Castle Pines North Homeowners Association Number One

Election Review - Page 7-9

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The following day Barrow called Johnston. They had an additional discussion regarding the annual meeting and the two proxies from Writer. Johnston requested that he receive copies of the proxies. Barrow contacted Young and had Young fax copies of the two proxies to Johnston. Thereafter, Johnston called Geoie Writer but did not speak to him. Rather, later that same day Johnston talked to Nickless by telephone. The attorney’s billing records reflect that Johnston presented Nickless three options: Writer should conclude that the Horan proxy counted; alternatively, that the Nickless proxy counted; or alternatively, withdraw both proxies. What no one apparently considered was that since the election was over, options one and three were not available. Nickless does not recall being presented with those three options. Rather, he recalls the discussion centering around the fact that Writer did not intend to influence the outcome of the election and therefore was considering withdrawing its vote altogether.

On September 28, 1998, Nickless sent a letter to Johnston which was received by Johnston on the 29th. In the letter Nickless apologized for the confusion which Writer had caused with respect to the Association election and stated that the letter served as Writer’s final desire with regard to the recent vote and that Writer was “hereby withdrawing both proxies which were submitted.” A copy of this letter was sent to Geoie Writer, Horan and Young. Upon receipt of the letter on the 29th, Johnston called Barrow to advise him of its existence. The following day Johnston had a phone conference with Butler about publishing Nickless’s letter in the Association’s newsletter. Johnston advised Butler that they would have to get Nickless’s permission to do so and they called Nickless to get his permission, which was given. However, the letter for some reason was never published. After September 30, it does not appear that there was any further contact with the Association’s attorneys until October 14, 1998.

Between September 29, 1998, the date of receipt of the Writer letter, and October 4, 1998, the date the decision was first communicated to a third party, the decision was made to give effect to the Writer letter, withdraw all of the Writer votes from the tabulation of the election such that Valiga ended up with 51 votes and LeRolland with 44 votes. This resulted in the reversal of the election with Valiga being declared the winner over LeRolland. There was never any formal meeting or gathering at which this decision was made. Rather, it appears the decision was reached through an informal polling process among Barrow, Butler, Frederick and Maidenberg. There is no evidence that Valiga was involved at all in the decision. As of the night of the annual meeting, Valiga was no longer a Board member or president of HOA #1. Frederick was the one who communicated the decision to Young.

Ultimately, on October 4, 1998, Frederick called Shively and advised him of the new election results and that LeRolland was no longer on the Board. Frederick then attempted to explain to Shively the confusion that had occurred with the Writer ballots. Shively’s response was “don’t tell me this, tell LeRolland” and gave Frederick LeRolland’s E-mail address so that he could contact him, since LeRolland was still in Paris. However, no one ever did. After the Frederick-Shively phone call, Sharon Frederick, who was at that time associated with the newsletter, called Tkach to advise him that he might wish to withdraw the advertisement he had arranged to place in the newsletter congratulating Barrow and LeRolland on the election results since LeRolland was no

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longer a winner of the election. In due course, the October newsletter was sent to all Association members containing a statement entitled “Subsequent Event” which advised all Association members of the change in the election results.

After the change in the election results were made public, Valiga re-assumed his position as a director of the Association. Ultimately LeRolland returned from Paris, whereupon he learned of the loss of the election he was originally advised he had won.

On October 14, 1998, after Mullen had returned from the Philippines, a meeting occurred involving Mullen, LeRolland, Tkach, Schaap, Shively and Jackson in which they discussed the election, the “subsequent event”, and what could be done about it. No formal consensus for action was reached that night. Subsequently Mullen, Schaap and Tkach (collectively “MST”) contacted an attorney, Joel Russman, for purposes of attempting to get matters set straight with respect to the election. This was done without any attempt on MST’s part to first raise the issue with the Board members. After being retained by MST, Russman contacted Johnston on October 19, 1998. During the conversation, Russman expressed his viewpoint that the seating of Valiga and undoing of the election results was improper and if the Board proceeded with the next regularly scheduled meeting for October 21, 1998 without including LeRolland, it would be seating an illegally constituted Board. Russman advised Johnston that he had been authorized by his clients to sue the Board and obtain a temporary restraining order to prevent that from happening. As an alternative, Russman requested that the Board consider postponing the meeting one week so that all could sit down and attempt to determine what happened. Johnston originally advised Russman that he also thought it would be a good idea to continue the meeting so that matters could be sorted out. Later on during the day of the 19th, Johnston had a telephone conversation with Barrow in which he advised him of the potential of litigation from MST concerning the election and the request to continue the meeting to allow for a meeting to discuss the matter. A decision was made not to participate in a meeting with MST and not to continue the scheduled Board meeting. Again, it is unclear who participated in this decision. There was no formal Board meeting; in fact, certain of the Board members, including Valiga, were unaware that the request had even been made.

On October 20, 1998, Johnston’s billing records reflect that he received a message from Barrow that the Board meeting would not be rescheduled. Johnston advised Russman of this fact, who responded that he was left with no alternative but to file a lawsuit and seek a temporary restraining order. The lawsuit was filed on the afternoon of October 20, and a hearing on the request for a temporary restraining order was scheduled for the following day.

On October 21, 1998, a hearing was held in the Douglas County District Court on MST’s request for a temporary restraining order seeking to restrain the Association and the individual members of its Board from conducting an official meeting without seating LeRolland. The hearing lasted approximately 2 hours. At the conclusion of the hearing, the Court found LeRolland was properly elected by a vote in which the proper proxy was counted and LeRolland should stand as the elected member of the Board of Directors. The Court further found that Writer’s attempt to withdraw its vote after the fact was ineffective since one cannot change their votes after an election

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has been concluded. The Court also did not accept any of the Board’s arguments concerning the validity of the Nickless proxy. The Court therefore entered a temporary restraining order restraining the Board from acting without including LeRolland as a duly authorized member of the Board of Directors and further directing the Board to seat LeRolland and to deny Valiga a seat on the Board. The Board complied with the order of the Court and at that night’s meeting LeRolland was seated as a director. At the next monthly meeting, the Board, with LeRolland abstaining, subsequently appointed Valiga back onto the Board to fill a vacant seat.

After the temporary restraining order hearing, the litigation continued. At first the Board considered actively fighting the restraining order. However, after a very short period of time a decision was made to enter into a stipulation to make the temporary restraining order a permanent order of the court. Entering into this stipulation avoided the necessity of additional court hearings. The stipulation was entered into on November 16, 1998. The Board believed that that stipulation should end the litigation. However, MST pressed forward with the lawsuit and pursued a claim to recoup their costs and attorneys fees in obtaining the temporary restraining order and also pursued a claim for declaratory relief. The Association and the Board, through its attorneys, actively contested these claims.

On January 4, 1999, the District Court held another hearing in this case. At the hearing, the Court entered an order ordering the Association to pay MST’s costs and attorneys fees in the amount of $6,824.20, which were the expenses they incurred in obtaining and finalizing the temporary restraining order. Additionally, on February 17, 1999, the District Court entered another order dismissing all of the rest of MST’s claims in the case. When this order was entered MST did file a request with the District Court to have the Association pay their costs and attorneys fees incurred from the date of the temporary restraining order to the date of the dismissal of the case. At a recently held hearing the District Court denied this request and the lawsuit came to an end.

During the period of time that the lawsuit was ongoing, both the Board on the one hand and MST on the other hand, waged what can best be described as a propaganda battle; the Board through the use of the community newsletter and MST through the use of flyers and a website. Materials disseminated by both sides contained inaccurate information and highly inflammatory statements that did nothing other than to fuel and perpetuate the controversy.

The Association’s insurance carrier has reimbursed the Association for the approximate $6,800.00 in legal fees paid to MST; however, it has refused to reimburse the Association for any of its fees.

The net result of this entire process is as follows:

1. LeRolland is seated as a member of the Board of Directors of the Association as originally elected;