Take proper precautions to ensure helpful, rather
than harmful,
executive session minutes
Bradley J. Epstein,
Esq., Angius & Terry LLP
It is commonly
known that boards may and should refrain from
disclosing executive session minutes. However, did
you also know that there are circumstances when
boards must or should disclose executive session
minutes? Because of the likelihood that, in
litigation, executive session minutes will be
disclosed, in order for your associations to avoid
liability, your boards should take precautions
regarding executive session minutes.
When may
boards refrain from disclosing executive session
minutes?
With some
exceptions, discussed below, the Davis-Stirling Act
allows boards to refrain from disclosing executive
session minutes to homeowners. (Civil Code Section
1365.02) (State law limits boards’ executive
sessions to discussing SEQ
CHAPTER \h \r 1litigation, matters relating
to the formation of contracts with third parties,
member discipline, or personnel matters, or
to meeting with a member regarding the member's
payment of assessments. (Civil Code Section
1363.05))
When should
boards refrain from disclosing executive session
minutes?
Not only are
boards permitted to refrain from disclosing
executive session minutes, but, also, boards should
refrain from such disclosures in order to avoid
their associations incurring liability or adversely
affecting their associations’ positions in
lawsuits.
For example,
if a board discloses a homeowner’s financial
problems, which were discussed in an executive
session hearing, the board could subject their
associations to liability for infringing on the
homeowner’s privacy rights. (California
Constitution, Article 1, Section 1)
When should
boards disclose executive session minutes?
Although
boards may or should refrain from disclosing
executive session minutes, boards should not blindly
refrain from disclosing the minutes in all cases.
There are circumstances where disclosing executive
session minutes may prevent an association from
becoming involved in a dispute.
For example, a
board member may have recused herself from voting in
executive session on whether the association should
enter into a contract with a landscape maintenance
company because the board member was an owner of the
company, and as a result, had a conflict of
interest. Under those circumstances, disclosing the
minutes reflecting the board member’s recusal, could
save the association time and money by avoiding a
dispute with a homeowner who wanted proof of the
board member’s recusal.
However,
boards should be extremely careful when deciding
whether to disclose executive session minutes, and
should not do so without guidance of legal counsel.
Failing to carefully analyze whether to disclose
minutes could result in a waiver of important rights
of the association. For example, if a board decides
to disclose to a homeowner minutes that reflect the
board’s authorization to the association’s attorney
of a bottom-line settlement amount in a construction
defect lawsuit, then a court would likely rule that
the association has “waived” its attorney-client
privilege, and must disclose the minutes to the
developer.
When must
boards disclose executive session minutes in
lawsuits?
Subject to a
few limited exceptions, upon a request by a party in
a lawsuit, an opposing party must disclose executive
session minutes. The legal name for such a request
is a “discovery request.”
The two
primary exceptions to a party in a lawsuit having to
disclose their records upon a discovery request are
when the records (a) consist of information that if
revealed would infringe the privacy rights of a
homeowner or (b) reflect communications between the
board and the association’s attorney.
For example,
if a homeowner sues an association, then a court may
allow the association to refrain from disclosing
executive session minutes which reveal private
information about another homeowner. There is no
clear way to determine when this exception applies.
Rather a court will determine on a case-by-case
basis when this exception allows an association to
refrain from disclosing minutes.
In contrast,
the “attorney-client privilege” (Evidence Code
Section 954) is probably the best protection that
the law gives to parties in lawsuits to refrain from
disclosing records. It is extremely rare for courts
to require an association to disclose executive
session minutes which reflect a board’s discussions
with the association’s attorney.
Also, a
board’s executive session discussions with the
association’s attorney are protected from disclosure
by the attorney-client privilege even if the
association’s manager is present at the executive
session. This is because clients can, without
waiving the attorney-client privilege, disclose
communications to non-clients when “reasonably
necessary” to accomplish the purpose of the
discussion. (See Evidence Code Section 912)
Conversely,
such discussions are not protected from disclosure
if persons who are not board members (or litigation
committee members) or the manager are present at the
executive session. In that event, the association
may inadvertently waive its attorney-client
privilege, and then must disclose the minutes upon
request in a lawsuit.
It is also
noteworthy that the Davis-Stirling Act now provides
that an association must disclose to requesting
homeowners agreements between the association and
its attorneys. (Civil Code Section
1365.2(d)(1)(E)(iv))
What
precautions should managers take in light of
associations having to disclose most executive
session minutes in lawsuits?
Managers
should take the following precautions in order for
their associations to avoid liability or to avoid
compromising their position in lawsuits.
-
Draft
minutes so that they are clear, concise, and
accurate. It is true that most persons,
including court judges, consider statements in
writing to be more credible than verbal
testimony. Extra care should be given to avoid
sentences that could be interpreted more than
one way. For example, it is clearer to state,
“the association’s attorney advised the board to
settle the lawsuit,” rather than “the board
received advice on settling the lawsuit.”
-
Keep the
executive session minutes in a safe place
separate from the open board meeting minutes.
-
Limit to a
clear and concise statement the required
description in the open board meeting minutes of
the executive session matters.
-
Inform
boards that the association will have to
disclose most executive session minutes in the
event of a lawsuit.
-
Ensure
that only board members (and litigation
committee members) and management are present
when the board meets with the association’s
attorney in executive session. The presence in
executive session of persons who are not an
authorized representative or agent of the
association may result in the association
inadvertently waiving its attorney-client
privilege which protects against the association
having to disclose minutes, even in a lawsuit.
Reprinted
with permission from California Association of
Community Managers, Inc. (CACM) Law Journal
(Copyright, 2011, CACM)”
