114 N.J.L.J. 609
December 13, 1984
Conflict of Interest Attorney to Municipal
Sewer Authority Whose Partner Represents
Non-Profit Housing Corporation Which is a
Litigant in a Suit with the Sewerage Authority;
further, Whether Counsel or his Partner may
be a Member of a Rotary Club which is the
Sponsor of the Non-Profit Housing Corporation
As early as 1970, (Opinion 189, 93 N.J.L.J. 789 (1970)) and as
late as 1983 (Opinion 516, 111 N.J.L.J. 481 (1983)), this Committee
referred to the great number of inquiries that it receives which
arise out of representation by one or more members of a law firm of
a municipal or other public agency. We noted in both opinions that,
if the inquirer in many or most of those cases considered the
standard relating to the avoidance of an appearance of wrongdoing,
most of these inquiries could be resolved without the necessary
intervention of this Committee. In spite of those suggestions,
inquiries still arrive in large proportion to the number of
inquiries received by the Committee. This inquiry involves within
it the same issues.
The facts as originally set forth here are that A and B are attorneys in New Jersey who have been associated since February 1981. Prior to their association, B was a sole practitioner who represented a Rotary senior citizens housing corporation sponsored by a local Rotary Club. The housing corporation is a non-profit corporation established in accordance with the statutes of the State of New Jersey. It is a distinct legal entity which exists separate and apart from the sponsoring Rotary Club, although the directors of the housing corporation are elected by members in good standing of the sponsor. A became a member of the Rotary Club sometime in 1980, and through that membership, met and became friends with B. It is asserted in this inquiry that B and A agreed that B would continue to represent the housing corporation as his own individual client, separate and apart from the partnership, and that all fees received were to be solely his. An internal rule of the local Rotary Club is that no member of the Rotary Club may receive any fees, commissions, contracts or any other profit from the housing project which it sponsors. B, therefore, was never a member of the Rotary Club. A is a member of the Rotary Club, and, therefore, does not represent the housing corporation nor may he benefit from the fees paid by the housing corporation.
One of the matters in which B is involved as attorney for the housing corporation is a dispute with the local sewerage authority over the proper amount of connection fees to be charged by the authority to the corporation. That matter is in litigation between the parties. A has been appointed attorney to the sewerage authority, but it is told to us that, prior to his appointment, he advised the sewer authority of the fact that his partner or associate represented the housing corporation.
The initial inquiry asked whether, under the circumstances, B should disqualify himself from further representation of the non-profit housing corporation. Subsequent to the initial inquiry, a supplement was filed with the Committee in which A and B set out that, since the initial inquiry, B resigned as attorney for the housing corporation with respect to its pending litigation against the sewerage authority. Apparently, it is intended that A continue as counsel generally for the sewerage authority in matters other than the litigation between the sewerage authority and the housing corporation.
The first question addressed to this Committee is whether B may continue to represent the housing corporation if A continues to represent the sewerage authority. B has obviously attempted to insulate himself from the litigation between his client and his partner or associate's client.
In Opinion 415, 103 N.J.L.J. 38 (1979), it was said by this Committee that the governing principle applied to inquiries in the area of conflicts relating to counsel who represent public agencies is that such counsel must conduct themselves and their practices so as to avoid the appearance of impropriety. It was also said by this Committee in the same opinion that, while in that inquiry it was not clear that the function of the conflicting positions necessarily involved an inherent potential for conflict, the question had to be resolved by applying the rule that the appearance of impropriety must be avoided. That is the same principle by which this Committee must be guided with relation to the issue here addressed. Both attorneys here were aware of the fact of the representation of the housing corporation by one of them at the time of the formation of their relationship. They were equally aware of that relationship at the time that one of them accepted a position with the sewerage authority. They must now determine to which client they desire to owe their allegiance. While it may be that there is not necessarily an inherent potential for conflict because of the resignation by B as to the pending litigation, the appearance of impropriety exists. This Committee does not decide what the situation would be once the litigation is concluded. The facts existing at the time will determine its resolution.
The second issue presented is whether A may continue his membership in the Rotary Club which is the sponsor of the housing corporation. These parties may profit from the internal rule imposed by the Rotary Club itself which prohibits any member from acting for profit with relation to the housing corporation. While it is understood by this Committee that B retains all fees and profits from his representation of the company, it is clear that the appearance of impropriety is such that A may not continue to be a member of the Rotary Club. Lay members of that Club may not understand that one associate may not be a member of the Club because he represents the housing corporation, but another member of that affiliation may be a member. If such an internal rule in the Club did not exist, perhaps another determination would be made by this Committee. However, this Committee takes no position on a hypothetical situation not addressed to it.