On certification to the Superior Court, Appellate Division, whose opinion is reported at 344 N.J. Super. 470 (2001).
In this appeal, the Court determines whether it was a permissible exercise of municipal power for the Town of Kearny (Town) to approve a counsel-fee resolution in which the Town agreed to pay legal fees expended on behalf of Defendant Robert M. Czech (defendant), who was previously the municipal clerk and administrator of the Town, in an action by plaintiffs-taxpayers seeking to void defendant's severance agreement.
The Town appointed the defendant to dual positions of municipal clerk and town administrator on July 13, 1995. By statute, the term of office for a municipal clerk is three years. Defendant was appointed to the office of town administrator, an at-will position, based on an employment agreement. In the November 1997 election, the Town's incumbent mayor and two council members were defeated. A third incumbent council member did not seek re-election. Accordingly, in January 1998 a majority of the Town's governing body consisted of new members. During their campaign, these new members had made known their intention to remove defendant from his positions. In order to avoid the anticipated tensions and difficulties that would result if defendant insisted on the completion of his statutory and contractual terms of office, he and the outgoing mayor negotiated an agreement by which defendant would resign from both positions as of December 31, 1997, in return for a lump -sum severance payment and healthcare coverage extending to March 31, 1998, a date well within his three-year term. The lump -sum gross severance payment totaled $32,894.20. Had defendant remained in office for the balance of his term, namely, until July 1998, he would have earned $46,042 in salary, vacation and benefits. Defendant's resignation was accepted and a resolution approving the severance agreement was adopted unanimously at a special session of the Town Council on December 31, 1997.
Plaintiffs-taxpayers commenced this action against both the Town and defendant on January 15, 1998, challenging the severance resolution and asserting that because its subject was employee compensation, an ordinance was required. The Town was represented by its municipal attorney. Because of a potential conflict of interest between the Town and defendant, the Town took the view that defendant should be separately represented. Accordingly, the Town adopted a counsel-fee resolution retaining an attorney to represent defendant and capping the fees that it would pay for that representation at $10,000.
Plaintiffs amended their complaint to add a count challenging the counsel-fee resolution. Defendant filed a protective cross-claim against the Town seeking reinstatement to his two positions if the court determined that the severance resolution was invalid. All parties filed motions for summary judgment. The court invalidated the severance resolution reasoning that because it constituted a compensation agreement, an ordinance was necessary. The court sustained the counsel-fee resolution as having a sufficient nexus to defendant's official duties.
Defendant appealed from that portion of the summary judgment invalidating the severance agreement, and plaintiffs cross-appealed from that portion of the summary judgment upholding the counsel-fee resolution. The Town did not participate in the appeal. The Appellate Division reversed both trial court rulings. McCurrie v. Town of Kearny, 344 N.J. Super. 470, 474 (App. Div. 2001).
Defendant petitioned this Court for certification seeking review of the adverse counsel-fee holding, and plaintiffs cross-petitioned seeking review of the adverse ruling sustaining the severance resolution. Because the Court denied plaintiffs' cross-petition,
The opinion of the court was delivered by: LaVECCHIA, J.
Argued September 10, 2002
Defendant Robert M. Czech was the municipal clerk and administrator of the Town of Kearny. His appointment as municipal clerk was for a statutory three-year term although his appointment as administrator was at the Town's pleasure. Because a change in the political make-up of the governing body during Czech's statutory term induced him to believe that completion of his term would be counterproductive to both his and the public interest, he agreed with the outgoing municipal council that he would resign in return for a severance package. The severance agreement, approved by municipal resolution (the severance resolution), was challenged by plaintiffs-taxpayers in this action in lieu of prerogative writs in which both the Town and Czech were joined as defendants. The municipality, by resolution (the counsel-fee resolution), then undertook to pay the legal fees that Czech would incur in his defense of the severance resolution. The only question before us is whether the counsel-fee resolution constituted a permissible exercise of municipal power. We conclude that it did, and therefore reverse the contrary holding of the Appellate Division.
The Town appointed Czech to his dual positions of municipal clerk and town administrator on July 13, 1995. The initial three-year term of a municipal clerk is prescribed by N.J.S.A. 40A:9-133a. At the time of Czech's appointment to that office, he entered into an employment agreement with the Town by which he was also appointed to the office of town administrator, an at-will position. N.J.S.A. 40A:9-137. The agreement provided for a base compensation of $85,000 for the combined position, and Czech's entitlement to health insurance, life insurance, paid holidays, and sick days was set forth.
As a result of the municipal elections of November 1997, the incumbent mayor and two council members were defeated. A third incumbent council member did not seek re-election. Accordingly, at the reorganization meeting scheduled for January 1, 1998, four new members, a majority, would join the governing body. There is no dispute that during their campaign and following their election, those new members made known their intention to attempt to remove Czech from his positions. According to Czech, it had become clear to him during the election campaign that if those persons were elected, his "continued employment with the Town was going to be a politically divisive issue, which would distract the Kearny Town Council from focusing on other more important Town business."
In order to avoid the anticipated tensions and difficulties that would result if Czech insisted upon the completion of his statutory and contractual terms of office, he and the outgoing mayor negotiated an agreement by which Czech would resign from both positions as of December 31, 1997, in return for a lump-sum severance payment and healthcare coverage extending to March 31, 1998, a date well within his three-year term. The lump-sum gross severance payment was $32,894.20 allocated as follows: $980.75 to "Regular Earnings," $27,500 to "Special Earnings," and $4,413.45 in "Vacation Earnings." The after-tax sum was $23,363.86. Had Czech remained in office for the balance of his term, namely, until July 1998, he would have earned $46,042 in salary, thirteen and a half vacation days, and all the contractual fringe benefits.
A special session of the Town Council was held by the outgoing governing body on December 31, 1997, to consider Czech's resignation and the severance agreement. An approving resolution, the severance resolution, was adopted unanimously. The recitals of the resolution referred to Czech's statutory term and his resignation before its completion and explained that its purpose was "to allow the ...