In Re SBRMCOA, LLC
707 F. App'x 108
| 3rd Cir. | 2017Background
- Sapphire Beach Resort & Marina Condominium Association (the Association) sued Bayside, Beachside, and TSG, challenging a Water Supply Agreement the Board signed that assigned water-supply duties and included an arbitration clause.
- The Association argued the Agreement was void because the Board lacked authority and was coerced; the Declaration required a 67% unit-owner vote to amend.
- District Court initially compelled arbitration; this court remanded for factual development on whether the Agreement amended the Declaration (SBRMCOA II).
- On remand the District Court found the Agreement did not validly amend the Declaration (no 67% vote), but held one provision (making potable water a common expense) was ultra vires and severable, so the Agreement and arbitration clause remained enforceable.
- Association petitioned for a writ of mandamus asserting the District Court failed to follow the appellate mandate; the Third Circuit denied the petition, finding the District Court complied with the letter and spirit of the mandate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Water Supply Agreement was an unauthorized amendment of the Declaration | Agreement altered Declaration and thus required a 67% unit-owner vote; no such vote occurred so Agreement invalid | District Court: Agreement did not validly amend the Declaration; conflicting provisions are void but severable | Court: District Court addressed and found Agreement was not a valid amendment; complied with mandate |
| Whether the Board had authority to enter the Agreement | Board lacked authority if Agreement amended Declaration without vote | Board/Defendants: Board had authority to contract; severable invalid provisions do not void whole Agreement | Court: District Court determined Board had authority because excised Agreement is an ordinary contract the Board could enter |
| Whether ultra vires provisions render entire Agreement (including arbitration clause) unenforceable | Ultra vires provisions (e.g., making water a common expense) invalidates whole Agreement and arbitration | Defendants: Ultra vires provisions are severable; arbitration clause stands | Court: District Court correctly found offending provision severable; arbitration clause not rendered ultra vires |
| Whether District Court followed the Third Circuit’s mandate (writ of mandamus issue) | District Court failed to follow mandate by not treating Agreement as an attempted amendment | District Court: interpreted mandate to require examining conflicts and severability; complied with letter and spirit | Court: Denied further mandamus; District Court adhered to mandate (one judge dissented) |
Key Cases Cited
- United States v. Kennedy, 682 F.3d 244 (3d Cir.) (mandate rule: district courts must follow both letter and spirit of appellate mandate)
- Briggs v. Pennsylvania Railroad Co., 334 U.S. 304 (U.S. 1948) (appellate mandates limit trial-court authority)
- Ex parte Sibbald, 37 U.S. (12 Pet.) 488 (U.S. 1838) (historical statement on scope of appellate mandate)
- CGB Occupational Therapy, Inc. v. RHA Health Services, Inc., 499 F.3d 184 (3d Cir.) (mandate spirit violated when remand outcome is grossly incongruous with purpose of remand)
- Trans Penn Wax Corp. v. McCandless, 50 F.3d 217 (3d Cir.) (standard for issuing writ of mandamus)
- SBRMCOA, LLC v. Bayside Resort, Inc., [citation="596 F. App'x 83"] (3d Cir.) (prior mandamus directing District Court to consider whether Agreement amended Declaration)
- SBRMCOA, LLC v. Bayside Resort, Inc., 707 F.3d 267 (3d Cir.) (distinction between formation challenges for courts and validity challenges for arbitrators)