CONFLICT OF INTEREST; VOTING CONFLICT

CITY COUNCIL MEMBER VOTING ON MEASURES
AFFECTING LAW FIRM EMPLOYING HER HUSBAND

To: Scott Rudacille, City Attorney (Bradenton)

SUMMARY:

No prohibited conflict of interest is created for a City Council member under Section 112.313(3), Florida Statutes, occasioned by her husband's employment in a law firm providing legal services to the City, as the "grandfather" provision of Section 112.313(3)(c) applies to negate the conflict under that statute. No "unauthorized compensation" is present under Section 112.313(4), Florida Statutes; Section 112.313(7)(a), Florida Statutes, does not apply to the employment or contractual relationships of a member's spouse; and the spouse is not being hired or appointed to a position in the City, under Section 112.3135, Florida Statutes, the anti-nepotism law. Further, the City Council member is not presented with a voting conflict under Section 112.3143(3)(a), Florida Statutes, regarding votes/measures of the City Council involving the regular operation of the firm pursuant to its engagement with the City, where the husband receives no compensation from any firm fee derived from the firm's work on matters involving the City. CEO 85-40, CEO 87-14, CEO 02-14, CEO 03-17, CEO 07-5, CEO 08-8, CEO 09-1, CEO 11-4, CEO 12-2, CEO 14-23, and CEO 15-11 are referenced.¹

QUESTION 1:

Would a prohibited conflict of interest be created where a law firm, of which a City Council member's husband is an employee, provides legal services to the City?

Under the unique circumstances presented, this question is answered in the negative.

In your letter of inquiry and supplemental information provided to our staff, you state that you are requesting this opinion on behalf of a member of a City Council. You advise that on October 31, 2019, the City executed an engagement letter (agreement) with a law firm to provide City Attorney services and serve as general counsel to the City. You relate that the engagement letter contemplates that you will serve as the City Attorney, a backup attorney has been identified, and that other members of the firm will provide services to the City on an as-needed basis, if a particular area of expertise is required for a matter. You state that the engagement letter provides that all of these services will be rendered on an hourly basis at the rates described in the agreement, except for third-party opinion letters, for which the fee is to be negotiated based upon the nature and amount of the issue. There is no stated term for the engagement, as the firm serves at the pleasure of the City Council.

You state that on July 8, 2020, the member was appointed to serve on the City Council for Ward 2 following the resignation of a Council member. You relate that the member had previously served for 15 years on the Council. You state that the member's husband currently is an attorney and equity shareholder in the law firm. However, you state that the member does not have any ownership in the firm and that she does not have any employment or contractual relationship with the firm or any of the firm's clients.

You state that because the firm serves as general counsel to the City and in order to address any conflicts of interest and/or voting conflicts issues that may arise as a result of his equity shareholder status within the firm, the member's husband has proposed forgoing his equity interest in the firm. You relate that once the member's husband has relinquished his equity shareholder status in the firm he will be a salaried employee of the firm who does not possess any ownership interest in the firm, he will not be an officer, partner, director, or shareholder in the firm and he will receive no direct bonuses,² compensation, or originating fee related to the firm's work on behalf of the City. However, you state that he will receive working credit for work he personally performs on City matters. Further, you relate that it is his intention to avoid performing work on any matter which has been directed to the firm by a vote of the City Council.³ With this factual background, you inquire as to whether conflicts of interest and/or voting conflicts may arise under the Code of Ethics for Public Officers and Employees (Code of Ethics) from the member's continued public service on the City Council and her husband's private employment as a non-equity employee in a law firm providing legal services to the City.

The provisions of the Code of Ethics that address conflicts of interest arising out of the interests or actions of relatives are contained in Section 112.313(3), 112.313(4), and 112.3135, Florida Statutes.⁴ Section 112.313(3), Florida Statutes, provides:

DOING BUSINESS WITH ONE'S AGENCY.—No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officer's or employee's spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer's or employee's spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to the officer's or employee's own agency, if he or she is a state officer or employee, or to any political subdivision or any agency thereof, if he or she is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business or when such offices are on property wholly or partially owned by the legislator. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

Section 112.313(3), Florida Statutes, prohibits the member from acting in her official capacity to purchase, rent or lease any goods, realty, or services for her agency, the City Council, from a business entity of which she or her spouse or child is an officer, partner, director, or proprietor, or in which she or her spouse or child owns more than a five percent interest, and it prohibits her from selling any services, goods, or realty to the City Council or to any agency of the City in her private capacity. However, Section 112.313(3)(c) contains a "grandfather" clause which exempts from its prohibitions contracts entered into prior to a public officer's "[a]ppointment to public office." See CEO 85-40, CEO 08-8, CEO 09-1, and CEO 14-23. As you have represented that the City's engagement letter/agreement with the firm predates the member's appointment to public office (by nine months), this exemption applies to negate the conflict of interest.⁵

Section 112.313(4), Florida Statutes, provides:

UNAUTHORIZED COMPENSATION.—No public officer, employee of an agency, or local government attorney or his or her spouse or minor child shall, at any time, accept any compensation, payment, or thing of value when such public officer, employee, or local government attorney knows, or, with the exercise of reasonable care, should know, that it was given to influence a vote or other action in which the officer, employee, or local government attorney was expected to participate in his or her official capacity.

Section 112.313(4) prohibits the member, her spouse, or her child from accepting anything of value when she knows, or with the exercise of reasonable care should know, that the thing of value was given to influence a vote or other action in which she was expected to participate in her official capacity. In CEO 15-11, which addressed a water management district's executive director's spouse being employed as an attorney in a law firm representing clients in district matters, the Commission opined that while the "thing of value" within the meaning of Section 112.313(4) could, under certain circumstances, encompass something of a non-gratuitous nature, such as legal client business (pay for legal services) provided to a law firm employing the spouse of a public officer, it also found that the statute was inapplicable because there was no indication that the clients of the law firm were directing their business to the spouse's firm in order to influence the executive director's conduct regarding their interests. Similarly, in the instant matter there are no facts present which indicate that any legal business provided to the firm pursuant to the engagement letter with the City will be provided with the intent of influencing the official decision-making of the member. On the contrary, the letter of engagement itself, which was executed by the City with the firm months before the member's appointment to public office, indicates the City's desire to acquire legal services from a firm that is accomplished and experienced in matters relevant to the City's interests.⁶

Further, Section 112.3135, Florida Statutes, is Florida's anti-nepotism law. Section 112.3135(2)(a), Florida Statutes, provides:

A public official may not appoint, employ, promote, or advance, or advocate for appointment, employment, promotion, or advancement, in or to a position in the agency in which the official is serving or over which the official exercises jurisdiction or control any individual who is a relative of the public official. An individual may not be appointed, employed, promoted, or advanced in or to a position in an agency if such appointment, employment, promotion, or advancement has been advocated by a public official, serving in or exercising jurisdiction or control over the agency, who is a relative of the individual or if such appointment, employment, promotion, or advancement is made by a collegial body of which a relative of the individual is a member. However, this subsection shall not apply to appointments to boards other than those with land-planning or zoning responsibilities in those municipalities with less than 35,000 population. This subsection does not apply to persons serving in a volunteer capacity who provide emergency medical, firefighting, or police services. Such persons may receive, without losing their volunteer status, reimbursements for the costs of any training they get relating to the provision of volunteer emergency medical, firefighting, or police services and payment for any incidental expenses relating to those services that they provide.

For the purposes of this statute, Section 112.3135(1)(d), defines "relative" to include one's "husband." However, the statute applies only to situations where a relative is being considered for appointment, employment, promotion, or advancement "in or to a position in the agency" in which the official serves or over which the official exercises jurisdiction or control. As the husband's employment position is in a private law firm and not in a governmental agency, this provision also would not be applicable here.

Accordingly, we find that based on these specific circumstances no prohibited conflict exists under either Sections 112.313(3) or (4), or 112.3135, Florida Statutes, as a result of the existing engagement letter between the City and a firm which employs the spouse of a City Council member.

QUESTION 2:

Would a voting conflict of interest be present for the City Council member were the Council to consider matters affecting the City and resulting in legal services provided by the law firm (a firm wherein her husband is a non-equity attorney)?

Under the unique circumstances presented, this question is answered in the negative.

Section 112.3143(3)(a), Florida Statutes,⁷ is the portion of the voting conflicts law contained within the Code of Ethics which is applicable to local, elective, public officers, such as city council members; it 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.

Section 112.3143(3)(a), Florida Statutes, requires the member to declare her interest in the measure, abstain from voting, and file a memorandum of voting conflict (CE Form 8B) as to any vote/measure of the City Council which would inure to her special private gain or loss, to that of her relative,⁸ to that of a principal by whom she is retained, or to that of her business associate. We observed in CEO 11-4 that

because the statute does not speak directly in terms of gain or loss to a client or employer of the official's relative, in order to determine whether it applies to a situation where the measure would impact a relative's client or employer, we are required to evaluate—not whether the measure impacts the relative's client or employer—but whether the measure would inure to the special private gain or loss of the relative.

In that opinion, the Commission considered whether a county commissioner would be faced with a voting conflict regarding land use matters affecting clients of a law firm wherein her son-in-law (relative) was a non-equity shareholder. The Commission found that no voting conflict would arise under Section 112.3143(3)(a) for the commissioner because, as a non-equity employee of the firm, the commissioner's relative did not possess an ownership interest in the firm, nor was he a director or officer of the firm, and he did not stand to receive any direct bonuses, compensation, or originating fee related to the firm's work before the county commission. Under those circumstances, we said, it could not be concluded that the Commissioner's relative would derive a "special private gain" from a land use measure in which the firm was representing the property owner before the county commission. Similarly, in CEO 07-5 we found that a county commissioner was not prohibited by Section 112.3143 from voting on measures affecting clients of a lobbying firm employing her husband, where the husband received no compensation from any firm fee derived from the firm's work on behalf of a client on a matter involving the county.

In the instant matter we are faced with facts, such as have not previously been addressed by the Commission on Ethics, wherein the law firm which employs the spouse of a City Council member has been retained pursuant to an engagement letter, executed prior to her appointment to public office, wherein the firm serves at the pleasure of the City Council. Currently the member's spouse is an equity shareholder in the law firm. However, in recognition of his firm's role as counsel to the City and in an effort to mitigate any voting conflicts affecting the member's public service, her spouse has proposed de-equitizing his interest in the firm.⁹ Once he has relinquished his equity interest in the firm he will be a salaried employee of the firm wherein he will no longer possess any ownership in the firm, nor will he be an officer, director, partner, or shareholder of the firm and he will not receive any direct bonuses, compensation, or originating fee related to the firm's work on behalf of the City. However, you relate that he will receive working credit for work he personally performs on City matters; nevertheless, it is his intention to avoid performing work on any matter which has been directed to the firm by a vote of the City Council. As a salaried employee of the firm, the member's spouse's compensation will be based upon factors applicable to all non-equity employees of the firm and will not be predicated upon a percentage of the overall increase or decrease in firm business resulting from any matter before the City.

Due to the firm's position as counsel to the City, every action or inaction by the City Council conceivably could generate legal work in some form for the firm. For example, the City Council's decision to legislate in a certain area could result in work necessary to prepare ordinances by the firm. The City Council's decision on a land-use matters could result in a legal challenge and potential legal work in defense of the City. Even a decision to schedule a meeting of the Council would ostensibly result in some additional participation by the firm.

However, we find that the actions of the spouse of the Council member to voluntarily forego his equity interest in the firm, thereby placing himself in a position wherein he is a salaried employee of the firm, provides sufficient safeguards such that he will not be in position to receive a "special private gain or loss" from votes/measures of the City Council which result in legal work to the firm. Although the City Council votes/measures concerning matters affecting the City could generate additional legal business to the firm, and thus, result in a special private gain or loss to the firm, the firm is neither the member's "relative" nor is it a "principal" that has retained the member herself.

Accordingly, we find that based on the specific circumstances unique to this matter, once the Council member's husband/relative has relinquished his equity shareholder status in the firm, the Council member will not be faced with voting conflicts regarding votes/measures affecting City business and which result in legal work to the firm, given that the relative will be a salaried employee not susceptible to receiving direct bonuses, compensation, or originating fees related to the firm's work on behalf of the City.¹⁰

ORDERED by the State of Florida Commission on Ethics meeting in public session on December 4, 2020, and RENDERED this 9th day of December, 2020.

____________________________________

Daniel Brady, Chair

^[1]Prior opinions of the Commission on Ethics can be viewed at www.ethics.state.fl.us.

^[2]You state that as a non-equity principal, he will be a salaried employee with bonuses to be determined by a compensation committee (of which he would not be a member) based upon criteria applied to all non-equity employees of the firm.