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HomeMy WebLinkAboutCOM 0240.002 2010-2012 +177...... Lincoln S.T. Ashida William P. Kenoi • U Corporation Counsel y ,� •,:,' Ma or ' • Katherine A. Garson ��. 4 . •• , Assistant Corporation a o: N► - Counsel COUNTY OF HAWAII OFFICE OF THE CORPORATION COUNSEL 101 Aupuni Street, Suite 325 • Hilo, Hawaii 96720 -4262 • (808) 961 -8251 • Fax (808) 961 -8622 E -mail: corpcounsel@co.hawaii.hi.us June 22, 2011 ._. Mr. Dominic Yagong Chair, Hawaii County Council Members of the Hawaii County Council ^' County of Hawaii 25 Aupuni St. -3 Hilo, HI 96720 Dear Chairman Yagong and Council Members: RE: Resolution 88 -11 Hiring of special counsel A special meeting of the Hawai'i County Council has been arranged by the Council chair to consider Resolution 88 -11. Unfortunately, there have been unsubstantiated statements and aspersions presented in the media, and by this letter we seek to properly correct the record. 1. The allegations of "sandbagging" are false. An allegation was made publicly that the Corporation Counsel somehow "sat" on a legal opinion provided to the Finance Department and did not say anything while the Council was deliberating the budget. This is not true. We received a communication from the Finance Department on June 3, 2011, memorializing comments from various finance officials and authorities statewide concerning the Council's unprecedented use of the "negative appropriation. " After seeing these comments, particularly the statewide concern the Council's actions lacked transparency our office unilaterally began to closely research the legal ramifications of a budgetary "negative appropriation. " 1 Enclosed as Exhibit 1 is the email received from the Finance Department. With respect to the enclosure with that email, we understand these deliberative drafts are protected as confidential by the Finance Department. 2 To date our office has not been asked by the Council to determine the legal integrity of the Council amendments to Bill 29 (Draft 4). Comm. No. 24 Hawai'i County is an Equal Opportunity Employer and Provider Ref. To: Pre+xee001 �` 1 4 11 -* lief. D.te,,,ujN 2 2011 Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 2 It was no surprise there was no case law in the State of Hawai'i on point concerning this issue. Similarly, nationwide there was very little legal precedent to guide us. This is because it is very rare for a legislative body to not take the opportunity to mandate reductions in line items. This is the one opportunity the legislative body has to effectively and legally direct the resources of government, and normally legislative bodies readily seize this opportunity. As a result, there were no reported opinions we could readily find. On June 8, 2011, we discovered Gallagher v. Regan, 55 A.D.2d 284, 390 N.Y.S.2d 703 (1976), a case from New York that was "on all fours" with the issue before us. We then prepared our letter to the Finance Director expressing our opinion and concerns since we would be forwarding the budget to the Mayor without our approval as to "form and legality. " All of this activity occurred after the Council had passed Bill 29 (Draft 4) on June 1, 2011. We did not "jump up and down" in front of the Council before then since we simply could not say at the time with any degree of certainty what the Council was doing may be legally wrong. If we did jump up and down without legal authority, we would probably be told to sit down. What were the options for the Corporation Counsel after reviewing the Gallagher case and concluding there were legal infirmities? Doing nothing would be tantamount to abdicating our responsibility and a disservice to the public we have sworn to serve (that would really be "hiding the ball "). 2. There is no legal adversity presenting a "real necessity" for the hiring of special counsel. Article VI, Chapter 5, Section 6 -5.5 of the Hawai'i County Charter (2010) (hereinafter "Charter ") provides as follows (emphasis supplied): The council may, by two- thirds vote of its entire membership, authorize the employment of special counsel for any special matter presenting a real necessity for such employment. Any such authorization shall specify the compensation, if any, to be paid for said services. City Council of the City and County of Honolulu v. Sakai, 58 Haw. 390, 570 P.2d 565 (1977) represents the only reported Hawai'i case discussing what constitutes a "real necessity" within the context of hiring special counsel for a county's legislative body. In that case, the Honolulu City Council sued the City's 3 Exhibit 2 is the verification from Westlaw when this case was received by us. 4 We note there is no legal requirement for the Corporation Counsel to sign off on bills as to "form and legality." This is a process that had been instituted by prior mayoral administrations and has carried on to this day. Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 3 finance director seeking payment of legal fees owed to special counsel hired by the Council to investigate contracts entered into by the administration. The Hawai'i Supreme Court opined the Council was authorized to hire special counsel. However the reason for this conclusion was premised on an examination of Section 3- 108(5) of the 1973 Charter (of the City and County of Honolulu), which provided as follows: The council may authorize the employment of special counsel to represent it, upon the affirmative vote of at least two- thirds of its entire membership. Any such authorization shall specify the compensation, if any, to be paid such special counsel, and the council shall make an appropriation therefor. The high court noted the significant and dispositive difference between the current version of the Honolulu Charter (cited above), and its predecessor 1959 version (found at Section 5- 205(3)), and stated as follows (emphasis supplied): In the process of revision, the power of the Council was clearly enlarged, from one exercisable only `for any matter presenting a real necessity for such employment ", to one exercisable without any express limitation. City Council of the City and County of Honolulu v. Sakai, supra, 58 Haw. at 397. The prior language of the Honolulu Charter mirrors the present version found in our Hawai'i County Charter. Thus, as argued by the Corporation Counsel in the Sakai case, it is the position in our County that "real necessity" is limited to circumstances (1) where there is a conflict of interest in the Corporation Counsel providing legal representation, or (2) where specialized legal expertise is required. In the present matter before the Council, there is no "real necessity" for the hiring of special counsel. In this time of financial challenge facing our County and communities, please consider dispassionately and non - politically the circumstances that have led to the presentation of this question before you. 5 The former 1959 version of the Honolulu Charter provided that "The council may, by two thirds vote of its entire membership, authorize the employment of special counsel for any special matter presenting a real necessity for such employment. Any such authorization shall specify the compensation, if any, to be paid for said services." 6 We note as an aside the title and body of the resolution stated a maximum contract amount of $8,000. For the future, we would recommend not revealing the maximum payment amount until there is final Council action approving the hiring of special counsel (this would comply with Charter Section 6 -5.5). Section 103D- 304(h), Hawai'i Revised Statues, as amended, contemplates confidentiality during the negotiation for professional services. Premature revelation of this figure may not be in the best financial interest of the County, as it allows potential vendors to know what maximum contract amount the County is willing to pay (attorneys will normally charge an hourly rate). Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 4 The "adversity" that has been created may exist in media reports, but should have no place in good governance. The administration and council are to our County as different vital organs are to the human body. Both are separate, perform independent functions yet are collectively vital to the wellness of the whole. There exists a healthy tension between the administration and council that is defined by the separation of powers and buffered by the various checks and balances found in our laws. In the case of the budget, our citizens and County expect if not demand, that the two branches of government perform their functions independently with the common goal of delivering services in a timely and efficient manner. Nothing in our legal opinion prevents this from happening. As is often repeated at Council meetings, our opinions are just that (opinions), and it is incumbent upon the policy makers in our County to determine whether these opinions are worthy of adherence. With or without our opinion, the Mayor was free to sign or veto Bill 29 (Draft 4). Similarly, the Council is not restricted in its ability to override the mayoral veto, if that is the collective will of its constituency. In analyzing other separation of powers cases, our Hawaii Supreme Court has said: We cannot proceed on the assumption that the relationship between the legislative branch and the executive branch is of an adversary nature. Each branch has a responsibility to cooperate with the other to effectuate each of their respective functions. The (Honolulu) Charter Commission clearly indicated that the intent of the amended Charter was to create a strong mayor and a strong council: The Commission hopes that the strong mayor- strong council form of government which it has sought to create will strengthen the council's role of policy- making without permitting interference in administrative matters. At the same time, it should be noted that the executive role of the mayor was strengthened to meet the increasing administrative complexity of city government. Akahane v. Fasi, 58 Haw. 74 at 84, 565 P.2d 552 (1977) (internal citations omitted throughout). Despite the "adversity" fostered in media reports and the present Resolution 88 -11, the Corporation Counsel remains committed as the attorney for the County of Hawai'i, specifically the organizational client County Council acting through its constituent Council members. Like some Council members, we had our doubts and questions about this "novel" approach to budgeting. We did not have the benefit of clairvoyance; we were as surprised as anyone with respect to the holding found in Gallagher v. Regan, supra, and its analysis concerning the illegal acts of the legislative body in that case. Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 5 Resolution 88 -11 erroneously alleges that "by not designating the June 14, 2011, legal communication as a privileged and confidential document, Corporation Counsel allowed this document to go public to the detriment of the Council." This is factually and legally untrue. Our June 14 opinion contained no attorney - client privileged communication between our office and the Council. Instead, it was strictly confined to a legal analysis addressed to the Finance Director examining the separation of powers ramifications in light of the reasoning found in Gallagher v. Regan, supra, and why our office would not approve Bill 29 (Draft 4) as to "form and legality" before forwarding to the Mayor. In forwarding our opinion to the Mayor, the Finance Director placed the decision of waiver before the appropriate authority who could waive any privilege that existed. Young v. City and County of Honolulu, 2008 WL 2676365, F.Supp.2d (D.Hawaii 2008), examined the attorney - client privilege in Hawai'i and the circumstances under which representatives of organizational government entities could effectively waive same. In that case, the plaintiffs (leasehold residential condominium owners) claimed they were entitled to attorney - client privileged documents as part of the discovery process, since former Honolulu City Councilmember Barbara Marshall had effectively waived the attorney - client privilege by publicly making the following statement: I'd like to hear from the other side. I'm a little leery about taking a recommendation of an attorney from one side of an issue this controversial which I believe contradicts advice of our own counsel... Young v. City and County of Honolulu, supra, 2008 WL 2676365 at 1. In finding no waiver of the privilege, the United States District court for the District of Hawaii distinguished a mayor's authority to waive privilege, versus the inability of a single member of the council to effectively do the same: An agent acting within the scope of her authority can waive a corporation's privilege. See Interfaith Housing Delaware, Inc. v. Town of Georgetown, 841 F.Supp. 1393, 1399 (D.De1.1994); see also Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 348, 105 S.Ct. 1986, 85 L.Ed.2d 372 (1985) ( "[T]he power to waive the corporate attorney - client privilege rests with the corporation's management and is normally exercised by its officers and directors. "). Thus, a corporation's president can make statements waiving the corporation's attorney - client privilege, as a mayor can for a city. See Interfaith Housing, 841 F.Supp. at 1399. A corporate president and a mayor "have clear leadership positions which give them authority to bind their respective principals. One can reasonably assume a mayor or corporate president has the authority ... to waive the attorney - client privilege." Id. (citations omitted). In contrast, a reasonably prudent person Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 6 would not assume that a single member of a city or town council has the authority to waive privileges on behalf of the city or town without evidence of such authority. See id.; see also United States v. Ferrell, No. CR07 0066MJP, 2007 WL 2220213, at *3 (W.D.Wash. Aug.l, 2007) ( "It is generally agreed that the [attorney - client] privilege belongs to the government agency, and not an individual government employee. `The privilege for governmental entities may be asserted or waived by the responsible public official or body.' " (quoting Restatement Third, Law Governing Lawyers § 74, Comment e)); N. Pacifica, 274 F.Supp.2d at 1126 n. 3 (stating that, even where a city council member willingly testified about his or her uncommunicated motivations, the court would not rule that this waived the deliberative process privilege because "the privilege is held by the body and not the individual legislator" (citing Nissei Sangvo Am. v. IRS. No. 95 - 1019 (TFH /PJA), 1997 U.S. Dist. LEXIS 22473, at *20, 1997 WL 1091466 (D.D.C. May 8, 1997) (noting that privilege belongs to government))). Young v. City and County of Honolulu, supra, 2008 WL 2676365 at 7. Again, the assertion in Resolution 88 -11 is that somehow attorney - client confidences involving the Council have somehow been compromised. There are no facts to support this contention. In fact, there was no attorney - client confidences since our office was never consulted by the Council concerning the legality of the "negative appropriation" found in Bill 29 (Draft 4). It is not clear what legal "detriment" accrues to the Council because of the opinion released by the administration. In sum, excising any misplaced political motivations and focusing exclusively on legal concerns, there is no legal adversity resulting in a conflict of interest such that a "real necessity" exists for the hiring of special counsel. 3. Conclusion In summation, we respectfully ask the Council to again revisit and carefully consider the following. 1. The record is clear there was no "sandbagging" since a legal review by Corporation Counsel was never sought by the Council. The allegation that somehow Corporation Counsel waited until after the Council passed Bill 29 (Draft 4) to reveal the legal infirmities is simply not true. The evidence is clear concerns were brought by the Finance Department on June 3 (after the budget had been passed by the Council) that prompted us to We caution the Council that Young v. City and County of Honolulu, supra represents an examination of Federal law with respect to the attorney - client privilege and the work product doctrine. We cannot warrant a State court would arrive at the same legal conclusion. Mr. Dominic Yagong & Members of the Council June 22, 2011 Page 7 closely research the issues. In fact to date, the Council has never asked us to research this issue. Our research was completed after June 8, and the budget was forwarded to the Finance Department with our legal concerns. These allegations were unsubstantiated yet publicly made, resulting in the undermining of the public trust. 2. There is no legal adversity presenting a "real necessity" for the hiring of special counsel. Unfortunately, adversity has been created where none legally exists. Our legal opinion would be written the same way, no matter who asked us to do it. The simple fact remains: The Mayor could veto the budget with or without our opinion, and the Council may override the Mayor's veto with or without our opinion. There is no need to spend taxpayer money to get another opinion; the Council does not need another opinion to do whatever it wants to do. If the Council proceeds to hire special counsel, at the end of the day our County will be left with two opinions that may or may not say the same thing, and it would not affect the Council's ability to override the Mayor's veto, if that is what is chooses to do. Thank you for your kind consideration. If you have any questions or comments, please contact me. Very truly yours, Ashida, Lincoln ae 22 2011 2:17 PM C )Starr LINCOLN S. T. ASHIDA Corporation Counsel Encls. Ashida, Lincoln From: Crawford, Nancy Sent: Friday, June 03, 2011 7:58 AM To: Ashida, Lincoln Cc: Sako, Deanna; Tom, Gary Subject: Fw: Council's Negative Appropriation Attachments: Negative Appropriation Comments.doc EXHIBIT 1 1 Ashida, Lincoln From: westlaw@westlaw.com Sent: Wednesday, June 08, 2011 5:04 PM To: lashida@co.hawaii.hi.us Subject: Westlaw Results : 390 N.Y.S.2D 703 Attachments: Westlaw_Document_22_03_49.doc Westlaw Delivery Summary Report for ASHIDA,LINCOLN Your Search: BUDGET /S "LUMP SUM" Is reduction cut reduc Date/Time of Request: Wednesday, June 8, 2011 22:03 Central Client Identifier: ASHIDA Database: ALLSTATES Citation Text: 55 A.D.2d 284 Lines: 561 Documents: 1 Images: 0 Recipient(s): lashida@co.hawaii.hi.us The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters, West and their affiliates. EXHIBIT 2 1