Petition — Baca v. Walgreen Co.

IN THE

Supreme Court of the United States

Octoser Term, 1982

MARY DOLORES BACA and SUSAN ROBERTSON GE-

RARD. as individuals, and MARY DOLORES BACA and

SUSAN ROBERTSON GERARD, as Trustees of the

LOUISE V. STOVER TRUST,

Petitioners,

v.

WALGREEN CO., an Illinois corporation,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF KANSAS

Terry F. Moritz

55 East Monroe Street

Chicago, Illinois 60603

312/332-2177

Counsel for Petitioners

Of Counsel:

Linpa K. STANWOOD

GOLDBERG, Koun, P.C.

55 East Monroe Street

Chicago, Illinois 60603

312/332-2177

Pandick Press Midwest, Inc. Chicago © (312) 454-7600

i

QUESTIONS PRESENTED FOR REVIEW

l. Does a state supreme court’s refusal to give effect to a

jurisdictionally valid state administrative order violate the

petitioners’ right to due process of law where:

a. The administrative order became fina! without a

hearing because the respondent waived its right to review

of the order and the order was relied upon by the

petitioner, and

b. There was no record evidence from which the state

supreme court could legitimately draw the factual con-

clusions upon which its decision was based.

ii

TABLE OF CONTENTS

TABLE OF AUTHORITIES

JURISDICTION ........

CONSTITUTIONAL PROVISION INVOLVED...............

STATEMENT OF THE CASE

REASONS WH Y THE WRIT SHOULD BE ALLOWED.

I. The Kansas Supreme Court Improperly Set Aside A

Valid Administrative Order By Making An Inde-

penderx Determination Based Not On Record Evi-

_ dence But On Speculation About Facts That Might

Have Been Adduced At A Hearing That Was Never

Requested

II. The Action Of The Supreme Court In Disregarding An

Administrative Order Without Benefit Of Record

Evidence Deprived The Trustees Of Due Process Of

Law

CONCLUSION

13

TABLE OF AUTHORITIES

Cases

Board of Regents of State Colleges v. Roth, 408

U.S. 564 (1972)

Camp v. Pitts, 411 U.S. 138 (1973)

Federal Power Commission v. Transcontinental

Gas Pipe Line Corp., 423 U.S. 326 ( 1976)............

Goldberg v. Kelly, 397 U.S. 254 (1970)

Ohio Bell Telephone Co. v. Public Utilities Commis-

sion of Ohio, 301 U.S. 292 (1937)

Robert E. Esrey & Co. v. Dibbern, 228 Kan. 784,

620 P.2d 827 (1980)...

United States v. Carlo Bianchi & Co., 373 U.S. 709

(1963).

United States Trust Co. of New York v. New Jersey,

431 U.S. 1 (1977)

Statutes

Kansas Fire Protection Code, Kan. Stat. Ann.

§ 31-132, et seg.

Kan. Stat. Ann. § 31-132

eR, PANNE OSPR ccceltsicdenwillinsgddinatientecaeincsstes

Kan. Stat. Ann. § 31-133(c)

Kan. Stat. Ann. § 31-139

Kan. Stat. Ann. § 31-140

Kan. Stat. Ann. § 31-141..

Kan. Stat. Ann. § 31-142

Miscellaneous

Kansas Administrative Regulations § 22-13-4 ........

Kansas Administrative Regulations § 22-13-32.......

PAGE

IN THE

Supreme Court of the Gnited States

Octoper Term, 1982

MARY DOLORES BACA and SUSAN ROBERTSON GE-

RARD, as individuals, and MARY DOLORES BACA and

SUSAN ROBERTSON GERARD, as Trustees of the

LOUISE V. STOVER TRUST,

Petitioners,

Vv.

WALGREEN CO., an Illinois corporation;

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF KANSAS

OPINIONS BELOW

The trial court’s opinion is not officially reported. The

Journal Entry of Judgment issued by the trial court is contained

in the Appendix ‘o this Petition (la-15a). The decision of the

Kansas Court of Appeals is reported at 6 Kan. App. 2d 505,

630 P.2d 1185 (1981) and is reproduced in the Appendix ( |6a-

43a). The decision of the Kansas Supreme Court is reported at

230 Kan. 443, 638 P.2d 898 (1982) and is reproduced in the

Appendix (44a-54a).

2

JURISDICTION

The decision of the Kansas Supreme Court was entered on

January 15, 1982. That decision relied on facts outside the

record, thereby denying the petitioners their right to due

process of law under the Fourteenth Amendment to the United

States Constitution. The denial of the right to due process of

law was raised in a timely motion for rehearing to the Supreme

Court of Kansas, which was denied on February 25, 1982. On

May 15, 1982, Mr. Justice White entered an order extending

time to file this petition for a writ of certiorari to and including

July 10, 1982. The jurisdiction of this Court is invoked under

28 U.S.C. § 1257(3).

CONSTITUTIONAL PROVISION INVOLVED

United States Constitution, Amendment XIV:

Section |. All persons born or naturalized in the United

States, and subject to the jurisdiction thereof, are citizens of the

United States and of the State wherein they reside. No State

shall make or enforce any law which shall abridge the privi-

leges or immunities of citizens of the United States; nor shall

any State deprive any person of life, liberty or property, without

due process of law; nor deny to any person within its jurisdic-

tion the equal protection of the laws.

STATEMENT OF THE CASE

Petitioners, Mary Dolores Baca and Susan Robertson

Gerard, individually and as trustees for the Louise V. Stover

Trust (“trustees”), are the owners of property located in

downtown Topeka, Kansas (App. la).' The respondent, Wal-

‘ The facts contained in this section are taken from the findings

of the trial court as expressed in the Journal Entry of Judgment and

from the decisions of the Kansas Court of Appeals and the Kansas

Supreme Court. The pages of the appendix to this petition at which

the facts, as stated, appear are indicated for the Court's convenience.

3

green Co., leases the property and operates a drug store on the

property. A written lease governs the relationship of the

trustees as landlord and Walgreen as tenant (App. 2a).

Under the terms of Articles 4 and 9 of the lease, Walgreen

is required to make ali necessary repairs and changes occasion-

ed by its use of the property and required by public authorities.

The lease, in pertinent part, provides as follows (App. 17a):

_ 4, ... Tenant shall comply with the valid requirements of

public authorities regarding the manner of the conduct of

Tenant's business in the leased premises ... .

9. Tenant may install and operate interior and exterior

electric and other signs, soda fountain machinery and any

other mechanical equipment, and in so doing, shall comply

with all lawful requirements.

Acting in accordance with their statutory authority under

the Kansas Fire Protection Code, Kan. Stat. ANN. § 31-139,

representatives of the Topeka Fire Department, Fire Pre-

vention Bureau and the Kansas State Fire Marshal Department

(hereinafter jointly referred to as the “fire officials”) inspected

the Walgreen store on October 12, 1978 (App. 9a). Walgreen

cooperated in this inspection and received the fire marshal’s

order.2 The fire marshal’s order stated that Walgreen was in

violation of both the Kansas statutes governing fire safety and

under (App. 9a). The order required that Walgreen install

, 1 fire extingtishing equi ithin 30 days.

2 The Kansas State Fire Marshal Department and the Topeka

Fire Department, Fire Prevention Bureau issued a joint report of

violations. It will be referred to as the “fire marshal’s order.”

3 The applicable statute is Kan. Stat. ANN. § 31-133 which gives

the state fire marshal authority to adopt administrative regulations.

Pursuant to that authority, Kansas Administrative Regulation § 22-

13-4 was promulgated, which provides as follows:

Automatic extinguishing systems. In addition to the provisions of

22-13-3, all facilities maintaining commercial cooking equipment

shall have approved automatic extinguishers mounted in the

( Footnote continued on following page)

4

The Kansas Fire Protection Code, Kan. Stat. ANN. §§ 31-

132 et seq. (“Fire Code”), which authorizes fire safety in-

spections also provides a 10-day period within which an

administrative hearing concerning a fire marshal’s order can be

requested.‘ In addition, the Fire Code provides for subsequent

judicial review. Walgreen did not avail itself of these adminis-

trative procedures and 10 days after the fire marshal’s order

was issued it became final. Walgreen has never challenged the

fire marshal’s order in accordance with the procedures con-

tained in the Fire Code.

( Footnote continued from preceding page)

ventilation canopies or directly above such equipment. All

equipment must bear the underwriters’ laboratories label and be

of an approved type extinguishing agent such as CO, or dry

chemical. Before any extinguishing system can be accepted it

must first meet the approval of the Kansas state fire marshal.

Provided, however, the authority having jurisdiction may exempt

a facility from the requirements of this section, if, in his opinion,

the waiving of this requirement would not present a definite life

safety hazard.

4 The relevant statute provides as follows:

Any person aggrieved by any order or ruling issued pursuant to

the provisions of this act may appeal such order or ruling to the

state fire marshal within ten (10) days from the date of the

service of such order by filing a notice of such appeal ‘n the office

of the state fire marshal. The state fire marshal or his authorized

representative shall hear such person within thirty (30) days

after the receipt of such notice of appeal, and the state fire

marshal shall give not less than ten (10) days’ written notice of

the hearing which shall be held in accordance with K.S.A. 31-

141. Within fifteen (15) days after such hearing, the state fire

marshal shall file his decision thereon and, unless by his authority

the order is revoked or modified, the order shall be complied with.

within the time fixed in his decision.

Kan. Stat. Ann. § 31-140

5 The relevant statute provides as follows:

Within thirty (30) days after the rendition of a decision in any

such hearing by the state fire marshal, any person affected

thereby may apply to the district court of the county in which the

order is to become effective for a review of such order or decision.

( Footnote continued on following page)

Ll

5

Although Walgreen did not seek administrative review of

the fire marshal’s order, it failed to comply with that order.*

The trustees, relying on the validity of that order, then brought

an action in the Kansas State District Court claiming that

Walgreen had breached Articles 4 and 9 of its lease. The

trustees sought to enforce the terms of the lease, which gave the

trustees the right to protect their property by recovering posses-

sion of the property from Walgreen (App. 12a, 17a-18a). No

question of an exemption from the effects of the fire marshal’s

order was raised at the trial of this action. Nor was evidence

concerning an exemption from the effects of the fire marshal's

order presented. Since the fire marshal’s order had become

final, the question of an exemption from the effects of the order

was not at issue in the case. Both the trial court and the Kansas

Court of Appeals held that the fire marshal’s order was a valid

requirement of a public authority and that under the lease,

Walgreen was required to comply (App. 12a, 29a-30a).’

( Footnote continued from preceding page)

If the order of the state fire marshal is to become effective in more

than one county, the application must be mavte wo the district

court of one of such counties. The application for review shall be

filed in. the office of the clerk of the district court of the proper

county, and it shall specifically state the grounds for review upon

which the applicant relies and shall designate the order or

decision sought to be reviewed. Notice of such appeal shall be

given in the manner provided in K.S.A. 60-2101, and any

amendments thereto.

Kan. Stat. Ann. § 31-142

© Walgreen did eventually install the equipment, but not within

the 30-day period specified in the fire marshal's order and not until it

had caused the cancellation of the trustees’ fire insurance.

* The trial court held that undér the lease, Walgreen was

=

The Kansas Supreme Court reversed, and based on evi-

dence outside of the record, rendered the fire marshal’s order

to issue the fire marshal’s order (App. 49a). The court upheld

the finding of the trial court and the Kansas Court of Appeals

that the obligation to install fire prevention devices was Wal-

green’s and not the trustees’ (App. 5la). But the Kansas

Supreme Court held that Walgreen was not in Violation of the

fire protection regulation and therefore had not breached the

lease. To reach this result, the court cited to the Kansas

Administrative Regulations § 22-13-32, which provides:

therewith, to continue in service so long as such facilities

are not determined by the authority having jurisdiction to

constitute a distinct hazard to life or property.

Kansas Administrative Regulations § 22-13-32.

Then, without record evidence, the supreme court deter-

mined that Walgreen was entitled to an exemption because the

fire marshal’s order failed to consider the potential hazard to

life or property of the Walgreen facilities.* The absence of

proper record evidence was a result of Walgreen's affirmative

decision to waive administrative challenge to the fire marshal’s

order and to accept the fire marshal’s order as final.

After the Kansas Supreme Court rendered its decision, the

trustees filed a motion for rehearing which raisec the violations

of the trustees’ right to due process of law.

-

-.. ais |

{

7

REASONS WHY THE WRIT SHOULD BE ALLOWED

. L THE KANSAS SUPREME COURT IMPROPERLY

SET ASIDE A VALID ADMINISTRATIVE ORDER BY

MAKING AN INDEPENDENT DETERMINATION

BASED NOT ON RECORD EVIDENCE BUT ON

SPECULATION ABOUT FACTS THAT MIGHT HAVE

BEEN ADDUCED AT. A HEARING THAT WAS NEV-

ER REQUESTED.

The Kansas statutes provide a procedure for determining

whether a business is complying with the regulations of the

state fire marshal. The statute contemplates that the state fire

marshal will make an inspection, will issue findings of viola-

tions, Kan. Stat. ANN. § 31-139, and will determine whether

certain business should be exempt from the regulations. Kan.

Stat. ANN. § 31-133{c). These orders and rulings are subject

to review by the State Fire Marshal Department at the request

of any aggrieved person. Kan. Stat. ANN. § 31-140. The

statute providing for review contemplates a full hearing with

the opportunity to present evidence and cross-examine wit-

nesses. Kan. Stat. ANN. § 31-141.

In this case, the fire officials made their inspection and the

fire marshal’s order cited Walgreen for violation of the regu-

lation requiring certain fire protection devices for cooking

surfaces in commercial establishments. Walgreen chose not to

seek review of this order or seek exemption from the regulation.

Nor did Walgreen comply promptly with the order as required

by the Kansas statute and by the terms of its lease.

The trustees were also afforded certain procedural rights

under the Fire Code. Had the fire marshal exempted Wal-

green’s cooking appliances from the regulation, the trustees

could have sought a hearing before the fire marshal in which

they could have presented evidence that Walgreen did not

qualify for the exemption. The trustees, however, agreed with

the fire marshal’s determination that the fire prevention devices

should be installed, and therefore did not seek any hearing.

Thus, the fire marshal’s order became final and the trustees

relied upon it to protect their property.

When Walgreen refused to comply with the fire marshal’s

order, the trustees filed a lawsuit seeking to recover possession

of the property. Both the trial court and the Kansas Court of

Appeals held that the report of the fire officials was the valid

requirement of a lawful authority, (App. 12a, 24a) and that

Walgreen was required by the lease to comply with that

requirement. When the lawsuit reached the Kansas Supreme

Court on appeal, the court refused to give effect to the final

order of the Kansas State Fire Marshal Department. -

The court based its refusal to enforce the order on specula-

tion that the fire officials, who cited Walgreen for failure to

comply with proper regulations, may not have been aware of an

exemption that might have been available to Walgreen. How-

ever, Walgreen’s right to an exemption was not at issue in the

case. Therefore, there was no basis in the record for any factual

determination concerning an exemption, nor covid there be,

because the validity of the adminisirative order was not proper-

‘ ly before the court. Walgreen had waived its right to an

administrative hearing and the evidence, which would have

been considered by the Kansas State Fire Marshal Department

in the context of the hearing, was never developed. Nonethe-

less, the Kansas Supreme Court speculated about what evi-

dence might have been introduced in that hearing and what the

result of that unknown evidence would be. In so doing, the

Kansas Supreme Court violated the trustees’ right to due

process of law.

9

Il. THE ACTION OF THE SUPREME COURT IN DIS-

REGARDING AN ADMINISTRATIVE ORDER WITH-

OUT BENEFIT OF RECORD EVIDENCE DEPRIVED

THE TRUSTEES OF DUE PROCESS OF LAW.

The trustees have a contract right, under the express terms

of the lease, to have Walgreen comply with the regulations of

state authorities. Contract rights are afforded protection by this

Court. The Court has recognized that persons have a liberty

interest in their freedom to enter into contracts. Board of

Regents of State Colleges v. Roth, 408 U.S. 564, 572 (1972).

And, of course, contract rights are a form of property. United

States Trust Co. of New York v. New Jersey, 431 U.S. 1, (1977).

Therefore, under the Fourteenth Amendment, a state cannot

deprive a persea of his contract rights without due process of

law.

This Court has held t!rat an administrator cannot deprive a

person of liberty or property rights based on facts outside the

record of the proceeding. Goldberg v. Kelly, 397 U.S. 254

(1970). In Ohio Bell Telephone Co. v. Public Utilities Commis-

sion of Ohio, 301 U.S. 292 (1937), this Court reversed the order

of an administrator which was based on facts outside the

record. The Court recognized that the effect of deciding a case

on facts not presented in the record is to deprive the affected

party of a hearing. As the Court stated “a hearing is no

judicial, at least in any adequate sense, unless the evidence can

be known.” Jd. at 304. The Court specifically held that such a

decision violated the party’s right not to be deprived of

Property without a fair hearing which is the minimum require-

ment of due process of law.

Moreover, in Ohio Beil this Court pointed out that the Ohio

Supreme Court's affirmation of an improper administrative

order was equally a violation of due process of law:

In such circumstances judicial review would be no longer a

reality if the practice followed in this case were to receive

the stamp of regularity. To put the problem more

phe

oye

10

ncretely: how was it possible for the appellate court to

evidence when the evidence that it approved was unknown

and unknowabie?

Id. at 303.

This Court has frequently admonished federal courts

against jrstifying or overturning administrative determinations

based on the reviewing court’s inferences concerning evidence.

In Federal Power Commission v. Transcontinental Gas Pipe

Line Corp., 423 U.S. 326 (1976), this Court overruled an

attempt by the Court of Appeals for the District of Columbia to

make an independent factual determination in a proceeding to

review an agency order. The Court stated that:

ordinarily review of administrative decisions is to be

confined to “consideration of the decision of the agency .. .

and of the evidence on which it was based.” United States

v. Carlo Bianchi & Co., 373 U.S. 709, 714-715 (1963).

“({T]he focal point for judicial review should be the

administrative record already in existence, not some new

record made initially in the reviewing court.” Camp v.

Pitts, 411 U.S. 138, 142 (1973).

423 US. at 331.

The Kansas Supreme Court has likewise adopted stan-

dards for reviewing administrative actions which prohibit a

reviewing court from substituting its own judgment for that of

the agency. In Robert E. Esrey & Co. v. Dibbern, 228 Kan. 784,

620 P.2d 827 (1980), the Kansas Supreme Court, in reviewing

an order of the state fire marshal, held:

This court’s scope of review is the same as the district

court’s when an administrative tribunal’s order is on

appeal. On appeal, the court may not substitute its

judgment for that of the administrative tribunal, but is

restricted to considering whether as a matter of law:

11

(1) The tribunal acted fraudulently, arbitrarily or

capriciously;

(2) The order is substantially supported by evidence,

(3) The tribunal’s action was within the scope of its

authority.

228 Kan. at 789°

Neither the trustee nor Walgreen had sought review of the

fire marshal’s order. Nonetheless, the Kansas Supreme Court,

disregarding its own precedent concerning the scope of admin-

istrative review, reversed the state fire marshal’s determination

that Walgreen violated the regulation requiring fire ex-

tinguishing devices. The supreme court’s decision was based on

the court’s speculation that the fire officials were unaware that

Walgreen may have been able to obtain an exemption from the

regulation. The availability of an exemption was a purely

factual issue to be determined in a proceeding before the

Kansas State Fire Marshal Department. Moreover, there was

nothing in the record indicating that Walgreen’s facilities did

not constitute a hazard to life or property, precluding the

exemption.

The reason that the record is devoid of these facts is that

the possibility of an exemption was never raised by Walgreen

® The Kansas Supreme Court’s failure to follow its own standards

for review of an administrative order may be, in part, a result of the

court’s consideration of matters de hors the record in deciding the

case. As the Bystander’s Affidavit of John Wilkinson, counsel for the

trustee, demonstrates, during oral argument the Kansas Supreme

Court expressed concern about the economic effect on downtown

Topeka, should Walgreen lose the case. The Bystander’s Affidavit is

included in the Appendix to this petition (App. 55a). One of the

justices, Justice Fromme, specifically asked Mr. Wilkinson whether, if

the lease was terminated, Walgreen might not leave downtown

Topeka (App. 56a). After oral argument, the trustees filed affidavits

seeking to disqualify Justice Fromme based on his prejudicial re-

marks. That motion was denied.

12

before the appropriate administrative body, the Kansas State

Fire Marshal Department. Had the issue been raised, and had

Walgreen been granted the exemption, the trustees would have

had a right to a hearing as to whether the exemption was

proper. These factual issues could then have been determined,

as contemplated by the statute, in the appropriate adminis-

trative setting. By reaching a decision adverse to the trustees,

based only on the court’s speculation as to the fire officials’

intentions and knowledge, the Kansas Supreme Court deprived

the trustees of their right to a hearing and to due process of law.

While the precise question presented by the instant matter

has not yet been addressed by this Court, the logic of Ohio Bell

is controlling. Ohio Beil holds that it is a violation of due

process of law for both a state supreme court and an adminis-

trative agency to make a determination affecting property rights

based on judicial notice of facts not presented as evidence. It is

equally a violation of due process of law for a state supreme

court to refuse to give effect to an administrative order and to

base that refusal on speculation about facts that might have

been presented at a hearing that was never held. To base a

refusal to enforce an administrative order affecting the trustee’s

property rights on speculation is more than poor judicial

practice. In effect, allowing such a practice strikes at the very

heart of the Ohio Beil holding and renders the Ohio Bell

decision meaningless. Under this Court’s decisions in Goldberg

and Ohio Beil, such a practice is a violation of due process of

law.

om

13

CONCLUSION

For the foregoing reasons the petitioners respectfully sub-

mit that this Court should grant their Petition for a Writ of

Certiorari to the Supreme Court of the State of Kansas and

reverse that court’s decision.

Respectfully submitted,

Terry F. Moritz

55 East Monroe Street

Chicago, Illinois 60603

312/332-2177

Counsei for Petitioners

Of Counsel:

Linpa K. STANWOOD

GOLDBERG, Koun, P.C.

55 East Monroe Street

Chicago, Illinois 60603

312/332-2177