While the ink in the Third District Court of Appeal’s December 12, 2012 opinion in Coronado Condominium Association vs. La Corte is still wet and the Court’s decision is not final until disposition of any timely motions for rehearing, this case will be of great interest to managers and board members alike as it clearly suggests that a community association should not be subjected to a claim for punitive damages for acts committed by the association’s manager when that manager is acting pursuant to a contract between the management company and the association.
In this case, La Corte was the plaintiff in the underlying litigation who alleged all sorts of misdeeds were committed by the association’s manager. In his proposed third amended complaint, La Corte added a verified motion for leave to add a claim for punitive damages against the association. According to the Court, La Corte described “numerous alleged misrepresentations, acts, and omissions on the part of the employees serving as the property manager for the Association and others working for a contractor performing balcony work at the Coronado Condominium.
The Court pointed out that the individual employee was a licensed property (community association) manager, but not a controlling officer, director, or “manager” of the association as a corporate entity. Similarly, La Corte’s allegations regarding his balcony repair, trespass claims, use of his bathroom, damage to the walls of his unit, and removal of carpeting and plumbing parts, did not involve active, knowing participation by, or the consent or gross negligence of the Association as an entity. The Court held that La Corte’s pleadings did not meet the specific and heightened rules established by the Legislature in Section 768.72(3) of the Florida Statutes, necessary to bring a claim for punitive damages against the association based upon the acts of its manager.
Section 768.72(3), Florida Statutes, provides, that, “in the case of an employer, principal, corporation, or other legal entity, punitive damages may be imposed for the conduct of an employee or agent only if the conduct of the employee or agent meets the criteria specified in subsection (2) of the Statute that defines the requirements for “intentional misconduct” and “gross negligence” and:
“(a) The employer, principal, corporation, or other legal entity actively and knowingly participated in such conduct;
(b) The officers, directors, or managers of the employer, principal, corporation, or other legal entity knowingly condoned, ratified, or consented to such conduct; or
(c) The employer, principal, corporation, or other legal entity engaged in conduct that constituted gross negligence and that contributed to the loss, damages, or injury suffered by the claimant.”
La Corte mistakenly assumed that the alleged misconduct of the individual property manager was akin to acts of misconduct committed by the Association. The Third DCA noted that the manager was not an officer or director and that La Corte’s allegations did not comply with the statutory procedure to impute the alleged misconduct to the Association as employer of the alleged tortfeasors (or as a corporate defendant) for purposes of the punitive damage claim. To decide otherwise, the court continued “would be contrary to the plain language of the statute”.
This case makes clear that a manager must control the corporation for the entity to be subject to punitive damages for the acts of its manager. Remember, a community association manager manages the association’s property, but it is the association’s board and officers that control and manage the corporate entity which we affectionately refer to as the “association”.