Court Rules on Manner of Director Resignations
By Robert Kaye, Esq., Kaye Bender Rembaum
In an oddly reasoned opinion, the Florida First District Court of Appeal has issued a ruling that director resignations should be in writing in order to be valid and enforceable. In the case of Pain Reduction Concepts, Inc. v. Frisbie and Paint Science Solutions, Inc., Case No 1D11-3928, April 24, 2013, the Court reviewed the resignations requirements under Chapter 607 of Florida Statutes (the Florida Corporations Act). Although community associations in Florida are subject to Chapter 617 F.S. (the Florida Not-For-Profit Corporations Act), the provisions on resignations are substantially the same in both statutes. As such, if this decision is not further appealed or there is no other appellate court ruling to the contrary, the holding of this case will have application to community associations in Florida.
Put it in Writing
The Court reviewed the statutory provision that states: “[a] director may resign at any time by delivering written notice to the board of directors or its chair or to the corporation. . .“ and reached the conclusion that a resignation must be in writing, noting that the word “may” is applied to the act of resigning, as opposed to the method of delivery of the resignation. While this decision is contrary to that reached in other jurisdictions considering substantially similar statutory language (notably Delaware), there is no other reported decision on the topic in Florida. As such, until such time as there is another appellate decision or a change in the legislation, the ruling of this case is the law in Florida.
Many associations have reported over the years that, in the heat of the moment at a board meeting, a board member verbally resigned and left the meeting, only to later claim that he or she changed his or her mind on the issue, attempting to rescind the resignation. In other instances, the resigning individual verbally quits and refuses to further participate in the operation of the community. So as to avoid potential confusion and discord on such issue in the future, should a member of the board verbally resign during a meeting or otherwise, it is recommended to obtain a written statement of the resignation from that individual. Of course, the possibility exists that a resigning individual may refuse to provide a written resignation. However, if such individual also refuses to attend meetings or otherwise participate actively as a director, significant problems for the association can exist in operating the association. Consequently, in order to best avoid the possibility of the problems that can occur, the association should consider adopting an amendment to the bylaws of the association to allow for verbal notifications, which is expressly authorized in Section 617.0141 F.S. Please contact your legal counsel for further assistance with the amendment process.