Could Oconee County promise to defend and indemnify employees under its proposed 2014 ordinance?

Plain-English summary

Oconee County asked in 2014 whether its proposed ordinance could provide legal defense and indemnity to county employees and elected officials. The Attorney General did not decide whether the ordinance was constitutional; it said only a court could make that determination. It observed that the proposal covered acts within employment and excluded fraud, malice, intent to harm, and crimes involving moral turpitude.

The office flagged two gaps. The draft did not confine indemnity to civil actions or exclude situations in which a grand jury indicted an employee for criminal conduct. The opinion said an indictment reflected probable cause inconsistent with good faith for this purpose and believed criminal indemnification in that setting lacked authority without a specific statute. It also noted a mismatch between an introduction naming elected officials and operative language addressing employees, because some officials were not county employees. Any county promise remained subject to the Tort Claims Act, the cited state statute, and constitutional fiscal limits.

Currency note

This opinion was issued in 2014. 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 the AG approve Oconee County’s ordinance?
A: No. The office presumed ordinances constitutional until a court ruled otherwise, but it identified legal limits and drafting gaps rather than issuing a binding validity decision.

Q: Was excluding fraud and malice enough?
A: The opinion said those limits were present, but also warned that the draft did not restrict coverage to civil actions or address a grand jury indictment for criminal conduct.

Q: Were all elected officials covered as county employees?
A: The office pointed out that some officials were not county employees and the ordinance's introduction and operative text used different categories.

Background and legal framework

The request asked about the county's authority, the proposed defense and indemnification method, its limits, and constitutionality. The opinion reviewed prior advice about indemnifying officials, distinctions between job-related and personal litigation, and statutory and constitutional limits on county spending. It left a final constitutional determination to a court.

Citations and references

The opinion cited the South Carolina Tort Claims Act, South Carolina Code Section 1-7-50, and the state constitution's fiscal provisions.

Official title

Regarding the constitutionality and legality of Oconee County Ordinance No. 2014-24.

Requester

Thomas L. Martin, Esquire, Oconee County Attorney.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/november-18-2014-1/
• Original PDF: https://www.scag.gov/wp-content/uploads/2014/11/Martin-T.-OS-9847-11-18-2014-00492451xD2C78.pdf

Original opinion text

Alan W ilson

'^ouni

Attorney General

November 1 8. 2014
Thomas L. Martin, Esquire
Oconee County Attorney

c/o McNair Law Finn, P. A.
Post Office Box 447
Greenville, SC 29602
Dear Mr. Martin:

Attorney General Alan Wilson has referred your letter dated October 28, 2014 to the Opinions section for a response. The following is this Office's understanding of your question and our opinion based on that

understanding.
Issues (as quoted from your letter):
[We seek an] opinion as to the constitutionality and legality of Oconee County Ordinance No. 2014-24

giving indemnification, specifically:
1)

Whether or not a county may defend and indemnify public employees in the circumstances denoted in Ordinance 2014-24. should it desire to do so;

2)

Whether the means of defending and indemnifying County employees, as set forth in Ordinance 2014-24 is lawful and constitutional:

3)

Whether the limits on indemnification set forth in Oconee County Ordinance 2014-24 meet the requirements of avoiding unlimited indemnification as required by South Carolina law and Constitution: and

4)

Whether the Ordinance, in all other regards, passes legal and constitutional muster.

Law/Analysis:

This opinion in no way makes a determination as to the constitutionality of the ordinance, as only a court may declare an ordinance unconstitutional. Ops. S.C. Altv. Gen.. 1998 WL 485264 (August 9, 1988); 1998 WL 383512 (March 31, 1988); 1988 WL 485247 (March 17, 1988); 1986 WL 289836 (September

15, 1986). This opinion does not address any ethical issues. Moreover, while the ordinance references federal and state law, this opinion only reviews applicable stale law. It is this Office's understanding you have already received an informal opinion from the State Ethics Commission regarding any potential ethical issues.

Regarding indemnification at the State level, this Office has consistently stated that the State or one of its agencies must have specific statutory authorization for indemnification.

In a 2010 opinion, we noted

examples of opinions reaching this conclusion and summarized these opinions as follows:
...

this office has issued several prior opinions holding that, generally, state

agencies do not have the authority to enter into indemnification agreements. As stated in an opinion dated September 29. 2004 determining that indemnification agreements "are without legal authority".

REMBERTC.DENNis Building • Post Office Box 1 1549 • Columbia, SC 2921 1-1549 • Telephone 803-734rtQ7n FArcmii c Qm *)«

Thomas L. Martin, Esquire
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November 18, 2014
"[i]t is our longstanding opinion that a state agency possesses no

authority to enter into indemnification agreements. It is our further opinion that this conclusion is not changed by the addition of language "so far as the laws of the State permit" or any other language. Because a state agency possesses no authority to enter into indemnification

agreements, insertion ofthe above-cited language or any other language cannot change or alter such lack of authority. Our opinions concluding that a state agency possesses no authority to enter into indemnification or "hold harmless " agreements date back at least to 1966. Another opinion dated September 27, 1972 by former Attorney General McLeod

stated that

[ijn my opinion, there is no authority for the execution by the State of "hold harmless"

clauses.

Similar

instances

occur

in

nearly

all

agreements with the federal government and, while such clauses have been inserted in many instances in various agreements, there is, in my opinion, no authorityfor the inclusion ofsuch clauses. The basis for this

position is that the State thereby subjects itself to tort action, for which there is no authority absent legislative authorization, (emphasis added). An opinion ofthis office dated August 15, 1972 determined that
[it] has been the consistent opinion of this Office that governmental

agencies, in the absence of specific authority therefor, do not have the authority to execute such "hold harmless" clauses. The basis of this conclusion is that this State possesses sovereign immunity, with certain

deviations therefrom in limited circumstances. ..The execution ofa "hold harmless " clause is nothing more nor less than subjection ofthe State or one of its political subdivisions to tort liability and, in the opinion ofthis

Office, can only be done by the State itselfthrough legislative enactment. (emphasis added).

See also: Op. dated February 13, 1968 ("fwje have uniformly advised State agencies that they do not have authority to enter into indemnification agreements

of this nature. Even if entered into, it is questionable if any rights could arise thereunder. ").

As also stated in the referenced September 29, 2004 opinion, "...we have consistently concluded that a state agency 'derives its powers solely from the statutes created by the Legislature. " ' See also: Op. Arty. Gen. dated March 18, 2004 citing Razzle v Huff. 319 S.C. 443. 462 S.E.2d 273 (1993) and Nucor Steel v. S.C. Public Service Comm.. 310 S.C. 539. 426 S.E.2d 319 (1992). As pointed out by the 1972 opinions referenced above, generally, the State cannot subject itself to tort action "absent legislative authorization" or "in the absence of specific authority therefor. "

Op. S.C. Attv. Gen.. 2010 WL 1808721 (April 6, 2010). Furthermore, this Office has also previously opined that a county, like the State, would not likely be able to enter into an indemnification agreement without specific authority. Op. S.C. Attv. Gen.. 1991 WL 633070 (November 4, 1991). In that opinion this Office stated:

Thomas L. Martin, Esquire
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November 18, 2014

We realize that the question you have presented is not whether the County may agree to indemnify a third party; however, as to that limited question, we advise

that this Office has previously opined that State agencies, as a general rule, lack authority to enter into open-ended indemnification agreements. Op. fS.C.l Attv. Gen.. April 10, 1991. We ha\'e no doubt that a similar conclusion would be

reached with regard to counties. See Wright v. Colleton County School District. 301 S.C. 282, 391 S.E.2d 564 (1990) [A political subdivision may not waive

immunity provisions provided by State law]; see also, S.C. Const. Art. X, Section 8 (1990 Cum.Supp.) ["Monies shall be drawn from ... the treasury of any of [the State's] political subdivisions only in pursuance ofappropriations made by law. "]; Id.. Art. X, Section 7(b) [Annual expenditures shall not exceed annual revenues]. Id.

Against this background, let us review certain rights belonging to a county applicable to this opinion. A county may sue and be sued. S.C. Code § 4-1-10 (1986 & Supp. 2013). A county may execute contracts

and do all acts necessarily relating to the property and concerns of the county. Id.

A federal court has

acknowledged that "[ajlthough a state and its agencies are entitled to Eleventh Amendment immunity, the Eleventh Amendment does not bar suits against local government entities or local government officials

sued in their official capacity. Gray v. Laws. 51 F.Sd 426, 431 (4th Cir. 1995)." Currv v. S.C.. 518 F. Supp.2d 661, 668-669 (D.S.C. 2007).

As stated above, this opinion in no way makes a determination as to the constitutionality of the ordinance, as only a court may declare an ordinance unconstitutional. Ops. S.C. Attv. Gen.. 1998 WL 485264 (August 9, 1988); 1998 WL 383512 (March 31, 1988); 1988 WL 485247 (March 17, 1988); 1986 WL

289836 (September 15, 1986). As this Office has previously stated:

We start with the basic proposition that a county ordinance would be entitled to a presumption of validity. Consistent with Article VIII of the South Carolina Constitution, which mandates Home Rule, a county possesses police power to enact ordinances tofurther the health and welfare of its residents. See § 4-9-30. As the Supreme Court ofSouth Carolina cautioned in Rothschild v. Richland County Bd. of Adjustment. 309 S.C. 194, 420 S.E.2d 853, 855 (1992), "it is well settled that ordinances, as with other legislative enactments, are presumed constitutional; their unconstitutionality must be proven beyond a reasonable doubt. " A court will

not declare an ordinance invalid unless it is clearly in conflict with the general law. Hospitality Assn. of S.C. v. County of Charleston. 320 S.C. 219, 464 S.E.2d

113 (1995). Keeping in mind the presumption of validity and the high standard which must be met before an ordinance is declared invalid, we note that, while this Office may comment upon constitutional problems or a potential conflict with general law, only a court may declare an ordinance void as unconstitutional, or preempted by or in conflict with State law. Accordingly, an ordinance will continue to be enforced unless and until set aside by a court of competent jurisdiction. Op. S.C. Attv. Gen.. March 21, 2003 (2003 WL 21043502). In Hospitality Assn.. the Court recognized the test for resolving the issue of the validity ofa local ordinance vis-a-vis State law. There, the Court stated that:

Thomas L. Martin, Esquire
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November 18, 2014

[djetermining if a local ordinance is valid is essentially a two-step process. The first step is to ascertain whether the county or municipality

that enacted the ordinance had the power to do so. If no such power existed, the ordinance is invalid and the inquiry ends. However, if the

local government had the power to enact the ordinance, the next step is to ascertain whether the ordinance is inconsistent with the Constitution or general law ofthis State. Id.. 464 S.E.2d at 116. The Court referenced § 4-9-25, which provides that:
[a]11 counties of the State ...

have authority to enact regulations,

resolutions, and ordinances ... respecting any subject as appears to them necessary and proper for the security, general welfare, and convenience

of counties or for preserving health, peace, order, and good government in them....

The Court and this Office recognize that § 4-9-25 provides general police powers to counties. See, e.g.. Greenville County v. Kenwood Enterprises. Inc.. 353 S.C. 157, 164, 577 S.E.2d 428, 431 (2003), overruled on other grounds by Bvrd v. Citv

of Hartsville. 365 S.C. 650, 620 S.E.2d 76 (2005); Op. S.C. Attv. Gen.. September 22, 2008 (2008 WL 4489051). This broad grant ofpower, noted the Court, "is

limited only by the requirement that the regulation, resolution, or ordinance be consistent with the Constitution and general law of this State. " Hospitality Assn.. 464 S.E.2d at 116. Moreover, the [...] Court stressed that § 4-9-25 states that

"[tjhe powers of a county must be liberally construed in favor of the county and the specific mention ofparticular powers may not be construed as limiting in any manner the general powers ofcounties. " Id

Thus, the first question which must be addressed in analyzing whether cm ordinance is consistent with State law is the authority of counties to regulate in

this area. Put another way, is the ordinance preempted by state law? The test for preemption of local government regulation is set forth in Buesv's. Inc. v. Citv of Mvrtle Beach. 340 S.C. 87, 530 S.E. 2d 890 (2000), in which the Court stated that:
[i]n order to preempt an entire field, an act must make manifest a legislative intent that no other enactment may touch upon the subject in any way. Town ofHilton Head Island v. Fine Liquors. Ltd.. 302 S.C. 550, 397 S.E. 2d 662 (1990). In Fine Liquors. Ltd.. the Court held, although the General Assembly gave the Alcoholic Beverage Control Commission the sole and exclusive authority to sell beer, wine and alcohol, it had not preempted the field so as to preclude the Town of Hilton Head from passing a zoning ordinance which prohibited internally illuminated "red dot" signs. Buesv's. 530 S.E. 2d at 892.

Applying the "manifest intention" test, the Court in Bugsv's found that "while the General Assembly has enacted a comprehensive scheme regulating many aspects

of video poker machines, the scheme does not manifest an intent to prohibit any other enactmentfrom touching on video poker machines. "Id. ... Op. S.C. Attv. Gen.. 2013 WL 1803938 (April 18, 2013).

Thomas L. Martin, Esquire
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November 18, 2014
The South Carolina Legislature has addressed the payment of defense of actions against public officers

and employees by statute. South Carolina Code Section 1-7-50 states: In the event that any officer or employee of the State, or of any political

subdivision thereof, be prosecuted in anv action, civil or criminal, or special proceeding in the courts of this State, or of the United States, bv reason of anv act done or omitted in good faith in the course of his employment it is made the duty of the Attorney General, when requested in writing by any such officer or employee, to appear and defend the action or proceeding in his behalf. Such appearance may be by any member of his staff or by any solicitor or assistant solicitor when directed to do so by the Attorney General. (Emphasis added) (1976 Code, as amended). However, the statute goes on to require an investigation first unless it appears the officer or employee was acting in good faith within the scope of his employment. S.C. Code § 1-7-60 (1976 Code, as amended).

This Office stated in a previous opinion

concerning this statute:

As can be seen, § 1-7-50 provides for legal representation by the Attorney General even in criminal matters, if the requisite goodfaith requirements are met. Former Attorney General McLeod drafted this statute in 1960, and submitted it to the General Assembly, which enacted it that year. In a letter written to the Attorney General of Arkansas on January 13, 1969, General McLeod wrote that "[i]n the past this office, for a number of years and without specific statutory authority, represented officers and employees of the State who were charged criminals as a result of their actions. Thus, in order to alleviate the absence of express statutory authorityfor such representation, the Attorney General proposed what is now § 1

7-50. In that same letter, General McLeodfurther advised that:
I suggested the enactment of the statute referred to in the belief that officers should not have to undertake the payment of their own expenses in defending actions brought against them for acts done in the performance oftheir duties.

Op. S.C. Attv. Gen.. 2014 WL 4253409 (August 14, 2014). Therefore, any such ordinance should require good faith and that any action be within the course of employment in order to indemnify. Regarding tort liability, the South Carolina Legislature expressed its intention in South Carolina Code § 15-78-20 regarding the public policy in this State "that the State, and its political subdivisions, are only liable for torts within the limitations of this chapter and in accordance with the principles established herein." The statute goes on to grant the State, all political subdivisions and all employees acting within the scope of their official duty immunity from liability and suit for tort other than what is waived in Title 15, Chapter 78. S.C. Code § 15-78-20(b) (1976 Code, as amended). The law states that all other immunities for government entities are preserved and that Chapter 78 is the exclusive civil remedy for torts by government entities and their employees. Id. Therefore, the only liability for torts for political

subdivisions of the State and their employees must be within the parameters of Title 15, Chapter 78.' South Carolina Code § 15-78-70 gives the exclusive remedy for torts committed by employees of

1 Please note compliance with the South Carolina Tort Claims Act would also include compliance with the South Carolina Insurance Reserve Fund (pursuant to S.C. Code § 1-1 1-140, et al.) in addition to any other applicable laws and insurance requirements.

Thomas L. Martin, Esquire
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government entities as long as the employee's conduct was within the scope of his official duties and was

not fraud, actual malice, intent to harm or a crime involving moral turpitude. An action brought against the governmental agency should name the agency or political subdivision as the defendant, not the employee individually, unless it cannot be determined which agency the individual is employed by. S.C.

Code § 15-78-70 (1976 Code, as amended). Any person who "may suffer a loss proximately caused by a tort of the State, an agency, a political subdivision, or a governmental entity, and its employee acting

within the scope of his official duty" has standing to file a claim under the Tort Claims Act. S.C. Code § 15-78-50(a) (1976 Code, as amended). Moreover, no governmental entity is liable for the tort of one of

its employees if the employee, as a "private person" would not himself be liable. S.C. Code § 15-78-50(b) (1976 Code, as amended). One concern in any such ordinance would be that it attempts to expand tort

liability outside of the scope of Title 15, Chapter 78.

This Office has previously opined that a county

council may indemnify a councilman acting within the scope of his official duties done in a good faith. Op. S.C. Attv. Gen.. 1987 WL 342727 (November 23, 1987).

An employee should not be personally

named in a lawsuit for torts committed within the scope of his official duty. S.C. Code § 15-78-70 (1976

Code, as amended).

Furthermore, the Tort Claims Act includes public officials and officers within the definition of an employee for purposes of the Act. S.C. Code § 15-78-30(c) (1976 Code, as amended). While a court has previously defined a public official as a government employee, this may not always be the case. Erickson v. Jones Street Publishers. LLC. 368 S.C. 44, 629 S.E.2d 653 (2006). While this Office is not aware of all

the officers and employees the ordinance is attempting to indemnify, a county auditor is appointed by the Governor to a four-year term, and this Office has opined that an auditor holds a public office. See S.C. Code § 12-39-10; On. S.C. Attv. Gen.. 2005 WL 2652384 (September 26, 2005). Moreover, this Office

has stated that while an employee of a county may be a public official, an official may not necessary be an employee of a county. Ops. S.C. Attv. Gen.. 2013 WL 4636665 (July 26, 2013); 2013 WL 3479875 (June 28, 2013); 1999 WL 397927 (February 17, 1999). While the ordinance designates employees and public officials as "employees," a public official may or may not also be the employee of a county. Id.

Moreover, this Office has issued previous opinions concerning reimbursement of funds. As we stated in a 1997 opinion, neither public funds nor counsel paid for with public funds may be used in a criminal proceeding without specific statutory authorization. On. S.C. Attv. Gen.. 1997 WL 323769 (May 13, 1997). Furthermore, as quoted above, this Office answered a similar question concerning representation of a Retirement Systems Investment Commission member and stated in that opinion: As one authority has stated,
[i]he purpose ofa statute requiring a governmental entity to pay costs or

fees incurred by or on behalf of an employee, in defense of a claim or suit for a loss occurring because ofacts or omissions within the scope of employee's employment, is to protect office holders from litigation by those dissatisfied with the decisions they make ... In contrast, public officials who pursue or defend personal suits ordinarily must bear their own legal expenses. 67 C.J.S. Officers. § 387. Further, as stated in Fillipone v. Mavor ofNewton. 352

Mass.

622, 629, 467 N.E.2d 182 (1984),

"fa]s a matter of policy, public

indemnification of public officials serves in part to encourage public service. " Courts have concluded that such indemnification statutes are " "quintessentially remedial legislation, " enactedfor the benefit ofpublic employees, and thus are "to

Thomas L. Martin, Esquire
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November 18, 2014

be liberally construed to effectuate [their] beneficial purpose. " Montgomery County Bd. ofEd. v. Horace. 860 A. 2d 909, 919 (Md. 2004).

Op. S.C. Attv. Gen.. 2014 WL 4253409 (August 14, 2014).

In the 2014 opinion this Office also

cautioned that in most circumstances involving criminal matters, especially where an officer has been indicted by a Grand Jury, indemnification would not be appropriate. Id.

Conclusion: The proposed ordinance you provided appears to limit indemnification to actions within the scope of an employee's duties and specifically excludes fraud, malice, intent to harm or a crime involving moral turpitude.

However, the ordinance does not limit it to civil actions or to actions where no grand

jury indicts an employee for criminal conduct.

As discussed above, this Office has consistently opined

where there has been a grand jury indictment, there is a finding of probable cause that a crime has been committed and would not be considered good faith. Op. S.C. Attv. Gen.. 2014 WL 4253409 (August 14, 2014).

Moreover, while your ordinance lists employees and elected officials in its introduction, the body of the ordinance discusses employees generally. This Office has noted some public officials are not employees of a county, even though they work closely with a county. Ops. S.C. Attv. Gen.. 2013 WL 4636665 (July 26, 2013); 2013 WL 3479875 (June 28, 2013); 1999 WL 397927 (February 17, 1999).

As we also stated above, while this Office does not have the authority to declare whether the proposed ordinance is constitutional or not, the law is clear indemnification cannot exceed the scope of the South Carolina Tort Claims Act, South Carolina Code Section 1-7-50, or the South Carolina Constitution. See,

e.g.. S.C. Const. Art. X, § 8 ("Monies shall be drawn from ... the treasury of any of [the State's] political subdivisions only in pursuance of appropriations made by law."); S.C. Cons. Art. X, § 7(b) (Annual expenditures shall not exceed annual revenues). Furthermore, this Office believes that without specific statutory authorization, indemnification cannot be for criminal acts where the accused has been indicted. Nevertheless, this Office presumes any such ordinance is constitutional until declared otherwise by a court. Op. S.C. Attv. Gen.. 2013 WL 1803938 (April 18, 2013).

Please note this Office is only issuing a legal opinion based on the current law at this time. Until a court or the Legislature specifically addresses the issues presented in your letter, this is only an opinion on how this Office believes a court would interpret the law in the matter. Additionally, you may also petition the court for a declaratory judgment, as only a court of law can interpret statutes and make such determinations. S.C. Code § 15-53-20, et al. If it is later determined otherwise or if you have any additional questions or issues, please let us know. Sincerely,

Anita S. Fair
Assistant Attorney General

Thomas L. Martin, Esquire
PageS
November 18, 2014

REVIEWED AND APPROVED BY:

lobert D. Cook

Solicitor General