Board president should not also be legal counsel

Question: The president of our board is a California-licensed attorney. At the same time he has been a board director, he has also been the association’s legal counsel. Is this a conflict of interest?

Answer: There appears to be a serious conflict of interest between your board president’s obligations to advise and to act in the best interests of the association, and to seek more than one opinion as part of his due diligence.

Board directors, including the president, are volunteers and are prohibited from receiving direct or indirect compensation for their services. Because this director is both counsel and board president, the question arises as to whether his compensation is as legal counsel to the board or as its president. Trying to disguise his compensation for being the association’s legal counsel could expose other directors to having their insurance coverage voided.

Each director is obligated to use his or her independent judgment and perform his or her own due diligence before making any decision. Relying on the advice of one board member, who just happens to be the association’s attorney and president, leaves the door wide open for a legal challenge.

On the other hand, the attorney should recognize this very fundamental conflict, and would be doing his ethical duty by refusing to give legal advice to his own board for just that reason alone.

When the board takes only his advice, the board itself violates its fiduciary duty to the titleholders. Legal advice is not necessary on every question that arises in a board meeting, yet the opinion of this president may be mistaken for legal advice, for which the board may be paying, obviating any further discussion or independent due diligence on behalf of the other board directors.

State Bar of California Rules of Professional Conduct indicate that the attorney is in violation of Rule 3-310 regarding the representation of conflicting interests. As a board director, he is responsible for representing the interests of the association and its membership. Yet, as an attorney, he may be advising the board to act against one or more of the members, thus creating the conflict.

Many associations have attorneys who are titleholders, some of whom serve on their association boards and committees. Boards should avail themselves of the experience of directors and owners who are attorneys when it comes to contracts and procedural formalities. Where there exists a genuine need for legal counsel, the association should engage an outside attorney.

Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.