You are the town counsel for the town of ABC. Your duties involve the supervision and control of the town's law department. Specifically, you have official responsibility both for the prosecution of all legal proceedings on the town's behalf and for the defense of any action brought against the town or against one of its employees for performance of his or her official duties.[1] Your position is part-time but you have not been designated a special municipal employee. You also are engaged in the private practice of law. In that capacity you will be sharing office space with some other attorneys. You and the other attorneys will have separate practices, including separate letterheads, secretaries, telephone lines, files and bank accounts. You have also indicated that any signs will list all attorneys separately with no representation of a firm or other association beyond sharing office space. The building in which the offices will be located is owned by a corporation, the stock of which is owned by two of the attorneys in equal shares. When you move into the building you will become the third shareholder of the corporation, although you will own fewer shares than the other two attorneys. You have stated that the corporation will be making no profits. You also state that the reason the two other attorneys chose the corporate form for building ownership is that it will be easier to bequeath each one's interest to his spouse and children and because there will not be personal liability in connection with any claims arising from injuries that might occur on the premises. You will serve as treasurer of the corporation with responsibility for paying all of its bills. The three stockholders will share all expenses of the property in proportion to their share of stock ownership. You also state that you and the other two attorneys have agreed on a value per share for the stock so that if one of the stockholders decides to leave, he will sell his stock back to the other shareholders.
1. Does your relationship with the other stockholder attorneys constitute a partnership for purposes of G.L. c. 268A, §§ 18 and 19.
2. Assuming it does not, what limitations does G. L. c. 268A place on you both in your private law practice and in your position as town counsel?
1. No.
2. You are subject to the limitations set forth below.
1. Your relationship with the other shareholder attorneys
As town counsel for ABC you are a municipal employee and therefore are subject to the provisions of the conflict of interest law, G.L. c. 268A. Because the law places limitations on the activities of a municipal employee's partner(s), the first issue to be considered is whether your association with the other two attorneys as the three shareholders in a corporation separate from your individual law practices constitutes a partnership within the meaning of the statute.
Section 18(d) prohibits the partners of a municipal employee from acting as agent or attorney for anyone other than the town in connection with any particular matter[2] in which the same town is a party or has a direct and substantial interest, and in which the municipal employee participates or has participated, or which is the subject of his official responsibility. Section 19 prohibits a municipal employee from participating as an employee in a particular matter in which he or his partner has a financial interest. To advance the purposes of the law, the term "partner" is not restricted to those who enter formal partnership agreements. Thus, the Commission has held that a partner is any person who joins with another, formally or informally, in a common business venture. The substance of the relationship is what counts, not the term the parties use to describe it. Additionally, if a group creates a public appearance of a partnership (for example by linking their names on a letterhead, business card or business listing), they may be treated as partners even though they may not, in fact, share profits. See EC-COI-84-78; 82-68; 72-19; 80-43.[3] See also Formal Opinion 310, ABA Committee on Professional Ethics (June 20,1963); Massachusetts Bar Association Ethical Opinion 76-19. The Commission concludes that the substance of your office sharing arrangement with the three other attorneys will not constitute a partnership because you will all be conducting separate law practices. Nor will your arrangement create the public appearance of a partnership because you will have taken the necessary steps to avoid linking your name with the other attorneys.
Your corporate association with the other attorneys must also be examined in light of these principles because the limitations of §§ 18 and 19 extend even to those activities of a municipal employee's partners which have nothing to do with partnership affairs.[4] For example, if your corporate association were considered to be a partnership, then the two other shareholder-attorneys would be limited in the legal matters they could handle for clients in which the town or one of its agencies was a party or had a direct and substantial interest. The corporation obviously is not a partnership as that concept is traditionally defined, nor will it create a public appearance of a partnership. There is no reason why the public would know of the arrangement by which the house is owned. The remaining issue, then, is whether the substance of your corporate arrangement would trigger the § 18 and § 19 limitations. The Commission concludes it would not.
The reasoning behind an expansive view of the concepts of partner and partnership is to prevent those who otherwise might be covered from circumventing the conflict of interest law. This does not mean, however, that every association will or should be considered a partnership. Instead, the Commission will examine each association to determine both if it was formed to avoid the limitations of the law or whether it is sufficiently like a partnership to warrant such a finding. In your case you have stated that there will be no sharing of corporate profits because no profits were intended or anticipated, and that the corporation was formed solely for the purposes of ownership of real estate for the reasons stated earlier. Additionally, the association as you have described it does not lead to the conclusion that any sort of alter ego type relationship will exist in the way one would expect with a partnership-type arrangement. For these reasons, your association will not be viewed as a partnership within the meaning of the statute and the provisions which affect the interests and activities of partners will not be applicable.
2. Limitations on your private practice and in your position as town counsel
Section 17 provides in pertinent part that a municipal employee may not receive compensation from or act as agent or attorney for anyone other than the town in connection with any particular matter in which the same town is a party or has a direct and substantial interest. This means that you may not be compensated by or act on behalf of any client in connection with any proceeding before any ABC municipal agency[5] or any proceeding in which the law department is involved. You are also prohibited from acting on behalf of the corporation in any matter in which the town is a party or has a direct and substantial interest. See EC-COI-83-48.
Section 19 in pertinent part prohibits a municipal employee from participating as such an employee in any particular matter in which he or a business organization in which he is serving as an officer has a financial interest. Obviously, you are prohibited from acting in your town counsel capacity on any matter in which you personally have a financial interest, such as any aspect of one of your own client's cases. You would also be prohibited from acting on any matter in which the corporation might have a financial interest, for example a zoning or tax matter, or any matter that might affect the value of corporate assets.
The last section of the statute relevant to your questions is § 23 which contains general standards of conduct applicable to all state, county and municipal employees. Because of your association with the other attorneys both in the office-sharing context and as the three shareholders of the corporation, the principles of § 23 are particularly important. Section 23 ¶ 2 prohibits the use or attempted use of one's official position to secure unwarranted privileges or exemptions for himself or others. It also prohibits one from, by his conduct giving reasonable basis for the impression that any person can improperly influence or unduly enjoy his favor in the performance of his official duties, or that he is unduly affected by the kinship, rank, position or influence of any party or person. To avoid creating even the appearance of any impropriety under this section, you should refrain from having any involvement in the law department in matters where the other two shareholder-attorneys and the third attorney in the office space represent parties in the proceedings. Involvement would include not only involvement in the substance of the proceeding but also things such as granting extensions for filing papers. Section 23 ¶ 3 prohibits an employee from disclosing confidential information he has gained by reason of his position or authority to further his personal interests. Because you have overall responsibility for the supervision and control of the law department, you would be privy to confidential information. It should not be used to further your personal interests, financial or otherwise.
End Of Decision
