Welcome to the Coleman & Horowitt, LLP Agricultural and Environmental Law Blog. In this blog, we will focus on developments in California Agricultural and Environmental Law.

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Thursday, January 10, 2019

What Consultants to Governmental Agencies Need to know about Government Code § 1090 and the Political Reform Act



Government Code§ 1090 and the Political Reform Act
This article is part of presentation that was made to the San Joaquin Valley Chapter of the American Council of Engineering Companies (ACEC) by David Weiland on January 9, 2019.


Government Code § 1090(a):

 Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. Nor shall state, county, district, judicial district, and city officers or employees be purchasers at any sale or vendors at any purchase made by them in their official capacity. 

How does Government Code section 1090 apply to consultants to California public entities? 


 If you provide professional services under contract for any public agency, or fill a statutory position by contract, awareness of section 1090 is critically important.  Attorneys, accountants, and engineers all need to understand the impact of section 1090 and its preclusive effect on the services they provide.  Opinions issued by the Fair Political Practices Commission (“FPPC”) and the California Attorney General (“AG”) are instructive as to such effect, and are covered herein.

Public officials, whether elected or appointed, should perform their duties in an impartial manner, free from bias caused by their own financial interests or the financial interests of persons who have supported them. (Gov. Code § 81001, Par. b; “Political Reform Act.”)

Assets and income of public officials which may be materially affected by their official actions should be disclosed an in appropriate circumstances the officials should be disqualified from acting in order that conflicts of interest may be avoided. (Gov. Code § 81002, Par c.)

For the same reasons set forth involving Government Code section 1090, ACEC members should be aware of provisions of the Political Reform Act which might prohibit or restrict conducting business with a Public Agency if the member has a spouse employed by the Agency.  The FPPC also issues advisory opinions regarding Political Reform Act conflicts and should be consulted whenever there is the possibility of a conflict.


GOVERNMENT CODE SECTION 1090

The 2015 appellate court case of Steven K. Davis v. Fresno Unified School District (“Davis”) highlights the dangers inherent for consultants working for public agencies involving projects consisting of multiple tiers of services and separate contracts.  While the Davis case solely addressed the involvement of a general contractor in pre-bid consulting services to the school district which subsequently hired the general contractor to construct the project, public agency attorneys and the FPPC have given the case broad interpretation to prohibit consultants from performing professional services to the agency involving overall planning, scoping, and project recommendations and then providing the services recommended by the consultant at the planning stage.  

Such prohibition is not necessarily limited to recommendations made by the consultant in an official capacity (i.e. Contract City Engineer).  It can include, for example, providing design services for a public works project emanating from recommendations made by the consultant in an earlier master plan prepared by the same consultant.  The Davis court concluded that Section 1090 was broad enough to include the corporate general contractor within the reach of the code’s prohibitions, finding that the contract to construct the school, after the general contractor served in a consulting capacity to the district, was illegal. 

 The remedy for an illegal public agency contract is the disgorgement of funds paid to the contracting consultant.  However, since Davis did not seek such remedy, it was not available to him in his lawsuit.  Nonetheless, the Davis court’s analysis of Section 1090, and of the Political Reform Act prohibitions on conflicts of interest, has now been extended by public agency attorneys and the FPPC to a wide range of professional service contracts.  Following are specific examples.

In a 2016 FPPC opinion letter, the FPPC concluded that a local city could not award a construction management (contract administration) contract to an engineering consulting firm that had previously prepared the construction drawings and specifications for the project. (FPPC File A-16-170.)  In this case, the consulting firm served in the statutory capacity of City Engineer, and had over the years, obtained a series of general services contracts covering a broad range of civil engineering services typically provided by a City Engineer.  Such contracts are not unusual, and are typical, for small communities which cannot afford their own engineering staff.  
Nonetheless, because the engineering consultant had prepared the construction drawings and specifications under a separate contract, the FPPC opinion concluded that the consultant had a disqualifying economic interest in the construction management contract prohibiting the consultant from providing those services.  Coleman & Horowitt was retained to respond to the opinion letter.  The response included a detailed historical recitation of the general services contracts between the consultant and the city, and a discussion of the broad range of services provided in the contracts which not only allowed the consultant to perform the construction management services, but arguably mandated that the consultant perform them.  While the effort in responding was expensive, it actually resulted in the FPPC withdrawing its prior opinion letter, allowing the consultant to perform the construction management services.
  
Acknowledging that there were details in the contracts unique to the particular project at issue, it has resulted in recommendations from our office that general services contracts of the nature at issue in the cited FPPC opinion be as broad and detailed as possible as to the types of services to be provided by the consultant, and the conditions under which such services must be provided by the consultant.

The AG has taken a slightly different approach to Section 1090 conflicts.  In an opinion issued in 2016, the AG determined that a City Attorney could not separately contract for bond counsel services based upon a percentage fee arrangement even though the attorney’s general services contract provided for such bond counsel services. (AG 12-409, January 28, 2016.)  In so holding, the AG determined that the percentage fee contract was allowable under the Political Reform Act, but not allowable under Section 1090 because the percentage fee arrangement presented the opportunity for the City Attorney to advise the city in a way that economically benefitted the City Attorney. 
 In other words, because the compensation to be paid to the City attorney under the separate bond counsel contract provided a “bonus” of sorts in the form of a percentage of the amount of the bonds, the attorney was in a position to economically benefit if the value of the bonds was higher.  Hence, the City Attorney’s recommendations for the bond issuance was potentially influenced by the attorney’s interest in the percentage fee, an arrangement prohibited by Section 1090. 
 In addition, the fact that a separate contract was required for the bond services also triggered the financial interest exclusion of Section 1090.  Hence, it can be concluded that, had the City Attorney merely provided the bond services under the scope of the general services agreement, without a separate contract, there would have been no conflict.  This is consistent with the ultimate conclusion reached by the FPPC in withdrawing its opinion letter involving the previously mentioned City Engineer contract for construction management services.



POLITICAL REFORM ACT

While the Political Reform Act (Gov. Code, § 81000, et seq.) is aimed primarily at California Election campaigns and practices, the provisions cited above apply to a wider range of situations involving consultant activities with public agencies which could economically benefit the consultant.  Where contracts are involved, the FPPC has authority to issue advisory opinion letters.  One recent letter emphasizes the potential issues that can arise involving spouses or close family members.

In an opinion issued on November 6, 2018 (FPPC File A-18-212), the FPPC determined that the public agency employee, employed in a management position, was prohibited from reviewing any project involving her spouse, a planning consultant with multiple projects filed with the public agency.  While the public agency’s subsequent actions did not disqualify the planning consultant from dealing with the public agency, they did result in the public agency employee being shielded from any involvement with the planning consultant’s projects.  The FPPC analysis is instructive.

First, the FPPC factually determined that the agency employee was: a department head with ultimate responsibility over 60 employees and three separate divisions of City government; reported to only the City Manager but also consulted with other department heads of the City; provided direct supervision to five management level employees within the department; provided secondary guidance and supervision to other employees within the department; assisted the public in navigating the processes of the department; met with developers to answer questions regarding the department processes; made decisions involving ministerial acts; and provided recommendations regarding discretionary applications to be considered by the City Council.  The FPPC then factually determined that the spouse was employed as a planner and project manager for a corporate employer conducting business with the agency employee’s department.

The FPPC then analyzed whether the agency employee had a “financial interest” in the outcome of any decisions made by the department involving the projects with which her spouse was a consultant. (Gov. Code §§ 87100 & 87103.)  The Act defines a financial interest as: any business entity in which the public official has a direct or indirect investment of $2,000 or more (§ 87103(a).); any business entity in which the public official is a director, officer, partner, trustee, employee, or holds a position of management (§ 87103(d).); any source of income, except gifts or loans by a commercial lending institution made in the normal course of business on terms available to the general public without regard to official status totaling more than $500 in the preceding 12 months (§ 87103(c).); or the agency employee’s personal finances including those of immediate family members (§ 87103.).  Based on its analysis of these factors, the FPPC determined that the agency employee had a financial interest in the form of a community property interest in the consultant’s income from his employer.

Next, the FPPC examined whether it was reasonably foreseeable that a decision by the agency employee would have a material financial effect on her financial interest, which was the community property interest in the consultant’s income from his employer.  Applying Regulations 18701(b), 18702.1(b), 18702.1(b)(1) through (3), and 18704 of the California Code of Regulations, the FPPC determined that, even though the consultant did not actually submit the applications for the projects being considered, the agency employee had direct authority over the decisions regarding the project applications, resulting in a reasonably foreseeably material financial effect on the agency employee’s community property interest in the consultant’s income.  With the cooperation of the City Attorney, the agency employee directed the department staff that she would not be involved in any projects involving the consultant’s employer and further instructed her staff to carry out the policies of the department just as they would for any other applicant.  Only time will tell how successful this directive will prove to be.


David J. Weiland is a partner in the firm and is the head of the firm's litigation department. David joined the firm in 2014. He was admitted to practice in 1992. He is a graduate of California State University, Fresno, where he received a degree in civil engineering. He received his JD from San Joaquin College of Law, where he served as the Managing Editor of the San Joaquin Agricultural Law Review. Prior to joining the firm, David served as a partner, member of the Board of Directors, President and chair of the litigation department of the Fresno firm Dowling Aaron Incorporated. David, a registered civil engineer, represents clients in complex commercial, construction, real estate, professional liability defense, tort defense, as well as municipal law, real estate transactions, and land use matters. David is experienced in all phases of real estate and construction litigation and public agency law. He also has significant experience in the defense of professional liability claims against design professionals and attorneys. David previously served as the City Attorney for the cities of Sanger and Mendota. He also serves as an arbitrator privately and with the American Arbitration Association as well as a mediator. He attended the Straus Institute for Dispute Resolution for ADR training. David has been named a Super Lawyer® by Thomson Reuters from 2009 to 2018 and holds an AV®-preeminent rating from Martindale Hubbell. David is a member of the American Bar Association (Member: Construction Law Forum), Fresno County Bar Association (Member: Real Estate, Construction and Litigation sections), Association of Business Trial Lawyers, Legal Advisory Committee of the Associated

Friday, January 4, 2019

Wednesday, December 26, 2018

Supreme Court Depublishes Prop 65 Cereal Preemption Case

The California Supreme Court in October denied the Petition for Review of the Second District  Court of Appeal's opinion that a  Proposition 65 suit concerning acrylamide in breakfast cereals was preempted by federal law.  Although the trial court  rejected this argument the cereal manufacturers successfully appealed  
to the Court of Appeals. The Court found that  a Prop. 65 cancer warning on whole grain cereal would pose an "obstacle" to Congress' nutrition policies that encourage the consumption of whole grain foods.The Supreme Court denied the Petition to review, however they did grant the request by the California Attorney General and several environmental groups to depublish the lower court decision. Consequently this case cannot be cited as precedent

"The petition for review is denied. The requests for an order directing depublication of the opinion are granted. The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above entitled appeal filed July 16, 2018, which appears at 25Cal.App.5th 278. (Cal Const., art. VI, section 14; rule 8.1125(c)(1), Cal. Rules of Court.) Corrigan, J., was absent and did not participate." 

Cal.Supreme Court 10/31/2018.  POST FOODS v. S.C. (SOWINSKI) Division SF Case Number S250937 

Monday, December 24, 2018

Lee N. Smith of Coleman & Horowitt to Participate in Water Quality/Water Law Conference in Sacramento

Lee N. Smith of our office will be participating in a Water Law and
Regulations Conference in Sacramento on January 16, 2019. Mr. Smith will be discussing Water Quality issues in California. His talk will encompass the origins of water quality regulation, the relevant agencies, liability under the Water Code, and touch upon several of the emerging issues including the recent Basin Plan Amendment proposals, the Irrigated Lands Program, and C.V. Salts.


Tuesday, December 11, 2018

Proposed Rule Redefining Wetlands under the Federal Clean Water Act


 On Tuesday December 11, 2018,  the Environmental Protection Agency released the long awaited (promised by President Trump) proposed rule that would reduce the types of areas covered by the wetlands programs under the federal Clean Water Act.

( Pre-publication version of the Federal Register notice, the supporting analyses and fact sheets are available at: https://www.epa.gov/wotus-rule)

The proposed rule from the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers reduces the types of waterways that are covered as compared to the 2015 Obama era rule that was the subject of controversy because of the scope of the reach of jurisdiction. The more restrictive interpretation included in the proposed rule is based on a 2006 opinion by Supreme Court Justice Scalia, in Rapanos v. United States 547 U.S. 715 (2006). who opined that the federal Clean Water Act only applied to relatively permanent waters; while the other areas, should be regulated by states.
Of particular interest is the section that discussed crop land:
   Prior converted cropland.

§  This longstanding exclusion for certain agricultural areas would be continued under the proposal, and the agencies are clarifying that this exclusion would cease to apply when cropland is abandoned (i.e., not used for, or in support of, agricultural purposes in the preceding five years) and has reverted to wetlands.

The proposed rule creates six exclusive categories of areas that fall under federal jurisdiction. This text if from the EPA Fact Sheet:

        o   Traditional navigable waters (TNWs)
§  Under the proposal, traditional navigable waters would be large rivers and lakes, tidal waters, and the territorial seas—such as the Atlantic Ocean, the Mississippi River, the Great Lakes, and tidally influenced waterbodies, including wetlands, along coastlines—used in interstate or foreign commerce. 
o   Tributaries
§  In the agencies’ proposal, tributaries would be rivers and streams that flow to traditional navigable waters—such as Rock Creek, which feeds to the Potomac River in Washington, D.C.
§  Under the proposal, these naturally occurring surface water channels must flow more often than just when it rains—that is, tributaries as proposed must be perennial or intermittent. Ephemeral features would not be tributaries under the proposal.
§  Tributaries can connect to traditional navigable waters directly, through other “waters of the United States,” or through other non-jurisdictional surface waters so long as those waters convey perennial or intermittent flow downstream.
o   Certain ditches
§  A ditch under the proposed rule would be an “artificial channel used to convey water.”
§  Under the proposal, ditches would be jurisdictional where they are traditional navigable waters, such as the Erie Canal, or subject to the ebb and flow of the tide.
§  Ditches may also be jurisdictional where they satisfy conditions of the tributary definition as proposed and either 1) were constructed in a tributary or 2) were built in adjacent wetlands.
o   Certain lakes and ponds
§  Lakes and ponds would be jurisdictional where they are traditional navigable waters, such as the Great Salt Lake in Utah or Lake Champlain along the Vermont-New York border.
§  Lakes and ponds would be jurisdictional where they contribute perennial or intermittent flow to a traditional navigable water either directly, through other “waters of the United States,” or through other non-jurisdictional surface waters so long as those waters convey perennial or intermittent flow downstream, such as Lake Pepin in Minnesota or Lake Travis in Texas.
§  Lakes and ponds would be jurisdictional where they are flooded by a “water of the United States” in a typical year, such as many oxbow lakes.
o   Impoundments
§  Under the proposal, impoundments of “waters of the United States” would be jurisdictional.
o   Adjacent wetlands
§  Under the proposal, wetlands that physically touch other jurisdictional waters would be “adjacent wetlands,” such as Horicon Marsh in Wisconsin.
§  Wetlands with a surface water connection in a typical year that results from 1) inundation from a “water of the United States” to the wetland or 2) perennial or intermittent flow between the wetland and a “water of the United States” would be “adjacent.”
§  Wetlands that are near a jurisdictional water but don’t physically touch that water because they are separated, for example by a berm, levee, or upland, would be adjacent only where they have a surface water connection described in the previous bullet through or over the barrier, including wetlands flooded by jurisdictional waters in a typical year.

·         The proposal also clearly outlines what would not be “waters of the United States,” including:

o   Waters that would not be included in the proposed categories of “waters of the United States” listed above—this would provide clarity that if a water or feature is not identified as jurisdictional in the proposal, it would not be a jurisdictional water under the Clean Water Act.

o   Ephemeral features that contain water only during or in response to rainfall.

o   Groundwater.

o   Ditches that do not meet the proposed conditions necessary to be considered jurisdictional, including most farm and roadside ditches.

o   Prior converted cropland.
§  This longstanding exclusion for certain agricultural areas would be continued under the proposal, and the agencies are clarifying that this exclusion would cease to apply when cropland is abandoned (i.e., not used for, or in support of, agricultural purposes in the preceding five years) and has reverted to wetlands.

o   Stormwater control features excavated or constructed in upland to convey, treat, infiltrate, or store stormwater run-off.

o   Wastewater recycling structures such as detention, retention and infiltration basins and ponds, and groundwater recharge basins would be excluded where they are constructed in upland.

o   Waste treatment systems.
§  Waste treatment systems have been excluded from the definition of “waters of the United States” since 1979 and would continue to be excluded under this proposal; however, waste treatment systems are being defined for the first time in this proposed rule.
§  A waste treatment system would include all components, including lagoons and treatment ponds (such as settling or cooling ponds), designed to convey or retain, concentrate, settle, reduce, or remove pollutants, either actively or passively, from wastewater or stormwater prior to discharge (or eliminating any such discharge).  

This article is based on preliminary reporting- we will update this report further on this as we  review the related documents that were released. There is a sixty day comment period for the proposed rule.