Opinion
No. CV04-0092738
June 7, 2006
MEMORANDUM OF DECISION
The plaintiffs, Jay S. Koslow and Marilyn F. Koslow, want the court to order the defendant, Woodridge Lake Property Owners Association, Inc., to permit the plaintiffs to inspect and photocopy the financial records and "all other records" of the defendant. The plaintiffs also ask this court to declare null and void that portion of the defendant's by-laws that gives the defendant, in the person of its board of directors, the option to deny access to financial and other records upon a showing of good cause. The plaintiffs seek a declaration from this court that they are entitled to know the job titles, dates of employment, and compensation of the individual employees of the defendant. The defendant asserts that the plaintiffs' demand for access to accounting records and all other records fails to comply with statutory requirements that such requests be made with specificity, in good faith and for a proper purpose. The defendant claims that it is barred by employees' statutory privacy rights from disclosing individual employee compensation. The defendant, Paul Whitby, is an individual who was the chairman of the defendant's board of directors until January 1, 2005. Because Whitby no longer plays an active role on the board of directors of the association, all references herein to the defendant or the defendant association shall mean the Woodridge Lake Property Owners Association, Inc. and its board of directors at the time referenced. Because the composition of the board of directors has changed and the plaintiffs have now been granted access to all records, except individual employee compensation and personnel files the defendant maintains that most of the relief sought by the plaintiffs has been rendered moot.
FACTS
The parties submitted a written stipulation of facts and exhibits. They filed trial memoranda on February 15, 2006. The stipulated facts may be summarized as follows. The plaintiffs are husband and wife, who own and reside in a single-family residence at Woodridge Lake. Woodridge Lake is a planned community consisting predominantly of single-family residential homes on individually-owned lots with uniform covenants applicable to each lot and home. It is a common interest community within the meaning of the Common Interest Ownership Act (CIOA). General Statutes §§ 47-200 through 47-299. The defendant is a Connecticut non-stock corporation that operates and controls the common areas, activities and interests at Woodridge Lake. In accordance with the duly-adopted and recorded Amended and Restated Declaration of Restrictions Woodridge Lake Development, Goshen, Connecticut, owners of lots at Woodridge Lake have designated a board of directors to serve as the defendant's executive board and have enacted by-laws. As defined in the declaration, the plaintiffs are members of the defendant association. They have rights of members as described in the by-laws.
The members of the defendant association finance its operations through annual dues assessments. Officers and directors on the board of the defendant serve as volunteers. They receive no compensation for their services as board members. Pursuant to Article V of the by-laws, the board has the power and responsibility to manage and control the affairs of the defendant association; uphold the provisions set forth in the declaration, the by-laws and any applicable rules and regulations of the defendant; act in all instances on behalf of the defendant; institute, defend or intervene in litigation or administrative proceedings in the defendant's name; exercise any other powers conferred by the declaration or by-laws; and exercise any other powers necessary and proper for the governance and operation of the defendant. The by-laws require the defendant to maintain records of all receipts and expenditures, assets and liabilities, and contracts and agreements, pertinent to the operations of the defendant. Article V, Section 1F of the by-laws requires the board of directors on an annual basis to provide to members of the defendant association, including the plaintiffs, proposed budgets for adoption at the annual meeting, as well as updated actual and end-of-year projected financial data for the then current year. Such financial data shall include details on assets, liabilities, net worth, income, expenses, reserves and unfunded liabilities. The board of directors has been in compliance with these requirements. By letter dated November 19, 2003, the plaintiffs wrote to the defendant's board of directors asking to see those financial records of the defendant showing the title, position and salary being paid to each individual employed by the defendant. After seeking advice from legal counsel, the board of directors orally declined to make the information available. The board cited General Statutes § 31-128f, which protects employee privacy and the confidentiality of personnel records. On January 22, 2004, the plaintiffs wrote the board with a further request for access to all records, as permitted by § 47-260 of the CIOA. By letter dated February 17, 2004, the defendant replied to the plaintiffs, denying the requests of both letters. As to the later request, the board relied upon the provisions of § 33-1236(c) regarding nonstock corporations, which require that members meet certain prerequisites when requesting accounting records. The board felt that the plaintiffs had not been specific in their request to see all records and had not enunciated a proper, good faith purpose. The plaintiffs commenced this action by writ dated March 16, 2004, with return date of April 13, 2004.
Since the commencement of this action, the composition of the board of directors has changed. Subsequent to January 1, 2005, the board has maintained a more open policy towards review of financial records by members of the defendant association. Although the defendant is not willing to disclose individually identifiable salary and bonus information, the defendant is willing to make available to its members the range of compensation of particular classes of positions without identifying specific employees' salaries. Since January 1, 2005, the defendant has used its best efforts to make available to the plaintiffs all financial records requested by the plaintiffs, except for the individual employee salary and compensation information. The plaintiffs have inspected the records provided and have received copies of records selected by them for copying. The defendant now makes available to any of its members, upon reasonable notice and during business hours, the following records:
1. Contracts and bids for contracts procured by the defendant for projects undertaken by the defendant, and services and materials acquired by the defendant in the ordinary course of its business.
2. All records pertinent to financial statements produced by the defendant and the supporting documentation therefor.
3. Records relative to budgeting documents including invoices for work done on behalf of the defendant, and ledgers showing expenditures made by the defendant.
4. Documents maintained by the defendant relative to its corporate existence.
5. Written communications between the board and members of the defendant association.
6. Minutes of all meetings of the board as well as the subcommittees thereof.
7. Bids, contracts, and invoices from suppliers for services and materials, and records of expenditures made by the defendant relative to the foregoing regarding its major capital projects, such as the recently completed construction of its clubhouse.
8. Policies of insurance in effect for the benefit of the defendant and records relative to the premiums charges therefor.
9. All income tax returns filed on behalf of the defendant.
10. Documentation of a non-privileged nature relative to any claim against or legal action in which the defendant, the board, or one of its members acting in his or her capacity as a member of the board is a party.
11. All documentation describing or pertaining to the sale or encumbrance of common elements of the defendant.
12. Such other records of a financial nature that form the basis of line items and proposed budgets for adoption at the annual meeting and prepared financial reports.
The plaintiffs are satisfied with the scope of information now made available to them, with the exception of the refusal of certain individual employee information. The plaintiffs are not seeking any information in the personnel files of individual employees, other than compensation, job titles and dates of employment.
I
The plaintiffs demand access to the financial records and all other records of the defendant. The Common Interest Ownership Act imparts special rights to owners within a planned community. "CIOA is a detailed statutory scheme governing the creation, organization and management of common interest communities and contemplates the voluntary participation of the owners . . . It anticipates group decision-making relating to the development of a budget, the maintenance and repair of the common elements, the placement of insurance, and the provisions for common expenses and common liabilities." Wilcox v. Willard Shopping Center Associates, 208 Conn. 318, 326-27, 544 A.2d 1207 (1988). A member of a nonstock corporation is generally limited in his or her rights to inspect and copy accounting records of the corporation. General Statutes § 33-1236(b). Such a member may inspect accounting records "only if: (1) His demand is made in good faith and for a proper purpose; (2) he describes with reasonable particularity the purpose and the records he desires to inspect, and (3) the records are directly connected with this purpose." General Statutes § 33-1236(c). The rights of common interest owners go beyond those of members of other types of nonstock corporations. "CIOA is a remedial statute and therefore must be afforded a liberal construction in favor of those whom the legislature intended to benefit." (Internal quotations omitted.) Fruin v. The Colonnade One at Old Greenwich Ltd., 237 Conn. 123, 133, 676 A.2d 369 (1996). Recognizing that dues and common charges paid by owners in a common interest community provide virtually all of the dollars to pay the common expenses, the legislature has granted to those owners the unfettered right to scrutinize the accounting records of the association. "All financial and other records shall be made reasonably available for examination by any unit owner and his authorized agent." General Statutes § 47-260.
It appears that the defendant now recognizes that the rights of owners within a common interest community extend beyond those of members of other nonstock corporations. The defendant is no longer requiring that a member explain why he or she wishes to inspect or copy a record. The defendant no longer demands that members make their requests for inspection in good faith or for proper purposes. Such requirements affecting members of other types of nonstock corporations are not imposed upon common interest owners under the CIOA. The plaintiffs, as owners and members of the defendant association, are entitled to view all financial records, including but not limited to, the accounting records of the defendant without meeting the procedural prerequisites of § 33-1236(c).
To the extent that the defendant might refuse a member access to financial or accounting records for "good cause given in writing", as set forth in Article X, Section 2 of the defendant's by-laws, such "good cause" can only be related to the reasonableness of times and places of access. The CIOA permits no waiver or variation as to members' rights under the Act. General Statutes § 47-203.
II
The plaintiffs claim the right to learn the salary, benefits and bonuses of individual employees of the defendant. The defendant invokes General Statutes § 31-128f for the proposition that employee consent is required before such information can be released. That statute states, in pertinent part: "No individually identifiable information contained in the personnel file or medical records of any employee shall be disclosed by an employer to any person or entity not employed by or affiliated with the employer without the written authorization of such employee except where the information is limited to the verification of dates of employment and the employee's title or position and wage or salary . . ." General Statutes § 31-128f. The statute protecting employee personnel information provides less protection for certain types of information. Anyone who is in a position to make a good guess as to an employee's title, dates of employment or salary may acquire verification of that information. Such information is specifically exempted from the high protections of § 31-128f. There is no requirement that the original source of salary information be the employee himself or herself. For example, someone who is entitled to view the payroll checks could deduce such information.
The plaintiffs argue that they are "affiliated with the employer" within the meaning of § 31-128f and, therefore, are privy to individual employee personnel file information. Public Act 80-158 added the words "employed by or affiliated with the employer" to § 31-128f before the original effective date of the statute. The legislative history provides no explanation for the addition of these words. In 1980, "affiliate" bore a legal dictionary definition involving merely an association or membership. It "[s]ignifies a condition of being united; being in close connection, allied, associated, or attached as a member or branch." Black's Law Dictionary (5th Ed. 1979). "Affiliate company" bore a separate definition as a "[c]ompany effectively controlled by another company." Id. In the context of a corporate entity in a 1980 decision, however, our Supreme Court cited the Webster, Third New International Dictionary definition: "`Affiliate' has been defined as a branch or unit of a larger organization; a company effectively controlled by another or associated with others under common ownership or control." Muha v. United Oil Company, Inc., 180 Conn. 720, 727 n. 3, 433 A.2d 1009 (1980). Subsequent editions of Black's Law Dictionary, including the current 8th Edition, exclude every definition separate from a corporate connection. Consistent with the Supreme Court, the Appellate Court has addressed the definition of "affiliate" by adopting Webster's Third New International Dictionary definition and the contemporary Black's definition: "Black's Law Dictionary (7th Ed. 1999) defines `affiliate' as `[a] corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation.'" Lombardo's Ravioli Kitchen, Inc. v. Ryan, 268 Conn. 222, 232-33, 842 A.2d 1089 (2004). Because the defendant association in this case is a corporation, there is no need to speculate as to the meaning of the words "affiliated with" in cases where the employer is not a corporation. When the employer is a corporation, the Lombardo definition of "affiliated" applies. The plaintiffs are not affiliated with the defendant within that definition.
The defendant's accounting records must encompass check ledgers, whether paper or electronic, including every disbursement and receipt. The plaintiffs have the unrestricted right to view all accounting records. The plaintiffs may see all payroll checks and benefit disbursements. If payroll checks are issued by an outside accountant or payroll agency, the plaintiffs are entitled to see the financial records and reports of the defendant that give direction to those who cut the checks. Since verification of the individual payroll information is allowed generally by § 31-128f, there seems no logical reason to put the plaintiffs through the exercise of perusing individual payroll checks and benefit disbursements so that they may deduce the compensation of individual employees before requesting verification. Section 47-260 requires the defendant to provide to the plaintiffs access to all financial records. The plaintiffs are entitled to information concerning individual employee titles, dates of employment, and wages and benefits.
CONCLUSION
The plaintiffs' request for an order declaring null and void a certain December 20, 2003 resolution of the defendant's board of directors has been rendered moot by the subsequent action of the board itself in rescinding that resolution. The plaintiffs' request for an order declaring null and void Article X, Section 2 of the defendant's by-laws is denied. Members of a common interest community need detailed financial information to evaluate the value of the goods and services for which they are paying. The CIOA affords to owners extraordinary rights of access to financial information, including all accounting records. Consistent with those rights, the defendant is permanently enjoined from denying to its members access to information concerning the job titles, dates of employment and compensation of individual employees of the defendant.