Petition — Sendak v. Citizens Energy Coalition of Indiana

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IN THE

Supreme Court of the United States

Octoser Term, 1978

N.—_@8=-]1895

TxHeopore L. Senpak, Attorney General,

State of Indiana, in his official and

individual capacities,

Petitioner,

vs.

Crrizens Enercy Coa.ition oF INDIANA,

d/b/a Citizens Action Coalition of

Indiana, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

THeoporE L. SENDAK

Attorney General of Indiana

Auan L. Crapo

Assistant Attorney General

Office of the Attorney General

219 State House

Indianapolis, Indiana 46204

Telephone: (317) 633-6246

Attorneys for Petitioner.

C. E. Pauley & Co., Inc., Indianapolis

TABLE OF CONTENTS

Page

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SERIA ES CORSE FS a TL 2

8 tS OES IEEE a ee 2

Questions Presented for Review ...............2..........csscecceeeeess 2

Constitutional and Statutory Provisions Involved .......... 3

Se Se 3

Facts Material to the Consideration of the

SIE ER Re ae 3

Reasons for Allowance of the Writ -......2.2.2......0.20.20.2..00000-0- +

Tee ea a siemmencenmassnesinedeane 7

TABLE OF AUTHORITIES

Cases

Page

Barry v. Mercein, 46 U.S. 103 (1847) 222... eceeeeeeeeees 7

Cheney v. Unroe, 166 Ind. 550, 77 N.E. 1041 (1906) ........ 6

Citizens Energy Coalition of Indiana, I ne., et al.,

v. Theodore L. Sendak, et al., Cause No. IP 78-352-C.... 3

Goldsmith v. Sutherland, 426 F.2d 1395 (6th Cir. 1920)...

Gully v. First National Bank of Meridian, 299 U.S. 109

Se PEUPIIE: ece <i ical bbocadieste aistepsboeteabadedinnh aiitaaaceseen <a. walled etancecsds 7

Secretary of State of Indiana v. Indiana AFL-CIO,

a il ct a a 6

Statutory Provisions

RE 5 REE RE: Freer ATT DAE han et Ele 2

Ts TRL: secaeinsreahciecaenseshdok teneicig hcl dnehcasassetickercccoetsecaaieleis 3

es III san ccs: cid naichaiadeiscebasccche ternignciteetsneendcessasla ae

ee I Sia tcciinta Si cclpnag tba kinhacntiiagheb ptaieneassiseealal 3, 5, 7

Rs SANE ga ee Nee MN el PIP 3,4

Bs EE II cites Lapssicn bd Debcamsaacleuinadoceimanebiadel 3, 5

Is SIN ING rebitc ci iectncnceccchactatabidicaabinadiooabtteiel 3, 4, 5, 6

Other Authorities

Rule 19(1)(b) of the Rules of the Supreme Court

Oe Ve Ne sic ee ee 2

il

IN THE

Supreme Court of the United States

Octroser Term, 1978

No.

TxHeopore L. Senpak, Attorney General,

State of Indiana, in his official and

individual capacities,

Petitioner,

vs.

Crrizens Enercy Coauition or [npiana,

d/b/a Citizens Action Coalition of

Indiana, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioner Theodore L. Sendak, Attorney General, State

of Indiana, respectfully prays this Court issue a Writ of

Certiorari to review the decision of the United States

Court of Appeals for the Seventh Circuit (hereafter Sev-

enth Circuit) entered in cause numbers 78-2509 and 78-

2601 on March 28, 1979, which affirmed the preliminary

injunction order of the United States District Court for

the Southern District of Indiana, Indianapolis Division

(hereafter District Court).

2

OPINIONS BELOW

The opinion of the Seventh Circuit issued on March 28,

1979 has not been officially reported. A copy of that opinion

has been appended hereto at pages A-1 through A-8. The

Preliminary Injunction and Findings of Fact and Conclu-

sions of Law of the District Court have not been officially

reported, but copies have been appended at pages A-9

through A-29.

JURISDICTION

The jurisdiction of this Court is invoked pursuant to 28

U.S.C. § 1254(1) and Rule 19(1)(b) of this Court, to review

an opinion of the Seventh Circuit which has decided an

important state question in a way in conflict with applicable

state law, and which has decided an important question of

federal law in conflict with the decisions of this Court and

with decisions of other courts of appeals on the same

matter.

The decision of the Seventh Circuit was entered on

March 28, 1979. The Petition is timely in that it is filed

prior to the expiration of the ninety (90) day period allowed

by 28 U.S.C. § 2101(¢e).

QUESTIONS PRESENTED FOR REVIEW

1. Whether the Seventh Circuit erred in holding that

the Attorney General’s disapproval as to form and legality

of a contract between a state agency and the Respondent,

which was a quasi-judicial act calling for the exercise of

his professional judgment and discretion, resulted in an

erroneous application of Indiana law.

_2. Whether the Seventh Circuit erred in holding that

the District Court had jurisdiction in conflict with appli-

cable decisions of this Court and with decisions of other

courts of appeals on the same matter. ;

3

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The case involves the following statutory provisions:

Indiana Code 2-4-3-7, Indiana Code 2-4-3-9, Indiana Code

4-13-2-14, 28 U.S.C. § 1331 and 42 U.S.C. § 6805, which are

not set out verbatim, but which have been appended hereto

at pages A-29, A-30, and A-31, respectively.

STATEMENT OF THE CASE

This Petition arises from the sffirmance by the Seventh

Circuit of a preliminary injunction issued by the District

Court in the case entitled Citizens Energy Coalition of

Indiana, Inc., et al. v. Theodore L. Sendak, et al., Cause

No. IP 78-352-C, ordering that the Attorney General of

Indiana (hereafter Attorney General), acting in his official

and individual capacities, be enjoined from refusing to

approve the legality of subgrants for financial assistance

allocated by the Indiana Public Counselor in accordance

with the consumer group program pursuant to 42 U.S.C.

§ 6805, on the basis that the subgrantees are or retain

lobbyists in the Indiana General Assembly.

Facts Material to the Consideration

of the Questions Presented

On December 21, 1977, the Indiana Public Counselor

executed a proposed contract in the amount of $5000.00

with the Citizens Energy Coalition, Inc. (Coalition) for

services to be performed under the terms of a grant pur-

suant to 42 U.S.C. § 6805.

Subsequently, on March 29, 1978, the Indiana Attorney

General disapproved the proposed contract, pursuant to

his duty to approve contracts as to form and legality under

Indiana Code 4-13-2-14, on the grounds, inter alia, that the

t

Coalition retained a registered lobbyist in the Indiana

General Assembly in conflict with Indiana Code 2-4-3-7.

Evidence at trial showed that the Coalition was incorpo-

rated primarily to lobby and did, in fact, employ its chief

executive officer as a registered lobbyist.

All of the plaintiffs in the case retained lobbyists or were

lobbyists during the preceding session of the Indiana Gen-

eral Assembly.

REASONS FOR

ALLOWANCE OF THE WRIT

I,

The Decisions of the District Court and the

Seventh Circuit have Resulted in an

Erroneous Application of Indiana Law

The Indiana Public Counselor executed a proposed con-

tract with the Coalition which was subsequently disap-

proved by the Attorney General, pursuant to his statutory

authority, on the grounds that the contract ‘‘would have

the effect of tending to lessen the performance of public

duties’’ and ‘‘would be in conflict with Ind. Code 2-4-3-7."’

Following suit by the Coalition, the District Court, on

October 17, 1978, held that to ‘‘disapprove the contract of

December 21, 1977, on the grounds that the contract would

be in conflict with Ind. Code 2-4-3-7 [prohibiting lobbying

for pay by public officials] would be an erroneous disap-

proval.’’? The Court accepted the ‘‘tending to lessen the

performance of public duties’’ rejection of the contract,

and did not order it approved. The Coalition did not appeal

that judgment to the Seventh Circuit, and thus, it is not

before this Court. The Seventh Circuit affirmed the Dis-

trict Court’s decision.

Indiana Code 4-13-2-14 provides that all contracts en-

tered into by state agencies shall be approved as to form

5)

and legality by the Attorney General. No contract with a

state agency is legally binding until such approval has

been secured.

In approving contracts, the Attorney General exercises a

quasi-judicial professional discretion pursuant to Indiana

Code 4-13-2-14; however, in the case at bar, the Seventh

Circuit held that the Attorney General could be enjoined

from refusing to approve any subgrants for financial as-

sistance pursuant to 42 U.S.C. § 6805, solely on the basis

that the subgrantees retain lobbyists. This result was

reached despite the fact that no subgrants have been sub-

mitted to the Attorney General for his approval as to form

and legality. Thus, the courts below, in attempting to

cause the approval of future subgrants by the Attorney

General, have substituted themselves as ad hoc Attorneys

General to carry out his legislatively mandated review.

In addition to the duty to review all contracts, including

subgrants, as to form and legality, the Attorney General

has prosecutorial duties with regard to those who violate

the Indiana lobbyist-employer statute pursuant to Indiana

Code 2-4-3-9. Moreover, part of the basis for the rejection

of the Coalition contract was the fact that the oreanizat:

had maintained lobbyists in the Indiana General Assembly

immediately after completing work under the contract

terms.

If the Attorney General is banned from a consideration

of whether a subgrant between lobbyist organization and

the State is legal, pursuant to his duties under Indiana

Code 4-13-2-14, he could be placed in the position of having

to prosecute parties to contracts which he had approved,

if the lobbyist organization violated Indiana Code 2-4-3

et seq.

6

All of the plaintiffs in the case at bar maintained lobby-

ists or were themselves lobbyists during the second session

of the 100th Indiana General Assembly.

The Indiana Court of Appeals recently ruled in Secre-

tary of State of Indiana v. Indiana AFL-CIO, et al., 371

N.E.2d 1348 (1978), that a person who serves on a volun-

tary board of the State of Indiana could not also be a

lobbyist. In the case of Cheney v. Unroe, 166 Ind. 550,

77 N.E. 1041 (1906), the Indiana Supreme Court held that

a contract between a State official and a private party is

void where such contract tends to lessen the performance

of the official’s public duties. The Attorney General be-

lieves contracts by state agencies or officials with lobbyist

groups would have precisely that effect.

In the case at bar, the Attorney General was acting with-

in the scope of his authority in not approving a contract

which would present a conflict of interest under Indiana

Code 2-4-3 et seq., and at the same time lessen the per-

formance of public duties of the Public Counselor. Thus,

the Seventh Circuit has decided an important state question

in a way which conflicts with Indiana State law.

II.

The Decisions of the District Court and the Seventh

Circuit on Jurisdiction are in Conflict with the

Decisions of Other Courts

This is not a case arising under an act of Congress. This

case arises under state law. The Attorney General’s duty

with regard to the approval or nonapproval of a contract

is solely a matter of the law of the State of Indiana. See,

Ind. Code 4-13-2-14. While the subject matter of the con-

tract dealt with establishing guidelines to govern the ad-

ministration and distribution of financial assistance to

7

consumer groups under 42 U.S.C. § 6805, the subject matter

of the contract is not the subject matter of the case. The

subject matter of the case is the refusal of the Attorney

General to approve the proposed contract, a matter of state

rather than of federal law.

The decision of the Seventh Circuit is-:thus in conflict

with the decision of this Court in Gully v. First National

Bank of Meridian, 299 U.S. 109 (1936). In Gully, this Court

held that ‘‘a right or immunity created by the Constitution

or laws of the United States must be an element, and an

essential one, of the plaintiff’s cause of action.’’ Zd., at 112.

The federal controversy must be basic rather than col-

lateral. 7d., at 118. In the present case, the basic contro-

versy is one of state law and the question of the content

of the contract is merely a collateral matter. Therefore,

the decision of the Seventh Circuit is in conflict with this

Court’s decision in Gully.

The decision of the Seventh Circuit is further in error

and in conflict in not holding that the District Court lacked

jurisdiction for lack of the requisite amount in controversy.

The amount sought by plaintiffs is $5,000. In finding juris-

diction, the decision of the Seventh Circuit is in conflict

with the decision in Goldsmith v. Sutherland, 426 F.2d 1395

(6th Cir. 1920), in which it was held ‘‘that there is no excep-

tion to the $10,000 requirement simply because the alleged

damages under the asserted claim may be incapable of a

monetary valuation.’’ That court further held that juris-

diction cannot be found on a right secured by the Constitu-

tion unless it is capable of monetary evaluation. Accord,

Barry v. Mercein, 46 U.S. 103 (1847). The decision of the

Seventh Circuit in the present case is thus in conflict.

8

CONCLUSION

For the foregoing reasons, a writ of certiorari should be

issued to review the judgment and order of the Seventh

Circuit.

Respectfully submitted,

TueoporeE L. SENDAK

Attorney General of Indiana

Auan L. Crapo

Assistant Attorney General

Office of the Attorney General

219 State House

Indianapolis, Indiana 46204

Telephone: (317) 633-6246

Attorneys for Petitioner. APPENDIX

IN THE

United States Court of Appeals

FOR THE SEVENTH CIRCUIT

Nos. 78-2509 and 78-2601

Citizens Enercy Coauition Or Inpiana, d/b/a Citizens

Action Coalition of Indiana, et al.,

Plaintiff s-A ppellees,

v.

Txeopore L. Senpak, Attorney General of Indiana, et al.,

Defendant-A ppellant.

Appeal from the United States District Court for the

Southern District of Indiana, Indianapolis Division.

No. IP 78-352-C—William E. Steckler, Judge.

ArcuED Frsruary 26, 1979—Decipep Marcu 28, 1979

Before Fatrcuitp, Chief Judge, Sprecuer and Tone,

Circuit Judges.

Sprecuer, Circuit Judge. This is an appeal from the

granting of a preliminary injunction enjoining the Attor-

ney General of Indiana from refusing to approve sub-

grants for financial assistance allocated by the Public

Counselor of Indiana, in accordance with Section 205(a)

of the Energy Conservation and Production Act of 1976,

42 U.S.C. § 6805(a), establishing state consumer protection

offices, solely on the basis that the subgrantees retain

lobbyists.

I

Enacted as part of the Energy Conservation and Produc-

tion Act, Section 205(a) (hereafter referred to as 42 U.S.C.

A-2

§ 6085(a)) was intended to provide financial assistance to

state offices of consumer services for the purpose of facili-

tating the presentation of consumer interests before utility

regulatory commissions. 42 U.S.C. § 6801. A state office

of consumer services so financed must ‘‘assist consumers

in the presentation of their positions before utility regula-

tory commissions’’ and ‘‘advocate, on its own behalf, a

p*sition which it determines represents the position most

advantageous to consumers.’’ Section 6805(a).' Financial

grants are now made by the Department of Energy.

An Indiana statute provides that the governor shall ap-

point a practicing attorney as public counselor to represent

the public in utility rate hearings before the state Public

Service Commission.* Ind. Code 8-1-1-4.

In September, 1977, the Public Counselor of Indiana had

applied for and received from the Department of Energy

(DOE) a $200,000 grant under § 6805(a), which was ap-

142 U.S.C. §6805(a) provides:

The Administrator may make grants to States . . . under

this section to provide for the establishment and operation of

offices of consumer services to assist consumers in their presen-

tations before utility regulatory commissions. Any assistance

provided under this section shall be provided only for an office

of consumer services which is operated independently of any

such utility regulatory commission and which is empowered

to—

(1) make general factual assessments of the impact of

proposed rate changes and other proposed regulatory actions

upon all affected consumers;

(2) assist consumers in the presentation of their positions

before utility regulatory commissions; and

(3) advocate, on its own behalf, a position which it de-

termines represents the position most advantageous to con-

sumers, taking into account developments in rate design

reform.

2 The preliminary injunction also enjoined the publie counselor from

refusing to consider subgrant applications for financial assistance from

consumer groups pursuant to 42 U.S.C. § 6805, solely on the basis that

such groups retain lobbyists. However the public counselor did not

appeal.

A-3

proved by the Indiana Attorney General as to ‘‘form and

legality.’’ Eighty-Four Thousand dollars of this grant

was allocated for financial and technical assistance to con-

sumer groups in order to facilitate participation in utility

rate proceedings.

On December 21, 1977, the Public Counselor executed a

proposed contract with the Citizens Energy Coalition, Inc.

(Coalition), an Indiana private, not-for-profit organization,

for services to be performed by the Coalition for $5,000

under § 6805(a). An Indiana statute provides that all con-

tracts entered into by state agencies shall be approved as

to form and legality by the Attorney General. Ind. Code

4-13-2-14.2 On March 29, 1978, the Indiana Attorney Gen-

eral disapproved the proposed contract in part because

the Coalition maintained a registered lobbyist and ‘‘a

conflict may arise under the terms of IC 2-4-3 et seq.’”

The district court held that to ‘‘disapprove the contract

of December 21, 1977 on the grounds that the contract would

be in conflict with Ind. Code 2-4-3-7 [prohibiting lobbying

for pay by public officials] would be an erroneous disap-

proval.’”

% Ind. Code 4-13-2-14 provides:

All contracts and leases shall be approved as to form and

legality by the attorney-general. A copy of every such contract

or lease extending for a term longer than one [1] year shall be

filed with the director of public works and supply [department

of administration].

*The Attorney General also disapproved the contract because it

“would have the effect of tending to lessen the performance of public

duties.” The district court concluded tl! t “it was within the discretion

of the Attorney General to disapprove the contract on that ground,

but not on the ground that the contract might conflict with Ind. Code

2-4 3-7.” The Coalition has not appealed the validity of the disapproval

of the contract upon the lessening of the performance of public duties

ground.

5 Ind. Code 2-4-3-7 provides in part:

It shall be unlawful for any publie official of this state, or

of any county, township, city or town, including elective and

appointive officers and employees, or any officer, member or

A-4

After the Attorney General had disapproved the Coali-

tion contract, the Coalition submitted to the Public Coun-

selor three proposals seeking § 6805(a) financial assistance

totaling $46,000. The Indiana Public Interest Research

Group (Research Group), also an Indiana private, not-for-

profit organization which maintained a registered lobbyist,

submitted a proposal for financial assistance in the amount

of $9,785 to the Public Counselor.

In the meantime the Public Counselor on, April 5, 1978,

wrote to the Attorney General with supporting affidavits,

requesting reconsideration of the disapproval of the origi-

nal $5,000 contract. Several days later the Attorney Gen-

eral returned the Public Counselor’s letter with a notation

that the ‘‘A.G. will not accept lobbyist or organization on

contract.’’®

On April 17, 1978, the Public Counselor by letter re-

quested the advice of the Attorney General as to whether

or not he could make grants under § 6805(a) to consumer

groups who had lobbied in the preceding session of the

Indiana General Assembly. No formal or informal written

response was ever made to this request.

In letters of May 30 and 31, 1978, the Publie Counselor

advised the Coalition and the Research Group that he was

unable to approve their requests for financial assistance

‘tin view of the ruling of the Indiana Attorney General

which prohibits my contracting with any organization or

employee of any state central committee of any party, to

receive any compensation to appear before the general assembly

of the state of Indiana, or before either house or any com-

mittees of the general assembly or either house thereof or before

any member as a legislative counsel or agent on behalf of any

person, firm, corporation or association from which he directly

or indirectly receives any compensation or salary, other than

the state of Indiana, or the county township, city, town or

state central committee with which he is associated.

®*The district court found that “this evidence comes closest to any

proof that the Attorney General’s nonacceptance of the ‘Organization’

was arbitrary in nature.”

A-5

individual registered as a lobbyist during the most recent

session of the Indiana General Assembly.’”

The Public Counselor did approve an application for

financial assistance in the amount of $24,000 by the Con-

sumer Center of Fort Wayne, Indiana, which organization

did not retain a lobbyist.

In June, 1978, DOE directed the public counselor to re-

frain from spending or committing any further funds

allocated for § 6805(a) financial assistance ‘‘until such time

as the ‘lobbyist’ issue has been satisfactorily resolved.’’

On June 14, 1978, the Coalition and the Research Group

filed their complaint in this action against the Attorney

General and the Public Counselor. On October 17, 1978,

the district court, upon the plaintiffs’ motion, granted the

preliminary injunction.

II

In his appeal the Attorney General first argued that the

district court did not have subject matter jurisdiction. The

district court concluded that it did have jurisdiction, find-

ing that ‘‘the constitutional claims in this action are sub-

stantial’’ and that the action raised the issue of whether

public officials acting under color of state law have deprived

the plaintiffs of their constitutional rights. In addition the

cause arises under an act of Congress. 28 U.S.C. § 1337.

In regard to the Attorney General’s argument that the

Eleventh Amendment bars the action, the Supreme Court

again reaffirmed in Quern v. Jordan, — U.S. — (March 5,

1979) that ‘‘under the landmark decision in Ex Parte

Young, 209 U.S. 123 (1908), a federal court, consistent

with the Eleventh Amendment, may enjoin state officials

to conform their future conduct to the requirements of

federal law... .’’ The plaintiffs also have standing.

7The Publie Counselor also refused to consider an application for

§$ 6905(a) financial assistance by the Indiana State AFL-CIO on the

grounds that that consumer group had lobbied during the preceding

session of the Indiana General Assembly and therefor was ineligible as a

result of his understanding of the Attorney General’s policy.

A-6

Next the Attorney General contended that the district

court should have abstained but it declined to do so. ‘‘Ab-

stention is... appropriate where there have been presented

difficult questions of state law bearing on policy problems

of substantial public import whose importance transcends

the result in the case then at bar.’’? Colorado River Water

Conservation District v. United States, 424 U.S. 800, 814

(1976).

The state statute here involved is simple and uncompli-

eated. Ind. Code 2-4-3-7 prohibits public officials from

lobbying. The district court expressly found that ‘‘the

Public Counselor would not directly or indirectly receive

compensation for lobbying by virtue of the DOE grant

program.’’ The court further found that the ‘‘ plaintiffs

are neither public officials nor employees within the mean-

ing of the statute.’’ The court also concluded:

If an application for financial assistance or a sub-

grant pursuant to 42 U.S.C. § 6805 were alloted to

... [the plaintiffs], said parties would not become

public officials or employees within the meaning of

Ind. Code 2-4-3-7.

The district court properly exercised its discretion in

declining to abstain. As the Supreme Court noted in Colo-

rado River, supra at 815 n.21, ‘‘the presence of a federal

basis for jurisdiction [as opposed to diversity jurisdiction]

may raise the level of justification needed for abstention.’’

The Attorney General has not shown any sound justifica-

tion which would make abstention appropriate.

Finally the Attorney General has argued that the pre-

liminary injunction jeopardizes his right to exercise discre-

tion in approving contracts. The district court found and

concluded as to this argument and we agree:

5. The Attorney General exercises a quasi-

judicial professional discretion when approving con-

tracts pursuant to Ind. Code 4-13-2-14. However, in

determining whether to approve or disapprove state

contracts, the Attorney General may only consider

A-7

the legality and form of the proposed contract. The

Attorney General has a mandatory duty to approve

all contracts which are lawful as to form and con-

tent. The Attorney General has no discretion to

reject a contract which is lawful as to form and con-

tent; he is not a party to the contract.

10. A valid state law such as Ind. Code 2-4-3-7

cannot be applied in a way to thwart the exercise

of a right guaranteed by the Constitution and laws

enacted by Congress. See NAACP v. Thompson,

357 F.2d 831, 833 (5th Cir.), cert. denied, 385 U.S.

820 (1966).

Ill

The discretion of the district court in granting a prelimi-

nary injunction is measured by (1) whether the plaintiffs

have no adequate remedy at law and will be irreparably

harmed if the injunction did not issue; (2) whether the

threatened injury to the plaintiffs outweighs the threatened

harm the injunction may inflict on the defendants; (3)

whether the plaintiffs have at least a reasonable likelihood

of success on the merits; and (4) whether the granting of

the preliminary injunction will not disserve the public

interest. Fox Valley Harvestore, Inc. v, A.O. Smith Har-

vestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir. 1976).

The district court expressly found all of these factors to

exist and to weigh particularly heavily in favor of the

plaintiffs. For example, the court found that federal fund-

ing for Indiana consumer groups has been paralyzed by

the Attorney General’s refusal to approve subgrants to

organizations retaining lobbyists and that the entire state

program envisaged by § 6805(a) may be in jeopardy and

subject to imminent destruction. The Attorney General

has not addressed these factors in his appeal. Consequently

we cannot say that the district court abused its discretion.

The preliminary injunction order is affirmed.

A-8

Tone, Circuit Judge, concurring. It is enough to give

the federal courts jurisdiction that the First Amendment

question is substantial. Without going further in our con-

sideration of that question, we should affirm because of

the high probability that plaintiffs will succeed at least on

the state law issues of the proper interpretation of Ind.

Code 2-4-3-7 and the absence of any other sufficient ground

for disapproval by the Attorney General. This, together

with the other factors making a preliminary injunction

appropriate, is enough to support affirmance. I therefore

concur in affirming the preliminary injunction.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circutt

A-9

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

Cirizens ENercy CoaLition OF

Inp1ana, Inc., et al.

v.

Tueopore L. Senpak, et al.

IP 78-352-C

PRELIMINARY INJUNCTION

In accordance with the Findings of Fact and Conclu-

sions of Law issued by the Court in this cause on this

date, a preliminary injunction is hereby GRANTED.

IT IS HEREBY ORDERED that defendant Theodore

L. Sendak, acting in his official and individual capacities,

should be and is hereby enjoined from refusing to approve

subgrants for financial assistance allocated by the Public

Counselor in accordance with the consumer group program

pursuant to 42 U.S.C. § 6805, solely on the basis that the

subgrantees retain lobbyists.

IT IS HEREBY ORDERED that defendant Frank J.

Biddinger, acting in his official and individual capacities,

should be and is enjoined from refusing to consider sub-

grant applications for financial assistance from consumer

groups pursuant to 42 U.S.C. § 6805 solely on the basis

that such groups retain lobbyists.

Dated this 17th day of October, 1978.

WituiaMm E. Sreck.er

United States District Judge

A-10

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

Citizens Enercy Coa.iTIon OF

Inp1ana, Inc., et al.

v.

THeopore L. Senpak, et al.

IP 78-352-C

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This action arises from the disapproval by the At-

torney General of the State of Indiana of a proposed

contract’ between the Public Counselor of the State of

Indiana and the Citizens Energy Coalition of Indiana,

Inec., d/b/a Citizens Action Coalition of Indiana. Plaintiffs’

complaint alleges in substance that the defendants have

violated their constitutional rights by the Attorney Gen-

eral’s alleged policy of refusing to approve contracts be-

tween a state agency and an organization which employs

a lobbyist and the Public Counselor’s policy of refusing to

consider applications for monetary grants from such

organizations under the Energy Conservation and Produc-

tion Act, 42 U.S.C. § 6805 (1976).* Plaintiffs seek injunctive

' Ind. Code 4-13-2-14 (1978) provides in pertinent part:

“All contracts [by state agencies] . . . shall be approved as

to form and legality by the attorney-geneval.”

“The Energy Conservation and Production Act, 42 U.S.C. § 6805

(1976), provides in pertinent part:

“(a) The Administrator may make grants to States .. .,

under this section to provide for the establishment and operation

of offices of consumer services to assist consumers in their

presentations before utility regulatory commissions. Any as-

sistance provided under this section shall be provided only for an

office of consumer services which is operated independently

of any such utility commission and which is empowered to—

(1) make general factual assessments of the impact of

proposed rate changes and other proposed regulatory actions

upon all affected consumers;

A-11

relief and also sue in quantum meruit for Five Thousand

Dollars ($5,000.00) in monetary damages for work per-

formed under the proposed contract. The Attorney Gen-

eral’s policy allegedly stems from his interpretation that

the proposed contract between the Public Counselor and

Citizens Action Coalition may conflict with Ind. Code

2-4-3-7 (1978). The Public Counselor’s policy is derived

from his understanding of the Attorney General’s policy

concerning organizations which employ lobbyists.

After commencing this action, plaintiffs filed a motion

for a preliminary injunction and defendant Attorney Gen-

eral Sendak filed a motion to dismiss. Having heard evi-

dence and oral arguments on the motions on August 16

and 17, 1978, this Court now makes the following findings

of fact and conclusions of law and issues its preliminary

injunction in accordance therewith. By reason of its find-

(2) assist consumers in the presentation of their positions

before utility regulatory commissions; and

(3) advocate, on its own behalf, a position which it de-

termines represents the position most advantageous to con-

sumers, taking into account developments in rate design

reform.”

3Ind Code 2-4-3-7 (1978) provides in pertinent part:

“Lobbying for pay by public officials or members of the

press prohibited. . . .—It shall be unlawful for any public

official of this state, or of any county, township, city or town,

including elective and appointive officers and employees, or

any officer, member or employee of any state central com-

mittee of any party, to receive any compensation to appear

before the general assembly of the State of Indiana, or before

either house or any committees of the general assembly or

either house thereof or before any member as a legislative

counsel or agent on behalf of any person, firm, corporation or

association from which he directly or indirectly receives any

compensation or salary other than the State of Indiana, or

the county, township, city, town or state central committee

with which he is associated.”

Ind. Code 2-4-8-9 provides: :

“Penalty —A person who recklessly violates this chapter

commits a Class A misdemeanor. The attorney general, upon

information, shall bring prosecutions under this section.”

A-12

ings and conclusions, the Court hereby DENIES defendant

Sendak’s motion to dimiss the action as against him in

his official capacity and in his individual capacity. On

motion of the defendant Biddinger, the action was pre-

viously dismissed as against him in his individual capacity.

FINDINGS OF FACT

1. The Citizens Energy Coalition, Ine. (hereinafter CAC)

is a private, not-for-profit organization which was incor-

porated in the State of Indiana in 1975. CAC maintains

its headquarters in Indianapolis, but has local affiliates

throughout the service territories of the major Indiana

electric utilities. CAC has no less than 1,200 individual

members and organizational members who represent over

250,000 Indiana citizens. CAC’s governing board and mem-

bership include persons from diverse areas, backgrounds

and occupations. One of CAC’s principal purposes is to

represent the interests of residential utility ratepayers.

It has intervened in several rate and rulemaking proceed-

ings of the Public Service Commission of Indiana (herein-

after PSCI) and has registered a lobbyist to appear before

the Indiana General Assembly in 1976, 1977, and 1978.

2. Fritz Wiecking (hereinafter Wiecking) is CAC’s

Executive Director.

3. The Indiana Public Interest Research Group (herein

after InPIRG) is a private, not-for-profit organization,

which was incorporated in the State of Indiana in 1973.

InPIRG has 3,000 dues paying members, most of whom

are students at the Bloomington campus of Indiana Uni-

versity. InPIRG’s governing board consists of students,

faculty and community representatives from the Bloom-

ington vicinity. InPIRG’s principal purposes are to pro-

vide its members with an educational experience in public

policy research, provide useful data to Indiana _ policy-

makers and advocate consumer and environmental interest.

InPIRG has published several studies on Indiana public

policy questions, has participated in a few PSCI proceed-

A-13

ings and has had registered lobbyists during the 1975,

1977, and 1978 sessions of the indiana General Assembly.

4. Thomas Wathen (hereinafter Wathen) is the Staff’

Director of InPIRG.

3. Theodore L. Sendak (hereinafter Attorney General)

is the Attorney General of Indiana. Alan Crapo is an

Assistant Attorney General, who, among his other duties,

is principally responsible for reviewing state contracts as

to legality and form.

6. Frank J. Biddinger (hereinafter Public Counselor)

is the Public Counselor of Indiana.*

7. In August of 1977, the grant application of the Publie

Counselor to the United States Federal Energy Administra-

tion (hereinafter USFEA), now the Department of Energy

(DOE), was approved by the Indiana Attorney General

as to ‘‘form and legality.’’

In September of 1977 the DOE approved the application

for $200,000.00 under 42 U.S.C. §6805 and the Public

Counselor’s office was approved as an ‘‘office of consumer

services’’ to assist consumers in their presentations before

the Indiana public utility regulatory commission. The

period during which the funds were to be spent was Septem-

ber 350, 1977 through September 29, 1978. Eighty-four

thousand dollars ($84,000.00) of the grant was allocated

for financial and technical assistance to consumer groups

in order to facilitate participation in utility rate proceed-

ings. Five thousand dollars ($5,000.00) was budgeted for

bringing together consumer groups regarding utility reg-

ulation matters and for the development of guidelines to

govern the administration and distribution of financial

assistance to consumer groups.

8. The Public Counselor was required to submit guide-

lines to the Department of Energy (DOE) by February

2, 1978.

*The authority and duties of the Public Counselor are prescribed

by Ind. Code 8-1-1-4 (1978) as set out in the Appendix.

A-14

9. On December 21, 1977, CAC and the Public Counselor

executed a proposed contract whereby, among other under-

takings, CAC would perform or provide the following:

(1) Technical assistance in preparation of a grant

for ECPA Section 205 funding.

(2) Preparing draft copies of guidelines for ad-

ministering subgrants and contracts for ECPA Sec-

tion 205 funding.

(3) Arrange meetings of consumer groups and

potential subgrantees to analyze and discuss funding

and/or provision of technical assistance for electri-

cal utility interventions.

(4) Technical assistance in planning and setting

up a ‘*Consumer Advisory Committee’’ to provide

strategic and tactical input into the planning of the

Office of the Public Counselor and to help set out

priorities for the Office’s regulatory work.

(5) Technical assistance in drafting a proposed

litigation/intervention/action strategy for approach-

ing the Public Service Commission’s regulation of

electric utilities.

In consideration for the performance of the contract

CAC was to be paid $5,000.00. The public Counselor and

the CAC understood that CAC would have to perform in

time for the Public Counselor to submit the guidelines to

DOE by February 2, 1978.

10. Under the statute, 42 U.S.C. § 6805, and the DOE

rules and regulations, 10 C.F.R. § 460 (1978), prior to the

expenditure of any grant funds and no later than six

months from the date of notification of the grant award

made under the regulations, the grantee had to have in

existence, or was required to establish a consumer-interest

office meeting the requirements of the Act and the DOE

rules and regulations, and in addition was required to

establish procedural guidelines for administering the grant

or financial assistance to eligible consumer groups to enable

them to make presentations before utility regulatory com-

A-15

missions. The purpose of the contract of December 21,

1977, was to assist the Public Counselor in establishing

the procedural guidelines for administering the grant

award to his office, and to meet the requirements of the

regulations governing financial assistance or subgrants to

eligible consumer groups. In other words, to assist the

Public Counselor in meeting the minimum program re-

quirements to enable that office to provide technical and

financial assistance to eligible consumer-interest groups,

such as CAC itself. The grant application to DOE from

the Public Counselor specifically mentioned the Public

Counselor’s intent to contract with CAC for the technical

assistance described above.

11. Except for a 30-minute conference on January 30,

1978, between the Public Counselor and Wiecking, by Jan-

uary 24, 1978, CAC fully performed its duties under the

December 21 contract.

12. The Public Counselor had no prior authority from

any of the other state officials to proceed with or authorize

work to proceed under the alleged contract. The Public

Counselor alone cannot bind the state. Other signatures

are required before any contract is valid, in this instance

the signatures of the Attorney General, the Governor,

and the State Budget Director.

13. On January 25, 1978, CAC registered with the Sec-

retary of the State of Indiana that it had designated Fritz

Wiecking as its legislative agent for the remainder of the

second session of the 100th Indiana General Assembly.

The application for registration stated that the subject

matter of the lobbying may include any issues affecting

the Public Service Commission of Indiana and the office

of the Public Counselor. Mr. Wiecking acted as CAC’s

legislative agent from January 25, 1978, until the ad-

journment of the 100th General Assembly on March 4

1978.

On January 11, 1978, InPIRG registered with the See-

retary of the State of Indiana that it had designated

Thomas Wathen as one of its legislative agents for the

’

A-16

remainder of the second session of the 100th Indiana Gen-

eral Assembly. Thomas Wathen acted as InPIRG’s legis-

lative agent from January 11, 1978, until the adjournment

of the 100th General Assembly on March 4, 1978.

14. On February 8, 1978, fifteen (15) davs after comple-

tion of the proposed contract, the same was submitted to

the State Budget Agency. This was forty-nine (49) days

after the proposed contract had been signed by representa-

tives of CAC and the Public Counselor. On February 14,

1978, the contract was submitted to the office of the At-

torney General for his approval. On February 14, 1978,

the contract was returned to the office of the Public Coun-

selor by Assistant Attorney General Alan T. Crapo be-

cause of a mistake in attestation of the signature of Mr.

Fritz Wiecking. On March 14, 1978, the contract was re-

turned to the office of the Attorney General.

15. On March 29, 1978, the Attorney General disapproved

the proposed contract in a letter signed by Assistant At-

torney General Alan L. Crapo. In his letter Crapo stated:

‘“‘This letter is pursuant to our review of the

above named contract which involves your agency

and the Citizens Energy Coalition of Indiana, Inc.,

d/b/a Citizens Action Coalition of Indiana.

‘We are in receipt of information that Citizens

Action Coalition of Indiana maintained a registered

lobbist [sic] in the 1978 session of the General

Assembly in the person of Mr. Fritz Wiecking who

has signed the contract as executive director for

the organization.

‘*Because of the above situation we are unable

to approve this contract as it would have the effect

of tending to lessen the performance of public

duties. See Cheney v. Unroe (1906), 166 Ind. 550,

77 N.E. 1041 and Secretary of State v. Indiana

State AFL-CIO and Willis Zagrovich (1978) No.

1-877-A-180 (opinion attached). Moreover, a con-

flict may arise under the terms of IC 2-4-3 et seq.

A-17

‘‘Therefore we are unable to approve the subject

contract as it appears to create a conflict [sic] of

interest. I would be happy to discuss this matter

and answer any questions you may have.’’

16. The only topic on which InPIRG lobbied in 1978

was the duration of Indiana’s statute of limitations on

manufacturer’s product liability. CAC lobbied in 1978

on utility customer service standards and on ‘‘ex parte’’

contacts with PSCI commissioners. Neither organization

lobbied on legislation directly affecting the Public Coun-

selor, nor on appropriations for the Office of the Public

Counselor. Neither organization was requested to lobby on

a particular piece of legislation or issue by the Public

Counselor. The Court finds that none of the party plaintiffs

were acting as lobbyists on behalf of the Public Counselor.

17. The Court finds that the Public Counselor would

not directly or indirectly receive compensation for lobby-

ing by virtue of the DOE grant program or the proposed

contract with CAC.

18. On April 5, 1978, the Public Counselor, by letter

with supporting affidavits, requested reconsideration of the

disapproval on the grounds that the December 21, 1977

contract was almost completely performed prior to CAC’s

registration as an employer of a legislative agent.

19. On or about April 12, 1978, the guidelines of the

Public Counselor governing grants to consumer groups

under 42 U.S.C. § 6805 were approved by DOE. The guide-

lines do not disqualify lobbying consumer groups from

applying for or receiving aid. The disqualifying condition

has not been published by the Public Counselor or approved

by DOE.

20. On April 14, 1978, the Office of the Attorney General

returnec the Public Counselor’s letter and enclosures of

April 5 with a covering memo stating: ‘‘A.G. will not

accept lobbyist or organization on contract.’’ This evidence

comes closest to any proof that the Attorney General’s

nonacceptance of the ‘‘Organization’’ was arbitrary in

nature.

A-18

21. On April 17, 1978, the Public Counselor, by letter,

requested the advice of the Attorney General on whether

or not he could make grants under the 42 U.S.C. § 6805

program to consumer groups who had lobbied in the pre-

ceding session of the Indiana General Assembly. No formal

or informal written response was ever made to this request.

22. In a letter dated May 24, 1978, CAC and Fritz

Wiecking, by legal counsel, requested the Attorney General

to approve the December 21 contract on the grounds that

the Attorney General’s objections were groundless. The

Attorney General has not responded to said letter.

23. All grants by DOE channeled through the office of

the Public Counselor are subject to the requirements of

Indiana law in addition to any federal requirements.

24. On January 15, 1978, CAC intervened in Cause No.

39214 before the PSCI concerning a request by Public

Service Company of Indiana, Ine. for a rate increase

which would increase annual revenues by $75.3 million, On

January 24, 1978, CAC intervened in Cause No. 35132 be-

fore the PSCI concerning a request by Indianapolis Power

and Light Company for a rate increase which would in-

crease annual revenues by $52 million. On February 16,

1978, CAC intervened in Cause No. 35251 before the PSCI

concerning a request by Indiana and Michigan Company

for a rate increase which would increase annual revenues

by $97 million. CAC expected to pay for attorney and

witness fees related to the above proceedings through

grants from the Public Counselor under 42 U.S.C. § 6805.

25. Prior to learning of the Attorney General’s dis-

approval of the December 21 contract, CAC, according to

plaintiffs’ testimony, incurred approximately $3,000.00 in

legal expenses in preparation for the causes referred to

above. That testimony, however, is not supported by docu-

mentary evidence or office records.

26. Subsequent to learning of the Attorney General’s

disapproval of the December 21 contract, CAC incurred

no further expenses in relation to the proceedings referred

A-19

to in paragraph 24 and ceased all preparation of expert

testimony.

27. In April of 1978, InPIRG applied for $9,785.00 in

financial assistance under 42 U.S.C. § 6805 from the Public

Counselor. InPIRG proposed to study the projections in

demand for electricity made by Indiana utilities and the

- relationship of these projections to rate increase requests.

InPIRG intended that this study would be introduced as

evidence in Cause No. 35214 before the PSCI and would be

similarly utilized in subsequent electric utility, general rate

proceedings.

98. In March of 1978 and on May 22, 1978, CAC submit-

ted to the Public Counselor proposals for financial as-

sistance under 42 U.S.C. § 6805 in order to pay for attorney

and witness fees in the three rate proceedings in which

CAC had intervened. CAC’s three requests totaled $46,-

000.00

29. In letters dated May 30 and May 31, 1978, the Public

Counselor refused to consider applications for assistance

of CAC and InPIRG respectively, on the grounds that he

was unable to do so as a result of his understanding of the

Attorney General’s policy on the legality of contracts with

lobbyists.

30. The Public Counselor refused to consider an appli-

cation for financial assistance under 42 U.S.C. § 6805

from the Indiana State AFL-CIO on the grounds that that

consumer group had lobbied during the preceding session

of the Indiana General Assembly: and therefore was in-

eligible as a result of his understanding of the Attorney

General’s policy.

31. Three of the four consumer groups who applied for

financial assistance under 42 U.S.C. § 6805 were rejected

as a result of the Public Counselor’s interpretation of the

Attorney General’s policy, and no contracts for subgrants

were executed by those groups and the Public Counselor.

The subgrant applications by the three groups had never

been approved by the Public Counselor nor submitted to

the Attorney General.

A-20

32. The Public Counselor has approved an application

for financial assistance under 42 U.S.C. §6805 in the

amount of approximately $24,000.00 from the Consumer

Center of Fort Wayne, Indiana. The Consumer Center

did not lobby or retain a lobbyist in the preceding session

of the Indiana General Assembly. The Attorney General

has not approved the grant because of this pending suit.

33. In the context of the controversy as a whole, the

Court is persuaded to believe and thus to find that the

Attorney General’s policy precluded the Public Counselor

from entering into any contracts by a consumer group

which had a registered or paid lobbyist.

34. In a letter received on or about June 12, 1978, DOE

directed the Public Counselor to refrain from spending or

committing any further funds allocated for the provision

of financial and technical assistance to consumer groups

until such time as the lobbyist issue is resolved.

35. Except for the lack of funds, there is no evidence

before this Court that any of the plaintiffs or any of the

individual members therein were precluded from partici-

pating in any matter before the Public Service Commission

of Indiana or to appear before the Indiana General <As-

sembly.

36. InPIRG and an affiliate of CAC have contracted

with Indiana government agencies other than the Public

Counselor and both CAC and InPIRG will seek such con-

tracts in the future. In addition to the December 21, 1977

contract and the proposals for financial assistance of March,

April, and May 22, 1978, CAC and InPIRG intend to apply

for other funds from the Public Counselor under 42 U.S.C.

§ 6805.

37. CAC and InPIRG intend to designate lobbyists

during the future sessions of the Indiana General Assembly.

38. As a result of the actions of the Attorney General

CAC’s participation in the proceedings referred to in

paragraph 24 were substantially diminished in that they

were unrepresented by legal counsel during most of the

A-21

proceedings and were unable to introduce expert testimony.

InPIRG was unable to participate in the PSCI proceeding

referred to in paragraph 27 or prepare the study for which

it sought a grant from the Public Counselor.

39. Unless this Court enjoins the Attorney General and

Public Counselor from implementing the policy of dis-

qualifying lobbying consumer groups from contracting

with the Public Counselor for the receipt of assistance

under 42 U.S.C. § 6805, CAC, InPIRG, and other lobbying

consumer groups will be unable to participate in the Fed-

eral Energy Conservation and Production Act grants.

CONCLUSIONS OF LAW

Based on the foregoing findings of fact the Court makes

the following conclusions of law:

1. The Court has jurisdiction pursuant to 28 U.S.C.

- $$ 1331, 1343(3), (4), and pendent jurisdiction over the

state claims. The constitutional claims in this action are

substantial. For purposes of establishing jurisdiction under

28 U.S.C. § 1343(3), it is irrelevant whether or not a public

official is acting in accordance with state law, so long as

said person, acting under color of state law, has arguably

deprived another person of rights secured by the Federal

Constitution. In the case at bar, each of the defendants

acted under color of Indiana law.

2. The Court declines to abstain from the exercise of its

federal jurisdiction, and the Court in its discretion will

accept pendent jurisdiction of the state law claim based

on quantum meruit in relation to the proposed contract

of December 21, 1977.

3. The Court concludes that both the corporate entities

and individual plaintiffs have standing to sue. A person

denied the right to apply for governmental benefits has

standing to complain of the denial whether or not it can

be shown to a certainty that the benefits would have been

granted had the person been permitted to apply. While the

thrust of the Attorney General’s standing to sue argument

was directed at InPIRG and Wathen, InPIRG does have

A-22

standing to complain of those policies of the defendants

which resulted in the refusal of the Public Counselor to

consider InPIRG’s application for financial assistance

under 42 U.S.C. § 6805. InPIRG has standing to complain

of those policies of the Attorney General which jeopardize

its right to contract with or receive grants from other

Indiana governmental bodies. InPIRG and Wathen have

standing to complain of those policies of the defendants

which burden their rights to petition government indi-

vidually and collectively by employing lobbyists.

4, Ind. Code 4-13-2-14 provides that all contracts entered

into by state agencies shall be approved as to form and

legality by the Attorney General. No contract with a state

agency is legally binding until such approval has been

secured.

5. The Attorney General exercises a quasi-judicial pro-

fessional discretion when approving contracts pursuant to

Ind. Code 4-13-2-14. However, in determining whether to

approve or disapprove state contracts, the Attorney Gen-

eral may only consider the legality and form of the pro-

posed contract. The Attorney General has a mandatory

duty to approve all contracts which are lawful as to form

and content. The Attorney General has no discretion to

reject a contract which is lawful as to form and content;

he is not a party to the contract.

6. The Attorney General has misapplied Ind. Code

2-4-3-7 (1978), the lobbying for pay by public officials

statute, to the parties and the facts of this case. Plaintiffs

are neither public officials nor employees within the mean-

ing of the statute.

If an application for financial assistance or a subgrant

pursuant to 42 U.S.C. § 6805 were allotted to CAC or

InPIRG, said parties would not become public officials or

emplovees within the meaning of Ind. Code 2-4-3-7. More-

over, the awarding of such a grant is not tantamount to

indirect compensation to the Public Counselor for lobbying.

7. To disapprove the contract of December 21, 1977,

solely on the grounds that the contract would be in conflict

A-23

with Ind. Code 2-4-3-7 would be an erroneous disapproval.

However, in view of the specific provisions of the contract

of December 21, 1977, defining the nature and scope of

the engagement of the parties, the Court cannot conclude

that the Attorney General acted erroneously or that the

disapproval of the contract was a clear abuse of his quasi-

judicial discretion. Here the contract was disapproved on

the grounds that the contract ‘‘would have the effect of

tending to lessen the performance of [the Public Coun-

selor’s] public duties.’’ The potential influence on the dis-

cretion of the Public Counselor in the performance of his

duties and operation of his office was extensive. As stated

in the Court’s findings, the contract specified that CAC

would render: .

‘*(4) Technical assistance in planning and setting

up a ‘Consumer Advisory Committee’ to provide

strategic and tactical input into the planning of the

Office of the Public Counselor and to help set out

priorities for the Office’s regulatory work.

‘*(5) Technical assistance in drafting a proposed

litigation/intervention/action strategy for approach-

ing the Public Service Commission’s regulation of

electric utilities.’’

In view of this far-reaching language of this particular

contract, reasonable minds could draw different conclu-

sions as to the effect the parties’ mutual obligations and

their performance under the contract might actually have,

or tend to have, on the performance of the Public Coun-

selor’s public duties. Therefore the Court concludes that

it was within the discretion of the Attorney General to dis-

approve the contract on that ground, but not on the ground

that the contract might conflict with Ind, Code 2-4-3-7. While

the Attorney General was acting within his discretion in

disapproving the particular contract of December 21, 1977,

he would be acting outside the scope of his discretionary

duties, or would be abusing his quasi-judicial discretion,

if he were to disapprove, on the same basis, contracts or

subgrants for financial assistance to consumer groups to

A-24

make presentations before a utility regulatory commission.

It is one thing to enter into a contract directed toward the

Public Counselor’s office meeting the requirements of 42

U.S.C. § 6805 and the regulations thereunder, and quite

another for an eligible consumer group to apply for and

receive a subgrant or financial assistance for the purpose

of intervening and making presentations in proceedings

before a utility regulatory commission.

8. A policy of the Attorney General of refusing to ap-

prove contracts for subgrants or financial assistance be-

tween the Public Counselor and consumer groups who

have employed lobbyists solely on the basis of their lobby-

ing activity, and the Public Counselor’s refusal to consider

applications for subgrants under 42 U.S.C. § 6805 by con-

sumer groups who have employed lobbyists, by reason of

the Attorney General’s policy, violate 42 U.S.C. § 1983 by

depriving plaintiffs of their first amendment right to pe-

tion the government and their right to equal protection

of the laws guaranteed by the fourteenth amendment of

the Constitution.

9. The policy of the Attorney General creates two classes:

persons or organizations who have lobbied, and those who

have not lobbied. The policy of the Attorney General and

the Public Counselor invidiously discriminates against

that class of lobbyists who would exercise the fundamental

right to petition the government.

10. A valid state law such as Ind. Code 2-4-3-7 cannot

be applied in a way to thwart the exercise of a right guar-

anteed by the Constitution and laws enacted by Congress.

See NAACP v. Thompson, 357 F.2d 831, 833 (5th Cir.),

cert. denied, 385 U.S. 820 (1966).

11. The Attorney General’s policy burdens and deters

the exercise of the first amendment right to petition the

government. Persons and organizations such as plaintiffs

are confronted with a dilemma: forsake lobbying or give

up the right to seek contracts or subgrants from the State

of Indiana.

A-25

12. The first amendment and the fourteenth amendment

to the United States Constitution protect speech directed

to influencing legislation, including the employment of

lobbyists.

13. Under the first and fourteenth amendments, a state

may not directly abridge lobbying activities or indirectly

abridge such activities by withholding government benefits

from those persons who lobby or retain lobbyists.

14. Substantial infringements of the right to lobby must

be justified by a compelling state interest, and said interest

must be effectuated in that manner which least restricts

lobbying.

15. The burden is on the defendants to show the existence

of a compelling state interest. Moreover, it is not enough

that the means chosen in furtherance of the interest be

rationally related to that end. The gain to the subordinating

interest provided by the means must outweigh the incurred

loss of protected rights, and the government officials must

employ means closely drawn to avoid unnecessary abridge-

ment. Elrod v. Burns, 427 U.S. 347, 362-63 (1978).

16, Indiana’s interest in assuring that state and mu-

nicipal officials execute their duties with exclusive fealty

to the public good is not rationally related to the policy of

prohibiting said officials from contracting with or making

subgrants to lobbyists. Even if the policy were rationally

related to a compelling state interest, the policy does not

result in a gain which outweighs the loss of first amendment

rights, nor is it closely drawn to avoid unnecessary abridge-

ment of the right to petition the government.

17. Indiana’s interest of assuring disinterested public

administration and avoiding an appearance of impropriety

can be promoted by policies less restrictive of the right to

petition government.

18. The continuation of the policies complained of in

this complaint, together with the spectre of criminal prose-

cution, will have a chilling effect on the exercise of the right

to petition government by persons and organizations whose

A-26

\

lobbying activities pose no threat to any lawful interest

of the State of Indiana.

19. The Attorney General’s policy effectively eliminates

most of the eligible consumer groups from consideration

for grants under the DOK. Criteria for eligibility are set

out in 10 C.F.R. § 460.14 (1978). There is no question that

the regulations leave some latitude in setting priorities

to the state office which allocates the grants, 10 C.F.R.

460.12(b)(8) (1978), yet the guidelines for setting these

priorities are to be submitted to DOE for approval. 10

C.F.R. 460.12(b) (1978). To permit the disqualification of

the most effective consumer groups is to subvert the pur-

pose and language of the federal law governing the con-

sumer aid program.

20. The Attorney General, acting in his quasi-judicial

capacity, is immune from liability for monetary damages.

However, this immunity does not extend to injunctive relief.

Drollinger v. Milligan, 552 F.2d 1220, 1226 (7th Cir. 1977) ;

Littleton v. Berbling, 468 F.2d 389 (7th Cir. 1972), rev’d

on other grounds sub. nom., O’Shea v. Littleton, 414 U.S.

488 (1974).

21. Federal courts should act cautiously and with re-

luctance in issuing injunctions against the activities of

state officers discharging in good faith their supposed off-

cial duties. However, plaintiffs are entitled to relief in the

form of a preliminary injunction preventing the further

implementation of the policy at issue. Substantial and

irreparable injury will result to plaintiffs and to the public

interest if this Court does not act. Not only have the actions

at issue paralyzed the federal funding for Indiana con-

sumer groups in the fiscal year which ended on September

29, 1978, but continuation of funding for the entire program

in the future may be in jeopardy.

Plaintiffs have shown that the law is in their favor and

that they are more likely than the defendants to succeed

on the merits. Plaintiffs have no adequate remedy at law.

Any damage to defendants is far outweighed by the

harm which will result to the consumer interests if the

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imminent destruction of the program under 42 U.S.C. § 6805

is not averted.

22. A prelimiary injunction consistent with the foregoing

shall issue.

Dated this 16th day of October, 1978.

WILLIAM E. STECKLER

United States District Judge

8-1-1-4 [54-111]. Public counselor—Appointment—Term

—Salary —Removal— Qualifications—Duties—Power and

authority—Expenses.—(a) The governor shall appoint a

publie counselor, for a term of four [4] years at a salary

to be fixed by the governor. The public counselor shall

serve at the will and pleasure of the governor. The coun-

selor shall be a practicing attorney, and qualified by knowl-

edge and experience to practice in public utility proceed-

ings. For any public counselor first appointed after April

30, 1977, said public counselor shall apply his full efforts

to the duties of the office and may not be actively engaged

in ‘any other occupation, practice, profession or business.

(b) The counselor may appear on behalf of rate payers,

patrons and the public in all hearings before the commis-

sion, in appeals from the orders of the commission and in

all suits and actions in any court which may involve rates

for service, services, extensions and contracts for service,

valuations of utilities, applications of utilities for authority

to issue securities, app&eations for mergers and sales and

in all other proceedings, including proceedings before fed-

eral agencies, and suits and actions in which the subject

matter of the action affecis the patrons of any utility doing

business in this state. He shall decide whether to appeal

an order of the commission, and may on his own motion

initiate any appeal.

(c) Upon the institution of any proceeding before the

commissiou in which the public counselor is authorized to

appear, the commission shall immediately notify the public

counsélor thereof and transmit to him a copy of the petition

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or complaint filed. The counselor is empowered to call his

own witnesses to testify before any proceeding or hearing

in which he makes an appearance, and to require the pro-

duction for examination of any books and papers relating

to any matter under investigation and in question before

the commission, any other agency or any court. The coun-

selor shall have the right, with the consent of the petitioners

or complainants, when the petition is filed on behalf of the

rate payers, patrons or the public, to make such amend-

ments to the petition or complaint as he may deem advis-

able. The commission shall not proceed to hear any peti-

tion, complaint or proceeding in which the public counselor

is entitled to appear until he shall have had at least ten [10]

days’ notice thereof, unless he shall have waived the same.

In all proceedings before the commission and in any court

in which he shall appear, the counselor shall have charge

of the interests of the rate payers and patrons of the

utility and utilities involved and he may give notice of

such hearings to all municipalities, corporations, or organi-

zations and persons parties to the proceedings, suit or ac-

tion, other than such utility or utilities. In addition to

notice given by the public counselor, the commission shall

give the notices otherwise required by law.

(d) The publie counselor shall be entitled to employ

and fix the compensation, with the approval of the governor

and the budget agency accountants, utility economists, en-

gineers, attorneys, stenographers or other help as may

be necessary to carry out the duties of his office. The com-

pensation of the public counselor and staff shall be paid

from an appropriation made for that purpose by the gen-

eral assembly, or with the approval of the governor and

the budget agency from a contingency fund established

under IC 8-1-6-1. Services of all engineers, experts and

accountants of the commission may be availed of by the

public counselor in the performance of his duties as such,

and they shall make such appraisals and audits as the

public counselor may request, and he shall have access to

the records and files of the commission: Provided, That

with the advice and consent of the governor the counselor

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may employ additional stenographers, examiners, experts,

engineers, assistant counselors, accountants, and consulting

firms with expertise in utility econemics or management,

or both, at such salaries and compensation and for such

length of time as the governor and the budget agency

may approve for any particular case or investigation; the

compensation together with cost of transportation, hotel,

telegram and telephone bills of tne employees and the

counselors while traveling on public business shall be paid

from the expert witness fee account, or with the approval

of the governor and the budget agency from a contingency

fund established under IC 8-1-6-1 on warrants drawn by

the auditor of state, sworn to by the parties who incurred

the expenses. After the same shall have been approved

by the public counselor any expenses incurred by the regu-

lar staff of the public counselor, or any expense incurred

by the public service commission of Indiana, either upon

complaint against any public utility, or upon petition of

any public utility shall be charged and paid in the manner

provided in IC 8-1-2-70. Nothing in this section shall be

construed to prevent any party interested in a proceeding,

suit or action from appearing in person or from being rep-

resented by counsel. [Acts 1941, ch. 101, § 4, p. 255; 1945,

ch. 46, § 2, p. 92; 1959, ch. 370, §1, p. 993; 1974, P. L. 27,

§ 1, p. 134; 1977, P. L. 98, § 1, p. 482.]

2-4-3-7 [34-306]. Lobbying for pay by public officials or

members of the press prohibited—Sale of bills by officers

and employees of general assembly prohibited.—It shall be

unlawful for any public official of this state, or of any

county, township, city or town, including elective and ap-

pointive officers and employees, or any officer, member or

employee of any state central committee of any party, to

receive any compensation to appear before the general

assembly of the state of Indiana, or before either house

or any committees of the general assembly or either house

thereof or before any member as a legislative counsel or

agent on behalf of any person, firm, corporation or associa-

tion from which he directly or indirectly receives any com-

A-30

pensation or salary, other than the state of Indiana, or the

county, township, city, town or state central committee with

which he is associated.

It shall be unlawful for any elective or appointive officer

or employee of either house of the general assembly, or

any representative of any newspaper or press association,

or other person having the privilege of the floor of either

house, to act as a legislative counsel or agent, and it shall

be further unlawful for any such person to promote or

oppose any legislation by personal solicitation, appeal or

threat te any member. It shall be unlawful for any pro-

prietor, editor or publisher of any newspaper, journal,

periodical or other publication, printed or circulated in this

state, to receive any compensation whatsoever or thing of

value in the nature of an award from any source, either

directly or indirectly, for the printing of any article, edi-

torial, news item (so-called), or advertisement, either for

or against any bill or resolution pending before either house

of the general assembly of this state, without indicating

in such article, editorial, news item (so-called) or advertise-

ment, at whose instance the same was so printed, and the

compensation or thing of value received therefor.

The officers and employees of the general assembly, or of

either house thereof, are prohibited from supplying, for

a compensation, given directly or indirectly, any bill, me-

morial or resolution to any person, firm, company, corpo-

ration or association, except upon a written order of the

presiding officer of one of the two [2] houses. [Acts 1915,

ch. 2, § 7, p. 5; 1977, P. L. 4, § 1, p. 105.]

2-4-3-9 [34-308]. Penalty. — Whoever violates any of

the provisions of this act [2-4-3-1—2-4-3-9] shall be guilty

of a felony, and, upon conviction thereof, shall be fined not

less than two hundred dollars [$200] nor more than one

thousand dollars [$1,000], or imprisoned not less than

three [3] months nor more than one [1] year. It shall be

the duty of the attorney-general, upon information, to bring

prosecutions under this section. [Acts 1915, ch. 2, § 8, p. 5.]

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4-13-2-14 [60-1814]. Contracts and leases — Approval

by attorney-general—Filing.—A1] contracts and leases shall

be approved as to form and legality by the attorney-

general. A copy of every such contract or lease extending

for a term longer than one [1] year shall be filed with the

director of public works and supply [department of admin-

istration]. [Acts 1947, ch. 279, § 14, p. 1138.]

§ 1331. Federal question: amount in controversy; costs

(a) The district courts shall have original jurisdiction

of all civil actions wherein the matter in controversy ex-

ceeds the sum or value of $10,000, exclusive of interest

and costs, and arises under the Constitution, laws, or

treaties of the United States, except that no such sum or

value shall be required in any such action brought against

the United States, any agency thereof, or any officer or

employee thereof in his official capacity.

(b) Except when express provision therefor is other-

wise made in a statute of the United States, where the

plaintiff is finally adjudged to be entitled to recover less

than the sum or value of $10,000, computed without regard

to any setoff or counterclaim to which the defendant may

be adjudged to be entitled, and exclusive of interests and

costs, the district court may deny costs to the plaintiff and,

in addition, may impose costs on the plaintiff.

As amended July 25, 1958, Pub.L. 85-554, § 1, 72 Stat. 415;

Oct. 21, 1976, Pub.L. 94-574, § 2, 90 Stat. 2721.

§ 6805. Grants for State consumer protection offices by

Administrator

Establishment, operation, and purpose;

qualifications for funds

(a) The Administrator may make grants to States, or

otherwise as provided in subsection (c) of this section,

under this section to provide for the establishment and

operation of offices of consumer services to assist con-

sumers in their presentations before utility regulatory

A-32

commissions. Any assistance provided under this section

shall be provided only for an office of consumer services

which is operated independently of any such utility regu-

latory commission and which is empowered to—

(1) make general factual assessments of the im-

pact of proposed rate changes and other proposed

regulatory actions upon all affected consumers; —

(2) assist consumers in the presentation of their

positions before utility regulatory commissions; and

(3) advocate, on its own behalf, a position which

it determines represents the position most advan-

tageous to consumers, taking into account develop-

ments in rate design reform.

Grants subject to State assurances on funds

(b) Grants pursuant to subsection (a) of this section

shall be made only to States which furnish such assurances

as the Administrator may require that funds made avail-

able under such section will be in addition to, and not in

substitution for, funds made available to offices of con-

sumer services from other sources.

Offices established by Tennessee Valley Authority

(c) Assistance may be provided under this section to an

office of consumer services established by the Tennessee

Valley Authority, if such office is operated independently

of the Tennessee Valley Authority.

Pub.L. 94-385, Title II, § 205, Aug. 14, 1976, 90 Stat. 1144.