[Director Inspection Rights; Attorney-Client Privilege] A director’s right to inspect corporate records does not include the right to access attorney-client privileged information that was generated in defense of a suit filed by the director against the corporation.
The Gomez Law Group and Alvin M. Gomez for Petitioner.
No appearance for Respondent.
The Law Offices of Shawn A. McMillan, Shawn A. McMillan; and Kathryn E. Karcher for Real Party in Interest.
OPINION MCINTYRE, J.-
Although corporate directors have an “absolute right” to “inspect and copy all [corporate] books, records and documents of every kind” (Corp. Code, § 1602), including documents protected by the attorney-client privilege, we conclude that a corporate director does not have the right to access documents covered by the attorney-client privilege that were generated in defense of a suit for damages that the director filed against the corporation.(All undesignated statutory references are to the Corporations Code unless otherwise specified.) As such, we grant the petition and direct the trial court to conduct further proceedings to determine whether: (1) the requested documents are covered by the attorney-client privilege and (2) if the requested documents are privileged, whether an exception exists or there was an express or implied waiver of the privilege.
FACTUAL AND PROCEDURAL BACKGROUND
Tritek Telecom, Inc. (Tritek) is a California corporation with two equal shareholders, Andre Rerolle and Prospect Development Inc. (Prospect), a[1388]company solely owned by Chik-Lun Mak. Tritek initially had three members on its board of directors, Alvin Ly, Rerolle and Mak. In May 2007, Rerolle and Mak hired L. Michael Wilson of the Apollo Law Group to act as Tritek’s corporate counsel in relation to Ly’s resignation from the board, leaving Rerolle and Mak as the sole members of Tritek’s board of directors.
The following month, conflicts arose between Rerolle and Mak regarding the operation of Tritek and management responsibilities. Mak claimed, among other things, that Rerolle improperly locked him out of Tritek facilities, stopped paying his salary and misappropriated Tritek assets. In turn, Rerolle claimed that Mak engaged in numerous corporate improprieties.
Mak and Prospect sued Tritek, Rerolle and others, alleging various causes of action and seeking return of their $410,000 investment and damages against all defendants. (Prospect Development, Inc. v. Tritek Telecom, Inc., (Super. Ct. San Diego County, 2007, No. 37-2007-00072571-CU-MC-CTL (the shareholder action).) The shareholder action was assigned to the Honorable Ronald S. Prager. Tritek later filed a cross-complaint against Mak, Prospect, Ly and others alleging, among other things, that Mak breached his fiduciary duties to and defrauded the corporation. Wilson initially represented Tritek and Rerolle in the shareholder action, but Judge Prager granted a motion to disqualify him as counsel, noting that Wilson removed himself as counsel for Tritek and finding that Wilson had previously given advice to both Mak and Rerolle and was now precluded from representing one against the other.
Mak and Prospect later filed a complaint against Tritek and Rerolle, seeking the removal of Rerolle as a director for Tritek (which is pending before Judge Prager) and a separate petition for the appointment of a provisional director which was assigned to the Honorable Joan M. Lewis. Judge Lewis has since entered a judgment appointing Richard M. Kipperman as a provisional director of Tritek.
Mak filed the instant petition under section 1603 against Tritek, Rerolle and Wilson, seeking to enforce his right as a director of Tritek to inspect Tritek’s books and records and the matter was assigned to the Honorable Yuri Hofmann. Tritek, Rerolle and Wilson answered, asserting the petition sought attorney-client privileged documents generated by Tritek and Rerolle in defense of Mak’s related actions. Tritek also raised the attorney work product doctrine. After Mak dismissed Wilson and Rerolle, the trial court tentatively granted the petition, stating that Tritek’s evidentiary showing was insufficient to justify withholding the documents and noting that Tritek had previously given Mak access to the requested documents and this “seemingly render[ed] the privilege objections moot.”[1389]
At a hearing on the ruling, the trial court denied Tritek’s requests for an evidentiary hearing and for judicial notice of additional documents. The trial court concluded that Tritek failed to meet its burden to show cause why the records should not be produced and adopted its tentative ruling.
After Mak filed a proposed judgment and proposed peremptory writ of mandate, Tritek objected to them on the ground they ordered disclosure of confidential attorney-client communications generated by Tritek in defense of litigation brought by Mak in other related actions. Wilson substituted out as Rerolle’s attorney and objected to the proposed judgment and writ because they ordered disclosure of confidential attorney-client communications between himself and Rerolle. Rerolle also objected to the proposed judgment and writ on the same grounds and suggested submitting a privilege log. The trial court took no action on the objections, entered the proposed judgment and issued the peremptory writ of mandate.
Among other things, the judgment ordered Tritek to produce: (1) the entire content of the Apollo Law Group case files relating to the shareholder action and any other matters for which Apollo Law Group has been consulted or employed by Tritek; (2) all communications between Apollo Law Group and any officer, director or employee of Tritek; and (3) any case files evidencing Tritek’s involvement in any litigation.
Tritek sought writ review of the judgment, arguing the trial court abused its discretion by failing to continue the evidentiary hearing and ordering disclosure of documents covered by the attorney-client privilege and attorney work product doctrine. We stayed production of the documents and the subsequent judgment and issued an order to show cause why the relief sought should not be granted. During the pendency of this proceeding, the parties settled the underlying case; however, they requested a decision on the unresolved legal issue presented in this writ proceeding.
(Mak’s requests for judicial notice of various documents in the related actions are granted. (Evid. Code, § 452, subd. (d).) Tritek’s request to strike portions of Shawn A. McMillan’s declaration is denied.)
DISCUSSION
1. General Legal Principles
[1] A client has a privilege to refuse to disclose, and to prevent another from disclosing, a confidential communication between the client and his or her lawyer unless the privilege is waived. (Evid. Code, § 954.) A corporation is a “client” protected by the attorney-client privilege[1390](Evid. Code, §§ 175, 951;D.I. Chadbourne, Inc. v. Superior Court(1964) 60 Cal.2d 723, 736) and a “confidential communication” includes “a legal opinion formed and the advice given by the lawyer in the course of that [attorney-client] relationship.” (Evid. Code, § 952.) [2] Once a party establishes that a privilege applies, the burden shifts to the party opposing the privilege to demonstrate that the privilege did not apply, that an exception existed, or that there was an express or implied waiver. (Evid. Code, §§ 405, 917, subd. (a);Titmas v. Superior Court(2001) 87 Cal.App.4th 738, 745.)
[3] Corporate directors owe a fiduciary duty of care to the corporation and its shareholders and must serve “in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders[.]” (§ 309, subd. (a).) Although it is generally presumed that the directors of a corporation are acting in good faith (Katz v. Chevron Corp.(1994) 22 Cal.App.4th 1352, 1366), a court is required to defer to the business judgment only of disinterested directors. (See, e.g., Gaillard v. Natomas Co.(1989) 208 Cal.App.3d 1250, 1265-1266.) “[A] director is independent when he is in a position to base his [or her] decision on the merits of the issue rather than being governed by extraneous considerations or influences. [Citation.]” (Katz v. Chevron Corp., supra, 22 Cal.App.4th at p. 1367.)
[4] Corporate directors also have the “absolute right” at any reasonable time to inspect and copy all corporate books, records, and documents of every kind (§ 1602) and a court may enforce this right “with just and proper conditions.” (§ 1603.) This right “represents a legislative judgment that directors are better able to discharge [their fiduciary] duties if they have free access to information concerning the corporation.” (Havlicek v. Coast-to-Coast Analytical Services, Inc.(1995) 39 Cal.App.4th 1844, 1852.)The absolute right, however, is subject to exceptions and may be denied where a disgruntled director announces his or her intention to violate his or her fiduciary duties to the corporation, such as using inspection rights to learn trade secrets to compete with the corporation. (Id. at pp. 1855-1856.)
2. Analysis
Initially, we note that four separate but related matters were assigned to three different judges and there is a possibility of conflicting rulings on discovery matters. There are rules to prevent this. (Cal. Rules of Court, rule 3.300.) Accordingly, the presiding judge of the superior court is directed to send this petition and any pending related matters to one judge.[1391]
On the merits, Tritek does not dispute Mak’s right to inspect general corporate documents; rather, it contends that the trial court’s ruling was overbroad because it encompassed documents protected by the attorney-client privilege. We agree.
Mak filed this action to enforce his inspection rights as a director after he filed the shareholder action against Tritek and Rerolle in his individual capacity as a shareholder to vindicate his personal rights. Accordingly, Mak is not a disinterested director and the presumption of good faith does not apply. Additionally, enforcing Mak’s “absolute” inspection rights in this case is problematic because it gives him access to documents he could not obtain via discovery in the shareholder action.
[5] Although Mak is still a Tritek director, his filing of the shareholder action makes him Tritek’s adversary. Mak cannot take off his “shareholder’s hat” and swap it for his “director’s hat” and claim an absolute right to access all corporate documents. In this situation, a court may properly limit a director’s inspection rights because the director’s loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director’s personal interest in obtaining damages against the corporation.(La Jolla Cove Motel and Hotel Apartments, Inc. v. Superior Court(2004) 121 Cal.App.4th 773, 787-788 [corporate counsel has no duty to disclose privileged information to dissident director with which the corporation has a dispute].)
[6]Accordingly, we conclude that a corporate director does not have the right to access documents that are covered by the attorney-client privilege and were generated in defense of a suit for damages that the director filed against the corporation. Although the trial court noted that Tritek had given Mak access to corporate documents and this production “seemingly” rendered the privilege objections moot, Mak presented no evidence showing Tritek had produced attorney-client privileged documents in response to his earlier request. Thus, the trial court had no factual basis on which to conclude Tritek had waived its right to assert the attorney-client privilege.
Furthermore, Wilson and the Apollo Law Group jointly represented Rerolle in the shareholder action for a period of time and Rerolle properly asserted his individual attorney-client privilege. Mak is not entitled to any documents covered by Rerolle’s individual attorney-client privilege. Finally, while it is unlikely that Tritek has documents covered by the attorney work product doctrine that would not also be covered by the attorney-client privilege, the trial court should allow the parties to address the application of this doctrine.
Under these circumstances, the trial court is directed to conduct further proceedings to determine whether: (1) any of the requested documents are[1392]covered by the attorney-client privilege or attorney work product doctrine, and (2) if the requested documents are privileged, whether an exception exists or there was an express or implied waiver of the privilege.
DISPOSITION
Let a writ of mandate issue directing the superior court to vacate its May 12, 2008, judgment and peremptory writ of mandate and to conduct further proceedings in accordance with the views expressed in this opinion. The presiding judge of the superior court is further directed to transfer this matter to one judge. Tritek is entitled to its costs in this writ proceeding. The stay issued on May 12, 2008, will be vacated when the opinion is final as to this court.
[Director Inspection Rights; Privacy] A director’s record inspection rights may be limited by the association’s duty to protect the privacy rights of its members in their voting decisions.
John F. Kunath, Jr., for Plaintiff and Appellant. Richard A. Tinnelly and Anthony M. Garcia for Defendant and Respondent.
OPINION
WALLIN, J.
In this case we are asked to consider the extent of a homeowner association director’s rights to inspect the records of the association under Corporations Code section 8334. fn. 1 Here a director asks us to conclude his inspection rights are absolute and include an unfettered right to review and copy the ballots cast by the association’s homeowner members in its annual election of its board of directors. The association asks us to hold, as the trial court did, that a director’s rights of inspection must be balanced against the members’ legitimate expectations of privacy in their voting decisions. We affirm.
Thomas J. Chantiles was an elected member of the board of directors of the Lake Forest II Master Homeowners Association (the Association). The Association elects its seven directors annually. Voting is cumulative, meaning that each homeowner member has seven votes per election which may be divided however he or she wishes among the candidates, for example, the member may cast one vote for each of seven candidates or all seven votes for one candidate.
As required by law, voting is done by a proxy ballot, rather than by direct written ballot. The proxy ballots are mailed to each member. The ballot[919]gives the member several options. He or she first designates a person as that member’s voting proxy holder. If no person is named, by default, the chair of the Association’s election committee is the designated proxy holder. The proxy holder is authorized to cast the member’s seven votes. The member may indicate on the ballot how those votes are to be cast, i.e., he or she may directly vote for the candidates listed on the ballot. If no direction is made, the proxy holder has discretion to cast the votes in whatever way he or she chooses. The member may indicate on the ballot that the proxy designation is solely for the purpose of achieving a quorum and no votes may be cast for any candidate.
The member may either mail the proxy back to the Association or hand deliver it and place it in the ballot box. The chair of the election committee holds the ballots for tabulation. As an alternative, candidates may directly solicit proxies from members which the candidate hand delivers at the annual meeting for tabulation. The proxy ballot form which a candidate might directly solicit is slightly different from the form which is mailed to members, but contains the same options and information.
Chantiles had served as a director of the Association for many years. He ran for a 10th term in 1992 and was reelected, apparently as a member of a minority faction. Believing that he had been shorted by 800 to 1,300 proxy votes, which he presumably would have cast for other candidates from his faction, Chantiles demanded the Association allow him to inspect and copy all of the ballots cast in the 1992 annual election. Citing its concern for preserving the privacy of individual voting members, the Association refused.
In July 1992 Chantiles filed a complaint Orange County Superior Court case No. 693389, seeking a judicial determination of the validity of the election under section 7616. On August 19, counsel for the Association met with Chantiles to attempt to resolve the matter. The meeting was unproductive. In September the parties agreed to allow Chantiles to inspect the ballots in the Association’s counsel’s office, in the presence of a monitor for each side, but that meeting never took place. The complaint was dismissed without prejudice on December 1.
On December 18, 1992, Chantiles filed this petition for writ of mandate (Code Civ. Proc., § 1085) to compel the Association to permit the inspection and copying of the ballots under section 8334, which gives directors of nonprofit corporations the right to inspect and copy corporate records. The Association opposed the writ, arguing that unfettered access to the ballots[920]would violate its members’ expectations that their votes were private. It submitted declarations from 120 members who stated they believed their ballots to have been secret when they cast them, and they did not wish the ballots to be divulged to Chantiles.
The trial court concluded the ballots were the type of record to which a director had a right of inspection pursuant to section 8334. However, members had a legitimate expectation of privacy in their ballots against which the inspection right must be balanced. In May 1993 the court issued its writ of mandate. It ordered the Association to make available to Chantiles’s attorney, John Kunath, Jr., all ballots cast in the 1992 election. Counsel for the Association, or another representative, could be present during the inspection. Mr. Kunath could take notes while inspecting, but those notes could not contain the names of voting members, only the names of their designated proxy holders. He could not disclose to anyone the names of persons who voted or how any individual voted, without further order of the court. The court reserved the issue of attorney fees and costs. Rather than conduct the inspection authorized by the court, Chantiles filed the instant appeal.
I.
[1a] The Association contends the appeal is moot because Chantiles is no longer on its board of directors and therefore cannot assert a director’s inspection rights. At the annual meeting on June 3, 1993, Chantiles was not reelected to the board of directors. fn. 2 Although we have located no California case addressing the effect of a director’s defeat, other states have held “the right of a director [of a nonprofit corporation] to inspect the books and records of the corporation ceases on his removal as a director, by whatever lawful means[.]” (State v. Soc. for Pres. of Common Prayer (Tenn. 1985) 693 S.W.2d 340, 343.) Chantiles essentially concedes he no longer has a director’s inspection rights, but asserts the appeal is not moot for several reasons. First, the trial court specifically reserved the issues of costs and attorney fees (see § 8337), which, Chantiles argues, cannot be decided if we dismiss the appeal. He also argues the issue of a director’s inspection rights is one of public importance which we should decide, even if it is technically moot.[921]Finally, he contends the issue is likely to recur between these same parties, as he may be reelected.
[2] It is this court’s duty ” ‘to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it. It necessarily follows that when, pending an appeal from the judgment of a lower court, and without any fault of the defendant, an event occurs which renders it impossible for this court, if it should decide the case in favor of plaintiff, to grant him any effectual relief whatever, the court will not proceed to a formal judgment, but will dismiss the appeal.’ ” (Consol. etc. Corp. v. United A. etc. Workers (1946) 27 Cal.2d 859, 863 [167 P.2d 725]; see also Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541 [63 Cal.Rptr. 21, 432 P.2d 717]; Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1, 10 [244 Cal.Rptr. 581].)
We may, in appropriate circumstances, exercise our discretion to retain and decide an issue which is technically moot. (Davies v. Superior Court (1984) 36 Cal.3d 291, 294 [204 Cal.Rptr. 154, 682 P.2d 349].) We do so when the issue is of substantial and continuing public interest. (DeRonde v. Regents of University of California (1981) 28 Cal.3d 875, 880 [172 Cal.Rptr. 677, 625 P.2d 220].) Such a resolution is particularly appropriate when the issue is “presented in the context of a controversy so short-lived as to evade normal appellate review” (Evans Products Co. v. Millmen’s Union No. 550 (1984) 159 Cal.App.3d 815, 820, fn. 5 [205 Cal.Rptr. 731]; see also San Jose Mercury-News v. Municipal Court (1982) 30 Cal.3d 498 [179 Cal.Rptr. 772, 638 P.2d 655]; Hardie v. Eu (1976) 18 Cal.3d 371, 379 [134 Cal.Rptr. 201, 556 P.2d 301]), or when it is likely to affect the future rights of the parties (Evans Products Co. v. Millmen’s Union No. 550, supra, 159 Cal.App.3d at p. 820, fn. 5).
Membership in condominiums, cooperatives and planned unit developments, known as “common interest” developments, is increasingly common. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 370 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) Common interest developments number in the tens of thousands. (See Sproul & Rosenberry, Advising California Condominium and Homeowners Associations (Cont.Ed.Bar 1991) § 1.1, p. 2 (Sproul & Rosenberry) [by 1986 there were 13,000 to 16,000 common interest developments in California.].) Such developments are usually governed by a homeowners association which is incorporated as a nonprofit mutual benefit corporation under section 7110 et seq. (Sproul & Rosenberry,[922]supra, § 1.9, p. 9.) The homeowners association is governed by a board of directors. (§ 7210.) The directors are elected by the association members for a term specified by the articles of incorporation, not to exceed four years. (§ 7220, subd. (a).) Chantiles, and the other directors of the Association, are elected for terms of only one year, as is common with many homeowners associations.
[1b] We agree with Chantiles that the issue presented here, the extent of an elected director’s rights to inspect election ballots, is of significant public interest concerning a large number of citizens. For many Californians, the homeowners association functions as a second municipal government, regulating many aspects of their daily lives. The court in Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642 [191 Cal.Rptr. 209], noted the “quasi-governmental” nature of homeowners associations. ” ‘[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a “mini-government,” the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. All of these functions are financed through assessments or taxes levied upon the members of the community, with powers vested in the board of directors … clearly analogous to the governing body of a municipality.’ ” (Id. at p. 651, italics added.)
We also agree that the controversy would often be so short-lived as to escape appellate review. The Association’s directors serve only for one-year terms. That is often the case with homeowners’ associations. Therefore, we exercise our discretion to retain the matter and decide the issue. fn. 3
II.
[3a] Although the writ of mandate was ostensibly in Chantiles’s favor, he contends the restrictions the trial court placed upon inspection of the ballots effectively wiped out any inspection rights he had. He argues section 8334 confers an absolute right to inspect and copy all corporate books, records and property and the ballots are documents to which a director has a right of access. The Association concedes the ballots are the kind of record subject to section 8334, but argues a director’s right to inspect them must be[923]balanced against its members’ expectation of privacy in voting. We consider first the nature of any privacy right in the ballots and the nature of a director’s inspection rights. We then consider whether the trial court properly balanced those rights in fashioning its order.
Chantiles begins by asserting that the homeowner members of the Association have no legitimate expectation of privacy in their voting decisions because the voting is done by proxy. A proxy by its very nature connotes revealing to another person one’s voting choice. Furthermore, he argues, the homeowners must certainly realize that their votes will be revealed to the inspector of elections who is charged with tabulating the proxy votes, again negating any expectation of privacy. fn. 4
Section 7513 governs the balloting process in the election of directors. Although that section does not mandate confidentiality in voting, the Department of Real Estate Regulations governing common interest developments specifies, “Voting for the governing body shall be by secret written ballot.” (Cal. Code Regs., tit. 10, § 2792.19, subd. (b)(1).) fn. 5 However, proxy voting is required when an association’s bylaws provide for cumulative voting, as is the case here. (§§ 7513, subd. (e), 7615.) A “proxy” is defined as the “written authorization” of one member giving another person “power to vote on behalf of such member.” (§ 5069.)
Article I, section 1 of the California Constitution provides: “All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.” (Italics added.) [4] This privacy right protects against invasions by private citizens as well as by the state. (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 20 [26 Cal.Rptr.2d 834, 865 P.2d 633]; Heda v. Superior Court (1990) 225 Cal.App.3d 525, 527 [275 Cal.Rptr. 136]; Chico Feminist Women’s Health Center v. Scully (1989) 208 Cal.App.3d 230, 242 [256 Cal.Rptr. 194].)[924]
[3b] Although the issue of whether ballots cast in a homeowners association election are confidential or subject to a constitutional privacy right has not been previously addressed, we must examine the “reasonable expectations of the members” in deciding the issue. (Sproul & Rosenberry, supra, § 2.44, p. 92.) In Hill v. National Collegiate Athletic Assn., supra, 7 Cal.4th 1, the court stated there is a legally recognized privacy interest “in precluding the dissemination or misuse of sensitive and confidential information (‘informational privacy’)[.] … [] Informational privacy is the core value furthered by [California Constitution, article I, section § 1]. A particular class of information is private when well-established social norms recognize the need to maximize individual control over its dissemination and use to prevent unjustified embarrassment or indignity. Such norms create a threshold reasonable expectation of privacy in the data at issue.” (Id. at p. 35.)
Certainly in the case of direct written ballots cast by a member for a candidate, “… the reasonable expectation of members is that their personal voting decision will not be known to other members, as it would be in a vote conducted by a show of hands.” (Sproul & Rosenberry, supra, § 2.44, pp. 92-93.) We reject Chantiles’s assertion that there is no similar expectation of privacy in a written proxy ballot. A member has three choices in casting a proxy vote. He or she may give a proxy to a specific person, or the inspector of elections if no one is designated, to vote as that member directs. The member may give a proxy to a person to vote the member’s vote as the proxy holder desires. The member may give a proxy to a person or the inspector of elections for the sole purpose of establishing a quorum so the annual meeting may go forward. In choosing any of those options, a member has an expectation of privacy. “And, of course, the custodian of such private information may not waive the privacy rights of persons who are constitutionally guaranteed their protection.” (Board of Trustees v. Superior Court (1981) 119 Cal.App.3d 516, 526 [174 Cal.Rptr. 160].)
The trial court correctly concluded homeowners association voting was a class of information in which members have a reasonable expectation of privacy. The Association submitted declarations of 120 members stating they believed their ballots were private and they did not want them divulged. In its written tentative ruling, after noting the increasing power homeowners associations wield in their members’ everyday lives (see also Cohen v. Kite Hill Community Assn., supra, 142 Cal.App.3d at p. 651), the trial court stated, “Homeowner association elections may raise emotions as high or higher than those involved in political elections. Under these circumstances a degree of privacy afforded to the electors in such elections appears to be desirable. Neighbors may cease to speak to each other if it became publicly [925] known that certain votes were cast. Voters may be intimidated to vote in a certain way should their ballot be subject to public scrutiny. [] Under these circumstances, the expectation of privacy to which many of the voters certified in their declarations gains credibility.” Chantiles submitted nothing to the contrary.
We consider next the extent of a director’s inspection rights. Section 8334 provides, “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.” (See also Cal. Code Regs., tit. 10, § 2792.23, subd. (f).) Chantiles contends his inspection and copying rights are absolute and not subject to any privacy rights of the members. Although section 8336 provides that the trial court “may enforce the demand or right of inspection with just and proper conditions[,]” he argues that proviso applies only to conditions on the hours of inspection, not on the manner or extent of his inspection.
We reject Chantiles’s assertion because section 8334 gives him an “absolute right” to inspect, this right need not yield to any other right, not even a constitutional right. As Sproul and Rosenberry note, “[Section 8334’s] broad and unqualified statement of a director’s inspection rights can present difficult ethical and legal issues …. [For] example, what if a director who ran for office on a platform critical of the present general manager’s conduct and salary demands the right to inspect the general manager’s personnel file and to disclose its contents to the members …? [] [T]he manager’s constitutional right of privacy under [California Constitution, article I, section 1] may preempt a director’s general rights of inspection[.]” (Sproul & Rosenberry, supra, § 2.52, pp. 103-104; see also Advising California Nonprofit Corporations (Cont.Ed.Bar 1984) § 8.53, p. 439 [“A director’s right of inspection may be subordinate to other statutes specifically protecting confidential, private, or privileged records against inspection, although there is no such express provision.”].)
The need for balancing privacy rights against other statutory rights is well recognized. In Board of Trustees v. Superior Court, supra, 119 Cal.App.3d 516, the court conducted a ” ‘careful balancing’ of the ‘compelling public need’ for discovery against the ‘fundamental right of privacy’ ” when it denied a plaintiff’s request for discovery of confidential personnel records. (Id. at p. 525.) In Heda v. Superior Court, supra, 225 Cal.App.3d 525, the court concluded a plaintiff’s statutory right to trial preference based on the defendant’s ill health was outweighed by the defendant’s right of privacy when it denied the plaintiff discovery of the defendant’s medical records. [926](Id. at p. 529.) Chantiles offers no compelling argument for concluding a balancing of rights is inappropriate.We hold that homeowners association members have a constitutional privacy right in their voting decisions, even when conducted by proxy ballot. A homeowners association director’s statutory right to inspect the records of the association must be balanced against this privacy right.
[5] We consider finally, whether the trial court’s order properly balanced these competing interests. Chantiles states his purpose in inspecting the ballots was to determine whether he had been shorted proxy votes. It was his intention to compare the ballots with his own list of homeowners on which he monitored the proxies promised him. He would later determine whether a judicial challenge would be brought. Chantiles wanted to compare the votes he believed he had been promised to the votes he actually received. We can conceive of no greater violation of the privacy of the Association’s members. Any neighbor may well have told Chantiles he would receive his or her proxy votes, but actually cast his or her votes otherwise. To now give Chantiles personal access to the names of those voting and how they voted certainly violates well-established social norms.
The trial court offered a reasonable resolution. It appointed Chantiles’s own attorney to review and tally the ballots, provided he not disclose the name of any individual voter, or how he or she voted, without further order of the court. Chantiles refused this resolution, which strongly suggests his motive was not simply to check the math, but to find out how his neighbors actually voted. He cannot now complain that he was denied such an opportunity. The trial court’s order was appropriate. fn. 6
III.
[6] The trial court specifically reserved the issues of attorney fees and costs. Section 8337 provides that in any action to enforce inspection rights “if the court finds the failure of the corporation to comply with a proper demand … was without justification,” the court may award reasonable costs and expenses, including attorney fees. Chantiles argues the matter must be remanded for a determination of costs and attorney fees below.
We need not remand the matter. The trial court may only exercise its discretion to award costs and attorney fees if it finds the Association acted[927]without justification. It is not reasonably probable that the court would make such a finding here. Implicit in its ruling was that the Association had a duty to guard the privacy rights of its members in their voting decisions. Furthermore, the trial court offered a reasonable remedy to Chantiles which he refused. We affirm the trial court’s conclusion. The Association’s refusal to allow Chantiles the unfettered access to the ballots which he demands was not unjustified. Therefore, he is not entitled to costs and attorney fees. The judgment is affirmed. Respondent is entitled to its costs on appeal.
Sills, P. J., concurred.
CROSBY, J.,
Concurring.-Thomas J. Chantiles was a member of the homeowners association’s board of directors when he filed this action. He lost that seat in an election after the trial court entered judgment. As he is no longer a director, he enjoys no inspection rights under Corporations Code section 8334; and for that reason alone I concur in the decision not to award him any relief.
While the appeal is technically moot, in my view, as to Chantiles, the issue is one “of continuing public interest and likely to recur in circumstances where, as here, there is insufficient time to afford full appellate review” (Leeb v. DeLong (1988) 198 Cal.App.3d 47, 51-52 [243 Cal.Rptr. 494]). Accordingly, I agree with my colleagues that it should be addressed. But I disagree with their analysis.
Corporations Code section 8334 was enacted in 1978, years before the election in this case. And the inspection rights it confers on directors of corporations are unconditional: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind … of the corporation of which such person is a director.” Where, as here, a statute is unambiguous, a court should simply apply it without indulging in interpretation. (See, e.g., Brewer v. Patel (1993) 20 Cal.App.4th 1017, 1021 [25 Cal.Rptr.2d 65].)
My colleagues suggest this absolute right of inspection is nevertheless qualified and may be defeated when the director’s request is animated by an improper motive. (Maj. opn., ante, p. 926.) They also conclude it must yield to the association members’ constitutional right of privacy (Cal. Const., art. I, § 1), i.e., to keep voting decisions confidential. But the members could not have had any expectation-reasonable or otherwise-that proxies could be withheld from the association’s directors, and the majority’s improper motive analysis is at odds with both clear statutory language and case law.[928]
The constitutional right to privacy is not absolute (County of Alameda v. Superior Court (1987) 194 Cal.App.3d 254, 260 [239 Cal.Rptr. 400]); it only applies where there is an objectively reasonable expectation of privacy. (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 36-37 [26 Cal.Rptr.2d 834, 865 P.2d 633].) Although some association members submitted declarations attesting to their belief in the confidentiality of the proxies, they had no objectively reasonable expectation of privacy. Quite the contrary. A director could have no more important duty than assuring the honesty of association elections by carefully monitoring the tally of proxies. This certainly could involve a personal audit of the vote and a challenge to any questionable proxy.
In any event, a proxy is, by definition, not confidential. It is “a written authorization signed by a member or the member’s attorney in fact giving another person or persons power to vote on behalf of such member. ‘Signed’ for the purpose of this section means the placing of the member’s name on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the member or such member’s attorney in fact.” (Corp. Code, § 5069.) Under these circumstances, how homeowners association members could reasonably expect the proxies could not be scrutinized by the association’s directors, with their “absolute” statutory right to inspect, is beyond me. fn. 1
Moreover, because the right of inspection under Corporations Code section 8334 has no exceptions, a director’s motive for requesting an inspection is irrelevant. No reported decisions construe Corporations Code section 8334, but cases involving virtually identical provisions elsewhere in the Corporations Code conclude motive is irrelevant. For example, Valtz v. Penta Investment Corp. (1983) 139 Cal.App.3d 803 [188 Cal.Rptr. 922] concerned the “absolute right” under Corporations Code section 1600 of any shareholder with more than 5 percent of a company’s stock to examine the shareholder list. The corporation contended a shareholder’s inspection request was prompted by his desire to form a competing enterprise and refused the demand, asserting an unclean hands defense. (139 Cal.App.3d at p. 806.) Rejecting the argument, the Court of Appeal declared, “The California Legislature chose to allow inspection without any restriction based on the[929]shareholder’s purpose and we cannot impose such a restriction via the unclean hands doctrine.” (Id. at p. 810.)
True, Valtz involved a shareholder rather than a director. But a director has a stronger case for unqualified inspection rights than a shareholder. A director is a fiduciary charged with running the corporation in an informed manner. (National Automobile & Cas. Ins. Co. v. Payne (1968) 261 Cal.App.2d 403, 412-413 [67 Cal.Rptr. 784].) Because a director, unlike a shareholder, is potentially liable for failure to exercise appropriate oversight, an unconditional right to inspect is essential. (Hoiles v. Superior Court (1984) 157 Cal.App.3d 1192, 1201 [204 Cal.Rptr. 111]; see also 1A Ballantine & Sterling, Cal. Corporation Law (4th ed. 1995) § 272.02 at p. 1322 [“A director must be familiar with the affairs of the corporation in order to perform his duties and the absolute right of inspection is to assist him in performing (those) duties in an intelligent and fully informed manner.”].)
Also, in light of a director’s potential exposure, the denial of unconditional access to corporate books and records constitutes poor policy: well qualified individuals might decline to serve with something less than absolute inspection rights. (Cf. Gould v. American Hawaiian Steamship Company (D.Del. 1972) 351 F.Supp. 853, 859.) As this case illustrates, to allow defenses based on a director’s alleged motive would in many cases result in the right to inspect being buried in litigation before it could ever be exercised, good motive or bad.
Nor does a director’s unfettered access to corporate books and records leave the corporation unprotected. Any number of tort theories may be used to redress a misuse of information gleaned via an improperly motivated inspection. (Hoiles v. Superior Court, supra, 157 Cal.App.3d at p. 1201.) Damages for misapplication of corporate information, rather than a threshold rejection of a director’s inspection rights, is the appropriate remedy. fn. 2 (Ibid.)
FN 1. Corporations Code section 8334 provides: “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.” All further statutory references are to the Corporations Code unless otherwise indicated.
FN 2. The Association requested it be allowed to produce this additional fact on appeal. (Code Civ. Proc., § 909.) Its proffered evidence is the declaration of the Association’s general manager to the effect that Chantiles was not reelected. Chantiles objects to our receiving the declaration because it does not indicate the geographic location where it was signed. However, he readily concedes he was not reelected in 1993, and does not object to our receiving this fact. Because that is the only salient fact contained in the proffered declaration, we grant the Association’s motion to take additional evidence. The Association also filed a separate motion to dismiss which we consider in conjunction with the appeal.
FN 3. Accordingly, the Association’s request for sanctions against Chantiles for maintaining a moot appeal is denied.
FN 4. The board of directors may appoint an inspector of elections before the annual election. The inspector has the power to “determine the number of memberships outstanding and the voting power of each, the number represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all members.” (§ 7614, subd. (b).) The inspector must perform those duties “impartially, in good faith, to the best of [his or her] abilit[ies] and as expeditiously as is practical.” (§ 7614, subd. (c).)
FN 5. Also, the California Constitution, article II, section 7, governing voting for public office provides, “Voting shall be secret.”
FN 6. As discussed in section I, ante, since Chantiles is no longer a director, he has no current inspection rights. Nor do we perceive any legitimate corporate interest he would have in the future, if reelected, for inspecting the 1992 election ballots. Thus, as far as that election is concerned, this controversy is ended.
Purpose for the Request The member requesting the membership list must state the purpose for the request, which must be reasonably related to his or her interest as a member. (Civ. Code § 5225.) If the board reasonably believes that the list will be used for another purpose, it may deny the member’s request. If the request is denied, in any subsequent action brought by the member pursuant to Civil Code Section 5235 the association will have the burden to prove that the member would have used the list for purposes unrelated to his interest as a member. (Civ. Code § 5225;Tract No. 7260 Association, Inc. v. Parker (2017).)
Liability for Misuse of Membership List The membership list is a corporate asset of the association. (Corp. Code § 8338(a).) Pursuant to Corporations Code Section 8338(a), without consent of the board, the membership list may not be:
(1) Used to solicit money or property unless such money or property will be used solely to solicit the vote of the members in an election to be held by their corporation.
(2) Used for any purpose which the user does not reasonably and in good faith believe will benefit the corporation.
(3) Used for any commercial purpose or purpose in competition with the corporation.
(4) Sold to or purchased by any person.
Any person who misuses a membership list is liable to the association for any damage caused by the misuse, including punitive damages for fraudulent or malicious misuse of the membership list. (Corp. Code § 8338(b); See also “Misuse of Association Records.”) Where the association prevails in an action based upon the misuse of the membership list, the association may recover its costs and expenses, including reasonable attorney’s fees. (Corp. Code § 8338(d).)
Petition to Set Aside Request Where an association believes the membership list will be used for an improper purpose, it may petition the superior court for an order setting aside the demand for the membership list. (Corp. Code § 8331.)
Copying & Mailing Costs The association may bill the requesting member for the direct and actual costs of copying and mailing the membership list. The association must inform the member of the amount of the copying and mailing costs, and the member must agree to pay those costs, before the association copies and mails the membership list. (Civ. Code § 5205(f); See also “Fees & Costs for Records.”)
Email Addresses Member email addresses are included within the scope of information contained on an association’s membership list, where such email addresses “were collected by the association in accordance with Section 4041.” (Civ. Code § 5200(a)(9).) Civil Code Section 4041 addresses the annual notice of owner contact information that each owner is required to submit to the association, and which the association must solicit from all members at least thirty (30) days prior to the distribution of the association’s annual budget report. (Civ. Code § 5200(a)(9).)
Membership List Opt-Out
Any member of the association may opt out of having their contact information included on the association’s membership list by notifying the association in writing of the member’s to be contacted by an alternative process. (Civ. Code § 5220.)
[Membership List; Email Addresses] The “addresses” of members which must be disclosed with a member’s request to inspect the membership list pursuant to Corp. Code § 8330(a) includes the members’ email addresses.
Romero, Park & Wiggins, H. Troy Romero; Baker Hostetler, Peter W. James, Thomas D. Warren and Lisa I. Carteen for Plaintiff and Appellant.
Snell & Wilmer, Richard A. Derevan, Steven T. Graham and Todd E. Lundell for Defendant and Appellant.
Robin D. Miller, in pro. per., for Defendant and Respondent.
Girard Gibbs, Jonathan K. Levine and Elizabeth C. Pritzker for Interveners and Respondents.
OPINION
BLEASE, Acting P. J.—
California’s Corporations Code grants members of a nonprofit mutual benefit corporation the right to inspect and copy, or obtain for a reasonable charge, the record of the names, addresses, and voting rights of the members of the corporation upon 10 business days’ written notice, provided it is for a purpose reasonably related to the person’s interest as a member. (Corp. Code, § 8330, subd. (a)(1), (2).)[1] Such a record may be kept in electronic form. (§ 8320.) A record that is “written” includes an “electronic communication[]” (§§ 5079, 8310) and an electronic communication includes an e-mail. (§§ 5079, 20.)
Appellant WorldMark, The Club (WorldMark), is a California nonprofit mutual benefit corporation owned by its more than 260,000 members. It owns vacation time-share resorts throughout North America, including California, and the Pacific. Respondent Wyndham Resort Development Corporation (Wyndham) is an Oregon corporation that manages the operations of WorldMark’s resorts pursuant to a management agreement.
A WorldMark member, respondent Robin Miller, invoked section 8330 to demand that WorldMark “make available” to its members a petition proposing amendments to the corporation’s bylaws. When WorldMark refused to do [1022] so, Miller demanded a right to inspect and copy WorldMark’s membership records, including the e-mail addresses of its members, for the purpose of distributing his petition to amend the bylaws. E-mail is one of the methods that WorldMark uses to communicate with its members. When WorldMark denied the demand, it proposed the use of a third party mail house to send the petition by conventional mail as a “reasonable alternative” that achieved the purpose identified in Miller’s demand. (§§ 8330, subds. (b) & (c), 8331, subd. (a).)
When Miller refused, WorldMark petitioned the superior court to set aside Miller’s demand (§ 8331, subd. (a)) on the ground it had satisfied its statutory obligations in proposing an alternative (§ 8330, subd. (b)(1)). The trial court denied the petition because the alternative was not reasonable as it was too costly and ordered WorldMark to allow Miller to inspect and copy WorldMark’s membership register, including the names, addresses, e-mail addresses, telephone numbers, and voting rights of its members. (§ 8331.) This appeal followed.
WorldMark’s primary contention is that there is no statutory authority for the trial court’s order requiring it to produce its member e-mail addresses. We shall conclude that the term “members’ … addresses,” in section 8330, subdivision (a)(1), which a corporation is required to disclose, is sufficiently broad to encompass e-mail addresses in light of the section’s purpose and in light of allied sections that allow a corporation to communicate with its members for the purpose of the corporation’s business.
We shall modify the trial court’s order to provide that the information Miller seeks may be made available to him electronically at his option, that no further written demand is necessary, and affirm the order as modified.
FACTUAL AND PROCEDURAL BACKGROUND
WorldMark is a California nonprofit mutual benefit corporation. It is owned by its more than 260,000 members. WorldMark owns vacation time-share resorts in California and throughout North America and the Pacific. WorldMark members own credits, rather than a fractional ownership interest in a particular resort.
Wyndham is an Oregon corporation that manages the operations of WorldMark’s resorts pursuant to a management agreement. All of WorldMark’s properties were purchased and developed by Wyndham. Wyndham transferred ownership of the resorts to WorldMark, and retained [1023] the exclusive right to market and sell the original credits created by the development of each resort. WorldMark members may also advertise, sell, and transfer their credits to others.[2] Other companies also compete with Wyndham for the resale of existing time-share credits.
Miller’s first attempt to contact other WorldMark members is evidenced by a letter dated August 8, 2008, addressed to the WorldMark board of directors. Enclosed with the letter was a membership petition with proposed resolutions attached. Miller requested that the board make the petition available to the membership via WorldMark’s e-mail list in order to have the measures voted on at WorldMark’s annual meeting, which was scheduled to be held on October 23, 2008. Miller did not request a list of WorldMark member e-mail addresses, but merely requested that the board distribute his petition via e-mail. Miller indicated that by including the measures at the board’s annual meeting, the significant expense of calling a special meeting would be avoided.
Miller’s proposed petition expressed a concern over the domination of WorldMark’s board of directors by current or former Wyndham executives, the failure to conduct meetings at which member motions could be raised and voted upon, the absence of any independent owners on the board, and the lack of meaningful member representation in the governance of WorldMark. The proposed resolutions would, if passed, revise WorldMark’s bylaws to address these concerns.
The response to Miller’s letter came from Stephanie Aardal, WorldMark’s director of board and owner relations. Aardal’s letter stated that Miller’s request did not comply with section 3.3(c) of WorldMark’s bylaws requiring a written request signed by members holding 5 percent of the voting power.[3] Miller’s request was declined.
[1024] Miller sent a second letter on August 25, 2008. He urged the board to reconsider, and noted that the board could call a meeting without obtaining any signatures, and he was requesting that the board do so. He also noted that no signatures were required to distribute his petition to the membership.
Aardal answered Miller’s letter, and again informed him that it was his responsibility to gather the minimum 5 percent owner support to bring the petition to the membership. Aardal stated that the board would take appropriate action when he submitted the names of those signing the petitions and copies of the original signed petitions, provided he had received a valid number of signatures.
Miller responded by letter (his third) on September 9, 2008. Since the board refused the request to distribute his petition, he gave notice that he wanted an opportunity within five days to personally inspect WorldMark’s membership records, including its e-mail list. He acknowledged that he would use the information only to distribute his petition.
Instead of scheduling an opportunity for Miller to inspect the membership register as provided in the WorldMark bylaws, Aardal wrote back to Miller informing him that the membership register did not include e-mail addresses, and enclosing a copy of WorldMark’s “Policies and Procedures” regarding the inspection of WorldMark’s membership roster. The Policies and Procedures were approved by WorldMark’s board of directors, but were not part of the bylaws.
The document stated that the policy of the board was that members not be allowed to inspect or copy the membership roster “because of privacy concerns and because [of] the roster’s tremendous commercial value ….” Instead, the board would provide a “reasonable alternative as provided by California law.” The alternative procedure required that the member deliver to WorldMark’s offices a copy of the materials he or she desired to be sent to the other members. If WorldMark determined that the content was not commercial in nature and was reasonably related to the affairs of the corporation, it would contact the member demanding payment for WorldMark’s cost of providing the information, then upon receipt of payment, would provide the member with the name of a mail house to contact in order to arrange the mailing of the materials at the owner’s expense.
Miller sent a fourth letter on September 26, 2008, and for the first time referenced section 8330. The letter stated in part:
“Notwithstanding the Club’s refusal to acknowledge the hundreds of member signed Petitions submitted over the past month, you’ve been made [1025] amply aware of the substantial owner voting power endorsing this Petition and supporting its distribution to the membership.
“Be advised that this demand for membership access has been endorsed by WorldMark owners holding voting rights well in excess of the `authorized number’ specified in section 5036 of the California Corporation[s] Code. Be further advised that pursuant to section 8330 of that Code the undersigned, individually & collectively, hereby demand access to the Club’s records of the member names, voting rights and corresponding e-mail addresses for personal inspection & copying at the Redmond office within five (5) business days from the date of this communication. Further evidence of endorsement is now being executed and sent to your attention.
“The purpose for the requested information is to enable a timely & cost effective electronic distribution of the Membership Petition prior to the Annual Meeting set for October 23, 2008.”
On October 7, 2008, the WorldMark board of directors sent Miller a letter detailing its “serious concerns about the detrimental effect the petition measures would have on the Club if implemented.”
On October 10, 2008, Miller went to WorldMark’s offices in Redmond, Washington, and presented WorldMark with a list of members purporting to constitute the authorized number to make a demand under section 8330. Miller demanded the e-mail addresses of the members.
On October 15, 2008, Aardal sent Miller a letter acknowledging the receipt of the signed membership petitions, but rejecting Miller’s request to disclose e-mail addresses. Aardal stated this time that the e-mail addresses were owned by Wyndham, and that Wyndham “strenuously” objected to their production. The letter stated that it would “take some time” to determine whether the petitions submitted by Miller satisfied the authorized number of members. WorldMark again proposed the alternative of providing the membership list to a mailing house, which would distribute the petitions, and further agreed to pay 50 percent of “the costs associated with administering the mailing, including processing, presorting, addressing and delivering your mailing” to the post office. Miller would, however, be responsible for providing the finished printed materials and paying the postage.
On October 22, 2008, Miller sent a fifth letter to WorldMark. He rejected the alternative WorldMark offered because (1) it was not responsive to his stated objectives, (2) it lacked the efficiency of e-mail communication, (3) it [1026] lacked the cost-effectiveness of e-mail communication, (4) the cost of the alternative was unreasonable, and (5) the alternative could not achieve the stated objectives in a timely manner. Miller again demanded compliance with his request, referencing section 8331.
The same day (Oct. 22, 2008) WorldMark filed its petition under section 8331 to set aside the demand for inspection and copying. The petition alleged WorldMark had offered Miller a reasonable alternative, but that he had rejected the alternative and “escalated” his demand to include e-mail addresses. WorldMark alleged (1) Miller had not satisfied the requirements of section 8330 in submitting his request, (2) e-mail addresses were not part of the membership list, therefore not subject to disclosure under section 8330, subdivision (a)(1), (3) WorldMark did not own the e-mail address list, (4) WorldMark believed the e-mail addresses would be used for an improper purpose, and (5) the alternative proposed by WorldMark was reasonable.
On October 27, 2008, the trial court set a hearing and stayed the production of any information pending the hearing. It was, of course, impossible at this point to get any information to the membership in advance of the October 23, 2008, meeting. On October 30, 2008, the Wixons filed a motion for leave to intervene, and applied to stay the hearing pending a ruling on their motion. The Wixons asserted that they were plaintiffs in a class action against Wyndham in federal court. The federal action alleged, inter alia, that WorldMark directors refused to provide WorldMark members who were attempting to mount a proxy drive with access to the WorldMark membership register, and that this was part of a long effort to manipulate WorldMark board elections to ensure Wyndham’s continued domination of WorldMark.
The trial court denied interveners’ application to stay the hearing, stating that interveners’ rights would not be affected by disposition of the case, since it bore only on Miller’s rights. However, the trial court granted the motion to intervene.
On January 23, 2009, the trial court denied WorldMark’s application for a protective order, and ordered WorldMark to make the membership register, including names, addresses and e-mail addresses, telephone numbers, and voting rights available for inspection and copying.
WorldMark appealed the order, and petitioned this court for a stay of the trial court order pending appeal. This court initially granted the stay pending appeal. However, Miller and the Wixons moved to vacate the stay after WorldMark placed a ballot proposal before its membership seeking to retroactively amend the bylaws to authorize WorldMark to respond to any [1027] request to inspect and copy the membership register by distributing the member’s message through a mail house or other third party distributor.
In response to the motion to vacate, this court modified the stay to permit enforcement of the trial court’s order except insofar as the order required that e-mail addresses be subject to disclosure.
Five days after we modified the stay, the attorney for interveners sent a letter to WorldMark formally demanding production in electronic form of the membership register, including names, addresses, and telephone numbers.[4]
WorldMark responded to interveners by letter from its counsel refusing the demand. The excuses given were that (1) the trial court order required only inspection and copying, not production in electronic form, (2) the attorney’s representation that the information would not be used for an improper purpose was insufficient, (3) the letter did not specify the purpose of the request, and (4) the member had not given reasonable notice. The letter further stated that WorldMark had “grave concerns about the process it has been afforded in the Court of Appeal,” and that notwithstanding its bylaw provisions, “WorldMark’s constituent documents do not permit WorldMark to disclose the Membership Register because of the coalescence of the Bylaws and the laws of other states where WorldMark has members and properties.”
On November 19, 2009, Miller personally sent a letter to WorldMark renewing his demands for access to the membership list, including the mailing addresses, voting rights and telephone numbers of the members. He reiterated his declaration that he would comply with all restrictions on terms of use of the information as contained in the bylaws and ordered by the court.
WorldMark responded to Miller’s letter by letter from its counsel advising Miller that there were “significant new facts and circumstances” bearing on his request. The letter referenced a Florida judgment prohibiting the copying and distribution of the names, addresses, or e-mail addresses of any WorldMark members without their consent. The letter further stated that since Miller had made several requests for information, none of which complied with the bylaws, WorldMark did not know to which request to respond. It further stated Miller had not complied with the conditions of the trial court order.
The Florida judgment to which WorldMark referred was entered in a case filed by five WorldMark members, and referenced a Florida law prohibiting the disclosure of the names, addresses, or e-mail addresses of any members. [1028] WorldMark filed its answer to the Florida complaint two days after the complaint was filed, and essentially admitted all the allegations of the complaint.[5] In response to the Florida plaintiffs’ motion for judgment on the pleadings, WorldMark submitted no vigorous opposition, but specifically referenced the California action against Miller and indicated that without a judicial declaration under Florida law it might be compelled to produce the membership register under order of the California court. Accordingly, a final judgment was entered in the Florida matter granting the plaintiffs a permanent injunction from the production of WorldMark’s membership register. The Florida judgment was entered on November 4, 2009, a mere nine days (seven business days) after the action was filed.
DISCUSSION
I. Rights of Inspection
(1) Section 8330 provides that a member of a mutual benefit corporation has the right to “[i]nspect and copy the record of all the members’ names, addresses and voting rights, at reasonable times, upon five business days’ prior written demand upon the corporation which demand shall state the purpose for which the inspection rights are requested ….” (§ 8330, subd. (a)(1).) A member may also “[o]btain from the secretary of the corporation, upon written demand and tender of a reasonable charge, a list of the names, addresses and voting rights of those members entitled to vote for the election of directors …. The demand shall state the purpose for which the list is requested. The membership list shall be made available on or before the later of ten business days after the demand is received or after the date specified therein as the date as of which the list is to be compiled.” (§ 8330, subd. (a)(2).)
The corporation may deny a member or members access to the list if it “reasonably believes that the information will be used for another purpose, or where it provides a reasonable alternative pursuant to subdivision (c) ….” (§ 8330, subd. (b)(1).)[6]
[1029] Both sections 8330, subdivision (b)(1) and 8331, subdivision (f) provide that in any subsequent action to enforce the rights of a member to inspect membership records of the corporation, the corporation has the burden of proving that the member will allow use of the information for purposes unrelated to the person’s interest as a member or that the alternative method it proposes will reasonably and in a timely manner achieve the purpose set forth in the demand.
Thus, in reviewing the trial court’s order, we must determine (1) whether the trial court’s determination that the member will not permit the membership list to be used for an improper purpose is supported by substantial evidence, and (2) whether the alternative proposed by the corporation was reasonable.
A. Substantial Evidence Supports Miller’s Proper Purpose
The trial court’s order is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of the correctness of the order. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [275 Cal.Rptr. 797, 800 P.2d 1227].) “When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and endswith the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.” (Primm v. Primm (1956) 46 Cal.2d 690, 693 [299 P.2d 231].) “Substantial evidence is evidence that is `reasonable, credible, and of solid value’; such that a reasonable trier of fact could make such findings. [Citation.] [¶] It is axiomatic that an appellate court defers to the trier of fact on such determinations, and has no power to judge the effect or value of, or to weigh the evidence; to consider the credibility of witnesses; or to resolve conflicts in, or make inferences or deductions from the evidence.” (In re Sheila B. (1993) 19 Cal.App.4th 187, 199 [23 Cal.Rptr.2d 482].)
Miller repeatedly asserted in his communications to WorldMark his intent to use the membership information solely to contact other members regarding his proposed petition to amend the corporation’s bylaws. WorldMark’s contrary evidence consisted of its claim that Bill Stephan, one of the 36 members who signed an endorsement of Miller’s petition, was the director of sales and marketing for a company in direct competition with Wyndham.
[1030] Inherent in the trial court’s ruling was the finding that WorldMark’s speculation in this regard was not sufficient to meet its burden of proving that “the member will allow use of the information for purposes unrelated to the person’s interest as a member ….” (§ 8330, subd. (b)(1).) Miller’s representations regarding his intent to use the information solely for a proper purpose constitutes sufficient evidence to support the trial court’s finding on that issue.
B. The Alternative Was Unreasonable
The trial court made several findings with respect to the reasonableness of the alternative presented by WorldMark. It found that the cost to Miller of the proposed alternative would be $1 per member for alternative mailing, resulting in a cost of over $260,000.[7] It also found the alternative did not comport with section 7.1 of WorldMark’s bylaws, which provides that the membership register shall be made available to any member for inspection and copying upon reasonable notice. The trial court found that the Policies and Procedures for requests to inspect and copy the membership register passed by the board were a violation of the bylaws that had not been shown to be in compliance with the provisions for modification of the bylaws.
In determining whether the alternative offered by WorldMark was reasonable, we look to the purposes of the statutory scheme, as well as the purpose of Miller’s request. The obvious purpose of the statute is twofold: to allow members access to the membership list for purposes related to their interests as members, and to protect the sensitive nature of a nonprofit corporation’s membership lists.
The comments based on the legislative committee summary to section 6330, which deals with public benefit nonprofit corporations and which contains language virtually identical to section 8330, states in part:
“A danger exists in allowing too free an access to membership lists; however, the potential for abuse must be balanced against a member’s legitimate needs and rights to utilize lists in election contests and for purposes reasonably related to a member’s interest.
[1031] “The old nonprofit law allowed one member to gain access to a membership list for a purpose reasonably related to the member’s interest as a member. However, a member had to bring suit to enforce this right if the corporation refused to provide the list. The new nonprofit law adopts the former law as to the rights of a single member except that it allows the corporation to provide a `reasonable alternative.’ …
“… The committee felt that the above provisions would draw a proper balance between a member’s need for adequate access to membership lists and the need of a corporation to protect itself from wrongful exploitation of an important asset.” (Coms. Based on Legis. Com. Summary, Deering’s Ann. Corp. Code (2009 ed.) foll. § 6330, p. 209.)
We derive from Miller’s numerous requests that in addition to wanting the membership list for the proper purpose of contacting the membership about bylaw changes, he specifically requested e-mail addresses in order to distribute his materials in an inexpensive and timely manner, so they could be considered at the annual meeting of the WorldMark board scheduled to occur approximately two and one-half months after his first request.[8] The process proposed by WorldMark would have served its own interest in protecting the membership list, but would have failed to satisfy either of the interests asserted by Miller.
(2) The cost of contacting and distributing information to other members is a legitimate factor in determining the reasonableness of any alternative. It is especially pertinent to the consideration of this case, where the membership of the corporation is extremely large, making the cost of contacting the other members by conventional mail such a significant factor that, as a practical matter, a member is completely prohibited from attempting to contact other members for corporate business. The costs go even higher when a third party is paid to physically sort, copy, and mail the information.
The proposed alternative also would not have accomplished Miller’s purpose in a timely manner. Although Miller sent his original request some two and one-half months prior to the annual meeting, WorldMark did not propose its alternative until October 15, 2008, only eight days before the scheduled meeting.[9] At that point the only way to transmit the information in a timely manner was electronically.
[1032] WorldMark argues that the trial court erred in assuming that member e-mail addresses were required to be produced under section 8330. WorldMark reasons that the cost of mailing the information through a third party mail house would not have been significantly more expensive than Miller’s cost of mailing the information himself, especially since WorldMark offered to share the cost associated with using the mail house.
However, we shall conclude in the next part that the language of part 8330, read in the light of allied sections, is sufficiently broad to encompass e-mail addresses in light of the obvious purpose of the statute. Thus, in determining what constituted a reasonable alternative for purposes of sections 8330 and 8331, the trial court could consider options that involved the electronic transfer of the information to the members, including e-mail.
II. E-mail Addresses
WorldMark argues it had no obligation to disclose the e-mail addresses of its members because neither section 8330 nor its own bylaws required it to do so, and because it does not own the membership roster, which it claims is owned by Wyndham.
WorldMark’s claim that e-mail addresses are not part of its membership register, if accurate, is relevant only to its disclosure requirements under its own bylaws, since section 8330 et seq., do not include the term “membership register.” Even if e-mail addresses are not considered part of the membership register under WorldMark’s bylaws, this fact would not invalidate WorldMark’s obligation to disclose the e-mail addresses as required by statute or under other terms of its bylaws.
Section 7.1(a) of the WorldMark bylaws states that the “Membership register (including mailing addresses and telephone numbers)” must be made available for inspection and copying by any member. However, in addition to the membership register, WorldMark must also make available its articles, bylaws, declaration, rules, books of account, minutes of proceedings, “and all other records of the Program maintained by the Club or its Manager ….” (§ 7.1(a), italics added.) This inclusive language is broad enough to encompass the e-mail addresses of its members.
[1033] Moreover, as indicated, section 8330 provides for the disclosure of the members’ names, addresses, and voting rights. WorldMark argues that this language does not include e-mail addresses because the statute was enacted in 1978, and at the time it was passed the Legislature did not contemplate the inclusion of e-mail addresses. We disagree.
(3) Although section 8330 has not been amended since its enactment, allied sections within the statutes governing nonprofit corporations have been amended since the advent of electronic mail.[10] The ultimate purpose of these amendments is to allow electronic communication for the purpose of communicating with shareholders regarding the corporation’s business.
Thus section 8320 was amended in 2004, as part of legislation providing for the use of electronic communications, to provide that the “record of [the corporation] members … their names and addresses and the class of membership held by each ….[¶] … shall be kept either in written form or in any other form capable of being converted into clearly legible tangible form ….” (Id., subds. (a) & (b); Stats. 2004, ch. 254, § 27.) The distinction between a tangible form and one that is not, clearly includes an electronic form that can be made into a tangible form. This reading is supported by the simultaneous enactment of sections 8321 and 8322, which allow certain financial information of the corporation to be distributed annually via “electronic transmission by the corporation (Section 20).” (Stats 2004, ch. 254, §§ 28, 29.)
(4) In the same enactment section 5079, which applies to section 8330 by virtue of section 5002, was amended to provide that the term “[w]ritten” includes “an electronic transmission by a corporation that satisfies the requirements of Section 20.” (Stats. 2004, ch. 254, § 13.)[11] Section 20 specifically includes electronic mail within the definition of an electronic transmission.[12]
[1034] WorldMark points to other statutes that specifically reference both addresses and electronic mail addresses, and argues that these indicate the Legislature made a deliberate choice to exclude e-mail addresses from section 8330. For example, Civil Code section 1798.91, subdivision (a)(2) defines individually identifiable information to mean information that “includes or contains any element of personal identifying information sufficient to allow identification of the individual, such as the individual’s name, address, electronic mail address, telephone number, or social security number, or other information that, alone or in combination with other publicly available information, reveals the individual’s identity.” (Italics added.)
(5) However, the term “address” as used in section 8330 is sufficiently broad to include e-mail addresses. (6) Even before the advent of the Internet and electronic mail, the term “address” was defined as: “[t]he location at which a particular organization or person may be found or reached.” (The American Heritage Dict. (New College ed. 1981) p. 15.) An e-mail address fits within this definition because it is a location, albeit an electronic location, at which a person or organization can be reached. Nothing in the statute limits the term “address” to mean only a physical street address. One could not seriously argue that the term excludes post office boxes. An electronic mail address is nothing more than an electronic post office box.
(7) Where, as here, the term used in the statute is susceptible to more than one reasonable interpretation, we may look to the purpose the Legislature sought to achieve and the statutory scheme of which the statute is a part. (Polster v. Sacramento County Office of Education (2009) 180 Cal.App.4th 649, 663 [103 Cal.Rptr.3d 291].) The Legislature could not have intended in 1978 that the term “addresses” specifically would include e-mail addresses, since the concept of widespread and instantaneous communication by electronic mail was the stuff of science fiction in 1978. Nevertheless, as noted, the code, of which section 8330 is a part, was amended in 2004 to provide for [1035] electronic communications to and from nonprofit mutual benefit corporations and their members, including specifically e-mail. The purposes implicit in the enactment of the amendments were to provide for the disclosure of records the corporation maintained electronically and to allow the corporation to communicate information to and from its members via electronic mail. (§§ 20, 5079, 8320, 8321, 8322.)
(8) Furthermore, the legislative purpose of the statute indicates the Legislature would have intended the inclusion of e-mail addresses in the original statute had it anticipated the existence of such. The comments based on the legislative committee summary indicate the purpose of the statute was to balance a member’s legitimate right to contact the membership for election contests or purposes reasonably related to the member’s interest, against the potential for abuse in allowing too free an access. (Coms. Based on Legis. Com. Summary, Deering’s Ann. Corp. Code, supra, foll. § 6330, p. 209.)
The addition of e-mail addresses would do nothing to upset the balance that the Legislature sought to achieve. Such balancing was accomplished by the process of allowing the corporation to propose a reasonable alternative. The use of e-mail addresses to achieve this goal does not affect the balance. Thus, the corporation may either give the list of member e-mail addresses to a requesting member for a proper purpose, or propose an alternative in which it sends the requested information to the membership via e-mail, without disclosing the e-mail addresses to the requesting member.[13]
In this case, because of the extremely large membership and the resulting cost of copying and mailing any kind of communication to each member, denial of the right to contact other members by e-mail effectively denies a member the right to contact other members for a proper purpose. Such a result would unfairly upset the balance sought by the enactment of this legislation, and cannot be a result that the Legislature intended.
[1036] (9) The application of an expanded definition of the term “address” to section 8330 fulfills the direction that “courts must be sufficiently receptive to the notion of adapting legal principles to address societal changes brought upon by new technologies, [and] where, as here, the issue involves an interpretation of existing statutes, we must maintain our usual deference to the Legislature in such matters and ask ourselves first how that body would have handled the problem if it had anticipated it. [Citation.]” (People v. Butler (1996) 43 Cal.App.4th 1224, 1229 [51 Cal.Rptr.2d 150].) “This is a particularly apt formulation of the standard in cases of emerging technology lest our laws be interpreted only in light of yesterday’s accomplishments.” (Id. at p. 1235.)
We are not persuaded differently by the cases cited by Wyndham, Citizens for Civic Accountability v. Town of Danville (2008) 167 Cal.App.4th 1158 [84 Cal.Rptr.3d 684] (Citizens) and InSyst, Ltd. v. Applied Materials, Inc. (2009) 170 Cal.App.4th 1129 [88 Cal.Rptr.3d 808] (InSyst). InSyst held that delivery of instructions to obtain an electronic copy of a judgment did not amount to service of a file-stamped copy of the judgment for purposes of triggering the time in which to appeal. (Id. at p. 1140.) However, the court indicated that a superior court clerk could electronically serve a triggering document if electronic service had been authorized. (Id. at p. 1139.) The court’s decision turned on whether an e-mail explaining where to obtain a document was the same as actually transmitting the document. The decision is not helpful to our analysis.
Citizens, supra, 167 Cal.App.4th 1158, also involved whether an e-mail from the superior court clerk directing the parties to a Web site where they could find an electronic copy of the judgment was the equivalent of service of a file-stamped copy of the judgment. (Id. at p. 1160.) Citizens held that the time for appeal was triggered only by the mailing of the judgment via the United States Postal Service. (Ibid.) However, the court recognized that the term “mail” was reasonably susceptible of multiple meanings, and resolved the ambiguity by applying the principle that ambiguities should be resolved in favor of preserving the right to appeal. (Id. at p. 1163.) That principle is not at play in this case.
We reject WorldMark’s claim that it does not “own” the e-mail addresses of its members, but that such addresses are “owned” by Wyndham. WorldMark’s bylaws provide that a member may inspect and copy all records of the vacation owner program, whether maintained by the corporation or by its manager [1037] (Wyndham).[14] Moreover, Miller presented evidence that WorldMark’s online reservation system operated via the e-mail addresses of the participating members, and that its online proxy/ballot voting system also utilizes the members’ e-mail addresses. WorldMark may not thwart a member’s legitimate attempt to communicate via e-mail by claiming that it does not “own” the addresses of its own members.
III. Miller’s Demand Satisfied Section 8330
We reject WorldMark’s argument that Miller’s request did not comply with section 8330, subdivision (b)(2). Subdivision (b)(2) states that the right of inspection and copying may be exercised by: “The authorized number of members for a purpose reasonably related to the members’ interest as members.” The “authorized number of members” is defined in section 5036, which also provides that any right that may be exercised by the authorized number may be exercised “by a member with written authorizations obtained within any 11-month period from members who, in the aggregate, hold the equivalent voting power. Any such authorization shall specify the right to be exercised thereunder and the duration thereof (which shall not exceed three years).” (Id., subd. (d).) WorldMark claims Miller’s authorizations were inadequate because they did not specify the duration of the authorization.
(10) However, section 8330 provides that the rights of inspection and copying may be exercised either by a single member or by the authorized number of members. Thus, it was not necessary for Miller to obtain authorizations from any other members in order to exercise his right of inspection and copying.
IV. Scope of 8330 Request
WorldMark argues the trial court should not have allowed the Wixons to intervene, or considered WorldMark’s bylaws in determining the scope of disclosure in a section 8330 proceeding. We disagree.
We will not reverse the order either because the trial court allowed the Wixons to intervene or because the trial court considered the bylaws when [1038] making its determination. The intervention of the Wixons has no bearing on our determination, and our conclusion that the e-mail addresses must be disclosed is based upon statute, not upon WorldMark’s bylaws.
(11) Finally, WorldMark rejected respondents’ postjudgment request for the disclosure of its membership register in electronic form because the trial court order did not require disclosure in electronic form. Our review of the relevant statutory framework indicates that if the records are maintained in electronic form, a member may request that such records be turned over in electronic form. Section 8310 provides that if a record subject to inspection and copying under the statute is not maintained in written form, the corporation must make the record available in written form. That section provides that the terms “written” and “in writing” also include “cathode ray tube and similar electronic communications methods.” Section 5079, which has been amended since section 8310 was last amended in 1982, further provides that the terms “[w]ritten” and “in writing” include “facsimile, telegraphic, and other electronic communication as authorized by this code ….”
The first sentence of section 8310 provides: “If any record subject to inspection pursuant to this chapter is not maintained in written form, a request for inspection is not complied with unless and until the corporation at its expense makes such record available in written form.” Substituting the word “electronic” for the word “written,” as both sections 8310 and 5079 indicate we must, we conclude that if a record is maintained in electronic form, the corporation must make the record available in electronic form or written form, at the member’s request.
We shall therefore modify the trial court’s order to provide for the disclosure of the information in electronic form or written form at the option of respondents. Respondents need not make any further request for information.
DISPOSITION
The trial court’s order is modified to provide that the information Miller seeks, including e-mail addresses, shall be made available to him in electronic form at his option and that no further written demand is necessary. If any member’s address is not in electronic form WorldMark shall provide a written copy of such address to Miller. Consistent with the trial court’s order, Miller or his duly appointed representative must acknowledge in writing his agreement not to use or allow use of the membership information for commercial or other purposes not reasonably related to the affairs of the club. In all other respects the judgment (order) is affirmed. The stay is vacated upon finality of the judgment.
[1039] Costs are awarded to Robin Miller and interveners.
Robie, J., and Cantil-Sakauye, J., concurred.
[1] Further references to a section are to the Corporations Code unless otherwise indicated.
[2] The Wixons are named plaintiffs in a federal class action against Wyndham. Their federal complaint alleges that an active resale market in WorldMark credits has arisen with the advent of the Internet, and that because the price of resale credits is typically lower than the price of credits purchased from Wyndham, Wyndham has suffered a negative impact on its sales. As a result, they allege, Wyndham has instituted certain programs that destroy the resale market for credits and have a negative impact on WorldMark members.
[3] Section 3.3(c) of WorldMark’s bylaws, entitled “Special Meetings” states: “Special meetings of the Members for any lawful purpose and at any time shall be scheduled in response to a call by the President, by the Board, or upon receipt of a written request signed by Members holding five percent (5%) of the Voting Power held by Members other than Declarant. Such meetings must be duly noticed and held not less than thirty-five (35) days nor more than ninety (90) days after request therefore is received by the President or Secretary. If notice is not given by the Secretary within twenty (20) days of such receipt by the Club of a request for special meeting, then the person(s) requesting the meeting may give notice.”
Miller’s initial request was not directed at a special meeting of the Board. Moreover, section 8330 imposes no such limitation upon a member’s request.
[4] Respondents’ request for judicial notice is granted.
[5] WorldMark stated it had no knowledge of some of the allegations.
[6] Subdivision (c) of section 8330, states in full: “The corporation may, within ten business days after receiving a demand under subdivision (a), deliver to the person or persons making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list. An alternative method which reasonably and in a timely manner accomplishes the proper purpose set forth in a demand made under subdivision (a) shall be deemed a reasonable alternative, unless within a reasonable time after acceptance of the offer the corporation fails to do those things which it offered to do. Any rejection of the offer shall be in writing and shall indicate the reasons the alternative proposed by the corporation does not meet the proper purpose of the demand made pursuant to subdivision (a).”
[7] WorldMark argues for the first time in its reply brief that Miller never tendered evidence that the cost of mailing under the alternative would be at least $260,000. Arguments raised for the first time in the reply brief are untimely and may be disregarded. (Hernandez v. Vitamin Shoppe Industries Inc. (2009) 174 Cal.App.4th 1441, 1461, fn. 10 [95 Cal.Rptr.3d 734].) In any event, we may take judicial notice under Evidence Code section 452, subdivision (h), that the current cost of a first-class stamp is 44 cents, thus for postage alone (not including the cost of paper, copying, sorting, and handling) the cost to mail 260,000 first-class letters would be $114,400, an amount that is still prohibitive for the average member.
[8] Although Miller’s purpose of contacting the membership prior to the 2008 annual meeting can no longer be accomplished, his purpose of having his proposed bylaw amendments distributed to the membership and put up for a vote may still be accomplished at a future meeting.
[9] Section 8330, subdivision (c) provides that the “corporation may, within ten business days after receiving a demand … deliver to the person or persons making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list.”
[10] Both parties also point to the Vacation Ownership and Time-share Act of 2004 (Bus. & Prof. Code, § 11210 et seq.). WorldMark cites it to show that the language is similar to that of the Corporations Code, and does not specify e-mail addresses. Respondents cite it to show more expansive language which they contend would include e-mail addresses. Neither party contends the time-share act is applicable here.
[11] “`Written’ or `in writing’ includes facsimile, telegraphic, and other electronic communication as authorized by this code, including an electronic transmission by a corporation that satisfies the requirements of Section 20.” (§ 5079.)
[12] Section 20 provides: “`Electronic transmission by the corporation’ means a communication (a) delivered by (1) facsimile telecommunication or electronic mail when directed to the facsimile number or electronic mail address, respectively, for that recipient on record with the corporation, (2) posting on an electronic message board or network which the corporation has designated for those communications, together with a separate notice to the recipient of the posting, which transmission shall be validly delivered upon the later of the posting or delivery of the separate notice thereof, or (3) other means of electronic communication, (b) to a recipient who has provided an unrevoked consent to the use of those means of transmission for communications under or pursuant to this code, and (c) that creates a record that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form. However, an electronic transmission under this code by a corporation to an individual shareholder or member of the corporation who is a natural person, and if an officer or director of the corporation, only if communicated to the recipient in that person’s capacity as a shareholder or member, is not authorized unless, in addition to satisfying the requirements of this section, the consent to the transmission has been preceded by or includes a clear written statement to the recipient as to (a) any right of the recipient to have the record provided or made available on paper or in nonelectronic form, (b) whether the consent applies only to that transmission, to specified categories of communications, or to all communications from the corporation, and (c) the procedures the recipient must use to withdraw consent.”
[13] Our holding does not mean that a corporation will be unable to prevent the disclosure of e-mail addresses or physical mailing addresses in the future. Miller originally presented WorldMark with an alternative that would have satisfied the concerns of both sides—the transmission by WorldMark of Miller’s petition via e-mail. This would have accomplished a quick and inexpensive dissemination of the material to the WorldMark membership without necessitating the disclosure of membership information. However, WorldMark rejected the request, and that alternative is no longer at issue here. The important point in terms of the individual member’s access, is that in this day and age of instantaneous electronic transmission of data, a corporation may not insist on a slower and more expensive form of communication when a member requests a form of electronic communication and the corporation has the capability of complying with the request.
[14] The bylaws provide that a member’s access to such documents must be “for a purpose reasonably related to his interests as a Member.” Thus, Wyndham’s alarm that any member would be able to access the Social Security numbers or consumer credit histories of other members is unfounded.
Actions for Misuse of Association Records Where a member sells association records, uses them for a commercial purpose, or uses them for any other purpose not reasonably related to his or her interest as a member, Civil Code Section 5230 allows the association to take legal action against the member for injunctive relief and damages:
“(a) The association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member’s interest as a member. An association may bring an action against any person who violates this section for injunctive relief and for actual damages to the association caused by the violation.
(b) This article may not be construed to limit the right of an association to damages for misuse of information obtained from the association records pursuant to this section or to limit the right of an association to injunctive relief to stop the misuse of this information.” (Civ. Code § 5230(a)-(b).)
Misuse of Member’s Personal Information by Association or Manager An association or its managing agent are prohibited from:
Selling a member’s personal information for any purpose without the consent of the member; (Civ. Code § 5230(c)(1)(A).)
Transmitting a member’s personal information to a thirty party without the consent of the member, unless required to do so by law, including but not limited to situations where the transmission of the information must be made in response to a member’s request to inspect association records as defined under Civil Code Section 5200. (Civ. Code § 5230(c)(1)(B).)
If an association violates the above restrictions, a member may bring an action against the association for injunctive relief and actual damages caused by the violation. If the member’s action is successful, the member is entitled to recover reasonable costs and expenses, including reasonable attorney’s fees. (Civ. Code § 5230(c)(2).)
Recovery of Attorney’s Fees & Costs Where an association is successful in enforcing its rights under Civil Code Section 5230, the association is “entitled to recover reasonable costs and expenses, including reasonable attorney’s fees.” (Civ. Code § 5230(d).)
A member’s right to inspect and copy various association records is not absolute and may be limited by the year the requested record was prepared as well as the contents of the requested record.
Records Which may be Withheld or Redacted The following includes records which are not subject to inspection and/or which may be withheld or redacted pursuant to Civil Code Section 5215:
Information which, if released, is reasonably likely to lead to (1) identity theft (i.e., bank account numbers of members or vendors, social security or tax id numbers, credit card numbers, etc.), (2) fraud in connection with the association, or (3) compromising the privacy of an individual member of the association. (Civ. Code § 5215(a)(1),(2),(4); Civ. Code § 5215(a)(5)(c); See also Chantiles v. Lake Forest II Master HOA (1995) 37 Cal.App.4th 914.)
Association employee information (i.e., name, social security number, or other personal information), except for employee compensation information to be set forth by job classification or title. (Civ. Code § 5215(b).)
Information which is privileged under law (i.e., documents subject to attorney-client privilege, documents relating to litigation in which the association is or may become involved, confidential settlement agreements, etc.). (Civ. Code § 5215(a)(3); See also Smith v. Laguna Sur Villas Community Assn. (2000) 79 Cal.App.4th 639.)
Records of goods or services provided a la carte to individual members for which the association received monetary consideration other than assessments. (Civ. Code § 5215(a)(5)(A).)
Records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records. (Civ. Code § 5215(a)(5)(B).)
Interior architectural plans, including security features, for individual homes. (Civ. Code § 5215(a)(5)(F).)
Written Explanation for Withholding or Redacting Records An association that denies or redacts records must, if so requested by the requesting member, “provide a written explanation specifying the legal basis for withholding or redacting the requested records.” (Civ. Code § 5215(d).)
Costs of Redacting Records Where any record requested by a member will need to be redacted before being produced, the association may charge the member “an amount not in excess of ten dollars ($10) per hour, and not to exceed two hundred dollars ($200) total per written request, for the time actually and reasonably involved in redacting an enhanced association record.” (Civ. Code § 5205(g).) The association is required to inform the member of the estimated redacting costs, and the member is required to agree to pay those costs, before redacting the records and providing them to the member. (Civ. Code § 5205(g); See also “Member Record Inspection Rights” and “Fees & Costs for Records.”)
Limitation of Liability “No association, officer, director, employee, agent or volunteer of an association shall be liable for damages to a member of the association or any third party as the result of identity theft or other breach of privacy because of the failure to withhold or redact that member’s information under this subdivision unless the failure to withhold or redact the information was intentional, willful, or negligent.” (Civ. Code § 5215(c).)
Minutes of Board and Member Meetings Minutes of board meetings and member meetings must be made available to members within thirty (30) calendar days following the meeting and distributed upon request by a member. (Civ. Code § 4950.)
Minutes Prepared During Current Fiscal Year – must be provided to the member within ten (10) days following the association’s receipt of the member’s request. (Civ. Code § 5210(b)(1).)
Minutes Prepared During Prior Years – must be provided to the member within thirty (30) calendar days following the association’s receipt of the member’s request. (Civ. Code § 5210(b)(2).)
Minutes of Committee Meetings with Decisionmaking Authority Minutes of committees with “decisionmaking authority” for meetings commencing on or after January 1, 2007 must be made available within fifteen (15) calendar days following approval. (Civ. Code § 5210(b)(5); See also “Committee Meeting Minutes.”)
Fiscal Records & Governing Documents Any statement or record available pursuant to Civil Code Section 5300 (insurance, budget, financial statements, etc.) or pursuant to Civil Code Section 4525 (governing documents, construction defects, assessment changes, etc.) must be made available within the specified time frame:
Records for Current Fiscal Year – must be provided within ten (10) business days following the association’s receipt of the member’s request. (Civ. Code § 5210(b)(1).)
Records for Prior Fiscal Years – must be provided within thirty (30) calendar days following the association’s receipt of the member’s request. (Civ. Code § 5210(b)(2).)
A member of an association has certain rights to inspect and copy various association records. Those rights cannot be limited by contract or by the association’s articles or bylaws. (Corp. Code § 8313.) However, not all records are subject to inspection and copying by a member. Those limitations, along with the requirements and procedures applicable to requesting and inspecting association records, are principally governed by Civil Code Sections 5205, 5210 and 5215.
Records Subject to Inspection
Association records are broken down into two (2) categories: (1) “association records” (Civ. Code § 5200(a)), and (2) “enhanced association records” (Civ. Code § 5200(b)). “Association records” include such items as annual budget reports and financial statements, income tax filings, board meeting minutes (except for executive session minutes), and executed contracts. “Enhanced association records” include such items as invoices, canceled checks, purchase orders, credit card statements, and reimbursement requests submitted to the association. (See “Records Subject to Inspection.”)
Records Not Subject to Inspection
Many association documents contain sensitive, confidential or privileged information. While such documents may fall within the purview of an “association record” or an “enhanced association record,” they may be withheld or redacted. (Civ. Code § 5215; See also “Records Not Subject to Inspection.”)
Proper Purpose Requirement
A member’s request to inspect association records must be for a proper purpose:
“…association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member’s interest as a member.” (Civ. Code § 5230; See also Tract No. 7260 Association, Inc. v. Parker (2017).)
This proper purpose requirement is also referenced in Corporations Code Sections 8330 and 8333. A member’s misuse of records may subject the member to legal action by the association for injunctive relief and damages. (Civ. Code § 5230(b); See also “Misuse of Association Records.”)
Right to Designate Agent
A member may designate another person to inspect and copy the specified records on the member’s behalf. (Civ. Code § 5205(b); Corp. Code § 8311.) Such a designation must be made in writing. (Civ. Code § 5205(b).)
Costs of Copying, Mailing & Redacting Records
An association may charge the member for the direct and actual cost of copying and mailing the requested records. (Civ. Code §§ 5205(f), 4950(a); See also “Fees & Costs for Records.”) An association may also charge the member “an amount not in excess of ten dollars ($10) per hour, and not to exceed two hundred dollars ($200) total per written request, for the time actually and reasonably involved in redacting an enhanced association record.” (Civ. Code § 5205(g).) An association is required to inform the member of the amount of copying and mailing costs, including estimated redacting costs, and the member is required to agree to pay those costs, before providing the member with the requested records. (Civ. Code § 5205(f)-(g).)
Electronic Production of Records
A member has the option of receiving the requested records “by electronic transmission or machine-readable storage media as long as those records can be transmitted in a redacted format that does not allow the records to be altered.” (Civ. Code § 5205(h).) Where records are delivered by such means, “[t]he cost of duplication shall be limited to the direct cost of producing the copy of a record in that electronic format.” (Civ. Code § 5205(h).)
Location for Inspecting & Copying Records
Records must be made available at the association’s onsite business office or, if there is none, at a location agreed upon by the member and the association. (Civ. Code § 5205(c)-(d).) If there is no onsite business office and no alternate location can be agreed upon, or if the member submits a written request directly to the association for copies of the records, the association may mail them to the member by individual delivery within the applicable deadlines for producing the requested records. (Civ. Code § 5205(e).)
Enforcement of Inspection Rights
If an association wrongfully denies a member’s valid request for records, the member may bring a lawsuit (including a small claims suit where possible) against the association to enforce the member’s inspection rights. (Civ. Code § 5235(a),(c).) If the association is found to have unreasonably withheld access to association records, the member is entitled to reasonable costs and expenses, including reasonable attorney’s fees, and the association may be further subject to a civil penalty of up to five hundred dollars ($500) for the denial of each separate written request. (Civ. Code § 5235(a).) If the association prevails, and if the court finds the member’s action to have been “frivolous, unreasonable, or without foundation,” the association may recover its costs from the member. (Civ. Code § 5235(c).)
Most of the books, records and items of information maintained and generated by an association during the course of its operations are subject to inspection and copying by a member. (Civ. Code § 5205;See also “Member Record Inspection Rights.”) The records of an association that are subject to inspection and copying are broken down into two (2) main categories: “association records” and “enhanced association records.” (Civ. Code § 5200.)
“Association Records” Civil Code Section 5200(a) defines “association records” to include all of the following:
Interim financial statements, periodic or as compiled, containing any of the following: (a) balance sheet; (b) income and expense statement; (c) budget comparison; (d) a “general ledger” of transactions over a period of time. (Civ. Code § 5200(a)(3); See also “Financial Statement.”)
Returned ballots, signed voter envelopes, the voter list of names, parcel numbers, and voters to whom ballots were to be sent, proxies, and the candidate registration list. Signed voter envelopes may be inspected but may not be copied. (Civ. Code § 5200(c).)
“Enhanced Association Records” Civil Code Section 5200(b) defines “enhanced association records” to include “invoices, receipts and canceled checks for payments made by the association, purchase orders approved by the association, bank account statements for bank accounts in which assessments are deposited or withdrawn, credit card statements for credit cards issued in the name of the association, statements for services rendered, and reimbursement requests submitted to the association.” Anything which constitutes an “enhanced association record” is also an “association record.” (Civ. Code § 5200(a)(13).)
Exception: Inspector’s reports compiled pursuant to Section 5551 (pertaining to exterior elevated elements) must be made available for inspection at least two (2) inspection cycles. (Civ. Code § 5210(a)(3).)
Request for Inspection & Production Requirements
Subject to certain limitations, members and directors of an association have varying rights to inspect association records. (See “Member Record Inspection Rights;” See also “Director Record Inspection Rights.”)
An association’s collection policy sets forth the “association’s policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments.” (Civ. Code § 5310(a)(7).) Those policies and practices typically include the recording and foreclosure of assessment liens, obtaining money judgments, and suspending membership privileges.
When Distributed
The collection policy is a required part of the association’s annual policy statement that must be distributed to the members within thirty (30) to ninety (90) days before the end of the association’s fiscal year. (Civ. Code § 5310(a)(7); See also “Annual Policy Statement.”)
