Adams Stirling PLC


QUESTION: What do you do about a board member who shows up drunk at meetings?

ANSWER: To avoid personal liability for their actions/decisions, directors must perform their fiduciary duties "with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances." (Business Judgment Rule.) That standard is hard to meet when a board member attends meetings under the influence of drugs or alcohol.

Reckless Indifference. Under those conditions, a director's judgment is impaired. If the impairment is self-induced, a jury could find that the director was behaving with reckless indifference or deliberate disregard for his/her obligations to the membership, If so, it would be an abdication of their duties as a director. Such behavior is specifically excluded from protection by Corporations Code ยง 204(a)(10)(iv)&(v), i.e., the behavior exposes a director to personal liability.

Fellow Directors. What impact does it have on fellow directors? The worst case scenario is the drunk director gets into a fight with and seriously injures a homeowner at a board meeting. The injured owner then sues the board for not previously taking action against the inebriated director. While the likelihood of success against all directors would depend upon foreseeability of the impaired director's actions, the lawsuit would certainly succeed against the problem director. The plaintiff would also prevail against the association since the director's actions occurred while in his official capacity.

Censure. If the board does nothing, it has the effect of condoning the director's bad behavior--something that could be used against the board at the time of trial. To protect themselves and the association, fellow directors should warn the impaired director to go home and sleep it off and never again appear at a meeting intoxicated. If the bad behavior continues, the board should censure the director.

Removal from Office. If the director is an officer, he can be removed from office by fellow directors. Unseating him from the board is not an option unless the bylaws specifically authorize it. That is something normally reserved for the membership via a recall election. Even so, the board can, on its own initiative, initiate a recall and put the matter before the membership for a vote.

Ethics Policy. If boards have not already done so, they should adopt a "Code of Conduct" or "Ethics Policy" to address these kinds of situations. It gives fellow directors something to reference when talking to a wayward director and provide a stronger basis for a censure.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC