Page 23 - Microsoft Word - Lozano Smith Board Member Toolkit 2025

Rule of Necessity
The rule of necessity is a judicially-recognized exception to the conflict of interest
prohibitions. Under the rule, if an official has a financial interest in a contract, the
agency itself is not powerless to proceed if the contract is necessary to carry out
the agency’s statutory duties and powers. If the rule of necessity applies, the Board
may act with the interested party abstaining, without nullifying the contract or any
other consequences. The rule of necessity is to reflect actual necessity after all
possible alternatives have been explored.

Penalties
Penalties for violating section 1090 are harsh. Contracts made in violation of section
1090 are void. A party to the contract can sue to declare the contract void and require
the official to return all funds and benefits received. A willful violation is punishable as
a misdemeanor or a felony, and an official convicted of violating section 1090 is
forever disqualified from holding public office.

Common Law Conflicts of Interest
There is also a judicially-recognized “common law” prohibition against conflicts. The
purpose of this common law prohibition is to avoid even the “appearance of
impropriety.” Courts and the California Attorney General’s Office have applied this
doctrine to situations involving non-financial personal interests.
The common law conflicts doctrine prohibits public officials from placing themselves in
a position where their private, personal interests may conflict with their official duties.
Public officials are entrusted with the public confidence and therefore must exercise
the powers conferred on them with “disinterested skill, zeal and diligence primarily for
the benefit of the public.” As such, if a common law conflict of interest arises, another
party, or their personal involvement in the underlying matter at issue, it is generally
recommended that the public official recuse him or herself from any related action of
the public agency. In the context of personnel matters, student matters, or other
matters in which the public officials will consider evidence or make findings, the failure
of a public official to recuse him or herself, may result in judicial invalidation of the
action taken by the public agency.

For the foregoing reasons, under the common law doctrine, if there is any doubt as to
whether a public official should recuse themselves, the safest avenue is to do so, and
thereby avoid any undue controversy or potential legal challenge.

Financial Interest Disclosure
Officials must file Form 700, also known as a Statement of Economic Interests, conflict-
of-interest statements when they are either:
 Elected officials listed in the Political Reform Act. These persons disclose all
economic interests located in or doing business in the jurisdiction.
 Public officials who management public investments.

20 Guide to Effective Governance