Effective January 1, 2012, amendments to the Common Interest Development Open Meeting Act (Civil Code §1363.05) clarify several key aspects of board meeting processes and decision-making. Among the clarifications: the law establishes that executive sessions are board meetings that require posted notice and agendas. However, the notice for executive sessions (two days) will be only half of the notice required for open meetings (four days). Conference call protocols (which are likely to become more commonly used) are now specified in statute. Finally, board discussions and decision-making by email are expressly prohibited unless necessary to address emergencies and, even in that case, only with unanimous consent to the emergency email decision by all directors.
While some express dismay at being forced away from their computer screens and smart phones and daily, if not hourly, involvement by email in association affairs, the new legislation also may permit paving the way for greater efficiency and organization in conducting business, increased interest in attending well-agendized, transparent meetings, and an appropriate adjustment of member and director expectations of themselves and each other. Further, the new amendments to the CID Open Meeting Act encourage better handling of confidential items of business and diffuse some of the intense disputes surrounding currently debatable aspects of open and executive session meeting procedures. And so, while in some aspects the new amendments might be perceived to be a burden especially by boards who meet quarterly or who actively use email to conduct association business between meetings it also creates opportunities that can facilitate better operations.
Under the CID Open Meeting Act, decisions of the board are generally required to be made at a meeting, thus making that term essential to understand. The CID Open Meeting Act is the community association version of the Ralph M. Brown Act, the body of law in California that requires open meetings for local government agencies (such as cities, counties and special districts.). Like the Brown Act, the purpose of the CID Open Meeting Act is to promote transparency in decision-making by association boards of directors and committees comprised of a majority of directors. The point of the law is to ensure that members of an association have the opportunity to hear their board debate the pros and cons of proposed actions, to watch the decision-making, and to understand and appreciate the reasoning that goes into it.
While the CID Open Meeting Act has always contained a definition of a meeting, the amendments provide much needed clarification of several common situations. SB 563, the bill that was enacted, amends the definition of a meeting to mean either a face-to-face gathering of or a conference call among a majority of directors. It is now clarified that a meeting includes both open and executive session gatherings of the board. Specifically, section 1363.05(k) provides that a meeting is now either:
A congregation of a majority of members of the board at the same time and place to hear, discuss, or deliberate upon any item of business that is within the authority of the board
(2) A teleconference in which a majority of the members of the board, in different locations, are connected by electronic means, through audio or video or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the association and otherwise complies with the requirements of this title. Except for a meeting that will be held solely in executive session, the notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend and at least one member of the board of directors shall be present at that location. Participation by board members in a teleconference meeting constitutes presence at that meeting as long as all board members participating in the meeting are able to hear one another and members of the association speaking on matters before the board.
Pursuant to the amended statute, meetings in a traditional sense (e.g., a majority of board members gathering in-person to discuss and decide upon agendized items) are not changed. However, the formal definition and rules concerning board meetings are expanded to include conference call meetings of the type that are being used more and more frequently.
The following examples are instructive as to what constitutes a meeting according to paragraph (1):
Example 1: Three of five Board members gather at the mailboxes and chat about the proposed roofing project. Is this a meeting?
Yes, a majority of members of the Board are in the same place at the same time, discussing an item of business within the authority of the Board.
Example 2: Three of five Board members gather at the pool and plan a surprise birthday party for one Board member's spouse. Is this a meeting?
No, the planning of a private party is not an item of business. It is just a social gathering. However, if association funds were going to be used to pay for the party (e.g., quarterly birthday celebrations for all ages), then the gathering would be a meeting. And since perception is sometimes stronger than reality, a board that goes out of its way not to discuss official association business when the board is together for purely social functions is a respectful board.
Example 3: The Board gathers in executive session to discuss member discipline and legal matters. Is this a meeting?
Yes, SB 563 provides that executive sessions are meetings. They simply are not meetings that are open to the general membership.
In specifying that executive sessions are meetings, the legislation imposes new notice and agenda requirements for them. Moreover, the amendments intentionally override older bylaw provisions that might otherwise require a board to first meet in an open session (with requisite four days' notice and agenda) before the board can go into executive session. Where the only reason a board is meeting is for an executive session purpose, it now need not go through the open meeting procedures. As a trade-off, non-emergency executive sessions will now require two days' notice and general agendizing for meetings held solely in executive session (as opposed to four days' notice and specific agendizing for open meetings).
The new agenda requirement for executive sessions must be handled with care, as executive session agendas will now both be required to be posted in the common area and be available to the members on request. The board must be particularly careful, for example, to maintain confidentiality involving owners who might be disciplined in executive session or the specifics of litigation that the board plans to discuss with counsel. The law permits broad categories to be described in executive session agendas, such as:
Member access to executive session minutes remains unchanged by the new legislation. Such access is not permitted. Instead, a board must also still note the general subject of each executive session in the minutes of its next open meeting.
The prevalence of conference call meetings in recent years has opened up opportunities for more members to serve on their boards of directors and, at the same time, introduced new challenges in terms of properly conducting such meetings with transparency. Consider whether the following example is a meeting:
Example 4: Five of five Board members have a conference call to consider matters related to the budget. Will this be considered a meeting that calls for posted, agendized notice and include members?
Yes, this squarely falls within the second definition of a meeting directors by conference call discussing and deliberating an item of business within their authority. A specific conference call protocol (see statutory language above) is required, with the goal being to ensure transparency and meaningful member oversight of board decision-making.
Teleconferences must be conducted at a meeting site where interested members can attend in person. The notice of meeting must state the place where at least one board member will be located with a speaker phone. The equipment used must enable all directors to hear each other and to hear members speaking to the board during open forum, and vice versa.
An emergency meeting is one in which: (1) circumstances that could not have been reasonably foreseen, (2) require immediate attention and possible action by the board, and (3) notice is impracticable. See Civil Code §1363.05(g). The definition of an emergency meeting is unchanged by SB 563.
Broad authority to conduct emergency meetings absent notice and an agenda enables boards to respond nimbly to emergencies as defined above. However, care must be taken not to abuse this power. Emergency meetings can only be held when notice is truly impracticable and not for reasons of convenience.
The procedure by which special or emergency meetings are arranged is often found in an association's bylaws. Subdivision (g) of the CID Open Meeting Act addresses the issue as well. Pursuant to that subdivision, an emergency meeting of the board may be called by the President or by any two members of the board other than the President. Emergency meetings may be conducted in three ways: (1) in person, (2) via conference call, or (3) via email if the board's decision is unanimous and properly documented.
Indeed, emergency meetings are now the only scenarios in which board decision-making by email is authorized, including email exchanges that lead to a collective concurrence among a board majority prior to a meeting. As a result, most board discussion of association business by email is now prohibited.
Subdivision (j)(2)(A) of the CID Open Meeting Act now states:
Notwithstanding Section 7211 of the Corporations Code [which permits both decision-making by electronic means and decisions by a corporate board to be made outside of a meeting by unanimous written consent], the board of directors shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail, except as specified in subparagraph (B). (emphasis added.)
Subparagraph (B) contains the sole exception the board may use email as a method of conducting a meeting (i.e., to discuss, deliberate and decide matters) by email but only in emergency situations, only if the resulting decisions are unanimous, and only if the unanimous written consent or consents are filed with the minutes of board meetings.
The legislature did not enact email constraints to make directors' lives more difficult, but to promote transparency in board decision-making. Conducting association business at open meetings embraces members who want to stay abreast of board decisions, particularly those of financial or personal importance, and minimizes disputes about how and why a board reached the decisions that it did. The email constraints in SB 563 allow the entire board to discuss, deliberate and decide important business issues, not just those with access to email 24/7. In this way, all directors fully participate and are engaged in decision-making that is sometimes very difficult and wrought with compromises and challenges. This also permits the board to consider member comments made in open forum, which better protects both the members and directors from belated disputes.
Limiting board email communication between meetings could have several other benefits to associations. While seemingly inefficient, it can actually save time for everyone by inspiring better organization of scheduled meetings. Managers and board members can be freed from continual email exchanges, often on a daily basis and sometimes numbering in the dozens of messages and back-and-forth on a subject. The board prepares for its meeting by studying a single board packet that consolidates relevant information. Limiting email conversation can enhance communication and promote a businesslike approach to board meetings. It can also discourage over-personalizing issues and angry exchanges. Once an email chain descends to this level, constructive discussion by the board team is over. The hurt feelings of those involved may linger long after the misunderstandings are resolved.
Finally, from a legal perspective, limiting email communication, especially freewheeling board discussions, helps keep association business secure. One negative aspect of email is that once sent, a permanent communication can be forwarded to anyone without the sender having any control over the dissemination of the message. If no emails are created, they cannot be forwarded to unauthorized recipients. It is critical to remember that while the Brown Act provides members of local public agencies immunity from personal liability for comments made during deliberations in legislative settings, association directors are not afforded such protection. An association and its members can be held liable for defamatory or harassing remarks made by individual board members during email discussions. As a result, creating permanent written records of email remarks was already strongly discouraged.
Potential embarrassment aside, email exchanges can also put the association at greater risk, especially if litigation ensues. Discovery in litigation today routinely includes emails and other electronic documents. If an association becomes involved in litigation, relevant emails may be discoverable, regardless of whether they express the final, or even accurate, decisions of the board.
New protocols will be needed to aid boards in emergency decision-making by email. First, the need for an emergency meeting must be carefully considered. Examples of emergency decision-making for which notice might not be practicable might be major storm damage resulting in a massive water leak on common area, a serious conduct violation by a resident that results in police activity, or the need to seek a temporary restraining order. An emergency would not be a decision on a routine matter occurring in more than four days, as a special meeting of the board (including by conference call) can reasonably be noticed and agendized for such scenarios.
Once the need for an emergency meeting is determined, the meeting itself is called by the President or any other two members of the board. Action at an emergency meeting conducted by email requires unanimous written consent.
As a result of this unanimity requirement, if all directors do not approve the emergency action being considered by email, there is no approval of the decision. In such a case, the board would instead conduct the emergency meeting via an in-person meeting or by conference call, which would permit a decision to be made by a majority of the board.
After the emergency email meeting, emails documenting the subject and each director's consent should be printed out, attached to an explanatory resolution that justifies the emergency and gives the decision context, and filed with the minutes of the meeting.
The best strategy for dealing with the new prohibition on email meetings is for the manager and board to be prepared. Comprehensive agendas and supporting information should be prepared for every open meeting. Executive sessions need to be planned for.
The next healthy habit for boards to adopt is to be explicit in the direction given to management and in the delegation of tasks so that association business can be efficiently accomplished between meetings. The amendments to the CID Open Meeting Act now specifically address the authority of the board to delegate some types or levels of decision-making to the President, management, or committees comprised solely of directors (but not a majority of directors).
Use Committees and Committees of the Board
Some projects, for example large capital projects such as roofing or litigation matters, require frequent conferring and interim decision-making. If the board is unwilling or unable to meet more frequently or be available on short notice, then committees of the board can be formed to handle these matters. Advisory committees can also do legwork on dense and sustained subjects, reporting out and making recommendations for board decisions at scheduled meetings.
While no statute can anticipate every circumstance, amendments to the CID Open Meeting Act provide much-needed clarity as to what constitutes a meeting and how meetings are to be conducted. In particular, the legislature has now confirmed that executive sessions are meetings and must be noticed and agendized in a particular manner. Further, useful technological advances such as telephone and video conferencing are encouraged, within certain parameters. The free-form use of email among a majority of directors in lieu of formal meetings is prohibited, promoting transparency in association decision-making. Boards still have a wide number of ways in which to respond to emergencies, including meeting via email if all directors agree to the decision being made and such decisions are properly documented.