Quote from NJ HOA Info on August 3, 2024, 6:34 pm

https://njlitigationblog.com/nj-supreme-court-rules-that-former-trustee-cannot-recover-attorneys-fees-and-costs-against-condominium-board-under-an-ambiguous-by-law-indemnification-clause/

The plaintiff, Patrick Boyle, a condominium owner and former trustee of the condominium association board, claimed that he was entitled to recover attorneys’ fees and costs against the defendant condominium association, reimbursing him for fees expended to successfully challenge his removal from the board. The issue in Boyle v. Huff, 257 N.J. 468 (2024) was whether an indemnification clause in a condominium association’s bylaws allowed the plaintiff to recover attorneys’ fees and costs in his first-party claim against the association.

Patrick Boyle was an owner in the Ocean Club Condominium (OCF Condominium of approximately 750 units ) in Atlantic City. 

He also served as a trustee of the Ocean Club Condominium Association (Association), a nonprofit organization managed by a Board of Trustees (Board). The Board, consisting of 7 condominium owners, oversees the OCF Condominium affairs and enforces the Association’s bylaws. 

On August 16, 2020, the Board expelled Boyle as a trustee for alleged acts of misconduct. In response, he filed a complaint and order to show cause against the Board, challenging the removal.

In his original claim, Boyle sought a declaratory judgment, requesting the trial court to conclude that his removal was improper and reinstate his role as a trustee. The trial court granted the request and Boyle was reinstated as a trustee on December 11, 2020. Further, the trial court held that the Board violated the bylaws and N.J.A.C. 5:26-8.12(a) and (d) for failure to provide Boyle with adequate notice of the scheduled vote. 

Later, Boyle filed an amended complaint, adding a claim for indemnification for his attorney’s fees incurred in his lawsuit challenging his removal.

In April 2021, plaintiff filed a third amended complaint, bringing a derivative claim on behalf of the Association, alleging that the trustee defendants had breached their fiduciary duty. 

After being defeated in the Board’s election in August 2021, Boyle moved for summary judgment, requesting injunctive and declaratory relief and partial summary judgment on the indemnification clause, seeking reimbursement of his attorney’s fees and costs.

The trial court held that the plain language of the bylaws entitled the plaintiff to recover attorneys’ fees and costs. Consequently, the trial court awarded plaintiff legal fees and costs of $516,811.80 and required the Condo Association (defendant) to pay plaintiff in thirty days. Boyle moved to reconsider the award amount, and the Condo Association moved for a stay of thirty-day payment requirement. Because the trial court did not schedule a hearing for the stay request before the thirty-day deadline, the Condo Association submitted a motion for a stay of the deadline to the Appellate Division.

The Appellate Division granted Condo Association’s motion for a stay, and simultaneously, the trial court granted Boyle’s motion for reconsideration. The trial court awarded Boyle a final judgment of $563,031.80. The Condo Association then filed a notice of appeal from the final judgment and summary judgment with the Appellate Division.

In an unpublished decision, the Appellate Division held that the indemnification provision covered the attorney’s fees and costs incurred by Boyle in his first-party claims against the Association. However, the Appellate Division reversed the trial court’s award, finding that Plaintiff is not entitled to attorneys’ fees and costs incurred in pursuing his derivative action claim.

The Condo Association (the defendant) further appealed the decision to the NJ Supreme Court. The Court granted their petition for certification. To determine whether Boyle, the plaintiff, could be indemnified for attorney’s fees and costs, the Court employed the canon of contract construction in Kieffer v. Best Buy to interpret the indemnification provision in the Association’s bylaws. In that case, the Supreme Court held that an ambiguous indemnification provision would be “strictly construed against the indemnitee.” Furthermore, because the issues in this case were concerned with attorney’s fees, the Court also relied on the American Rule. Under the American Rule, without statutory or judicial authority or express contractual language, parties are responsible for paying for their own attorney’s fees.

After reading the indemnification provision in the Association’s bylaws in its totality, the Court concluded that… 

• The indemnification provision only indemnified trustees for costs incurred when other unit owners initiate an action against them in their capacity as trustees in absence of any willful misconduct or bad faith actions on their parts. 
• The indemnification provision was ambiguous and must be construed against Boyle. The Court referred to the American Rule, stating that absent express contractual language, there must be affirmative indicia of the intent to indemnify parties for their attorneys’ fees. Due to ambiguity in the indemnification clause, the Court refused to adopt the Appellate Division’s presumption that the indemnification clause allowed plaintiff to recover for attorneys’ fees incurred from his first-party party claims against the Association.

Accordingly, the Court held that the indemnification provision did not cover the attorney’s fees and costs incurred by Boyle in his first-party claims against the Association, reversing the Appellate Division decision.