A state appeals court has ruled that New Jersey law firm McManimon, Scotland & Baumann had an impermissible conflict of interest when it represented both the city of Orange and a private company working on a city-sponsored redevelopment project.

Involvement by McManimon Scotland, a 35-lawyer firm based in Roseland, on both sides of a contract violates the Rules of Professional Conduct, the Appellate Division said Wednesday in The Four Felds v. The City of Orange Township.

The court reversed the ruling of a judge below who found no conflict for McManimon Scotland in its representation of the Orange Housing Development Corp. as general counsel, and of the city itself as redevelopment counsel.

A three-judge panel found that McManimon Scotland violated RPC 1.7(a), which bars a lawyer from representing a client if the representation involves a concurrent conflict of interest, and RPC 1.8(k), which mandates that a lawyer employed by a public entity may not undertake representation of another client if it limits the lawyer's ability to provide advice or representation to either party.

The ruling stems from one of several suits filed against the city by two businesses in Orange, L. Epstein Hardware Co. and Reasonable Lock & Safe, concerning the redevelopment of a blighted business district with the construction of affordable housing by private developers granted long-term tax exemptions.

The plaintiffs claimed the mayor of Orange exceeded his authority by signing an agreement for a long-term tax exemption for phase III of a project called Walter G. Alexander Village. McManimon Scotland represented an entity called WGA III LLC in connection with that project, according to the court.

The plaintiffs sought to halt the redevelopment project for a variety of procedural reasons, such as the developer's alleged failure to pay water and sewer bills on other projects, and the project's purported failure to meet all or part of Orange's low- and moderate-income housing obligation.

Essex County Superior Court Judge James Rothschild Jr. dismissed those claims, and the Appellate Division affirmed.

But also at issue on appeal were the plaintiffs' claims that McManimon Scotland's simultaneous representation of the city and the OHDC created an appearance of impropriety, in violation of RPC 1.8(k). Rothschild found no conflict.

On appeal, Judges Jose Fuentes, Ellen Koblitz and Karen Suter said in a per curiam decision that the appearance of impropriety standard did not apply because McManimon Scotland was not acting as an adviser to the governing body of Orange in its role as a quasi-judicial entity. But the appeals court said an attorney representing a governing entity's governing body for only limited-scope duties, such as redevelopment counsel, is barred from appearing on behalf of private clients before that entity's governing body.

McManimon Scotland engagement as Orange's redevelopment counsel meant it was barred from representing any private client before the city's governing body, the appeals court said in the unpublished opinion.

The panel said the Supreme Court has rejected the general application of the appearance of impropriety standard. The court said the standard remains applicable only to the conduct of “municipal officials acting in a quasijudicial capacity,” and it extends to the legal advice and representation provided by “an attorney advising a governing body in its performance of a quasi-judicial act.”

However, the signing of the financial agreement for the Walter G. Alexander Phase III PILOT ordinance was not a quasi-judicial act, the panel said.

Guidelines from the Supreme Court permit lawyers who represent municipal entities to evaluate conflicts under RPC 1.8(k), the court said, citing Advisory Committee on Professional Ethics Opinion No. 697. Under those guidelines, “an attorney engaged by a governmental entity's governing body for only limited scope duties, such as the attorneys here, is barred 'from appearing on behalf of private clients before that governmental entity's governing body only.' A limited-scope engagement does not serve as a 'per se bar' to prevent that attorney 'from appearing on behalf of private clients before that governmental entity's subsidiary boards, agencies and courts.'”

The panel continued: “Despite the suggestion in its name, 'Orange Housing Development Corporation,' that OHDC might be a part of City government, it was a non-profit New Jersey corporation. The record supports the conclusion that it was a private non-profit New Jersey corporation. Nor was WGA III LLC a public entity. It was a limited liability urban renewal entity.”

Demetrice Miles of McManimon Scotland represents the Orange Housing Development Corp. and his firm in the case. The firm said in a statement, “We respectfully disagree with the decision issued by the Appellate Division,” and added that  “The defendants, Walter G. Alexander Village Urban Renewal III, LLC, and the Orange Housing Development Corporation are corporate entities formed by our public client the Orange Housing Authority for specific purposes, and they are one and the same as the Orange Housing Authority. This matter is under review by our office as we contemplate further legal action.”

Jeffrey Feld of Orange, who represents the plaintiffs, declined to comment, citing Appellate Division rulings in related cases that are still pending.

Robert Kretzer of Lamb Kretzer in Secaucus, who represented Orange in the case, did not return a call.