116 N.J.L.J. 270
August 22, 1985
Conflict of Interest - Bond Counsel
for Municipality Representing Clients
Before Governing Body or Municipal Boards
The inquiry presented to us is as follows:
"To what extent is a law firm, and consequently its members,
precluded from representing clients before a municipal board or
body when they also act as bond counsel for that municipality?"
The inquirer states that a municipality has retained a law firm as bond counsel and that, while acting in that capacity, members of that firm have appeared before the governing body of the municipality on behalf of land developers seeking zoning changes and exchanges of property.
The law firm which acts as bond counsel is involved with the legal aspects of the municipality's tax-exempt financing program. It prepares bond ordinances for projects funded through the issuance of debt and prepares the various certificates and legal opinions for the issuance of bond anticipation notes and long term bonds. We are advised that the law firm is involved with the municipality only on an irregular basis and that the work of the firm as bond counsel is handled exclusively by members of the firm's bond department.
In situations where there is a conflict of interest or the appearance of conflict the fact that the legal work performed in connection with the municipality's tax-exempt financing program is handled exclusively by members of the firm's bond department is of no significance. Under R.P.C. 1.10(a), When lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by R.P.C. 1.7, R.P.C. 1.9 or 2.2. Since there is a public entity involved, any disqualification may not be waived.
The financing programs of every municipality in this state are subject to and controlled by the provisions of the "Local Bond Law" N.J.S.A. 40A:2-1 et seq. N.J.S.A. 40A:2-38.1 of that statute provides as follows:
No county, municipality or other political subdivision of the State or any board, commission or agency thereof, shall compensate an attorney for services rendered in connection with the issuance of bonds other than at a reasonable rate agreed on prior to the rendering of services.
Bond counsel provide legal services to governmental units in connection with the authorization and sale of bonds and notes. They are employed and paid by the governmental unit which engages their services to represent its interests in the financing program.
Our opinion is that R.P.C. 1.7 "Conflict of Interest: General Rule" applies to the present inquiry. Bond counsel employed by a public entity must avoid not only conflicts of interest, but also the appearance of impropriety. They cannot act as bond counsel for a public entity and represent private interests in effecting property exchanges with the same public entity, nor can they appear on behalf of private interests before agencies of the public entity while acting as bond counsel.
We direct the attention of the bar to R.P.C. 1.7(c) and the last paragraph of the "Comment to R.P.C. 1.7", dated July 12, 1984, which is as follows: