In January of this year, the Appellate Division, the state’s second highest court, determined that a board of education improperly terminated the employment contract of its in-house counsel and ordered the board to pay out the balance of the contract.
The board hired the counsel in 2009 to provide legal services to the district and afterward entered into a series of one-year contracts through June 2012. Unfortunately, in 2012, criminal charges were filed against several board members in connection with the National School Lunch Program. During the then-pending criminal proceedings, the counsel and the board negotiated and agreed to a three-year contract to provide stability in the administration of the district. The contract provided that the board could only terminate the contract for cause, including conviction of a felony or a crime involving moral turpitude.
In April 2013, the board counsel was arrested in connection with the continuing investigation into the school lunch program. The attorney promptly notified the superintendent about his arrest and was subsequently placed on paid administrative leave pending a formal investigation. In December 2013, the counsel was indicted on charges of conspiracy, official misconduct, tampering with public records, tampering with or fabricating physical evidence, and hindering apprehension. The board then terminated his contract. At the time, the attorney had 18 months left in his agreement, worth a little more than $273,000.
Subsequently, after a six-week criminal trial, the board counsel was acquitted of all charges. During the trial, he testified to the jury that the charges stemmed from his alleged failure to provide a single document in response to a subpoena arising from the school lunch program investigation. The attorney indicated that when he was notified that a document had not been produced, he consulted with outside counsel that handled the board’s subpoena compliance and believed that the missing document was produced electronically.
After his acquittal, the board counsel filed a complaint against the board for breach of contract. Following a two-day bench trial, the court found that the board breached the contract and awarded the attorney contractual damages. The board then appealed to the Appellate Division. Before that court, the board argued that the contract was an unenforceable violation of the Rules of Professional Conduct (RPC), the code of ethics for attorneys.
In rejecting the board’s argument, the court noted that according to the RPC, a client may always discharge a lawyer regardless of the cause and regardless of any agreement between them. Despite this rule, however, the court determined that the attorney was not seeking reinstatement to his former position, he instead was seeking damages for breach of contract. After a thorough analysis of precedent, the court determined that the contract was not a violation of the RPC. A breach of the contract was found because the attorney was not convicted, only indicted, and was thereafter fully acquitted. The contract only provided for conviction as just cause for termination. According to the court, while the board always had the right to terminate the contract, it was liable for any improper termination of the agreement. The court noted, “[n]othing in that limited remedy impaired the board’s inherent right to hire and fire (the attorney), it simply was required to answer, like any party, for the consequences of that breach.” The court concluded by upholding the trial court decision, but remanded to that court for a determination of pre-judgment interest.
The full text of the decision is available here. For more information about this matter, board members may speak with their board attorney or call the NJSBA Legal, Labor, and Policy Department at (609) 278-5254.