On appeal from The Department of Community Affairs, Division of Local Government Services, Local Finance Board.
Petrella, Conley and Villanueva.
This is an appeal by the Bergen County Utilities Authority (BCUA) from a decision of the Local Finance Board (LFB), in the Department of Community Affairs, which approved an application submitted by the County of Bergen (Bergen) pursuant to N.J.S.A. 40A:5A-20 for the dissolution of the BCUA.
The BCUA argues that (1) the LFB erred in failing to declare the dissolution application a contested case and improperly proceeded with the dissolution hearing without first referring the case and the alleged attorney conflict of interest issue to the Office of Administrative Law (OAL); (2) Bergen's special counsel should have been disqualified from representing Bergen in this matter due to that firm's past representation of the BCUA, as it represents either a conflict of interest or, at least, a clear appearance of impropriety; (3) the LFB failed to consider whether Bergen adequately provided for the payment of the BCUA's creditors or obligees and for the assumption of necessary services presently provided by the BCUA; and (4) the LFB failed to set forth adequate findings and to endorse properly the bond ordinance, as required by N.J.S.A. 40A:2-7(d).
The Bergen County Board of Chosen Freeholders (Freeholders) created the Bergen County Sewer Authority on February 19, 1947. The Freeholders reorganized this authority on March 1, 1978, and renamed it the BCUA. This entity now provides portions of Bergen with water, sewer, and solid waste services and holds the necessary permits, licenses, and approvals issued by the appropriate federal and state agencies to perform these functions.
On February 8, 1993, Bergen's county executive notified the BCUA that he had appointed a review team to investigate it. He
also requested documents concerning the BCUA's operations. On March 3, 1993, Bergen announced its plan to dissolve the BCUA.*fn1 The Freeholders introduced nine ordinances on March 24, 1993, relating to the dissolution, and adopted resolutions authorizing the filing of a dissolution application with the LFB. Further, the Freeholders approved certain filings with the Department of Environmental Protection and Energy (DEPE) and also other agencies concerning the transfer of the BCUA's service responsibilities to Bergen and a new authority known as the Bergen County Improvement Authority (BCIA). Bergen submitted its dissolution application to the LFB on March 29, 1993, and supplemented it shortly thereafter. Bergen also provided the BCUA with a copy of the application.*fn2
On March 25, 1993, the Division of Solid Waste Management in the DEPE informed Bergen that it would cooperate in Bergen's plan to change the entities for "wastewater and solid waste functions, and the transfer of all applicable licenses, permits, certificates, and other related matters consistent with the applicable laws."
The LFB held a public hearing on April 20, 1993, regarding the dissolution application at which various Bergen representatives made presentations. Mr. McManimon, Special Counsel for Bergen, who was a principal in the law firm that previously acted as bond counsel not only for Bergen but also for the BCUA, presented the dissolution proposal. The county executive and the freeholder chairman discussed the underlying policy and management reasons for implementing the plan. In addition, a financial expert,
an engineering expert, and an accounting expert made presentations. A representative of the DEPE discussed, among other things, the permit and license requirements.
The LFB provided the BCUA with a full opportunity to present evidence and state its objections at this hearing. Several individuals did indeed participate on behalf of the BCUA, including its executive director, attorneys, and bond counsel. Various legislators also spoke on behalf of the BCUA. In addition, the BCUA presented a financial analyst and a former LFB chairman -- each discussed the financial aspects of the plan.
More specifically, the BCUA had asserted that the LFB should not proceed because of an alleged attorney conflict of interest. The then law firm of Kraft & McManimon, now McManimon & Scotland, was the BCUA's bond counsel. Hence, the BCUA took the position that the bond transactions that the McManimon firm previously represented it on were substantially related to the transaction that Bergen wished to undertake in dissolving the BCUA. The BCUA sought the disqualification of the law firm. The LFB decided to refer that issue to the OAL.*fn3 After deciding to transfer that particular issue, the LFB continued to conduct the hearing and approved the dissolution application on that date pursuant to N.J.S.A. 40A:5A-20 and N.J.S.A. 40A:2-7(d). The Freeholders adopted appropriate dissolution ordinances on April 21, 1993. On that same date, this court denied the BCUA's request for a stay of implementation of the dissolution plan.*fn4 It filed a notice of appeal on May 7, 1993.
We deal preliminarily with the conflict of interest issue. We preface our Discussion by indicating that, although there is
merit in the BCUA's argument on this point, any violation of the rules of professional responsibility has not tainted the LFB proceedings to date and does not affect the dissolution decision.
The BCUA essentially argues that because an alleged conflict of interest existed between Bergen's special counsel and the BCUA, the LFB should have resolved that issue before proceeding on the dissolution application. The BCUA, however, never presented the matter to any Supreme Court committee nor did it seek relief in the courts. Instead, the BCUA had essentially asked an administrative agency in the executive branch of government to make a determination with respect to the practice of law, a matter peculiarly subject to the jurisdiction and control of the New Jersey Supreme Court and which all courts are responsible for enforcing. Of course, if the agency acted in a quasi-judicial fashion, it would be expected to apply the same principles as a court would apply when a judicial question arises. See Linden Merchants Association v. Linden City Council, 214 N.J. Super. 33, 41, 518 A.2d 245 (Law Div.1986). Even considering, arguendo, for purposes of this specific issue only, that the LFB had been acting in a quasijudicial capacity, see Jersey City v. Department of Civil Service, 57 N.J. Super. 13, 45, 153 A.2d 757 (App.Div.1959), such an administrative agency does not have the final word on attorney conflict of interest problems and compliance with the Rules of Professional Conduct. Our Rules of Professional Conduct are stringently enforced, and would even appear to be stricter than those of other states. See, e.g., First Wisconsin Mortgage Trust v. First Wisconsin Corp., 584 F. 2d 201 (7th Cir.1978) (en banc). In any event, the issue is not whether the LFB had an obligation to transfer the conflict question to the OAL, but whether or not a conflict of interest existed.*fn5