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Who Should Pay for Attorney's Fees in Ethics Proceedings?
Thursday, April 28th, 2011
Robert Wechsler
Update: September 17, 2011 (see below)
An article in yesterday's Stamford Advocate keeps asking the question, Who should pay? The article is referring to attorney's fees related to an ethics proceeding. Most ethics codes do not deal with this issue, and therefore it often turns into a big political controversy after the fact, leaving a bad taste in citizens' mouths, especially if they are forced to foot the bill.
For this reason, it should be clear from the start who pays, under what circumstances, and how much.
An Attorney's Role in an Ethics Proceeding
It's worth noting what an attorney's role is in an ethics proceeding. In the beginning stages, before an investigation begins, there is nothing to do. Many, if not most, ethics complaints are dismissed at this stage.
The first thing an attorney does is help the official write a response to the complaint. Then, during an investigation, there is little else an attorney needs to do other than, possibly, be present when her client is interviewed and negotiate a settlement. And that settlement can include payment of attorney's fees, as did a recent settlement in an ethics proceeding against a member of Stamford's board of finance. But negotiating a settlement should not run up much of a bill.
Anything else, such as defending the official's reputation and filing ethics complaints and judicial actions (as the Stamford board of finance member did), is superfluous and should not be reimbursed under any circumstances.
An attorney's role expands if the ethics proceeding moves to the public hearing stage, and there is true disagreement regarding the facts (so that few facts can be stipulated to) and regarding the application of ethics code provisions to the particular situation (this is usually straightforward, although it was not in the Stamford case).
It's important to recognize that an ethics proceeding, if handled properly by both the respondent and the EC, is not a life-and-death matter. Fines are usually limited or unavailable, and in most jurisdictions there is no chance of jail time, a criminal record, suspension, or removal from office (a jurisdiction that criminalizes ethics should recognize that this might greatly increase requests for attorney's fees). In other words, in the great majority of cases, attorney's fees for a possible $1,000 fine, or even, as in Stamford, just a reprimand, should not be tens of thousands of dollars. Anyone who believes he might have to pay for attorney's fees would settle the case or argue it himself, especially considering that ethics proceedings are usually administrative in nature, which means that the evidentiary aspects are relatively easy to handle. They are not trials and require little legal expertise.
One can argue that one's reputation cannot be given a value, but if one handles an ethics complaint responsibly, there should be no serious harm to one's reputation. If one simply denies and fights back, that is a personal decision that should not be funded by the public.
And yet, another Stamford board of finance member was recompensed for $30,000 in legal fees even though the complaint against him was dismissed relatively early on. It is hard to believe that most of these fees were necessary. The board of finance member who filed ethics complaints and a judicial action says that he ran up over $100,000 in attorney's fees. This is outrageous. And it is ironic that someone known as a fiscal watchdog could be so extravagant when it came to, in his opinion, his reputation. This shows how much his attacks on city officials were more about him than about saving taxpayers money.
Local Government Payment of Attorney's Fees
The City Ethics Model Code deals with attorney's fees in two instances. With respect to an ethics proceeding, §213.14 requires the local government to pay a respondent's reasonable attorney's fees only "if the Ethics Commission finds that a complaint was filed with the knowledge that it is without foundation in fact," and only up to a certain dollar amount. This protects officials from having to pay to defend themselves against frivolous complaints (with "frivolous" defined more clearly).
Any provision for attorney's fees should, like the City Ethics Model Code, contain two elements: a dollar limit and the word "reasonable" before "attorney's fees." If an official files countercomplaints and court suits, as the Stamford board of finance member did, these should be considered unreasonable and not be paid by the government. If the official spends an inordinate amount on legal representation, she should have to prove that the expenditures were reasonable.
Some jurisdictions provide for the payment of attorney's fees in every case, either in laws or regulations, or via historical precedent. But it is more common to provide for the payment of attorney's fees only when a violation is not found. This seems fair to an official who is not found to have violated an ethics provision, until one realizes that there are many other ways to end a proceeding without finding there was a violation, including a settlement, resignation, dismissal on a technicality, the running of time limits, an injunction based on constitutional or other issues, and even threats of lawsuits (or actual lawsuits) against the commission, its members, or the complainant (who then asks that the proceeding be dismissed). In all of these situations, the official might have violated the code, and yet he has an incentive to prevent such a finding, knowing that the EC has limited resources and cannot afford to hold out for a finding of a violation. Remember, the official's attorney's fees wouldn't come out of the EC budget, so the EC's interests with respect to attorney's fees would differ from the local government's.
If an ethics complaint is dismissed because it does not state a possible violation, a good argument could be made that attorney's fees should be paid to the respondent, but since this is the first step in a proceeding, there should be hardly any attorney's fees at all. Respondents should be alerted to the strong possibility that a complaint will be dismissed without any action by the respondent. The respondent need not be in a rush to file a lengthy response, as long as there aren't overly short time requirements.
Government Protection or Indemnification of Its Officials
There is another sort of law that sometimes comes into play in determining who pays for attorney's fees in ethics and related proceedings: the government protection of local officials and employees statute. Here is the one in Connecticut that a Stamford official's attorney said required his client's reimbursement:
Therefore, I don't think this statutory section applies, but it is possible that a court would disagree, and certainly possible that a local government would pay its official's attorney's fees pursuant to such a statute. And, in any event, local governments usually insure their officials against suits brought against them, and it is possible that the insurance language may, at least arguably, include ethics complaints. Like so many problems in today's world, this one could boil down to insurance coverage. In a municipality where ethics proceedings are insured, officials could run up huge bills fighting an ethics commission, thereby making the ethics program appear too expensive and open for attack.
Complainant Payment of Attorney's Fees
Another approach is to force the complainant to pay attorney's fees if a complaint is dismissed. This is popular with officials, because it is the easiest way to prevent complaints from being filed. No matter how certain a complainant is about the facts, he has no control over how the code is interpreted or how the proceeding ends. Too many things are outside a complainant's control for anyone to file a complaint knowing that it might cost him many thousands or even tens of thousands of dollars.
More often, a complainant is required to pay attorney's fees only if a complaint is found to be without any foundation in fact. Or in such a case, the respondent is expressly permitted to sue the complainant for attorney's fees or even damages, the approach taken in City Ethics Model Code §213.13.
It is important to severely limit requirements on a complainant to pay a respondent's costs, because the last thing an ethics program should do is make it hard for even questionable complaints to be filed. Often complainants do not have access to much information, but have a reasonable belief that something is wrong. Such a complainant may have few facts and little understanding of government ethics. After all, most government officials have a poor understanding of government ethics, so why should complainants be penalized for having the same level of understanding?
In such situations, an investigation is needed to find out what is going on, and often an investigation leads to amending a complaint or even adding allegations. In a jurisdiction that allows anonymous tips and the filing of complaints by the ethics commission, there is far less need for complainants to file complaints with limited knowledge. This is a good argument for allowing anonymous tips and EC-initiated complaints, two things that most government officials do not like. It might be worth trading attorney's fees for these two provisions, since complainants with little information would be less likely to file poor complaints, and the EC could recommend that a poor complaint be withdrawn in favor of a tip to be investigated at the EC's discretion.
Government Attorney Representation of Respondents
Another approach is to allow respondents in ethics proceedings to be represented by the city or county attorney's office. This is less expensive for the local government, but it raises other problems, including conflicts. First of all, in many cases it would require the government to represent an official's personal interest against the public interest that the government attorney is pledged to protect. This puts the government attorney in a seriously conflicted position. I don't think it is right to ask this of anyone.
Second, if the government attorney advised the official on the matter, and the official did not follow the advice, how can the government attorney represent that official?
Third, in many cases the city or county attorney's office represents the ethics commission. Would it be fair to have the only person in the office with ethics expertise represent the official, while the ethics commission has to try to find someone with equivalent expertise, which is not easy to do? This would also raise a legal conflict situation, where an attorney is faced with representing a client in a matter before, or even argued by, his longstanding client.
This exacerbates what is already a difficult situation. In the Stamford situation, for example, even without representing the official in the proceeding, the corporation counsel withdrew from the matter, so that the ethics commission was forced to hire outside counsel.
And in some jurisdictions, the city or county attorney is charged with bringing criminal charges for ethics violations, which certainly prevents them from representing the official being charged.
Some Final Thoughts
One thing I find fascinating about arguments regarding attorney's fees is that people rarely argue for a local government to pay for the complainant's fees, or for a city or county attorney to represent the complainant, even if the complainant is a government official or employee, as is the case in Stamford. Complainants can spend money investigating and writing a complaint, and they are often named in suits, and interviewed and questioned in hearings just as respondents are.
Assuming there was a violation, they are providing a better service to the community than an official who has arguably violated the ethics code. This is why City Ethics Model Code §110.2 provides for attorney's fees in a suit by a whistleblower who has been threatened, dismissed, etc.
Maricopa County, AZ, a spider's-nest of a local government, has a recent "Talk First, Sue Later" rule that requires elected officials, when engaged in disputes with other county officials, to try alternative dispute resolution methods before filing a suit. And if they file a suit, their department or agency must cover their own legal fees; no money may come from the county's general fund. This rule, which is a response to myriad intra-government disputes, would mean that no attorney's fees would have been awarded in Stamford.
Update: September 17, 2011
According to an article in the Stamford Advocate this week, the city is seeking a court determination of its obligation to pay the attorney's fees of the board of finance member who filed a suit against and then reached a settlement with the city's ethics board, and of a respondent council member whose ethics complaint was dismissed.
Robert Wechsler
Director of Research-Retired, City Ethics
---
An article in yesterday's Stamford Advocate keeps asking the question, Who should pay? The article is referring to attorney's fees related to an ethics proceeding. Most ethics codes do not deal with this issue, and therefore it often turns into a big political controversy after the fact, leaving a bad taste in citizens' mouths, especially if they are forced to foot the bill.
For this reason, it should be clear from the start who pays, under what circumstances, and how much.
An Attorney's Role in an Ethics Proceeding
It's worth noting what an attorney's role is in an ethics proceeding. In the beginning stages, before an investigation begins, there is nothing to do. Many, if not most, ethics complaints are dismissed at this stage.
The first thing an attorney does is help the official write a response to the complaint. Then, during an investigation, there is little else an attorney needs to do other than, possibly, be present when her client is interviewed and negotiate a settlement. And that settlement can include payment of attorney's fees, as did a recent settlement in an ethics proceeding against a member of Stamford's board of finance. But negotiating a settlement should not run up much of a bill.
Anything else, such as defending the official's reputation and filing ethics complaints and judicial actions (as the Stamford board of finance member did), is superfluous and should not be reimbursed under any circumstances.
An attorney's role expands if the ethics proceeding moves to the public hearing stage, and there is true disagreement regarding the facts (so that few facts can be stipulated to) and regarding the application of ethics code provisions to the particular situation (this is usually straightforward, although it was not in the Stamford case).
It's important to recognize that an ethics proceeding, if handled properly by both the respondent and the EC, is not a life-and-death matter. Fines are usually limited or unavailable, and in most jurisdictions there is no chance of jail time, a criminal record, suspension, or removal from office (a jurisdiction that criminalizes ethics should recognize that this might greatly increase requests for attorney's fees). In other words, in the great majority of cases, attorney's fees for a possible $1,000 fine, or even, as in Stamford, just a reprimand, should not be tens of thousands of dollars. Anyone who believes he might have to pay for attorney's fees would settle the case or argue it himself, especially considering that ethics proceedings are usually administrative in nature, which means that the evidentiary aspects are relatively easy to handle. They are not trials and require little legal expertise.
One can argue that one's reputation cannot be given a value, but if one handles an ethics complaint responsibly, there should be no serious harm to one's reputation. If one simply denies and fights back, that is a personal decision that should not be funded by the public.
And yet, another Stamford board of finance member was recompensed for $30,000 in legal fees even though the complaint against him was dismissed relatively early on. It is hard to believe that most of these fees were necessary. The board of finance member who filed ethics complaints and a judicial action says that he ran up over $100,000 in attorney's fees. This is outrageous. And it is ironic that someone known as a fiscal watchdog could be so extravagant when it came to, in his opinion, his reputation. This shows how much his attacks on city officials were more about him than about saving taxpayers money.
Local Government Payment of Attorney's Fees
The City Ethics Model Code deals with attorney's fees in two instances. With respect to an ethics proceeding, §213.14 requires the local government to pay a respondent's reasonable attorney's fees only "if the Ethics Commission finds that a complaint was filed with the knowledge that it is without foundation in fact," and only up to a certain dollar amount. This protects officials from having to pay to defend themselves against frivolous complaints (with "frivolous" defined more clearly).
Any provision for attorney's fees should, like the City Ethics Model Code, contain two elements: a dollar limit and the word "reasonable" before "attorney's fees." If an official files countercomplaints and court suits, as the Stamford board of finance member did, these should be considered unreasonable and not be paid by the government. If the official spends an inordinate amount on legal representation, she should have to prove that the expenditures were reasonable.
Some jurisdictions provide for the payment of attorney's fees in every case, either in laws or regulations, or via historical precedent. But it is more common to provide for the payment of attorney's fees only when a violation is not found. This seems fair to an official who is not found to have violated an ethics provision, until one realizes that there are many other ways to end a proceeding without finding there was a violation, including a settlement, resignation, dismissal on a technicality, the running of time limits, an injunction based on constitutional or other issues, and even threats of lawsuits (or actual lawsuits) against the commission, its members, or the complainant (who then asks that the proceeding be dismissed). In all of these situations, the official might have violated the code, and yet he has an incentive to prevent such a finding, knowing that the EC has limited resources and cannot afford to hold out for a finding of a violation. Remember, the official's attorney's fees wouldn't come out of the EC budget, so the EC's interests with respect to attorney's fees would differ from the local government's.
If an ethics complaint is dismissed because it does not state a possible violation, a good argument could be made that attorney's fees should be paid to the respondent, but since this is the first step in a proceeding, there should be hardly any attorney's fees at all. Respondents should be alerted to the strong possibility that a complaint will be dismissed without any action by the respondent. The respondent need not be in a rush to file a lengthy response, as long as there aren't overly short time requirements.
Government Protection or Indemnification of Its Officials
There is another sort of law that sometimes comes into play in determining who pays for attorney's fees in ethics and related proceedings: the government protection of local officials and employees statute. Here is the one in Connecticut that a Stamford official's attorney said required his client's reimbursement:
-
Sec. 7-101a. Protection of municipal
officers and municipal employees from damage suits. Reimbursement of
defense expenses. Liability insurance. Time limit for filing notice and
commencement of action. (a) Each municipality
shall protect and save harmless any municipal officer, whether elected
or appointed ... from financial loss and expense, including legal fees
and costs, if any, arising out of any claim, demand, suit or judgment
by reason of alleged negligence, or for alleged infringement of any
person's civil rights, on the part of such officer or such employee
while acting in the discharge of his duties.
(b) In addition..., each municipality shall protect and save harmless any such municipal officer or municipal employee from financial loss and expense, including legal fees and costs, if any, arising out of any claim, demand or suit instituted against such officer or employee by reason of alleged malicious, wanton or wilful act or ultra vires act, on the part of such officer or employee while acting in the discharge of his duties. In the event such officer or employee has a judgment entered against him for a malicious, wanton or wilful act in a court of law, such municipality shall be reimbursed by such officer or employee for expenses it incurred in providing such defense and shall not be held liable to such officer and employee for any financial loss or expense resulting from such act.
Therefore, I don't think this statutory section applies, but it is possible that a court would disagree, and certainly possible that a local government would pay its official's attorney's fees pursuant to such a statute. And, in any event, local governments usually insure their officials against suits brought against them, and it is possible that the insurance language may, at least arguably, include ethics complaints. Like so many problems in today's world, this one could boil down to insurance coverage. In a municipality where ethics proceedings are insured, officials could run up huge bills fighting an ethics commission, thereby making the ethics program appear too expensive and open for attack.
Complainant Payment of Attorney's Fees
Another approach is to force the complainant to pay attorney's fees if a complaint is dismissed. This is popular with officials, because it is the easiest way to prevent complaints from being filed. No matter how certain a complainant is about the facts, he has no control over how the code is interpreted or how the proceeding ends. Too many things are outside a complainant's control for anyone to file a complaint knowing that it might cost him many thousands or even tens of thousands of dollars.
More often, a complainant is required to pay attorney's fees only if a complaint is found to be without any foundation in fact. Or in such a case, the respondent is expressly permitted to sue the complainant for attorney's fees or even damages, the approach taken in City Ethics Model Code §213.13.
It is important to severely limit requirements on a complainant to pay a respondent's costs, because the last thing an ethics program should do is make it hard for even questionable complaints to be filed. Often complainants do not have access to much information, but have a reasonable belief that something is wrong. Such a complainant may have few facts and little understanding of government ethics. After all, most government officials have a poor understanding of government ethics, so why should complainants be penalized for having the same level of understanding?
In such situations, an investigation is needed to find out what is going on, and often an investigation leads to amending a complaint or even adding allegations. In a jurisdiction that allows anonymous tips and the filing of complaints by the ethics commission, there is far less need for complainants to file complaints with limited knowledge. This is a good argument for allowing anonymous tips and EC-initiated complaints, two things that most government officials do not like. It might be worth trading attorney's fees for these two provisions, since complainants with little information would be less likely to file poor complaints, and the EC could recommend that a poor complaint be withdrawn in favor of a tip to be investigated at the EC's discretion.
Government Attorney Representation of Respondents
Another approach is to allow respondents in ethics proceedings to be represented by the city or county attorney's office. This is less expensive for the local government, but it raises other problems, including conflicts. First of all, in many cases it would require the government to represent an official's personal interest against the public interest that the government attorney is pledged to protect. This puts the government attorney in a seriously conflicted position. I don't think it is right to ask this of anyone.
Second, if the government attorney advised the official on the matter, and the official did not follow the advice, how can the government attorney represent that official?
Third, in many cases the city or county attorney's office represents the ethics commission. Would it be fair to have the only person in the office with ethics expertise represent the official, while the ethics commission has to try to find someone with equivalent expertise, which is not easy to do? This would also raise a legal conflict situation, where an attorney is faced with representing a client in a matter before, or even argued by, his longstanding client.
This exacerbates what is already a difficult situation. In the Stamford situation, for example, even without representing the official in the proceeding, the corporation counsel withdrew from the matter, so that the ethics commission was forced to hire outside counsel.
And in some jurisdictions, the city or county attorney is charged with bringing criminal charges for ethics violations, which certainly prevents them from representing the official being charged.
Some Final Thoughts
One thing I find fascinating about arguments regarding attorney's fees is that people rarely argue for a local government to pay for the complainant's fees, or for a city or county attorney to represent the complainant, even if the complainant is a government official or employee, as is the case in Stamford. Complainants can spend money investigating and writing a complaint, and they are often named in suits, and interviewed and questioned in hearings just as respondents are.
Assuming there was a violation, they are providing a better service to the community than an official who has arguably violated the ethics code. This is why City Ethics Model Code §110.2 provides for attorney's fees in a suit by a whistleblower who has been threatened, dismissed, etc.
Maricopa County, AZ, a spider's-nest of a local government, has a recent "Talk First, Sue Later" rule that requires elected officials, when engaged in disputes with other county officials, to try alternative dispute resolution methods before filing a suit. And if they file a suit, their department or agency must cover their own legal fees; no money may come from the county's general fund. This rule, which is a response to myriad intra-government disputes, would mean that no attorney's fees would have been awarded in Stamford.
Update: September 17, 2011
According to an article in the Stamford Advocate this week, the city is seeking a court determination of its obligation to pay the attorney's fees of the board of finance member who filed a suit against and then reached a settlement with the city's ethics board, and of a respondent council member whose ethics complaint was dismissed.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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