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HomeMy WebLinkAbout04-544 NicholsonBruce A. Nicholson, Esquire Duffy, North, Wilson, Thomas & Nicholson, LLP 104 North York Road Hatboro, PA 19040 Re: Conflict; Public Official /Employee; Chair; Redevelopment Authority Board; Law Partner; Business Relationship; Law Firm; Business With Which Associated; County Solicitor; Pre - existing Contract. Dear Mr. Nicholson: ADVICE OF COUNSEL May 13, 2004 04 -544 This responds to your letters of April 8, 2004, and April 13, 2004, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., presents any prohibition or restrictions upon an authority board member who is a partner in a law firm that is under a pre- existing contract to represent the authority in condemnation proceedings. Facts: As Solicitor to the Redevelopment Authority of the County of Montgomery (the "Authority "), you seek an advisory on behalf of the Chair of the Authority as to a possible conflict of interest involving the continued use by the Authority of an attorney who is the Chair's law partner. By way of background, you have submitted facts, which may be fairly summarized as follows. In 1996, the Authority initiated condemnation proceedings against property in Montgomery County. The Authority retained an attorney ( "Attorney A ") to handle the condemnation work for the Authority. You have submitted a redacted copy of the Engagement Letter of July 9, 1996, which letter is incorporated herein by reference. You note that although the engagement letter makes reference to Attorney A working with a second attorney, the second attorney was not actually involved in the matter. The condemnee resisted the condemnation by filing preliminary objections, which were dismissed by the Court of Common Pleas. The condemnee then appealed to Commonwealth Court, which ruled against the Authority, sustained the preliminary Nicholson, 04 -544 May 13, 2004 Page 2 objections, and dismissed the condemnation. The Supreme Court denied allocatur and the condemnee filed a petition for expenses under the Eminent Domain Code. The matter was finally resolved in August 2003. Attorney A represented the Authority throughout the entirety of the litigation. In January 2003, the condemnee filed a lawsuit against the Authority in federal court for damages it alleged were a result of the failed condemnation action. The Authority did not use Attorney A to handle the action in federal court. The Authority filed a motion to dismiss the matter and it has been dismissed with prejudice. The matter is now on appeal to the Third Circuit Court of Appeals. In March 2004, the Condemnee filed a Petition for Appointment of Viewers claiming an inverse condemnation. Upon receipt of the Petition for Board of View, the Authority forwarded it to Attorney A. Attorney A continues to handle this matter under his original retainer letter, although his hourly billing rates have been adjusted over time. Meanwhile, in the fall of 2000, Attorney A's law partner was appointed to the Authority Board. Attorney A's law partner serves as Chair of the Authority Board. The Authority Board Chair has publicly recused himself from involvement in any actions relating to Attorney A, or the payment of any invoices submitted by Attorney A. The specific question you pose is whether the continued use of Attorney A to handle the state court litigation arising out of the 1996 condemnation, including the handling of matter involving the Petition for Appointment of Viewers would transgress the Ethics Act. You state that due to the extensive knowledge and background of Attorney A in handling this matter since 1996, the Authority wants Attorney A to continue to represent the Authority. The Authority believes that a change in counsel would be prejudicial to the Authority both in terms of expense and due to the fact that a new attorney would be required to understand a very large and complicated case. You state that, more importantly, the Authority would lose the skills of Attorney A in whom the Authority has great confidence. 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 requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor 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 requestor has truthfully disclosed all of the material facts. The Chair of the Authority Board is a public official as that term is defined in the Ethics Act, and hence the Chair is subject to the provisions of that Act. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The following terms are defined in the Ethics Act as follows: § 1102. Definitions Nicholson, 04 -544 May 13, 2004 Page 3 "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. "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1102. In addition, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /employee anything of monetary value and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /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. Section 1103(f) of the Ethics Act provides as follows: § 1103. Restricted activities Nicholson, 04 -544 May 13, 2004 Page 4 (f) Contract. - -No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Section 1103(f) of the Ethics Act also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Section 1103(j) of the Ethics Act provides as follows: § 1103. Restricted activities (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 Nicholson, 04 -544 May 13, 2004 Page 5 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(j). In each instance of a conflict, Section 1103(j) requires the public official/ employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the disclosure requirements noted above are followed. See, Pavlovic, Opinion 02 -005. In applying the above provisions of the Ethics Act to your inquiry, it is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position - -or confidential information obtained by being in that position- -for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity, Gorman, Order 1041, or private client(s). Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010. If the private employer or business with which the public official /public employee is associated or a private client would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Miller, supra; Kannebecker, supra. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion 89 -002. In each instance of a conflict of interest, the public official/ public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 11030) set forth above. The abstention requirement would not be limited merely to voting, but would extend 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 considering the above, the law firm is a business with which the Authority Board Chair is associated. See, Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102. In addition, the Authority Board Chair has an ongoing business relationship with his law partner, Attorney A. See, Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010. Nicholson, 04 -544 May 13, 2004 Page 6 Pursuant to Sections 1103(a) and 1103(j) of the Ethics Act, the Authority Board Chair as a public official would generally have a conflict of interest and could not participate as to matters that would financially impact himself, Attorney A, his law firm, or business client(s). The Authority Board Chair would specifically have a conflict of interest as to any matters that the law firm /Attorney A would have with the Authority, including but not limited to, representation of the Authority by the law firm /Attorney A and the approval of the law firm's /Attorney A's legal fees. With respect to Section 1103(f) of the Ethics Act, it is noted that Attorney A continues to represent the Authority pursuant to the original contract with the Authority, which states that "the Redevelopment Authority has engaged [the law] firm...to litigate condemnation proceedings." Engagement Letter of July 9, 1996 (Emphasis added). Given that the contract was entered into prior to the Chair's appointment to the Authority Board, Section 1103(f) would have no application. However, if the Authority and the law firm would renew the contract or enter into a new contract, such contract, if over $500, would be subject to the restrictions of Section 1103(f) of the Ethics Act. Parenthetically, although such contracting would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and 1103(j) would be satisfied, a problem could exist under the Urban Redevelopment Law. In the instant situation, the Urban Redevelopment Law provides as follows: §1708. Interest of members or employes No member or employe of an Authority shall acquire any interest, direct or indirect, in any redevelopment project or in any property included or planned to be included in any redevelopment area, or in any area which he may have reason to believe may be certified to be a redevelopment area, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or services to be furnished or used by an Authority, or in any contract with a redeveloper or prospective redeveloper relating, directly or indirectly, to any redevelopment project. The acquisition of any such interest in a redevelopment project or in any such property or contract shall constitute misconduct in office. If any member or employe of an Authority shall already own or control any interest, direct or indirect, in any property later included or planned to be included in any redevelopment project under the jurisdiction of the Authority, or has any such interest in any contract for material or services to be furnished or used in connection with any redevelopment project, he shall disclose the same in writing to the Authority and to the Department of Community Affairs and the local governing body, and such disclosure shall be entered in writing upon the minute books of the Authority. Failure to make such disclosure shall constitute misconduct in office. 35 P.S. §1708. Since such contracting may be prohibited by the above quoted provision of the Urban Redevelopment Law, and since the State Ethics Commission does not have the statutory jurisdiction to interpret the Urban Redevelopment Law, it is suggested that the Authority Board Chair seek legal advice as to its applicability. 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 Nicholson, 04 -544 May 13, 2004 Page 7 conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Conclusion: The Chair of the Redevelopment Authority of the County of Montgomery is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "). The Authority Board Chair's law firm is a business with which the Authority Board Chair is associated. In addition, the Authority Board Chair has an ongoing business relationship with his law partner, Attorney A. Pursuant to Sections 1103(a) and 1103(j) of the Ethics Act, the Authority Board Chair as a public official would generally have a conflict of interest and could not participate as to matters that would financially impact himself, Attorney A, his law firm, or business client(s). The Authority Board Chair would specifically have a conflict of interest as to any matters that the law firm /Attorney A would have with the Authority, including but not limited to, representation of the Authority by the law firm /Attorney A and the approval of the law firm's /Attorney A's legal fees. Section 1103(f) the Ethics Act has no applicability because Attorney A continues to represent the Authority pursuant to the original contract with the Authority, which contract preceded the Chair's appointment to the Authority Board. However, if the Authority and the law firm would renew the contract or enter into a new contract, such contract, if over $500, would be subject to the restrictions of Section 1103(f) of the Ethics Act. Although such contracting would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and 1103(j) would be satisfied, a problem could exist under the Urban Redevelopment Law. Therefore, it is suggested that the Authority Board Chair seek legal advice as to its applicability. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), 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 requestor 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, Vincent J. Dopko Chief Counsel