HomeMy WebLinkAbout14-518 Confidential
ADVICE OF COUNSEL
May 12, 2014
14-518
This responds to your letter dated March 17, 2014, by which you requested a
confidential advisory from the Pennsylvania State Ethics Commission.
Issue:
Whether, pursuant to the Public Official and Employee Ethics Act (“Ethics
Act”), 65 Pa.C.S. § 1101 et seq., an individual who would resign from being an A in a
law firm upon commencing service as a B of Governmental Body C within
Commonwealth Department D would have a conflict of interest with regard to
participating in or voting on matters before Governmental Body C pertaining to such law
firm, its clients, companies related to its clients, or legal issues in which the individual
had been involved on behalf of a law firm client.
Facts:
You request a confidential advisory from the Pennsylvania State Ethics
Commission based upon submitted facts, the material portion of which may be fairly
summarized as follows.
You are an attorney, and you are currently an A in the law firm of \[name of law
firm\] (“Firm”). You represent business and personal clients with respect to \[type of
issues\] before Governmental Body C, Governmental Body E within Commonwealth
Department F, the Commonwealth Court of Pennsylvania (“Commonwealth Court”), and
the Pennsylvania Supreme Court.
You expect to become one of the three Bs of Governmental Body C.
Governmental Body C hears \[type of matters\] from Governmental Body E. The parties
in a matter before Governmental Body C are a G and Commonwealth Department F. A
tie vote of Governmental Body C results in \[a certain outcome\]. Bs of Governmental
Body C must \[meet certain qualifications\]. See, \[cite\].
You state that upon becoming a B of Governmental Body C, you will resign as an
A in the Firm and will immediately cease providing legal services in the Firm to any firm,
business, or individual, including specifically those clients which you have represented
at the Firm.
Upon your resignation from the Firm, you will be entitled to receive \[certain funds
paid out over a certain period of time\]. The only additional payments that you will
receive from the Firm will be representative of client fees payable to you alone which
were unbilled, uncollected, or collected but not distributed to you prior to your departure
from the Firm. You state that you will not be receiving any payment from the Firm, any
Confidential Advice, 14-518
May 12, 2014
Page 2
A at the Firm, or any client for transferring any of your existing client matters to another
attorney at the Firm and that you will not be receiving any payment from any third party
with respect to the transfer of any of your existing clients and client matters to any other
professional.
Based upon the above submitted facts, you pose the following questions:
(1) Whether you would be required to disqualify yourself from any matter
brought before Governmental Body C in which you had personally and
substantially represented the G as a Firm client by giving legal advice
and/or representing the G in its H before Governmental Body E and/or
\[taking a certain action involving Governmental Body C\] which would be
pending at the time of your departure from the Firm;
(2) If you had personally and substantially represented a Firm client in a
matter before Governmental Body C or in a later H, and the matter was
completed and closed at the time of your departure from the Firm, whether
you would be permitted to deliberate and vote on a wholly different matter
before Governmental Body C that would involve your former client and in
which you would have no financial interest;
(a) Whether the answer to this question would be different if the matter
in which you had previously represented your former client would
still be an open matter currently pending at the Commonwealth
Court;
(3) If a matter in which you were not personally and substantially involved
while an attorney with the Firm would be brought before Governmental
Body C by a Firm attorney or if the Firm would be involved in such matter
in some way, whether you would be required to disqualify or recuse
yourself from such matter simply because of the Firm’s involvement in it;
(4) Whether the answer to any of the above questions and the analysis of any
particular matter would be different if the G with a matter before
Governmental Body C was a former client and not an active client of you
or the Firm at the time of your departure from the Firm;
(5) If a matter before Governmental Body C would involve a parent,
subsidiary, or sister company of a Firm client to which you were providing
legal services at the time you left the Firm, and you would have no
expectation of direct or indirect financial gain or other benefit from the
specific matter, whether you would be precluded from deliberating and
voting on such matter;
(6) Whether there would be any circumstances in which you could not
deliberate or vote on a specific I issue brought to Governmental Body C by
a G once you have no financial or other connection with the Firm or any of
your former personal clients whose cases actively involved the same
specific I issue;
(7) To the extent you would be required to recuse yourself in any of the above
matters, whether you would be permitted to participate and vote in a
particular matter where you would fully disclose on the record the reasons
for your recusal and both parties before Governmental Body C would
thereafter agree to waive your conflict; and
(8) If you would be required to recuse yourself from a matter pending before
Governmental Body C and the two remaining Governmental Body C Bs
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May 12, 2014
Page 3
could not agree or one of the two would also be required to recuse
himself, whether Section 1103(j) of the Ethics Act would permit you to vote
on such matter, or would the nature of your duties and the practical result
of a tie vote by Governmental Body C render Section 1103(j) of the Ethics
Act inapplicable, and if so, whether there would be special notifications or
requirements in addition to those outlined by the Ethics Act.
Discussion:
It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester
based upon the facts that the requester has submitted. In issuing the advisory based
upon the facts that the requester has submitted, the Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts that have not
been submitted. It is the burden of the requester to truthfully disclose all of the material
facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a
defense to the extent the requester has truthfully disclosed all of the material facts.
Upon taking office as a B of Governmental Body C, you would become a public
official subject to the provisions of the Ethics Act.
Sections 1103(a) and 1103(j) of the Ethics Act provide:
§ 1103. Restricted activities
(a)Conflict of interest.--
No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
(j)Voting conflict.--
Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or
by any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three-member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
65 Pa.C.S. §§ 1103(a), (j).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
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May 12, 2014
Page 4
"Conflict" or "conflict of interest."
Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment."
The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business."
Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self-employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated."
Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or
has a financial interest.
"Financial interest."
Any financial interest in a legal
entity engaged in business for profit which comprises more
than 5% of the equity of the business or more than 5% of the
assets of the economic interest in indebtedness.
"Political subdivision."
Any county, city, borough,
incorporated town, township, school district, vocational
school, county institution district, and any authority, entity or
body organized by the aforementioned.
65 Pa.C.S. § 1102.
Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is
prohibited from using the authority of public office/employment or confidential
information received by holding such a public position for the private pecuniary benefit
of the public official/public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated.
The use of authority of office is not limited merely to voting, but extends to any
use of authority of office including, but not limited to, discussing, conferring with others,
and lobbying for a particular result. Juliante, Order 809.
In each instance of a conflict of interest, a public official/public employee would
be required to abstain from participation, which would include voting unless one of the
statutory exceptions of Section 1103(j) of the Ethics Act would be applicable.
Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have
to be satisfied in the event of a voting conflict.
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May 12, 2014
Page 5
Per the Pennsylvania Supreme Court’s decision in Kistler v. State Ethics
Commission, 610 Pa. 516, 22 A.3d 223 (2011), in order to violate Section 1103(a) of the
Ethics Act, a public official/public employee:
… must act in such a way as to put his \[office/public position\]
to the purpose of obtaining for himself a private pecuniary
benefit. Such directed action implies awareness on the part
of the \[public official/public employee\] of the potential
pecuniary benefit as well as the motivation to obtain that
benefit for himself.
Kistler, supra, 610 Pa. at 523, 22 A.3d at 227. To violate Section 1103(a) of the Ethics
Act, a public official/public employee “must be consciously aware of a private pecuniary
benefit for himself, his family, or his business, and then must take action in the form of
one or more specific steps to attain that benefit.” Id., 610 Pa. at 528, 22 A.3d at 231.
Based upon Kistler, the existence of a violation of Section 1103(a) would depend
upon the circumstances in a given case. Raphael, Opinion 13-003.
In addition, Sections 1103(b) and 1103(c) of the Ethics Act, 65 Pa.C.S. §§
1103(b), (c), provide in part that no person shall offer or give to a public official/public
employee anything of monetary value and no public official/public employee shall solicit
or accept anything of monetary value based upon the understanding that the vote,
official action, or judgment of the public official/public employee would be influenced
thereby. Reference is made to these provisions of the law not to imply that there has
been or will be any transgression thereof but merely to provide a complete response to
the question presented.
Having established the above general principles, your specific questions shall
now be considered.
It is initially noted that the phraseology of your specific questions appears to
relate to some extent to considerations under the Rules of Professional Conduct
applicable to attorneys. However, Section 1103(a) of the Ethics Act pertains to conflicts
of interest as defined in Section 1102 of the Ethics Act and does not address the Rules
of Professional Conduct.
Given your status as an A in the Firm, the Firm is a business with which you are
associated. Following your resignation from the Firm and the J in the Firm, the Firm
would not be considered a business with which you are associated.
Under the Ethics Act, the response to your first through sixth questions is
controlled by the Pennsylvania Supreme Court’s 2011 decision in Kistler, supra.
Based upon the Kistler decision, as a B of Governmental Body C, you would only
violate Section 1103(a) of the Ethics Act if: (1) you would be consciously aware of a
private pecuniary (financial) benefit for yourself, a member of your immediate family, or
a business with which you or a member of your immediate family is associated; and (2)
your action(s) would constitute one or more specific steps to attain that benefit. Kistler,
supra. This would be true regardless of whether a matter before Governmental Body C
would involve the Firm; an attorney from the Firm; a current or former Firm client which
you did not represent; a current or former Firm client which you represented
(irrespective of the nature or forum of the representation, the current status of any legal
proceedings involving such client, or the legal issues involving such client); a parent,
subsidiary, or sister company of a Firm client which you represented at the time you left
the Firm; or a G who neither you nor the Firm represented (irrespective of the legal
issue involving such G).
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May 12, 2014
Page 6
If the a matter before the Board would financially benefit you, for example, by
impacting the amount of payment(s) you would receive from the Firm, you would have a
conflict of interest in such matter. In the absence of a prohibited private pecuniary
benefit, a conflict of interest would not be established under Section 1103(a) of the
Ethics Act.
In each instance of a conflict of interest, you would be required to abstain from
participation, which would include voting unless a voting conflict exception contained in
Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure
requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event
of a voting conflict.
With respect to your seventh question, you are advised that the Ethics Act does
not provide for waiver where a conflict of interest exists.
With regard to your eighth question, you are advised as follows.
The exception in Section 1103(j) of the Ethics Act for breaking a tie vote despite
a conflict is available exclusively to members of three-member governing bodies of
political subdivisions who first abstain and disclose their conflicts as required by Section
1103(j) of the Ethics Act. Because Governmental Body C is not a governing body of a
“political subdivision” as that term is defined in the Ethics Act (65 Pa.C.S. § 1102),
Section 1103(j) of the Ethics Act would not apply to permit you to vote to break a tie if
the other two Bs of Governmental Body C would cast opposing votes on a matter in
which you have a conflict of interest. Cf., Noye, Opinion 91-007.
The other voting conflict exception contained within Section 1103(j) of the Ethics
Act requires that the following conditions be met: (1) the board must be unable to take
any action on the matter before it because the number of members required to abstain
from voting under the provisions of the Ethics Act makes the majority or other legally
required vote of approval unattainable; and (2) prior to voting, such members with
conflicts under the Ethics Act must disclose their conflicts as required by Section
1103(j). Pavlovic, Opinion 02-005. Therefore, if Governmental Body C would be unable
to take any action on a matter before it because you and at least one of the other two
Bs of Governmental Body C would have conflicts of interest under the Ethics Act,
Section 1103(j) would permit you to vote on such matter provided that you would fully
satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Pavlovic, supra.
Section 1103(j) of the Ethics Act would only allow you to vote and would not permit you
to otherwise participate, such as for example, by discussing or advocating as to the
matter that is the subject of the vote. Klutzaritz, Order 1078; Pavlovic, supra.
The propriety of the proposed conduct has only been addressed under the Ethics
Act; the applicability of any other statute, code, ordinance, regulation or other code of
conduct other than the Ethics Act has not been considered in that they do not involve an
interpretation of the Ethics Act. Specifically not addressed herein is the applicability of
the Rules of Professional Conduct.
Conclusion:
Based upon the submitted facts that: (1) you are an attorney, and
you are currently an A in the law firm of \[name of law firm\] (“Firm”); (2) you represent
business and personal clients with respect to \[type of issues\] before Governmental
Body C within Commonwealth Department D, Governmental Body E within
Commonwealth Department F, the Commonwealth Court of Pennsylvania, and the
Pennsylvania Supreme Court; (3) you expect to become one of the three Bs of
Governmental Body C; (4) Governmental Body C hears \[type of matters\] from
Governmental Body E; (5) the parties in a matter before Governmental Body C are a G
and Commonwealth Department F; (6) a tie vote of Governmental Body C results in \[a
certain outcome\]; (7) Bs of Governmental Body C must \[meet certain qualifications\]; (8)
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May 12, 2014
Page 7
upon becoming a B of Governmental Body C, you will resign as an A in the Firm and will
immediately cease providing legal services in the Firm to any firm, business, or
individual, including specifically those clients which you have represented at the Firm;
(9) upon your resignation from the Firm, you will be entitled to receive \[certain funds
paid out over a certain period of time\]; (10) the only additional payments that you will
receive from the Firm will be representative of client fees payable to you alone which
were unbilled, uncollected, or collected but not distributed to you prior to your departure
from the Firm; and (11) you will not be receiving any payment from the Firm, any A at
the Firm, or any client for transferring any of your existing client matters to another
attorney at the Firm, and you will not be receiving any payment from any third party with
respect to the transfer of any of your existing clients and client matters to any other
professional, you are advised as follows.
Given your status as an A in the Firm, the Firm is a business with which you are
associated. Following your resignation from the Firm and the J in the Firm, the Firm
would not be considered a business with which you are associated.
Upon taking office as a B of Governmental Body C, you would become a public
official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics
Act”), 65 Pa.C.S. § 1101 et seq. As a B of Governmental Body C, you would only
violate Section 1103(a) of the Ethics Act if: (1) you would be consciously aware of a
private pecuniary (financial) benefit for yourself, a member of your immediate family, or
a business with which you or a member of your immediate family is associated; and (2)
your action(s) would constitute one or more specific steps to attain that benefit. This
would be true regardless of whether a matter before Governmental Body C would
involve the Firm; an attorney from the Firm; a current or former Firm client which you did
not represent; a current or former Firm client which you represented (irrespective of the
nature or forum of the representation, the current status of any legal proceedings
involving such client, or the legal issues involving such client); a parent, subsidiary, or
sister company of a Firm client which you represented at the time you left the Firm; or a
G who neither you nor the Firm represented (irrespective of the legal issue involving
such G).
If a matter before the Board would financially benefit you, for example, by
impacting the amount of payment(s) you would receive from the Firm, you would have a
conflict of interest in such matter. In the absence of a prohibited private pecuniary
benefit, a conflict of interest would not be established under Section 1103(a) of the
Ethics Act.
In each instance of a conflict of interest, you would be required to abstain from
participation, which would include voting unless a voting conflict exception contained in
Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure
requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event
of a voting conflict. The Ethics Act does not provide for waiver where a conflict of
interest exists.
The exception in Section 1103(j) of the Ethics Act for breaking a tie vote despite
a conflict is available exclusively to members of three-member governing bodies of
political subdivisions who first abstain and disclose their conflicts as required by Section
1103(j) of the Ethics Act. Because Governmental Body C is not a governing body of a
“political subdivision” as that term is defined in the Ethics Act, Section 1103(j) of the
Ethics Act would not apply to permit you to vote to break a tie if the other two Bs of
Governmental Body C would cast opposing votes on a matter in which you have a
conflict of interest.
The other voting conflict exception contained within Section 1103(j) of the Ethics
Act requires that the following conditions be met: (1) the board must be unable to take
any action on the matter before it because the number of members required to abstain
Confidential Advice, 14-518
May 12, 2014
Page 8
from voting under the provisions of the Ethics Act makes the majority or other legally
required vote of approval unattainable; and (2) prior to voting, such members with
conflicts under the Ethics Act must disclose their conflicts as required by Section
1103(j). Therefore, if Governmental Body C would be unable to take any action on a
matter before it because you and at least one of the other two Bs of Governmental Body
C would have conflicts of interest under the Ethics Act, Section 1103(j) would permit you
to vote on such matter provided that you would fully satisfy the disclosure requirements
of Section 1103(j) of the Ethics Act. Section 1103(j) of the Ethics Act would only allow
you to vote and would not permit you to otherwise participate, such as for example, by
discussing or advocating as to the matter that is the subject of the vote.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act.
Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense
in any enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, provided the requester has disclosed
truthfully all the material facts and committed the acts complained of in reliance on the
Advice given.
This letter is a public record and will be made available as such.
Finally, if you disagree with this Advice or if you have any
reason to challenge same, you may appeal the Advice to the full
Commission. A personal appearance before the Commission will be
scheduled and a formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually
received at the Commission within thirty (30) days of the date of this
Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be
received at the Commission by hand delivery, United States mail,
delivery service, or by FAX transmission (717-787-0806). Failure to
file such an appeal at the Commission within thirty (30) days may
result in the dismissal of the appeal.
Sincerely,
Robin M. Hittie
Chief Counsel