Briefing Document: Gounder v. Royal Riviera Condominium Association

Executive Summary

This briefing document synthesizes the legal proceedings and outcomes of the case Paul Gounder v. Royal Riviera Condominium Association. The core issue revolves around the Association’s use of two substantively different ballots during its March 14, 2016, Board of Directors election, a practice the petitioner alleged violated state law and the Association’s governing documents.

The central finding, established after a rehearing, is that the Royal Riviera Condominium Association violated Arizona Revised Statutes (A.R.S.) § 33-1250(C)(2). The violation occurred because an absentee ballot listed six candidates with a write-in option, while a separate ballot distributed at the annual meeting listed seven candidates with no write-in option. This discrepancy deprived members voting by absentee ballot of the opportunity to vote for or against the seventh candidate, thereby denying them their full voting rights.

An initial Administrative Law Judge (ALJ) decision on October 18, 2016, had dismissed the petition, finding no explicit rule against the Association’s actions. However, this ruling was overturned following a rehearing. The second ALJ decision, issued on June 2, 2017, concluded that while ballots need not be identical, any substantive changes must be presented to all members to ensure a fair election. The Respondent’s argument that the issue was moot due to a subsequent election was explicitly rejected.

The Arizona Department of Real Estate adopted the second ALJ’s decision in a Final Order on June 12, 2017. The Association was ordered to reimburse the petitioner’s $500 filing fee, and the ruling was declared a final, binding administrative action.

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1. Case Overview

• Parties:

◦ Petitioner: Paul Gounder

◦ Respondent: Royal Riviera Condominium Association

• Jurisdiction: Arizona Department of Real Estate, Office of Administrative Hearings

• Case Numbers: 17F-H1716002-REL, 17F-H1716002-REL-RHG, HO-17-16/002

• Core Allegation: On June 23, 2016, Paul Gounder filed a petition alleging that the Royal Riviera Condominium Association violated A.R.S. § 33-1250(C)(2) and its Covenants, Conditions, and Restrictions (CC&Rs) by using two substantively different ballots to elect Board members at its annual meeting on March 14, 2016.

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2. Factual Background of the Disputed Election

The facts surrounding the March 14, 2016 election were described as “essentially undisputed” in the initial hearing.

• Election Context: The Royal Riviera development consists of approximately 32 condominiums. The Association has a seven-member Board of Directors. All seven positions were up for election at the March 14, 2016, annual meeting.

• Nomination Process:

◦ In December 2015, the Association notified members of the upcoming election and requested nominating forms.

◦ Three members submitted forms.

◦ Three incumbent board members indicated via email or phone their willingness to continue serving.

• Creation of the Absentee Ballot:

◦ The Association prepared an “absentee/write-in ballot” (also referred to as the “Mail Ballot”) containing the names of the six members who had indicated a willingness to serve.

◦ The ballot included a blank line for a write-in candidate and stipulated that it must be received by 12:00 p.m. on March 14, 2016, to be counted.

• Emergence of a Seventh Candidate:

◦ Prior to the meeting, the Association received absentee ballots with three write-in candidates.

◦ One write-in candidate indicated they were unwilling to serve.

◦ The other two write-in candidates shared a unit and requested that only one of their names, Eric Thompson, be considered.

• Creation of the Meeting Ballot:

◦ To accommodate the seven willing candidates for the seven open positions, the Association prepared a second ballot for members attending the meeting in person.

◦ This “Ballot” listed the original six candidates plus Eric Thompson.

◦ Crucially, this second ballot did not contain a space for write-in candidates.

• Election Results:

◦ Approximately seventeen members attended the annual meeting.

◦ A member, Al DeFalco, was nominated from the floor.

◦ Despite the floor nomination, the seven candidates listed on the meeting ballot received the most votes and were elected to the Board.

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3. Procedural History and Rulings

The case proceeded through an initial hearing, a dismissal, a rehearing, a reversal, and a final administrative order.

3.1. Initial Hearing and Decision (October 2016)

• Hearing Date: October 17, 2016

• Presiding ALJ: Diane Mihalsky

• Petitioner’s Argument: The use of a second, different ballot at the meeting violated A.R.S. § 33-1250(C)(2)’s requirement that ballots “provide an opportunity to vote for or against each proposed action.”

• ALJ Mihalsky’s Conclusion (October 18, 2016): The petition was recommended for dismissal. The judge reasoned that “no statute, CC&R, or bylaw by its plain language prevents Respondent from adding to the ballot that will used at the annual election that names of all members who have indicated a willingness to serve on the Board.” The decision noted that Board members are uncompensated volunteers and found no requirement for the Association to re-contact members who had not submitted nomination forms.

3.2. Rehearing and Second Decision (May-June 2017)

The initial decision was certified by the OAH, and the Petitioner successfully requested a rehearing from the Department of Real Estate.

• Hearing Date: May 17, 2017

• Presiding ALJ: Suzanne Marwil

• Key Arguments at Rehearing:

◦ Petitioner: The addition of a seventh candidate to the meeting ballot deprived absentee voters of their right to vote for or against all proposed actions. The meeting ballot also violated A.R.S. § 33-1250(C)(4) as it was not mailed seven days in advance.

◦ Respondent: No violation occurred, as statutes do not require identical ballots. It is common practice for HOAs to use different absentee and meeting ballots. The matter was moot because a new election was held in 2017.

• ALJ Marwil’s Conclusions of Law (June 2, 2017): The second decision granted the Petitioner’s petition, finding a statutory violation.

◦ Violation of A.R.S. § 33-1250(C)(2) Found: The use of two substantively different ballots was a violation. The decision stated: “Because the members who did not attend the meeting in person were not told of Mr. Thompson’s wiliness to run for the board, these members did not have the opportunity to vote for him and hence were denied their right to vote for or against each proposed action contained in the meeting ballot.”

◦ Clarification on “Identical Ballots”: The ruling explicitly noted that it “does not impose a requirement that ballots be identical; it simply states that substantive changes to ballots must be presented to all members.”

◦ Mootness Argument Rejected: The ALJ found that the subsequent 2017 election did not render the matter moot, stating that the Judge “can and does find that Respondent committed a statutory violation in the course of holding its 2016 election.”

◦ No Violation of A.R.S. § 33-1250(C)(4): The absentee ballot complied with this subsection’s mailing and deadline requirements. A meeting ballot would not need to meet these requirements if it were “substantively the same as the absentee ballot.” The problem arose specifically because the ballots were different.

3.3. Final Order (June 12, 2017)

• Judy Lowe, Commissioner of the Department of Real Estate, issued a Final Order accepting and adopting the ALJ decision of June 2, 2017.

• The order was declared final and effective immediately.

• Mandate: The Respondent, Royal Riviera Condominium Association, was ordered to “reimburse Petitioner’s filing fee of $500.00 within thirty (30) days.”

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4. Key Statutes and Governing Documents

A.R.S. § 33-1250(C) – Voting and Ballots

This Arizona statute provides procedures for voting in condominium associations. Key subsections cited in the case are:

• General Provision: “The association shall provide for votes to be cast in person and by absentee ballot…”

• 1. The ballot shall set forth each proposed action.

• 2. The ballot shall provide an opportunity to vote for or against each proposed action. (This was the basis for the final ruling).

• 3. The ballot is valid for only one specified election or meeting…

• 4. The ballot specifies the time and date by which the ballot must be delivered… which shall be at least seven days after the date that the board delivers the unvoted ballot to the member.

Royal Riviera CC&Rs, Article VII – Membership and Voting

• Section 2: The Association has one class of voting membership, with all owners entitled to one vote per apartment owned.

• Section 4: Every owner has the right to cumulate votes in an election for the Board. The number of votes equals the number of apartments owned multiplied by the number of directors to be elected.

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5. Notable Testimony and Quotes

Witness/Party

Affiliation

Key Testimony or Statement

Marlys Kleck

Petitioner’s Witness

Testified that after being given the new ballot at the meeting, she “hurriedly completed” it, then realized it was more appropriate to use her absentee ballot. She asked for the new ballot back and submitted her original. She stated she “believed that the March 14, 2016 election was a fraud.”

Dan Peterson

Respondent’s Witness

Testified that it was “hard to find seven members to accept Board positions” and that “most elections of Board members were not contested.” Explained the process for verifying candidate eligibility.

Paul Gounder

Petitioner

Argued that the Respondent “had arbitrarily selected the members whom it contacted about serving on the Board and that to be fair, Respondent should have called all of its members about whether they were willing to serve.”

ALJ Diane Mihalsky

First ALJ Decision

“No statute, CC&R, or bylaw by its plain language prevents Respondent from adding to the ballot… the names of all members who have indicated a willingness to serve on the Board.”

ALJ Suzanne Marwil

Second ALJ Decision

“Finding this violation does not impose a requirement that ballots be identical; it simply states that substantive changes to ballots must be presented to all members.”