Adams Stirling PLC


  2-Minute Video

Purpose. Executive sessions of the board of directors are provided by statute so boards can address confidential matters. Because they are confidential, members do not have a right to attend the meetings or to review executive session minutes. As provided for in Civil Code § 4935, boards may go into executive session for the following five enumerated matters.

1.  Litigation. Boards may go into executive session “to consider litigation…" Merriam-Webster’s Dictionary defines consider as “to think about something or someone carefully especially in order to make a choice or decision.” Black’s Law Dictionary defines litigation as “A lawsuit. Legal action, including all proceedings.” Based on these definitions both threatened and pending litigation fall under the executive session privilege. See Reporting Litigation to the Membership.

2.  Formation of Contracts. Boards may consider matters relating to the formation of contracts with third parties.

3.  Disciplinary Hearings. Boards should meet in executive session for all disciplinary hearings. The accused member is entitled to attend the executive session for that portion of the meeting dealing with the member's hearing.

4.  Personnel Issues. Personnel matters include anything involving employees including, but not limited to, hiring, firing, raises, disciplinary matters, performance reviews, and adopting or amending employee policies. Filling officer or director vacancies and appointing or removing committee members do not qualify as personnel matters. They need to be done in an open session.

5.  Payment Plans. The board may meet with members in executive session to discuss requests by delinquent members for payment plans.

Other Issues. The above list of topics is not exhaustive and does not exclude other matters that require confidentiality. For example:

6.  Foreclosure. The decision to initiate foreclosure shall be made only by the board of directors of the association and may not be delegated to an agent of the association. The board must approve the decision by a majority vote of the directors in executive session.

7.  Disability Requests. When a disabled person requests reasonable accommodation for their disability. California Code of Regulations 12176(b)(1) requires, "All information concerning an individual’s disability, request for an accommodation, or medical verification or information must be kept confidential and must not be shared with other persons..."

8.  Mental Illness. When a resident has a mental illness that is impacting other members of the association, such as hoarders.

9.  Director Censure. When a director is disrupting meetings, violating confidentiality, harassing vendors and/or staff, etc., the board may need to discuss possible censure of the director. This may involve legal issues, which also puts it under one of the six Davis-Stirling topics for executive session discussions.

10. Termination of a Contract. Boards may not want a vendor to know that it is contemplating the termination of the vendor's contract. There may be legal ramifications that need to be discussed with legal counsel. Although terminating a contract is not one of the approved categories for executive session, canceling contracts should be done in executive session. Before ending a contract, boards often engage in a wide-ranging discussion about problems with the contractor, possible legal consequences related to the termination, and input from legal counsel on how best to minimize legal exposure (potential litigation is one of the approved reasons for discussing matters in executive session).

If the debate about terminating a contract were done openly, it would compromise the association's legal position and expose the board to potential claims from the contractor. Accordingly, discussions related to the termination should take place in executive session. Anytime the board contemplates terminating a contract, it should get the advice of counsel.

11. Potential Liability Issues. There may be other issues of concern over potential liability that need to be discussed with legal counsel. Non-litigation matters, such as legal opinions related insurance, personnel, maintenance, easements, recalls, etc. would also be appropriate topics for executive session. Whenever the association's attorney is giving legal advice to the board, it is protected under Evidence Code §§ 950-962.

Form of Meeting. Executive session meetings can be held by any of the following methods:

Who May Attend. As noted above, members do not have a right to attend executive session meetings. However, that does not mean the meetings are limited to directors only. Directors, managers, recording secretaries, the association's legal counsel, members subject to disciplinary action as well as witnesses (but only for that portion of the meeting involving the disciplinary hearing), and others invited by the board (such as vendors bidding on a project) may attend executive session meetings.

Scheduling the Meeting. Unless otherwise provided in the articles or in the bylaws, executive board meetings may be called by the chairman or president or any vice president or the secretary or any two directors. (Corp. Code § 7211(a)1.) An emergency meeting of the board may be called by the president or by any two members of the board other than the president. (Civ. Code § 4923) Email discussion of director availability for the meeting as well as the date and time for the meeting is allowed. Scheduling discussions are not deemed "board meetings" and do not violate the Davis-Stirling Act.

Notice to Members. Starting January 1, 2012, members must be given notice of executive session meetings of the board. This is required regardless of anything to the contrary in an association's governing documents.

1.  With an Open Meeting. If executive session is held with a scheduled open meeting of the board, it must be included in the open meeting's four-day notice and generally noted in the open meeting agenda.

2.  Between Open Meetings. If a non-emergency meeting is to be held solely in executive session, members must be given notice of the time and place of the meeting at least two (2) days prior to the meeting. (Civ. Code § 4920(b)(2).) If an association's governing documents require a longer notice, they must be followed. (Civ. Code § 4920(b)(3).)

Notice must be posted in a prominent place or places in the common areas and by mail to any owner who had requested notice by mail (at the address requested by the owner). In addition, notice may be given by mail, by delivery of the notice to each unit in the development, by newsletter or similar means of communication, or, with the consent of the member, by electronic means. (See Notice of Meetings.)

Also see Notice of Adjourned Meetings.

Agenda. Notice of an executive session meeting must contain an agenda for the meeting. (Civ. Code § 4920(d).) Because executive sessions are confidential and topics are only generally noted in open meeting minutes (Civ. Code § 4935(e)), agenda descriptions should be brief and general in nature. See sample agenda.

Voting in Executive Session. Boards can vote on matters in executive session. They are not required to convene into an open meeting to cast their votes. For example, if a board meets with the association's attorney to discuss a pending mediation and authorizes settlement at a certain dollar amount, the vote should be done privately. To require that this vote be done in an open meeting would make negotiations impossible since the board's negotiating position would be published to the entire community. As the Court of Appeals noted:

It is no secret that crowds cannot keep them [secrets]. . . . "[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.)

Minutes. Boards must keep minutes of their executive session meetings and generally note their sessions in the minutes of the next open meeting of the board. The board's actions are then generally noted in the minutes of the next open meeting (such as: "The board discussed issues related to the pending mediation."). (Civ. Code § 4935(e).)

Violation of Confidentiality. Directors who violate the confidential nature of information gained in executive session are subject to censure, and personal liability for their behavior, i.e., they lose the protections of the Business Judgment Rule.

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