Women’s Professional Rodeo Association, Inc., and was decided by the Colorado Court of Appeals on August 5, 2021. This most recent case is known as Walker v. On the other hand, if somebody challenges the valid interpretation of an authorized rule, no legal liability to the board should result because of the protection afforded by the business judgment rule. If there is a true justification and provable evidence for those claims, a legal remedy may be available for members against the organization. Those limited circumstances include: fraud, self-dealing, unconscionable contracts, bad faith, arbitrary conduct, and a failure to follow mandatory procedures. This decision cautions that the courts should not second-guess the decisions of an organization except in limited circumstances. The essence of the business judgment rule is that the good faith acts of directors of a nonprofit organization that are within their powers and made within the exercise of an honest business judgment are valid. ![]() ![]() This is the most recent Colorado appellate discussion about the “business judgment rule”, which is an important legal protection for community associations and their board members. If claims alleging rule violations by a board of directors or nonprofit corporation do not involve allegations of fraudulent conduct, self-dealing, or similarly wrongful conduct, the courts will not override the board’s discretionary interpretation and application of validly-adopted rules. ![]() The Colorado Court of Appeals recently issued a decision confirming that a board of directors that reasonably interprets a validly adopted rule or regulation of the association is protected from liability.
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