Smith v. Laguna Sur Villas Community Ass'n

Condominium associations may bring construction defect lawsuits against developers without fear of having to disclose privileged information to individual homeowners. Like closely held corporations and private trusts, the client is the entity that retained the attorney to act on its behalf.

I

This litigation has its genesis in a construction defect action involving a 253-unit condominium project in the Laguna Sur development of the City of Laguna Niguel. The project was governed by the Laguna Sur Villas Community Association (Villas). Another group, the Laguna Sur Community Association (the Master Association), owned the development’s open space.

In June 1990, both associations jointly retained the law firm of Duke, Gerstel, Shearer & Bregante (Duke, Gerstel) to sue the developer. They split the legal fees and shared expenses for soils and structural experts.

The litigation proved to be more costly than anticipated and by August 1991 the fees exceeded $450,000. That fall the Villas’ board of directors adopted an emergency assessment of $2,000 per unit. The assessment was imposed without polling the members.

A dissident group of Villas residents was upset by the…