Posted by: Patricia Salkin | July 2, 2013

NJ Supreme Court holds that the Appearance of Impropriety Standard Governs the Evaluation of a Municipal Attorney’s Conflict of Interest

Plaintiff Kane Properties, LLC sought several variances to develop property in the city of Hoboken, New Jersey (“City”).  Skyline Condominium Association, Inc., represented by Michael Kates, Esq. (“Kates”), was a major opponent to the project.  The Zoning Board of Adjustment of the City of Hoboken (“Board”) held several hearings regarding the application where Plaintiff and Skyline provided evidence both for and against the project, respectively.  Kates actively participated in said hearings opposing the project on behalf of Skyline.  After a unanimous vote, the Board ultimately approved all of Plaintiff’s applications.

In December of 2009, Skyline appealed the Board’s decision to the City Council (“Council”).  Shortly after the appeal was filed, Kates was appointed to serve as the legal advisor to the Council and was replaced by W. Mark O’Brien, Esq. as counsel for Skyline.  Kates wrote a letter to both Plaintiff and Skyline, informing them of the procedures of the appeals process.  Plaintiff immediately wrote an objection to Kates being involved in the appeal, claiming that it was a conflict of interest since Kates had previously served as counsel for Skyline.  Edward J. Buzak, Esq. (“Buzak”) of the Council responded to Plaintiff, advising that Kates had recused himself from the appeal and that he, Buzak, would be taking Kates’ place.  Kates’s conflict of interest remained undisputed by the parties.  Later in February of 2010, Kates sent a legal memorandum to the members of the Council explaining the procedures to be taken regarding appeals of Zoning Board decisions, to which Plaintiff again objected.  In March of 2010, Buzak appeared at a hearing for the Kane-Skyline appeal.  Kates did not appear.  After the hearing, the Council reversed the Board’s decision, resulting in all but one of Plaintiff’s variances being denied.  Shortly thereafter, at a Council meeting regarding their recent decision, Kates served as counsel for the City instead of Buzak.  Kates actively participated in this meeting and even signed and approved the Council’s resolution.  The resolution listed six specific reasons in support of their decision to reverse the Board’s approval of the variances, concluding that Plaintiff failed to demonstrate that the property was “particularly suitable” for its intended use.

Plaintiff then sued the City and its Council in the trial court, alleging that the Council’s decision was arbitrary, capricious and unreasonable.  Plaintiff further claimed that Kates’s involvement in the appeal constituted a conflict of interest that “irreparably tainted and thoroughly undermined the City Council’s decision.”  In support of this contention, Plaintiff cited to the memorandum sent by Kates regarding the present appeal; Kates’s presence and participation in the meeting following the Council’s decision; and Kates’s signing and approval of the resolution.  The trial court reviewed the evidence and found that the record sufficiently supported the Council’s reversal of the Board’s decision to grant the variances.  The trial court further determined that Kates’s conflict of interest did not taint the Council’s decision.  It found that the memorandum was merely a procedural act of his administrative capacity and that his involvement in the resolution was too minimal to have affected the Council’s decision.  The trial court determined that the applicable standard of review was of “actual prejudice,” not “appearance of impropriety.”  As such, Plaintiff would need to provide actual evidence of Kates having influenced the Council’s decision as opposed to a mere appearance of unethical behavior.  Since the court found no such evidence, it rejected Plaintiff’s claims in this regard.

When Plaintiff appealed to the Appellate Division, the appellate panel reversed the trial court’s decision, finding that Kates’s participation and conflict of interest did taint the Council’s  determination.  The appellate panel disagreed with the trial court’s standard of review.  Instead, the applicable standard should have been whether, “in the mind of a reasonable citizen fairly acquainted with the facts, this scenario would create an appearance of improper influence.”  Citing to the different ways in which Kates involved himself in the appeal, the court held that such involvement was inappropriate and would give a “reasonable citizen cause for concern.”  The Appellate Division remanded the matter back to the Council.

Plaintiff then appealed to the Supreme Court of New Jersey (“Supreme Court”), objecting to the remand to the Council.  Plaintiff felt it inappropriate to send the matter back to the same decision-makers whose minds would be tainted in light of the proceedings.  Defendants also cross-appealed, contesting the finding that Kates’s involvement created an appearance of impropriety and tainted the Council’s decision.  The Supreme Court first reviewed the issue regarding Kates’s involvement by acknowledging that the conflict of interest is not only undisputed, but it is also clearly satisfied by the definition provided in the Rules of Professional Conduct (“RPC”).  According to the RPC, a government lawyer cannot participate in a proceeding in which he had previously been involved while in a non-governmental private capacity.  This directly applied to Kates in the present case.

The main issue at hand was whether Kates’s involvement, despite his recusal from the matter, was inappropriate under the circumstances.  The court noted that the trial court’s chosen standard of review was inapplicable in the present situation.  While the appearance of impropriety standard is correctly inapplicable to an attorney’s conflict of interest, a different standard applies to those acting in a judicial capacity.  According to the Code of Judicial Conduct, judges are to avoid both “impropriety and the appearance of impropriety in all activities.”  As recognized by the Appellate Division, the Supreme Court determined that the impropriety standard should apply to Kates, a municipal official acting in a quasi-judicial capacity.  Specifically, deciding whether there was an appearance of impropriety requires a determination of whether “a reasonable, fully informed person [would] have doubts about the judge’s impartiality[.]”  The judge’s conduct should not give the public any “reason to lack confidence in the integrity of the process and its outcome[.]”  No evidence of actual bias or impropriety is required under this standard.  Since Kates’s role gave him the “opportunity to interpret the law and advise on legal matters,” the Supreme Court reasoned that Kates’s responsibilities were “quasi-judicial” enough to require the appearance of impropriety standard.

The Supreme Court found that when this standard is applied to Kates’s conduct, a reasonable, informed member of the public would indeed question the Council’s impartiality and the integrity of the proceedings.  Being that Kates acknowledged the conflict of interest and recused himself, he should not have further participated in the appeal.  The court explained that a recusal requires a person to completely dissociate himself from the matter, which Kates failed to do.  As such, the court found that the Council’s decision was tainted and needed to be set aside.

The court ultimately remanded the matter to the trial court for a de novo review of the Board’s decision.  In light of Plaintiff’s fears of having the same judge re-review the matter, the court directed that the matter be sent to a different judge who would be unquestionably unbiased and impartial.

Kane Properties, LLC v. City of Hoboken, 2013 WL 3197164 (NJ 6/26/2013).

The opinion can be accessed at: http://www.judiciary.state.nj.us/opinions/supreme/A969711KanePropertiesLLCvCityofHoboken.pdf

 


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