Recall Quorum

Source: Adrian J. Adams Esq. 

QUESTION: The battle goes on in our community… the second recall election in six months! If they can’t make quorum, the petitioners believe they can adjourn the meeting to a new date with a lower quorum. I thought a recall died if it failed to meet quorum.

ANSWER: It depends on your bylaws. As you already know, special membership meetings are ridiculously easy to call. Only 5% of the membership need to sign a petition to trigger a recall meeting. That means quorum is the key issue.

Bylaws. Following is a typical bylaw provision:

In the absence of a quorum at a Members’ meeting, a majority of those present in person or by proxy may adjourn the meeting to another time… The quorum for such a meeting shall be at least twenty-five percent (25%) of the total voting power of the Association, present in person or by proxy.

No Exception. The provision makes no exception for recall meetings. Since recall meetings are membership meetings, a majority of those present can adjourn to a later date where the quorum drops to 25%. The unintended consequence is that a small number of members can recall an entire board. If only 25 of 100 members cast ballots, the recall meets the reduced quorum. Of the 25, only a majority, i.e., 13, are needed to approve the recall.

I find it troubling that in a 100-unit association, five members can trigger a special meeting and 13 members can recall an entire board. This scenario lends itself to a great deal of abuse as described in my October 26 newsletter. However, a careful reading of the bylaws with the Davis-Stirling Act provides some balance.

Majority of Those Present. The bylaws state that “a majority of those present…may adjourn the meeting” and the Davis-Stirling Act provides that:

each ballot…shall be treated as a member present at a meeting for purposes of establishing a quorum. (Civ. Code §5115(b).)

That means ballots count as members in the room. If 30 ballots were cast and only ten members physically attend the meeting and all ten vote for adjournment, ten is not a majority of forty. Therefore, the motion fails and the recall dies.

RECOMMENDATION: Rather than go through mental gymnastics, associations should amend their bylaws. I recommend eliminating cumulative voting, proxy voting, and quorum requirements for the election of directors (which eliminates the need for reduced quorums). All other meetings (including recalls) require a majority quorum.

Easy-Peasy. With those amendments, elections are easy. There are no reduced quorums and no cumulative voting calculations to create confusion. It’s a straightforward, two-step process. Did the petitioners make quorum? If not, the recall dies–there are no reduced quorum meetings. If they made quorum, did a majority approve the recall? It’s a straight up or down vote to remove a director or an entire board. No further calculations are needed.

If association’s have not already done so, they should update their documents with the above changes along with recall restrictions I described in prior newsletters. Doing so makes for low-cost, low-litigation elections. Contact me if you need assistance.

Nominees for Recall Elections

Source: Adrian J. Adams Esq. 

QUESTION: In the event of a recall of the entire board is it necessary to vote at the same time for new directors or do we operate without a board for a brief period?

RESPONSE: An association should never operate without a board. By law, corporations are required to have a board of directors:

Each corporation shall have a board of directors. . . . the activities and affairs of a corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board. (Corp. Code §300; §7210.)

Replacing Directors. Since an association cannot operate without a board, you have two choices: (i) the recalled board stays in place until a new board is elected or (ii) a new board is elected at the same meeting as the recall.

Option #1. I don’t recommend leaving a recalled board in place. If the membership is so unhappy that it votes to remove an entire board, they tend to get emotional if the recalled board continues running the association for another two or three months while nominations are solicited and a second election held.
Option #2. Electing a new board at the same meeting is the better course of action. Before distributing a recall ballot, the board should solicit nominees and include them on the ballot. At the meeting, the inspector of elections first establishes a quorum. If there is no quorum, the recall fails and everyone goes home. If there is a quorum, the inspector publicly counts the recall votes and announces the results. If there are insufficient votes to remove the board, the recall fails and everyone goes home. If the recall succeeds, the inspector tabulates the votes for candidates and announces a new board.
  
RECOMMENDATION: Associations should amend their election rules to include a section on recall procedures. If your association needs assistance, contact me.

Controlling Management

Source: Adrian J. Adams Esq. 

QUESTION: Our management company is trying to take over all board duties. I for one am against that. Can a board member perform certain duties within the association–like talking to vendors and current contractors to get information for possible work that may be planned?

ANSWER: A management company cannot take over an association on its own. It has no legal authority for such action. The company serves as a managing agent of the association and is given direction through the board of directors. As such, it has as little or as much authority as the board gives it. If a management company is out of control, it’s the board’s fault. 

Director Limitations. The same limitations are true for directors. Board members function within guidelines established by the board. Although directors have a duty of due diligence, they do not have the right to individually start questioning (interrogating as interviewees often see it) employees, contractors, members, and tenants without board approval. Doing so can lead to claims of harassment, interference with contractual relations, discrimination and constructive wrongful terminations.

Potential Liability. A director’s due diligence obligation can be satisfied by other means that don’t create potential liability. It can be done through the managing agent, industry experts and legal counsel. If a director wants to personally investigate a particular matter (and is qualified to do so), he should first get board permission. Otherwise, he may be incurring liability for himself as well as the association.

RECOMMENDATION: Each year following their annual meeting, incoming boards should meet with legal counsel to go over their rights and responsibilities as directors. It will help them avoid stepping on landmines during their tenure and function more cohesively as a board.

Adrian J. Adams, Esq - California Leading Attorneys

Adrian J. Adams, Esq.: Adrian J. Adams, Esq. a.k.a. Adams Stirling PLC is one of the leading attorneys in Los Angeles, California specializing in common interest developments. His practice includes high rise condominiums, stock cooperatives, business parks, lake associations, golfing communities, equestrian associations, and ocean-front communities. For more information about Adrian Adams Esq., contact us at (800) 464-2817 or (310) 945-0280.

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Missed Meetings

Source: Adrian J. Adams Esq. 

QUESTION: I need to know how many times a board member can miss meetings consecutively before being removed from the board.

ANSWER: There is nothing in the law about removing a director for missed meetings. That would be covered by your bylaws.

Bylaws. If your bylaws are silent, a director could miss every single meeting and the board would be powerless to address the problem. At best, the board could censure the missing director and ask the membership to remove him via a recall election.

RECOMMENDATION: You should consider amending your bylaws to make attendance at meetings a qualification for serving on the board. A common provision I use is if a director misses three consecutive regular meetings or a total of four regular meetings in a 12-month period, the board can vacate the director’s seat and appoint a replacement. If you amend your bylaws, you should include other qualifications as well. Let me know if you need assistance.