Business Judgment Rule Only Gets You So Far
Use of the business judgment rule can't protect associations from every type of legal action. Board members who choose not to enforce provisions in the declaration may not be protected by the business judgment rule. In Ekstrom v. Marquesa at Monarch Beach Homeowners Association, 168 Cal. App. 4th 1111, 86 Cal. Rptr. 3d 145 (2008) the California Court of Appeals held that the association had to enforce its restriction on the height of trees in the community to all trees. The court declined to allow the association to rely on the rule of judicial deference—an equivalent to Colorado's business judgment rule.
The Marquesa at Monarch Beach Homeowners Association had determined that the height restriction contained within the recorded declaration did not apply to palm trees, as palm trees can not generally be trimmed or pruned. The court found that nothing in the declaration permitted the association to exclude an entire species of trees from the height and view restrictions simply because the association favored the aesthetic benefit of those trees to the community. The court found that the board's interpretation of the declaration was inconsistent with the declaration's plain meaning and because the declaration did not grant the board the right to adopt rules and regulations that were inconsistent with the declaration itself, the court found that the judicial deference rule did not apply.