Judge issues mixed ruling on HRCA lawsuit

Some elements of secret sale should have been disclosed, court says

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The Highlands Ranch Community Association was ordered to pay $45,000 in legal fees to plaintiffs after a judge ruled the HRCA improperly hid the terms of a contract from association delegates.

The HRCA, a homeowners association that represents tens of thousands of homes across Highlands Ranch, sold off its Highlands Ranch Sub-Association Division — which managed 20 smaller homeowners associations — to Hammersmith Data Management in 2016.

Delegates from the smaller associations cried foul, saying they had not been consulted on the sale, as required by HRCA bylaws, and were given a redacted purchase agreement that blacked out key components, including the sale amount.

Seven delegates filed a class-action suit in early 2017, seeking an unredacted version of the purchase agreement.

District Court Judge David Stevens issued a narrow ruling in the case on June 28, 2019, saying that of seven redacted portions of the purchase agreement, three could arguably be called “trade secrets,” and that Hammersmith had the right to withhold that information so as not to compromise its bidding and negotiating practices.

Because Stevens found that more than half of the redacted portions were improperly blacked out, he found in favor of the plaintiffs, and ordered the HRCA to pay their attorney fees, totaling $45,000.

The lawsuit did not seek judgment on whether the HRCA violated its bylaws by not informing delegates of the sale negotiations.

An unredacted version of the purchase agreement, provided by plaintiff Jed Caswall, lists a purchase price of $265,000.

In a statement from the law firm Lasater & Martin, which represented the delegates, lead plaintiffs sounded off against the HRCA.

“Not only did the HRCA secretly make this deal with Hammersmith, HRCA told no one about it until well after it was signed, and breached every sub-association management contract they had that required approval of such a transaction,” said lead plaintiff Robert Bell, who represented The Highwoods Homeowners Association. “A properly transparent business approach by the Board and CEO Gerald Flannery would have minimized the significant costs and turmoil that affected all of the residents in the twenty sub-associations and their nearly 100 volunteer board members.”

In an email statement, HRCA spokeswoman Jamie Noebel called the situation the result of bad advice.

“This entire situation was a very disappointing undertaking for the HRCA, as the best interest of our members is always our priority,” Noebel said. “We respect the judge's ruling and have responded accordingly. In this situation, we acted in good faith and followed legal advice. We did what we were counseled and respected the confidentiality of the sales contract and did not disclose the details. It is regrettable we had bad legal advice from the onset of this entire situation, if not so there may not have been a lawsuit. When we learned the extent of the mistake, we released the contract for full disclosure and transparency to our members. The HRCA has contracted with a new legal firm to help navigate contractual negotiations to protect the organization in the future.”

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