Decoding Deflection
When “Good Judgment” Becomes a Shield for Bad Decisions
February 22, 2026
The Business Judgment Rule is one of the most legitimate protections in nonprofit governance law. It is also one of the most easily weaponized. Understanding the difference between those two things is how owners hold a board accountable, and why the 175 E Delaware Pl. HOA’s current defense of its Holiday Fund position is a case study in getting that distinction exactly wrong. The consequences fall on every unit owner.
Brought to you by Drew McManus, your neighbor in 7908.
The Rule
What the Business Judgment Rule Is All About
The Business Judgment Rule (BJR) is the legal equivalent of a benefit of the doubt. Courts applying the BJR presume that a nonprofit board’s decisions were made in good faith, with reasonable care, and in the organization’s best interest. As long as those conditions are met, a judge will not second-guess the outcome, even if the decision turned out to be wrong.
That protection exists for a good reason. Volunteer board members are not professional executives. Requiring them to be correct every time would make the job impossible to fill. The BJR allows boards to make difficult calls without fear that every unpopular outcome becomes a lawsuit.
But the protection has specific preconditions. The BJR does not apply simply because someone holds a board seat. It applies when the board:
- Acted in good faith: Decisions must be made with honest intent toward the organization’s interests, not as cover for a conclusion reached in advance.
- Exercised due care: Board members are expected to be informed. Relying on counsel is appropriate; using that reliance as a reason not to investigate is not.
- Avoided self-dealing: Conflicts of interest remove the presumption entirely. The rule protects disinterested directors.
At a Glance: Legitimate BJR Protection vs. “Weaponized” BJR (Shielding)
Nixon Parallel
If the Board Voted It, It Must Be Legal…right?
In 1977, Richard Nixon told interviewer David Frost: “Well, when the president does it, that means that it is not illegal.” The claim was not a legal argument. It was a status argument: that the office itself confers immunity, independent of what the office-holder actually does.
The courts eventually saw through Nixon’s claim. Courts have also seen through this version of it. The BJR fails in documented cases of bad faith, gross negligence, self-dealing, and decisions made with zero substantive investigation. What those cases share is that a board mistook the appearance of process for the substance of it.
Governance Catch-22
The Holiday Fund, the Records Request, and the Response
On February 16, during the Owners’ Forum before the 175 E Delaware Pl. HOA’s regular board meeting, I presented a documented case that the Holiday Fund operates under direct board control. The highlights alone make the case:
- Board President appoints committee chairs: The selection of who oversees the fund is not independent. It runs through the Board President.
- Association funds cover operational costs: Printing and mailing for the program are paid from Association accounts.
- Association staff time is allocated: The program consumes staff resources that belong to the Association.
- Sensitive employee data is shared with the committee: The committee uses Association-held personnel data to adjust individual payouts, including, in at least one documented instance, docking distributions for staff on approved medical leave.
In January, I submitted a records request for documentation related to the 2025 Holiday Fund cycle. The Association’s attorney, James Stevens, responded with a three-page letter asserting the fund is independent and no records obligation exists (see: Stevens letter). The letter did not explain how that conclusion was reached.
Then, on February 10, the Board President sent me an email confirming the very elements of board control I had been asking about (see: Board Present email). The Association’s own correspondence became the most direct evidence against the Association’s own legal position.
Good evening. My name is Drew McManus, co-owner of unit 7908.
I’m here to talk about the Holiday Fund. And before the rest of the words even come out of my mouth, I suspect at least some of you have already decided how this is going to go. You’re thinking: here comes the guy who wants to kill the Holiday Fund, ruin Christmas, and won’t rest until all of it is a smoking crater. I get it. That makes for a great villain narrative when it’s passed around between members. But that is not what’s happening here.
I want the Holiday Fund to continue. I also want a program that stops creating unnecessary legal exposure.
For those who aren’t already aware, in January, I submitted a records request about the Holiday Fund. The Association’s attorney, James Stevens, responded with a three-page letter stating the Fund is independent and the Association has no obligation to provide records. But there was no justification for how the Association came to that conclusion and subsequent requests for that information have been ignored.
Instead, on February 10th, I received an email from our Board President that confirmed a number of details showing clear board control over this program.
So let’s talk about what the Board actually controls here. The Board President appoints the committee chairs. Association funds pay for the printing and mailing. Association staff time is allocated to implement and manage the program. And the Association provides sensitive employee data to the committee which they use to adjust individual payouts at their own discretion, even scenarios like docking distributions for staff out on approved medical leave.
These are only the highlights, but they demonstrate that every meaningful decision in this program runs through, and is controlled by, the Association.
And here’s the part I keep coming back to: what does the Association gain by operating this way? If any state regulatory body or the IRS examines this arrangement, they won’t look at how it’s being labeled. They’ll look at the Association’s actions.
All of this matters because every board member is obligated to act in the best interest of this Association. That means preventing exactly this kind of avoidable exposure, not defending it.
And the Association can’t risk kicking this can down the road, hoping it will drift into memory. The outstanding records request is about the 2025 cycle, and it remains unresolved.
The good news is there’s a clean way to address this and remove the legal risk. First, fulfill the records requests for the 2025 cycle and acknowledge that after further review, this is indeed a board controlled committee. Second, for 2026 and beyond, pass a motion establishing a formal annual program with a written policy and equitable distribution.
Lastly, I want to be clear about something. I believe the owners who volunteered on this committee over the years have acted in good faith. But sincere motives don’t resolve these problems.
Failing to take action because “we’ve always done it this way” or using procedural politics to deflect action when the legal risks have been presented to this Board is a choice. But taking action tonight under new business demonstrates another type of good faith that fulfills the Board’s fiduciary duty to every owner in this building.
Thank you all for taking the time to listen.
Warning Signs
Relying On Counsel As A Shield
After I delivered my remarks, board member Susan Walker addressed the board directly. Walker is a commercial litigation lawyer and arbitrator with decades of active work in their field.
Their comment, in full:
“I just want to remind the board that our fiduciary obligation also is to use the business judgment rule. And relying on advice of counsel is a shield. And is prima facie, good business judgment.”
Let’s look at each one:
1) The Missing Steps
The Gist: It is a board’s legal responsibility to use the Business Judgment Rule.
- Here’s The Problem: The result is a legal label dropped in place of an actual explanation, with no evidence that the situation was ever thoroughly reviewed.
- Ask Yourself: How does labeling a refusal to share records as a “legal responsibility” make it anything other than sounding like requirement that owners are not allowed to question?
2) Using Fancy Words (an “appeal to authority”)
The Gist: Hiring a lawyer is prima facie (on its face) good judgment.
- Here’s The Problem: Prima facie is a legal term that basically means “don’t look any deeper.” The argument is that because a lawyer was involved, the case is closed.
- Ask Yourself: How is using professional jargon as a conversation-stopper anything other than a signal that experts have handled it and owners should stop asking questions?
3) Garbage In, Garbage Out
The Gist: If a lawyer gives us a letter, we are protected.
- Here’s The Problem: A lawyer’s advice is only as good as the information you give them. Think of it this way: if you ask a doctor ‘how do I avoid this surgery’ instead of ‘what does my condition actually require,’ you will get a very different answer. The question shapes the answer
- Ask Yourself: How is presenting a lawyer’s letter as a shield anything other than a way to make owners think the issue is resolved, regardless of what that lawyer was actually told?
If you’re interested in learning what you should understand about how governance abuse typically presents itself when the BJR is being misused, here’s a handy checklist:
- Trust Us, We Asked a Lawyer: When a board says it relied on counsel but does not explain what facts it disclosed to obtain that opinion, the reliance claim is unverifiable. An opinion is only as sound as the information it is based on.
- Going Through the Motions: When a board describes having followed a process as evidence that the process was correct, it has made a circular argument. The existence of a vote, a legal letter, or a committee structure does not answer the question of whether those structures were adequate or that each member can explain their vote.
- Lawyersplaining: When a board member with professional credentials uses those credentials to shut down a question rather than answer it, the credentials are functioning as a conversation-stopper rather than an analytical tool. Expertise is worth something when it is applied. It is worth nothing when it is presented as a reason to stop looking.
- Cherry-Picking the Facts: When a records request is denied on grounds that collapse under scrutiny of the board’s own correspondence, the problem is not a legal technicality. The problem is the pattern: ask a question, receive a denial, find the answer in documents the board itself produced.
The Standard
What Good Governance Actually Requires
On February 16, I made two requests.
- Fulfill the outstanding records requests and acknowledge the Holiday Fund is a board-controlled committee.
- For 2026, pass a motion putting the program on a formal, written basis with an equitable distribution policy.
Neither request asks the board to end the Holiday Fund. Both ask for something simpler: a governance structure the board can defend with its own correspondence.
The BJR, properly applied, is not threatened by transparency. A board that followed the right process has every reason to show its work.
What process, exactly, did the 175 E Delaware Pl. HOA follow when it determined that a fund appointed, funded, staffed, and supplied with employee data by the Association is nonetheless independent of the Association? None of that information was provided in response to my questions.
