Communication Defined. As corporate counsel to an association, an attorney must communicate with directors and managing agents. An attorney-client communication is a confidential communication between the association's legal counsel and the board or the board's representative. The communication may be oral or written.
Privileged. Attorney-client communications are privileged and cannot be discovered by an opposing party in litigation unless a waiver has occurred. The purpose of the privilege is to encourage full and frank communications between the board and the association's attorney. (Upjohn Company v. United States, 449 U.S. 383, 389.) A waiver of the attorney-client privilege occurs either by voluntarily abandoning the privilege (e.g. consent or disclosure of the communication or a significant part of the communication) or by conduct impliedly abandoning the privilege (assertion of “advice of counsel” defense). (Evid. Code § 912(a); Southern Cal. Gas Co. v. PUC (1984) 50 Cal. 3d 31, 40.)
No Waiver. Section 4935(e) of the Civil Code requiring that meeting minutes generally describe matters discussed in executive session is not a waiver of the attorney-client privilege nor are communications to the membership required by statute. (Seahaus La Jolla Owners Ass’n v. Sup. Ct. (2014), 224 Cal. App. 4th 754, 773; at a membership meeting association attorneys answered questions regarding litigation with the developer.)
Holder of the Privilege. The privilege is held by the association through its board of directors. (Smith v. Laguna Sur Villas.) The privilege is held by the board as a whole and not by individual directors. The privilege may be lost if one or more directors:
Discuss matters with non-directors outside of executive session.
Allow non-directors to attend executive session who have no legitimate purpose for attending.
Distribute executive session minutes or privileged documents to non-directors.
Erroneous Opinion. The L.A. Times ran a column with erroneous information on this subject. The authors of the "Associations" column (Nov. 27, 2005, p. K11) stated that discussion by an association's attorney with its management company "constitutes a serious breach of confidentiality." The authors then advised readers that "If your board signed a management company contract relinquishing that privilege by allowing management employees to make direct contact with the attorney, the board should be sued for breach of its fiduciary duty." The writers of the column were badly mistaken and gave bad advice.
Managing Agents. A corporation can only communicate through its agents and one of those agents is the manager. Accordingly, there is no breach of fiduciary duty and no breach of the attorney-client privilege when the manager talks to the association's attorney on behalf of the board. Such communications are provided for by law:
"client" means a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity..." [Calif. Evid. Code 951, emphasis added.]
Communications between an association's attorney and its managing agent do not lose their confidential character since managing agents are generally necessary to further the association's interests and are reasonably necessary for the purpose of transmitting information between the attorney and the board. [emphasis added, See Evid. Code §952 & §912(d), comment; Benge v. Sup.Ct. (1982) 131 CA3d 336, 346; San Francisco v. Sup.Ct. (1951) 37 C2d 227, 234-235]. Moreover, a liaison between company officials and outside counsel is an "authorized representative" of the company. [State Farm v. Sup.Ct. (1997) 54 CA4th 625, 639.]
Thus, confidential communications between legal counsel and the association's managing agent are legal and privileged.
Does Not Include Members. In an action by owners to compel discovery of privileged communications, the court held that associations are not required to disclose privileged information to owners. As the court noted:
It is no secret that crowds cannot keep them. Unlike directors, the residents owed no fiduciary duties to one another and may have been willing to waive or breach the attorney-client privilege for reasons unrelated to the best interests of the association. . . . "[o]ne can only imagine the sleepless nights an attorney and the Board of Directors may incur if privileged information is placed in the hands of hundreds of homeowners who may not all have the same goals in mind." (Smith v. Laguna Sur Villas.)
Karpoff Article. For a more detailed analysis, see "The Ethics of Honoring the Attorney-Client Privilege" by Michael S. Karpoff presented at the 2009 Community Associations Institute Law Seminar, January 31, 2009. The article is reprinted with permission of the Community Associations Institute. Also see issues involving adversarial directors and confidential information.
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