Issue
The Attorney General of California recently addressed two questions concerning potential conflicts of interest for directors of community services districts. (Attorney General Op. No. 03-408 (Sept. 3, 2003))
The district in question manages groundwater resources within the district’s boundaries, and issued a development permit to a neighbor of a member of the district’s board of directors. The director did not participate in the decision to issue the permit, and filed a lawsuit against the district seeking to overturn the board’s decision due to the possible adverse effects of the proposed development. The Attorney General was presented with the following questions:
- (1) whether a director of a community services district must resign from the board after filing a lawsuit challenging the board’s action; and
- (2) if the director remains on the board, whether he and the district may enter into an agreement settling the lawsuit.
Analysis
Resignation from Office. California’s Political Reform Act of 1974 (Government Code §§ 81000-91040) prohibits public officials from participating in any aspect of government decision-making concerning a matter in which the official has a financial interest. The official is not required to forfeit his office merely because he has such an interest, however. Neither the Political Reform Act nor other relevant state statutes prohibit a director from filing a lawsuit against a public agency of which he is a board member challenging an agency action concerning such a matter. The Attorney General therefore concluded that, while a director who files a lawsuit must completely recuse himself from all board business related to the matter, he is not required to resign from the board.
Settlement Negotiations. Because settlement agreements are contracts, the conflict-of-interest provisions of Government Code § 1090 apply. Section 1090 prohibits public officers acting in their official capacities from entering into any contract in which they have a financial interest. The prohibition extends to any public body or board of which the public official is a member, and applies even when the terms of a proposed contract are favorable to the agency in question. Violation of § 1090 would invalidate any agreement entered into while an interested board member is on the board, even if the member recused himself from participating in negotiations or executing the agreement. Here, settlement of the director’s lawsuit would present an unavoidable conflict of interest and the interested director would be presumed to have made the contract as a member of the board as well as on his own behalf. The Attorney General therefore concluded that, as long as the director remains on the board, the district and the director may not enter into an agreement settling the lawsuit.
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