Kane Properties, L.L.C. v. City of Hoboken, A-96/97 September Term 2011; Supreme Court; opinion by Hoens, J.; decided June 26, 2013. On certification to the Appellate Division, 423 N.J. Super. 49 (App. Div. 2011). [Sat below: Judges Payne, Reisner and Hayden in the Appellate Division; Judge DeCastro in the Law Division.] DDS No. 04-1-0434 [48 pp.]

In this appeal, the court determines the standard that governs the evaluation of a municipal attorney's conflict of interest and the appropriate remedy for a conflict that tainted a city council's zoning decision.

The matter before the court relates to the claim of a property owner who successfully sought a use variance before the local zoning board, only to see that grant of relief reversed by the municipality's governing body. Believing that the decision of the governing body was tainted because one of the municipal attorneys, Michael Kates, who participated in the governing body's proceedings, had represented the principal objector to the project before the zoning board, the property owner filed a complaint to commence an action in lieu of prerogative writs.

In that proceeding, the trial court agreed that the municipal attorney had a conflict of interest but found no evidence that it had affected the decision of the governing body. As a result, the trial court conducted its de novo review of the decision of the governing body and, concluding that it was not arbitrary, capricious or unreasonable, let it stand.

The property owner appealed. The Appellate Division first found that although the municipal attorney had recognized that his prior representation of the objector created a conflict of interest and had announced that he would recuse himself from the proceedings before the governing body, his recusal was not complete. Furthermore, the appellate panel concluded that, because the attorney had participated in certain aspects of the proceedings before the governing body, the attorney's conflict of interest had tainted the governing body's decision.

Disagreeing with the trial court's view that the property owner was required to demonstrate that the attorney's involvement had an actual effect on the governing body's decision, and relying instead on the appearance of impropriety standard, the Appellate Division concluded that the governing body's decision could not be sustained. The appellate panel vacated that decision and remanded the dispute back to the governing body, with instructions that it hear the matter anew.

The court granted plaintiff's petition and defendants' cross-petition for certification.

Held: The appearance of impropriety standard governs the evaluation of a municipal attorney's conflict of interest. The city council's decision is set aside because it was tainted by its attorney's conflict of interest.

Although an attorney's claimed conflict of interest is no longer evaluated in accordance with the appearance of impropriety standard, that standard remains applicable to judges and municipal officials acting in a quasi-judicial capacity. The court finds no basis on which to conclude that a different standard should apply to an attorney advising a governing body in its performance of a quasi-judicial act. Pursuant to the appearance of impropriety standard, it is not necessary to prove actual prejudice; rather, there must be an objectively reasonable belief that the proceedings were unfair.

An objectively reasonable, fully informed member of the public would perceive that Kates' participation in the proceedings calls into question the impartiality of the governing body and the integrity of the proceedings. Kates acted as counsel to the governing body, he answered questions from council members, he advised them on voting procedures, and he signed the resolution following their vote. Recusal of an attorney advising a municipal decision-making body must involve a complete separation from any aspect of the matter whatsoever to safeguard public confidence. Because Kates' incomplete recusal irretrievably tainted the action taken thereafter by the city council, its decision must be set aside.

The choice of a forum for the proceedings on remand dictates the degree of deference to be accorded to the zoning board's resolution. A remand to the city council would uphold the governing body's election to retain oversight of the zoning board's decision to grant use variances, but would not cure the taint of the conflict of interest. A remand to the Law Division, in circumstances in which the city council's determinations have been stricken, would elevate the zoning board's decision by giving it deference that is inappropriate in light of the role that should be played by the city council. In these unusual circumstances, the court crafts a remedy that will balance the rights of the parties and recognize the proper roles that would ordinarily be played in the process by the two levels of municipal decision-makers. The matter is remanded to the Law Division, which shall conduct a de novo review of the zoning board's resolution. The Law Division shall entertain such arguments or supplements to the record that the city council may present bearing on its own "expertise and knowledge" of the zoning scheme. The court shall also give due consideration to the city council's evaluation of whether the proposed use variances satisfy the positive and negative criteria imposed by the MLUL. Finally, in recognition of the appearance of impropriety standard, the remanded matter should be assigned to a judge who has not previously evaluated the matters in dispute.

The judgment of the Appellate Division is affirmed as modified and the matter is remanded to the Law Division for proceedings consistent with this opinion.

Chief Justice Rabner; Justices LaVecchia, Albin and Patterson; and Judges Rodríguez and Cuff, both temporarily assigned, join in Justice Hoens' opinion.

For appellant and cross-respondent — Arnold K. Mytelka (Kraemer Burns; Mytelka and John A. Avery on the briefs). For respondents and cross-appellants — Edward J. Buzak (The Buzak Law Group; Buzak and Susan L. Crawford on the briefs).