Could a Kentucky university hire a trustee's spouse for professional services without bidding?

Plain-English summary

The University of Louisville considered hiring a company owned by the husband of a university trustee. It asked whether the marriage created a conflict and whether the trustee-contract rule applied to a professional services contract that ordinarily did not require public bidding.

The Attorney General answered the two questions separately. Marriage by itself did not establish that the trustee had a personal financial interest in her spouse's company. Whether she actually had one was a factual question for the university to investigate; the opinion did not resolve it. If she did have that interest, KRS 45A.340(7) allowed a contract involving a trustee only through competitive bidding. The opinion concluded that the proposed personal services contract could not be awarded through a nonbid procurement in that circumstance.

Currency note

This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did a Kentucky university trustee automatically have a conflict if the university hired the trustee's spouse? A: The 1998 opinion said no. The marriage alone did not prove that the trustee had a personal and pecuniary interest in the contract. The university still had to determine the actual facts.

Q: Could the university use a nonbid professional services contract if the trustee had a financial interest? A: No, under the opinion's reading of KRS 45A.340(7). It required competitive bidding for a trustee-interested contract even when the ordinary procurement rules would otherwise allow another method.

Q: Did the Attorney General decide whether this trustee had an interest in her husband's company? A: No. The opinion said the university had to conduct a reasonable factual inquiry into the trustee's direct or indirect interest before deciding how the contract could be handled.

Background and statutory framework

KRS 45A.340(7), as quoted in the opinion, imposed bidding, lowest-bidder and advance-notice conditions when a university trustee or regent had an interest in a contract. The Attorney General treated these as conditions on the interested person's participation, including where a personal services contract would ordinarily be exempt from bidding. It declined to extend an earlier AG opinion's narrower reading of a different subsection to this trustee provision.

The opinion reviewed decisions about contracts with public officials' spouses to explain why a family relationship alone did not settle the interest question. It drew a distinction between marriage itself and an actual personal, pecuniary stake in the transaction.

Citations and references

Statutes: KRS 45A.340(7); KRS 45A.085; KRS 45A.095.

Cases: Githens v Butler County, 165 SW 2d 650 (Mo 1942); People v Simpkins, 45 Ill App 2d 202.

Source

• Landing page: https://kdla.access.preservica.com/uncategorized/IO_6a45add8-60c8-4078-a22b-6d71fbb26491/
• Original PDF: https://kdla.access.preservica.com/download/file/IO_6a45add8-60c8-4078-a22b-6d71fbb26491

Original opinion text

OAG 98-5
April 14, 1998
Subject:

Whether spouse of university trustee may contract
with the university

Requested by:

Thomas H. Lyons, counsel for University of Louisville

Written by:

Ross T. Carter

Syllabus:

Whether conflict of interest arises when spouse of a
public officer deals with the public agency is a factual question, not a legal one; conflict does not automatically arise as a matter of law. Trustee or regent may contract with university only via competitive bidding.

Statutes construed:
OAGs cited:

KRS 45A.340(7)

OAG 91-110 (f), OAG 87-65 (c)

Opinion of the Attorney General
The University of Louisville is considering a proposal to hire Medical Assessment Center, Inc., to provide professional services to the university. This corporation is owned by Dr. Sy Auerbach, whose wife, Mynx, is a member of the university’s board of trustees. Our opinion has been sought in order to resolve legal questions that arise because of the spousal relationship between the trustee and the contractor.

OAG 98-5
Page 2

Our attention is directed specifically to KRS 45A.340(7), which
states:
No member of a board of trustees or regents shall have an
interest in any contract with a state university unless such
contract shall have been subjected to competitive bidding
in compliance with KRS Chapter 45A, unless such trustee
or regent shall have been the lowest bidder and unless
such trustee or regent shall have first notified in writing
the remaining members of the board, and to the newspaper having the largest circulation in the county in which the university is located, of his intention to bid on such contract. Two issues confront us: whether Minx Auerbach has an interest in the contracts of her spouse, and whether KRS 45A.340(7) applies in situations that do not otherwise require a contract to be publicly bid. 1.

Contracts between government agency and spouse of
public officer

We have dealt with this subject before. In OAG 91-110 we stated
the general rule that statutes dealing with disqualifying interests of a
public officer do not apply to interests of the officer’s spouse. We
noted that this is the majority view in the United States. We have reexamined our conclusion in OAG 91-110 and although today we depart slightly from the analysis in that opinion, we reaffirm the soundness of its conclusion. In OAG 91-110 we cited various authorities supporting the view that a spousal relationship, or indeed any family relationship, is not in itself sufficient to taint a contract between the government and the spouse of a public official. We considered a case from Missouri, Githens v Butler County, 165 SW 2d 650 (Mo 1942), as representing the minority view. Further reflection reveals that Githens is in accord with the general principle rather than in conflict with it. The case involved the sale of land from a county to the spouse of the county

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judge. The court upheld a setting aside of the contract as a conflict of
interest. The court cited two aspects of the marital relationship that
united the wife’s interest in the property with her husband’s: the husband’s legal obligation to support the wife, and the husband’s dower interest. While courts today might disagree on the importance of the first reason, the second reason remains sound. The husband’s dower interest automatically gave him a pecuniary interest in the property conveyed; that is, even though the wife purchased the land in her own name and with her own funds, a definable interest in that land passed immediately to her husband by operation of the real property laws. We believe that Githens v Butler County does not depart from the majority view; rather, it deals specifically with conveyances of real property and correctly observes that in such transactions the interest of one spouse in the other’s property is direct, certain, and measurable. The case does not hold that as a general matter all property interests of one spouse belong to the other spouse. We are not aware of any court that has taken such a position, community property states excepted. Cases subsequent to Githens have reflected the dominant view that a marital relation in itself is insufficient to taint a contract with the spouse of a public official. In People v Simpkins, 45 Ill App 2d 202, 359 NE 2d 828, 833 (1977), the court found no conflict when a mayor’s wife worked for the city. The court observed, “In almost every instance when the question has been presented to the courts of the various jurisdictions, the mere fact of relationship, without more, has been held to have no disqualifying effect.” The court considered Githens and similar cases and concluded, “We think none of these cases weakens the general rule that the wife’s interest is not necessarily the husband’s interest, provided the contract is not a mere subterfuge for his own pecuniary interest.” In Coyne v State ex rel Thomas, 595 P 2d 970, 974 (Wyo 1979), a case involving school trustees whose spouses were school employees, the court observed, “A majority of the courts have held that family relationship, without more, does not disqualify an officer from act-

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ing on a matter involving the relative.” The court reversed a ruling
that ousted the trustees from office.
In Forster v Delton School District, 176 Mich 582, 440 NW 2d
421, 424 (1988), suit was brought against a school district officer who
negotiated a contract with teachers while his spouse was a teacher in
the district. The court upheld the officer’s actions, observing, “If the
Legislature intended to preclude a public officer or employee from participating in contract negotiations under which their spouse might be one of the several beneficiaries, it could have expressly provided for such a situation by inserting the word ‘spouse’ in the statute.” As we pointed out in OAG 91-110, a disqualifying interest must be personal and pecuniary. For example, in Woodward v City of Wakefield, 236 Mich 417, 210 NW 322 (1926), the court invalidated a contract between a city and the wife of the mayor where the wife did not participate in the household’s business affairs and considered her husband to be acting as her agent in the transaction. Because we are not sitting as a tribunal and can make no findings of fact, we cannot determine whether Minx Auerbach has in fact an interest in Medical Assessment Center, Inc. We rely on the parties to make candid disclosure of the facts and reasonable assessment of those facts. That process should be simplified now that we have clarified that the marital relationship by itself is not dispositive in this inquiry. 2.

Application of KRS 45A.340(7)

The subsection in question establishes three rules that apply
when a university trustee or regent has an interest in a proposed contract with the university:


The contract must be subjected to competitive bidding in
compliance with chapter 45A.



The trustee or regent must be the lowest bidder.



The trustee or regent must notify the board and the largest
local newspaper of his intention to bid on the contract.

OAG 98-5
Page 5

Obviously these rules presume that the contract will be reached
through regular competitive bidding. But chapter 45A does not always
require competitive bidding; in certain situations procurement may be
made by competitive negotiation (KRS 45A.085) or noncompetitive negotiation (KRS 45A.095). Particular rules apply to personal service contracts (KRS 45A.695). The contract with Medical Assessment Center, Inc. is for personal services and, were a trustee not involved, would be exempt from the bidding requirements of chapter 45A. The question before us is whether KRS 45A.340(7) removes that exemption and requires the contract to be bid or, stated another way, whether it prevents a trustee or regent from participating in all procurements that are effected by means other than competitive bidding. In OAG 87-65 we addressed another subsection of KRS 45A.340. Subsection 5 prohibits state officers from having contracts with the state “unless said contract, agreement, sale or purchase was made or let after public notice and competitive bidding.” We said that the restrictions in KRS 45A.340(5) do not apply when contracts are made through means other than competitive bidding. If we follow the thinking of OAG 87-65 to the subsection before us, KRS 45A.340(7), we must conclude that it does not apply when the contract is not publicly bid. We decline to do this. While we do not overrule OAG 87-65 and do not propose a new construction of subsection 5, we believe the logic of OAG 87-65 is not sufficiently sound to warrant its extension to other subsections of KRS 45A.340. Our reasoning is simple. Public bidding is without doubt the most open and collusion-free of the available methods of procurement. Other methods, such as competitive negotiation, provide needed flexibility at the cost of strict objective evaluation of competing contractors. Subsection 7 places some strict restraints on the procurement method that is already the most strict. We do not believe that those constraints should be less applicable when a more liberal procurement method is chosen; if anything, one would expect more restrictions, not

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fewer, as the procurement method slides farther away from highly objective, highly scrutinized public bidding. If collusive contracts with trustees cannot be prevent by the ordinary safeguards of competitive bidding, then there is no reason to believe that they can be prevented by the more lenient safeguards applicable to other procurement methods. Subsection 7 plainly states that the contract must be subjected to competitive bidding. It does not say “unless a different method is authorized by statute,” words that we supplied when construing subsection 5 and that we refuse to supply here. Just as the court in Forster v Delton School District was unwilling to insert the word “spouse” into a statute, we are unwilling to insert words into KRS 45A.340(7). We construe KRS 45A.340(7) as allowing a trustee or regent to contract with the university only when the procurement is done by competitive bidding. Trustees and regents may not participate in other types of procurements. 3.

Conclusion

If Minx Auerbach has some personal and pecuniary interest in
Medical Assessment Center, Inc., then Dr. Sy Auerbach may not be
awarded a personal services contract with the university. The university, on behalf of the Commonwealth, must conduct a reasonable inquiry in order to make this determination. While it may be difficult for Minx Auerbach to demonstrate no interest, direct or indirect, in the corporation, this is a fact finding process for the university to resolve. We recognize the delicacy of this task, involving as it does the flow of funds within the Auerbach household as well as the management, direction, and control of the corporation. Nevertheless, given the consequences of KRS 45A.990(3), all parties will benefit from a candid and good-faith disclosure of the facts.

OAG 98-5
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A. B. Chandler III
Attorney General

Ross T. Carter
Assistant Attorney General