Tag Archives: Attorney-client Privilege

Davis-stirling Act

Civil Code Section 5216. Safe at Home Program Participants.

(a) Notwithstanding any other law, upon request of a member of an association who is an active participant in the Safe at Home program, the association shall do both of the following:

(1) Accept and use the address designated by the Secretary of State as the Safe at Home participant’s substitute address under the Safe at Home program for all association communications.

(2) Withhold or redact information that would reveal the name, community property address, or email address of the Safe at Home participant from both of the following:

(A) All resident community membership lists, including mailbox bank listings, resident directories, electronic keypads, unit property numbers, and internet web portal accounts.

(B) Any membership list that will be shared with other members of the association.

(b) An association shall keep member participation in the Safe at Home program confidential.

(c) For purposes of this section:

(1) “Community property address” means the address of the member’s property within the community governed by the association.

(2) “Safe at Home participant” means a person certified as a program participant in the Safe at Home program.

(3) “Safe at Home program” means the address confidentiality program established pursuant to Chapter 3.1 (commencing with Section 6205) of Division 7 of Title 1 of the Government Code.

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Smith v. Laguna Sur Villas Community Association

(2000) 79 Cal.App.4th 639

[Association Records; Attorney-Client Privilege] A HOA, the corporate entity, is entitled to claim attorney-client privilege for communications between the HOA and its attorneys. The HOA’s members are not the holders of the privilege; rather, the HOA’s Board of Directors is the holder of the privilege.

Lee H. Durst and Nancy M. Padberg for Plaintiffs and Appellants.
Richard A. Tinnelly, Bruce R. Kermott, Aliso Viejo, and Deborah Cameron Vian for Defendant and Respondent.

OPINION

CROSBY, J.

Condominium associations may bring construction defect lawsuits against developers without fear of having to disclose privileged information to individual homeowners. Like closely-held corporations and private trusts, the client is the entity that retained the attorney to act on its behalf.

I

This litigation has its genesis in a construction defect action involving a 253-unit condominium project in the Laguna Sur development of the City of Laguna Niguel. The project was governed by the Laguna Sur Villas Community Association (Villas). Another group, the Laguna Sur Community Association (the Master Association), owned the development’s open space.[FN. 1]

In June 1990, both associations jointly retained the law firm of Duke, Gerstel, Shearer & Bregante to sue the developer. They split the legal fees and shared expenses for soils and structural experts.

The litigation proved to be more costly than anticipated and by August 1991 the fees exceeded $450,000. That fall the Villas’ board of directors adopted an emergency assessment of $2,000 per unit. The assessment was imposed without polling the members.

A dissident group of Villas residents was upset by the “runaway budget for expenditures” and demanded to review Duke, Gerstel’s work product and legal bills “within 15 days from their receipt by the Association or its representatives.” Villas objected on the grounds of attorney-client and work product privileges.

Plaintiff Leslie Smith also made the same demand to Villas in his capacity as a board member. However, Smith served as a director of the Master Association, not Villas. He voluntarily resigned from the Master Association in June 1992.[FN. 2]

The dissidents sought to recall the Villas board members for fiscal mismanagement, but lost the recall vote. The Villas board thereafter recommended an additional special assessment of $4,000 per unit. This [323] new assessment was ratified by a membership vote in 1993.

The dissidents responded with individual small claims actions against the Villas’ directors to recover the amount of the 1991 and 1992 assessments. They separately sued Villas in superior court for declaratory and injunctive relief. Villas in turn sued them for abuse of process and declaratory relief. The actions were consolidated.

After trial, the court found the 1991 special assessment was valid; Villas held the attorney-client privilege; and Smith’s inspection rights as a director were moot. Villas dismissed its damage claim for abuse of process. The court awarded attorney fees and costs to Villas as the prevailing party pursuant to Code of Civil Procedure section 1033.5 and Civil Code sections 1717 and 1354.

II

The court correctly held Villas was the holder of the attorney-client privilege and that individual homeowners could not demand the production of privileged documents, except as allowed by the Villas board.

Villas brought the construction defect litigation on its own behalf. California law expressly permits a mutual benefit non-profit corporation to “institute, defend, settle, or intervene in litigation … in its own name as the real party in interest and without joining with it the individual owners” in actions for damage to the common areas or for separate areas which it must repair or maintain. (Code Civ. Proc., § 383.) This represents a substantive change in previous case law which only accorded individual owners standing to sue. (Raven’s Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal. App.3d 783, 792, 171 Cal.Rptr. 334.)[FN. 3]

Corporations have a separate legal identity and enjoy the benefit of the attorney-client privilege. (Hoiles v. Superior Court (1984) 157 Cal.App.3d 1192, 1198, 204 Cal.Rptr. 111.) Evidence Code section 951 defines a “client” as the “person” who “directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer….” The term “person” includes a corporation (Evid.Code, § 175); indeed, it may extend to an unincorporated organization “when the organization (rather than its individual members) is the client.” (Cal. Law Revision Com. com, 29B Pt. 3 West’s Ann. Evid.Code (1995 ed.) foll., § 951, p. 207.) There is no statutory exception for shareholders, even for closely held entities, and courts are powerless to elaborate upon the legislative scheme. (Dickerson v. Superior Court (1982) 135 Cal.App.3d 93, 99, 185 Cal.Rptr. 97.)

Although appellants, as condominium owners, were members of Villas, they were not individually named as plaintiffs in the construction defect litigation. Because they did not consult with or retain the Duke, Gerstel law firm, they do not fit within the joint-client exception of Evidence Code section 962. (Hoiles v. Superior Court, supra, 157 Cal.App.3d at p. 1199, fn. 4, 204 Cal.Rptr. 111; see also Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 212, 91 Cal.Rptr.2d [324] 716, 990 P.2d 591[“no such [joint client] relationship is implied in law”].)

Appellants argue they were the “true clients” of Duke, Gerstel rather than Villas, a “faceless” association which could only act in a “representative” capacity of the general membership. They contend Villas owed them a fiduciary duty to act in their best interests as “the rightful owners who are paying with their assessments for the legal services being rendered on their behalf.” They characterize as the “crux” of the matter the question: “For whose benefit is the lawsuit being brought?”

We have squarely rejected this equation between beneficiaries and allegedly true clients. In Holies v. Superior Court, supra, 157 Cal.App.3d 1192, 204 Cal.Rptr. 111, we held that only closely-held corporations, not minority shareholders, were the client of the corporation’s attorney even though the corporate board members owed fiduciary duties to the complaining shareholders. In Shannon v. Superior Court (1990) 217 Cal.App.3d 986, 266 Cal. Rptr. 242, another court held a receiver could assert an absolute attorney-client privilege as to communications with his counsel even as to a disclosure request by the corporation which was placed into receivership and to which he owed fiduciary responsibilities.

Most recently, in Wells Fargo Bank v. Superior Court, supra, 22 Cal.4th 201, 209, 91 Cal.Rptr.2d 716, 990 P.2d 591, the Supreme Court refused to create a so-called “fiduciary” exception to the attorney-client privilege because courts “do not enjoy the freedom to restrict California’s statutory attorney-client privilege based on notions of policy or ad hoc justification.” In Wells Fargo the beneficiaries of a trust sought to discover confidential communications between the trustee (a bank) and outside trust counsel. Like appellants, the beneficiaries contended the trustees owed independent duties to provide them with complete and accurate information regarding the trust administration and to allow them to inspect books and documents. All to no avail, for the court declined to allow such responsibilities to trump the statutorily-created attorney-client privilege: “Certainly a trustee can keep beneficiaries `reasonably informed’ [citation] and provide `a report of information’ [citation] without necessarily having to disclose privileged communications…. If the Legislature had intended to restrict a privilege of this importance, it would likely have declared that intention unmistakably, rather than leaving it to courts to find the restriction by inference and guesswork….” (Id. at p. 207, 91 Cal.Rptr.2d 716, 990 P.2d 591.) Wells Fargo held that the attorneys only represented the trustees, not the beneficiaries.

The Supreme Court was not persuaded to the contrary because the beneficiaries were indirectly paying attorney fees which came out of the trust. That is because “[p]ayment of fees does not determine ownership of the attorney-client privilege…. In any event, the assumption that payment of legal fees by the trust is equivalent to direct payments by beneficiaries is of dubious validity…. [T]his question of cost allocation does not affect ownership of the attorney-client privilege.” (Wells Fargo Bank v. Superior Court, supra, 22 Cal.4th at p. 213, 91 Cal.Rptr.2d 716, 990 P.2d 591.)

Here, too, appellants did not individually arrange to pay their proportionate fees of the Duke, Gerstel legal fees; instead, the fees were billed to and paid by Villas, which drew its funds from the member assessments. As in Wells Fargo, such indirect payments do not suffice to create an attorney-client relationship.

It is no secret that crowds cannot keep them. Unlike directors, the residents owed no fiduciary duties to one another and may have been willing to waive or breach the attorney-client privilege for reasons unrelated to the best interests of the association. Some residents may have had no defects in their units or may have had familial, personal or professional relationships with the defendants. Indeed, it [325] is likely that the developer in the underlying litigation itself may have owned one or more unsold units within the complex. As Villas points out, “[o]ne can only imagine the sleepless nights an attorney and the Board of Directors may incur if privileged information is placed in the hands of hundreds of homeowners who may not all have the same goals in mind.” With the privilege restricted to an association’s board of directors, this is one worry, at least, that their lawyers can put to rest.

III

As an alternative to their rights as homeowners, appellants argue that Smith and another individual, Hunter Wilson, were entitled to copies of the billing documents in the construction defect litigation in their separate capacity as directors and that their written demands to view the “attorney bills, reports and documents” were ignored.

We provided a “short answer” to a similar claim in Hoiles v. Superior Court., supra,157 Cal.App.3d at p. 1201, 204 Cal. Rptr. 111. We do so again. No such claim is contained in the complaint. Appellants’ contention is meritorious in the abstract since directors do have the right to request privileged information in their capacity as fiduciaries. However, it is specious in the particular. Neither Smith nor Wilson was a director of the association they sued. They were directors of the Master Association, not Villas. As counsel pointed out to the court: “Mr. Smith is trying to seek … rights of inspection by suing Laguna Sur Villas. It is a separate and distinct corporation which he never sat on as a director….”[FN. 4]

Appellants make a meritless argument that the two associations “operated as one in the … construction defect litigation” and shared legal expenses. That is a nonsequitur. There was no attempt to establish that the two associations were alter egos of one another, and each maintained a separate legal existence.

Moreover, as the trial court observed, Smith’s rights (if any) as a director of either association ceased when his term expired in 1992. In Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914, 920, 45 Cal. Rptr.2d 1, we acknowledged the rule that “`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[.]'” This issue was thus moot even before the time of trial, and Smith had no reason to pursue it here.

IV

Appellants question the 1991 emergency assessment because “there was no emergency….” The court, however, ruled that appellants had failed to prove this contention “without the actual documentation” that Villas had adequate cash reserves to pay for consultants and repairs to the damaged common property.

That failure of proof manifests itself here as well. If there is a legal argument disguised somewhere in appellants’ briefs, it is too well hidden for us. Appellants have not affirmatively established error to overcome the presumption in favor of the ruling below. (Fundamental Investment etc. Realty Fund v. Gradow (1994) 28 Cal. App.4th 966, 971, 33 Cal.Rptr.2d 812.)

The judgment, including the fee award to respondent as prevailing party, is affirmed. Costs on appeal, including reasonable attorney fees to be assessed by the superior court, are awarded to respondent.

SILLS, P.J., and RYLAARSDAM, J., concur.

 

FN. 1 – The two boards had two or three common members and occasionally met collectively for informal workshops, but otherwise maintained a separate legal existence.

FN. 2 – Smith erroneously pleaded that he was a Villas director in 1991 and 1992. He never sued the Master Association.

FN. 3 – Smith raises for the first time in his reply brief the purported impact of recent legislation (Civ.Code, § 1375, subd. (g)) requiring associations to provide notice to individual owners of rejected settlement offers by builders or of proposed civil actions by the association and to allow for a special meeting of the members to discuss the matter. Aside from the impropriety of raising issues for the first time by reply brief (City of Costa Mesa v. Connell(1999) 74 Cal.App.4th 188, 197, 87 Cal.Rptr.2d 612), we fail to see the statute’s relevance. Under the statute, for example, the notice requirements do not come into play when an association’s board of directors accepts a developer’s written settlement offer, or where it agrees to submit to alternative dispute resolution after meeting and conferring with the developer. (Civ.Code, § 1375, subds. (e)(3), (g) [“If the board of directors of the association rejects a settlement offer presented at the meeting …”].)

FN. 4 – Appellants also tell us that “Abel Armas” was a board member of the Villas Association and that he, too, futilely made inspection requests of his fellow Villas board members. But Armas is not a party to the instant lawsuit, and there is no record he made any requests for documents.

 

Seahaus La Jolla Owners Association v. Superior Court

(2014) 224 Cal.App.4th 754

[Attorney-client privilege; Homeowners] Attorney-client privilege applies to communication between association’s attorney and homeowners.

Epsten Grinnell & Howell, Anne L. Rauch; Rockwood & Noziska, Brant Noziska, Neal Rockwood; Law Offices of William A. Bramley and William A. Bramley for Petitioner.
Simpson Delmore & Greene, Paul J. Delmore, Elizabeth A. Donovan and Brook T. Barnes for Real Parties in Interest CLB Partners Ltd. and La Jolla View Ltd., LLC.
Gordon & Rees, Sandy M. Kaplan, R. Scott Sokol and Matthew G. Kleiner for Real Parties in Interest Webcor Development, Inc., Webcor Builders, Inc., and Webcor Construction, L.P.
Bryan Cave, Robert E. Boone III, Edward M. Rosenfeld, Tony Tootell and David Harford for Real Parties in Interest Bank of America Corporation, Bank of America, N.A., and Countrywide Home Loans, Inc.

OPINION

HUFFMAN, J. —

Petitioner Seahaus La Jolla Owners Association (Association) is the plaintiff in a construction defect action alleging water and other damage to the common areas of a common interest development. The Association sued the developers and builders of the complex, La Jolla View Ltd., LLC, and Webcor Construction L.P. (Defendants), who, among others, are the real parties in interest in this mandamus proceeding. The Association contends the trial court erred and abused its discretion in overruling the Association’s claim of attorney-client privilege in this discovery dispute over Defendants’ efforts to depose individual homeowners regarding disclosures made at informational meetings about the litigation.

The record shows that counsel for the Association’s board of directors (the Board) gave notice to the individual homeowners in June 2009 that the Board was pursuing mediation but was also contemplating filing construction defect [760] litigation. (Civ. Code, former § 1368.5, now § 6150.)[FN. 1] Such litigation was filed in July of 2009, and the Board and its counsel subsequently conducted meetings with many individual homeowners of the 140 units to apprise them of the status and goals of the litigation. Pursuant to the provisions of the governing documents, at one such litigation update meeting, the Board sought and obtained majority approval by the homeowners for pursuing the action. (Civ. Code, § 6150, subd. (b); Association’s Declaration of Covenants, Conditions and Restrictions (CCRs), § 4.4.11, “Members’ Approval of Certain Actions.”)

By the time of the later litigation update meetings, a subgroup of individual homeowners had filed its own companion action in which they seek damages for construction defects in their private individual units, and their action was coordinated for discovery purposes with the Association’s action. (Sarnecky v. La Jolla View Ltd., LLC (Super. Ct. San Diego County, No. 37-2010-00092634-CU-OR-CTL) (Sarnecky action).)[FN. 2]

Defendants’ contested discovery requests were made during depositions of many individual homeowners, and seek to inquire into the content and disclosures made at those informational litigation update meetings, which were conducted by the Association’s counsel. The Association objected, invoking the attorney-client privilege under Evidence Code[FN. 3] section 952 and the “common interest” doctrine. (See OXY Resources California LLC v. Superior Court (2004) 115 Cal.App.4th 874, 887-888 [9 Cal.Rptr.3d 621] (OXY Resources) [parties who possess common legal interests may share privileged information without losing the protection afforded by the privilege].) However, several rulings by the trial court have declined to allow such a privilege to be asserted by the Association, or have concluded any privilege was waived, regarding the communications received at the meetings by [761] individual homeowners who are not the actual clients of the Association’s retained counsel. This petition ensued.

“Confidential communications” between client and lawyer are defined in section 952 as meaning “information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.” (Italics & underscoring added.)

(1) We evaluate this discovery dispute in the context of the usual first principles, that parties may obtain discovery regarding any unprivileged matter that is relevant to the subject of the pending action or motions, but subject to the rule that “the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” (Code Civ. Proc., § 2017.010, italics added.) Defendants’ claim to entitlement to information about the litigation update meetings is apparently based upon the claim of some of the individual plaintiffs to stigma damages for their units (apparently in the Sarnecky action). Defendants argue that in the Association’s common area action, they should be able to inquire into the beliefs of the individual homeowner plaintiffs about damages and the source of their beliefs (such as any perceptions gained from information given to them by the Association’s attorneys at the Board’s litigation update meetings).

To the extent this record reveals anything about the purpose of the requested discovery, it shows that counsel for Defendants is seeking to develop information about the litigation strategy of the Association’s counsel, including the legal opinions formed and the advice given by the lawyers in the course of that relationship, and such disclosures would not likely lead to the discovery of admissible evidence. (§ 952; Code Civ. Proc., § 2017.010; Mitchell v. Superior Court (1984) 37 Cal.3d 591, 609-610 [208 Cal.Rptr. 886, 691 P.2d 642] (Mitchell) [public policy concerns outlined against unwarranted invasions of privilege].)

(2) In the Act governing common interest developments, the Legislature placed certain obligations on homeowners association governing boards to communicate with individual owners about proposed construction defect litigation by the association regarding the common areas. (Civ. Code, § 6150, subd. (a).) The association may sue developers over common area defects and [762] also over alleged damage to the separate interests that the association must maintain or repair, or damage to the separate interests that is integrally related to damage to the common areas. (Ibid.; Civ. Code, § 5980.) By the same token, individual owners have economic interests in the value of not only their own individual units, but also in the state of the development as a whole. (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc. (2003) 110 Cal.App.4th 120, 126-127 [1 Cal.Rptr.3d 528] (Ostayan).)

As we will show, the challenged orders in the Association’s action represent an overly technical definition of the attorney-client privilege, and do not account for the protection of client confidentiality as it operates through the common interest doctrine, in this factual and legal context surrounding common interest developments. We grant relief on the petition to allow the attorney-client privilege to be asserted under these circumstances.

FACTUAL AND PROCEDURAL SUMMARY

A. Nature of Meetings Held by Board for Individual Homeowners; Legal Representation

The Board hired the Epsten Grinnell & Howell law firm to represent it in pursuing mediation with the developer and general contractor of the development. On June 23, 2009, the Association’s counsel sent a letter to all homeowners notifying them that mediation was pending, no lawsuit had been filed, and a preliminary list of defects was enclosed, reflecting that the Association was currently investigating the nature, extent and severity of the defects at the site. The letter stated that if an owner was selling or refinancing a unit, “you may be required to provide this document to escrow, buyer, or a lending institution.”

The next letter from the Association’s attorneys was dated August 17, 2009, and provided homeowners with an update regarding the status of the construction defect claims involving the common areas of the development. This letter notified homeowners that (1) the Association had just filed its lawsuit on July 31, 2009, due to limitations concerns and bankruptcy of one defendant, and (2) the homeowners might be required to disclose that filing in connection with any pending sale or refinance of a unit. Mediation was continuing, but the legal action filing had been deemed to be essential to preserve the claims. Counsel stated that members of the firm would be present at the Association’s annual meeting on September 16, 2009, to answer questions and discuss the Association’s legal options and the status of the investigation and mediation efforts.

On January 13, 2010, the Board and its mediation and litigation committee sent out a notice of an informational meeting to all homeowners, at which [763] counsel for the Association would be present to provide owners with information about the status of the claims against the developers and builders of the complex. The meeting was scheduled for January 26, 2010, for presentations by the attorneys and some of the consultants retained to assist in connection with pursuing the claims.

Next, counsel for the Association sent all homeowners another status update on the claims against the developers and builders dated March 1, 2010. This letter referenced the homeowner meeting held January 26, 2010, and stated that additional defects had been identified and were being investigated. The homeowners were told that additional meetings would be scheduled when the results of the current investigation were obtained.

On March 20, 2012, counsel for the Association notified the individual homeowners that an upcoming open forum meeting was scheduled for March 24, 2012, to answer individual homeowners’ questions regarding the litigation, particularly its relationship to the separate Sarnecky individual homeowners’ action. Only some of the individual homeowners were parties to the separate action, and they were represented by their own attorneys (the Aguirre firm). The letter also stated that the Association’s structural engineer would be attending the meeting to answer questions.

B. Discovery Dispute; Referee

Defendants pursued discovery in the Association’s action, requesting that several individual homeowners be produced for deposition and questioned about the litigation meetings’ content, and any basis they might have learned there about any stigma damages being claimed for their units. Defendants argued that the meetings were not held in a confidential context and any applicable privileges had been waived.

The Association objected to the questions and asserted that the information was protected from disclosure by the attorney-client privilege. The Association did not claim that the individual homeowners were also clients of its counsel, but rather that they were “third persons … to whom disclosure is reasonably necessary for the … accomplishment of the purpose for which the lawyer is consulted.” (§ 952.) Thus, it claimed the individual homeowners were present to further the interests of the Association, as client, in the consultation.

When Defendants continued to seek information about the content of the meetings, the Association brought the issue before the appointed discovery referee, James A. Roberts. After a tentative ruling and hearing, the referee issued a report and recommendations for a protective order to be issued by [764] the court. The referee concluded that the information requested about the content of the meetings was not subject to discovery because it was neither directly relevant to the action nor reasonably likely to lead to relevant evidence. In his June 4, 2012 letter decision, he stated his opinion that the Association had the better argument as to why such communications should be determined to be privileged. In his formal recommendation dated July 13, 2012, issued after a request for reconsideration, the referee stated that even though some of the letters from the Association’s counsel to the homeowners, about the status of the litigation and the claims being made, were stated on their face not to be confidential and thus could be shown to lenders or prospective purchasers, the public content of those letters was different from the content of the confidential information being discussed at the homeowner litigation meetings.

C. Court Proceedings on Referee’s Recommendation

Defendants brought their objections to the referee’s recommendations to the trial court (Judge Vargas), who held several hearings. In a series of proposed orders and rulings, Judge Vargas stated he “sustains defendant’s objection” to the recommendation, but also stated “[t]he court overrules all other objections.” Although the order granted the protective order proposed by the referee, it was stamped “granted with modifications” (which were unclear), and the same order was stamped as “Rejected — Defective (Courtesy Copy Not Received by Court).” Meanwhile, some of the individual homeowners’ depositions were proceeding, out of over 30 that were set.

At the end of 2012, Judge Vargas retired and the case was reassigned to Judge Meyer. In July 2013, Defendants moved to compel further answers, claiming that the information sought about the meetings at the individual homeowners’ depositions was not protected by the attorney-client privilege, since there were no attorney-client relationships between the Association’s counsel and the individual homeowners.

The Association responded that there was not any attorney-client relationship between its own counsel and the individual homeowners, but that nevertheless, its counsel’s disclosures to those homeowners were privileged under section 952, as reasonably necessary for “the accomplishment of the purpose” for which the Association’s lawyer was consulted.

At the hearing on the motion to compel, Judge Meyer stated that he could not understand Judge Vargas’s orders, which were ambiguous and contradictory. The matter was taken under submission and the motion to compel granted on September 4, 2013: “This court cannot change Judge Vargas’s order [765] reversing the Discovery Referee’s determination regarding an attorney-client relationship between the Association’s counsel and individual homeowners.”

This petition followed, asserting that the court erred in granting the motion to compel solely on the ground that it had to follow Judge Vargas’s earlier order, which was ambiguous. Petitioner seeks orders compelling the trial court to vacate its orders allowing the requested discovery, and asks that we direct the trial court to order adoption of the referee’s report. The Association contends this privilege question is one of first impression that should be considered by this court before the Association or witnesses are required to disclose information it claims is privileged.[FN. 4]

We issued a stay, received additional briefing, and issued an order to show cause. Oral argument was held and the matter submitted.

DISCUSSION

In this context of Association litigation seeking recovery for construction defects in the common areas, we are asked to decide whether attorney-client privileges extend to communications, for which confidentiality was intended or preserved, between the Association’s counsel and third party nonclients (individual homeowners), at Association update meetings about the common area litigation, which were held for the individual homeowners. Although there may be some differences between the procedural posture of some of these third party nonclients (i.e., only some of the individual homeowners have filed the separate Sarnecky action seeking damages to their private units), we will treat the Association and its litigation counsel’s communications to individual homeowners at the meetings as raising the same legal issue. Were such communications sufficiently confidential, and “reasonably necessary for the accomplishment of the purpose for which the [Association’s] lawyer is consulted,” based on common interests in the subject matter of the Association’s litigation updates? (See §§ 912, 952.)

[766]I

APPLICABLE STANDARDS

A. Review of Privilege Rulings

“Extraordinary review of a discovery order will be granted when a ruling threatens immediate harm, such as loss of a privilege against disclosure, for which there is no other adequate remedy. [Citation.] `”We review discovery orders under the abuse of discretion standard, and where the petitioner seeks relief from a discovery order that may undermine a privilege, we review the trial court’s order by way of extraordinary writ. [Citation.]”‘” (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1493 [66 Cal.Rptr.3d 833] (Zurich).) Each challenged discovery ruling concerning the recognition of a privilege is considered on a “`case-by-case'” basis, and we decide only the issues before us. (Upjohn Co. v. United States (1981) 449 U.S. 383, 396-397 [66 L.Ed.2d 584, 101 S.Ct. 677].)

In this context, “`[t]he trial court’s determination will be set aside only when it has been demonstrated that there was “no legal justification” for the order granting or denying the discovery in question.'” (OXY Resources, supra, 115 Cal.App.4th 874, 887.) A trial court has abused its discretion in determining the applicability of a privilege when it utilizes the wrong legal standards to resolve the particular issue presented. (Zurich, supra, 155 Cal.App.4th 1485, 1493-1494.)

(3) The party claiming privilege has the burden of establishing the preliminary fact that the communications were made during the course of an attorney-client relationship. (D. I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 729 [36 Cal.Rptr. 468, 388 P.2d 700]; Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 740 [101 Cal.Rptr.3d 758, 219 P.3d 736].)

(4) The overarching standards for the scope and applicability of a privilege are statutory in nature. (§ 911.) “The privileges set out in the Evidence Code are legislative creations; the courts of this state have no power to expand them or to recognize implied exceptions.” (Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 206 [91 Cal.Rptr.2d 716, 990 P.2d 591] (Wells Fargo); see Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 373 [20 Cal.Rptr.2d 330, 853 P.2d 496];Zurich, supra, 155 Cal.App.4th 1485, 1494.) Public policy supports the proper scope of application of attorney-client privileges, to ensure “`the right of every person to freely and fully confer and confide in one having knowledge of the law, and skilled in [767] its practice, in order that the former may have adequate advice and a proper defense.'” (Mitchell, supra, 37 Cal.3d 591, 599.)

(5) The proper purposes of discovery are to obtain information on unprivileged matters that are relevant to the subject of the pending action, “if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” (Code Civ. Proc., § 2017.010.) “For discovery purposes, information is relevant if it `might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement.’ [Citation.] Admissibility is not the test and information, unless privileged, is discoverable if it might reasonably lead to admissible evidence. [Citation.] … [T]he scope of discovery extends to any information that reasonably might lead to other evidence that would be admissible at trial. `Thus, the scope of permissible discovery is one of reason, logic and common sense.'” (Lipton v. Superior Court (1996) 48 Cal.App.4th 1599, 1611-1612 [56 Cal.Rptr.2d 341] (Lipton); italics omitted.)

B. Procedural Status: No Reliance on Laches

Before analyzing the record in light of the above legal principles, we acknowledge that the sequence of discovery referee recommendations and two sets of superior court rulings have created some confusion on the basis for the rulings and the exact issues to be resolved. Defendants complain that the Association could have sought mandamus relief earlier, but did not do so until well into the discovery and litigation process, and thus, the petition arguably should be barred by laches. (See, e.g.,Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68 [99 Cal.Rptr.2d 316, 5 P.3d 874]; Planned Parenthood Golden Gate v. Superior Court (2000) 83 Cal.App.4th 347, 356 [99 Cal.Rptr.2d 627].)

Writ review on the merits is appropriate to evaluate the rulings granting the motion to compel brought by Defendants, since they effectively disallowed the claims of attorney-client privilege raised by the Association with respect to the proposed questioning of individual homeowners. It is not necessary to enter into the debate about what Judge Vargas meant in the rulings he made before he retired in 2012, or about Judge Meyer’s subsequent interpretation of what Judge Vargas must have meant, when Judge Meyer found it determinative that there was no attorney-client relationship between the Association’s counsel and individual homeowners. In light of the novel and important issues raised by the petition on the interpretation of section 952, we decline to take the route of relying on principles of laches to resolve this matter. (See Lipton, supra, 48 Cal.App.4th 1599, 1612.)

Moreover, the Association has requested in its petition that this court direct the trial court to order adoption of the referee’s report. Such an intermediate [768] step is not necessary, and instead we exercise our discretion to reach the merits of the privilege questions presented.

II

ELIGIBILITY FOR PRIVILEGE COVERAGE

A. Basic Statutory Criteria: Evidence Code

(6) Two basic situations arise under section 952 for determining whether a “confidential communication” between a client and lawyer will retain its privileged character. Most importantly to the case before us, section 952 provides that confidentiality is retained if such an attorney-client communication is transmitted in confidence “to no third persons other than those who are present to further the interest of the client in the consultation ….” (§ 952, italics added.) Together, sections 912 and 952 will “permit sharing of privileged information when it furthers the attorney-client relationship; not simply when two or more parties might have overlapping interests.” (McKesson HBOC, Inc. v. Superior Court (2004) 115 Cal.App.4th 1229, 1237 [9 Cal.Rptr.3d 812], italics added, citing Raytheon Co. v. Superior Court (1989) 208 Cal.App.3d 683 [256 Cal.Rptr. 425].)

In general, section 912, subdivision (a) provides guidance for when disclosures operate to waive a privilege. One of its exceptions, section 912, subdivision (d) expressly clarifies it is not a waiver of privilege under the following circumstances: “`A disclosure in confidence of a communication that is protected by a privilege provided by [attorney-client privilege, section 954], when disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer … was consulted, is not a waiver of the privilege.'” (OXY Resources, supra, 115 Cal.App.4th at p. 890, italics added; see First Pacific Networks, Inc. v. Atlantic Mutual Ins. Co.(N.D.Cal. 1995) 163 F.R.D. 574, 581 [both §§ 912 and 952 contain the same concept, i.e., whether there is a reasonable necessity for disclosure to a third party, in order to accomplish the purpose of consulting the lawyer].)

(7) Accordingly, section 952 allows privileges to be preserved when a family member, business associate or joint client (and/or the attorney for same) meets with the client and attorney who claim privilege, in regard to a matter of joint concern, “`when disclosure of the communication is reasonably necessary to further the interest of the [claimant/litigant].'” (Insurance Co. of North America v. Superior Court(1980) 108 Cal.App.3d 758, 767 [166 [769]  Cal.Rptr. 880], italics added; see 2 Witkin, Cal. Evidence (5th ed. 2012) Witnesses, § 124, pp. 423-424.)[FN. 5]

In a related situation, public policy considerations were enunciated to assist in defining the proper scope of statutory protections of attorney-client confidential communications. The Supreme Court in Mitchell, supra, 37 Cal.3d 591, 611, was confronted with a defendant’s discovery requests that were nominally intended to produce evidence relating to a plaintiff’s claimed damages, in the form of questioning of the plaintiff about the nature and content of any warnings or information she had received from her attorney about the potential damages she was asserting. (Id. at p. 597.) In that case, the plaintiff was claiming injury from the defendants’ wrongful environmental contamination, including her emotional distress stemming from fears of future physical harm that might be caused from the contamination. (Id. at p. 595.)

In the requested discovery in Mitchell, defense counsel arguably was seeking to inquire into whether the plaintiff and her counsel had discussed any potential physical harm to her from the contamination, “and if so, whether that discussion had contributed to plaintiff’s distress.” (Mitchell, supra, 37 Cal.3d 591, 610.) In considering privilege, the Supreme Court balanced the respective interests and concluded that such questioning went too far, because it “might very well reveal much of plaintiff’s investigative efforts and trial strategy.” (Ibid.) The plaintiff’s attorney-client privilege should protect against any such investigation by opposing counsel into confidential client communications about injury and damages. (Id. at pp. 610-611.)

Moreover, allowing such proposed discovery into attorney-client discussions would “potentially uphold a harassment tactic whereby defendants … are able to shift the focus of the case from damages caused by [their actions] to damages caused by allegedly inflammatory or false information provided by self-serving attorneys…. [T]his technique not only obfuscates many of the substantive issues in a case but also frequently places the wrong `defendant’ on trial.” (Mitchell, supra, 37 Cal.3d 591, 610-611.) Permitting such discovery would constitute “an unwarranted abrogation of the attorney-client privilege,” that would unjustifiably undermine the proper functioning of the judicial system. (Id. at p. 611.)

[770] Having set forth these basic principles and policy limitations regarding the protected scope of the attorney-client privilege, we turn to the more specific questions presented about the application of the common interest doctrine in this situation.

B. Common Interest Doctrine Definition

(8) “Although the protection of the attorney-client privilege is absolute, the protection afforded by the common interest doctrine is qualified, because it depends on the content of the communication…. [T]here is `no absolute brightline [sic] test which distinguishes between the parties [sic] “adversarial” interests and their “common” interests.'” (OXY Resources, supra, 115 Cal.App.4th 874, 896.)

Not only the content of the communication must be considered, but also the circumstances of the communication. “Applying these waiver principles in the context of communications among parties with common interests, it is essential that participants in an exchange have a reasonable expectation that information disclosed will remain confidential. If a disclosing party does not have a reasonable expectation that a third party will preserve the confidentiality of the information, then any applicable privileges are waived. An expectation of confidentiality, however, is not enough to avoid waiver. In addition, disclosure of the information must be reasonably necessary for the accomplishment of the purpose for which the lawyer was consulted. (Evid. Code, § 912, subd. (d).) Thus, `[f]or the common interest doctrine to attach, most courts seem to insist that the two parties have in common an interest in securing legal advice related to the same matter — and that the communications be made to advance their shared interest in securing legal advice on that common matter.’ [Citations.]” (OXY Resources, supra, 115 Cal.App.4th at p. 891, italics added.)

(9) In Citizens for Ceres v. Superior Court (2013) 217 Cal.App.4th 889, 915 [159 Cal.Rptr.3d 789], the court expounded on the rules regarding the nonwaiver principles of sections 912 and 952. A communication to a lawyer, even when made in the presence of another person (e.g., a business associate or joint client, who is present to further the interest of the client in the consultation), and on a matter of joint concern, may retain a privileged character, within the existing scope of the privilege statutes. “Evidence Code sections 912 and 952, however, make no reference to common interests or joint concerns; they refer instead to a reasonable necessity of disclosure. Those two sections give rise to the common-interest doctrine…. [T]he alignment of the parties’ common interests may mean disclosures between [771] them are reasonably necessary to accomplish the purposes for which they are consulting counsel.” (Citizens for Ceres, supra, at p. 916.)[FN. 6]

(10) In Smith v. Laguna Sur Villas Community Assn. (2000) 79 Cal.App.4th 639, 642 [94 Cal.Rptr.2d 321] (Smith), the court analyzed discovery demands for attorney-client privileged information that were made by appellants as condominium owners and members of their Association, regarding litigation materials created by the Association. Those owners were not individually named as plaintiffs in the Association’s construction defect litigation against the developers, so that the owners were not equivalent to the Association client that had retained the attorney to bring the lawsuit, and thus the owners could not be allowed to access the privileged information. The court explained, “Like closely held corporations and private trusts, the client [(association)] is the entity that retained the attorney to act on its behalf.” (Ibid.; see id. at p. 643 [§ 951 defines “`client'” as the “`person'” who “`directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer ….'”].) Thus, “[w]here the association sues in its own name without joining with it the individual unit owners, the association, not the unit owners, holds the attorney-client privilege.” (9 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 25B:110, p. 25B-233 (rel. 10/2007).)

In reaching its conclusions, the court in Smith, supra, 79 Cal.App.4th 639, relied on Wells Fargo, supra, 22 Cal.4th 201, 209, in which no “fiduciary” exception to the attorney-client privilege was allowed on behalf of beneficiaries of a trust, who had sought to discover confidential communications between their trustee and the outside trust counsel hired by the trustee. It was immaterial that the trust had paid the attorney; such payments “do not suffice to create an attorney-client relationship.” (Smith, supra, at p. 645.) Courts “do not enjoy the freedom to restrict California’s statutory attorney-client privilege based on notions of policy or ad hoc justification.” (Wells Fargo, supra, at p. 209.)

[772] In Smith, supra, 79 Cal.App.4th 639, the court colorfully addressed concerns about group client confidentiality and potentially conflicting loyalties of association counsel, by stating: “It is no secret that crowds cannot keep them. Unlike directors, the residents owed no fiduciary duties to one another and may have been willing to waive or breach the attorney-client privilege for reasons unrelated to the best interests of the association. Some residents may have had no defects in their units or may have had familial, personal or professional relationships with the defendants. Indeed, it is likely that the developer in the underlying litigation itself may have owned one or more unsold units within the complex. As [association] points out, `[o]ne can only imagine the sleepless nights an attorney and the Board of Directors may incur if privileged information is placed in the hands of hundreds of homeowners who may not all have the same goals in mind.’ With the privilege restricted to an association’s board of directors, this is one worry, at least, that their lawyers can put to rest.” (Id. at p. 645.)

C. Homeowners Associations’ Obligations: Civil Code Criteria

(11) For purposes of evaluating the proper scope of the attorney-client privilege, we turn to the statutes governing the Association’s obligations to its members. In Civil Code former section 1368.3 (now Civ. Code, § 5980), an association that was established to manage a common interest development is granted standing to sue in its own name on matters concerning damage to the common area, or damage to separate interests that are affected by damage to the common areas, etc. (Civ. Code, § 5980; former § 1368.3, repealed by Stats. 2012, ch. 180, § 1, operative Jan. 1, 2014.)[FN. 7] As previously explained, after the Association filed its construction defect action in 2009 alleging damage to the common areas, individual homeowners hired their own attorneys to file a separate but coordinated action for damage to individual units (the Samecky action). However, the Association can seek redress for damage to separate interests that are affected by damage to the common areas, etc. (Civ. Code, § 5980.)

[773] (12) “The duties and powers of a homeowners association are controlled both by statute and by the association’s governing documents.” (Ostayan, supra, 110 Cal.App.4th 120, 126-127.) In that case, the appellate court observed that the “complex” relationship between the individual owners and the managing association of a common interest development may “`”depend[] on the function the association is fulfilling under the facts of each case.”‘” (Id. at p. 126.) Although the individual owner “`has an economic interest in the proper business management of the development as a whole for the sake of maximizing the value of his or her investment,'” in other ways, “`each individual owner, at least while residing in the development, has a personal, not strictly economic, interest in the appropriate management of the development….'” (Id. at pp. 126-127, quoting Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 266-267 [87 Cal.Rptr.2d 237, 980 P.2d 940].)

(13) As explained already, the Act places certain obligations on an association to communicate with individual owners about any proposed construction defect litigation. Civil Code section 6150, subdivision (a), part of the Act, requires the board of an association to provide a written notice to each current member of the association, 30 days prior to the filing of any civil action by the association against the developer, “for alleged damage to the common areas, alleged damage to the separate interests that the association is obligated to maintain or repair, or alleged damage to the separate interests that arises out of, or is integrally related to, damage to the common areas or separate interests that the association is obligated to maintain or repair.” Such a notice shall specify (1) a meeting will take place to discuss problems that may lead to the filing of a civil action; (2) what are the options available to address the problems; and (3) the time and place of the meeting. (Ibid.) (If there are potential statute of limitations problems imminent, the association may give such notice within 30 days after the filing of the action (Civ. Code, § 6150, subd. (b)); this method was evidently used here.)

In the CCRs applicable to this property, the Association is required not only to give such written notice of intended litigation to Association members, but also to obtain a vote of approval by more than 50 percent of the members, before filing the action. (CCRs, § 4.4.11.) This provision implements the protections of the individual homeowners’ economic interests in the value of not only their own individual units, but also the development as a whole. (Ostayan, supra, 110 Cal.App.4th 120, 126-127.) It anticipates that investigation of common area defects could require individual homeowners to permit access and testing that affect their units.

[774] III

ANALYSIS; NO WAIVER FOUND

In light of the above principles of law, we turn to the record and request for relief in this case.

A. Was Confidentiality of Communications Maintained at Meetings?

(14) The common interest doctrine is properly characterized under California law “as a nonwaiver doctrine, analyzed under standard waiver principles applicable to the attorney-client privilege and the work product doctrine.” (OXY Resources, supra, 115 Cal.App.4th at p. 889, fn. omitted.) “`[F]or the common interest doctrine to attach, most courts seem to insist that the two parties have in common an interest in securing legal advice related to the same matter — and that the communications be made to advance their shared interest in securing legal advice on that common matter.’ [Citations.]” (Id. at p. 891.)

Defendants argue that any confidentiality of communications at the meetings was initially waived through several different sets of circumstances. First, persons employed by or affiliated with Defendants, and who were also individual homeowners, were allowed to attend, and expert consultants attended and spoke at the meetings. (But see fn. 5, ante.) Second, a few homeowners later discussed issues raised at the meetings with their relatives and friends. Third, the letters announcing the meetings stated that the letters could be shared with potential buyers or lenders. Also, the Association had not kept confidential, but had made available to others, the numerous e-mails its counsel had received from individual homeowners about the defects they were experiencing in their units.

In response, the Association provided the declaration of its managing agent, Nina McCarthy, stating that the Association and its counsel gave instructions that attendance at the litigation meetings was to be restricted to Seahaus owners only, not tenants, prospective buyers, real estate agents or other such third parties.

The concerns expressed in Smith, supra, 79 Cal.App.4th 639, about the difficulty of preserving confidentiality when a large crowd of homeowners is involved were outlined by the court in that case, in response to the individual homeowners’ efforts to access privileged material created by the association’s lawyers. Such access was not necessarily intended to further the purpose of the association’s lawyers’ job, but was adverse to it. (Id. at p. 645.) Our [775] situation is the converse, in which the Association and its Board and lawyers perceive that the Board has a duty to keep all the individual homeowners informed about common area litigation that might affect the value of the individual units.

Likewise, in Wells Fargo, supra, 22 Cal.4th 201, the individual beneficiaries were seeking to force disclosure of the trustee’s privileged information, for their own dissident reasons. Again, our situation is the converse, in which the corporate entity is attempting to offer confidential legal information to other interested persons about matters in which the entity (the Association) and its members (individual homeowners) have some common interests, and which the attorneys for the Association are attempting to protect. Concededly, the interests of the Association and the individuals will not always be aligned, and it can be difficult to draw a line between their allied interests and their adverse interests. (See OXY Resources, supra, 115 Cal.App.4th at p. 896.) However, the Association was seeking to share its privileged information with homeowners, to the extent that it believes that they “`all have the same goals in mind.'” (Smith, supra, 79 Cal.App.4th at p. 645.)

(15) To determine the scope of the privilege, we look to the content of the subject communications, as well as the circumstances, for indications on whether the meetings will advance the common interests in the representation by counsel. (OXY Resources, supra, 115 Cal.App.4th at p. 891.) In considering the Civil Code sections listed above about the initiation of construction defect litigation, together with the Association’s governing documents, we conclude that the Association’s duties and powers include communicating with those parties who have closely aligned common interests, and the individual homeowners at the development have such common interests in this particular context. On balance, these circumstances show that the Association and its counsel, and the individual homeowners who participated in the litigation meetings, maintained a reasonable expectation that information to be disclosed about the status of the litigation was confidential in nature. “Clearly, the fundamental purpose behind the privilege is to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters.” (Mitchell, supra, 37 Cal.3d 591, 599.) In the role of client, the Association could properly take into account not only its own goals of protecting the common areas, but also the interests of its individual member homeowners in their units, as related to the common areas that the Association was seeking to repair. The relationship of the two construction defect actions was close enough so that the individual homeowners had common interests in the legal status of the Association’s action. (See Civ. Code, § 6150, subd. (a).) Moreover, the presence of some homeowners who may have had conflicting loyalties (homeowners who were affiliated with Defendants) did not destroy all other common interests.

[776] We conclude that the subject litigation meetings were held to accomplish the purpose for which the Association’s lawyers were consulted. (§ 912, subd. (d); OXY Resources, supra, 115 Cal.App.4th at p. 891.) The common interest doctrine and its protection of confidentiality of these communications apply as a matter of law to these circumstances.

B. Was “Reasonable Necessity” Shown for Disclosures at Meetings?

We turn to the related question of whether the record supports the conclusion that it was “reasonably” necessary to the purpose of the Association’s attorney retention for such disclosures to be made at the subject meetings, to the individual homeowners. (§§ 952, 912, subd. (d).) Defendants appear to argue that even if the original meeting, seeking individual voter approval of the Board’s decision to pursue the litigation, was required by the CCRs and therefore was reasonably necessary, any subsequent meetings lost that protected status. We disagree. Both the content and the circumstances of each set of communications made about the Association’s legal strategy or advice support conclusions that each stage of these disclosures was intended to carry out the purpose of pursuing the Association’s lawsuit (to recover for asserted damage to the common areas) in such a way that would be consistent with and not interfere with the rights of the individual homeowners.

Although the two sets of plaintiffs involved here have some common interests in obtaining legal advice about their respective and distinct property rights, those rights will ultimately differ and are being resolved in separate lawsuits. Nevertheless, the Association’s attorney was attempting to communicate in the subject meetings with other stakeholders, the individual homeowners, in a manner that would advance their shared interests in securing advice on similar legal and factual issues. (OXY Resources, supra, 115 Cal.App.4th at pp. 887-888.) These circumstances were enough to connect the disclosure of the litigation update information with the statutorily required “reasonably necessary” steps toward accomplishing the purpose for which the lawyers were consulted. (§ 912, subd. (d).)

If we agree with the position taken by Defendants, which is that the Association’s attorneys’ communications to individual homeowners were not confidential and merely served to create inflated expectations of individualized stigma damages, we run the risk of offending the public policy considerations set out in Mitchell, supra, 37 Cal.3d at pages 609 through 610. Even if discovery into privileged discussions between attorneys and clients would nominally be intended to produce some evidence relating to the issues about damages, “it might very well reveal much of plaintiff’s investigative efforts and trial strategy.” (Id. at p. 610.) Such discovery about attorney-client [777] communications regarding potential damage evaluations or items “would potentially uphold a harassment tactic whereby defendants … are able to shift the focus of the case from damages caused by [their actions] to damages caused by allegedly inflammatory or false information provided by self-serving attorneys…. [T]his technique not only obfuscates many of the substantive issues in a case but also frequently places the wrong `defendant’ on trial.” (Id. at pp. 610-611.)

(16) In reaching this conclusion and granting the petition, we do not expand the scope of statutory privileges, but instead apply recognized rules to an unusual set of facts. (Wells Fargo, supra, 22 Cal.4th 201, 206.) The trial court erred in granting Defendants’ motion to compel deposition answers from individual homeowners about the content and strategies disclosed to them by the Association or its counsel at the litigation update meetings, and the trial court must deny the motion and issue a protective order concerning the attorney-client privilege in light of the common interest doctrine.

DISPOSITION

Let a peremptory writ of mandate issue directing the superior court to vacate its September 4, 2013 order denying assertion of the attorney-client privilege and compelling discovery, and enter a new order issuing a protective order and denying the motion to compel. The stay issued on September 17, 2013 is vacated. Petitioner is entitled to costs in the writ proceeding.

McConnell, P. J., and Irion, J., concurred.

 

[FN. 1] Both Civil Code former section 1368.5 and current Civil Code section 6150 are provisions contained in the Davis-Stirling Common Interest Development Act (the Act), which was recently repealed, reenacted and renumbered by Statutes 2012, chapter 180, section 1, operative January 1, 2014; see Civil Code section 4000 et seq. on residential properties, and Civil Code section 6500 et seq. for commercial and industrial properties. We utilize the current Civil Code section designations. The Association is a nonprofit mutual benefit corporation managing the common interest development.

[FN. 2] The Sarnecky action was brought by a group of approximately 30 unit homeowners against not only the developers and builders, but also the lenders and escrow holders. One real party in interest here, defendant Bank of America, was never sued in this Association action, but only in the individual homeowners’ coordinated action. Bank of America recently obtained summary judgment in theSarnecky action and has notified this court that it is no longer a real party in interest and will not be filing a return. However, its previous filings were properly before this court, and have been relied on by the other real parties in interest, and may be considered here.

[FN. 3] All further statutory references are to the Evidence Code unless noted.

[FN. 4] We assume that only those individual homeowners who are litigants in the Sarnecky action could be seeking stigma damages, and that the Association is not doing so regarding the common areas. In any case, the parties each assume that the same privilege questions apply to the Association and each individual homeowner deponent.

[FN. 5] Parenthetically, we need not discuss at length the other statutory concept in section 952, that privileges remain when confidences are disclosed to persons “to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted.” (§ 952, italics added; see 2 Witkin, Cal. Evidence, supra, Witnesses, § 125, pp. 424-425 [rule covers various kinds of agents and intermediaries, e.g., secretary, accountant, other expert, etc.].) The expert consultants who attended the litigation update meetings would fall into this category.

[FN. 6] In Citizens for Ceres v. Superior Court, supra, 217 Cal.App.4th 889, the appellate court was addressing an arcane question under the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.), about whether a developer and a municipality have any “common interest” in the creation of a legally defensible environmental impact report about the developer’s application. The appellate court was analyzing whether those two entities had waived the attorney-client and other privileges, with respect to the communications they disclosed to each other before the project was approved. This required interpretation of the terms of Public Resources Code section 21167.6, subdivision (e) (governing the preparation of the administrative record). The court held that the administrative record statute does not impliedly abrogate the lead agency’s attorney-client privilege, but any privilege is nevertheless waived as to any documents shared with the developer’s counsel before the project is approved. (See 9 Miller & Starr, Cal. Real Estate (2013-2014 supp.) § 25A:6, pp. 100-101.) That case is factually distinguishable. Its general statement of the common interest doctrine is useful, although the court’s application of it has been criticized by commentators. (Ibid.)

[FN. 7] Cf. Wardleigh v. Second Judicial Dist. Court In & For County of Washoe (1995) 111 Nev. 345 [891 P.2d 1180, 1185], applying Nevada law that a homeowners association lacks standing to file an action, but when it “acts as an agent or facilitator for homeowners who have retained counsel, Association officials so acting on behalf of the Association would be drawn into the privilege enjoyed by the homeowner clients,” despite a lack of a direct attorney-client relationship with the homeowners in litigation sponsored by the association. Further, “such representation by the Association will be privileged only to the extent that the Association acts on behalf of the homeowner clients in a setting where it is clear that the communications with the homeowners’ counsel were intended to be privileged and confidential.” (Ibid.) We need not rely on out-of-state law, as California law is sufficient.

Director Record Inspection Rights

A member’s right to inspect and copy various association records is not absolute and may be limited in certain circumstances. (See “Records Not Subject to Inspection.”).  However, Corporations Code Section 8334 gives each board member (each director of the association) 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.”  Thus, unlike regular members of an association, directors generally (1) are not subject to the requirements of Civil Code Section 5205 (i.e., do not have to pay for the costs in producing records), and (2) have broader record inspection rights than regular members (i.e., can inspect executive session minutes).

Limitations
Notwithstanding the term “absolute” under Corporations Code Section 8334, a director’s record inspection rights may still be limited in order to avoid conflicts of interest, to protect privacy concerns, and/or to protect the association from tortious acts and breaches of fiduciary duties by the director.

Avoid Conflicts of Interest:
“…a corporate director does not have the right to access corporate documents covered by the attorney-client privilege that were generated in defense of a suit for damages that the director filed against the corporation.” (Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385, 1387.)

A director’s absolute right to inspect and copy corporate records “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…” (Tritek at 1390.)

Protect 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. (Chantiles v. Lake Forest II Master HOA (1995) 37 Cal.App.4th 914, 927 (“…the Association had a duty to guard the privacy of rights of its members in their voting decisions…the Association’s refusal to allow [the director] the unfettered access to the ballots which he demands was not unjustified.”).)

Protect from Tortious Acts:
“Where the corporation determines that an unfettered inspection [by the director] will result in a tort against the corporation, it may decline the request for inspection.” (Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1856.)

*Evidence must Establish Clear Intent to Commit Tort – The mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights. The evidence must establish the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation, such that allowing inspection would produce an “absurd result”. (Fowler v. Golden Pacific Bancorp (2022) 80 Cal.App.4th 205, 211.)

Former Directors
A former director loses his/her broad record inspection rights once the former director loses his/her status as a sitting (current) director of the association (i.e., no longer serves on the board.)  This is true notwithstanding the fact that the desired record pertains to a decision or action of the former director or of the board while the former director was serving:

“…current director status is required to pursue current inspection rights.  This line of cases will not allow enforcement of any absolute director’s right of inspection to a former corporate director, when the reason for the inspection right (holding office and performing fiduciary duties as a director) no longer exists.” (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 919.)

Wolf v. CDS Devco

(2010) 185 Cal.App.4th 903

[Director Inspection Rights; Former Director] A director loses his/her broader record-inspection rights upon loss of status as a director.

OPINION

HUFFMAN, Acting P. J.—

Plaintiff and appellant Walter E. Wolf, who formerly served as a corporate director of San Elijo Ranch, Inc. (SERI), brought this action against SERI and related parties, to seek enforcement of the “absolute” rights of a director to inspect SERI’s corporate records. (Corp. Code, [FN 1] § 1602.) Wolf is also a 20 percent shareholder of CDS Devco (Devco; [907] a Cal. real estate development corporation), which is the parent corporation of SERI. Wolf does not own shares in SERI itself.

Although Wolf was not reelected to the SERI board of directors, in his first amended petition for writ of mandate (the FAP), he continues to assert the rights of a director as against three defendants and respondents: (1) SERI; (2) HomeFed Corporation, the parent corporation of Devco, owning 80 percent of its shares; and (3) Paul J. Borden, who is the president of both Devco and SERI, as well as an officer of HomeFed Corporation (sometimes collectively defendants). (Code Civ. Proc., § 1085.)[FN 2]

In his FAP, Wolf alleges that he has a right and SERI and its controlling shareholders and officers, HomeFed Corporation and Borden, have a mandatory duty to allow him to pursue a complete inspection of SERI financial records. He had continually been requesting such documents for a period of almost a year, before he received notification he would not be nominated for reelection to the SERI board. Wolf contends that his removal from the SERI board was unlawful, and such removal should not affect his inspection rights or deprive him of standing to pursue this action as a former director.

In opposition to the petition, defendants filed demurrers, pointing out that Wolf’s petition admits he is no longer a director of SERI. Based on fairly recent case law, defendants argue this statutory scheme does not permit a person who is not currently serving as a director any further entitlement to inspect its records. (§§ 1602, 1603; Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914 (Chantiles).) Defendants also argued that Wolf had not pled any sufficient basis for a judicial extension of the statutory scheme, or any other qualified equitable right to inspect SERI records for any valid purpose, in the capacity of a director or former director.

The superior court ruled that the demurrers must be sustained without leave to amend, because Wolf had no statutory standing as a director to pursue his demands for inspection of SERI records, nor had he presented any sufficient basis to create any exceptions to the rule. Wolf appeals, contending the trial court erred and abused its discretion when it sustained the demurrers without leave to amend, because he sufficiently pled his entitlement to an exception to the standing requirements of section 1602. Wolf claims that he [908] was unlawfully removed as a director, such that his rights to sue in that capacity, to protect minority shareholders’ or his own interests, had become fixed at the time he filed the original complaint (one day before the annual meeting at which he was not reelected).

The issues before us are narrow, and we decide only that Wolf’s statutory arguments of ongoing entitlement to inspect corporate records in a director’s capacity are without merit. (§ 1602.) He lacks the required status and standing to assert inspection rights that are properly due to a corporate director. Nor can he allege any realistic possibility of amendment, on a nonstatutory or equitable basis, to allege successfully on these facts that he is entitled to such continued director’s inspection rights.

Other forms of action exist in which a corporation’s rights may be enforced and its injuries redressed, if the corporate board will not take appropriate action. (See, e.g., Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108 [shareholder derivative suit].) Here, however, the trial court’s analysis of the relevant legal and policy considerations, as applied to the pleaded facts, was correct as a matter of law. We affirm the judgment of dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

 A. Petition and Demurrer

For purposes of analyzing the demurrer ruling, we take the facts properly pleaded to assess whether they may state a cause of action as a matter of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Originally, Wolf brought not only a complaint but also two petitions for relief in mandamus in his capacity as a director of SERI who was entitled to inspection of corporate records, and also as a 20 percent shareholder of Devco, who was entitled to shareholder rights. Pursuant to the parties’ stipulation, the FAP amended and consolidated all prior pleadings in the action and effectively became the operative pleading in the action, superseding the complaint filed on September 9, 2008, and the two petitions filed on October 17, 2008. The parties further agreed that the FAP, as the operative pleading, would relate back to the date the initial complaint was filed on September 9, 2008.

In the FAP, Wolf pleads as general background that SERI is governed by a board of directors, four of whom are nominated by majority shareholder Devco (85 percent owner). (Art. III, §§ 2-4.) The other director is nominated by the minority shareholders (15 percent owner), and elections are held at annual meetings or by written consent. Wolf was nominated to the SERI [909] board by Devco and was elected for 13 terms of one year. During his latter term, he began to believe that corporate mismanagement had occurred between SERI and its parent corporations, and that his efforts to investigate them were being met with resistance by SERI and the parent corporations, Devco and HomeFed Corporation.

Beginning in October 2007, Wolf began to make document requests to SERI, Devco, and HomeFed Corporation. The various responses he received from SERI, Devco and Borden were in the nature of summaries that he considered to be inadequate. The parties also disagreed over the terms of a nondisclosure agreement that SERI was requesting. After about eight months, some records were provided but not enough to satisfy Wolf.

In August 2008, SERI management sent Wolf a written consent action form to call the annual meeting for September 10, 2008, listing Wolf as a candidate for director. Wolf signed and returned it. Unfortunately, Wolf also inadvertently transmitted to defendant Borden a copy of a draft complaint that Wolf was preparing in order to compel SERI, Devco and others to provide more complete responses to the October 2007 request for information.

Upon receiving the draft complaint, Borden inquired what was going on, and in a letter dated September 5, 2008, he advised Wolf that SERI and Devco management had decided to replace him on the SERI board of directors, and would not be renominating him for election at the September 10 meeting.

Wolf filed his original pleading on September 9, 2008, alleging, among other things, that he had been removed because of his disclosure requests, and that mandamus should issue to allow him, as a director of SERI, to assert his ongoing inspection rights. [FN 3] Wolf sought a temporary restraining order (TRO) to postpone the annual meeting, once he learned he would not be renominated. At that hearing, Judge Steven Denton discussed Wolf’s theory that the filing of his complaint served to fix his rights as of that time. The TRO was denied and the FAP was filed. (The record is unclear whether and when Wolf has been replaced as a director.)

In defendants’ demurrer, they chiefly argued the pleading was defective on its face, because a statutorily required element to establish standing to bring an inspection petition was lacking, in that Wolf admitted he was no longer a director, and he therefore had no current duties to perform in that capacity. (§§ 1602, 1603.) Defendants also argued that the only proper respondent was [910] the corporation whose conduct was sought to be compelled, SERI, so that HomeFed Corporation and Borden should be dismissed for lack of binding allegations against them.

Opposition and reply papers were filed, disputing whether adequate facts were pled and proper parties named.

 B. Ruling

After oral argument on December 19, 2008, the trial court sustained the demurrer without leave to amend on all of the allegations concerning a director’s right to inspect SERI records. The court first took judicial notice, as requested by Wolf, of the reporter’s transcript of the TRO request by Wolf to postpone the annual meeting, at which he was not being renominated to serve as a director. (Evid. Code, § 452.) The court also granted the request by SERI et al. to take judicial notice of Wolf’s verification in support of his original petition, which had originally been set for a November 14 hearing. That scheduled hearing apparently went off calendar when Wolf filed his FAP on November 10, 2008. The parties stipulated that the FAP was the operative pleading.[FN 4]

On the merits, the court expressed its view that the case presents a close call: “However, the court believes the better interpretation of Corp. Code section 1602 is that it required that petitioner plead and prove that he is a current director, both at the time the action is commenced and at the time of the activities proposed to be the subject of a writ of mandamus. Because it is undisputed that Wolf is no longer a director of SERI (Am. Pet. at paragraph 2), the demurrer must be sustained without leave to amend. And, because Wolf has no standing to demand inspection from SERI, it is appropriate to sustain the demurrer as to all defendants ….”

In explaining its reasoning that a “bright line” rule of entitlement to inspection rights should be adhered to, the superior court set forth these observations: “First, directors on both sides of similar disputes will know exactly where they stand. Far from `clogging the courts’ as supposed by petitioner [citation], this rule will insure that controversies over inspection rights are brought to the tribunal in a timely fashion. The court notes there was a delay of a year in this case, and the deferral has not been beneficial to either party ….”

[911] The superior court then explained its view that the issue of standing is critical in assessing a director’s statutory request to review corporate records. The court declined “to defer the standing issue while the parties litigate over whether Wolf was improperly denied re-election to the SERI board. [Citation.] This strikes the court as putting the cart before the horse. If, as respondents assert, it turns out that there was no impropriety in the decision not to re-elect Wolf, it will be clear he has no inspection rights—but in the meanwhile, both parties will be put to substantial time, energy, effort and expense. Given that it is petitioner’s obligation to establish standing [(Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232-233; Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, 749)], the court believes it is appropriate to address this threshold issue at the outset of the case.”

Further, the superior court found unpersuasive Wolf’s contention that in view of the denial of his ex parte application to postpone the September meeting and election, Wolf’s rights as a director were fixed or conclusively established, simply because he had filed suit before the board election. That TRO ruling was not binding or dispositive.

The superior court also declined to follow, on these facts, an out-of-state rule “allowing inspection rights to a former director where the director faces personal liability.” (See State of Tennessee ex rel. Oliver v. Society for Preservation of the Book of Common Prayer (Tenn. 1985) 693 S.W.2d 340, 343 (Oliver); Cohen v. Cocoline Products, Inc.(1955) 309 N.Y. 119, 124 [former director retains right to inspect records related to the period of service as a director, where access to the records is necessary to protect the director or shareholders].) Rather, the FAP contained no meaningful allegations to support Wolf’s contentions that he, as a former director, faced serious threats of personal liability exposure from his activities while a director, and instead, “[t]he court holds that a theoretical, inchoate exposure to personal liability is simply not enough.”

Accordingly, the demurrers were sustained without leave to amend and the court dismissed the action as to all defendants. Wolf timely filed his notice of appeal.

Along with the respondents’ brief, defendants have filed a request for judicial notice of a different first amended complaint filed by Wolf against them, including some claims as a Devco shareholder. (Evid. Code, §§ 452, 459.) That request has been deferred to this merits panel.

[912]

DISCUSSION

 I. INTRODUCTION AND STANDARD OF REVIEW

(1) Mandamus is available in proper circumstances to compel the performance of duties of nongovernmental bodies or officers, such as a “corporation, board, or person,” or to compel performance of a duty resulting from “an office, trust, or station,” or to compel admission of a party to “the use and enjoyment of a right or office to which the party is entitled.” (Code Civ. Proc., § 1085, subd. (a); see Most v. First Nat. Bank of San Diego (1966) 246 Cal.App.2d 425 [corporation may be ordered to allow stockholder to inspect corporate books]; 8 Witkin, Cal. Procedure (5th ed. 2008) Extraordinary Writs, § 96, pp. 991-992.) Mandamus may be issued to require an appropriate exercise of discretion “under a proper interpretation of the applicable law.” (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 442 (Common Cause).)

Wolf contends that since he filed his original pleading the day before his term as a director ended, he is entitled to mandamus to allow him inspection of corporate records, in the nature of “use and enjoyment of a right or office” to which he remains entitled. He places himself in the role of a fiduciary director who suspects corporate mismanagement and has an absolute right to inspect records, to protect the interests of minority shareholders or to protect himself from personal liability. He contends such rights were effectively denied when these corporations stalled in allowing him full inspection, until he was no longer a director.

To address these arguments, we set forth basic rules for review and statutory standards for evaluating such petitions, and apply them to these allegations. “A demurrer tests the legal sufficiency of the complaint. [Citation.] Therefore, we review the complaint de novo to determine whether it contains sufficient facts to state a cause of action. [Citation.] `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.’ [Citation.] The trial court exercises its discretion in declining to grant leave to amend. [Citation.] If it is reasonably possible the pleading can be cured by amendment, the trial court abuses its discretion by not granting leave to amend. [Citation.] The plaintiff has the burden of proving the possibility of cure by amendment. [Citation.]” (Grinzi v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78 (Grinzi); see Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

[913] (2) In ruling on this demurrer, the superior court was required to apply statutory standards to the pleaded facts. Determining the meaning of a statutory standard requires the resolution of a question of law. (People ex rel. Lockyer v. Shamrock Foods Co.(2000) 24 Cal.4th 415, 432.) “The soundness of the resolution of such a question is examined de novo.” (Ibid.) Remedial statutes such as section 1602 are liberally construed. (Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1856 (Havlicek).)

In Saline v. Superior Court (2002) 100 Cal.App.4th 909, 913, the court interpreted section 1602 et seq. in the context of asserted free speech protections. The court treated the scope of a corporate director’s right to inspect corporate documents as a pure question of law that would be reviewed on a de novo basis, and we will do likewise.

 II. EXTENT OF ISSUES PRESENTED

 A. Identity of Defendants; Reinstatement Issues

Before turning to the pleading questions regarding the scope of protections afforded to Wolf under this statutory scheme, we first limit the issues that are actually presented for decision. Although the FAP makes generalized allegations against defendants other than SERI (i.e., parent corporation HomeFed Corporation and corporate official Borden; nothing is now claimed directly against Devco), the gist of the inspection right asserted only pertains to SERI itself, of which Wolf was formerly a director. Under Code of Civil Procedure section 1085, subdivision (a), both corporations and persons can be compelled to perform their official duties, but Wolf has made no specific arguments on appeal about the special role of HomeFed Corporation or Borden, beyond allegations of duties owed to him by SERI. Apparently, his only remaining theory is that SERI wrongfully denied him statutory or equitable director’s inspection rights, and we need not further consider any potential liability of those other two defendants and respondents. Any arguments about them have been waived on appeal.

Further, Wolf did not expressly argue until he filed his reply brief that the relief he sought might include a request for reinstatement to the SERI board of directors. In his opening brief, he only generally argued that he is somehow still entitled to director status, because he was “unlawfully” removed. However, the body and the prayer of the FAP only sought enforcement of SERI corporate obligations to provide him, as a director, with [914] inspection opportunities, regardless of his current official status, on the theory that the filing date of his complaint predated the annual meeting and election that did not retain him.

(3) Generally, we need not address arguments made for the first time in a reply brief (such as his reinstatement). (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894-895, fn. 10.) Normally, a party is not permitted “`to change [his] position and adopt a new and different theory on appeal’ because doing so would be unfair both to the court and to the opposing litigant. [Citation.]” (Grinzi, supra, 120 Cal.App.4th 72, 85.) The reinstatement request is such an unexpected change of position and need not be considered here.

No different result is required even if we look at appellant’s new reinstatement theory in light of the rule that, in considering an appeal from a dismissal after the sustaining of a demurrer without leave to amend, an appellate court will examine whether the allegations state a cause of action under any possible legal theory. (Grinzi, supra, 120 Cal.App.4th 72, 85 [“Under these circumstances, new theories may be advanced for the first time on appeal.”].) The gravamen of the FAP is found in the allegations of statutory and equitable director’s inspection rights, and not in any alleged right to official, ongoing director status (except as it might affect such inspection rights). We find no justification for expanding the issues beyond those actually pled in the mandamus request.

 B. Judicial Notice

As the merits panel, we are next obligated to address the deferred request by defendants that we take judicial notice of an unconformed copy of a different first amended complaint filed by Wolf, seeking alternative relief against the same set of corporate defendants here, in the nature of a shareholder derivative action pursued in Wolf’s capacity as a 20 percent shareholder of Devco stock. (Wolf v. Borden (Super. Ct. San Diego County, 2009, No. 37-2009-00093090-CU-BC-CTL).) Those claims evidently include both contract and tort theories, such as breach of fiduciary duty, to seek damages and declaratory relief. It is not clear from the submission whether discovery has been pursued regarding any shareholder requests to seek Devco corporate records, similar to the director’s request here regarding SERI.

(4) Judicial notice is proper under Evidence Code section 452, subdivision (d)(2), of the records of “any court of record of the United States or of any state of the United States.” However, such a court record would normally show a conformed file stamp or other evidence of reliability. (Ross v. Creel Printing & Publishing Co. (2002) 100 Cal.App.4th 736, 743 (Ross).)

[915] “‘ [W]hen a party desires the appellate court to take judicial notice of a document or record on file in the court below the parties should furnish the appellate court with a copy of such document or record certified by its custodian.’ [Citations.]” (Ross, supra, 100 Cal.App.4th 736, 743.) “It is the burden of the party seeking judicial notice to demonstrate a reason for the failure to furnish certified copies.” (Ibid.) Even though no opposition was filed to this judicial notice request, we decline the request because the document offered is not in proper form.

Even if the document were properly authenticated, we would take judicial notice only as to the existence of the pleading, not as to the truth of any of the allegations contained in it. (Ross, supra, 100 Cal.App.4th 736, 743; Day v. Sharp (1975) 50 Cal.App.3d 904, 914.) The fact that Wolf has apparently filed an alternative complaint against the same defendants does not assist us in our legal analysis of whether he can continue to pursue a director’s inspection rights, by statute or authorized extension of those rights. (§ 1602.) The judicial notice request is denied.

III.       STATUTORY SCHEME

 A. Purpose of Inspection Rights; Standing Issues

Wolf bases his claim of a lawful demand for inspection on several factors, including his status as a director when the request was made and the lawsuit filed, and his argument that he was unlawfully removed. In addition, he argues that he may be exposed to personal liability for his own or other directors’ activities that occurred before he left the board, such that he should be able to investigate on his own behalf, or on behalf of minority shareholders of SERI.

We begin with the normal rules of statutory interpretation, to ascertain the policies promoted by section 1602 and the criteria for pleading entitlement to relief under it. “First, we look to the words of the statute giving `”effect to the usual, ordinary import of the language, at the same time not rendering any language mere surplusage.”‘ [Citation.] We must give the statute `”`a reasonable and commonsense interpretation consistent with the apparent purpose and intention of the Legislature, practical rather than technical in nature, and which, when applied, will result in wise policy rather than mischief or absurdity. [Citations.]'”‘ [Citation.] `If the language of a statute is clear, we should not add to or alter it to accomplish a purpose which does not appear on the face of the statute or from its legislative history.’ [Citation.]” (Grinzi, supra, 120 Cal.App.4th 72, 85.)

[916] (5) Section 1602 grants to “[e]very director” an “absolute” right (albeit subject to appropriate legal qualifications), to inspect and copy corporate records and documents. (See Havlicek, supra, 39 Cal.App.4th 1844, 1855-1856; Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385, 1390-1391 (Tritek) [“absolute” right is historically subject to exceptions].) This inspection right is subject to enforcement under section 1603, subdivision (a), which allows the superior court, “[u]pon refusal of a lawful demand for inspection,” to enforce the right of inspection under “just and proper conditions.”

(6) In Tritek, supra, 169 Cal.App.4th 1385, 1390-1391, this court discussed the scope of directors’ inspection rights, in terms of their intended function of promoting the directors’ proper exercise of fiduciary duties to the corporation and shareholders. (See § 309, subd. (a) [directors must serve “in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders”].) “Although it is generally presumed that the directors of a corporation are acting in good faith [citation], a court is required to defer to the business judgment only of disinterested directors. [Citation.] `”[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.]'” (Tritek, supra, 169 Cal.App.4th 1385, 1390.)

(7) SERI challenges Wolf’s statutory standing as an independent director to conduct such a prospective inspection, because he lost status as a director immediately after filing suit. “Standing” is an aspect of justiciability, which is decided upon the intertwined criteria of standing and ripeness. (3 Witkin, Cal. Procedure, supra, Actions, § 21, pp. 84-85.) “`One who invokes the judicial process does not have “standing” if he, or those whom he properly represents, does not have a real interest in the ultimate adjudication because the actor has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.'” (Id. at p. 84.) A plaintiff must “possess standing to have the underlying controversy adjudicated and the desired relief granted after a trial on the merits ….” (Common Cause, supra, 49 Cal.3d 432, 439-440.)

(8) In Californians for Disability Rights v. Mervyn’s, LLC, supra, 39 Cal.4th 223, 232-233,the Supreme Court applied principles of standing: “For a lawsuit properly to be allowed to continue, standing must exist at all times until judgment is entered and not just on the date the complaint is filed. `[C]ontentions based on a lack of standing involve jurisdictional challenges and may be raised at any time in the proceeding.’ [Citations.]” Arguably, the FAP fails to state its cause of action, because the requested relief, to a “director,” cannot now be granted personally to Wolf. A plaintiff may lose [917] standing even where an actual controversy originally existed “but, by the passage of time or a change in circumstances, ceased to exist.” (3 Witkin, Cal. Procedure, supra, Actions, § 21, pp. 84-86; see Wilson v. L. A. County Civil Service Com. (1952) 112 Cal.App.2d 450, 453 [246 P.2d 688].)

 B. Authorities and Analysis

This court and other courts have strictly applied standing rules in this statutory context. In Chantiles, supra, 37 Cal.App.4th 914, 920-926, the court had before it an individual who was no longer on the board of a homeowners association, but who sought to assert a director’s inspection rights, in the context of challenging election results (under § 8334, creating association directors’ inspection rights that are parallel to those of § 1602). The Court of Appeal discussed the justification for considering the action not to be moot, in light of the director’s leaving office during the appeal. The court ruled that the inspection demand represented an issue of recurring interest that should be decided. (Chantiles, supra, at pp. 920-926.)

Next, on the merits of the inspection request by the former director, the court in Chantiles considered out-of-state authority, such as Oliver, supra, 693 S.W.2d 340, 343,in which it was 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[.]'” (Chantiles, supra, 37 Cal.App.4th 914, 920.)

Although the former director, Chantiles, conceded he no longer had any director’s inspection rights, he continued to pursue his inspection request because he believed the election that removed him had not been fairly conducted. The corporation objected, raising privacy concerns about homeowner ballots that had been cast. The superior court created a limited ballot inspection procedure to be conducted by the former director’s own attorney, with certain privacy protections. However, the former director refused this proposed solution, “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.” (Chantiles, supra, 37 Cal.App.4th 914, 926.) The appellate court majority additionally based its holding upon the statement that “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 [same] ballots.” (Chantiles, supra, 37 Cal.App.4th 914, 926, fn. 6.)

In a concurring opinion, Justice Crosby disagreed with the majority that there were any reasonably enforceable expectations of privacy by those [918] voters, but he concurred in the result because “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 [(parallel section to § 1602)]; and for that reason alone I concur in the decision not to award him any relief.” (Chantiles, supra, 37 Cal.App.4th 914, 927 (conc. opn. of Crosby, J.).) Further, the concurring opinion reasoned that the fiduciary duties of the former director were strong enough to override any privacy expectations of the homeowner/voters. “[A] director . . . is potentially liable for failure to exercise appropriate oversight, [so] an unconditional right to inspect is essential.” (Id. at p. 929 (conc. opn. of Crosby, J.).)

In Hartman v. Hollingsworth (1967) 255 Cal.App.2d 579 (Hartman), the petitioner was a director of a dissolved corporation, who sought inspection of corporate books.[FN 5] He claimed an ongoing need to inspect, based on “`various legal obligations'” flowing from his directorship and an “`absolute right'” to examine the corporate records to protect himself “accordingly.” (255 Cal.App.2d at pp. 581-582.)

In Hartman, supra, 255 Cal.App.2d 579, 582, the appellate court interpreted the statute (a former version of § 1602) with a view toward enforcement of its evident purposes. The unqualified statutory right of inspection allowed to a director was created only to aid the performance of his or her fiduciary duties to the corporation and its stockholders, such as in the winding-up process. When a “dead” corporation was no longer being wound up, the director had no further protected need to inspect corporate documents related to his former status. (255 Cal.App.2d at pp. 581-582.) Thus, the scope of the statute granting the right to inspect records was restricted to current, not former directors of corporations, when they retained responsibilities for winding up the corporation. That particular request for records was not properly made in pursuit of that legitimate purpose, so the petitioner (essentially a former director) did not qualify under the inspection statute. (Id. at pp. 581-582.)

In Tritek, supra, 169 Cal.App.4th 1385, 1390-1391, this court interpreted section 1602 to hold that a corporate director could lose the “absolute” right to inspect corporate documents. That director had filed his own shareholder action that was adversary to the corporation, and this served to remove any statutory basis for his right to access to all corporate documents: “In this situation, a court may properly limit a director’s inspection rights because the [919] 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.” (169 Cal.App.4th at p. 1391.) In light of his newly acquired adversary status, the director could not properly continue to seek a director’s access to documents that would be covered by the attorney-client privilege. (Id. at pp. 1391-1392.)

(9) To be entitled to inspect corporate records, directors must remain disinterested and independent in the performance of their fiduciary duties. (Tritek, supra, 169 Cal.App.4th at p. 1391.) In our case, the pleadings and judicially noticeable materials from the original complaint and petition proceedings demonstrated to the trial court that before Wolf received notification he would not be renominated, Wolf had inadvertently transmitted to corporate official Borden a copy of the draft complaint in which he planned to sue SERI and Devco, to compel them to provide more complete responses to his October 2007 request for information. Even though Wolf remained a director when he filed suit, his director’s entitlement to inspection of corporate records was severely undermined by those admissions of his potential adversary status to SERI.

(10) Chantiles, supra, 37 Cal.App.4th 914, the leading case in this area, was decided in 1995, and has not been overruled or limited in its holding or reasoning that currentdirector status is required to pursue current inspection rights. This line of cases will not allow enforcement of any absolute director’s right of inspection to a former corporate director, when the reason for the inspection right (holding office and performing fiduciary duties as a director) no longer exists. These authorities strictly interpret standing rules in applying the language of section 1602. Under the law as we understand it, Wolf has lost the status and standing that are required to justify pursuit of his asserted director’s inspection rights. The trial court correctly applied standing principles and interpreted the statute to find that Wolf was no longer under such fiduciary obligations, as a former director, to justify his claim to an ongoing and enforceable right to inspect corporate records. (Common Cause, supra, 49 Cal.3d at pp. 439-440.)

However, Wolf makes alternative arguments to justify recognition of ongoing inspection rights, as we next discuss.

 IV. IMPLIED STATUTORY OR EQUITABLE EXCEPTIONS

Wolf contends that his inspection rights as a corporate director became fixed when he filed his original pleading, and he therefore falls within some [920] implied statutory or equitable exception to the standing requirements of section 1602. He relies on out-of-state law that designates, for a discharged director, a “qualified right … covering a period of his directorship, whenever in the discretion of the trial court he can make a proper showing by appropriate evidence that such inspection is necessary to protect his personal responsibility interest as well as the interest of the stockholders.” (Cohen v. Cocoline Products, Inc., supra, 127 N.E.2d 906, 908, italics omitted; see also Oliver, supra, 693 S.W.2d 340 [Tenn. law].)

A. Nature of Removal from Office

Wolf first relies on language in Chantiles, supra, 37 Cal.App.4th 914, 920, to argue that “`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.‘” (Italics added.) According to Wolf, he was not “lawfully” removed, and he therefore retains inspection rights. In support, he argues that even if a valid notice were originally given for the September 10 annual meeting, when he received the letter from Borden that privately removed him from the notice of listed candidates, the meeting was no longer completely lawfully noticed, such that he was unlawfully not reelected. He relies on section 301, subdivision (b), generally holding that a director holds office “until the expiration of the term for which elected and until a successor has been elected and qualified,” to argue that he must retain directorship status for inspection purposes.

(11) Wolf’s argument about his status should be viewed in light of the purpose of the rules requiring adequate notice to shareholders about the agenda for an annual meeting. Section 601, subdivisions (a) and (f), set forth the requirements for notice of annual meetings, including their place, time and manner of shareholder participation. Section 601, subdivision (a) states: “The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the board for election.” (Italics added.) Section 601, subdivision (f) provides that shareholder approval of proposals is not valid unless the “general nature” of the proposal presented was stated in the notice of the meeting or in the written waiver of notice document. Those statutory requirements are reflected in the corporate articles for SERI, regarding notice of meetings.

The authors of 9 Witkin, Summary of California Law (10th ed. 2005) Corporations, section 86, page 859, explain that directors must properly call meetings, and obtain a quorum, for exercise of their powers as a board. This requirement of notice “is primarily for the protection of shareholders and may be relaxed where the shareholders have waived it or have otherwise consented to informal action.” (Ibid.)

[921] Under these standards, Wolf, as a director or former director, cannot show that the letter that notified him he would not be renominated amounted to a change in the notice given, that somehow invalidated the results of the election at the annual meeting. The notice was accurate when given, containing the names of nominees “intended at the time of the notice to be presented by the board for election,” including Wolf. (§ 601, subd. (a).) The general nature of the business of the meeting did not change. (§ 601, subd. (f).)

(12) Moreover, Wolf cannot successfully plead, as a matter of law, that it was wrongful for the board to decline to renominate him as a director. In the first place, not being renominated is not exactly the same as being removed, and Wolf’s term expired. His allegations that he was removed for the sole purpose of avoidance of corporate disclosure obligations amount only to contentions or conclusions of law that do not withstand demurrer. Under section 303, subdivision (a), a director may be removed without cause if the removal is approved by the shareholders, subject to certain protections. For example, section 303, subdivision (c) allows directors to be “removed” prior to the expiration of the director’s term of office, only under certain circumstances (for cause or incompetence as confirmed by court order; §§ 302, 304). This record does not reflect whether Wolf has been replaced, but in any case, he has not pled the corporation is unable to function due to an inadequate number of directors. (See § 301, subd. (b), providing that a director holds office until the expiration of his or her term and until a successor is in place.)

(13) Wolf has no authority to support his argument that his inspection rights continue simply because he was still in office when he made the inspection requests and when he filed suit. Despite his public policy arguments promoting corporate accountability, he has not been transformed into an ombudsman or freelance investigator, for purposes of inspecting corporate records. When he lost his seat on the board, he lost standing to assert recognized inspection rights, since they are intended to promote the appropriate exercise of a director’s fiduciary duties. (Common Cause, supra, 49 Cal.3d 432, 439-440.) The current record does not support a claim that he was unlawfully removed, and he has not shown how he can plead around the fact that his term expired, in order to plead an equitable right to inspection.

B. Potential Personal Liability of Former Director

Wolf alternatively asserts that he should be allowed to inspect SERI corporate records, even though he has left its board, because he might come under some personal exposure to liability, stemming from the time that he served upon the board. He again relies on the authority that a discharged director seeking to inspect corporate records may have a “qualified right . . . covering a period of his directorship, whenever in the discretion of the trial [922] court he can make a proper showing by appropriate evidence that such inspection is necessary to protect his personal responsibility interest as well as the interest of the stockholders.” (Cohen v. Cocoline Products, Inc., supra, 127 N.E.2d 906, 908, italics added & omitted.)

Wolf fears that he may be subject to claims (by minority shareholders) that, while he was in office, he did not do enough to combat corporate mismanagement, so he should be able to defend himself by inspecting records of SERI transactions. He cites to several sections that might have been violated by others, such as those prohibiting corporate officers or directors from making false reports or altering records, which might lead to some imposition of penalties for defrauding shareholders or misusing corporate assets. (§§ 1507, 2201, 2251, 2254, 2255.)

(14) At the pleading stage, to support allegations of continued inspection rights of a director, Wolf would have to set forth facts supporting his potential exposure to personal liability for his own acts as a director or acts of other corporate officers, such as if he “(1) participated in the acts, (2) was negligent in supervising the business, or (3) was negligent in the appointment of the wrongdoer. The director cannot be held liable for wrongs of officers that take place after the director has ceased to be a director.” (9 Witkin, Summary of Cal. Law, supra, Corporations, § 105, pp. 881-882.) Thus, Wolf would have to show facts supporting allegations that the business judgment rule would not likely protect him from personal liability, for any ultimately adjudicated failure on his watch as a director, such as failing to remedy corporate misconduct by wrongdoers. (See ibid.) Wolf has not shown facts to support assertions of continued inspection rights of a director, on the basis that personal liability is a realistic threat to him.

We emphasize that our analysis is restricted to Wolf’s claims for statutory or equitable relief due him, in his capacity as a director or former director, and we do not discuss any alternative remedies to which he may theoretically be entitled, on some other legal theory or in some other pleading. He may be able to pursue other avenues to redress alleged corporate mismanagement to promote his corporate accountability position. We decide only that Wolf has not shown any error or abuse of discretion in the superior court’s well-reasoned ruling that dismissed the FAP, for failure to state a claim upon which relief can be granted.

[923]

DISPOSITION

The judgment of dismissal is affirmed. Costs are awarded to respondents.

Nares, J., and McIntyre, J., concurred.

FN1 – All further statutory references are to the Corporations Code unless noted. Section 1602 in relevant part 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 and also of its subsidiary corporations, domestic or foreign.”

FN 2 – Originally, Wolf also sought relief in mandamus in another respect, as a 20 percent shareholder of Devco, but he has dismissed those shareholder claims from this action. A judicial notice request has been brought by defendants regarding another such related shareholder action, as we will discuss in part IIB., post.

FN 3 – Section 1603, subdivision (a) in relevant part provides: “Upon refusal of a lawful demand for inspection, the superior court of the proper county, may enforce the right of inspection with just and proper conditions ….”

FN 4 – It must be emphasized that the subject ruling did not sustain the demurrers without leave to amend as to Wolf’s shareholder petition with respect to Devco, but as noted, Wolf has voluntarily dismissed that portion of his claims in order to obtain this immediate appellate review of his inspection theory as a SERI director.

FN 5 – Hartman, supra, 255 Cal.App.2d 579, was disapproved on another point in Penasquitos, Inc. v. Superior Court (1991) 53 Cal.3d 1180, 1184, for its adherence to common law rules about the lack of any surviving actions against a dissolved corporation; now, causes of action are not entirely lost by reason of such dissolution.

Havlicek v. Coast-to-Coast Analytic Services, Inc.

(1995) 39 Cal.App.4th 1844

[Director Inspection Rights; Breach of Duties] A director’s rights to inspect corporate records may be denied where the corporation believes such rights will be used to commit a tort against the corporation.

McCutchen, Doyle, Brown & Enersen, Susan L. Hoffman, James G. Snell and Neil A. Rubin for Plaintiffs and Appellants.

Richards, Watson & Gershon, Timothy L. Neufield and Alison E. Maker for Defendants and Respondents.

OPINION
YEGAN, J.

Appellants Mary Havlicek and Stephen C. Havlicek, directors of respondent Coast-to-Coast Analytical Services, Inc. (CCAS), sought an[1849]order from the superior court allowing them to inspect the books and records of CCAS. In addition, appellants unsuccessfully sought to enjoin a pending merger by CCAS until they had completed their inspection. Appellants contend they have an “absolute right” to review all CCAS documents and are not required to explain or justify their inspection demands. (Corp. Code, § 1602.) fn. 1

CCAS objected to the inspection on the theory that Delaware law applied because CCAS is a Delaware corporation. Pursuant to the Delaware statute, a director may review corporate documents only for “a purpose reasonably related to his position as a director[,]” and the Delaware Court of Chancery has exclusive jurisdiction to enforce inspection rights. (Del. Code Ann. tit. 8, § 220, subd. (d) (1995).) The trial court agreed with CCAS and denied appellants’ request, stating that it lacked “jurisdiction” to order an inspection.

We conclude that the trial court erred in applying Delaware law and in refusing to grant appellants, at the very least, an “inspection with just and proper conditions.” (§ 1603, subd. (a).) fn. 2

Facts

CCAS is a Delaware corporation. When appellants filed their request in the superior court, CCAS maintained its principal executive office in Camarillo, California. Appellants are two of the five directors of CCAS and control 40 percent of its stock. They reside in California. The three remaining directors of CCAS are employees of respondent ISS International Service System, Inc. (ISS), which owns 60 percent of CCAS stock.

Appellants allege that, on April 24, 1994, they were constructively terminated from their positions as officers and employees of CCAS. In early May,[1850]CCAS announced plans to merge its assets with those of two other corporations to form Pace Incorporated. Appellants opposed the merger and demanded broad access to CCAS documents. Although CCAS allowed appellants to review certain documents, other documents were withheld because CCAS became suspicious that appellants would use them to establish a competing business.

A majority of the CCAS directors approved the merger on June 6, 1994. Appellants voted against it and continued, unsuccessfully, to demand access to company documents. They filed this action on July 27, 1994, five days before the merger was scheduled to close. At the hearing on July 28, the trial court denied relief. On August 1, 1994, we also denied appellants’ petition for writ of mandate.

On August 3, 1994, CCAS merged with Pace. CCAS no longer maintains an office in California. Although it continues to exist as a corporation, its only assets are shares of stock in Pace. Pace, located in New York, now owns the documents appellants wish to inspect but CCAS has represented that they continue to exist and can be made available for inspection. The controversy is not over. Litigation between the parties is extant.

The Relocation of CCAS’s Principal Office and Removal of the Documents From California Does Not Render This Action Moot.

[1] CCAS argues this appeal is moot because CCAS has transferred its documents and assets to Pace and no longer maintains an executive office in California. An action becomes moot 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 ….’ ” (Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1, 10 [244 Cal.Rptr. 581].)

The fact that CCAS has relocated and removed the documents from California is insufficient to render the action moot. Changed circumstances render a matter moot only when they occur ” ‘without any fault of the defendant ….’ ” (199 Cal.App.3d at p. 10.)

CCAS is, of course, responsible for closing the California office and its moving of the documents out of state. We need not decide whether section 1603, subdivision (a) limits the right of a director to inspect “… books and records kept in this state …” or whether the “in the state” aspect of the statute applies only to court-appointed inspectors or accountants. Where, as[1851]here, the books and records are moved, section 1603 cannot be used as a shield to defeat inspection. This rule is but a variation of the equitable maxim, “[n]o one can take advantage of his own wrong.” (Civ. Code, § 3517.) Moreover, an “… appeal reviews the correctness of the judgment or order as of the time of its rendition ….” (Karrin v. Ocean-Air Mobile Home Estates (1991) 1 Cal.App.4th 1066, 1070 [2 Cal.Rptr.2d 581]; see also In re Elise K. (1982) 33 Cal.3d 138, 149 [187 Cal.Rptr. 483, 654 P.2d 253].)

Choice of Law

[2a] Appellants insist that California law governs the inspection issue. CCAS argues that Delaware law applies because CCAS is a Delaware corporation. [3] To determine the correct choice of law, we apply a three-step analysis. First, we determine whether the two concerned states have different laws. Second, we consider whether each state has an interest in having its law applied to this case. Finally, if the laws are different and each state has an interest in having its own law applied, we apply the law of the state whose “interests would be more impaired if its policy were subordinated to the policy of the other state.” (North American Asbestos Corp. v. Superior Court (1986) 180 Cal.App.3d 902, 905 [225 Cal.Rptr. 877]. See also Bernhard v. Harrah’s Club (1976) 16 Cal.3d 313, 320 [128 Cal.Rptr. 215, 546 P.2d 719].)

[2b] The California statute provides: “Every director [has] the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind ….” (§ 1602.) Under the analogous Delaware statute, a director has “the right to examine the corporation’s … books and records for a purpose reasonably related to his position as a director.” (Del. Code Ann. tit. 8, § 220, subd. (d) (1995).) In addition, the Delaware statute grants its Court of Chancery exclusive jurisdiction to resolve disputes concerning inspections by corporate directors. (Ibid.)

If Delaware law applies, the Delaware Court of Chancery has exclusive jurisdiction and appellants must prove that they have a proper purpose for their request. The California statutory scheme does not impose a “proper purpose” requirement (Valtz v. Penta Investment Corp. (1983) 139 Cal.App.3d 803, 810 [188 Cal.Rptr. 922]), and appellants have never articulated the purpose for their inspection demand. Thus, while the California[1852]statutory scheme would grant appellants an inspection, the same would not necessarily be true under the more restrictive Delaware statute. fn. 3

The directors of a corporation owe a fiduciary duty to the corporation and its shareholders. (Hartman v. Hollingsworth (1967) 255 Cal.App.2d 579, 581-582 [63 Cal.Rptr. 563].) Section 1602 represents a legislative judgment that directors are better able to discharge those duties if they have free access to information concerning the corporation. Thus, California has a public policy favoring broad inspection rights for the directors. The Legislature has also declared that it is the public policy of California to apply the same standards to foreign corporations whose principal executive offices are located in California. We may not ignore that declaration of public policy. (California Casualty Indemnity Exchange v. Pettis (1987) 193 Cal.App.3d 1597, 1605 [239 Cal.Rptr. 205].)

Delaware also has important interests at stake. Because CCAS is a creation of Delaware law, Delaware has an interest in prescribing the powers of CCAS, imposing uniform regulations on its internal affairs, and controlling its rights and liabilities. (Riley v. Fitzgerald (1986) 178 Cal.App.3d 871, 877 [223 Cal.Rptr. 889].) The Delaware statute expresses a public policy which attempts to protect corporations against unreasonable or burdensome inspections by directors.

We must decide which state’s interests would be more impaired if its policy were subordinated to the policy of the other state. (Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 166 [148 Cal.Rptr. 867, 583 P.2d 721].) Delaware’s interest in regulating the activities of its domestic corporations is less substantial where, as here, its only contact with the corporation is in issuing a certificate of incorporation. CCAS has no Delaware shareholders or directors. It does not have an office or store its documents in Delaware. The record does not reflect whether CCAS ever conducted business in Delaware. By contrast, California has strong contacts with CCAS. CCAS maintained its principal office and most of the documents at issue in this state until the merger occurred. CCAS also conducted business in California and employed California residents. Forty percent of its stock and two of the five seats on its board of directors are controlled by California residents.[1853]

California’s interests would be impaired by the application of Delaware law because Delaware cannot at the same time honor a director’s “absolute” inspection right and limit inspections to a “purpose reasonably related to his position as a director.” However, as we shall explain, the trial court can protect Delaware’s interest in avoiding a burdensome inspection by imposing reasonable conditions. We conclude, therefore, that California’s interest would be more impaired by the application of Delaware law than Delaware’s interest would be impaired by the opposite result. California law applies to the inspection issue. fn. 4

Section 2115 Does Not Render Section 1602 Inapplicable.

[4] CCAS argues that it need not comply with section 1602 because it does not meet the test provided in section 2115 for the application of California law to a foreign corporation. Section 2115 provides that portions of the Corporations Code, including section 1602, apply to a foreign corporation if, among other things, “more than one-half of its outstanding voting securities are held of record by persons having addresses in this state.” (§ 2115, subd. (a).) ISS owns 60 percent of the CCAS voting securities and does not have an address in California.

CCAS fails the test under section 2115, but that does not settle the question because section 1602 contains a separate and distinct test; i.e., a “long arm” provision. The statute provides that it “applies to a director of any foreign corporation having its principal executive office in this state ….” (§ 1602.) CCAS meets this test but argues that section 1602 applies only where the corporation also meets the test established in section 2115.

Section 1602 was amended to apply to foreign corporations after section 2115 was enacted. We assume that the Legislature was aware of section 2115 when it amended section 1602 and that it intended to maintain a consistent body of statutes. (Schmidt v. Southern Cal. Rapid Transit Dist. (1993) 14 Cal.App.4th 23, 27 [17 Cal.Rptr.2d 340].) We must also avoid an interpretation of section 2115 which requires that section 1602 be ignored unless ” ‘the two acts are so inconsistent that there is no possibility of concurrent operation ….’ ” (Hays v. Wood (1979) 25 Cal.3d 772, 784 [160 Cal.Rptr. 102, 603 P.2d 19].)[1854]

Here, although the two sections contain different tests, they are capable of concurrent operation. Each section may be given effect because each establishes a separate and distinct test for determining whether a foreign corporation must comply with section 1602. CCAS met one such test and is therefore required to comply with section 1602, regardless of whether it also meets the other available test.

The Internal Affairs Doctrine Does Not Require Application of Delaware Law.

[5] CCAS argues that Delaware law must be applied because the appellants’ claim involves the internal affairs of a Delaware corporation, a matter traditionally controlled by the state of incorporation. (Valtz v. Penta Investment Corp., supra, 139 Cal.App.3d at p. 807.) “The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs … because otherwise a corporation could be faced with conflicting demands.” (Edgar v. MITE Corp. (1988) 457 U.S. 624, 645 [73 L.Ed.2d 269, 285, 102 S.Ct. 2629].) Here, complying with California law will not require CCAS to violate Delaware law. The Delaware statute allows, but does not require, that a corporation restrict the inspection rights of its directors. CCAS will not violate Delaware law by granting appellants greater access to its documents. The internal affairs doctrine does not apply.

Section 1602 Does Not Violate the Commerce Clause.

[6] CCAS also argues that application of California law in this case would violate the commerce clause of the United States Constitution. (U.S. Const., art. I, § 8, cl. 3.) We disagree. The commerce clause prohibits states from discriminating against interstate commerce. (Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources (1992) 504 U.S. 353 [119 L.Ed.2d 139, 147, 112 S.Ct. 2019].) It also “precludes the application of a state statute to commerce that takes place wholly outside of the State’s borders … ,” (Edgar v. MITE Corp., supra, 457 U.S. at pp. 642-643 [73 L.Ed.2d at p. 283]) and invalidates regulations that “adversely … affect interstate commerce by subjecting activities to inconsistent regulations.” (CTS Corp. v. Dynamics Corp. of America (1987) 481 U.S. 69, 88 [95 L.Ed.2d 67, 84, 107 S.Ct. 1637].)

Section 1602 does not suffer from these defects. It does not discriminate against foreign corporations because it imposes on those corporations the same burdens imposed upon domestic corporations. It does not apply to[1855]activities occurring wholly outside the borders of California because, until the merger, most CCAS documents were located in California. The same would probably be true for any foreign corporation maintaining its principal office in this state. Finally, section 1602 does not subject CCAS to conflicting regulatory demands. Application of section 1602 to CCAS does not, therefore, violate the commerce clause.

Section 1602 Does Not Violate the Full Faith and Credit Clause.

[7] Similarly, section 1602 does not violate the full faith and credit clause. (U.S. Const., art. IV, § 1 [“Full Faith and Credit … be given in each State to the public Acts, Records and Judicial Proceedings of every other State ….”].) A state’s choice of law decision does not violate the full faith and credit clause if the state has significant contacts with the dispute ” ‘such that choice of its law is neither arbitrary nor fundamentally unfair.’ ” (Wilson v. Louisiana-Pacific Resources, Inc. (1982) 138 Cal.App.3d 216, 222-223 [187 Cal.Rptr. 852].) For purposes of the full faith and credit clause, the location of a corporation’s principal executive office within a state is a “significant contact.” (Valtz v. Penta Investment Corp., supra, 139 Cal.App.3d at p. 807.)

CCAS located its principal executive office in this state and has more substantial contacts with California than it does with Delaware. Accordingly, the choice of California law as opposed to Delaware law is neither arbitrary nor fundamentally unfair. Application of section 1602 does not violate the full faith and credit clause.

The Trial Court May Impose Limitations on Appellants’ Inspection Rights Under Sections 1602 and 1603.

[8] The trial court must apply California law but is not obligated to grant appellants unfettered access to every document ever created by CCAS. Instead, the trial court may impose “just and proper conditions” upon appellant’s otherwise “absolute” inspection rights. We admit that the Legislature’s choice of the word, “absolute,” in section 1602 does give us pause. But one hypothetical illustrates that “absolute” cannot mean “absolute.” A disgruntled director unambiguously announces his or her intention to violate his or her fiduciary duties to the corporation and the shareholders by using inspection rights to learn trade secrets, gain access to confidential customer lists, and compete with the corporation. In this situation, does the Legislature[1856]want the judiciary to come to the aid of the disgruntled director, enforce the “absolute right” to inspect and help the director commit a tort against the corporation? No. fn. 5 ” ‘ “The literal meaning of the words of a statute may be disregarded to avoid absurd results ….” ‘ [Citation.]” (Unzueta v. Ocean View School Dist. (1992) 6 Cal.App.4th 1689, 1698 [8 Cal.Rptr.2d 614].)

The “absolute right” to inspect documents is the general rule in California. However, section 1602 must be read in pari materia with section 1603. (Unzueta v. Ocean View School Dist., supra, 6 Cal.App.4th at p. 1695.) The language of section 1603, subdivision (a) is expansive. It is not expressly limited to an inspection request by a shareholder. Being a remedial statute, it must be liberally construed. (Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347, 356 [185 Cal.Rptr. 453, 650 P.2d 328].)Where the corporation determines that an unfettered inspection will result in a tort against the corporation, it may decline the request for inspection.In this situation, “… directors can enforce their inspection rights by court action…. [§ 1603].” (Friedman, Cal. Practice Guide: Corporations 2 (The Rutter Group 1995) ¶ 6:502, pp. 6-98; see also 15 Cal.Jur.3d, Corporations, § 263, p. 367 )

Upon a director’s request for inspection pursuant to section 1603 in the superior court, the corporation must demonstrate, by evidentiary showing, that a protective order is necessary to prevent a tort against the corporation. Whether there are other situations where a director’s inspection rights may be curtailed is not before us and we offer no opinion thereon. The superior court may then exercise its broad discretion under section 1603, subdivision (a) to fashion a protective order imposing just and proper conditions on the inspection. Precisely what “just and proper conditions” are necessary in this case, if any, is a question we leave to the superior court.

Conclusion

The trial court erred in applying Delaware law and denying appellants any inspection rights. We reverse and remand the matter to allow the trial court[1857]to enter an order granting appellants an appropriate inspection. Each party shall bear its own costs. Stone (S. J.), P. J., and Gilbert, J., concurred.

FN *. Retired judge of the Ventura Municipal Court sitting under assignment by the Chairperson of the Judicial Council.

FN 1. All statutory references are to the Corporations Code unless otherwise stated.

Section 1602 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 and also of its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. This section applies to a director of any foreign corporation having its principal executive office in this state or customarily holding meetings of its board in this state.”

FN 2. Section 1603, subdivision (a) provides: “Upon refusal of a lawful demand for inspection, the superior court of the proper county, may enforce the right of inspection with just and proper conditions or may, for good case shown, appoint one or more competent inspectors or accountants to audit the books and records kept in this state and investigate the property, funds and affairs of any domestic corporation or any foreign corporation keeping records in this state and of any subsidiary corporation thereof, domestic or foreign, keeping records in this state and to report thereon in such manner as the court may direct.”

FN 3. Appellants place great reliance on Valtz v. Penta Investment Corp., supra, 139 Cal.App.3d 803. There, owners of over 5 percent of the shares sought to enforce their “absolute right” to inspect and copy the shareholders list. The corporation refused, alleging that the information would be used in a competing business. (Id., at p. 806.) The opinion does observe that the “unclean hands” defense was tantamount to the “proper purpose” rule and therefore inapplicable. (Id., at p. 810.) The opinion, however, is silent with respect to section 1603 subdivision (a) and its provision for a protective order.

FN 4. Our construction of section 1603, subdivision (a) (see post, at pp. 1855-1856) does not render the conflict of laws issue moot. The California and Delaware rules for director inspection remain different.

Were we to rule that Delaware law applied to this inspection controversy, a director’s right to inspect would not only be chilled, it might be frozen. Whether appellants would suffer the burden of litigating the inspection issue in the Delaware chancery court is unknown.

FN 5. We also note the recent case of Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914 [45 Cal.Rptr.2d 1]. There, an analogous provision in section 8334, provided for an “absolute right” of inspection for a homeowners association director. Notwithstanding the use of the word “absolute,” a majority of the court were of the opinion that the right to privacy could, and there did, outweigh the “absolute” right of inspection. (37 Cal.App.4th at pp. 925-926.)

Tritek Telecom, Inc. v. Superior Court

(2009) 169 Cal.App.4th 1385

[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.

Huffman, Acting P. J., and Aaron, J., concurred.

Davis-stirling Act

Civil Code Section 5215. Redacting Information from Association Records.

(a) Except as provided in subdivision (b), the association may withhold or redact information from the association records if any of the following are true:

(1) The release of the information is reasonably likely to lead to identity theft. For the purposes of this section, “identity theft” means the unauthorized use of another person’s personal identifying information to obtain credit, goods, services, money, or property. Examples of information that may be withheld or redacted pursuant to this paragraph include bank account numbers of members or vendors, social security or tax identification numbers, and check, stock, and credit card numbers.

(2) The release of the information is reasonably likely to lead to fraud in connection with the association.

(3) The information is privileged under law. Examples include documents subject to attorney-client privilege or relating to litigation in which the association is or may become involved, and confidential settlement agreements.

(4) The release of the information is reasonably likely to compromise the privacy of an individual member of the association.

(5) The information contains any of the following:

(A) Records of goods or services provided a la carte to individual members of the association for which the association received monetary consideration other than assessments.

(B) Records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records.

(C) Any person’s personal identification information, including, without limitation, social security number, tax identification number, driver’s license number, credit card account numbers, bank account number, and bank routing number.

(D) Minutes and other information from executive sessions of the board as described in Article 2 (commencing with Section 4900), except for executed contracts not otherwise privileged. Privileged contracts shall not include contracts for maintenance, management, or legal services.

(E) Personnel records other than the payroll records required to be provided under subdivision (b).

(F) Interior architectural plans, including security features, for individual homes.

(b) Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors, or contractors. Compensation information for individual employees shall be set forth by job classification or title, not by the employee’s name, social security number, or other personal information.

(c) 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 section unless the failure to withhold or redact the information was intentional, willful, or negligent.

(d) If requested by the requesting member, an association that denies or redacts records shall provide a written explanation specifying the legal basis for withholding or redacting the requested records.

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Davis-stirling Act

Civil Code Section 5200. “Association Records” and “Enhanced Association Records” Defined.

For the purposes of this article, the following definitions shall apply:

(a) “Association records” means all of the following:

(1) Any financial document required to be provided to a member in Article 7 (commencing with Section 5300) or in Sections 5565 and 5810.

(2) Any financial document or statement required to be provided in Article 2 (commencing with Section 4525) of Chapter 4.

(3) Interim financial statements, periodic or as compiled, containing any of the following:

(A) Balance sheet.

(B) Income and expense statement.

(C) Budget comparison.

(D) General ledger. A “general ledger” is a report that shows all transactions that occurred in an association account over a specified period of time.

The records described in this paragraph shall be prepared in accordance with an accrual or modified accrual basis of accounting.

(4) Executed contracts not otherwise privileged under law.

(5) Written board approval of vendor or contractor proposals or invoices.

(6) State and federal tax returns.

(7) Reserve account balances and records of payments made from reserve accounts.

(8) Agendas and minutes of meetings of the members, the board, and any committees appointed by the board pursuant to Section 7212 of the Corporations Code; excluding, however, minutes and other information from executive sessions of the board as described in Article 2 (commencing with Section 4900).

(9) Membership lists, including name, property address, mailing address, email address, as collected by the association in accordance with Section 4041 where applicable, but not including information for members who have opted out pursuant to Section 5220.

(10) Check registers.

(11) The governing documents.

(12) An accounting prepared pursuant to subdivision (b) of Section 5520.

(13) An “enhanced association record” as defined in subdivision (b).

(14) “Association election materials” as defined in subdivision (c).

(b) “Enhanced association records” means 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.

(c) “Association election materials” means returned ballots, signed voter envelopes, the voter list of names, parcel numbers, and voters to whom ballots were to be sent, proxies, the candidate registration list, and the tally sheet of votes cast by electronic secret ballot. Signed voter envelopes may be inspected but may not be copied. An association shall maintain association election materials for one year after the date of the election.

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