When acting as a board member, you use board/association counsel to review documents. When you reveal information to other people (attorneys or other), you may be breaching your fiduciary duty to retain confidentiality as a board member.
The mistake was not in saying something. The mistake was in showing the document to your attorney.
Sara A. Austin, Esq.
Austin Law Firm LLC
226 E. Market St.
York, PA 17403
Phone: (717) 846-2246
Fax: (717) 846-2248
The board of directors should select an attorney to represent the association. The association attorney should represent the association, not any particular board member.
If an individual board member wants to hire their own attorney, at their own expense, they can do so. However, the board is not obligated to follow the advice of an attorney representing an individual board member.
The board can certainly consider the comments of the board member’s personal attorney but does not have to follow that person’s advice. I do not believe that it is wrongful for a board member to have their own attorney but the association simply does not have to follow that person’s advice. The association should have its own attorney to advise the association on legal issues and documents affecting the association.
David G. Hellmuth, Esq.
Hellmuth & Johnson
8050 West 78th Street
Edina, MN 55439
Phone: (952) 941-4005
Fax: (952) 941-2337
First and foremost, as long as an issue is not confidential or privacy-sensitive, such as one dealing with an owner’s delinquent account for example, it is not in any way inappropriate for board members to consult with persons outside the board who may have beneficial knowledge, experience or professional expertise regarding a particular issue as to which the board must evaluate and vote, such as a contract with a vendor. To the contrary, because board members have a fiduciary duty to the association to be careful and responsible stewards of the association’s resources, board members can and should seek outside input on any non-confidential and non privacy-sensitive matter where such outside input could be helpful. (I assume for the purpose of answering this question that the information, insight or recommendations from the questioner’s attorney would be provided to the board free of charge. If not, this analysis might be different.)
Although it would be necessary to review the bylaws and other potentially applicable governing documents before giving a definitive answer to this question, the board probably does have the power and authority, if the majority votes in favor of same, to require that no consultation by board members with anyone outside the board may occur in regard to a particular issue or matter, in this case a contract. If, after officially imposing that restriction and memorializing it in meeting minutes or a written memorandum distributed to board members, a board member such as the questioner here then violates it, the board probably does have the power and authority to impose the sanction of disallowing the violating board member from participating in discussions or receiving documents related to the specific matter or issue that was the subject of the outside communication restriction.
But having said this, for a board to implement such a communication restriction and/or impose such a sanction in regard to an agreement that the association is reviewing is plainly unwise and can fairly be viewed as an abuse of the board’s power and authority that is almost surely detrimental to the association. At best, this attitude and approach by the board majority has the effect of depriving the board of potentially useful and valuable input that one board member’s attorney is offering (again, presumably free of charge). At worst, such conduct by the board majority could create the impression that the board majority that is acting in this manner may have an improper ulterior motive for wanting to restrict, squelch and silence outside input in regard to the agreement at issue. After all, the board majority that is acting to sanction the questioner and exclude her or him from further participation could just as easily receive the input from the questioner’s attorney, acknowledge having received it, and simply choose to exercise its discretion and not follow it (preferably, in order to protect itself under the Business Judgment Rule, by noting in the meeting minutes or other written memo its legitimate and well-reasoned justification for rejecting the recommendation from the questioner’s attorney). To instead treat the input from the questioner’s attorney as a threat, and to regard the board member who is offering it as if she or he committed a hostile or disruptive act, most certainly casts the board majority in an unfavorable light and could raise suspicion in the community of an improper ulterior motive by the board majority.
Sean O’Connor, Esq.
Finkel Law Firm, LLC
4000 Faber Place Drive, Suite 450
North Charleston, SC 29405
Phone: (843) 577-5460
There is no legal impediment to having your own attorney look over such a document. There are some things, however, that you should know.
1. Your attorney may not have malpractice insurance with respect to any advice he gives you. He has no official connection with the association, and likely has not reported to his insurance carrier that he is giving advice with respect to association affairs.
2. While most attorneys are fully capable of reviewing a contract, your attorney should not be used as a substitute for allowing the community association’s attorney to conduct his/her review. Community association attorneys, because they deal with similar contracts and with contractors executing the work on a frequent basis, have experience in the bad things that happen with such contracts, and usually insert language needed to cover these contingencies.
Robert C. Griffin, Esq.
Griffin Alexander, P.C.
415 Route 10, 2nd Floor
Randolph, NJ 07869
Phone: (973) 366-1188
Fax: (973) 366-4848
As a director, you have the right to view documents and participate in decisions unless doing so would violate some other duty, such as a conflict of interest. Initially the courts will look to what a director does with confidential information to determine whether they are liable for a breach of their duties, as opposed to barring them from access to that information beforehand. As a practical matter, though, if you have a pattern of breaching your duty of confidentiality to other owners (to the perceived detriment of the association), the board might have reason to limit your access to information. In this case, though, the board’s actions do not seem to relate to your claimed breach. Although you do not say why you sought counsel from your lawyer, legally you cannot be prevented consulting him or her. To begin with, the subject may be one as to which you were concerned about personal liability, such as denial of a purchase application or suspicions of self-dealing. And your lawyer is bound by a stricter duty of confidentiality than you are, so the information is unlikely to go further. Second, there is no claim of conflict of interest other breach that would make your vote voidable. Instead the board simply appears to want to punish you for taking advantage of additional information that you have obtained from your counsel that could influence your vote on the issue. While that may be appropriate for a jury trial, it is not appropriate for a board vote.
Kenneth Jacobs, Esq.
Spolzino Smith Buss & Jacobs LLP
733 Yonkers Avenue
Yonkers, NY 10704
(914) 476-0600 X4102
As an initial matter, the fiduciary duties of a board member includes the duty of confidentiality. A director breaches that duty of confidentiality by, among other things, disclosing to a third party confidential information discussed or reviewed during a board meeting. It may be appropriate, at times, for a director to seek independent external professional advice, but only sparingly and under specific circumstances. It is important to keep in mind that board members act in a collective capacity and should make decisions based on information that is available to all board members. A board member who routinely seeks external advice in connection with board business is not only potentially breaching his duty of confidentiality, but is also making decisions based on information that has not been made available to all board members. So, this is disfavored. Where, however, a board member has legitimate concerns that the board as a whole (or the entity’s retained professional advisers) are not willing to address, external professional advice may be appropriate, and in such circumstances, potentially at the cost of the organization.
With that said, whether your board may preclude you from participating in board business will depend on the entity’s bylaws, resolutions and other governing documents. Some bylaws provide for disciplinary action against a director who breaches his fiduciary duties, including censure, a period of suspension, or even termination. Those bylaw provisions typically include a due process procedure. Generally, the board cannot unilaterally remove a director or implicitly do so by preventing the director’s participation on the board.
Nancy Durand, Esq.
733 Yonkers Avenue, Suite 200
Yonkers, New York 10704
Phone: (914) 476 0600 x4149