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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Legal Services (contract with town attorney's law firm)
TOWN ATTORNEY -- Conflict of Interest (contract by town with town attorney's law firm for additional legal services)

TOWN LAW, §§20(2)(a), 27(1); GENERAL MUNICIPAL LAW, §§801, 802(1)(b): A town attorney would have a prohibited interest in a contract for additional legal services between the town and his or her law firm, if the town attorney has any of the powers or duties listed in General Municipal Law, §801, unless one of the exceptions in General Municipal Law, §802 applies.

You ask whether a town, without the adoption of a local law, may engage the services of the town attorney's law firm to provide additional legal services to the town.

Initially, we note that Town Law, §20(2)(a) provides, in pertinent part, that the town board of any town which has established the office of town attorney "may employ counsel to the town attorney in respect to any particular subject matter, proceeding, or litigation ..." As a general rule, if a statute commits a decision to a local legislative body but is silent as to the mode of its exercise, the decision may be exercised by resolution (5 McQuillin, Municipal Corporations, §15.06). Since section 20(2)(a) is silent as to how the town board may act to employ outside counsel, the board may act by simple resolution and a local law is not required.

A contract between the town and the town attorney's law firm, however, raises the question of potential conflict of interest. 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. Pursuant to General Municipal Law, §800(3), a municipal officer or employee has an interest in any 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. In addition, regardless of whether an officer or employee receives a direct or indirect pecuniary benefit from a contract, an officer or employee is deemed to have an interest in any contract of a firm or partnership of which he or she is a member or employee, or a corporation of which the officer or employee is a director, officer, employee or shareholder (General Municipal Law, §800[3][c]). That interest is prohibited if the officer, employee, individually or as a member of a board, has the power or duty 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 (General Municipal Law, §801) and none of the exceptions contained in Article 18 are applicable (see General Municipal Law, §802).

Any contract willfully entered into in which there is a prohibited interest is null, void and unenforceable (General Municipal Law, §804) and any officer or employee who willfully or knowingly violates the provisions of Article 18 may be guilty of a misdemeanor (General Municipal Law, §805). We also note that, if an officer or employee has an interest in a contract that is not prohibited under the provisions of Article 18, General Municipal Law, §803 nonetheless generally requires that the interest be disclosed in writing and included in the official record of the governing board's proceedings. Disclosure is not required under section 803 in the case of an interest in a contract which is not prohibited under subdivision two of section 802 (General Municipal Law, §803[2]).

Based on the foregoing, a town attorney who is an employee or partner of a law firm is deemed to have an interest in a contract between the firm and the town. Further, if the town attorney in this instance has any section 801 powers and duties in connection with the contract with the law firm, he or she would have a prohibited conflict of interest unless any of the exceptions in 802 apply. In this regard, we note that town attorneys commonly do possess one or more of these section 801 functions (1981 Opns St Comp No. 81-102, p 101). We also note that since it is the existence of section 801 powers and duties which gives rise to a prohibited conflict of interest, refraining from exercising any such functions will not cure a prohibited conflict of interest (Dykeman v Symonds, 85 Misc 2d 567, 380 NYS2d 567, affd 54 AD2d 159, 388 NYS2d 422; 1988 Opns St Comp No. 88-14, p 25).

It appears that the only exception which may be applicable in this instance is contained in section 802(1)(b). Subdivision 1(b) provides an exception in those instances where an interest is prohibited solely by reason of employment as an officer or employee of a firm if (1) the remuneration of such employment will not be directly affected as a result of such contract and (2) the duties of such employment do not directly involve the procurement, preparation or performance of any part of such contract. We do not have sufficient facts to determine whether this exception is applicable. However, assuming it is applicable, the town attorney's interest would not be prohibited, although disclosure of the interest in accordance with section 803 would be required.

Even if it is determined that there is no prohibited conflict of interest in this case, the town's code of ethics should be consulted to determine whether it contains any pertinent provisions. Also, 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 which, although not violating the literal provisions of Article 18 of the General Municipal Law, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest 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). Thus, even if a contract with the town attorney's firm is found not to violate the letter of Article 18 of the General Municipal Law or the code of ethics, the board should consider the possible consequences of judicial review of such a contract.

Finally, we note that hiring a law firm to provide additional legal services should be distinguished from paying the town attorney individually for additional services. In this regard, we note that Town Law, §20(2)(a) requires a town board which has established the office of town attorney to fix a salary for that office. Town Law, §27(1) states that "(s)alaries shall be in lieu of all fees, charges or compensation for all services rendered to the town or any district or subdivision thereof ..." We have stated, however, that, by local law, these sections of the Town Law may be superseded, and a town attorney may be compensated by a fixed amount for certain specified services and also be paid an additional amount, which might be computed at an hourly rate, for the performance of specified services in excess thereof. The services performed and amount of time spent must be properly documented and payment should be made pursuant to the payroll method to permit more efficient accounting for the various deductions from gross compensation which may be required (Opn No. 81-102, supra). Under such a local law, the compensation paid to the town attorney individually, regardless of whether it be in the form of a fixed annual amount, an hourly rate or a combination thereof, may be viewed merely as compensation for performing the functions of town attorney in his or her capacity as an officer. Therefore, since General Municipal Law, §801 provides that nothing in Article 18 shall preclude the payment of lawful compensation in one or more positions of public employment, compensation paid under such an arrangement would not be violative of Article 18 (see 1980 Opns St Comp No. 80-792, p 218).

March 14, 1989
Joan F. Lillis, Supervisor
Town of West Seneca