Supreme Court to Hear Case on Association Rights

Last month the Supreme Court of the United States agreed to consider the case of Mariner’s Cove Townhomes Association v. United States, a decision that could have broad implications on the 60 million Americans living in community associations as well as the directors, officers and managers who oversee them.

The case involves a condo development in New Orleans that had a pumping station installed nearby after Hurricane Katrina. After installing the pumping station that would prevent further flooding in the area, the federal government decided that the proximity the station was to a number of the Mariner Cove Townhomes had substantially destroyed the value of many of those homes.  The government agreed to pay the owners fair market value for their homes. After purchasing 14 of the units closest to the station, the Army Corps of Engineers demolished those buildings.

The association brought suit to recoup the lost assessments that came from eliminating 14 of their 58 units.  Mariner’s Cove argued that the destruction of those units precluded the association from realizing the ongoing stream of income from the association dues.  Mariner argued that its interest in the units meant they were owed payment by the government to compensate for them destroying the buildings.

The U.S. Court of Appeals for the Fifth Circuit ruled for the government, stating that “the right to collect assessments, or real covenants generally” are not subject to the fifth amendment’s requirement that “private property be taken for public use, without just compensation”. The case was appealed to the Supreme Court who agreed to hear the arguments.

The matter brings new issues and exposures for those managing associations, as board members have a fiduciary responsibility to protect the assets of the organization. Contact today to discuss better protecting your board members in a time of increasing regulation and litigation.