Court of Appeals hears dispute over gross negligence, fiduciary characterization in HOA lawsuit

The Utah Court of Appeals on Tuesday heard arguments in Fleming v. Delante over whether homeowner George Fleming’s claims against a homeowners-association officer should be treated as statutory negligence claims or as breach-of-fiduciary-duty claims and whether the record contains disputed facts sufficient to send gross-negligence allegations to a jury.

Why it matters: The court’s characterization determines whether the plaintiff had to bring a derivative claim on behalf of the association, and it affects eligibility for attorney fees under provisions that allow fees when a fiduciary-duty claim is found and the litigation posture changes. The outcome could affect how members of homeowners associations bring individual claims for property-related harms.

At argument, counsel for Fleming said the Nonprofit Corporations Act shields officers and directors from liability for ordinary negligence but not for gross negligence, and that Fleming’s amended pleadings were intended to state individualized harms rather than derivative corporate injuries. “The legislature...shielded officers and directors of the corporation for general negligence. It did not shield officers and directors when their actions constitute gross…