Can a law firm that serves as bond counsel to a municipality also represent private clients before that municipality's governing body or boards?

Plain-English summary

The inquiry asked to what extent a law firm, and therefore its members, is precluded from representing clients before a municipal board or body when the firm also acts as bond counsel for that municipality. The facts were that a municipality had retained the firm as bond counsel and that, while serving in that capacity, members of the firm had appeared before the governing body on behalf of land developers seeking zoning changes and property exchanges. The firm's bond work was handled exclusively by its bond department and the firm was involved with the municipality only on an irregular basis.

The Committee held that the bond-department-only insulation was of no significance. Under RPC 1.10(a), when lawyers are associated in a firm, none may knowingly represent a client when any one of them practicing alone would be barred from doing so by RPC 1.7, 1.9, or 2.2; the disqualification is imputed to the whole firm. And because a public entity was involved, the Committee stated that any disqualification could not be waived.

Turning to the substance, the Committee concluded that RPC 1.7 applies: bond counsel employed by a public entity must avoid not only conflicts of interest but also the appearance of impropriety. The opinion held that such counsel cannot act as bond counsel for a public entity and at the same time represent private interests in effecting property exchanges with that same entity, nor appear on behalf of private interests before agencies of that entity while serving as bond counsel. The opinion noted the statutory framework governing municipal bond financing, the Local Bond Law (N.J.S.A. 40A:2-1 et seq.), and directed the bar's attention to RPC 1.7(c) and the comment to RPC 1.7.

Currency note

This opinion was issued in 1985, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct (which abolished the freestanding "appearance of impropriety" standard the Committee invoked and reorganized the conflict rules). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Does it matter that only the firm's bond department handles the municipality's bond work?

A: No. The opinion held that confining the bond work to one department is of no significance, because RPC 1.10(a) imputes one lawyer's disqualifying conflict to the entire firm.

Q: Can the municipality consent to waive the conflict?

A: No. The opinion stated that because a public entity is involved, any disqualification may not be waived.

Q: What specifically may bond counsel not do for private clients?

A: Per the opinion, bond counsel may not represent private interests in effecting property exchanges with the same public entity, nor appear for private interests before that entity's agencies, while acting as its bond counsel.

Background and rules framework

The opinion applies RPC 1.7 (general conflict-of-interest rule) and the imputation rule of RPC 1.10(a), together with the appearance-of-impropriety doctrine as it stood in 1985. It situates the analysis in the statutory scheme for municipal bond financing under the Local Bond Law, N.J.S.A. 40A:2-1 et seq., including N.J.S.A. 40A:2-38.1 governing compensation of bond counsel.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NJ RPC 1.7 and 1.7(c) (conflict of interest: general rule)
• MR 1.10 / NJ RPC 1.10(a) (imputed disqualification within a firm)

Statutes:

• N.J.S.A. 40A:2-1 et seq. (Local Bond Law)
• N.J.S.A. 40A:2-38.1 (compensation of attorneys in connection with the issuance of bonds)

See also

• NJ ACPE Op. 606: Regional Utilities Authority Counsel and a Municipal Zoning Board
• NJ ACPE Op. 620: Partner of Planning Board Counsel as Utilities Authority Counsel
• NJ ACPE Op. 622: County Counsel Appearing Before Local Boards

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp571-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

116 N.J.L.J. 270, August 22, 1985

OPINION 571

Conflict of Interest - Bond Counsel for Municipality Representing Clients Before Governing Body or Municipal Boards

The inquiry presented to us is as follows:

"To what extent is a law firm, and consequently its members, precluded from representing clients before a municipal board or body when they also act as bond counsel for that municipality?"

The inquirer states that a municipality has retained a law firm as bond counsel and that, while acting in that capacity, members of that firm have appeared before the governing body of the municipality on behalf of land developers seeking zoning changes and exchanges of property.

The law firm which acts as bond counsel is involved with the legal aspects of the municipality's tax-exempt financing program. It prepares bond ordinances for projects funded through the issuance of debt and prepares the various certificates and legal opinions for the issuance of bond anticipation notes and long term bonds. We are advised that the law firm is involved with the municipality only on an irregular basis and that the work of the firm as bond counsel is handled exclusively by members of the firm's bond department.

In situations where there is a conflict of interest or the appearance of conflict the fact that the legal work performed in connection with the municipality's tax-exempt financing program is handled exclusively by members of the firm's bond department is of no significance. Under R.P.C. 1.10(a),

When lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by R.P.C. 1.7, R.P.C. 1.9 or 2.2.

Since there is a public entity involved, any disqualification may not be waived.

The financing programs of every municipality in this state are subject to and controlled by the provisions of the "Local Bond Law" N.J.S.A. 40A:2-1 et seq. N.J.S.A. 40A:2-38.1 of that statute provides as follows:

No county, municipality or other political subdivision of the State or any board, commission or agency thereof, shall compensate an attorney for services rendered in connection with the issuance of bonds other than at a reasonable rate agreed on prior to the rendering of services.

Bond counsel provide legal services to governmental units in connection with the authorization and sale of bonds and notes. They are employed and paid by the governmental unit which engages their services to represent its interests in the financing program.

Our opinion is that R.P.C. 1.7 "Conflict of Interest: General Rule" applies to the present inquiry. Bond counsel employed by a public entity must avoid not only conflicts of interest, but also the appearance of impropriety. They cannot act as bond counsel for a public entity and represent private interests in effecting property exchanges with the same public entity, nor can they appear on behalf of private interests before agencies of the public entity while acting as bond counsel.

We direct the attention of the bar to R.P.C. 1.7(c) and the last paragraph of the "Comment to R.P.C. 1.7", dated July 12, 1984, which is as follows: