Over the last several years, Illinois Courts have issued quite a
few opinions related to community association living. Yet, no
case had more practitioners talking, scratching their heads, and
has silenced even the most vocal board member like Palm v.
2800 Lake Shore Drive Condo. Ass’n.1 The case is commonly
referred to as Palm II because it was the second appeal that
arose from the case originally filed in 2000. After the fourth
or fifth reading of Palm II, it became apparent that the fear
installed by it is not necessary. The purpose of this article is
to provide practical advice to practitioners so as to free their
community association clients from the paralysis they believe
Palm II bestowed upon them.
Palm v. 2800 Lake Shore.
Drive Condominium Association.
Gary Palm, an Illinois lawyer, was a unit owner and former
board member for the 2800 Lake Shore Drive Condominium
Association (hereinafter “2800 Association”).2 He filed suit
against the 2800 Association and the President of the Board
of Directors.3 In 2013, the Illinois Supreme Court ruled on an
issue related to Palm’s document request to the 2800 Association,
under the City of Chicago’s Condominium Ordinance.4 Only
the issues addressed in Palm’s second appeal will be summarized
and highlighted in this article.
Palm alleged that the Association and its Board of Directors
failed to comply with several provisions of the Association’s
governing documents and the Illinois Condominium Property
Act (hereinafter “the Act”).5 Palm alleged that the board of
directors for the 2800 Association violated the Act by conducting
workshops.6 During these workshops, notice was not given
to the members of the Association, but only the board of
directors.7 Yet at these meetings, the board of directors
discussed business related to the 2800 Association.8 The 2800
Association argued that in these workshops no decisions were
made by the board of directors; hence a meeting of the board
did not occur and the 2800 Association did not violate the Act
or its governing documents.9 The Appellate Court ruled that
conducting board business means directing or taking part in
the operation or management of the Association. It further
held that it is a meeting, when a quorum of the board meets to
discuss or address association business, even if no decision is
made.10 Moreover, Appellate Court held that the plain language
of the Act, specifically Section 18(a)(9), does not support the
2800 Association’s interpretation. The Appellate Court held
that the workshops were board meetings and they should have
been opened to the members.11
Palm also alleged that the 2800 Association improperly decided
whether to exercise its right of first refusal by e-mail, instead of
making the decision in an open meeting.12 Palm alleged that the
Board took action on a pay increase for the employees simply
by engaging in a written canvassing of the board members
instead of voting in an open meeting.13 The Appellate Court
again relied on the language of Section 18(a)(9) of the Act in
ruling that the 2800 Association and its board violated the
declaration and the Act.14
Palm alleged that the 2800 Association allowed only one or
more officers, but less than a majority, to approve bids or
contracts.15 The 2800 Association did not contest the fact that the
Board delegated approval of certain contracts to management
with only a segment of the Board approving the contract.16
The problem was that an issue was being submitted and
decided by less than the entire board. The Appellate Court
ruled that this delegation of authority was not allowed by the
2800 Association’s documents or the Act.17
Palm further alleged that the 2800 Association board failed to
vote on litigation matters in an open meeting.18 The Appellate
Court noted that while discussions related to litigation were
not to be discussed in an open meeting, any decisions related
to the issues not allowed in an open meeting, were to be made
in the open meeting.19 The Appellate Court affirmed the trial
court’s ruling on this issue in favor of Palm.20
Next, Palm alleged that the board for the 2800 Association
transferred a surplus from the association’s income to the
association’s reserve account. Palm alleged that this was in
violation of the 2800 Association’s governing documents,
which provided that if at the end of the fiscal year there was
a surplus in the association’s operating account, a credit was
to be given to the members of the 2800 Association.21 The
board for 2800 Association asserted that it relied on the advice
of its legal counsel before it acted.22 It also asserted that the“business judgment rule” protected it from liability.23
However, the board did not submit any evidence of a written
opinion or legal advice from its attorney or accountant.24
The Appellate Court noted that the “business judgment rule”
protects directors who have been careful and diligent in performing
their duties from being held liable for honest, mistakes
of fact.25 The Appellate Court also noted that relying on the
advice of counsel is a proper exercise of the business judgment
rule. However, it did not find the rule applicable to the 2800
Association since there was no evidence that such an opinion
had been given to the board.26 The inadequate evidence
produced by the Association led the Appellate Court to
affirm the trial court’s ruling on this issue in favor of Palm.
Finally, Palm alleged that the board failed to properly give
notice of board meetings to the members.27 It was the practice
of the 2800 Association to mail notice to the non-resident
owners and deliver notice to the resident owners by leaving the
notices in front of the owner’s doors.28 The 2800 Association’s
declaration specifically stated that notice to a board meeting
had to be mailed to the members.29 The Appellate Court
concluded that the trial court correctly determined that the
2800 Association’s board failed to properly give notice of the
How Do We Guide Associations
to Conduct Business After Palm?
Many believe that the ruling in Palm only applies to condominium
associations subject to the First District Appellate
Court. Yet, the language from the Act that the Palm II court
relied on is language that is similar to that within the Common
Interest Community Association Act31 and the Illinois Not for
Profit Corporation Act.32 Hence, it would be very difficult for
an attorney for a non-condominium association to argue that
Palm II is not applicable. So the message from the Judges in
Palm II–that board of directors for community associations
need to be more transparent and diligent–must be heeded by
all community associations. Many boards believe that conducting
business after Palm is impossible. Here are some tips on how
you can help your community association clients comply with
Palm and not meet more often.
1. Conduct workshops but give members notice
Any gathering of at least a quorum of the board to discuss
and address association business is a meeting. For this
reason, we can advise the Board they can still conduct workshops,
so long as notice of the same is given to the members.
2. Limit e-mail communication
The board must be certain not to discuss issues via e-mail.
Such discussions must only occur in an open meeting. We
can advise our boards that they can utilize e-mail to complete
ministerial tasks, i.e., schedule meetings, and forward
information. However, we should advise them not to press“Reply All” as it may trigger a discussion that should only
occur in an open meeting. Likewise, we must prevent them
from voting via e-mail. While the Palm Court addressed
voting via e-mail, it did not address how a board of directors
should address an emergency situation. It also did not
address a board of director’s ability to utilize Section 108.45
of the Illinois Not for Profit Corporation Act, which allows
a board of directors to take action without a meeting of
the board, when unanimous written approval is given by
the board of directors, when such action is not prohibited
by the association’s governing documents.33 Reading the
Condominium Property Act and the Not for Profit Corporation
Act together, it appears that a board of directors can
utilize the Not for Profit Act when necessary and when the
board knows unanimous approval will be granted. Even so,
this should not become the “norm” for the Association, but
instead a tool to be utilized only when necessary.
3. Only authorized authority should be delegated
Most community association’s governing documents
authorize a board of directors to engage the services of a
managing agent. It is also not uncommon for a common
interest community association’s governing documents to
allow a board to delegate certain authority to a committee.
Such language allows a board to delegate authority to
the managing agent or to a member of the board, so that
business can be completed between meetings. The delegation
should also be very specific so that it is clear what can and
cannot be done in between meetings. Boards should be
advised to include such delegation and the specific authority
within the association’s minutes. To stay in line with the ruling
in Palm, this delegation must be approved by at least a
majority of the board.
4. Ensure all votes are made in an open meeting
It is still proper under Illinois law to close certain portions
of the board’s meeting. Yet, the decisions of the board
related to these sensitive subjects must be done in an open
meeting. Therefore, after an executive session, the board
must determine what votes are necessary and it must
make such votes in an open meeting. Likewise, the board
must be sure that its involvement in litigation, whether as
plaintiff or as defendant, is made in an open meeting.
This includes litigation related to the collection of unpaid
assessments. As we direct our boards to take action, we
should advise them to vote on the matter in an open meeting.
We can also advise them specifically what should be included
in their motions.
5. Obtain all advice in writing
and act carefully and in a diligent manner
The board of directors is not expected to have all of the
answers, but it is expected to have a team of professionals
and to work with the professionals. When the board of
directors seeks the advice of counsel, the advice should be
in writing. In fact, any advice from an expert or professional
should be in writing. When the board is taking action based
on our advice, we should be certain we put the advice in
writing and/or directed the board to adopt a resolution explaining the basis for its actions, i.e. what it relied on to
make this decision. This “paper trail” protects the Association
and the individual board members. We need to remind our
board of directors to obtain written opinions.
6. Follow the Association’s governing
documents as drafted
Under Illinois law the board of directors is to strictly comply
with the association’s governing documents. Failure to do so
can be regarded as a breach of fiduciary duty. Not only do we
have to guide our clients as to when it should obtain written
advice from legal counsel, we should also review standard
procedures with our boards of directors. For example, if
boards want to give notice via e-mail, we should advise our
boards as to how this can be done legally. Regularly reviewing
basic “how to’s” with our board of directors can avoid
mistakes likes those made by the 2800 Association. Also, on
an annual basis or as a board undertakes a bigger project,
we can review with our boards how authority has or will
be delegated. Our active involvement early on can avoid
It should be noted that the ruling in Palm relied on provisions
within the law, which were already in existence. Except on
the issue of workshops, we knew the requirements of the
Condominium Property Act and that a board of directors
must strictly comply with its governing documents. While at
first glance, the Palm ruling seemed to create a fundamental
change in the managing of an association, it really only reiterated
the well-established law in Illinois. With proper planning
and managing the association like a corporation, members of
the board do not have to live in fear. In fact, when followed
properly, Palm II should make being on a board of directors
less intimidating and better, as the negative “personal agendas”
of some board members should be eliminated.
1. 2014 IL App (1st) 111290.
2. 22014 IL App (1st) 111290,¶ 3.
3. 32014 IL App (1st) 111290,¶ 1.
4. 2013 IL 110505 (2013). This ruling resulted in a change to the City of Chicago’s ordinance related to
the inspection of documents. Chap. 13-72 Section 080.
5. 2014 IL App (1st) 111290,¶¶5-8.
6. 2014 IL App (1st) 111290,¶ 49.
7. 2014 IL App (1st) 111290,¶ 60.
8. 2014 IL App (1st) 111290,¶¶ 52-60.
9. 2014 IL App (1st) 111290,¶ 52.
10. 2014 IL App (1st) 111290,¶¶ 59-60.
11. 2014 IL App (1st) 111290,¶ 60.
12. 2014 IL App (1st) 111290,¶¶ 61-68.
13. 2014 IL App (1st) 111290,¶ 63.
14. 2014 IL App (1st) 111290,¶ 67.
15. 2014 IL App (1st) 111290,¶¶ 70-84.
16. 2014 IL App (1st) 111290,¶ 74.
17. 2014 IL App (1st) 111290,¶ 78
18. 2014 IL App (1st) 111290,¶ 86-89.
19. 2014 IL App (1st) 111290,¶¶ 87-89.
20. 2014 IL App (1st) 111290,¶ 89.
21. 2014 IL App (1st) 111290,¶ 110.
22. 2014 IL App (1st) 111290,¶ 113.
23. 2014 IL App (1st) 111290,¶ 119.
24. 2014 IL App (1st) 111290,¶ 115.
25. 2014 IL App (1st) 111290,¶ 119.
26. 2014 IL App (1st) 111290,¶ 119.
27. 2014 IL App (1st) 111290,¶ 125-128.
28. 2014 IL App (1st) 111290,¶ 125.
29. 2014 IL App (1st) 111290,¶ 126.
30. 2014 IL App (1st) 111290,¶ 128.
31. 765 ILCS160/1-1, et seq.
32. 805 ILCS 105/101.01, et seq.
33. 805 ILCS 105/108.45.
Gabriella R. Comstock, an attorney at Keough &
Moody. P.C., has been representing community
associations since 1996. Gabriella received her J.D.
degree from Loyola University of Chicago School of
Law. Her undergraduate degree is also from Loyola.
In May 2014, Gabriella was admitted to the College
of Community Association Lawyers, a prestigious
group of attorneys practicing community association law in the United States.