|Advisory Opinion No. 95-24:||Application of the revolving door provisions of Public Officers Law §73(8) to a former Department of  employee filing a uniform prospectus before his former agency.|
The following advisory opinion is issued in response to a request submitted by , a former employee of the New York State Department  ("Department"), concerning the application of Public Officers Law §73(8) to his future endeavors as a practicing attorney.
Pursuant to its authority under Executive Law §94(15), the New York State Ethics Commission ("Commission") concludes that the two year bar of Public Officers Law §73(8)(a) does not prohibit the requesting individual from preparing a franchise prospectus that will be submitted to franchise regulators in several states, including the Department in New York, although he may not appear before the Department in connection with the submission. He may also prepare contracts which are submitted to the Department as exhibits to prospectuses as part of the overall submission.
The requesting individual was employed for over thirty years by the Department until his retirement on , 1995. He served as  and for the last fourteen years administered the provisions of the New York State Franchise Sales Act ("Act").
The Act requires any person who wishes to offer and sell franchises in or from New York State to do so pursuant to a prospectus filed and registered with the Department. Each prospectus is reviewed before it is registered to determine if it meets the full disclosure requirements of the Act and the Department's franchise regulations. The requesting individual's duties included review of prospectuses submitted for registration.
The requesting individual has been offered a part-time job with a law firm that submits franchise prospectuses to the Department. He anticipates that his duties would include performing legal research in connection with litigation or disputes which might ripen into litigation; drafting or assisting others in the drafting of franchise contracts between franchise sellers (franchisors) and franchise buyers (franchisees); writing or assisting others to write franchise prospectuses; and giving advice to others in the firm on the New York franchise law, the franchise law of other states and the rules of the Federal Trade Commission.
New York is one of 15 states that have adopted uniform rules and forms in the area of franchise regulation. These rules allow franchisors to file basically the same prospectus in all participating states, although individual states may adopt minor modifications.(1) Thus, the work the requesting individual would be performing would be for use in all of the uniform states in which a franchisor intended to do business. New York State's specific requirements would apply only if New York was one of those states. Work done under the federal rules would be uniform throughout the country.
The requesting individual states that his work would be performed in the "backroom," and he would not appear before the Department, either in person, by letter or by telephone. He would not work on any prospectus for a franchisor that had applications in the Department during his employment there. He does, however, intend to work on contracts for such franchisors, but only if the contracts or other underlying documents would be used in other states in which the franchisors were doing business. He also would not work on any franchise prospectus, contract or underlying documents for a franchisor which intends to do business only in New York.
Public Officers Law §73(8) states, in relevant part, that:
(a) No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation, or association in relation to any case, proceeding or application or other matter before such agency.
Public Officers Law §73(8), generally referred to as the "revolving door" provision, sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their employment with a State agency. Paragraph (a), cited above, contains a two year absolute bar on an employee's appearing, practicing or rendering services for compensation on any matter before his or her former agency.(2)
Generally, a former employee may not, during this two year period, prepare an application or submit or complete any documents that will be reviewed by his or her former agency. (See Advisory Opinion No. 90-21.) As noted above, one of the requesting individual's duties will be to prepare contracts between franchisors and franchisees, which contracts will be attached to prospectuses submitted to and reviewed by the Department. A contract, however, is not, in and of itself, prepared for Department review. Rather, it is prepared to establish the relationship and obligations between the franchisor and the franchisees. While the Department will review the contract to ensure that it does not contain illegal terms, the Department does not review the merits of its provisions, which constitute "the deal" between the parties. Its basic review is to assure that the prospectus fully and fairly reveals the terms of "the deal." Thus, although it is included as part of the package to be reviewed by the requesting individual's former agency, the contract is not a "matter" before the Department. Therefore, he may prepare such contracts.(3) He may not, however, respond to any Department inquiry concerning a contract, as this would cause him to make a prohibited appearance before his former agency.
On the other hand, there can be no doubt that a prospectus submitted for review is a "matter" before the Department. Thus, Public Officers Law §73(8)(a) precludes the requesting individual from preparing any such prospectus during the period of the two year bar. This would preclude his providing backroom assistance, as the Commission has previously held that such work constitutes the receipt of compensation for services rendered in a matter before an individual's former agency in violation of Public Officers Law §73(8)(a). (See Advisory Opinion No. 90-7.) While backroom assistance on a particular matter is prohibited, the Commission has permitted a former employee to provide generic advice as long as the former employee does not work on a specific proposal or application to be submitted to his or her former agency. (See Advisory Opinion No. 90-3.) Thus, the requesting individual could provide generic advice to his law firm relative to the Act as long as the advice does not refer to a particular prospectus. He may also advise the law firm with regard to the franchise law of other states and the Federal Trade Commission rules governing franchise business opportunities, as these do not involve matters before the Department.
While the above rules have been clearly established by the Commission, the requesting individual's inquiry presents the novel question of whether he could submit a prospectus to the Department if the prospectus has been prepared pursuant to the UFOC.(4) He argues that because New York is one of 15 states that has a franchise sales act with similar regulations, any prospectus prepared for states other than New York would satisfy the Department's requirements.
The Commission agrees that the requesting individual may submit a prospectus to the Department if it is prepared for and is, in fact, submitted pursuant to the UFOC in other states. In such circumstances, he would not be rendering services in a specific matter before the Department. Rather, he would be rendering services in a matter that is before several states, only one of which is New York. He may not, however, prepare any part of a prospectus that is New York State specific, as he would then be rendering services for compensation on a matter before the Department; nor may he respond to any Department inquiries about a prospectus that he prepared, as that would cause him to appear in a matter before his former agency.
Concerning any litigation that may arise in New York State, the requesting individual may not assist with litigation where he prepared a prospectus submitted to the Department that is the subject of the lawsuit. In matters that do not involve such a prospectus, the requesting individual may provide assistance to the law firm once a court action has been initiated, as the "matter" would no longer be before the Department but before the courts. (See Advisory Opinion No. 89-7.)
The Commission concludes that the post-employment restrictions of Public Officers Law §73(8)(a) do not prohibit the requesting individual from preparing a uniform franchise prospectus that will be submitted to franchise regulators in several states, including the Department in New York, although he may not appear before the Department in connection with the submission. He may also prepare contracts which are submitted to the Department as exhibits to prospectuses.
This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.
Joseph M. Bress, Chair
Angelo A. Costanza,
Robert E. Eggenschiller, Members
Dated: July 18, 1995
1. According to the requesting individual, the North American Security Administrators' Association, of which all states are members, proposed a model form of regulations dealing with franchising called the Uniform Franchise Offering Circular ("UFOC"). The Federal Trade Commission has approved the use of UFOC by the states.
2. The lifetime bar of Public Officers Law §73(8)(b) is not an issue, as the requesting individual states that he will not work on any prospectus that had been filed with the Department during his employment there.
3. The Commission recognizes that this discussion may be academic, as the requesting individual states that he will only work on such contracts for franchisors who intend to do business in other states.
4. See footnote 1.