McNally v. Sun Lakes Homeowners Association #1, Inc.
At a Glance
| Parties | Colette McNally (elected director/plaintiff-appellant) v. Sun Lakes Homeowners Association #1, Inc. (defendant-appellee). |
|---|---|
| Panel | Presiding Judge Andrew W. Gould, Judge Peter B. Swann, Judge Patricia A. Orozco |
| Statutes interpreted |
Summary
This case arose after an HOA board barred one of its own elected directors from executive-session meetings. The board argued it needed to do that because of confidentiality concerns and tried to justify the move as a committee or governance decision. The court of appeals rejected that position. It held that neither Arizona law nor the association’s bylaws gave the board power to exclude a sitting director from executive sessions. Because executive sessions are where boards discuss legal advice, litigation, personnel, and other major operational matters, excluding a director effectively stripped her of the ability to perform her legal duties. The court reversed the denial of preliminary injunctive relief and made clear that a board cannot sideline an elected director by informal internal action.
Holding
An HOA board lacked authority to exclude a duly elected director from executive sessions. Arizona nonprofit-corporation statutes and the association’s bylaws required the director’s participation and notice rights, and the board could not evade those duties through a committee theory.
Reasoning
The court emphasized that directors of a nonprofit corporation have a statutory duty to manage the corporation’s affairs. In an HOA, executive sessions are not peripheral; they are where major association business is often discussed under section 33-1804. Excluding one director therefore prevented her from carrying out the office to which she had been elected.
The association’s reliance on the committee statute also failed. The court read the committee power in context and refused to let a board majority use it to nullify the management rights of a minority director. If that were allowed, a board could effectively remove or disable any dissenting director without ever using the formal removal and governance procedures provided by law and the governing documents.
Why This Matters for HOAs
This is a practical governance case for disputes over executive sessions, dissident directors, and closed-meeting tactics. Boards cannot lawfully solve interpersonal conflict by freezing one director out of the room where real decisions happen.
For homeowners and directors, the case underscores that governance fights still have to follow statutes and bylaws. If a board wants to remove a director or limit authority, it needs actual legal authority and proper process. Informal exclusion is not a substitute for lawful governance.
