A Court Decision That Focuses on the Reasons Behind Conflict of Interest Rules

Two months ago, I pointed out Patricia Salkin's new summary of 2009 reported cases dealing with ethical aspects of local government land use matters. I'm finally getting around to analyzing one of them that provides a fascinating perspective on why conflicts of interest are important. The decision shows that, when you look at the reasons behind conflict rules, you take a far more broad-minded, less technical approach to possible conflict situations. It makes it clear that ethics training should focus less on rules than on the reasons behind them.

A New Jersey decision, Randolph v. City of Brigantine Planning Board, went beyond the interpretation given to most conflicts laws, concluding, “it is not simply the existence of a conflict that may be cause to overturn an action of a public official, but also the appearance of a conflict.” Here's the conflict language (it's from the state municipal land use statute, but the court said it applies equally to the conflict language in the state's local government ethics law and common-law conflicts relating to quasi-judicial proceedings):

[n]o member of the planning board shall be permitted to act on any matter in which he has, either directly or indirectly, any personal or financial interest.

Here is the situation in the Randolph case. A planning board chair had cohabited for ten years with the principal of an engineering firm that acted as planning engineer for the board (an employee of the firm, not the principal, acted as engineer in this and most matters). The chair participated in the first part of a proceeding involving review of a hotel site plan, and then was asked by the plaintiff to recuse herself, which she did for the second part, although she felt she had no conflict.

The court favorably quotes a 1956 decision, as follows:

Under the common law, "[i]t is fundamental that the public is entitled to have its representatives perform their duties free from any personal or pecuniary interests that may affect their judgment." In determining whether a conflict exists, "[t]he potential for psychological influences cannot be ignored." ... "[I]t is the mere existence of the interest, not its actual effect, which requires the official action to be invalidated."

This is an unusually sensitive approach to conflicts, focusing on why conflicts are important rather than the usual technicalities and limitations. Here's one more quote concerning the ideas that lie behind conflict of interest provisions, from a 2007 New Jersey decision:

Officials must be free of even the potential for entangling interests that will erode public trust in government actions. Thus, it is the potential for conflict, rather than proof of an actual conflict or of actual dishonesty, that commands a public official to disqualify himself from acting on a matter of public interest.

The court goes on to quote a New Jersey commentator on the standard to use in conflict matters:

Would an impartial and concerned citizen, intelligent and apprised of all the facts in the situation, feel that there was the potential for non-objectivity on the part of the officeholder making a decision? If the answer is affirmative the appearance of conflict exists.

But the court does acknowledge a limit on the application of an appearance approach, quoting from a 1977 decision:

[Courts] must also be mindful that to abrogate a municipal action at the suggestion that some remote and nebulous interest is present, would be to unjustifiably deprive a municipality in many important instances of the services of its duly elected or appointed officials.

The court notes that the state ethics law, applying to local officials, broadens the common-law definition of conflict, from applying only to interests to applying to "involvement." Here's the language:

No local government officer or employee shall act in his official capacity in any matter where he, a member of his immediate family, or a business organization in which he has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity or independence of judgment.

With respect to evidence of impairment of judgment, the court says, " It is not necessary to establish that [the chair] did not exercise her independent judgment, it is only the potential that she may fail to exercise her judgment that need be shown."

There is also the issue of family, since the conflict here involves an official's domestic partner (the court notes that, although the chair and the engineering company principal are not married, the perception is the same, thus effectively including domestic partners in the definition of "spouse"). With respect to family involvement, the court discusses a 2004 case:

In finding that "when a family member's vote results in another family member obtaining a position in a government agency . . . a conflict is usually present," we focused on the public's perception that the committeewoman had "a personal interest in the reappointment of her husband to a prestigious and potentially very influential position."

The court notes that conflicts usually involve a commission member and an applicant, not a commission member and a board professional. But it found one recent case, an appeal from a state ethics commission decision, where a board member was the sister of a board employee, and this was found to disqualify the board member from any matter where her sister made a presentation or where her work product was used.

Finally, the court details the appearance of impropriety in this case. Primarily it involves the appearance of bias toward the engineer's advice, because his advice would likely be based partially on the domestic partner's advice (as the board's former engineer and the current engineer's boss), and also because the chair would want the engineer to look good so that his firm's annual contract would be renewed by the board.

It's noteworthy that the judge does not focus on the fact that the failure to renew the contract would mean a financial detriment to the chair's household. Unlike so many people who deal with conflict matters, this judge is less interested in money than in the appearance of bias.

It's interesting that, in this very matter, the chair voted against the engineer's advice to require a variance. The court says it is not important whether bias is actually shown. The issue is whether it might be perceived. It is the situation rather than the specific facts that the court focuses on, because conflicts are not determined by how an official acts. One of the most common mistakes in government ethics is believing that how an official votes on a matter is relevant.

The court makes one last observation, and responds to it. This observation is important, given the opposition of many muncipal officials, and their associations, on these very grounds:

We recognize that our opinion could "reduce the number of qualified persons . . . willing to serve on local boards" in small municipalities. Gunthner v. Planning Bd. of Bay Head, 335 N.J. Super. 452, 457, 762 A.2d 710 (Law Div. 2000) (quoting Assembly Local Government Committee Statement, Assembly No. 826, Sept. 29, 1994). Yet, in reconciling the competing public interests at stake, the need for unfettered objectivity by planning board members outweighs the potential difficulties small municipalities may experience in attracting people to serve on local boards.

The court concludes that the proceeding must be voided and set aside. This is something that ethics commissions rarely do, or have the power to do. They can usually only slap officials' hands or fine them. This is a topic for another blog post.

Robert Wechsler
Director of Research-Retired, City Ethics

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