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SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-1699-16T
LOCAL FINANCE BOARD,
Submitted January 22, 2018 – Decided March 12, 2018
Before Judges Sabatino, Ostrer and Whipple.
On appeal from the Local Finance Board,
Department of Community Affairs, Docket No.
Kelaher, Van Dyke & Moriarty, attorneys for
appellant (Peter J. Van Dyke, on the briefs).
Gurbir S. Grewal, Attorney General, attorney
for respondent (Melissa H. Raksa, Assistant
Attorney General, of counsel; Melanie R.
Walter, Deputy Attorney General, on the
Paul J. Kennedy appeals from the Local Finance Board's final
decision that he violated
N.J.S.A. 40A:9-22.5(c), (d), (e), and
(g) of the Local Government Ethics Law. The Board imposed a $500
fine.1 The Board's finding arises out of Kennedy holding various
paid positions in the Ocean Gate Borough government, in addition
to his position as mayor. We affirm the finding of violations,
but vacate the imposition of a penalty, and remand.
After the Board's initial finding, and Kennedy's demand for
a hearing before the Office of Administrative Law (OAL), the
parties eventually filed cross-motions for summary decision. In
a written opinion that the Board adopted in its entirety, the
Administrative Law Judge (ALJ) denied Kennedy's motion and granted
We presume the reader's familiarity with the facts that the
ALJ reviewed at length. It suffices to note here that Kennedy,
while serving as the Borough's unpaid mayor, performed many duties
that would normally be assigned to a municipal administrator,
personnel director, insurance administrator, and ADA coordinator,
whose positions were all vacant. Kennedy suggested to the Borough
Council that it formally appoint him to those positions and pay
him a salary without pension or other benefits. The Council
agreed, first appointing him Acting Administrator and two years
Kennedy does not appeal the Board's finding that he violated
N.J.S.A. 40A:9-22.6(a)(1) by filing incomplete financial
disclosure statements and fining him $100.
22.10(b). Therefore, we do not address that finding.
later, adding the other positions in an "acting" capacity. 2 By
then, the administrator's salary had risen from $15,000 to $30,000.
The other positions added another $20,000 in salary.
On appeal, Kennedy renews arguments he presented to the Board
that: (1) his actions did not violate the Ethics Law; (2) he
reasonably relied on the advice of counsel; and (3) if his
counsel's affidavit is deemed insufficient, the matter should be
remanded for a plenary hearing.
We begin with our standard of review. The test for granting
a motion for an administrative agency's summary decision under
N.J.A.C. 1:1-12.5(b) is "substantially the same" as the one
governing a motion to a trial court for summary judgment under
Rule 4:46-2. Contini v. Bd. of Educ. of Newark,
286 N.J. Super.
106, 121 (App. Div. 1995). However, our review of an agency's
summary decision differs from our de novo review of a court's
grant of summary judgment. See Henry v. N.J. Dep't of Human
204 N.J. 320, 330 (2010). While we review de novo an
agency's determination that there are no genuine issues of material
fact, we "strive to 'give substantial deference to the
interpretation [the] agency gives to a statute that the agency is
The Council also made the mayor's position salaried, with a range
of $1 to $5000. The record does not include a Council resolution
approving a particular salary level for Kennedy's service as mayor.
charged with enforcing.'" In re Application of Virtua-West Jersey
Hosp. Voorhees for a Certificate of Need,
194 N.J. 413, 423 (2008)
(citing Saint Peter's Univ. Hosp. v. Lacy,
185 N.J. 2, 15 (2005)).
We generally will affirm an agency's final quasi-judicial decision
unless it is "arbitrary, capricious, or unreasonable." Russo v.
Bd. of Trustees, Police and Firemen's Ret. Sys.,
206 N.J. 14, 27
(2011). Nonetheless, we are "in no way bound by the agency's
interpretation of a statute or its determination of a strictly
legal issue." Mayflower Sec. Co. v. Bureau of Sec.,
64 N.J. 85,
Applying this standard of review, we affirm the Board's
specific conclusion that Kennedy violated multiple provisions of
the Ethics Law substantially for the reasons stated in the ALJ's
decision. Using his position as mayor, Kennedy was the moving
force in his own hiring. The method he used also deprived others
of an equal chance to apply for the positions. As the ALJ observed,
Kennedy never even considered seeking other candidates.
Consequently, he "use[d] . . . his official position to secure
unwarranted . . . advantages for himself. . . ."
22.5(c); he used the non-public information about the hiring
process he obtained as mayor "for the purpose of securing financial
gain for himself,"
N.J.S.A. 40A:9-22.5(g); and he "act[ed] in his
official capacity . . . where he . . . ha[d] an interest, [or]
. . . direct . . . financial or personal involvement that might
reasonably be expected to impair his objectivity or independence
of judgment . . . ."
N.J.S.A. 40A:9-22.5(d). Additionally, as a
multi-office-holder, Kennedy created the risk that his use of the
mayoral veto of Council actions under
N.J.S.A. 40A:60-5(d) could
be affected by the Council's power to fire him from the various
other offices he held. Thus, he had "undertake[n] . . . employment
. . . which might reasonably be expected to prejudice his
independence of judgment in the exercise of his official duties."
Our decision in Gayder v. Spiotta,
206 N.J. Super. 556 (App.
Div. 1985), upon which Kennedy relies, does not compel a different
result. In Gayder, we held that a village president, equivalent
to a mayor, could vote for his appointment as the police
administrator. Disqualification because of personal interest was
not required because the statute authorized filling the position
from the village board of trustees, on which the village president
served. By contrast, Kennedy's actions were not contemplated by
statute. He used his office to propose his hiring, thereby
violating a principle the Gayder panel reaffirmed: "[A] public
official may not exercise his office to confer a personal benefit
upon himself," including securing "another office or position."
Id. at 562.
Nor does it matter that Kennedy did not vote for his
employment. Kennedy highlights that fact to distinguish himself
from the council member in Grimes v. Miller,
113 N.J.L. 553 (Sup.
Ct. 1934), who wrongfully withheld a vote, leaving a tie in place
that secured his appointment to an office. Kennedy still used his
power to place himself in office. That was the fundamental wrong
that Grimes identified. Id. at 557-58. In sum, we discern no
basis to disturb the Board's conclusion that Kennedy's actions
violated the Ethics Law.
We turn next to Kennedy's advice-of-counsel defense. We
recognized the defense in dictum in In re Zisa,
385 N.J. Super.
188, 198-99 (App. Div. 2006). Although we held that Zisa's
activities did not violate the Ethics Law, we held that even if
they did, the Board erred in rejecting Zisa's advice-of-counsel
defense. To establish the defense: (1) an officer must receive
the advice before taking the questioned action; (2) the officer
must make "full disclosure of all pertinent facts and
circumstances"; (3) the advisor must "possess authority or
responsibility with regard to ethical issues"; and (4) the officer
must "comply with the advice received, including any restrictions
it might contain." Ibid.3 We noted that the Executive Commission
on Ethical Standards applied a similar test in In re Howard,
93 N.J.A.R 2d (Vol. 5A) 1 (Executive Comm'n on Ethical Standards
1993), aff'd as modified,
94 N.J.A.R 2d (Vol. 5A) 1 (App. Div.
1994). In re Zisa,
385 N.J. Super. at 199. The advice-of-counsel
defense lies although an officer can, instead of seeking advice
of counsel, seek an advisory opinion from the Board itself. See
We found nothing in the record to support the Board's
conclusion that Zisa's reliance on counsel was unreasonable, apart
from those four factors. Id. at 197-98. In particular, we
rejected the Board's conclusion that it was unreasonable to rely
on an oral opinion of the municipal attorney, absent evidence that
written opinions were the usual practice. Ibid. We also rejected
the Board's conclusion that Zisa's experience and astuteness made
it unreasonable for him to follow the attorney's advice. Id. at
Although not expressly stated, the attorney-advisor must also be
independent, and not saddled with a conflict of his or her own in
providing advice. Cf. Mortensen v. Comm'r,
440 F.3d 375, 387 (6th
Cir. 2006) ("In order for reliance on professional tax advice to
be reasonable, however, the advice must generally be from a
competent and independent advisor unburdened with a conflict of
interest and not from promoters of the investment.").
However, the defense does not vitiate a finding of an Ethics
Law violation that does not hinge upon a public servant's state
of mind. Cf. id. at 197 (stating the defense is not a "absolute
defense"). It is a defense to a penalty. There is no element of
the substantive statutory violations to which good faith reliance
on counsel's advice would be relevant.4 By contrast, for example,
in the tort setting, reliance on counsel's advice "erases the
'absence of probable cause' element of the tort of malicious use
of process. . . ." See LoBiondo v. Schwartz,
199 N.J. 62, 106
(2009); see also id. at 95 (noting that prior cases held that
"reliance on the advice of counsel . . . will defeat the separate
element of malicious intent"). The defense approved in Zisa
pertains to whether a local office-holder should be subject to an
otherwise mandatory penalty of between $100 and $500 for a
The Executive Commission on Ethical Standards found that the
defense was relevant to establishing a knowing conflict under
N.J.S.A. 52:13D-23(e)(7). "[A]n employee who received prior
approval for a particular action cannot be found to have acted in
a knowing fashion in violation of
. . . ." In re Howard,
93 N.J.A.R 2d at 14. However, the
Appellate Division panel held that the "knowing" state-of-mind
pertains to the act itself; but proof of subjective knowledge
"that the act will be perceived as a breach of trust" is not
required. The court noted the test is an objective one. In re
94 N.J.A.R 2d at 5.
The ALJ, and the Board by adoption, found that Kennedy's
reliance on the advice of counsel was unreasonable. In support
of Kennedy's motion for summary decision, the Borough Attorney
stated in an affidavit that Kennedy requested his advice before
he accepted the various municipal offices; Kennedy made him "aware
of the facts and the circumstances surrounding" his contemplated
acceptance; the attorney advised him there was no "legal rule or
principle that forbade his accepting those positions"; and Kennedy
thereafter accepted the positions.
The ALJ did not directly ascertain Kennedy's compliance with
the four Zisa factors — a point we shall discuss. Instead, the
ALJ found that the attorney's affidavit was too conclusory to
"allow an assessment of the reasonableness of his advice." The
ALJ also faulted Kennedy for failing to identify ambiguity in the
Ethics Law that prompted him to seek legal advice. The ALJ
concluded that the law so clearly prohibited his conduct that it
was unreasonable to rely on the Borough Attorney's advice to the
The ALJ cited Cooper v. United States,
834 F. Supp. 669, 670
(D.N.J. 1993), aff'd,
9 F.3d 1539 (3d Cir. 1993), wherein the
district court held that a taxpayer did not establish "reasonable
cause" under 26 U.S.C. § 6651(a) to fail to file a timely tax
return. The court held that it was unreasonable for the taxpayer
to rely on "facially extraordinary" advice that a filing could be
postponed while the taxpayer was the subject of an ongoing criminal
The ALJ and the Board misapplied the defense. It does not
directly depend on the reasonableness or correctness of the
attorney's advice. It depends instead on the reasonableness of
the office-holder's reliance. Although it would be unreasonable
to rely upon wildly implausible advice, those instances should be
Rather, an officer should be able to reasonably rely on the
advice of an independent attorney responsible for providing it.
An officer should not be required to pinpoint ambiguities in the
law to justify seeking legal advice in the first place. Rather,
it should usually suffice that the officer "'evidenced sensitivity
to the issue of a potential conflict . . . and sought legal
advice." In re Zisa,
385 N.J. Super. at 198 (citation omitted).
In other contexts, courts have concluded that clients should
be free to rely in good faith on their attorney's advice. See
United States v. Boyle,
469 U.S. 241, 251 (1985) (noting, in the
tax context, "[w]hen an accountant or attorney advises a taxpayer
on a matter of tax law, such as whether a liability exists, it is
reasonable for the taxpayer to rely on that advice"); McKeown-
Brand v. Trump Castle Hotel & Casino,
132 N.J. 546, 558 (1993)
(noting, in applying frivolous litigation statute, "a client who
investigation into prior returns, particularly since the taxpayer
did not request an extension. Id. at 672-73.
relie[d] in good faith on the advice of counsel cannot be found
to have known that his or her claim or defense was baseless").
The local official who is not an expert in local government ethics
law should rarely be obliged to second-guess the responsible
attorney. The United States Supreme Court observed, regarding
taxpayers' reliance on counsel's advice:
Most taxpayers are not competent to discern
error in the substantive advice of an
accountant or attorney. To require the
taxpayer to challenge the attorney, to seek a
"second opinion," or to try to monitor counsel
on the provisions of the Code himself would
nullify the very purpose of seeking the advice
of a presumed expert in the first place.
469 U.S. at 251.]
The same holds true for a local governmental official seeking
While the existing record does not support a finding that
Kennedy acted unreasonably in relying on the advice he received,
the Borough Attorney's affidavit provided insufficient detail to
enable the Board to assess fairly Kennedy's compliance with the
four elements of the advice-of-counsel defense articulated in
Zisa. The attorney does not state when Kennedy sought his advice,
particularly whether he sought his advice before the Council
actually approved the resolutions appointing him to the several
paid positions. The attorney also does not describe in any detail
the facts and circumstances provided to him. Evidently, the ALJ
did not explicitly analyze those factors once he concluded that
Kennedy's reliance was unreasonable.
Therefore, it is appropriate to vacate the imposition of the
$500 penalty and remand the case to the Board to provide Kennedy
with an opportunity to supplement the record with additional
evidence in support of his defense that he reasonably relied on
counsel and satisfied the four elements in Zisa. We leave it to
the Board to determine whether additional discovery is warranted,
and whether the matter should be referred again to the OAL for a
plenary hearing. Although Kennedy moved for summary decision, he
did not waive the opportunity to supplement the record under the
circumstances. See O'Keeffe v. Snyder,
83 N.J. 478, 487 (1980)
(stating that a movant may assert that the facts are undisputed
according to its theory of the case, while contending genuine
issues of fact remain if the court adopts the opponent's theory).
Affirmed in part. Vacated and remanded in part. We do not