BALLOTS / ELECTIONS

DO WE HAVE TO HAVE INSPECTORS OF ELECTION? CAN THE BOARD OR ASSOCIATION MANAGER COUNT BALLOTS AND PROXIES?

It is strongly recommended and Yes, with an admonition. Corporations Code §7614 provides for, and we strongly recommend that the association facilitate, the appointment of inspectors of election. The Corporations Code specifically indicates that the number of inspectors of election is either one or three. Therefore, associations should be careful to adhere to the statute by not appointing two inspectors or more than three inspectors of election. Additionally, the Corporations Code provides that the board can appoint the inspectors of election at any time in advance of the membership meeting. If the board does not appoint the inspectors, or if any person so appointed fails to appear at the membership meeting, the chair (usually the president of the association) at the membership meeting may, and on the request of any member must, appoint inspectors of election. Although an unusual provision, if inspectors of election are appointed at the membership meeting and not by the board, the majority of the members represented in person and by proxy at the membership meeting shall determine whether it is one or three inspectors to be appointed. To avoid such confusion, we strongly recommend that the board of directors designate the inspectors of election in advance of any membership meeting. In the case of any action by a written ballot, the board should similarly appoint inspectors of election to count and tabulate all votes. Inspectors of election not only tabulate the votes, but they determine the authenticity, validity and effect of proxies. They further determine all challenges and questions arising in connection with the right to vote, determine the result, and do all acts which are proper to conduct the election or votes with fairness to all members.

In large associations, there may be a need to have additional personnel available to assist with tabulation of the vote total. Such additional personnel would not be inspectors of election, but assist by organizing the voting materials, acting as readers of the ballots / proxies, or assisting in the tabulation. They would have no power to determine authenticity, validity and effect of any proxies or ballots, which authority would still reside only with the inspectors of election themselves.

Additionally, in most circumstances it is not recommended that the association's property manager act as the sole inspector of election, because it may place him/her in an adversarial position and create the appearance that he/she influenced the outcome. However, we see no problem if the manager is one of the inspectors if the maximum three inspectors of election are appointed.

WHY DO MANY ASSOCIATIONS JUST ANNOUNCE THE NAMES OF THE WINNERS OF A BOARD OF DIRECTORS ELECTION? CAN THE EXACT ELECTION RESULTS BE GIVEN?

Yes, they can. However, many associations do not announce the vote counts that each nominee received at an election as a courtesy to those who lost or to those who did not receive very many votes. However, under California law, members have the right to ask for the exact vote counts, as long as the request is submitted in writing within 60 days from the date of the annual meeting. Corporations Code §8325 specifically states that:

... for a period of 60 days following the conclusion of an annual, regular, or special meeting of members, a corporation shall, upon written request from a member, forthwith inform the member of the result of any particular vote of members taken at the meeting, including the number of memberships voting for, the number of memberships voting against, and the number of memberships abstaining or withheld from voting. If the matter voted on was the election of directors, the corporation shall report the number of memberships, or votes if voted cumulatively, cast for each nominee for director. If more than one class or series of memberships voted, the report shall state the appropriate numbers by class and series of memberships.

We recommend that a copy of the report or certificate of the inspectors of election be provided to any members who make a vote count request, which report or certificate should provide sufficient information to comply with the above statute.

IS THERE A DIFFERENCE BETWEEN APPROVAL "BY A MAJORITY OF ALL MEMBERS" AND APPROVAL "BY THE MEMBERS"?

Yes. When particular provisions of the Corporations Code or the association's governing documents state that an action must be "approved by a majority of all members," it means that the action be approved by the affirmative vote or written ballot of a majority of the votes entitled to be cast with respect to the matter. Thus, if the association has 100 members, 51 must approve. Even if only 51 attend the meeting or send in a proxy / ballot, all 51 must approve.

Conversely, any provision which states that an action must be "approved by the members" or "a majority of a quorum of the members" means that the action must be approved: (1) if at a membership meeting by the affirmative vote of a majority of the votes represented at a duly held meeting at which a quorum is present; (2) if by a written ballot measure by the affirmative vote of a majority of the ballots sent back to the association, provided a quorum of the membership sent in their ballots. As an example, assume a 100 unit subdivision and a quorum requirement of 51%. Any action required to be taken, be it either a ballot measure or at a membership meeting, would require that at least 51 members attend the meeting or submit their ballots as it relates to the ballot measure. Once a quorum is obtained, a majority of those members voting would then approve the action. As a further example, if the association submitted a ballot measure to approve a special assessment and needed approval from a majority of a quorum of the members, assume further that only 80 members actually voted and submitted their ballots back to the membership. So long as 41 of the 80 ballots voted in favor of the special assessment, the special assessment passed. Conversely, if 41 members vote against the special assessment, when 80 have voted, the special assessment would not pass.

I AM A BOARD MEMBER WHO ASKED TO SEE THE BALLOTS AND PROXIES OF OUR RECENT ELECTION TO CHECK THE VOTE COUNT FOR ACCURACY, BUT WAS ADVISED I COULD NOT VIEW THEM. DON'T BOARD MEMBERS HAVE ABSOLUTE INSPECTION RIGHTS? Although most governing documents and California law provide that board members have the "absolute right to inspect all books, records and documents of the association," such right must be balanced with a member's right to privacy.

California Corporations Code § 8334 states:

Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director.

According to the foregoing statute, a director would have the right to inspect and copy all corporate books and records. However, in the 1995 landmark case of Chantiles v. Lake Forest II Master Homeowners Association (37 Cal.App. 4^th 914, 45 Cal.Rptr. 2^d 1), a board member's absolute right to inspect all corporate records was restricted when it came to the inspection of voting ballots and proxies.

In the Chantiles case, the appellate court upheld the superior court's decision to allow the board member's attorney to review and tally the ballots on the condition he would not disclose the names of voters to his client or any other person. The appellate court determined that this was a proper balance between the voters' constitutional right to privacy and the board member's right to inspect such documents. The appellate court also concluded that there is an expectation of privacy whether the balloting is done by written ballot or proxy. It stated voters may be intimidated and neighbors may cease to speak to each other if privacy in voting is not guaranteed.

Although the courts concluded that the proxy ballots were the type of record to which a director has a right of inspection pursuant to Corporation Code § 8334, they were quick to recognize that a board member's right to inspect corporate records must be balanced against the members reasonable expectation of privacy in their ballots. The courts rejected Chantiles' contention that there is no expectation of privacy when balloting is done by proxy.

Two main lessons can be gleaned from the court's ruling:

First, that a person's constitutional right to privacy may be superior to a board member's right to inspect association documents.

Second, the association has a duty to protect the privacy interests of its members in their voting decisions. The Chantiles case is instructive and underscores the association's need to recognize and protect the privacy interests of its members.

In light of the Chantiles case, it is this firm's opinion that it is not appropriate to allow board members to inspect and review election materials, such as ballots and proxies. Nevertheless, we do believe that an alternative is available should the board choose to consider a compromise. A board member could be provided copies of redacted proxies which would only show the text, including the voting instructions, on the proxies but would not show that portion of the proxy which reveals the member's name, address or signature. This compromise would permit a board member who is legitimately concerned about the validity or use of proxies or a proper vote count to review election materials without invading a member's right to privacy.

CAN MEMBERS VOTE VIA AN ABSENTEE MAILED BALLOT IF THE GOVERNING DOCUMENTS CALL FOR CUMULATIVE VOTING?

NO. If an association's governing documents provide for cumulative voting, California Corporations Code §7513(e) prohibits the use of absentee mailed ballots. The relevant code section provides that written ballots may not be used in an election of directors which is to be conducted by cumulative voting. The pertinent section of the Corporations Code states the following:

(e) Directors may be elected by written ballot under this section, where authorized by the articles or bylaws, except that election by written ballot may not be authorized where the directors are elected by cumulative voting pursuant to Section 7615. [emphasis added]

Thus, if your association's bylaws provide for cumulative voting, a written ballot may not be mailed to the homeowners Nonetheless, a secret written ballot, if applicable, would still be provided on the date of the election, i.e. at the annual meeting.

Many bylaws and Corporations Code §7615(b) provide that no member may cumulate his/her votes unless, prior to the voting, at least one (1) member has given notice of his/her intention to cumulate votes. Because it is difficult to ascertain whether a member will invoke cumulative voting by giving notice, many associations simply plan and provide for it. We believe this technical point is the basis for Corporations Code §7513(e) and the preclusion of balloting for directors by mail.

However, many associations can get around the preclusion of absentee mailed ballots when they have cumulative voting through the use of a Designated Proxy with Election Instructions. Specifically, the designated proxy indicates that:

• It can only be used for quorum purposes and that the election instructions related to the election of directors must be followed.
• The Association is authorized to tabulate the votes from the election instructions indicated on the proxy and a secret ballot need not be cast (in order to avoid confusion).
• The homeowner waives his/her right to vote by secret written ballot if such provisions are contained within the governing documents.
• It is assumed within the voting instructions and notice to the membership that the board has invoked cumulative voting, thus, allowing all members to cumulate their votes in their election instructions. Without that assumption, an association would never know when sending out its proxy materials if cumulative voting would be requested by one member, creating absolute chaos and confusion in the election process.

Following these procedures and the use of a designated proxy, members can vote by mail, not through absentee ballots but, rather, through designated proxies containing specific election instructions.

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