Fryson v. Towne Estates Condominium Owners, 2010 Del. Ch. Lexis 37 (Del. Ch. February 25, 2010), read opinion here.
Danielle Blount, an associate in our Delaware office, prepared this summary.
In this Court of Chancery decision, the condominium unit owners brought direct and derivative claims against Towne Estates Condominium (“Towne Estates”,) Town Estates Council (“Council”) and Emory Hill Real Estate Services, Inc. (“Emory Hill”), the manager of Towne Estates, to recover costs to replace condominium units and repair the common areas damaged by a fire. The unit owners, as the plaintiffs, also alleged that the Council and Emory Hill should be held liable for procuring an inadequate amount of insurance.
In its decision, the Court determined that the complaint failed to plead facts supporting a rational inference that any failure by the Council in procuring adequate coverage was the result of bad faith or willful misconduct. Although the Court stated that the Council may have been negligent, the code of regulations and the enabling declaration governing Towne Estates exculpated Council members for liability to Towne Estates or its unit holders for any acts that are not the result of bad faith or willful misconduct. As for Emory Hill, the Court determined that Emory Hill was obligated to provide certain information if requested to do so by the Council in the Council’s own efforts to obtain coverage. The complaint failed to show that Emory Hill failed to provide such information after a request.
In addition to the above claims, the plaintiffs advanced numerous subsidiary claims that were styled as derivative. But the Court held that the plaintiffs did not plead particularized facts supporting an inference that the Council is unable to “fairly consider a demand.” The Court granted the Council’s motion o dismiss, granted Emory Hill’s motion for summary judgment and dismissed the derivative claims.