On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. ATL-L-1011-02.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued June 1, 2006
Before Judges C.S. Fisher, Yannotti and Miniman.
The trial judge in this matter correctly invalidated an agreement to settle a federal lawsuit, which was entered into by the governing body of Atlantic City, because it resulted from a process infected by numerous conflicts of interest. The settlement was reached after one of the two plaintiffs in the federal suit, Lorenzo Langford, had been elected and sworn in as the City's mayor; the other plaintiff, William Marsh, was named to fill a vacancy on the City Council immediately after the settlement was approved and funded. Despite the invalidity of the City's agreement to settle Langford and Marsh's federal suit against the City and its then mayor and council, the judge concluded that no remedy was available to the Office of Government Integrity (OGI), the plaintiff in the suit at hand, because the judge believed any remedy would interfere with or override a federal order which dismissed the settled federal suit. Because there is no reason to conclude that the federal judge intended to retain jurisdiction over this particular post-settlement controversy, and because equity is sufficiently flexible to devise an appropriate remedy without impacting upon the federal court's processes, we reverse the judge's order denying relief and remand for further proceedings in conformity with this opinion.
The issues presented in this action have their genesis in the termination of the positions held by Langford and Marsh with the Atlantic City Board of Education. Langford and Marsh believed they lost these jobs in 1998 because of their political activities and their opposition to Mayor James Whelan and members of the City Council. Langford had run against Whelan in the 1998 mayoral election and lost; Marsh, a long-time Langford ally, was Langford's campaign treasurer during the 1998 election.
Upon the termination of their positions with the board of education, Langford and Marsh consulted with Charles Ercole, Esq., who recommended that they seek the advice of Sidney Gold, Esq. Gold's law firm commenced a civil rights suit on behalf of Langford and Marsh in the United States District Court for the District of New Jersey in 1999, seeking damages against Atlantic City and Whelan, as well as Timothy Mancuso, Barbara Hudgins, John Schultz, Edward McGettigan, Gibb R. Jones, and Michael Zingarelli, who were then members of the City Council.
The federal action was still pending*fn2 when Langford was elected mayor in the November 2001 election. On November 28, 2001, prior to Langford's taking office, the City Council went into executive session to discuss the federal lawsuit.*fn3 During that session, the city solicitor advised the Council that Langford and Marsh were "very interested" in settling and that she would provide further advice following a conference with the federal district judge.
On December 12, 2001, the Council again went into executive session. In this second session, the city solicitor advised that, during the conference with the district judge, Langford and Marsh had collectively demanded $1,000,000, while the district judge suggested that the City negotiate toward a nominal settlement. The city solicitor advised the Council that she thought "$150,000 would be more than a nominal settlement and a good faith offer to settle," and also suggested $300,000 might ultimately settle the case, although she did not think this would be acceptable to Langford and Marsh. The city solicitor indicated that the district judge was concerned about the impact of Langford's election as mayor and, as a result, he would thereafter become "very involved," would possibly appoint separate counsel for the City, or possibly put the case "on hold for four years." Despite the heightened interest in settling the suit before Langford took office, no resolution was reached.
Langford was sworn in as mayor on January 2, 2002. On that same day, Langford appointed Benjamin Fitzgerald as the City's business administrator. By executive order issued by Langford on January 18, 2002, Fitzgerald was designated as "Acting Mayor" in Langford's absence.
On January 16, 2002, the Council adopted a resolution authorizing Langford, as mayor, to execute a contract for the purchase of legal services from Ercole, who had served as Langford's co-campaign finance chair during the 2001 race. Ercole had also consulted with Langford and Marsh regarding their claims against the City prior to the commencement of the federal suit by another attorney. Ercole entered into a legal services agreement with the City on January 25, 2002.
On January 30, 2002, the Council went into a closed session to discuss the federal suit. Langford stepped aside, as he had during the prior months when he was a member of the Council.
With the considerable involvement and influence of Fitzgerald (the business administrator who was acting as mayor pursuant to Langford's executive order), Ernest D. Coursey (the president of the City Council, who resigned that position to become Langford's confidential aide the next day), and Ercole (the attorney retained to render services for the City at the mayor's direction, who had also advised Langford and Marsh prior to the commencement of their federal suit), the acting mayor and the Council decided to enter into an agreement to settle the federal suit for $850,000.*fn4
The federal district judge was advised of the settlement on January 31, 2002. An order dismissing the action was entered the same day.
On February 27, 2002, the Council introduced and adopted a resolution to fund the settlement. About this time, the OGI learned of these events and advised Ercole that the legitimacy of the settlement was being investigated. The OGI requested that the settlement funds be held in escrow pending the completion of its investigation. The parties refused to accede to the OGI's requests and the settlement funds were immediately released to Langford and Marsh.
The OGI filed a complaint in the Law Division seeking, among other things, the imposition of a constructive trust on the settlement funds. There being no material factual disputes, the judge held by way of summary judgment that the settlement agreement violated the Faulkner Act, N.J.S.A. 40:69A-1 to -210, and was the product of numerous intolerable conflicts of interest. The judge, however, held that any remedy would have the effect of overriding the January 31, 2002 order of dismissal entered in the federal district court and, thus, the trial judge concluded that no relief could be granted.
The OGI appealed, contending that the trial judge mistakenly failed to either order restitution of the settlement funds or grant other legal or equitable relief that might redress the consequences of the inappropriate settlement. Langford and Marsh cross-appealed, arguing that the trial judge erroneously declared the settlement agreement to be invalid. We affirm that part of the final judgment which declared the ...