Case Summary
| Case ID | 19F-H1918014-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2019-04-05 |
| Administrative Law Judge | Jenna Clark |
| Outcome | The Administrative Law Judge granted the petition, finding that the Association violated A.R.S. § 33-1804 by failing to notice at least one meeting which was improperly held in closed session. The Tribunal noted that while some executive sessions regarding pending litigation were permissible, meetings regarding vendor changes (management and landscaping) required open session and notice. The filing fee was refunded, but no civil penalty was assessed as the conduct was not found to be intentional or in bad faith. |
| Filing Fees Refunded | $500.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | James Dutton | Counsel | Steven W. Cheifetz |
|---|---|---|---|
| Respondent | Cielo Noche Community Association | Counsel | Lydia Linsmeier; Nicholas Nogami |
Alleged Violations
A.R.S. § 33-1804
Outcome Summary
The Administrative Law Judge granted the petition, finding that the Association violated A.R.S. § 33-1804 by failing to notice at least one meeting which was improperly held in closed session. The Tribunal noted that while some executive sessions regarding pending litigation were permissible, meetings regarding vendor changes (management and landscaping) required open session and notice. The filing fee was refunded, but no civil penalty was assessed as the conduct was not found to be intentional or in bad faith.
Key Issues & Findings
Failure to provide notice of meetings and acting on results of secret meetings
Petitioner alleged the Association violated open meeting laws by failing to provide notice of meetings held between November 2017 and May 2018, specifically regarding the hiring of new management and landscaping companies in executive session without community input or proper notice.
Orders: The Tribunal found the Respondent held at least one closed meeting that should have been open/noticed. Respondent is ordered to pay Petitioner the filing fee.
Filing fee: $500.00, Fee refunded: Yes
Disposition: petitioner_win
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Video Overview
Audio Overview
Decision Documents
19F-H1918014-REL Decision – 693361.pdf
19F-H1918014-REL Decision – 699583.pdf
19F-H1918014-REL Decision – 693361.pdf
19F-H1918014-REL Decision – 699583.pdf
Administrative Decision Briefing: Dutton vs. Cielo Noche Community Association
Executive Summary
This document summarizes the administrative proceedings and final decision in the case of James Dutton v. Cielo Noche Community Association (No. 19F-H1918014-REL). The dispute centered on allegations that the Association’s Board of Directors violated Arizona Revised Statutes (A.R.S.) § 33-1804 by holding "secret" meetings, failing to provide proper notice to members, and taking actions in executive sessions that should have occurred in open meetings.
Following hearings held on January 4 and March 7, 2019, Administrative Law Judge (ALJ) Jenna Clark determined that the Respondent violated the Arizona Open Meeting Law. While the Board’s actions were not found to be in bad faith or intentionally negligent, the Petitioner's request for relief was granted, and the Association was ordered to reimburse the Petitioner’s $500 filing fee.
Detailed Analysis of Key Themes
1. Transparency and the Open Meeting Law (A.R.S. § 33-1804)
The central conflict of this matter was the tension between the Board’s perceived need for privacy during vendor transitions and the statutory requirement for transparency. Arizona law mandates that all meetings of a homeowners' association and its board be open to all members, with very narrow exceptions.
- Violations Identified: The Tribunal found that the Board held at least one closed meeting that should have been open to the community. Specifically, the Board discussed and acted upon the hiring of a new management company (Tri-City) and a new landscaping vendor (Peak) in executive sessions.
- Notice Failures: Testimony revealed a "miscommunication" between the community manager and the Board that led to a complete lack of notice for a meeting held on July 23, 2018.
- The Scope of Executive Sessions: The Board argued that discussions regarding the management company were "employee performance" matters. However, the ALJ ruled that these topics did not meet the strict statutory criteria for closed sessions.
2. Governance and Management Transitions
The evidence highlighted a period of significant transition for the Cielo Noche subdivision, which consists of 164 homes in Queen Creek, Arizona.
- Management Shift: The Association transitioned from Trestle Management Group to Tri-City Management Company. Petitioner James Dutton, a former Board President, argued that the community was denied input on this critical decision, which resulted in a 3% increase in management costs.
- Vendor Influence: The Board also replaced the community landscaper via executive vote. This was a point of contention because the landscaping vendor receives approximately one-third of the community's annual budget.
- Role of the Community Manager: Kari Moyer, the Tri-City manager, testified that she repeatedly had to "issue reminders" to the Board between June and November 2018 that they were not permitted to hold executive sessions for the reasons they were citing.
3. Legal and Procedural Missteps
The proceedings underscored the importance of legal counsel in maintaining HOA compliance.
- Lack of Counsel: Testimony indicated that during the period when many of the contested decisions were made, the Association did not have its own legal counsel, relying instead on advice from the management company.
- Emergency Meetings: The Petitioner provided evidence of "emergency meetings" held in September and November 2018 where the Board failed to read or approve minutes at subsequent open meetings, a violation of A.R.S. § 33-1804(E)(2).
Key Entities and Roles
| Entity | Role | Key Contributions/Findings |
|---|---|---|
| James Dutton | Petitioner | Former Board President; filed the petition alleging secret meetings and lack of notice. |
| Cielo Noche Community Association | Respondent | The HOA governing a 164-home subdivision; found in violation of Open Meeting Law. |
| Jenna Clark | ALJ | Presided over the hearings; issued the final order in favor of the Petitioner. |
| Kari Moyer | Witness | Community Manager for Tri-City; admitted to notice failures and correcting the Board's improper use of executive sessions. |
| David Hibler | Witness | Association Treasurer; testified regarding the Board’s rationale for closed sessions during developer negotiations. |
Important Quotes with Context
On Statutory Requirements
"It is the policy of this state… that all meetings of a planned community… be conducted openly and that notices and agendas be provided… any person or entity that is charged with the interpretation of these provisions… shall construe any provision of this section in favor of open meetings."
— A.R.S. § 33-1804(F) (Cited in the Conclusions of Law to emphasize the legal preference for transparency).
On the Finding of Violation
"Based on a review of the credible and relevant evidence in the record the Tribunal holds that Respondent held at least one closed meeting which should have been held either partly or entirely in open session."
— Administrative Law Judge Decision, Page 12 (The core legal conclusion of the case).
On Notice Failures
"Ms. Moyer conceded that the Board’s July 18, 2018, meeting was not noticed. Ms. Moyer explained that there was a miscommunication between herself and the Board. Specifically, each party believed the other was going to post notice to the community, but neither did."
— Finding of Fact 46 (Contextualizing the lack of notice for a specific meeting).
On Management's Corrective Actions
"Ms. Moyer testified that… after the Board meeting held that day [May 30, 2018] she informed the Board that they were not permitted to hold executive sessions for the reason(s) they did, and that in the future such discussions needed to take place in open session."
— Finding of Fact 43 (Showing that the management company recognized and attempted to correct the Board's errors).
Actionable Insights for Association Governance
Based on the Findings of Fact and Conclusions of Law in this matter, the following principles are established for HOA compliance under A.R.S. § 33-1804:
- Strict Adherence to Executive Session Criteria: A board may only close a meeting for five specific reasons: legal advice, pending/contemplated litigation, personal/financial/medical information of members, employee job performance, or discussions regarding a member's appeal of a violation.
- Vendor Contracts are Open Business: Discussing the performance of a third-party contractor (like a landscaping company) or the hiring of a new management firm generally does not qualify as an "employee job performance" exception and should be handled in open session.
- Mandatory Notice Requirements: Boards must ensure that notice is posted for all meetings, including informal "workshops" where a quorum of the board meets to discuss association business, regardless of whether a vote is taken.
- Emergency Meeting Protocol: If an emergency meeting is called to handle business that cannot wait 48 hours, the minutes must state the reason for the emergency and must be read and approved at the next regularly scheduled meeting.
- Email Voting Limitations: While minor administrative tasks (like architectural requests) might be handled via email per certain bylaws, substantive business and voting should generally occur in a noticed, open forum to avoid "secret meeting" allegations.
- Documentation of Legal Basis: Before entering a closed session, the board must identify the specific statutory paragraph that authorizes the closure.
Study Guide: Dutton v. Cielo Noche Community Association
This study guide provides a comprehensive overview of the administrative hearing between James Dutton and the Cielo Noche Community Association. It explores the application of Arizona Open Meeting Laws, the powers of homeowners' association (HOA) boards, and the procedural requirements for administrative law proceedings.
Section 1: Case Overview and Legal Framework
Case Background
The case of James Dutton vs. Cielo Noche Community Association (No. 19F-H1918014-REL) centers on allegations that the Association's Board of Directors violated state statutes by failing to provide notice for meetings and conducting business in "secret" or executive sessions that should have been open to the membership.
Key Entities
| Entity | Description |
|---|---|
| James Dutton | The Petitioner; a property owner in the Cielo Noche subdivision and former Board President. |
| Cielo Noche Community Association | The Respondent; a homeowners' association for a 164-home development in Queen Creek, Arizona. |
| Arizona Department of Real Estate (ADRE) | The state agency authorized to receive and decide petitions from HOA members regarding violations of community documents or state statutes. |
| Office of Administrative Hearings (OAH) | The independent state agency that conducts evidentiary hearings for the ADRE. |
| Jenna Clark | The Administrative Law Judge (ALJ) who presided over the hearing and issued the decision. |
Governing Documents and Statutes
- A.R.S. § 33-1804: The primary statute in question, which mandates that meetings of homeowners' associations and their boards be open to all members, with specific, narrow exceptions for closed (executive) sessions.
- Covenants, Conditions, and Restrictions (CC&Rs): The enforceable contract between the Association and property owners that empowers the Association to control property use.
- Association Bylaws: The internal rules governing Board conduct, including meeting frequency, quorum requirements, and the ability to act via unanimous written consent.
Section 2: Key Concepts and Legal Standards
The Open Meeting Law (A.R.S. § 33-1804)
The state policy dictates that all meetings must be conducted openly, with notices and agendas provided to members.
Authorized Reasons for Executive Sessions: Under A.R.S. § 33-1804(A), a board may only close a portion of a meeting to discuss:
- Legal advice from an attorney for the board or association.
- Pending or contemplated litigation.
- Matters relating to the job performance of an individual employee of the association or a contractor's employee.
- Personal, health, or financial information of an individual member or employee.
- Discussions regarding a member's appeal of a violation (unless the member requests it be open).
Procedural Requirements for Closed Meetings:
- Identification: The board must identify the specific statutory paragraph authorizing the closure before entering the executive session.
- Emergency Meetings: May be called for business that cannot wait 48 hours. Minutes must state the reason for the emergency and be read/approved at the next regularly scheduled meeting.
- Informal Meetings: Any quorum of the board meeting informally to discuss association business (workshops, etc.) must still comply with open meeting and notice provisions.
The Burden of Proof
In administrative proceedings of this nature, the Petitioner bears the burden of proving the allegations by a preponderance of the evidence. This means the evidence must show that the contention is "more probably true than not."
Section 3: Short-Answer Practice Questions
- What was the central issue the Petitioner paid to have adjudicated?
- Answer: Whether the Association violated A.R.S. § 33-1804 by failing to provide notice of meetings and acting on the results of secret meetings.
- What was the Respondent’s justification for hiring Tri-City Management and Peak Landscaping in executive sessions?
- Answer: The Association argued these discussions related to employee performance (for Trestle Management) and were part of privileged negotiations regarding construction defects with the developer (KHOV).
- According to the Bylaws, what constitutes a quorum for the Cielo Noche Board of Directors?
- Answer: A majority of the number of Directors.
- How much was the filing fee the Petitioner had to pay to the Department?
- Answer: $500.00.
- What was the ALJ’s finding regarding the Board’s conduct?
- Answer: The ALJ found that the Board held at least one closed meeting that should have been open and failed to provide proper notice for at least one meeting (July 18/23, 2018), thus violating the Arizona Open Meeting Law.
- Why did the ALJ decline to assess a civil penalty against the Respondent?
- Answer: The record did not reflect that the Association’s conduct was intentional, negligent, or in bad faith.
- What is required of the Board regarding the minutes of an emergency meeting?
- Answer: The minutes must state the reason for the emergency and must be read and approved at the next regularly scheduled meeting.
- Who were the two primary witnesses called by the Respondent?
- Answer: Kari Moyer (Tri-City Community Manager) and David Hibler (Association Treasurer).
Section 4: Essay Prompts for Deeper Exploration
- The Tension Between Privacy and Transparency: Analyze the Board’s decision to hire a new management company and landscaping vendor in executive session. Discuss whether "employee performance" exceptions should extend to the selection and hiring of third-party corporate contractors, or if such actions fundamentally impact the community's budget and require open-session deliberation.
- Statutory Construction and Policy: A.R.S. § 33-1804(F) states that any person interpreting the statute "shall construe any provision of this section in favor of open meetings." Evaluate the Board’s actions regarding the July 23, 2018 meeting notice. How does the "miscommunication" defense presented by the Association weigh against the state’s explicit policy of transparency?
- The Role of Legal Counsel and Management Advice: During the hearing, it was revealed that Trestle Management and later Kari Moyer provided advice regarding executive sessions. Discuss the extent to which a Board’s reliance on professional management or legal counsel mitigates their liability for statutory violations, specifically in the context of the ALJ’s decision to waive civil penalties.
Section 5: Glossary of Important Terms
- Administrative Law Judge (ALJ): An official who presides over hearings and makes findings of fact and conclusions of law in cases involving state agencies.
- A.R.S. § 33-1804: The Arizona Revised Statute governing open meetings for planned communities.
- CC&Rs: Covenants, Conditions, and Restrictions; the governing documents that dictate the rules of the community and the powers of the HOA.
- Electronic Signature: As defined by A.R.S. § 44-7002(8), an electronic sound, symbol, or process attached to a record and executed by an individual with the intent to sign.
- Executive Session: A portion of a board meeting that is closed to the general membership to discuss sensitive or legally protected matters.
- Petitioner: The party who initiates the legal action or petition (in this case, James Dutton).
- Preponderance of the Evidence: The standard of proof in civil and administrative cases; evidence that has the most convincing force and shows a claim is more likely true than not.
- Quorum: The minimum number of board members who must be present (personally or via communication means) for the transaction of business to be legal.
- Respondent: The party against whom a petition is filed (in this case, Cielo Noche Community Association).
- Stipulated Order: A legal order where both parties agree to certain terms, such as extending a deadline for a decision.
- Unanimous Written Consent: A provision in the Bylaws (Article VII, Section 5) allowing Directors to take action without a meeting if all Directors provide written consent.
Transparency Behind Closed Doors: Lessons from the Dutton vs. Cielo Noche HOA Decision
1. Introduction: The Conflict Over Community Governance
For homeowners in a planned community, the Board of Directors acts as a local government with significant power over property values and daily life. However, this power is not absolute. In Arizona, the law is designed to prevent "secret governance," yet the tension between Board efficiency and a member’s right to transparency remains a primary source of litigation.
The case of James Dutton vs. Cielo Noche Community Association (No. 19F-H1918014-REL) stands as a stark warning to Boards that treat executive sessions as a convenient shield for uncomfortable public business. When even a former Board President—an insider familiar with the gears of power—must petition the state to force transparency, it signals a systemic failure in accountability. The central question of this case remains vital for every Arizona homeowner: When exactly can an HOA Board legally shut its doors, and when does "privacy" become a statutory violation?
2. The Case Context: From President to Petitioner
The conflict within the Cielo Noche Community Association, a high-end development in Queen Creek, began following a leadership transition. James Dutton served as the Association’s Board President from August 2016 until his resignation in November 2017. Upon returning to the rank of a concerned member, Dutton discovered that the governance of the community had shifted toward a culture of closed-door decision-making.
On July 25, 2018, Dutton filed a petition with the Arizona Department of Real Estate, triggering an adjudication by the Office of Administrative Hearings. The core of the dispute was the Association’s adherence—or lack thereof—to A.R.S. § 33-1804, the Arizona Open Meeting Law. The Administrative Law Judge was tasked with determining whether the Board had systematically bypassed notice requirements and improperly used executive sessions to decide matters that, by law, belonged in the public eye.
3. Timeline of the "Secret" Decisions
The hearing revealed a troubling chronology of actions taken between November 2017 and July 2018. The Board frequently utilized executive sessions to conduct business that had direct, significant financial impacts on the community without the membership’s knowledge:
- November 2017: Immediately following Dutton’s resignation, the Board used an executive session to vote on hiring a specific law firm, accept bids for a community reserve study, and deliberate on the retention of their management company.
- April – May 2018: The Board negotiated and signed a contract with Tri-City Management, replacing Trestle Management. This decision not only changed the community’s primary administrative partner but also saddled the homeowners with a 3% increase in management fees—all without a public vote.
- May 30, 2018: In a further closed-door session, the Board voted to replace the community’s landscaping vendor with a company called "Peak."
- July 18, 2018: The Board held a meeting to vote on financial documents without providing any notice to the community. While the Association later claimed this was a "miscommunication," the manager conceded that no notice was posted.
- Secret Administrative Tasks: Beyond major vendor changes, the Board used closed sessions to discuss mundane community business that strictly required open deliberation, including drainage issues, parking variances, gate lighting, and the community website.
4. The "Open Meeting" Standard: A.R.S. § 33-1804
Arizona law is not ambiguous regarding HOA transparency. The statutory construction of A.R.S. § 33-1804(F) mandates that any ambiguity must be resolved in favor of the homeowner’s right to observe:
"It is the policy of this state… that all meetings of a planned community… be conducted openly… any person or entity that is charged with the interpretation of these provisions… shall construe any provision of this section in favor of open meetings."
The Board at Cielo Noche attempted to justify their secrecy through broad interpretations of the law. The following table contrasts those legal justifications with the reality found by the Tribunal:
| Legal Justification (A.R.S. § 33-1804(A)) | The Association's Argument | The Reality & Legal Finding |
|---|---|---|
| Legal Advice (A1): Private advice from an attorney regarding litigation. | The Board argued that negotiations with the developer (KHOV) were privileged legal matters. | The Board held several "legal" executive sessions in Nov 2017 before they had actually secured legal counsel in Dec 2017 or Jan 2018. Secrecy is only permitted for actual legal advice. |
| Personnel Matters (A4): Job performance of an individual employee. | Management and landscaper changes were characterized as "employee performance" reviews. | A.R.S. § 33-1804(A)(4) applies only to individual employees. Management firms and landscaping companies are corporate contractors; their performance is community business, not a private personnel matter. |
| Proper Notice (D/E): 48-hour notice is mandatory for all Board meetings. | The failure to notice the July 18 meeting was a "miscommunication" between the Board and Manager. | Notice is a statutory mandate, not a courtesy. A "miscommunication" does not excuse an illegal meeting. |
5. Key Testimonies: Management vs. Membership
The evidentiary record highlights a Board that disregarded professional warnings in favor of autonomy.
- James Dutton (Petitioner): Dutton’s testimony emphasized the high stakes of these secret meetings. He noted that the landscaping vendor alone accounted for one-third of the community’s budget, and the management company controlled all financial records and resident correspondence. Excluding members from these decisions deprived them of oversight over the Association's most critical financial pillars.
- Kari Moyer (Tri-City Manager): In perhaps the most damaging testimony for the Association, Moyer—a CAAM-certified manager—admitted she had to repeatedly warn the Board from May through November 2018 that they were holding executive sessions for reasons not permitted by law. Despite these professional warnings from a certified expert, the Board continued its practice of "secret" governance.
- David Hibler (Board Treasurer): Hibler, an engineer by trade, conceded that the Board conducted early closed-door negotiations regarding developer settlements without legal counsel present, undermining the Association's claim that these sessions were protected by "legal advice" exceptions.
6. The Verdict: Accountability without Penalties
Administrative Law Judge Jenna Clark ruled that the Cielo Noche Community Association had indeed violated the Arizona Open Meeting Law. The Tribunal found that the Board held at least one closed meeting that should have been open and failed to provide proper notice to the community.
The Order:
- Petition Granted: The Tribunal formally concluded the Association violated A.R.S. § 33-1804.
- Mandatory Reimbursement: Pursuant to A.R.S. § 32-2199.02(A), the Association was ordered to reimburse James Dutton for his $500 filing fee.
- No Civil Penalty: While the Judge did not find "bad faith" sufficient to warrant additional civil penalties, the ruling serves as a permanent record of the Board’s failure to adhere to the strict requirements of Arizona law.
7. Conclusion: 4 Essential Takeaways for HOA Members
The Dutton decision provides a clear roadmap for ensuring Board accountability:
- The Default is Open: All meetings where a quorum of the Board meets to discuss Association business—including informal "workshops"—must be noticed and open. The five exceptions in A.R.S. § 33-1804(A) are to be narrowly construed.
- Corporate Vendors are Not "Employees": Boards cannot hide the hiring or firing of management companies or landscaping firms behind "personnel" exceptions. Those exceptions apply only to individual employees of the HOA or the contractor.
- Notice is a Strict Liability Requirement: There is no "oops" in the Open Meeting Law. If a Board fails to provide the required 48-hour notice, any action taken is a violation of the law, regardless of intent or "miscommunication."
- Emergency Meeting Transparency: Emergency meetings are for true emergencies only. The minutes must explicitly state the "reason necessitating the emergency" and must be read and approved at the very next regular meeting.
Closing Statement
The case of Cielo Noche serves as a reminder that transparency is not a gift granted by a Board; it is a right owned by the members. Homeowners must remain vigilant, and when Boards ignore the warnings of their own professional managers, the Arizona Department of Real Estate stands as a critical venue for restoring the rule of law.
The final decision in this matter was transmitted on April 5, 2019.
Case Participants
Petitioner Side
- James Dutton (petitioner)
Cielo Noche subdivision
Former Board President; property owner - Steven W. Cheifetz (attorney)
Cheifetz Law, PLLC
Counsel for Petitioner
Respondent Side
- Nicholas C. Nogami (attorney)
Carpenter, Hazelwood, Delgado & Bolen PLC
Counsel for Respondent - Lydia Linsmeier (attorney)
Carpenter, Hazelwood, Delgado & Bolen PLC
Counsel for Respondent - Kari Moyer (witness)
Tri-City Property Management Services
Community Manager - David Hibler (witness)
Cielo Noche Community Association
Board Treasurer
Neutral Parties
- Jenna Clark (ALJ)
Office of Administrative Hearings
Administrative Law Judge - Judy Lowe (Commissioner)
Arizona Department of Real Estate - c. serrano (clerk)
Signed minute entries/transmission
Other Participants
- Cindo Dutton (observer)
Attended hearing - Aaron Smith (observer)
Attended hearing - Bob Willis (observer)
Attended hearing - Thomas Pruit (observer)
Attended hearing - Kenny Shepherd (observer)
Attended hearing - Luke Clesceri (observer)
Attended hearing - Carol Clesceri (observer)
Attended hearing - Derek Zeigler (observer)
Attended hearing - Carole Cozzi (observer)
Attended hearing - Anthony Cozzi (observer)
Attended hearing