CEO 03-1 -- January 28, 2003
CONFLICT OF INTEREST
FLORIDA CITRUS COMMISSION MEMBER EMPLOYED BY COMPANY WHERE CORPORATESIBLING OF COMPANY IS SUING THE DEPARTMENT OF CITRUS
To: Name withheld at person's request
SUMMARY:
No prohibited conflict of interest is created where a member of the Florida Citrus Commission is employed by a citrus processing company and where a corporate sibling of his company is one of five plaintiffs suing the Department of Citrus to have an advertising tax declared unconstitutional. Section 112.313(7)(a), Florida Statutes, would not be violated as the Citrus Commission member has no employment or contractual relationship with any of the plaintiffs, and the fact that there are overlapping officers and directors between the two subsidiary companies and their corporate parent does not necessarily create a continuing or frequently recurring conflict or an impediment to the full and faithful discharge of his public duties. The Commission member is advised to be mindful of the proscriptions in Sections 112.313(6) and 112.313(8), Florida Statutes, which prohibit him from corruptly misusing his position to obtain a special benefit for himself or someone else, and from using information he obtained through his office and which is not available to the general public for his or someone else's personal benefit. With regard to votes that the Commission member may face, Section 112.3143(2), Florida Statutes, would require him to disclose those votes that inure to his special private gain or loss or to the special private gain or loss of either his employer or its parent company.
QUESTION:
Is a prohibited conflict of interest created where a Florida Citrus Commission member is an officer and employee of a company, and where a corporate sibling of his company, owned by the same company owning his company, is challenging the constitutionality of an advertising tax which, in part, funds the operations of the Department of Citrus?
Under the circumstances presented, your question is answered in the negative.
In your letter of inquiry, you explain that this opinion is sought on behalf of Mr. Tristan Chapman, who serves as a member of the Florida Citrus Commission and who is an officer and employee of a company whose corporate sibling is one of five plaintiffs who have brought a legal action against the Department of Citrus.
More specifically, we are advised that a Delaware corporation (U.S. Sugar Corporation) owns 100 percent of the shares of stock of a Florida corporation (Southern Gardens Citrus Holdings Corporation) which, in turn, owns 100 percent of the shares of stock of several subsidiary companies. There are overlapping officers among the various corporate entities. The Commission member is an officer (but not an employee) of the parent company, and is also an officer and employee of one subsidiary company. Another subsidiary is named as one of five plaintiffs in a lawsuit brought against the Florida Department of Citrus challenging the constitutionality of an advertising excise tax imposed on processed grapefruit and oranges. We are further advised that with the exception of this one lawsuit, there is no other pending litigation concerning the Department of Citrus and any of these corporations.
The taxes the plaintiffs object to are collected by the Department of Citrus and deposited into the "Florida Citrus Advertising Trust Fund" maintained by the State Treasury. By law, 3 percent of the revenues collected are deposited into General Revenue; not more than 24 percent is used to fund the operations of the Department of Citrus; and the balance (approximately 73 percent) is used exclusively for advertising, merchandising, publicity, or sales promotion of citrus products. Section 601.15(7), Florida Statutes. In the complaint filed by the plaintiffs in Leon County Circuit Court, they contend that the tax is unconstitutional under the United States and Florida Constitutions because it compels them to financially support speech to which they object, it compels them to subsidize speech without their consent, and it abridges their freedom of association. You question whether these circumstances create a prohibited conflict of interest on the part of the Commission member.
Section 112.313(7)(a), Florida Statutes, provides:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he or she is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his or her private interests and the performance of his or her public duties, or that would impede the full and faithful discharge of his or her public duties. [Section 112.313(7)(a), Florida Statutes (2001).]
This statute prohibits a public officer from having an employment or contractual relationship with a business entity that is doing business with or regulated by his agency. It also prohibits the public officer from having an employment or contractual relationship which creates a continuing or frequently recurring conflict between his private interests and the performance of his public duties, or which impedes the full and faithful discharge of his public duties.
The Commission member is an officer and employee of a company engaged in citrus processing; he is neither employed by nor has any contractual relationship with the company suing the Department or its corporate parent (the Florida holding company), or with any other party to the lawsuit. However, he is an officer of the Delaware corporation owning the Florida holding company which, in turn, owns the various subsidiaries. We note that you have suggested that the exemption in Section 112.313(7)(b), Florida Statutes, might be applicable to excuse a conflict on the part of the Commission member. It provides:
This subsection shall not prohibit a public officer or employee from practicing in a particular profession or occupation when such practice by persons holding such public office or employment is required or permitted by law or ordinance.
Clearly, the qualifications for Citrus Commission members as set forth in Section 601.04, Florida Statutes, require all 12 members to be "practical citrus fruit persons" whose livelihoods involve growing citrus, growing and processing citrus, or growing and shipping citrus. However, the issue in this opinion is not whether the Commission member has an employment or contractual relationship with a business entity regulated by or doing business with the Department of Citrus; the issue is whether his positions as a corporate officer with the foreign corporation, as well as his relationship as a corporate officer and employee of the business entity whose corporate sibling is suing the Department, creates a prohibited conflict for him. Because he does not have an employment or contractual relationship with that corporate sibling, the first part of Section 112.313(7)(a) is inapplicable.
Under the second part of Section 112.313(7)(a), we must decide whether the Commission member's office with the foreign corporation, and office and employment with the subsidiary of the Florida holding company, where another corporate sibling is suing the Department, creates a continuing or frequently recurring conflict or impediment to the full and faithful discharge of his duties as a member of the Florida Citrus Commission. We have not had many occasions to render opinions construing Section 112.313(7)(a) in the context of litigation brought against one's own agency. In CEO 88-8 and CEO 82-7, we opined that a public officer cannot represent a client against his own agency, but that is not the case in this situation. Slightly more analogous is CEO 90-20, in which a city council member was elected to office while also a member of a citizens' group with a lawsuit against the city challenging a special assessment. That opinion concluded that the citizens' group was not regulated by or doing business with the city, and that he did not have a contractual relationship with it for purposes of Section 112.313(7)(a), since he had resigned as an officer immediately after his election to the city council and had his name removed as a plaintiff to the lawsuit. CEO 90-20 also references CEO 77-14, where a city council member served on the board of a condominium association suing the city. There, we held that he did not have a contractual relationship for purposes of Section 112.313(7)(a), either as an noncompensated director of the association or as an owner of stock in the association. And see CEO 92-31, where a similar result was reached.
Here, while we note that the Commission member has no employment or contractual relationship with the plaintiff company which is his company's corporate sibling, we also note the overlapping officers and directors among the parent company, the holding company, and its subsidiaries. Notwithstanding, we do not view these combined circumstances as creating a prohibited conflict of interest on the part of the Commission member. Concerns about "institutional loyalty" were raised in CEO 96-29, where an adjunct professor at a state university was also an attorney in a small firm which was representing a client in a public records lawsuit against the university. There, we noted that
Section 112.313(7)(a) "establishes an objective standard which requires an examination of the nature and extent of the public officer's duties together with a review of his private employment to determine whether the two are compatible, separate and distinct or whether they coincide to create a situation which 'tempts dishonor.'" Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982). Under this standard, whether a prohibited conflict of interest would be created depends on the nature and extent of one's public duties and of one's client's interests, rather than on considerations of "institutional loyalty."
Ultimately, after examining the adjunct professor's public duties we concluded that the situation did not create a prohibited conflict of interest because, as an adjunct professor, she was not in a position to advance the client's interests since the lawsuit primarily involved legal issues and was not fact-intensive litigation involving other university employees in the department where she taught.
We recognize that, as a corporate officer, the Commission member has a duty to act in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he reasonably believes to be in the best interests of the corporation. While we perceive that there may be some concern here that the Commission member might, out of either some sense of loyalty or in fulfilling his duties as a corporate officer, seek to advance the interests of the plaintiffs, like CEO 92-31, CEO 90-20, and CEO 77-14, he does not have a contractual relationship with any of the plaintiffs. And, like CEO 96-29, he is not in a position to benefit the plaintiffs as a member of the Citrus Commission since the lawsuit was filed in Circuit Court, it involves a constitutional challenge to a tax, and it is not a review of agency action. Notwithstanding, we believe that the Commission member should be mindful of the proscriptions in Sections 112.313(6) and 112.313(8), Florida Statutes, which prohibit him from corruptly using his position to obtain a special benefit for himself or others, or from using information not available to the general public and gained through his public position for his or another's personal benefit. For these reasons, the Commission member may wish to avoid certain situations, like attorney-client sessions held pursuant to Section 286.011(8), Florida Statutes, due to the appearance of conflicting interests.
We would also note that Section 112.3143(2), Florida Statutes, may require the Commission member to disclose an interest in those votes that inure to the special private gain or loss of his principal or the parent organization of a corporate principal by whom he is retained.
Section 112.3143(2) provides:
No state public officer is prohibited from voting in an official capacity on any matter. However, any state public officer voting in an official capacity upon any measure which would inure to the officer's special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom the officer is retained or to the parent organization or subsidiary of a corporate principal by which the officer is retained; or which the officer knows would inure to the special private gain or loss of a relative or business associate of the public officer shall, within 15 days after the vote occurs, disclose the nature of his or her interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes.
Without information about any votes the Commission member may face, we cannot predict whether Section 112.3143(2) would require his filing of the voting conflict memorandum. However, we encourage the Commission member to seek additional guidance from us if there is a question about whether a particular vote inures to the special private gain or loss of him, his principal, or the parent company of his corporate principal.
Your question is answered accordingly.
ORDERED by the State of Florida Commission on Ethics meeting in public session on January 23, 2003 and RENDERED this 28th day of January, 2003.
__________________________
Patrick Neal
Chair