Thursday, October 24, 2013
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Conflict-of-Interest Law Held Not Applicable to Campaign Donors
Contribution Not ‘Gift’ or ‘Income,’ Fourth District Court of Appeal Rules
By KENNETH OFGANG, Staff Writer
A statute barring a public official from voting on a matter involving someone who gave the official a “gift” or “income” of more than $250 in the previous 12 months does not apply where the donor merely gave a campaign contribution in such an amount, the Fourth District Court of Appeal has ruled.
Div. Three Tuesday affirmed an Orange Superior Court judge’s dismissal of a lawsuit brought by a towing company that sought $2 million in damages after it was denied a non-exclusive contract to tow illegally parked vehicles in the City of Orange. All Towing Services LLC, doing business as American All-Star Towing, claimed that two members of the city council had conflicts of interest because they had recently received donations of more than $250 from one of the other bidders.
All Towing complained that the city acted arbitrarily and capriciously by awarding contracts to five of the other bidders in the 2010-2011 bid process, even though All Towing was ranked higher than three of the five by the evaluating process. The company claimed that Councilman Fred Whitaker, an attorney with Cummins & White, had a conflict of interest because he represented a company that provided fuel to other towing companies, but not to All Towing.
Company’s Claims
All Towing claimed that Whitaker had opposed its bid in the mistaken belief that it owed money to Whitaker’s client. That money was actually owed by another towing company, with a similar name, whose assets All Towing had purchased when the other company went belly up two years earlier.
Whitaker also mistakenly believed that All Towing had assumed liability for the other company’s debts, and was thus in a weak financial position, All Towing asserted. All Towing also claimed that two unnamed council members were biased because they had received donations from other companies.
The council agreed to reconsider the contracts based on All Towing’s complaints. Whitaker recused himself in order to avoid an appearance of impropriety, even though the city attorney advised him that he had no conflict of interest.
A motion to award All Towing a contract, in addition to the other five companies, failed on a 2-2 vote.
All Towing then sued the city, Whitaker, and the two members who had voted against it the second time, Denis Bilodeau and Jon Dumitru. It alleged that Whitaker had a conflict in the first vote, and that the other two had conflicts based on their acceptance of donations from other towing companies.
Whitaker’s disqualifying conflict was not cured by his recusal from the second vote, the company argued, because it put All Towing in the disadvantageous position of needed three votes out of four to secure a contract, whereas its competitors needed only three votes out of five.
Demurrers by all defendants were sustained.
Prior Discussion Said Wrong
In concluding that receipt of contributions by Bilodeau and Dumitru did not disqualify them under the Political Reform Act, Justice Richard Aronson, writing for the Court of Appeal, said there was an error in a case the plaintiff cited, BreakZone Billiards v. City of Torrance (2000) 81 Cal.App.4th 1205.
The court in that case suggested that the Political Reform Act’s $250 “gift”-or-“income” rule applied to campaign donations, but said in a footnote that the act did not apply because the donations at issue were made 17 months before the challenged action. The court instead decided the issue before it—whether council members who had received $9,000 in donations from opponents of a zoning variance should have disqualified themselves from voting on it—on the basis of due process.
Aronson’s response was:
“Whether the statement in BreakZone that campaign contributions require recusal under the PRA is dictum or not, it is wrong....It appears BreakZone assumed in its brief, footnoted discussion of the PRA that the definition of ‘financial interest’ in section 87103 included campaign contributions as a ‘Gift’ or ‘Income’ requiring recusal for amounts more than $250 within 12 months of a challenged decision. To the contrary, however, the PRA’s definitions of ‘Gift’ and ‘Income’ now and at the time BreakZone was decided expressly exclude campaign contributions.”
In an unpublished portion of his opinion, Aronson said Whitaker did not have a conflict of interest, because his firm did not represent any towing companies and its representation of a fuel company was too tangential to the issues before the council.
“…Whitaker and the city carried their initial burden to show they were entitled to judgment as a matter of law because no evidence suggested that denying or awarding All Towing any share of the police towing contract would have any effect on [his clients’] financial interests, and therefore the contract award had no discernible ‘ripple’ effect on Whitaker’s financial interests,” the jurist wrote.,
The case is All Towing Services, LLC v. City of Orange, 13 S.O.S. 5449.
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