Are Secret Board Meetings Ever a Good Idea?
By Selena Chavis, Condo Owner Magazine, June 15, 2013
Consider the following scenario.
Board officers of a condominium association work secretly behind closed doors to secure contracts on behalf of the association with companies in which they each own an interest. Other members are not provided the opportunity to give input.
In this case, the motivation behind the “secret” nature of the meeting is obvious, and most owners would easily be able to pinpoint wrong doing. In fact, according to Will Anderson, an attorney with Daniell, Upton and Perry in Daphne, Ala., the effort of the officers to use their position for self-gain could easily result in civil or criminal liability depending on the circumstances.
Not all situations are this black and white, though. Consider another possible scenario.
Newly-elected members of a condominium association board find that previous board members were managing funds unwisely. Along with a lack of discretion associated with expenditures, new board members also identify problems with some contracts that need to be resolved. In an effort to avoid embarrassing members who previously volunteered their time and intended no harm, the newly-elected board decides to convene to correct some of the issues—without notifying association members.
The intention behind the decision seems innocent enough, but was it a good idea?
According to Jay Roberts, an attorney with Becker and Poliakoff in Fort Walton Beach, the answer in Florida is “no.”
“In Florida, there is never a reason for secret meetings,” said Becker noting that while there are a couple of circumstances that would enable a board to meet privately, members have to always be given notice that a meeting is occurring. “You can’t put hurt feelings above the law,” he said.
The Florida Condominium Act specifically dictates that “meetings of the board of administration at which a quorum of the members is present are open to all unit owners” with two exceptions. Florida law provides the following parameters for closed-door meetings:
a. Meetings between the board or a committee and the association’s attorney, with respect to proposed or pending litigation, if the meeting is held for the purpose of seeking or rendering legal advice; or
b. Board meetings held for the purpose of discussing personnel matters.
“You still have to give notice and keep meeting minutes, but they are not open to the public,” Roberts pointed out.
In Alabama, the law is not as specific, according to Anderson. “The Alabama Uniform Condominium Act does not speak specifically about closed meetings,” he said, adding that condominium associations fall under the jurisdiction of Alabama corporate law, allowing more flexibility to conduct business behind closed doors based on the business judgment rule. “As long as actions are performed in ‘good faith,” most would not create [legal liability].”
Even with the allowed flexibilities, Anderson said that he advises his clients to follow similar guidelines to that of Florida law. “I don’t know if there is a place for secret board meetings,” he emphasized. “Closed meetings can create mistrust among owners.”
Speaking anonymously, a condominium owner of a unit along the Alabama Gulf Coast recalled a situation where the board was conducting meetings and conference calls in secret about a reconstruction effort following extensive damage incurred during Hurricane Ivan. Board members would call owners individually to take a “straw vote” on their agenda prior to any formal association meeting.
“This bred a lot of mistrust, especially when the board’s preferred developer turned out to be a relative of one of the board members who wasn’t able to get financing for the project,” she recalled, adding that the protracted time it took to get everyone on the same page ultimately resulted in an inability to get construction efforts off the ground. “Real estate values began plummeting, and it soon became cost prohibitive to build the condo back to the new international building codes. Nine years after Hurricane Ivan, there are only sand dunes where our condo once stood—and fourteen very unhappy, frustrated former condo owners who still don’t trust one another.”
While Alabama law may allow more discretion for board members to act outside of a formal board meeting, Anderson emphasized that potential for negative fallout—like that of the aforementioned example—makes it unwise to pursue anything outside of the full knowledge of owners, with the exception of the legal Florida exceptions. “There are legitimate circumstances where discussions should not be shared with owners,” he said.
Pointing out that an association is a corporate entity acting through a board of directors, Roberts recalled a situation where a board president was suing his own association. “We had to form a legal committee and exclude him,” he said, adding that the entity then has to protect its legal strategy, which lends to closed-door discussions. “There will be matters of attorney-client privilege being discussed.”
In this case, Florida law dictates that notice is provided to owners that a meeting is occurring, but the minutes taken at the meeting would not be disclosed.
Much like the need to protect discussions of attorney-client privilege, the provision for closed-door discussions regarding personnel matters not only protects the privacy of employees but also keeps the rumor mill at bay, Roberts said. For example, if an in-house maintenance employee is not performing a job at par with expectations, board members may need to discuss disciplinary action or the need to fire the employee.
These parameters would only apply to hired personnel, Roberts added, pointing out that firing a board president or board member would have to be conducted in an open meeting.
In a nutshell, Florida law provides specific parameters for closed door meetings but never allows for a situation where a “secret” meeting can occur. In Alabama, the parameters for closed meetings are not as defined, but Anderson suggested that “as a simple rule of thumb—most meetings should be open.”
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