This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.
CONFLICTS OF INTEREST -- Exceptions (contracts entered into prior to municipal service) -- Legal Services (contract with town attorney's law firm); (town attorney or town attorney's law firm representing clients before town agencies)
GENERAL MUNICIPAL LAW §§800(2), (3), 801(1), 802(1)(h), 803, 805-a(1)(c), (d): An attorney who is appointed town attorney would not have a prohibited interest in a pre-existing contract between the town and his or her law firm. The attorney, however, would be required to disclose his or her interest in the contract. The attorney should also recuse him or herself from any matter affecting his or her law firm, with those functions instead being performed by a deputy, if any. The attorney, and possibly his or her law firm, may not perform compensated services for private clients in relation to any matter before any town agency for which the town attorney serves as attorney, or any services for contingent compensation in relation to any matter before any town agency.
You ask whether an attorney, upon being appointed town attorney, would have a prohibited interest in a pre-existing contract between the town and his or her law firm.
You state that the attorney in question is a partner in a private law firm. In 1998, the law firm was retained by the town to prosecute certain litigation. The agreement between the law firm and the town runs until the case that is the subject of the litigation is "finally determined" either by the courts or by settlement of the parties1. You anticipate that the case will not be "finally determined" until after the appointment of the proposed town attorney.
Article 18 of the General Municipal Law (§800 et seq.) contains the provisions of law which relate to conflicts of interest of municipal officers and employees, including town officers and employees (General Municipal Law §800[4], [5]). Among other things, article 18 prohibits municipal officers and employees from having interests in contracts with the municipality for which they serve under certain circumstances (General Municipal Law §801).
For purposes of article 18, a "contract" includes any express or implied claim, account or demand against or agreement with a municipality (General Municipal Law §800[2]). A municipal officer or employee has an "interest" in a contract with his or her municipality if he or she receives a direct or indirect pecuniary or material benefit as a result of that contract (General Municipal Law §800[3]). In addition, a municipal officer or employee is deemed to have an "interest" in the contracts of a firm, partnership or association of which he or she is a member or employee, and in the contracts of a corporation of which he or she is an officer, director, employee or stockholder (General Municipal Law §800[3][b]-[d]).
Insofar as here relevant, section 801 of the General Municipal Law prohibits a municipal officer or employee from having an interest in a contract with the municipality that he or she serves if the officer or employee has certain powers and duties with respect to the contract and if none of the exceptions contained in section 802 of the General Municipal Law are applicable (General Municipal Law §801[1]). The powers and duties that may give rise to a prohibited interest in a contract are the power or duty, individually or as a member of a board, to: (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties (id.).
In this instance, the town's agreement with the law firm is a "contract" because it is an "agreement" with the town. Upon being appointed town attorney, the attorney in question would be deemed to have an "interest" in that contract because the attorney is a partner in the law firm. If, as town attorney, the attorney in question would have any of the above-described powers and duties in connection with the town's contract with his or her law firm, the attorney's interest in the contract would be prohibited unless one or more of the exceptions in section 802 of the General Municipal Law is applicable2.
Section 802(1)(h) of the General Municipal Law provides that an interest in a contract is not prohibited if the contract was entered into prior to the time that a municipal officer or employee was elected or appointed to his or her municipal position. This exception, however, does not apply to renewals of any such contract.
Here, should the attorney in question be appointed town attorney and, as such, have one or more of the powers and duties that may give rise to a prohibited interest in a contract, the attorney's interest in the contract between the town and his or her law firm would not be prohibited because the contract would have been entered into prior to the appointment. Pursuant to section 803 of the General Municipal Law, however, the attorney would be required to disclose his or her interest in the contract publicly and in writing to the town board, and the disclosure must be included in the official record of the town board's proceedings (General Municipal Law §803[1]).
We also note that section 805-a(1)(c) of the General Municipal Law prohibits municipal officers and employees from receiving, or entering into any agreement for, compensation for services rendered in relation to any matter before any municipal agency of which he or she is an officer, member or employee, or any municipal agency over which he or she has jurisdiction. In addition, section 805-a(1)(d) prohibits municipal officers and employees from appearing before any town agency if their compensation is contingent upon any action by the agency. Therefore, should the attorney in question be appointed town attorney, he or she would be prohibited from performing compensated services for private clients in relation to any matter before any town agency for which he or she serves as attorney, and from appearing before any town agency for contingent compensation (see 1985 Opns St Comp No. 85-60, p 84). Similarly, the attorney's law firm may also be prohibited from performing such services, depending on whether the attorney in question would share in the compensation earned by the law firm from the rendition of such services (id.)3.
Further, section 806(1)(a) of the General Municipal Law requires the town board of each town to adopt a code of ethics setting forth for the guidance of its officers and employees the standards of conduct reasonably expected of them. Among other things, a code of ethics must contain standards of conduct with respect to disclosure of interest in legislation before the town board and with respect to private employment in conflict with official duties (id). Therefore, the town's code of ethics should be reviewed to ascertain whether it contains any provisions that would be pertinent in the event that the attorney in question is appointed town attorney.
Finally, we note that the courts of this State have held public officials to a high standard of conduct and, on occasion, have negated certain actions that did not violate the literal provisions of article 18 or a municipality's code of ethics, but did violate the spirit and intent of these enactments, were inconsistent with public policy or suggested self-interest, partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation and Taxpayers Ass'n v Town Board of the Town of Tuxedo, 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521). Accordingly, should the attorney in question be appointed town attorney, the attorney should avoid potential appearances of impropriety by recusing him or herself from any matter affecting his or her law firm, with those functions instead being performed by a deputy, if any (cf. Kayatt v Dinkins, 148 Misc 2d 510, 560 NYS2d 736; see 2000 Opns St Comp No. 2000-7, p 20).
Accordingly, an attorney who is appointed town attorney would not have a prohibited interest in a pre-existing contract between the town and the law firm in which the attorney is a partner. Disclosure of the attorney's interest in the contract, however, is required. Also, the town's code of ethics should be reviewed to ascertain whether it contains any pertinent provisions, and the attorney should recuse him or herself from any matter affecting his or her law firm, with those functions instead being performed by a deputy, if any. The attorney, and possibly the law firm, may not perform any compensated services for private clients in relation to any matter before any town agency for which the town attorney serves as attorney, or any services for contingent compensation in relation to any matter before any town agency.
December 11, 2000
Sheila Fuller, Town Supervisor
Town of Bethlehem
1 For purposes of this opinion, we assume that the agreement between the town and the law firm does not violate the common law prohibition against binding successor governing boards to contracts relating to governmental matters in the absence of express statutory authority (see, e.g., Town Law §20[2][a]; compare Morin v Foster, 45 NY2d 287, 408 NYS2d 387; Ramapo Carting Corporation v Reisman, 192 AD2d 922, 596 NYS2d 602; Harrison Central School District v Nyquist, 59 AD2d 434, 400 NYS2d 218, app den 44 NY2d 645; Edsall v Wheler, 29 AD2d 622, 285 NYS2d 306).
2 Although the powers and duties of town attorneys are not generally prescribed by statute, we have previously noted that town attorneys commonly possess one or more of the powers and duties that may give rise to a prohibited interest in a contract (see, e.g., 1989 Opns St Comp No. 89-65, p 143; 1981 Opns St Comp No. 81-102, p 101). We have also noted that because it is the existence of these powers and duties which gives rise to a prohibited contractual interest, recusal will not cure a prohibited interest in a contract (see, e.g., Opn No. 89-65, supra, 1988 Opns St. Comp No. 88-14, p 25).
3 Should the attorney in question be appointed town attorney, the Code of Professional Responsibility may also prohibit the attorney, his or her law firm, or both, from representing clients in relation to matters involving the town. For further information in this regard, we suggest contacting the State Bar Association.