Conflict of Interest for Governing Board Member

The California Attorney General has issued an opinion (No. 03-408) holding that a member of the governing board of a local agency who sues the agency to challenge its decision may not enter into a settlement agreement concerning the lawsuit because a prohibited financial interest would be present.
A member of the board of directors of a community services district opposed the district’s decision to grant a groundwater extraction permit to one of his neighbors because of the possible adverse effect on the board member’s water well. He brought suit against the district challenging the decision.
The Attorney General opined that the board member was not required to resign from the board upon filing the lawsuit. He would be required to abstain from every aspect of the decision-making process relating to the lawsuit and could not participate in or obtain information from closed sessions affecting his interest.
However, with respect to any settlement agreement, the entire board would have a financial interest prohibited by Government Code section 1090 which cannot be cured by the affected member’s abstention. The Attorney General noted that section 1090’s prohibition applies even when the terms of the proposed contract are fair and equitable, or even plainly to the agency’s advantage. The Attorney General concluded that the district and the director could not enter into an agreement settling the lawsuit.
We recommend you consult legal counsel in any instance where it appears a trustee or school official is affiliated with an entity seeking to contract with your district or county office to determine whether a prohibited conflict exists.