12(b )( 6) motion into a motion for summary judgment means that the extrinsic
materials the Defendants have submitted in defense of the conduct of the elections will have to
be considered at a later time.
Counts II and VI-Breach if Fiduciary Dury and Violation cifthe MNCA: The counts of the
complaint that seem most clearly viable are the claim in Count II for breach of fiduciary duty
and that in Count VI under the Maine Nonprofit Corporation Act.
As to Count II, it would indeed be a breach of fiduciary duty for officers and directors to
manipulate a board election to bring about a desired outcome. It would be bad faith for
purposes ofthe business judgment rule for an officer or director who was opposed to enforcing
the smoking ban to manipulate the election so as to cause like-minded unit owners to be elected
who would not have been elected had the election been conducted properly. (Again, the court is
by no means declaring the Plaintiffs allegations of manipulation valid, and is only deciding that
17 they cannot be dismissed on their face, without any further development of underlying facts
and circumstances).
As to Count VI, the Plaintiffs claims as to the Association and the individual
Defendants clearly are pleaded to be within the two exceptions in the MNCA to the general
rule shielding corporate acts and omissions from challenge on ultra vires grounds: he is
bringing an action against the Association to enjoin the continuation of what he claims to be
unauthorized acts-namely the service of directors alleged to have been improperly elected; he
is bringing this action against individual officers and directors for acts "exceeding their
authority." See lS-B M.R.S. § 20S(I)(A)-(B).
The Amended Complaint does state a claim in Count II and Count VI and the
Defendant's motion is denied, except as to the Association and Mr. Molloy with respect to
Count II because the court is not persuaded that, as a matter oflaw, there is any set of facts
under which either the Association (as opposed to the officers and directors of the Association)
or Mr. Molloy could be deemed to have breached any fiduciary duty to the Plaintiff or to unit
members. Count VI is also dismissed as to Mr. Molloy because he is not alleged to have been
an officer or director.
Counts IV and VIII Violation if the MCA and Breach if Contract: The reason why the
claims in Counts IV and VIII are less clearly viable for purposes of a Rule 12(b)(6) motion is
that, as discussed previously, both the MCA and the Declaration impose standing requirements
of particularized injury by limiting the right of action to unit owners "adversely affected" and
"aggrieved." The parties have not briefed the issue whether an improperly conducted board of
directors election "adversely affect[s]" and/ or "aggrieve[s]" every unit owner in a way that
failing to enforce a smoking ban does not, so as to give any unit owner a viable cause of action.
The court will let Counts IV and VIII stand, except as to Mr. Molloy.
18 Count IX: Intentional Misrepresentation: Count IX will be dismissed because, like the
negligence claim in Count X, Plaintiffhas not alleged or sufficiently established particularized
harm. What he claims to be misrepresentations appear to have been made generally, not just to
him. The essential element ofreliance also is lacking on the face of the Amended Complaint
because Plaintiff was not misled as a result of the asserted misrepresentation.
The Remedies Counts: Counts XI, XII and XIIL
The remaining three counts of the Amended Complaint, as previously noted, do not
allege freestanding, independent causes of action.
Count XI seeks injunctive relief in the nature of a mandatory injunction compelling the
Defendants to enforce the smoking ban. That count must go the way of the Plaintiffs smoking
ban claims and is dismissed.
Count XII seeks injunctive relief as to the elections. Clearly, injunctive relief could be
awarded ifPlaintiffprevails on any ofthe election claims that the court has decided survive the
Defendants' Rule 12(b)(6) motion. Because injunctive reliefis not an independent cause of
action, however, Count XII will be dismissed on the understanding that injunctive relief,
mandatory or prohibitory, may be awarded ifPlaintiffsucceeds on the merits of any ofhis
surviving election claims.
Count XIII, seeking appointment of a receiver, is somewhat of a hybrid between a cause
of action and a pure remedy. In practical terms, even ifPlaintiffprevails on his election claims
and the court decides to award relief, this court is likely to try injunctive reliefbefore
appointing any outside party to manage the affairs of the Association. Moreover, a receiver
usually takes over day-to-day financial management. If this court appoints an outsider to
supervise elections, which essentially is what the Plaintiffwould have a receiver do, the
outsider would likely be designated as a master rather than a receiver. For these reasons,
19 Count XIII is also dismissed, but on the understanding that the court retains authority to
appoint an outside party to supervise an election (but only if the Plaintiffprevails and only if
such a step is shown to be necessary and appropriate).
CONCLUSION
For the reasons stated, it is hereby ORDERED as follows:
I. Defendants' Motion to Dismiss the Verified Amended Complaint is hereby granted
in part and otherwise denied.
2. Counts I, III, V, VII, IX, X, XI, XII and XIII of the Verified Amended Complaint are
hereby dismissed in their entirety.
S. Counts II, IV, VI and VIII ofthe Verified Amended Complaint are hereby dismissed
as to Defendant Molloy.
4. Count II of the Verified Amended Complaint is dismissed as to the Defendant
Association.
5. The motion to dismiss Counts IV, VI and VIII is denied as to all Defendants other
than Defendant Molloy.
6. The motion to dismiss Count II is denied as to all individual Defendants other than
Defendant Molloy.
Pursuant to M.R. Civ. P. 79(a), the clerk is hereby directed to incorporate this Order by //
//;lift/~ reference in the docket.
Dated March 16, 2012
A.M. Horton Justice, Business and Consumer Court
Entered on the Docket: g. J't •l 1.... Copies sent via Mail_ Electronically~
20 STATE OF MAINE BUSINESS AND CONSUMER DOCKET CUMBERLAND, ss. Location: Portland
VITORINO AMERICA individually and on behalf of SUNSPRA Y CONDOMINIUM ASSOCIATION
v. DOCKET NO. BCD-CV-2011-41
ROBERT YAMARTINO, et al
Defendant
COUNSEL OF RECORD
Party Name: Attorney Name: Vitorino America Neal Pratt, Esq. Jonathan Mermin, esq.
Robert Yamartino Geraldine Sanchez, Esq. Board of Directors, Sunspray Condo As soc Geraldine Sanchez, Esq. Michael Molloy Geraldine Sanchez, Esq. Robert Parent Geraldine Sanchez, Esq. Roger Smith Geraldine Sanchez, Esq. Reno Levesque Geraldine Sanchez, Esq.