CONFLICT OF INTEREST; VOTING CONFLICTS

CITY COUNCILMEMBER ATTORNEY/REAL ESTATE BROKER WITH CLIENTS
THAT INTERACT WITH THE CITY AND WHO REFERS CLIENTS
TO A LAW FIRM THAT INTERACTS WITH THE CITY

To: Name withheld (City of Hialeah)

SUMMARY:

Guidance concerning Section 112.313(7)(a), Florida Statutes, is provided to a city councilmember regarding circumstances where clients of his law practice or real estate business, or clients of a law firm other than his own, have matters coming before the city council, subordinate city boards, or city staff. Additional guidance is provided concerning the applicability of Section 112.3143(3)(a), Florida Statutes, in situations where a vote concerns a client of his law practice or his real estate business. Referenced are CEO 19-11, CEO 18-4, CEO 17-5, CEO 16-2, CEO 15-1, CEO 12-9, CEO 12-3, CEO 11-14, CEO 11-6, CEO 10-24, CEO 09-10, CEO 09-9, CEO 08-14, CEO 08-12, CEO 08-8, CEO 08-7, CEO 08-1, CEO 07-18, CEO 07-13, CEO 06-5, CEO 04-14, CEO 03-7, CEO 00-14, CEO 00-3, CEO 96-1, and CEO 77-126.

QUESTION 1:

Would a City Councilmember attorney who has a referral relationship with a law firm other than his own have a prohibited conflict of interest under Section 112.313(7)(a), Florida Statutes, were the other firm to represent clients before the City Council?

Under the circumstances presented, Question 1 is answered in the negative.

In your letter of inquiry and additional information provided to our staff, you state you are bringing this inquiry on behalf of a newly-elected City Councilmember for the City of Hialeah who also is a newly-licensed attorney. You indicate the Councilmember has an ongoing affiliation with a private law firm (other than his own firm) whereby they refer clients to each other. The materials you provide indicate the other law firm practices mainly in the areas of land use, zoning, and real estate development.

You inquire on behalf of the Councilmember whether he will have a prohibited conflict of interest under the Code of Ethics were the law firm with which he has a referral relationship to represent clients in matters which are matters of the City Council. The materials you provide state the law firm appears in matters of the City Council, particularly land use and zoning matters, approximately four times per year,¹ although the firm often meets with the City's Mayor and Department heads on matters which do not need to come before the City Council.

Section 112.313(7)(a), Florida Statutes, states:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIOSHIP.--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, any 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 Section 112.313(7)(a) prohibits a public officer from having employment or a contractual relationship with any agency or business entity that is either subject to the regulation of, or is doing business with, the officer's own agency. The second part of the statute prohibits a public officer from having employment or a contractual relationship that will create a "continuing or frequently recurring" conflict of interest, or that will "impede the full and faithful discharge of the officer's public duties."

Whether the Councilmember will have a prohibited conflict of interest were the other law firm to represent clients in City Council matters is a question that concerns the second part of Section 112.313(7)(a). The phrase "conflict of interest," as used in the statute, is defined in Section 112.312(8), Florida Statutes, to mean "a situation in which regard for a private interest tends to lead to disregard of a public duty or interest." A "conflict of interest" may be found if a public officer's duties and his private employment or contractual relationships "coincide to create a situation which 'tempts dishonor.'" See Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982). However, as discussed below, essential to applicability of the prohibition is that the public officer hold a conflicting employment or contractual relationship.

In the past, we have found that the second part of Section 112.313(7)(a) prohibits a public officer from representing a client in matters that are before a board where he is a member because it may interfere with the full and faithful discharge of his public duties, and, when such representations are frequent, may present a continuing or frequently recurring conflict of interest. See CEO 00-3, Question 2. We even have found the prohibition triggered when the public officer represents a client on a single matter or in a single instance, when the matter is a matter of his board. See CEO 09-10. And the conflict cannot be mitigated simply because another member of the public officer's professional firm engages in the representation. This is because the concern is the potential loss of objectivity a public officer may have if his firm is attempting to influence the decisions of his board. This concern remains present so long as the officer's firm is representing a client on a matter of his board, even if he is refraining from personally advising the firm or its client about the matter. See CEO 10-24, Question 1, and CEO 09-10. We also have applied this reasoning to situations where an attorney serves in an "of counsel" capacity to a law firm. See CEO 07-13, Question 1. While it is a lesser tie than serving as a partner, shareholder, or associate, "of counsel" still connotes a personal and contractual relationship that creates a conflict of interest if the law firm appears on behalf of a client in matters of the officer's public board. See CEO 09-10; CEO 00-3, Question 2; CEO 96-1, Question 1, aff'd by PCA Korman v. State Commission on Ethics, 710 So. 2d 553 (Fla. 1st DCA 1996).²

However, the Councilmember here does not contemplate becoming an employee of the law firm or even associating with it on an "of counsel" basis. Instead, you indicate he and the firm only will be referring clients to each other. The Councilmember personally emphasizes this point in correspondence to the Commission, stating he is not employed or retained by the firm, has no contractual, verbal, or written referral arrangement with the firm, and, very importantly, does not intend to share referral fees with the firm.

Having found no legal authority (caselaw, statute, bar rule) indicating that this informal ability-to-refer relationship is contractual (binding) in nature, we find that the second part of Section 112.313(7)(a) will not be applicable were the other firm to appear on a matter of the City Council. If all that is present is an informal referral relationship, the Councilmember will not have an employment or contractual relationship with the firm, as would be needed to trigger the application of the statute. In ABA Formal Op. 90-357, the American Bar Standing Committee on Ethics and Professional Responsibility found that the forwarding and receiving of legal business does not create an "of counsel" relationship, much less an employment relationship. See CEO 96-1, Question 1. And while a lawyer who refers a matter to another attorney may charge and collect a referral fee under the Florida Bar Rules—arguably creating an implied contract for fees between the attorneys—the Councilmember here has stated no referral fees will be shared. Because all that is proposed here is a gratuitous transfer of legal work on an occasional basis without remuneration, Section 112.313(7)(a) is not implicated, as no employment or contractual relationship will exist.

This advice is limited, though, to the Councilmember interacting with the firm on a referral basis without remuneration. In the event he becomes employed by or "of counsel" to the firm, or enters into any contractual relationship with the firm, our favorable analysis under Section 112.313(7)(a) would change, and to the contrary.

We also caution the Councilmember that this opinion should not be read to condone an implied understanding with the law firm whereby they frequently and routinely refer clients to each other, thereby establishing a close relationship without having an actual contract. While such a relationship may not trigger the second part of Section 112.313(7)(a)—inasmuch as the element of an employment or contractual relationship still will be missing—it may nevertheless raise concerns about the Councilmember's objectivity if and when the law firm argues matters before the City Council. To avoid even the appearance of a conflict, we advise the Councilmember to limit the frequency of his referrals to and from the law firm, and to limit his contact with the firm in general.

Question 1 is answered accordingly.

QUESTION 2:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent law clients on matters outside the City when the clients will have separate matters before the City Council, so long as he does not represent the clients on the City Council matters?

Question 2 is answered as set forth below.

You next inquire whether the City Councilmember will have a prohibited conflict of interest were he to represent a law client on a matter outside the City when the client may appear on City Council matters in which the Councilmember does not represent the client. As discussed in Question 1, the prohibition in the second part of Section 112.313(7)(a) is triggered if the Councilmember represents a client on a City Council matter. But, assuming the Councilmember confines his representation for the client to matters outside the City, we find that the second part of Section 112.313(7)(a) will not apply. The question then becomes whether the Councilmember will have a conflict of interest under other prohibitions in the Code of Ethics if another attorney (one not in the Councilmember's firm) represents the client on the City Council matter.

This analysis concerns the first part of Section 112.313(7)(a), which, as discussed above, applies if the Councilmember has an employment or contractual relationship with a business entity or agency that is subject to the regulation of, or is doing business with, his agency, the City Council.³ Attorneys clearly have a contractual relationship with their individual clients. See CEO 03-7, Question 15. Therefore, if the City Councilmember represents a business entity⁴ or agency,⁵ even in matters outside the City, and that client becomes subject to the regulation of the City Council, or does business with the City Council, the Councilmember will have a prohibited conflict under the first part of Section 112.313(7)(a). In that scenario, unless a statutory exemption applies (see Section 112.313(12), Florida Statutes), he will have a contractual relationship with a business entity or agency subject to the regulation of, or doing business with, his agency. The fact that another law firm handles the client's business or regulatory matter before the City Council will not negate the statute's application. Nor will the Councilmember be able to avoid the application of Section 112.313(7)(a) simply by abstaining from a vote concerning the client. As previously noted, we have found that Section 112.3143, the voting conflict statute, operates independently from Section 112.313(7)(a), finding that compliance with one statutory provision does not alleviate a conflict under the other.

We anticipate circumstances in which a client of the Councilmember will be conducting business with the City Council will be isolated, rare, or nonexistent. More common might be instances where a client has a regulatory matter that must be considered by the City Council. The question then becomes what types of matters will be considered "regulatory" in nature, triggering the application of Section 112.313(7)(a).

Initially, we note that decisions made by the City Council of general applicability—such as approving a comprehensive plan for land development within the City, passing City-wide ordinances, or involvement in similar issues common to all or many City residents and/or landowners—are not "regulation" within the meaning of the statute. Otherwise, every person or business entity within the City would be considered subject to the regulation of the City Council, and the City Councilmember would be prohibited under Section 112.313(7)(a) from entering into an attorney-client relationship with nearly everyone in the City. In the past, we have declined to find, in a variety of contexts, that laws of general applicability constitute "regulation" for the purposes of Section 112.313(7)(a). See, in the State context, CEO 04-14 (declining to find the State Statutes concerning boating activities and other waterway uses constitute regulation); and see, in the local context, CEO 00-14 (declining to find a general county phosphate mining ordinance makes phosphate miners subject to the regulation of the county commission), and CEO 77-126 (declining to find amendments to a city's master development plan or zoning plan to be regulation).

However, we find that if clients of the Councilmember appear before the City Council on matters insularly affecting themselves, their properties, or their businesses, the matters would constitute "regulation" under Section 112.313(7)(a). Examples of this include if a client were to apply for or receive a permit, variance, approval, or similar action from the City Council, or to request approval of changes of use of property, approval of proposed construction, or approval of deviations from the City's development plan or land development regulations specifically affecting them.

In the past, we have found an exception to the application of Section 112.313(7)(a) when the regulation is "incidental or passive," finding such actions do not constitute the type of regulatory interface that triggers Section 112.313(7)(a). This exception for "incidental or passive regulation" was found in CEO 11-6, where we found certain activity—such as applying for or receiving a variance or approval, or other similar actions administered by a planning and zoning board—was too "incidental or passive" to be considered "regulation" for the purposes of Section 112.313(7)(a). See, also, CEO 15-1,, Question 4 (relying on CEO 11-6 to find a city council's issuance of a one-day permit to dispense alcohol at a golf tournament did not make the recipient subject to the council's "regulation").

Notwithstanding our finding in CEO 11-6, "incidental or passive" regulation is not expressly found in Section 112.313(7)(a), or in any other provision in the Code of Ethics. It also is contrary to earlier opinions finding similar activity to be regulatory in nature. See, for example, CEO 10-24, Question 3 (recognizing a board's role in issuing a permit for a sidewalk cafe constituted "regulation") and CEO 08-1, Question 2 (recognizing that a city's board of adjustment regulates a developer via the board's ability to grant conditional uses and variances sought by the developer). Considering that regulation previously found "incidental or passive" may have an insular effect on the requestor, and that Section 112.313(7)(a) carves out no exception for "incidental or passive" regulation, we hereby recede from that portion of CEO 11-6, and any related opinions, based in "incidental or passive regulation."

Therefore, drawing together the threads of this analysis, if the City Councilmember here has a business entity or agency as a client,⁶ and if that client is seeking to conduct business with the City Council or is appearing before the City Council in a regulatory matter affecting the client, the Councilmember will have a prohibited conflict under the first part of Section 112.313(7)(a) were he to continue representing the client, even if he confines that representation to unrelated matters and abstains from the vote.⁷

Question 2 is answered accordingly.

QUESTION 3:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent clients on matters outside the City when the clients will not have matters before the City Council?

Question 3 is answered in the negative.

You further inquire whether the City Councilmember will have a conflict of interest were he to represent clients on matters outside the City when the clients will not have matters within the province of the City Council. In such circumstances, the prohibitions of Section 112.313(7)(a) will not apply. And, because the Councilmember will not be voting on measures affecting the clients, the voting conflict statute similarly will be inapplicable.

Question 3 is answered accordingly.

QUESTION 4:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent clients on matters before subordinate City boards or City staff?

Under the particular circumstances presented, this question is answered in the affirmative.

You next inquire whether the City Councilmember will have a prohibited conflict of interest were he to represent a client before City staff members or subordinate City boards. Alternately, you inquire whether a conflict will be found if, following a vote of a subordinate board or staff level review, the matter will require a vote of the City Council.

The second part of Section 112.313(7)(a) is most pertinent. As discussed in Question 1, this portion of the statute, in part, prohibits the City Councilmember from having a contractual relationship or employment that could "impede the full and faithful discharge" of his public duties. This portion of the statute is grounded on the principal that one cannot serve two masters (see CEO 18-4), and requires the Commission to compare the Councilmember's public responsibilities against his private interests to "determine whether the two are compatible, separate, and distinct, or whether they coincide to create a situation which tempts dishonor." Zerweck, 409 So. 2d at 61. Practically, this means the statute can be triggered even without intentionally wrongful conduct by the City Councilmember. See CEO 16-2, Question 2. If the Councilmember's private economic considerations, based in a contractual relationship, have the potential to override the faithful discharge of his public duties—meaning they could "tempt" him to dishonor his public position—that is all that is needed to create a prohibited conflict of interest under the second part of the statute.⁸ See CEO 17-5, n. 3.

As addressed in Question 1, this portion of Section 112.313(7)(a) prohibits the City Councilmember from representing clients on matters before the City Council. Such a scenario is rife with potential conflicts because, even if the Councilmember treats the matter as a voting conflict under Section 112.3143, Florida Statutes, he still may be tempted to use the influence of his position, and his relationship with the other Councilmembers, for his client's benefit.

The question remains, though, whether a conflict will occur if he represents clients before City staff or subordinate City boards on matters not before the City Council. We find a conflict is presented in that scenario as well, considering that the Councilmember is serving on the City Council, the highest (governing) board of the City. This places the Councilmember in a position of authority over each of the City's employees and subordinate boards. To find that the Councilmember would not at least be tempted to use his influence over a subordinate City staff member or board for a client's benefit would be shortsighted. Indeed, the temptation to leverage his position for the benefit of a client might be even greater when the matter is before subordinate staff or a subordinate board than when the matter is before his peers on the City Council. Accordingly, we find the Councilmember will have a prohibited conflict of interest under the second part of Section 112.313(7)(a) if he represents a client on a matter that is before City staff or subordinate boards.⁹

We draw a distinction, though, between representing clients on matters subject to the discretion of a City staff member/board and simply making informational requests. Decision-making by municipal staff or board members on discretionary matters—such as whether to grant a waiver, permit, variance, or certificate, or decisions concerning violations of the City's code or ordinances—could be influenced by a City Councilmember exerting pressure on a client's behalf. However, when City staff or board members simply are responding to an informational request, and are not engaged in any discretionary decision-making, we find the potential for abuse is not present. In the materials that you have provided, the Councilmember expresses an intent to make purely informational requests on behalf of clients who are engaging in real estate transactions within the City. Such requests involve asking City staff to conduct lien searches and to provide records of water and sewer bills, code enforcement liens, and certificates of occupancy. These requests do not require the approval of the City Council or any subordinate board, they are handled administratively, and they simply procure publicly-available information to finalize real estate sales. We find that so long as the City Councilmember's contact with City staff or boards is limited to these types of informational requests, and does not involve discretionary decision-making, Section 112.313(7)(a) will not be triggered. Again, though, it is critical he confines his contact on behalf of a client to informational requests; if the contact in question pertains some type of application or request that requires discretionary review by City staff or City boards, or even if the Councilmember is attempting to unduly hasten a response to a purely informational request, a prohibited conflict of interest may be found.

We also note that your inquiry asks if a conflict of interest will be created for the Councilmember if the law firm with which he has a referral relationship represents a client before subordinate City boards or City staff, or accepts a referral from the Councilmember to represent a client before the City Council or a subordinate City boards/City staff. So long as the Councilmember has no employment or contractual relationship with the firm—and from what you indicate he shares only an informal, non-fee-sharing referral relationship with it—its representation of clients at any level of City government will not create a prohibited conflict of interest for the Councilmember under Section 112.313(7)(a).

Question 4 is answered accordingly.

QUESTION 5:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent, as a real estate broker, clients in real estate transactions outside the City when the clients will have matters before the City Council?

Question 5 is answered as set forth below.

You indicate the City Councilmember also is a licensed real estate broker who represents buyers, sellers, landlords, and tenants in real estate transactions. You inquire whether he will have a prohibited conflict of interest were clients of his real estate practice to appear, in matters other than his real estate transactions, before the City Council. For the purpose of this analysis, it is presumed that your inquiry concerns a current client of the Councilmember's real estate practice because, as discussed in Question 2, former or potential future clients will not trigger the prohibitions discussed herein.

As a real estate broker, the Councilmember has a contractual relationship with each of his clients, as the provision of licensed services constitutes a contractual relationship. See CEO 08-8, Question 2. Accordingly, if a real estate client is a business entity or agency, and if that client does business with or becomes subject to the regulation of the City Council, the Councilmember will have a prohibited conflict under the first part of Section 112.313(7)(a), unless a statutory exemption applies. See our response to Question 2, above. If the real estate client merely is a natural person (and not a sole proprietor), the Councilmember may continue representing the client on unrelated matters, even while the matter is before the City Council, although he will have to treat the matter as a voting conflict and respond in accordance with Section 112.3143(3)(a), as his real estate client will be considered a "principal by whom he is retained." See CEO 08-7, Question 1.

Question 5 is answered accordingly.

QUESTION 6:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent, as a real estate broker, clients in real estate transactions outside the City when the clients will not have matters before the City Council?

Question 6 is answered in the negative.

You next inquire whether the City Councilmember will have a conflict of interest were he to represent real estate clients on matters outside the City when the clients will not have matters within the province of the City Council. As described in Question 3, above, such a dynamic, where the client is not interacting with the City Council, will not create a prohibited conflict or a voting conflict for the Councilmember under either Section 112.313(7)(a) or Section 112.3143(3)(a).

Question 6 is answered accordingly.

QUESTION 7:

Would the City Councilmember have a conflict of interest under Section 112.313(7)(a) were he to represent clients on real estate matters before subordinate City boards or City staff?

Under the particular circumstances presented, this question is answered in the affirmative.

Regarding your question of whether the City Councilmember may represent his real estate clients in matters before subordinate City boards or City staff, such representation will trigger a conflict under the second part of Section 112.313(7)(a). See our response to Question 4, above. However, as explained in Question 4, this prohibition does not extend to making purely informational requests, so long as the requests do not require any discretion on the part of the subordinate City boards or staff.

Finally, in response to your inquiry, should the law firm with which the Councilmember has a referral relationship represent one of his real estate clients before a City staff member, a subordinate City board, or the City Council, this does not present a conflict of interest for the Councilmember so long as he has no employment or contractual relationship with the firm. Even if the Councilmember referred the client to the firm, this informal referral relationship, without more, will not be a contractual relationship or employment necessary to create a prohibited conflict of interest for him.

Question 7 is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on September 11, 2020, and RENDERED this 16th day of September, 2020.

____________________________________

Daniel Brady, Chair

^[1]From what you indicate, the matters typically relate to zoning applications that require the Council's approval.

^[2]And compliance with the voting conflict statute—Section 112.3143(3)(a), Florida Statutes—has been found not to negate the prohibited conflict under the second part of Section 112.313(7)(a). Because we have found that the two statutes operate independently, we have found that following the requirements for responding to a voting conflict under Section 112.3143(3)(a) does not create a defense against the application of Section 112.313(7)(a). See CEO 12-9 and CEO 03-7, Question 1.

^[3]For the purposes of Section 112.313(7)(a), the "agency" of a city councilmember has been found to be the city council. See CEO 19-11.

^[4]The term "business entity" is defined in Section 112.312(5), Florida Statutes, as:

any corporation, partnership, limited partnership, company, limited liability company, proprietorship, firm, enterprise, franchise, association, self-employed individual, or trust, whether fictitiously named or not, doing business in this state.

^[5]The term "agency" is defined in Section 112.312(2), Florida Statutes, 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; any public school, community college, or state university, or special district as defined in s. 189.012.

^[6]This analysis presumes that the Councilmember has a current relationship with the client at the time that the client has a matter within the province of the City Council. If the Councilmember has completed all legal obligations to the client prior to the client having a matter before the City Council, meaning his representation of the client has ended, he will no longer have a contractual relationship with the client, as would be needed to trigger the prohibition in Section 112.313(7)(a). See CEO 12-3, Question 1 and CEO 08-14. Moreover, in such a situation, the client will no longer be considered his "principal" for purposes of Section 112.3143(3)(a), as the voting conflicts law only addresses present, not past or future, employment. See CEO 09-9 and CEO 06-5.

^[7]Please note that the first part of Section 112.313(7)(a) will be triggered only if the Councilmember's client is a business entity or agency. The term "business entity," as defined in Section 112.312(5), Florida Statutes, encompasses any self-employed person performing services as a sole proprietor. See CEO 11-14. However, it does not extend to natural persons who merely own personal or real property. See CEO 08-12, Question 3 and CEO 07-18, note 4. Therefore, if the Councilmember's client is a natural person, and that person has a transactional or regulatory matter coming before the City Council, the Councilmember may continue representing the client, so long as he confines the representation to matters unrelated to the matter coming before the City Council. Also, in that circumstance, the Councilmember most likely will have a voting conflict on any measure affecting the client and should respond accordingly. The voting conflict statute, Section 112.3143(3)(a), prohibits a public officer from voting on a measure bringing "special private gain or loss" (defined in Section 112.3143(1)(d), Florida Statutes, as "an economic benefit or harm . . .") to a principal by whom the officer is retained. Here, the Councilmember's legal clients will be considered his principals, as the clients of a public officer's private law practice have been found to be principals by whom he is retained, so he will have a voting conflict if a measure before the City Council will economically affect them, whether they be business entities, agencies, or individual natural persons. See CEO 03-7, Question 2.

^[8]As previously mentioned the term "conflict of interest," as used in the context of Section 112.313(7)(a), is defined to mean "a situation in which regard for a private interest tends to lead to disregard of a public duty or interest." Section 112.312(8), Florida Statutes (emphasis added).

^[9]This finding is not meant to imply the Councilmember would intentionally misuse his position. We simply are finding that if he represents a client on a matter that is before the City Council, or any City staff or boards, he will be placed in a position that could "tempt dishonor," which is all that is needed to violate the second part of Section 112.313(7)(a).