CEO 03-7 -- June 10, 2003

CEO 03-7--June 10, 2003

CONFLICT OF INTEREST; VOTING CONFLICT

CITY COUNCIL MEMBER ATTORNEY IN LAW FIRM CLIENTS OF WHICH INTERACT WITH CITY

To: Mark Herron, Esquire (Tallahassee)

SUMMARY:

A prohibited conflict of interest would be created were clients of a city councilman's law firm to do business with the city in a variety of circumstances, inasmuch as the councilman would hold a contractual relationship with business entities doing business with his public agency contrary to Section 112.313(7)(a), Florida Statutes. However, a prohibited conflict would not be created were the firm to represent a convenience store chain that has property that is being annexed into the city, inasmuch as annexation constitutes neither "regulation" nor "doing business" under Section 112.313(7)(a). In addition, the councilman would be presented with a voting conflict under Section 112.3143(3)(a), Florida Statutes, in a variety of situations affecting clients. Nevertheless, were the councilman's status with the firm to be that of "of counsel" (as set forth in this opinion) rather than that of a shareholder, the conflicts of interest and voting conflicts identified herein would not be created or presented. CEO's 74-8, 76-173, 77-129, 78-12, 80-79, 81-12, 81-66, 83-84, 85-14, 85-17, 85-20, 85-46, 86-9, 86-37, 87-96, 92-11, 94-5, 94-10, 94-21, 94-37, 94-41, 94-42, 95-4, 96-1, 98-11, and 03-3 are referenced.^[1]

QUESTION 1:

Would a prohibited conflict of interest be created under Section 112.313(7)(a), Florida Statutes, were the law firm of which a city council member is a shareholder to represent an engineering firm providing services to the city, where the council member does not personally provide legal services to the engineering firm and where his law firm's representation of the engineering firm does not concern its provision of services to the city but instead concerns matters not related to the city?

Your question is answered in the affirmative.

By your letter of inquiry and a subsequent letter from you to our staff, we are advised that you make inquiry in behalf of Phil Diamond, a member of the Orlando City Council and an equity shareholder in a statewide law firm. His firm, you advise, has approximately two hundred attorneys and thousands of clients; and you advise that some of its clients may interact in numerous ways with the City.^[2] Regarding this question, you advise that an engineering firm has been recommended by City staff to provide engineering services to the City; that the staff's recommendation would require approval of the City Council in order for the engineering firm to provide services to (to do business with) the City; that the Council member personally does not represent the engineering firm regarding any matter; that the Council member's firm does not represent the engineering firm in its efforts to provide engineering services to the City; but that his firm represents the engineering firm in matters not related to the City.

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.

The first part of the statute prohibits a public officer (e.g., a city council member) from having or holding employment or a contractual relationship with a business entity (e.g., an engineering firm) that is doing business with the officer's public agency (e.g., a city). Since the engineering firm would be doing business with the City via its provision of services to the City, the issue for our consideration under the first part of the statute is whether the Council member would hold a contractual relationship with the engineering firm due to his law firm's representation of it, despite the fact that the Council member personally does not provide legal services to the engineering firm.

In accord with our longstanding view that shareholders of a law firm hold a contractual relationship with every client of the firm (whether or not they personally handle a particular client's legal business), we find that the Council member would hold a contractual relationship with the engineering firm, and thus find that a prohibited conflict would be created for him were the engineering firm to provide services to the City. See, inter alia, CEO 96-1 (Question 2), CEO 94-5, CEO 92-11, CEO 86-37, CEO 81-66, and CEO 80-79.^[3] Further, we adhere to our view that compliance with the voting conflicts law [Section 112.3143(3)(a), Florida Statutes] does not negate a prohibited conflict under Section 112.313(7)(a). See CEO 94-5.^[4] However, inasmuch as an attorney who is merely "of counsel" to a law firm is not deemed to hold a contractual relationship with every client of the firm (see CEO 96-1, Question 2), we find (under the facts presented regarding this question) that a prohibited conflict would not be created under the first part of Section 112.313(7)(a) were the Council member's connection to the law firm to be so modified.^[5] Nevertheless, we stress that our answers provided to the Council member throughout the entirety of this opinion, as to both Section 112.313(7)(a) and Section 112.3143(3)(a), Florida Statutes, which are grounded in his occupying an "of counsel" status, depend on the following substance: that the Council member has no ownership interest in the law firm, that the firm exercises no control over the Council member's activities or the activities of his clients, that the firm has no access to the Council member's personal books and records, that the Council member has no access to the books and records of the firm, and that the Council member does not share in the profits of the firm.

This question is answered accordingly.

QUESTION 2:

Would the Council member be presented with a voting conflict requiring his abstention from voting and other compliance^[6] with Section 112.3143(3)(a), Florida Statutes, regarding a City Council measure to approve City staff's recommendation to hire the engineering firm to provide services to the City?

Section 112.3143(3)(a), Florida Statutes, provides:

VOTING CONFLICTS.—No county, municipal, or other local public officer shall vote in an official capacity upon any measure which would inure to his or her special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained, other than an agency as defined in s. 112.312(2); or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of the officer's interest in the matter from which he or she is abstaining from voting and, 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.

Under the scenario of Question 1 above, this question is answered in the affirmative. Where one affected by a measure is a client of a public officer's private law practice or firm, the client is deemed to be a principal by whom the public officer is retained.^[7] See, inter alia, CEO 77-129, CEO 81-12, CEO 94-5, CEO 94-41, and CEO 98-11.^[8]

QUESTION 3:

Would a prohibited conflict of interest be created under Section 112.313(7)(a), Florida Statutes, were the Council member's law firm to represent a convenience store chain that has property that is being involuntarily annexed into the City?

This question is answered in the negative because we find that annexation constitutes neither "regulation" nor "doing business" for purposes of Section 112.313(7)(a).^[9]

Additionally, we are advised that the Council member's firm represents a convenience store chain that has property being involuntarily annexed into the City; that the Council member personally does not represent the chain; that his firm does not represent the chain regarding the annexation issue, but, rather, regarding matters not related to the City; and that the City Council's approval of an annexation ordinance is necessary for annexation of the property to occur.

Although previously we have not expressly found that annexation does not constitute "regulation" or "doing business" under the statute, prior decisions of ours on related topics guide our decision regarding this question. In CEO 92-11, we found that a taking (condemnation) of property by the Florida Department of Transportation (FDOT) did not constitute "doing business," thus finding that a member of the Florida Transportation Commission did not have a prohibited conflict under Section 112.313(7)(a) by virtue of his connection to a law firm practicing eminent domain law. Also, CEO 85-17,^[10] CEO 85-46,^[11] and CEO 87-96 ^[12] (decisions of ours directly dealing with annexation, albeit in the context of the voting conflicts law) are deafeningly silent regarding Section 112.313(7)(a), strongly implying nonapplicability of Section 112.313(7)(a) in the annexation context. Further, in CEO 74-8, our seminal opinion construing the meaning of "subject to the regulation of," we stated, in reliance on opinions of the Attorney General, that

[b]usiness entities 'subject to the regulation of' a state or local government agency . . . were described . . . as those businesses whose operations or modes of doing business are subject to the control or authority of such an agency.

Thus, in reliance on this construction, we determined in CEO 74-8 that a city councilman could accept employment with a major landowner within the city, reasoning that unless the operations of such company were subject to the control or authority of the city, "regulation" would not exist. Further, see CEO 76-173, in which we found that neither "regulation" nor a prohibited conflict existed in a situation in which the law firm with which a planning and zoning commission's attorney and the county attorney were affiliated represented a company in matters not related to zoning, where the company sought occasional zoning changes incidental to its operations.

QUESTION 4:

Would the Council member be presented with a voting conflict under Section 112.3143(3)(a) regarding the annexation ordinance?

This question is answered in the affirmative^[13] if the Council member is a shareholder of the law firm at the time of a vote on the ordinance and in the negative if his connection to the firm is "of counsel."See our response to Question 2 above.

QUESTION 5:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member's law firm to represent a communications equipment and service provider furnishing radios and maintenance to the City's police and fire departments?

You advise that the Council member's firm represents a communications equipment and service provider recommended by City staff to provide radios and maintenance agreements for the police and fire departments; that the staff's recommendation would require approval of the Council; that at least one of the recommendations involves a purchase pursuant to the same terms and conditions as a contract entered into between the provider and a county; that the Council member personally does not represent the provider; that the Council member's firm does not represent the provider in connection with the radios and maintenance agreements issues; but that his firm represents the provider in matters not related to the City.

This question is answered in the affirmative if the Council member is a shareholder of the firm and in the negative if his connection to the firm is "of counsel."See our response to Question 1 above.

QUESTION 6:

Would the Council member be presented with a voting conflict under Section 112.3143(3)(a) regarding a City Council measure to approve staff's recommendation to contract with the radios/maintenance provider?

This question is answered in the affirmative if the Council member is a shareholder of the law firm at the time of a vote and in the negative if his connection to the firm is "of counsel." See our responses to questions above.

QUESTION 7:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member's law firm to represent a communications equipment provider furnishing wireless telephones to City employees?

You advise that the Council member's firm represents a communications equipment provider recommended by City staff to provide wireless telephones to City employees; that the staff's recommendation would require approval of the Council; that the provider would furnish the telephones under the same terms and conditions as those applicable to the State contract concerning wireless telephones; that the Council member personally does not represent the provider; that the Council member's firm does not represent the provider in connection with the telephones issue; but that his firm represents the provider in matters not related to the City.

This question is answered in the affirmative if the Council member is a shareholder of the firm and in the negative if his connection to the firm is "of counsel." See our responses to questions above.

QUESTION 8:

This question is answered in the affirmative if the Council member is a shareholder of the law firm at the time of the vote and in the negative if his connection to the firm is "of counsel" at the time of the vote. See our responses to questions above.

QUESTION 9:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member's law firm to represent an investor-owned utility holding an easement from the City and allowing the City to temporarily use (in conjunction with an indemnification agreement) property of the utility?

You advise that the Council member's firm represents an investor-owned utility recommended by City staff to obtain an easement from the City and to obtain an indemnification agreement from the City regarding City use of utility property; that staff's recommendation would require approval of the Council; that the Council member personally does not represent the utility; that the Council member's firm does not represent the utility in connection with the easement issue or the property use/indemnification agreement issue; but that his firm represents the utility in matters not related to the City.

We find that the City and the utility would be "doing business" with each other by virtue of the scenario presented, in that a cause of action would exist if there were a breach of obligations regarding the easement or the property use/indemnification. See CEO 83-84 for a reference to our view of the meaning of "doing business with" for purposes of Section 112.313(7)(a). Also, the easement, the easement's limitation/restrictions, and/or the City's imposition of conditions on its use may constitute "regulation" of the utility (see CEO 94-21), notwithstanding likely regulation of the utility by State-level agencies.

QUESTION 10:

Would the Council member be presented with a voting conflict regarding a City Council measure to approve staff's recommendation to grant the easement or to use utility property under an indemnification agreement?

This question is answered in the affirmative if the Council member is a shareholder of the law firm and the time of the vote(s) and in the negative if his connection to the firm is "of counsel."^[14] See our responses to questions above.

QUESTION 11:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member's law firm to represent a law firm providing legal services to the City?

You advise that the Council member's firm represents another law firm; that the other firm has been recommended by City staff to provide legal services to the City; that the staff's recommendation would require approval of the Council; that the Council member personally does not represent the other firm; that the Council member's firm does not represent the other firm in connection with the legal services issue before the City; but that his firm represents the other firm in matters not related to the City.

This question is answered in the affirmative if the Council member is a shareholder of his law firm and in the negative if his connection to his firm is that of "of counsel." See our responses to questions above.

QUESTION 12:

Would the Council member be presented with a voting conflict regarding a City Council measure to approve staff's recommendation to contract with the other law firm for legal services for the City?

This question is answered in the affirmative if the Council member is a shareholder of his law firm at the time of a vote and in the negative if his connection to his firm is "of counsel." See our responses to questions above.

QUESTION 13:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member's law firm to represent a uniform supplier providing uniforms to the City?

You advise that the Council member's firm represents a uniform supplier recommended by City staff to provide uniforms to the City; that staff's recommendation would require approval of the Council; that the Council member personally does not represent the supplier; that the Council member's firm does not represent the supplier in connection with the provision of uniforms issue; but that his firm represents the supplier in matters not related to the City.

This question is answered in the affirmative if the Council member is a shareholder of his firm and in the negative if his connection to the firm is "of counsel." See our responses to questions above.

QUESTION 14:

Would the Council member be presented with a voting conflict regarding a City Council measure to approve staff's recommendation to contract with the supplier?

This question is answered in the affirmative if the Council member is a shareholder of his law firm at the time of a vote and in the negative if his connection to the firm is "of counsel." See our responses to questions above.

QUESTION 15:

Would a prohibited conflict of interest be created under Section 112.313(7)(a) were the Council member personally to represent (in matters not related to the City) a property owner seeking release from provisions of a developer's agreement entered into between the City and the property owner's predecessor in interest?

You advise that the Council member provides legal services to a property owner seeking release from restrictive provisions of a developer's agreement signed between the City and a predecessor in interest of the property owner's; that release was recommended by City staff and required approval of the Council; that the Council member personally represents the property owner; but that he does not represent the owner in any dealings with the City "in [the release] matter."

This question is answered in the affirmative. The Council member would hold a contractual relationship with a business entity (the developer/property owner)^[15] doing business with the City by virtue of the developer's agreement between the City and the developer/property owner.

We have found that entities and agencies are "doing business" with each other when they are party to a lease, contract, agreement or situation in which a cause of action would exist in the event of a breach (see, for example, CEO 83-84), as would appear to be the reality between the City and the property owner vis-à-vis the developer's agreement. See also CEO 78-12 in which we found that a development was doing business with an erosion prevention district board through the donation of funds for construction of a land groin.

We note that this question is somewhat ambiguous as presented in that the last part of the last sentence of paragraph "8" of your May 7 letter arguably implies that the Council member personally represents the property owner in City matters other than the developer's agreement matter. However, inasmuch as we do not view this language of your inquiry as intending to present an issue under the second clause of Section 112.313(7)(a), we do not address such an issue herein.

In addition, we find that the provision of the City's Code (Section 2.191), which you describe as prohibiting any and all communications between lobbyists for prospective vendors and Council members regarding the procurement process, would appear to be irrelevant to our decisions herein finding conflict under the first part of Section 112.313(7)(a).

QUESTION 16:

Would the Council member be presented with a voting conflict regarding a Council measure to approve staff's recommendation to release the property owner from provisions of the developer's agreement?

This question is answered in the affirmative. The measure would inure to the special private gain or loss of the property owner (a principal by whom the Council member is retained).

Your questions are answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on June 5, 2003 and RENDERED this 10^th day of June, 2003.

__________________________

Patrick K. Neal

Chair

^[1] Opinions of the Commission on Ethics cited herein are viewable on the Commission's website: www.ethics.state.fl.us

^[2] Your initial letter of inquiry is dated February 21, 2003. In your subsequent letter (dated May 8, 2003), you provided eight examples of likely interaction between the City and clients of the law firm. The examples (scenarios) ground the various questions set forth in this opinion.

^[3] We recognize that our finding regarding this question and previous findings of ours suggest that we have "treated lawyers differently" than other professions or occupations, such as, for example, that of an insurance agent. See CEO 94-37. However, our interpretation of the term "contractual relationship" (not defined within the Code of Ethics) is necessarily controlled by the term's meaning under the general or substantive law of contract in Florida; and as is apparent from a reading of our "insurance agent opinions" versus our "attorney opinions," and the caselaw cited therein, that Florida law distinguishes between the contractual responsibility of insurance agents versus that of attorneys in the context of their work within a corporate/business entity structure.

^[4] In view of our finding that a prohibited conflict would be created under the first part of the statute were the engineering firm represented by the Council member's law firm to do business with the City, it is not necessary for us to decide whether the situation also would create a continuing or frequently recurring conflict or impediment to the full and faithful discharge of public duty under the second part of the statute.

^[5] Further, if the Council member ceases to be a shareholder of the law firm and modifies to an "of counsel" status, we do not find that a prohibited conflict would be created under the second part of Section 112.313(7)(a). The facts presented do not indicate that either the Council member or the law firm would be appearing before the City regarding the engineering firm or otherwise indicate a basis of a continuing or frequently recurring conflict or impediment to the full and faithful discharge of public duty. We do not fail to note our very recent decision under the second part of the statute (CEO 03-3), involving a member of the Florida Senate's holding of an "of counsel" relationship with a law firm other members of which lobby the Legislature, but observe that it is not especially useful as a guide in resolving your local-government-based inquiries concerning the first part of the statute.

^[6] In addition to abstention, the law requires stating the basis for one's abstention and requires the timely filing of a memorandum (CE Form 8B).

^[7] We have made similar findings regarding other professions; see, inter alia, CEO 85-20 (engineering company), CEO 85-14 (accounting firm), and CEO 86-9 (surveying and engineering firm). We recognize that we have made arguably different findings regarding insurance agencies and insurance agents; however, the apparent differentiation is justified in that insurance agents often can be agents of insurance companies and not agents of insureds. See CEO 94-10 and CEO 81-59. Further, as discussed below, if the Council member merely was "of counsel" to the law firm, a voting conflict would not exist regarding firm clients for whom he personally does no legal work. This position apparently is based on our recognition that "retention," within the meaning of a principal (client) by whom one is retained, is essentially based in receipt of compensation or remuneration from the client, either directly or indirectly through the firm's revenue stream related to the particular client, a situation not existent in the context of an "of counsel" attorney whose compensation is not tied to affairs of particular clients of the firm.

^[8] However, were the Council member to modify his connection to the firm to that of an "of counsel" relationship, he would not be subject to the voting conflicts law regarding measures affecting clients of the firm not represented by him, assuming a measure also did not affect the firm, the Council member personally, or other persons or entities standing in an enumerated relationship to the Council member under Section 112.3143(a).

^[9] Also, we find that the situation described in this question does not indicate that a continuing or frequently recurring conflict or an impediment to the full and faithful discharge of public duty would be created under the second part of the statute were the Council member's firm to represent the chain. See, inter alia, CEO 76-173 and CEO 94-5, Question 2.

^[10] City mayor and commissioner employed by developer petitioning for annexation of property.

^[11] City commissioner employed by developer holding mortgage on property subject to annexation petition.

^[12] City commissioner voting on annexation of property sold by business partner.

^[13] Unless properties other than the property of the chain are subject to the votes/measures concerning annexation and the number and character (e.g., size) of the properties is such that the affect on the chain and/or its property from a vote/measure is not "special"; see, for example, CEO 95-4 and our opinions cited therein. Also, we have found that annexation causes the requisite effect (e.g., "gain") for a violation of the voting conflicts law; see, for example, CEO 85-17.

^[14] We have not been presented with any indication that the utility is an "agency" within the meaning of Section 112.312(2), Florida Statutes, such that any gain or loss to the utility from a vote/measure would be exempt from the requirements of the voting conflicts law under express language of Section 112.3143(3)(a). Section 112.312(2) defines "agency" to mean

any state, regional, county, local, or municipal government entity of this state, whether executive, judicial, or legislative; any department, division, bureau, commission, authority, or political subdivision of this state therein; or any public school, community college, or state university.

^[15] Our response assumes that your inquiry uses the terms "developer" and "property owner" synonymously in referring to the Council member's client.