TO THE HONORABLE MAYOR AND COUNCIL
DATE: November 11,2003
SUBJECT: REIMBURSEMENT OF ATTORNEYS' FEES FOR VICE-MAYOR RISCH IN CONNECTION WITH DEFENSE OF THE INVESTIGATION RELATED TO DOWNTOWN INCIDENTS OVER LABOR DAY WEEKEND 2003
REPORT IN BRIEF
At the October 7, 2003 City Council meeting under Citizens to be Heard, the President of the Public Safety Officers Association (PSOA) requested the City Council investigate the actions of the Vice-Mayor and the City Manager with regard to an incident in the Downtown which happened over the Labor Day weekend. The Mayor established a subcommittee and an investigation was undertaken. The Vice-Mayor retained an attorney to assist him during the investigation. The result of the investigation was that the subcommittee did "not find misconduct under the City Charter, the Code of Conduct or the Code of Ethics that rises to a level requiring sanctions." (RTC 03-374) The Council concurred in this determination at its meeting on October 21, 2003. The Vice-Mayor now seeks reimbursement of his attorneys' fees from the City. (RTC 03-401) Whether or not to reimburse these fees is up to the City Council to decide; there is no legal prohibition against such reimbursement, nor is there an absolute requirement for such reimbursement.
BACKGROUND
Under the California Tort Claims Act, the City has a legal obligation to defend and indemnify its employees in a civil lawsuit, when the lawsuit arises out of acts performed by employees in the course and scope of their duties. Cal. Gov’t Code § 825. In the case of administrative and criminal proceedings, however, the City has no legal obligation to defend or indemnify its employees. Cal. Gov’t Code §§ 995.4, 995.6, 995.8. Under the law officials such as members of the City Council are considered to be employees. The October investigation was administrative in nature.
Particularly applicable to this situation is Section 995.4, which reads:
A public entity may, but is not required to, provide for the defense of:
(a) An action or proceeding brought by the public entity to remove, suspend or otherwise penalize its own employee or former employee, or an appeal to a court from an administrative proceeding by the public entity to remove, suspend or otherwise penalize its own employee or former employee.
(b) An action or proceeding brought by the public entity against its own employee or former employee as an individual and not in his official capacity, or an appeal therefrom.
Under the California Tort Claims Act, a public entity may provide for a defense in three ways: (1) with its own attorney, (2) by employing other counsel, or (3) by purchasing insurance which requires the insurer to provide the defense. Cal. Gov’t Code § 996. Reimbursement for attorney fees, therefore, is permissible in an administrative matter, such as the investigation conducted recently. Generally speaking, one of the principle guidelines to be used when considering whether to reimburse attorneys' fees in such cases is whether the public interest will be served.
The discretionary decision and findings regarding reimbursement of attorney fees must be made by the City Council, as the governing body of the City. This raises the question of whether an individual involved in the investigation who is seeking such reimbursement has a conflict of interest that disqualifies him from participating in the findings and decision. The authorities relevant to this question are the Political Reform Act, California Government Code sections 81000 – 91015, and California Government Code section 1090.
DISCUSSION
Whether Or Not Reimbursement Is Appropriate
Reimbursement is optional with the City Council. The Council could conclude it was not necessary for the Vice-Mayor to retain an attorney and deny any fee recovery.
Reimbursement of fees would require findings that the actions were within the scope of employment and taken in good faith, and that the reimbursement is in the best interests of the City. If the City Council is inclined to consider reimbursement, factors to consider are set forth below.
The subcommittee determined the following:
"The Vice-Mayor followed proper procedure by sending his questions to the City Manager. The questions imply a challenge to the veracity of City Staff. This, however, is not uncommon for Councilmembers."
"The issues he discusses in his questions are legitimate territory for a Councilmember under the Charter and the Code of Conduct and Ethics."
The subcommittee went further and determined the Code of Conduct should be clarified to address some of the issues which arose, by recommending the following addition to the Code of Conduct:
A Councilmember has the right (per City Charter) to make an inquiry (ask questions) regarding operations (including Public Safety) in order to better understand current or future policy implications.
If the Council is so inclined, it does appear the report of the subcommittee provides a basis for determining the actions of the Vice-Mayor were within the scope of his position and were taken in good faith. Given the recommendation of the subcommittee that the Code of Conduct be amended to be more explicit with regard to the validity of making inquiries, the Council could further conclude that an important right affecting the public interest has also been enhanced as a result of the proceedings.
Accompanying the request for attorneys fees is a short memo questioning the process by which the subcommittee was formed and an allegation of denial of due process. First, it is pointed out that the action to form a subcommittee was taken in response to a request under Citizens to be Heard and was not on the agenda. This is true, despite the fact that each City Council agenda under Citizens to be Heard contains a notation "If your subject is not on the agenda, you will be recognized at this time; but the Brown Act (Open Meeting Law) does not allow action by Council Members."
Second, it is pointed out the Mayor acted unilaterally. A review of the tapes of the October 7, 2003 meeting indicate the following discussion on the formation question:
Fowler: Madam Mayor, the President of the Public Safety Officers Association has asked us to investigate this.
Miller: I believe as Mayor I could establish a subcommittee to conduct an investigation. I think it is an appropriate place to have these discussions at a subcommittee level to see what the facts are. Would you be willing to do that?
Fowler – Ok.
Miller – Thank you Councilmember Fowler.
And a bit later:
Valerio: – Thank you for the invitation to serve. I would do so out of the sense of commitment to the Council and the process. For a point of clarification, is
this an action that the Mayor does have the ability to do in terms of creating a subcommittee or is it something that the Council should vote on as a whole.
Miller: If you read the Code of Conduct under the duties of the Mayor, which I did today, it is the privilege of the Mayor to form subcommittees.
Fowler: May I remind Councilmember Valerio that when we had a similar situation with Councilmember Kawczynski, I asked you at the time when you were Mayor to form a subcommittee to investigate that and you did so.
Research indicates the not all actions taken were in conformance with existing policies and past practice. Charter Section 807, the only Charter section which mentions investigations by the City Council says, in relevant part:
The City Council and its members shall deal with officers and employees in the administrative service under the jurisdiction of the City Manager solely through the City Manager except: …
(2) In connection with an investigation into the affairs of the City or the conduct of any City department or office which the City Council by the affirmative vote of at least four of its members has undertaken.
The Code of Conduct, in the section concerning Sanctions, states:
If violation of the Code of Ethics or Code of Conduct is outside of the observed behaviors by the Mayor or Councilmembers, the alleged violation should be referred to the Mayor. The Mayor should ask the City Manager and/or the City Attorney to investigate the allegation and report the findings to the Mayor. It is the Mayor’s responsibility to take the next appropriate action. These actions can include, but are not limited to: discussing and counseling the individual on the violations; recommending sanction to the full Council to consider in a public meeting; or forming a Council ad hoc subcommittee to review the allegation; the investigation and its findings, as well as to recommend sanction options for Council consideration. Videotaping of the complaint hearing should be used for a Council ad hoc subcommittee.
Further, in 1999 when the prior incident referred to by Councilmember Fowler occurred, the Council as a whole acted to establish a subcommittee. Minutes from the meeting of August 17, 1999 reveal that a motion was made and seconded to form a subcommittee to look into possible violations of the Code of Ethics with regard to then-Councilmember Kawczynski. The motion was approved 6-1.
Third, it is pointed out that the Vice-Mayor was excluded from one or more of the subcommittee meetings, although the meeting was otherwise open to the public and to his accusers. Such exclusion runs contrary to basic legal principles.
Given the foregoing irregularities, Council could well conclude reimbursement of fees is in the best interests of the City.
In the limited time available it was not possible to research whether there have been past reimbursements for attorneys' fees to members of Council or to employees. None are recalled as far as the past decade is concerned.
Who May Participate in Reimbursement Decision
The Political Reform Act of 1974, codified at California Government Code sections 81000–91015, was adopted to ensure that public officials perform their duties in an impartial manner, free from bias caused by their financial interests. Cal. Gov’t Code §
81001. For purposes of the Act, a public official has a disqualifying financial interest in a decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the economic interests
delineated in California Government Code section 87103. Councilmembers seeking reimbursement for attorney fees have two potentially disqualifying interests: (1) a source of income to an official of $500 or more pursuant to California Government Code section 87103; and (2) an effect on the official’s personal finances of $250 or more. Cal. Code Regs. tit. 2, § 18705.5(a).
There are several provisions in the Act which, for policy reasons, exclude government income from being treated as a disqualifying financial interest for conflict of interest purposes. Salary and reimbursement of expenses received from a government agency are specifically excluded from the definition of "income" for purposes of the Act. Cal. Gov’t Code § 82030(a); Cal. Code Regs. tit. 2, § 18232(a). Additionally, the Act provides that an official is not "making or participating in making" a governmental decision when taking actions related to compensation or terms and conditions of employment. Cal. Code Regs. tit. 2, § 18702.4(a)(3).
However, in applying these "government income" exceptions to the provision of attorney fees to an official by a public agency, a distinction is made between a defense and indemnity that is legally required, and a defense and indemnity that is discretionary. The Fair Political Practices Commission has consistently opined in its advice letters that these government income exceptions do not apply to benefits that are not legally required, such as indemnity for punitive damages. In re Dixon, FPPC Priv. Adv. Ltr. A‑92‑227; In re Gumpert, FPPC Priv. Adv. Ltr. A‑96‑245a; In re Cronin, FPPC Priv. Adv. Ltr. A‑97‑579; In re Romney , FPPC Priv. Adv. Ltr. A‑99‑292. The reasoning stated in these advice letters for this distinction is that when an official is legally entitled to defense and indemnity, the official does not have any financial interest in the outcome of the legal proceeding, and can therefore participate in related decisions. However, when the agency is not required to defend and indemnify the official, the official does have a financial stake in the matter.
It is reasonably foreseeable that the decision to reimburse the Vice-Mayor for attorney fees related to the recent investigation will have a material effect on the his personal finances of $250 or more in a twelve month period. Cal. Code Regs. tit. 2, § 18705.5(a). Therefore, the Vice-Mayor is legally disqualified from participating in the reimbursement decision under the Act.
FISCAL IMPACT
The amount of the attorneys' fees has not been indicated. Before any reimbursement could be made, the specific amount needs to be identified, as would a source of funds. If the City Council determines to reimburse all or part of the fees pursuant to the request, the impact would be whatever the amount of fees the Council determines to pay. Although the City Council cannot force the PSOA to contribute to any fee
reimbursement, since the investigation was undertaken pursuant to the request of the PSOA, the Council could approach the PSOA for a financial contribution if Council proceeds with any reimbursement.
PUBLIC CONTACT
Standard Council Agenda posting and publication, including availability in the Library and on the City's website. (The request for reimbursement came in just before the Agenda was finalized and materials distributed (RTC 03-401), so this more detailed analysis was available at a later time.)
ALTERNATIVES
1. Determine there is a basis for reimbursing the Vice-Mayor in full for the attorneys' fees incurred as a result of the investigation.
2. Determine there is a basis for reimbursing the Vice-Mayor in part for the attorneys' fees incurred as a result of the investigation.
3. Determine there is no basis for reimbursing the Vice-Mayor for the attorneys' fees incurred as a result of the investigation.
RECOMMENDATION
Staff makes no recommendation.
Valerie J. Armento
City Attorney