Avoiding E-mail Pitfalls As a Director

Did you know that when you send electronic mail as a Board member, it may not be private? The California Electronic Discovery Act, a new California State law, provides that e-mails, even deleted e-mails, may be subject to subpoena and disclosure to the opposing party in a lawsuit. The following are tips to help you avoid some common pitfalls that arise from carelessly drafted and handled e-mails:

1. Establish an official e-mail address for your e-mail as a Board member, separate from your personal e-mail address. Doing so may allow you to keep your personal e-mails from being subject to subpoena and disclosure to the opposing party in a lawsuit. This will also remind you that your official e-mail address is for official business correspondence on behalf of the Board and the association.

2. Refrain from discussing issues scheduled to be discussed in an open Board meeting. If Board members discuss such issues in e-mails, then pursuant to California law, they risk liability and such action could result in the voiding of Board decisions based on the discussions.

3. Limit e-mail content to discussing executive session and emergency matters only. California law provides that executive session decisions must be limited to the following matters: litigation; formation of contracts; member discipline; personnel matters; and meeting with a member regarding delinquent assessment payment plans. California law also provides that emergency matters are limited to circumstances that could not reasonably be foreseen by the Board and that require its immediate attention and action.

4. Avoid drafting e-mails when you are emotional. Allow yourself a brief cooling off period before sending out any correspondence. When some time has passed, then calmly decide whether to send your e-mail. Remember that once you put something in writing, it is a permanent record. Keep your correspondence free of jokes, which you may not be comfortable explaining at a later time. Remember also that deleted e-mails are not really deleted – they remain in the memory of a computer. Some disputes between Board members are better left unwritten, if at all possible. The Board should present itself as a cohesive unit working for the benefit of the association and your correspondence should demonstrate that.

These guidelines should help limit your liability while serving on the Board, and will heighten your awareness that e-mails may not always be private. Keep in mind that these are only meant as general guidelines.The area of e-mail communication is complex and rapidly evolving, so we recommend that you contact Angius & Terry for guidance on your specific matter.

Does a Delinquent Director or an

Interested Director Spoil the Vote?

Has this situation ever happened to you? On the agenda for the Board of Directors meeting is the approval of a newly proposed contract with Hack and Whack Landscapers. Of the five member Board of directors, one director is the owner of Hack and Whack Landscapers, another director is delinquent in the payment of their assessments, and two other director are absent from the meeting. The bylaws specify that three directors are required to make a quorum. Is a quorum present to vote on the matter? Is the owner of Hack and Whack Landscapers disqualified from being counted towards the quorum? Is the delinquent director disqualified from being counted towards the quorum?

Although the owner of Hack and Whack Landscapers would be considered an “interested director,” he or she may still be counted towards quorum. However, this director must refrain from voting on approval of the contract. Furthermore, in order for a contract with a director to be valid, (1) the material facts of the contract and of the director’s interest in the company must be fully disclosed to the Board and (2) the contract must be just and reasonable to the association.

An association’s governing documents (typically the bylaws) usually require that persons to be elected to the Board must be members of the association in good standing, which means that they cannot be delinquent in payment of assessments at the time of their election. However, once on the Board, a delinquent Board member may be able to still serve and vote on association matters unless the association’s governing documents specify that a Board member may be removed for failing to maintain good standing status. Also, keep in mind that that, just as with other association members, the delinquent Board member may be entitled to a hearing before a finding is made that he or she is not in good standing.

Therefore, while the owner of Hack and Whack Landscapers would be able to be counted towards the quorum, he or she must refrain from voting on the contract. With regard to the delinquent Board member, a review of the association’s governing documents should be performed to determine their right to sit on the Board and vote. We encourage you to contact Angius & Terry if you face these or similar issues with regard to Board members at your association.