Petition — ASSN., INC. v. CHEVROLET MOTOR MOTOR CAR DEALERS (Nos. 83-1185, 83-1183, 83-1195)

Office - Supreme Court, U.S

83-1189 FILED)

JAN 18 1984

No.

In the Supreme Courte—

OF THE

United States

Octroser Term, 1983

NorTHERN CaLirorniA Motor Car Deauers

Association, Inc. and Motor Car DEaLers AssociaTION

or SouTHEerN Ca.irorn1, Inc., et al.,

Petitioners,

vs.

CuevroLtet Motor Drvisiox,

GENERAL Motors CorporaTION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE COURT OF APPEAL OF THE

STATE OF CALIFORNIA,

FIRST APPELLATE DISTRICT

James R. McCaui

Professor of Law, U.C. Hastings,

Of Counsel

Ricuarp E. Crow

Counsel of Record

Crow, Lyte, GiLwee,

Donocuur, ADLER & WENINGER

700 E Street

Sacramento, CA 95814

Telephone: (916) 441-2980

BOWNE OF SAN FRANCISCO, INC. * 180 NINTH ST. © S.F., CA 84103 © (415) 864-2300

QUESTIONS PRESENTED

1. Is every automobile dealer biased as a matter of law

and therefore prevented by the Due Process Clause of the

United States Constitution from being an adjudicating

member of a state administrative tribunal that determines

whether an automobile manufacturer has shown good cause

required by statute for the lawful termination of a fran-

chise of an individual dealer?

2. Assuming that all automobile dealers are biased as a

matter of law and therefore prevented by the Due Process

Clause from being adjudicating members of such a tribunal,

does the Due Process Clause also prevent an automobile

dealer from participating as a non-adjudicating member of

the tribunal when it makes good cause determinations in

franchise termination cases?

3. Does the Due Process Clause prohibit the appoint-

ment of a knowledgeable participant in a complex market

to an administrative board that determines factual issues

in disputes between buyers and sellers in that market?

ii

TABLE OF CONTENTS

Page

as saan saitihtasabiotnnisbiadeeien i

ETE EE 1

ia, sea hapantinnongenmiiiunecdelaitansest l

Statutory provisions involved .....0....cccccccceeeceseeeeeeeeeees 2

EEE ER 2

Reasons for granting the Writ ............cccccccccccccccececseeeeeeeerens 5

I

The court below acted on what it mistakenly believed

was the compulsion of the federal constitution with-

out any consideration of California law .................... 5

II

The decision below determines a federal question of

great substance in a way that clearly conflicts with

the applicable decisions of this court .............. Hy)

III

The decision below creates a conflict between state

courts of last resort on a question of great signifi-

cance, and the erroneous theories announced in the

decision below call into question virtually all admin-

istrative tribunal decisions in situations in which

the tribunals include participants in the economic

life regulated by the tribunal ..00..00..0.00..0.0ccccccceceseees 22

iii

TABLE OF AUTHORITIES CITED

Cases

Page

American Motors Sales Corp. v. New Motor Vehicle

Board, 69 C.A.3d 983, 138 Cal.Rptr. 594 (1977) ..passim

Andrews v. Agricultural Labor Relations Board, 28

Cal.3d 781, 171 Cal.Rptr. 590, 623 P.2d 151 (1981) 6

Cafeteria Workers v. McElroy, 367 U.S. 886, 6 L.Ed.2d

BOO, GPG, TT (ROG) caceccecdecnccedsaccSeanessosonsbacimosscns 15

Chevrolet Motor Division, ete. v. New Motor Vehicle

Board, 146 Cal.App.3d 533, 194 Cal.Rptr. 270 (1983)

sdabeiedleeliabendblcgibtiniasiiveiliieebih sit cuca lea ale ee aaa a ee 1, 20

City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283,

71 L.Ed.2d 152, 102 S.Ct. 1070 (1982) 00.0.0... ceceeseeees oy

Dugan v. Ohio, 277 U.S. 61, 72 L.Ed. 784, 48 S.Ct. 439

CRIED “jcaserescabians shdedleicidielicepenareasttemdieianiiaaaiahdiad cna k aCe 18

Ford Motor Company v. Pace (Tennessee 1960), 335

jf 7k PEER SAR. EP ILM 2s 19

Friedman v. Rogers, 440 U.S. 1, 59 L.Ed.2d 100, 99

Ste TEE C UIID . cciitnsiccndnnteishintativntihstesceuntinstiemaattnihe nes 13, 15

Garfinkle v. Superior Court, 21 Cal.3d 268, 146 Cal.

Retr. 906, STB P.Bd GBB (1978) .......ccccccccccocescrercerecscsees 7

Gay Law Students Assn. v. Pacific Tel. & Tel. Co., 24

Cal.3d 458, 156 Cal.Rptr. 14, 595 P.2d 592 (1979) ... 7

General GMC Trucks, Inc. v. General Motors Corpo-

ration, 239 Ga. 373, 237 S.f..2d 194 (Georgia 1977) 19

General Motors Corporation v. Capitol Chevrolet Com-

pany, 645 S.W.2d 230 (Tennessee 1983) 0000000000000... 19

Gibson v. Berryhill, 411 U.S. 564, 36 L.Ed.2d 488, 93

S.Ct. 1689 (1973) ......... PORTE seca tabanecgaieede ati Lai 6

Hortonville District vy. Hortonville Association, 426

U.S, 482, 49 L.Ed.2d 1, 96 S.Ct. 2308 (1976) ....12, 13, 21

Kruger v. Wells Fargo Bank, 11 Cal.3d 352, 113 Cal.

Ryptr. 440, 521 P.2d 441 (1974) .........cecccccccsoreresessersessessees 7

if

iv

TaB._e or AuTHorities CITED

Cases

Page

Laird v. Tatum, 409 U.S. 1, 33 L.Ed.2d 154, 92 S.Ct.

ae 15, 16

Lopez v. Henry Phipps Plaza South, Inc., 498 F.2d

Se NE SI UND enc cnccivcdnntisadcnndicdeumnsctmmdhasinnenti 15, 17, 18

Mental Hygiene Dept. of Cal. v. Kirchner, 380 U.S.

194, 13 L.E-d.2d 753, 85 S.Ct. 871 (1965) .................... 7,8

New Motor Vehicle Board vy. Orrin W. Fox, 439 U.S.

96, 58 L.Ed.2d 361, 99 S.Ct. 403 (1978) 000. . 9

Overlook Nursing Home, Inc. v. United States, 556

F.2d 500 (U.S. Ct. of Claims 1977) ............ ee 16, 17

Porter County Chapter, ete. v. Nuclear Regulatory

Commission, 606 F.2d 1363 (D.C, Cir, 1979) ............20, 21

Price v. Civil Service Com., 26 Cal.3d 257, 161 Cal.

Rptr. 475, 604 P.2d 1365 (1980) .o.ccccccccccccsssseesssseeeenevee 7

Smith v. Phillips, 455 U.S. 209, 71 L.ed.2d 78, 102

Se a seiianiaial 16

Tumey v. Ohio, 273 U.S. 510, 71 L.Ed. 749, 47 S.Ct.

437 (1987) enn... Ne Ne er OE Nel 6

Ward v. Village of Monroeville, 409 U.S. 57, 34 L.Ed.

2d 267, 98 S.Ct. 80 (1972) ............000.......... A RS

Withrow v. Larkin, 421 U.S, 35, 43 L.Ed.2d 712, 95

I nad 2, 21

Wolkenstein v. Reville, 694 F.2d 35 (2nd Cir, 1982) . 18

Constitutions

United States Constitution:

Fourteenth Amendment ..............0....... ieee 7,8

California Constitution:

SE ir MII © | calenensidehsshseseghainintiontadietesghioebmianaadaaaadios 2, 5, 6

Tasie or AvTuorities Crrep

Statutes

California Vehicle Code:

Section 3000

Section 3001

Section 3003

Section 3010

Section 3050 .

Section 3050(d)

Section 3060

Section 3060(b) ..

Section 3060(d) .

Section 3061

Section 3062

Section 3066(b)

Section 3066(d)

Section 3069 .

Stats. 1979, ch. 340, § 3, p. 1207

28 U.S.C. Section 1257(3)

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No.

In the Supreme Court

OF THE

United States

Ocroser Term, 1983

NorTHERN CaLirorniA Motor Car DEALERS

Association, Inc. and Motor Car DeaLers AssociaTION

or SouTHEerRN Cauirorni, Inc., et al.,

Petitioners,

vs.

CHEVROLET Motor Division,

GeneraL Motors Corporation,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE COURT OF APPEAL OF THE

STATE OF CALIFORNIA,

FIRST APPELLATE DISTRICT

Petitioners Northern California Motor Car Dealers As-

sociation and Motor Car Dealers Association of Southern

California (hereafter sometimes referred to as “the As-

sociations”) respectfully pray that a writ of certiorari issue

to review the judgment and opinion of the Court of Appeal

of the State of California, First Appellate District entered

in this proceeding on August 25, 1983 and on which the

Supreme Court of the State of California denied Peti-

tioners’ petition for hearing by an order made and filed on

October 20, 1983. The said judgment and opinion, procured

by Respondent Chevrolet Motor Division, General Motors

Corporation (“Chevrolet”) held that a provision of the

California Automobile Franchise Act (California Vehicle

Code §§ 3060-3069) violated the Due Process Clause. Peti-

tioners were granted leave to intervene as additional real

parties in interest in these proceedings at the trial court

level. Additional parties to this action are the New Motor

Vehicle Board of the State of California and 49er Chev-

rolet, both of whom seek review of the said judgment.

Petitioners are informed and believe that both of the addi-

tional petitioners are also filing Petitions for a Writ of

Certiorari in this action with this Court.

OPINION BELOW

The opinion of the Court of Appeal of the State of Cali-

fornia is reported as Chevrolet Motor Division, etc. v.

New Motor Vehicle Board, 146 Cal.App.3d 533, 194 Cal.

Rptr. 270 (1983) and appears in the Appendix A hereto.

JURISDICTION

The judgment of the Court of Appeal of the State of

California, First Appellate District was entered on August

25, 1983. Thereafter, a timely petition for hearing was

denied by the Supreme Court of California on October 20,

1983, and this petition for certiorari was filed within 90

days of that date. This Court’s jurisdiction is invoked

under 28 U.S.C. § 1257(3).

STATUTORY PROVISIONS INVOLVED

The provisions of the California Automobile Franchise

Act that were held to violate the Due Process Clause in

the California Court of Appeal opinion are California

Vehicle Code §§ 3050(d) and 3066(d). Those sections, as

weil as pertinent portions of California Vehicle Code

§§ 3000, 3001, 3003, 3010, 3060 and 3061 are set out ver-

batim in Appendix B hereto. (Unless otherwise indicated,

all section references are to sections of the California

Vehicle Code.)

The due process clause of the California Constitution

is contained in the first sentence of Article I, section 7 of

that document. The sentence, in pertinent part, reads:

A person may not be deprived of life, liberty, or prop-

erty without due process of law or denied equal pro-

tection of the laws;...

STATEMENT OF THE CASE

Respondent Chevrolet notified 49er Chevrolet (“49er”),

its franchised dealer in Angels Camp, California, that

49er’s existing franchise would not be renewed when it

expired. Pursuant to § 3060, 49er protested this refusal to

continue its franchise as the equivalent of a termination

under the terms of the section. Under § 3060, Chevrolet

could not lawfully terminate 49er’s franchise until 49er’s

protest was heard by the New Motor Vehicle Board

(“Board”) in accordance with § 3066. At the hearing, Chev-

rolet was required by § 3066(b) to prove that it possessed

good cause for the termination. The Board is directed by

§ 3061 to consider a number of pertinent facts concerning

the operation of the franchise involved in the termination

hearing, such as volume of the franchisee’s business rela-

tive to the volume possible for the particular location,

amount of investment by the franchisee, and adequacy of

franchisee’s sales and service facilities. Given the nature

3

of these considerations, it is not surprising that 4 3001

requires that a minority of four of the nine members of

the Board must be licensed new motor vehicle dealers

with five years of dealership experience prior to appoint-

ment. All members of the Board, who must be of good

moral character, are appointed by the Governor of Cali-

fornia, except for one public, or non dealer, member ap-

pointed by the California Senate Rules Committee and a

second non dealer member appointed by the Speaker of

the California State Assembly. The foregoing requirements

are set out in § 3001, which also requires that one of the

five non dealer members must be a member of the Cali-

fornia Bar and have been such a member for at least ten

years prior to his or her appointment. For reasons that

will be discussed below, the four dealer members do not

vote in § 3060 termination hearings, but are free to other-

wise participate in such hearings, including offering com-

ment and advice to the five non dealer Board members

($§ 3050(d) and 3066(d)).

Following a hearing, the Board sustained 49er’s protest

and Chevrolet sought a writ of mandate from the San

Francisco Superior Court to vacate the Board’s decision.

Chevrolet claimed that the Board action was improper for

many reasons including the assertions that the Board had

exceeded its jurisdiction in hearing the 49er protest, and

that the Board was not an impartial tribunal because of

the non voting participation in the hearing by the dealer

members and that such a biased tribunal violated Chev-

rolet’s right to due process of law. While the trial court

granted the writ requested on both of the grounds urged

by Chevrolet, the California Court of Appeal considered

only the biased tribunal claim in affirming the trial court

judgment.

The Associations, the Board and Real Party in Interest

49er all timely petitioned the Supreme Court of California

4

for a hearing of the Court of Appeal judgment. The Cali-

fornia Supreme Court, the highest court of that state in

which a decision could be had in this matter, denied all

three petitions on October 20, 1983, and the Associations

now seek a writ from this Court within ninety days fol-

lowing that denial.

In the trial court, Chevrolet specifically alleged in its

petition for writ of mandate that the participation of the

dealer members of the Board in the 49er termination hear-

ing violated Chevrolet's rights under the Due Process Clause

of the Fourteenth Amendment to the United States Consti-

tution (Chevrolet Petition for Writ of Mandate, California

Court of Appeal Clerk’s Transcript, page 003, line 15).

The Minute Order of the trial court stated the court's

view that the dealer member participation authorized by

sections 3050(d) and 3066(d) violated due process under

the Fourteenth Amendment to the United States Constitu-

tion under the rationale of the American Motors decision,

discussed below (Minute Order, California Court of Ap-

peal Clerk’s Transcript, page 237, lines 1-5, and page 237,

line 26 to page 238, line 15). While the opinion of the Cali-

fornia Court of Appeal refers rather vaguely to violations

of “due process,” it is clear that the opinion is referring to

the Due Process Clause of the Fourteenth Amendment to

the United States Constitution, because the opinion com-

pletely relies upon a previous decision of the California

Court of Appeal in American Motors Sales Corp. v. New

Motor Vehicle Board, 69 C.A. 3d 983; 138 Cal. Rptr. 594

(1977). In American Motors, the court held that voting by

dealer members in termination hearings of the Board, pur-

suant to the language then contained in relevant sections

of the Vehicle Code, violated “section 1 of the Fourteenth

Amendment to the United States Constitution .. .” (69 C.A.

3d at 985). Thus, the opinion below decided this action on

the basis of a federal question.

5)

To avoid possible confusion it should here be noted that

the California Legislature responded to the American

Motors decision in 1977 by amending § 3050(d) and adding

§ 3060(d) to eliminate dealer member voting in termination

hearings. In 1979, those sections were amended to specifi-

cally authorize non-voting dealer participation in such hear-

ings, and it is the 1979 version of §§ 3050(d) and 3066(d)

that was struck down by the court below.

As discussed below in the first of the reasons for grant-

ing the writ, Chevrolet has occasionally mentioned the due

process clause of the California Constitution in attacking

the Board’s action, and the trial court judgment also

notes it. However, as will also be discussed below, this

is a situation in which it is clear that both the trial and

appellate courts below acted under what they conceived to

be compulsion of the Federal Constitution, without any in-

dependent consideration of the California Constitution or

any other California law.

REASONS FOR GRANTING THE WRIT

I

THE COURT BELOW ACTED ON WHAT IT MIS.

TAKENLY BELIEVED WAS THE COMPULSION OF

THE FEDERAL CONSTITUTION WITHOUT ANY

CONSIDERATION OF CALIFORNIA LAW

As discuused above, Chevrolet mentioned Article I, sec-

tion 7 of the California Constitution, which contains a due

process clause, in its petition for mandate before the trial

court in this action, and the trial court judgment also notes

it. However, it was the trial court’s mistaken view that the

Federal Due Process Clause compelled its decision. No de-

cisions of a California state court applying a California

due process impartial tribunal requirement were cited or

argued before either the trial or appellate courts below.

This is because no California court has ever considered

6

whether a civil statute violates the California due process

clause. The decision in American Motors was believed to be

controlling by the court below, and American Motors is

based exclusively on a mistaken reading of three decisions

of this Court: * uwmey v. Ohio, 273 U.S. 510, 71 L.Ed. 749, 47

S.Ct. 437 (1.1); Ward v. Village of Monroeville, 409 U.S.

57, 34 L.iud.2d 267, 93 S.Ct. 80 (1972); and, considered the

most important by the American Motors court, Gibson v.

Berryhill, 411 U.S. 564, 36 L.Ed.2d 488, 93 S.Ct. 1689 (1973)

(see 69 C.A.3d at 988-992). Other federal court decisions

were also noted in American Motors, but, there being no

California law on the subject, none was, or could have been,

mentioned. The decision below felt that American Motors

was controlling, and that the due process violation caused

by dealer member adjudication in termination hearings

was not cured by the statutory amendments that prohibited

adjudication and authorized participation in the hearing

process.

In the opinion below, the court mentions only one Cali-

fornia decision, Andrews v. Agricultural Labor Relations

Board, 28 Cal. 3d 781, 171 Cal.Rptr. 590, 623 P.2d 151

(1981). Andrews involved regulation 20230.4 of the Agri-

cultural Labor Relations Board, not the California Consti-

tution, which is unmentioned in the decision. In Andrews

the California Supreme Court refused to disqualify an ad-

ministrative hearing officer challenged as being “biased”

simply because he may have had a crystallized point of view

concerning certain issues of economic and political policy.

In refusing to disqualify the administrative law judge, the

California Supreme Court acted in accordance with the

decisions of this Court and the decisions of courts of other

states. The Andrews decision is contrary to the theories

adopted by the court below. Certainly the fact that the

court below attempts to distinguish Andrews is no support

for the proposition that that court acted under what it

thought was the compulsion of that decision.

7

In point of fact, there is no independently developed

biased tribunal jurisprudence under the California due

process clause. A number of California decisions have

stated that Article I, section 7 of the California Constitu-

tion may provide safeguards separate from those afforded

by the Fourteenth Amendment (Cf. Kruger v. Wells Fargo

Bank, 11 Cal.3d 352, 367, fn. 21, 113 Cal.Rptr. 449, 521 P.2d

441 (1974) ; Garfinkle v. Superior Court, 21 Cal.3d 268, 282,

146 Cal. Rptr. 208, 578 P.2d 925 (1978); Gay Law Students

Assn. v. Pacific Tel. & Tel. Co., 24 Cal.3d 458, 469, 156 Cal.

Rptr. 14, 595 P.2d 592 (1979); Price v. Civil Service

Com., 26 Cal.3d 257, 284, 161 Cal.Rptr. 475, 604 P.2d 1365

(1980)). However, only one of those decisions actually

found any separate California proposition of constitutional

law that was not compelled by the decisions of this Court

under the Fourteenth Amendment. That decision, Gay Law

Students Assn. v. Pacific Tel. € Tel. Co., did not involve

the due process clause portion of Article I, section 7, but

instead was an interpretation of the equal protection clause

contained in the same sentence. Thus, as far as due process

requirements in civil actions are concerned, there is no

separate body of California law under the due process

clause of the California Constitution, the clause has never

been invoked in a “biased tribunal” decision, except in the

most pro forma manner in American Motors and the deci-

sion below. Decisions of this Court interpreting the Four-

teenth Amendment were thought by the California Court of

Appeal in American Motors to compel the erroneous deci-

sion it rendered, and the court below mistakenly believed

that it was correct in following American Motors. In such

a situation, it is clear that the court below struck down

sections 3050(d) and 3066(d) “under what it conceived to

be the compulsion of the Federal Constitution,” to use the

words of this Court in Mental Hygiene Dept. of Cal. v.

Kirchner, 380 U.S. 194, 200, 13 L.led.2d 753, 757, 85 S.Ct.

871 (1965). Unlike the California state court decision in-

volved in Nirchner, there is no indication or suggestion

whatsoever in the opinion below of any reliance upon, or

consideration of, California law, which in any event is non-

existent. Specifically, in Airchner, this Court noted that the

California court below had viewed certain California

decisions concerned in part with guarantees in the Cali-

fornia Constitution as controlling precedent. One such

precedent contained language strongly suggesting direct

reliance upon language in the California Constitution that

has no counterpart in the Federal Constitution (See 380

U.S. 194, 198-200). In the context of the ambiguity of the

California court opinion, this Court remanded for clarifi-

cation. Similarly, in City of Mesquite v. Aladdin’s Castle,

Inc., 455 U.S. 283, 71 L.Ed.2d 152, 102 S.Ct. 1070 (1982),

this Court remanded for clarification of an ambiguous de-

cision. The lower court opinion was based upon both federal

and state constitutional provisions, several state court de-

cisions were cited as controlling, and the invoked state

constitutional provision was written in broader terms than

the federal counterpart.

In this action, it is clear that the court below acted solely

on the basis of its view of the compulsion of the Federal

Constitution. There was no examination of California de-

cisions in American Motors, and the decision below relies

only on American Motors as precedent. Further, the perti-

nent due process clause language in the California Consti-

tution is identical to that in the Fourteenth Amendment.

In this action, the only reference to California law is the

meaningless parallel citation to Article I, section 7 by

careful counsel. That citation was merely mimicked by the

courts below. Such a gambit can not immunize a clearly

erroneous and significant state court Federal Due Process

Clause decision from review by writ of this Court.

9

II

THE DECISION BELOW DETERMINES A FEDERAL

QUESTION OF GREAT SUBSTANCE IN A WAY

THAT CLEARLY CONFLICTS WITH THE APPLI-

CABLE DECISIONS OF THIS COURT

The discussion of reason number three for granting the

writ considers the drastic effect of the decision below. A

related matter, the legal substance of the question involved,

will now be noted, followed by a brief description of why

the decision is clearly contrary to the decisions of this

Court as well as to various federal circuit and state su-

preme courts,

The decision below holds that disqualifying bias on the

part of an administrative adjudicator is proved, as a mat-

ter of law, when either of two grounds are shown.’ First,

'The point that the opinion below is wholly based on mistaken

abstractions, rather than facts, is underscored by a consideration of

the history of the Board’s decisions in § 3060 hearings. The Board

has functioned for over nine years, and from July 19, 1974 to

December 30, 1983 had entertained 158 dealer protests. The Board

sustained the protest (voted “for” the dealer) in only ten instances,

or 6% of the time. The protest was formally rejected (the Board

voting “for” the manufacturer) on 16 occasions, while the other

protests were withdrawn or settled without Board decision. As

discussed below, this Court rejected a previous challenge to the

constitutionality of the California Automotive Franchise Act in

New Motor Vehicle Board v. Orrin W. Fox, 439 U.S. 96, 58 L.Ed.2d

361, 99 S.Ct. 403 (1978). In that action, Chevrolet asserted that

§ 3062 of the Act, establishing a protest procedure regarding new

franchise placements in market areas served by existing dealers,

violated the Due Process Clause of the United States Constitution.

In rejecting the Chevrolet argument, this Court noted that the

Board very seldom sustained dealer protests in § 3062 hearings

(439 U.S. 96, 110, fn. 11, 58 L.Ed.2d 361, 376, fn. 11). From July

1, 1974 until the fall of 1978, 117 dealer protests under § 3062 were

filed, resulting in 42 hearings; only one protest was sustained by

the Board. Thus, less than 1% of the filings resulted in a Board

ruling favorable to a dealer. During the full period of the history of

10

an administrative adjudicator is biased if he or she has an

undefined, contingent, impersonal and seemingly highly re-

mote “economic stake” in the principles of law that may

be developed in the case before the administrative tribunal.

Second, an administrative adjudicator is also biased if he

or she has had or may have had some form of contact

with someone who has such an “economic stake” in the out-

come of the case before the tribunal. For convenience, the

two grounds for disqualifying bias established in the deci-

sion below will be referred to as the “economic stake” and

the “contamination” inferred bias grounds. Both grounds

are said to be based upon the holding in American Motors.

The Legislature’s express determination to include dealer

members in termination hearings because of their experi-

ence in and knowledge of the business of operating new car

dealerships was cavalierly dismissed as mistaken in the

decision below, which stated that “. .. car dealers have no

unique or peculiar expertise appropriate to the regulation

of business affairs of car manufacturers” (146 Cal.App.3d

at 538, quoting from American Motors). Of course the

Legislature was only concerned with regulation of a certain

aspect of the business relationship between car manufac-

turers and dealers, namely whether a dealer’s performance

in selling, servicing and generally representing a car man-

ufacturer was so deficient compared to the general level of

dealer performance in sales, investment, servicing war-

ranties and complying with franchise terms that the man-

ufacturer had “good cause” for terminating the dealer (see

Vehicle Code §§ 3060(b) and 3061). On these points, no one

the Board, the figures on § 3062 hearings also flatly dispel any

notion of favoritism for dealers or dealer interests. Of the 346 dealer

protests filed under § 3062 with the Board from July 19, 1974 to

December 30, 1983, only 13 were sustained by the Board (less than

3%), while 71 were formally denied by Board decisions in favor

of manufacturers. The remaining 262 protests were withdrawn,

settled, or, in a few instances, are presently pending a formal hear-

ing. These data are from the public records of the Board.

11

would question that experienced car dealers possess rele-

vant “unique or peculiar expertise,” or that a reasonable

legislative determination might be made that the “edu-

cated and needed advice of the New Motor Vehicle Board

members who are themselves new motor vehicle dealers

[should be available to] be utilized in the decision making

process of the board” (see 46 Cal.App.3d at 539, quoting

from Stats. 1979, ch. 340, § 3, p. 1207). An automobile deal-

ership invariably involves used car operations, consumer

financing problems, warranty and repair service require-

ments, management of a large workforce, and truly substan-

tial internal financial considerations. Expertise gained

through experience is obviously desirable, if not a prerequi-

site, for an administrative tribunal charged with making

judgments about “reasonable” business operations and “ad-

equate” retail representation of an automobile manufac-

turer’s product.

Hundreds, if not thousands, of state and federal agen-

cies include members of the occupation or profession the

agency regulates, either as the result of statutory com-

mand or intelligent choice by the relevant appointive

official. This fact is viewed as irrelevant by the decision

below because the members of the Board are “no longer

merely regulating members of their own occupation [but

are now] regulating the economic contractual relations of

others with members of their own occupation” (146 Cal.

App.3d at 538, quoting American Motors). However, it is

obvious that occupational licensing agencies (such as the

New Motor Vehicle Board) traditionally have regulated

the level of service and competence furnished by the mem-

bers of the occupation to “others” (the consuming public

in most cases) as well as the contract terms and methods

of advertising used by the members of the occupation in

dealing with “others” (including suppliers and creditors

as well as consumers). Thus, there is no significant dif-

ference in economic substance or practical effect between

the impact of Board rulings upon non automobile dealers

(including manufacturers) and the impact of a ruling of

any occupational licensing or regulatory agency upon lay-

persons who deal with members of the regulated occupation.

Turning to the American Motors decision, which first

announced the “economic stake” ground for inferred bias,

it is significant that in the six years since it was rendered,

the decision has never been followed as a precedent until

the decision below, and its holding has been expressly

and inferentially rejected in decisions discussed below.

This is because American Motors misread this Court's

decisions in Turney, Ward and Gibson to require inferred

bias disqualification on the speculative, indirect, and con-

tingent basis of “economic stake.” American Motors

neglected to consider either Withrow v. Larkin, 421 U.S.

35, 43 L. Ed. 2d 712, 95 S. Ct. 1456 (1975) and Hortonville

District v. Hortonville Association, 426 U.S. 482, 49 L. Ed.

2d 1, 96 S. Ct. 2308 (1976), the most recent occasions prior

to American Motors on which this Court directly addressed

the biased tribunal issue. In Withrow, the allegation was

made that a licensing board composed of practicing physi-

cians was a “biased tribunal” because it performed an

investigative function (determining whether probable

cause for criminal action or license revocation existed), as

well as an adjudicative function at a subsequent license

ievocation hearing. This Court refused to hold that the

licensing board, as a matter of law, was a biased tribunal,

and further established that disqualifying bias will be

held as a matter of law only when an adjudicator (sitting,

alone or as a member of a board of adjudicators) either

has a direct pecuniary interest in the outcome of the dis-

pute or has been the target of personal abuse from one of

the parties to the dispute he or she is hearing.

In Hortonville District, this Court gave further evidence

that disqualifying bias must not be inferred as a matter

13

of law on the basis of mere group antagonism or conflicting

economic interest when it held that a school board was not

a biased tribunal in holding disciplinary hearings to deter-

mine if certain teachers should be punished for engaging

in an illegal strike. The strike allegedly occurred because

of the school board’s negotiations with the teachers’

bargaining agent. The court held that the school board

was not a biased tribunal because its members had no

personal or direct financial interest in disciplinary action

taken against the teachers (see 426 U.S. at 491-497,

49 L. Ed. 2d at 8-12). Turning to the New Motor Vehicle

Board, it is clear that absent a showing of specific facts,

no dealer member of the Board has any direct pecuniary

interest in hearing a franchise termination dispute. Thus

American Motors, which apparently was based upon that

court’s view of conflicting economic interests and group

antagonism between dealers and manufacturers was, in

1977, contrary to the then controlling precedent from the

United States Supreme Court.

Decisions of this Court and principles stated by indi-

vidual Justices of this Court since American Motors was

decided in 1977, specifically reject the thinking in that deci-

sion. On the need for “balancing” of possibly affected

economic interests on tribunals and regulatory boards,

American Motors was directly overruled by this Court in

Friedman v. Rogers, 440 U.S. 1, 18, 59 L. Ed. 2d 100,

99 S. Ct. 887 (1978). This Court therein stated that there

is no constitutional basis for a due process claim that rep-

resentatives of different or contending economic interests

must be statutorily mandated on regulatory boards which

include representatives of one group within an occupation.

The sole purpose of the inquiry should be to determine

if a member of the board in question has either a personal

animosity or a personal, direct and uncontingent pecuniary

interest involved in a hearing. The Legislature’s decision

1

to include members of one particular economic or occu-

pational group and not any others is constitutionally ir-

relevant. Thus, the phrases from American Motors relied

upon in the decision below at 146 Cal.App.3d 537-538 are

all premised upon an erroneous view of the Due Process

Clause.

As one exainple of this erroneous view, American Motors

condemns the California Legislature because “[i]n effect

it took sides in all Board-adjudicated controversies between

dealers and manufacturers” by failing to require the ap-

pointment of manufacturers (see 69 C.A.3d 983 at 991,

quoted at 146 Cal.App.3d 538). American Motors goes on

to hold that this alleged failure to “balance” renders the

Board unconstitutignally biased. In the words of that de-

cision, “This legislative partisanship damns the Board”

(69 C.A.3d at 991, quoted at 146 Cal.App.34 538). The

“combination” of four factors said by the American Motors

court to render the Board unconstitutionally biased

amounts only to an overly elaborate restatement of the

florid phrase just quoted (see 69 C.A.3d 983 at 992, quoted

at 146 Cal.App.3d 538). Thus, it appears that if there had

been a “counterbalancing,” and the Act required four “man-

ufacturer members” of the Board in termination hearings

(“factor (2)”), the Board would have been held unbiased

by the American Motors court. In reacting to the statu-

torily mandated presence of dealer members solely on the

basis of the majority’s feelings of fairness or emotionally

held views of statutory propriety, the American Motors

court neglected to attempt an analysis to determine if the

dealer members actually had any personal, direct and

uncontingent interest in all dealer termination hearings.

This neglectful approach is clearly wrong under all ap-

plicable precedents and is close to an usurpation of the

constitutional power of the California Legislature to

legislatively establish adininistrative agencies.

15

While the “balancing” requirement of American Motors

is bad constitutional law and bad institutional policy, the

decision below specifically embraced the balancing require-

ment as the crucial test for “implied bias” and held that

the lack of mandated manufacturer members voids §§ 3050

and 3066 as violative of the Due Process Clause (see spe-

cifically 146 Cal.App.3d at 541, as well as the quotations

from American Motors at 146 Cal.App.3d 537-538).

While Friedman v. Rogers specifically rejects the basis

for the American Motors holding, the opinion by Justice

Powell in the former case is also instructive on the broader

issue of legislative freedom in the regulation of economic

life. In a footnoted statement specifically referenced to

the Court’s complete rejection of the argument that the

Due Process Clause requires some form of balancing of

affected economic interest on administrative tribunals, the

Court stated: “The Due Process Clause imposes only broad

limits, not exceeded here, on the exercise by a State of its

authority to regulate its economic life ... (citations)” (440

U.S. at 18). This principle was violated by the decision

below and by American Motors. Both decisions also violate

another controlling Due Process Clause principle that has

been recently invoked by federal courts in considering

“implied bias” claims: that due process is a flexible concept

and its “very nature... negates any concept of inflexible

procedures applicable to every imaginable situation”

(Cafeteria Workers v. McElroy, 367 U.S. 886, 895, 6 L.Ed.

2d 1230, 1236, 81 S.Ct. 1743, 1748 (1961), quoted by Judge

Friendly in Lopez v. Henry Phipps Plaza South, Inc., 498

F.2d 937, 944 (2nd Cir. 1974), discussed infra).

Regarding the decision in Laird v. Tatum, 409 U.S. 1,

33 L.Ed.2d 154, 92 S.Ct. 2318 (1972), Justice Rehnquist

issued a memorandwm found at 409 U.S. 824 on the subject

of disqualification of judges because of previously ex-

pressed points of view on legal, political and economic

issues involved in cases before the court. Justice Rehnquist

16

firmly rejected the notion that tribunals are either required

to, or should, be made up of persons with no expertise or

prior policy judgments concerning cases to be heard (see

409 U.S. at 835-839). In Smith v. Philips, 455 U.S. 209, 71

L.Ed.2d 78, 102 S.Ct. 940 (1982), this Court refused to

impute bias on the part of a juror in a criminal trial who,

during the trial, applied for employment as a “major felony

investigator in the District Attorney’s Office” that success-

fully prosecuted the case. Even in the context of a criminal

prosecution, this Court refused to assume, as a matter of

law, that a juror was “biased” on the basis of speculation

and conjecture about possible expectations of contingent

future economic benefit dependent upon the outcome of the

trial. Of course, just such an assumption of bias as a mat-

ter of law was made in American Motors and the decision

below.

Because of the firm posture of this Court disfavoring

imputations of bias generally and requiring the existence

of a direct, uncontingent and certain financial interest in

the outcome of the hearing before implied bias can be

found, it is expectable that federal appellate courts have

consistently rejected the type of speculative “economic

stake” claims of bias embraced by American Motors and

the decision below. In Overlook Nursing Home, Inc. v.

United States, 556 F.2d 500 (U.S. Ct. of Claims 1977),

Overlook, a provider of Medicare services disputed the

decision of its fiscal intermediary, Travelers Insurance

Co., to reject payment of approximately $360,000 of

claimed reimbursable costs. An administrative board was

convened to rule on Overlook’s claim, and two of the three

board members were employees of Travelers. The board

denied further recovery. Overlook sought court review,

claiming that the two Travelers employees were biased as

a matter of law because Travelers, as a private insurance

company, “would have an interest in similar issues [con-

cerning the right of health care providers to reimburse-

ment from an insurer] where it would be itself the health

17

insurer under private, non-governmental plans, and would

wish to establish precedents unfavorable to providers”

(556 F.2d at 502-3). After a thorough review of applicable

precedent, the court concluded, “[T]his plaintiff’s theory

is two [sic] conjectural and the character of the bias al-

leged too attenuated for us to agree that due process, a

flexible and practical concept by nature, was offended”

(556 F.2d at 504). Overlook’s claim regarding the economic

stake of Travelers in favorable precedent denying in-

surer liability is closely analogous to the American Motors

claim that dealer members have an “economic stake” in

holding that a manufacturer has not shown “good cause”

to terminate a dealer for low sales performance (69 C.A.3d

987, quoted as controlling in the decision below, page 4).

In the case at bar, as in Overlook, the asserted value of

“precedent” is not a direct, uncontingent and certain bene-

fit that would realistically lure a presumably impartial

board member to make a biased decision. Such a claim of

bias is, indeed “conjectural” and “attenuated.”

Judge Henry J. Friendly of the United States Court of

Appeals for the Second Circuit has discussed the issue of

implied bias on two occasions in recent years, and the

decisions repay close study. In the first, Lopez v. Henry

Phipps Plaza South, Inc., 498 F.2d 937 (2nd Cir. 1974),

Judge Friendly rejected an argument that a hearing off-

cer was “management oriented,” noting that although the

officer might well have a point of view and possess valuable

expertise, this did not render him incapable of being

impartial for due process purposes. The flexible nature of

the due process concept and the need for lower standards

of impartiality in administrative hearings than required

of a judge or juror were noted. On the last point, Judge

Friendly wrote, “The fact that [the hearing officer] might

have been disqualified as a judge or subject to challenge

for cause as a juror in a dispute between Phipps and Mrs.

18

Lopez does not, either in principle or under the authorities,

infect the hearing with a lack of due process” (448 F.2d

at 944).

In Wolkenstein v. Reville, 694 F.2d 35 (2nd Cir. 1982),

Judge Friendly provides a more elaborate discussion and

analysis of a charge of “implied bias” in an administrative

tribunal context. Noting applicable precedents, the flexi-

bility of the due process concept, and the presumption of

honesty, integrity and impartiality that the United States

Supreme Court mandates for administrative adjudicators,

Judge Friendly held that no implied bias reaching the level

of due process concern had been shown. Regarding the

claim that the adjudicator, a school superintendent, had a

disqualifying pecuniary interest in the determinations at

issue, the Judge held that a “direct, personal pecuniary

interest” must be shown, and that since the superintend-

ent’s salary was fixed, he had neither a direct nor an

indirect pecuniary interest in maximizing the penalties im-

posed. The Judge considered it possible that the superin-

tendent might receive a higher salary if he ruled that the

school system could collect large penalties from striking

teachers to be used for general school budget purposes,

including administrative salaries. However, this type of

contingent and speculative “benefit” was held to be no dif-

ferent from the mayor-judge’s nondisqualifying interest in

the city treasury in Dugan v. Ohio, 277 U.S. 61, 72 L.Ed.

784, 48 S.Ct. 439 (1927) (see 694 F.2d at 42 and fn. 7).

Thus, all federal court precedents are contrary to Amer-

ican Motors and the decision below on the issue of whether

a vague, impersonal, highly contingent adverse “economic

stake” can constitute constitutionally impermissible bias.

It is not surprising that, on the precise issue determined

in American Motors and the decision below, three decisions

of the supreme courts of other states have held dealer

board members to be free of any implied disqualifying bias

19

in hearings to determine if a franchise was terminable for

“good cause” (See Ford Motor Co. v. Pace, 335 S.W.2d

360, 367 (Tennessee 1960); General GMC Trucks, Inc. v.

General Motors Corp., 239 Ga. 373, 237 S.E.2d 194,

195-6 (Georgia 1977); General Motors Corp. v. Capitol

Chevrolet Co., 645 S.W.2d 230, 235-8 (Tennessee 1983)).

The Capitol Chevrolet decision is a particularly well

reasoned treatment of the issue. In it, the American Motors

holding is specifically rejected and the claim of “pecuniary

interest” of all dealers in ruling against manufacturers

draws this comment: “This is so attenuated and specula-

tive, in absence of proof of actual interest or bias, that we

are simply unable to accept it” (645 S.W.2d at 237). Inex-

plieably, the decision below cites these three state supreme

court decisions as support for its view that American

Motors is the controlling precedent (146 Cal.App.3d at 538).

In analyzing the “economic stake” an otherwise totally

impartial dealer member has in a particular termination

hearing, it is clear that the dealer has no personal inter-

est whatsoever in the case because he or she would be

challenged for cause if the dealer member owned, or had

any interest in, the dealership involved. Any “economic

stake” interest is therefore impersonal. Any such interest

is also highly contingent, depending on the dealer’s spec-

ulation concerning a number of possible future events,

and he or she must make all of the following deter-

minations before his decision could be affected by any

“bias.” The dealer must conclude that tf in the future his

or her dealership is terminated by the franchising manu-

facturer, and if he or she protests, and tf the Board's

decisions under any of the “good cause” factors listed in

Vehicle Code § 3061 are generally considered useful as

“precedents” by the then sitting Board, and if the case

presently before the Board might be decided so as to

20

become a helpful precedent in a future dispute with the

dealer’s manufacturer, and if a majority of the then sitting

nine member Board can be persuaded to vote against the

dealer’s franchise termination in whole or in part because

of the favorable “precedent” that might be fashioned out

of the case presently before the Board, the dealer might

vote on the case before the Board in a manner to create

a favorable precedent (if the dealer has a reasonable

chance of persuading four or more fellow Board members

to join him or her in the vote).

The above analysis shows the speculative, conjectural,

even metaphysical nature of the alleged “economic stake”

or “potential pecuniary interest” bias argument adopted by

American Motors and the decision below. In point of fact,

there is no meaningful “economic stake” that dealer mem-

bers possess in § 3066 hearings. The dealer members

merely have expertise and, in al! likelihood, some in-

formed opinions about the general nature of manufacturer-

dealer relationships. Neither expertise nor informed opin-

ions are, or should be, considered a basis for inferred

disqualification.

Turning to the “contamination” ground for inferred bias,

no court prior to the decision below has ever held that an

admittedly unbiased administrative adjudicator becomes

biased, as a matter of law, because he or she may discuss

the matter to be adjudicated with an allegedly biased

person. Using the applicable standards developed by this

Court, discussed above, it cannot be seriously argued that

the non dealer members of the Board have a direct

pecuniary interest in § 3060 hearings, nor can it be argued

that the public members have been subjected to abuse by

all automobile manufacturers.

On this point, the decision in Porter County Chapter,

etc. v. Nuclear Regulatory Commission, 606 F.2d 1363 (D.C.

Cir., 1979), is instructive. The petitioners in that case

21

argued that NRC was biased because it may have been

influenced by the recommendations of its staff, which had

previously opposed the construction permit at issue and

allegedly would be unable to fairly consider a petition to

commence proceedings to revoke the permit. The court

reviewed the Withrow and Hortonville District decisions

as the controlling precedents, concluded that the staff of

NRC could not be considered biased for purposes of the

Due Process Clause, and stressed that, in any event, the

members of the staff were not adjudicators on the tribunal

(the NRC) making the determination (see 606 F.2d at

1371-1372).

The decision below attempts to avoid the logic of the

Porter County decision by declaring that unlike staffs of

agencies, the dealer members have the abovementioned

vague and nebulous “economic stake” in each hearing before

the agency (146 Cal.App.3d 540-541). However, everyone

knows that agency staffs, as well as judicial clerks and any

number of colleagues of judges and administrative ad-

judicators have strong points of view and express them to

adjudicators. As long as the judges and adjudicators are

presumed to be impartial, fair, and honest, no court should

hold that such judicial or administrative officers become

hopelessly contaminated by contact with allegedly “biased

persons.” Unless this Court corrects the mischief of the

decision below, one may well wonder what new law will

begin to evolve requiring seclusion or some form of seques-

tration of all adjudicators in order to prevent such “con-

tamination.”

to

to

iil

THE DECISION BELOW CREATES A CONFLICT

BETWEEN STATE COURTS OF LAST RESORT

ON A QUESTION OF GREAT SIGNIFICANCE,

AND THE ERRONEOUS THEORIES ANNOUNCED

IN THE DECISION BELOW CALL INTO QUESTION

VIRTUALLY ALL ADMINISTRATIVE TRIBUNAL

DECISIONS IN SITUATIONS IN WHICH THE TRI-

BUNALS INCLUDE PARTICIPANTS IN THE ECO.

NOMIC LIFE REGULATED BY THE TRIBUNAL

As discussed above, the decision below conflicts with

decisions from two other states on the specific issue of the

inclusion of dealer members on administrative boards that

pass upon the legality of a termination of the franchise

of an automobile dealer. All states except Alaska now offer

dealer franchisees some form of state legislated protection

against unreasonable terminations, and boards with dealer

members make decisions upon franchise terminations in

13 states (Arkansas, California, Colorado, Delaware,

Louisiana, Mississippi, Nebraska, Oklahoma, Pennsylvania,

Rhode Island, South Dakota, Tennessee and Texas). Thus,

the precise issue determined in the decision below will now

have to be addressed by many different courts faced with

conflicting views of the application of the Due Process

Clause to dealer membership in administrative tribunals

performing the same function as the Board in § 3060

hearings.

However, the more ominous significance of the decision

below is the announcement of the nebulous but broad con-

cepts of “economic stake” and “contamination” as grounds

for invalidating administrative tribunal actions and negat-

ing the decisions of legislatures or appointing executive offi-

cials to insure that administrative tribunals possess ade-

quate expertise to deal intelligently with complicated issues

in our nation’s economic life. Without the ability to appoint

23

tribunal members who pafticipate in the regulated field of

economic activity, the state and federal administrative

process will be severely hampered, if not hamstrung.

For these reasons, a writ of certiorari should issue to

the judgment and opinion of the Court of Appeal of the

State of California for the First Appellate District.

Respectfully subu...tted,

James R. McCay

Professor of Law, U.C. Hastings,

Of Counsel

Ricnarp FE. Crow

Counsel of Record

Crow, Lytie, GiLweer,

Donocuur, ADLER & WENINGER

Appendix A

In the Court of Appeal

of the

State of California

First Appellate District

Division Three

A015529

(Super. Ct. No. 777974)

Chevrolet Motor Division, General Motors Corporation,

Plaintiff and Respondent,

Vv.

New Motor Vehicle Board, Defendant and Appellant;

49er Chevrolet, Real Party in Interest and Appellant;

Northern California Motor Car Dealers Association, Inc.,

et al., Interveners and Appellants.

[Filed August 25, 1983]

This appeal is from a judgment granting a peremptory

writ of mandamus, ordering that a decision of the state’s

New Motor Vehicle Board (the Board) be set aside. Appel-

lants are the Board, real party in interest 49er Chevrolet

(49er), and two associations of car dealers, Northern Cali-

fornia Motor Car Dealers Association, Inc. and Motor Car

Dealers of Southern California, Inc. (Associations), who

were granted leave to intervene below. Respondent is Chev-

rolet Motor Division, General Motors Corporation (Chev-

rolet).

,

-

to

I

The relevant facts are as follows. Chevrolet notified 49er,

its dealer in Angels Camp, that when their existing fran-

chise agreement expired on October 31, 1980, a new agree-

ment would not be offered. 49er protested to the Board

pursuant to Vehicle Code section 3060,‘ which provides in

pertinent part that “no franchisor shall terminate or refuse

to continue any existing franchise” for the marketing of

new motor vehicles “unless” the Board “finds . . . good

cause for termination or refusal to continue” the franchise.

The Board consists of nine members, four of whom are

required to be new motor vehicle dealers. (44 3000, 3001.)

At a hearing on a dealer-manufacturer dispute, the dealer

members of the Board may participate, hear, and comment

or advise other members, but they may not “decide” the

matter. ($$ 3050, subd. (d), 3066, subd. (d).)

After a hearing, the Board sustained 49er’s protest.

Chevrolet then filed this action, seeking to require the

Board to vacate its decision. The trial court granted the

petition for writ of mandate on two grounds: (1) partici-

pation of dealer board members in the deliberative process,

without participation of manufacturers, deprived the man-

ufacturers of an impartial tribunal, violating due process;

and (2) the Board was without jurisdiction to hear 49er’s

protest as the manufacturer neither “terminat[ed] [nJor

refus[ed] to continue any existing franchise” within the

meaning of section 3060. This appeal followed.

‘Unless otherwise indicated, all statutory references are to the

Vehicle Code.

A-3

II

When the Board was originally established in 1967 as

the New Car Dealers Policy and Appeals Board, it func-

tioned much as do other state occupational licensing boards.

Among its duties, for example, was the hearing of appeals

by licensed dealers from decisions of the Department of

Motor Vehicles. (See Stats. 1967, ch. 1397, § 2, p. 3261 et

seq.; see American Motors Sales Corp. v. New Motor

Vehicle Bd. (1977) 69 Cal.App.3d 983, 986.) Four of the

Board’s nine members were required to be “new car deal-

ers.” (Stats. 1967, ch. 1397, § 2, pp. 3261-3262.)

In 1973 the Legislature renamed the Board the New

Motor Vehicle Board, and added sections 3060 to 3069,

which established a series of procedures for the adjudi-

cation of disputes between dealers and new car manufac-

turers. (Stats. 1973, ch. 996, § 16, p. 1967-1971.) Among

other duties, the Board was empowered to determine

whether there is “good cause” to terminate or refuse to

continue a franchise. (4 3060.) The requirement that four

of the Board’s members be new car dealers was not

changed.

In American Motors Sales Corp. v. New Motor Vehicle

Bd., supra, 69 Cal.App.3d 983, a dealer-franchisee pro-

tested a noticed termination to the Board, which found that

good cause had not been shown. (/d., at p. 985.) As in the

present case, the franchisor challenged the Board’s deci-

sion by petitioning the superior court for relief in adminis-

trative mandamus. The superior court granted relief, con-

cluding that sections 3060 and 3066 of the Act violated

due process “ ‘because four of the nine members of the

A-4

Board are ... new car dealers, who may reasonably be

expected to be antagonistic to franchisors ....’” (Ibid.)

In a 2-1 decision, the Court of Appeal affirmed, and the

Supreme Court denied a petition for hearing. After taking

note of “a long history of legal warfare between the auto-

mobile manufacturers and their dealers” (American Mo-

tors Sales Corp. v. New Motor Vehicle Bd., supra, 69 Cal.

App.3d at p. 986), the court found it “unavoidable that

dealer-members of the Board have an economic stake in

every franchise termination case that comes before them.

The ability of manufacturers to terminate any dealership,

including that of a Board member, depends entirely upon

the Board’s interpretation of ‘good cause.’ It is to every

dealer’s advantage not to permit termination for low sales

performance, which fact however is to every manufac-

turer’s disadvantage.” (/d., at p. 987.)

The court acknowledged that in some instances a dealer

Board member might be more financially interested in rul-

ing in favor of the manufacturer, i.e., where the franchise

of a competitor was being terminated, or where the dealer

wished to ingratiate itself with its own manufacturer. The

court viewed this not as fairness, but ag an equalizing un-

fairness. “Either way, the objectionable feature of dealer-

membership on the Board is the distinct possibility that a

dealer-manufacturer controversy will not be decided on its

merits but on the potential pecuniary interest of the dealer-

members.” (American Motors Sales Corp. v. New Motor

Vehicle Bd., supra, 69 Cal.App.3d at pp. 987-988.)

The court distinguished cases holding that a licensing or

regulatory agency may constitutionally be composed in

whole or in part of members of the business regulated, on

the ground that the members of this Board were no longer

merely regulating members of their own occupation. In-

stead, they were regulating the economic and contractual

relations of others with members of their own occupation,

but “. .. car dealers have no unique or peculiar expertise

appropriate to the regulation of business affairs of car

manufacturers.” (American Motors Sales Corp. v. New

Motor Vehicle Bd., supra, 69 Cal.App.3d at pp. 990-991.)

The court then stated that the Legislature’s “require-

ment that the nine-man Board consist of at least four car

dealers” meant that “[i]n effect it [the Legislature] took

sides in all Board-adjudicated controversies between deal-

ers and manufacturers, making certain that the dealer

interests would at all times be substantially represented

and favored on the adjudicating body. This legislative

partisanship damns the Board.” (American Motors Sales

Corp. v. New Motor Vehicle Bd., supra, 69 Cal.App.3d

at p. 991.) “[T]he objectionable feature of dealer-member-

ship on the Board is the distinct possibility that a dealer-

manufacturer controversy will not be decided on its merits

but on the potential pecuniary interest of the dealer-

members.” (Id., at pp. 987-988.) “Because the challenged

Board members have a ‘substantial pecuniary interest’ in

franchise termination cases [citation], their mandated

presence on the Board potentially prevented a fair and

unbiased examination of the issues before it in this case,

in violation of due process.” (Id., at p. 992, original em-

phasis, fn. omitted.)

The court concluded as follows: ““What we hold is that

the combination of (1) the mandated dealer-Board mem-

A-6

bers, (2) the lack of any counterbalance in mandated

manufacturer members, (3) the nature of the adversaries

in all cases (dealers v. manufacturers), and (4) the nature

of the controversy in all cases (dispute between dealer and

manufacturer) deprives a manufacturer-litigant of proce-

dural due process, because the state does not furnish an

impartial tribunal.” (American Motors Sales Corp. v. New

Motor Vehicle Bd., supra, 69 Cal.App.3d at p. 992; ef.

General Motors Corp. v. Capitol Chevrolet (Tenn. 1983)

645 S.W.2d 230; Ford Motor Company v. Pace (1960) 206

Tenn. 559 [335 S.W.2d 360]: Gen. GMC Trucks v. Gen.

Motors Corp. (1977) 239 Ga. 373 [237 S.E.2d 194].)

In reaction to the American Motors Sales Corp. decision,

the Legislature amended Section 3050, subdivision (d), and

added subdivision (d) to section 3066 to provide that no

member of the Board who is a new motor vehicle dealer

may participate in, deliberate on, hear or consider, or

decide, any matter involving a dispute between manufac-

turer and dealer. (See Stats. 1977, ch. 278, §§ 2-3, pp.

1171-1173; Chrysler Corp. v. New Motor Vehicle Bd. (1979)

89 Cal.App.3d 1034, 1037.) However, in a 1979 enactment

which took effect as urgency legislation, the Legislature

again amended the statutes, this time providing that dealer

members of the Board “may participate in, hear, and com-

ment or advise other members upon, but may not decide,”

any matter involving a dealer-manufacturer dispute.

(§§ 3050, subd. (d), 3066, subd. (d); Stats. 1979, ch. 340,

§§ 1-2, pp. 1206-1207.) According to the Legislature’s

declaration of urgency, the amendment was necessary “[i]n

order that the educated and needed advice of New Motor

A-7

Vehicle Board members who are themselves new motor

vehicle dealers may be utilized in the decision making

process of the board. .. .” (Stats. 1979, ch. 340, $3, p.

1207.)

The trial court in this case concluded that the amend-

ments to sections 3050 and 3066 did not “cure the uncon-

stitutionality of the earlier provisions of the statute... .”

The court reasoned that although dealer-Board members

no longer have the right to vote, they have the opportunity

fully to participate otherwise in the adjudicatory process,

whereas the manufacturers are still left unrepresented.

First, appellants 49er and the Board argue that Chevro-

let was not entitled to raise this constitutional question

for the first time in the trial court. The general rule is

that an issue not raised at an administrative tribunal may

not be raised in subsequent judicial proceedings. (See,

e.g., City of Walnut Creek v. County of Contra Costa

(1980) 101 Cal.App.3d 1012, 1019-1020.) However, a

litigant who seeks to challenge the constitutionality of the

statute under which an agency operates need not raise that

issue in proceedings before the agency as a condition of

raising the issue in the courts. (See State of California v.

Superior Court (1974) 12 Cal.3d 237, 250-251; Chrysler

Corp. v. New Motor Vehicle Bd., supra, 89 Cal.App.3d at

pp. 1038-1039.)

Here Chevrolet was seeking a declaration that the

statutes prescribing the Board’s membership were uncon-

stitutional. The Board itself could not have granted this

relief because the Constitution expressly provides that an

“administrative agency ... has no power... [t]o declare

A-8

a statute unconstitutional. ...” (Cal. Const., art. ITI, § 3.5.)

There was no waiver of Chevrolet’s right to raise the

constitutional issue in the trial court in these circum-

stances.

The Board and 49er also argue that Chevrolet should

have requested that the dealer members “recuse” them-

selves from participating. The dealer members of the

Board constituted almost half of its total membership

(see §§ 3000-3001), and as members they were authorized

to participate in franchise disputes. (See § 3050, subd. (d).)

If this argument were accepted, predictably automatic

requests for the recusal of dealer members would have

the effect of routinely depriving the Board of participation

by a substantial number of its members in situations

involving one of its basic functions. Clearly their recusal

was not intended by the Legislature.

Next, appellants contend that American Motors is now

of questionable validity, in light of Andrews v. Agricultural

Labor Relations Bd. (1981) 28 Cal.3d 781. In that case,

the Supreme Court held that an administrative law officer

with expressed or “crystallized” political or legal views

cannot be disqualified on that basis alone, even if those

views result in an appearance of bias. (/d., at pp. 791,

793-794.) Appellants reason that the group antagonism and

economic conflict between dealers and manufacturers mean

that car dealer Board members at most may have “crystal-

,

lized views” about policy issues in adjudications between

manufacturers and dealers. After Andrews, appellants

urge, absent proof of actual bias, such views are not enough

to support a holding that an adjudicator cannot provide

a fair tribunal.

A-9

However, the American Motors court did not find the

dealer Board members partial because of their views on

issues of law or policy; rather, that court squarely held

that those Board members had an “economic stake” in

every franchise termination case which came before them.

The Andrews court itself acknowledged that no proof of

actual bias is required for disqualification when a judicial

officer has a financial interest in a case. (Andrews v. Agrt-

cultural Labor Relations Bd., supra, 28 Cal.3d at p. 793,

fn. 5.)

Appellants then argue that the Board is not a biased tri-

bunal and its action in this case did not deny Chevrolet due

process because none of the “adjudicator members” of the

Board were biased. Appellants emphasize that there is no

contention made that any factor exists which could lead a

court to find that the five public members of the Board were

or are biased. According to appellants, the dealer members’

participation in these proceedings was solely to provide

expert advice, a function analogous to that provided to

other boards or commissions by agency staff members or

assistants. (See, e.g., Porter County Chapter v. Nuclear

Reg. Com’n (D.C. Cir. 1979) 606 F.2d 1363, 1370-1372.)

We are not persuaded by appellants’ attempts to mini-

mize the dealer Board members’ role in these proceedings.

Unlike agency staff, the dealer Board members have a fi-

nancial stake in every dealer-manufacturer dispute which

comes before the Board. (American Motors Sales Corp. v.

New Motor Vehicle Bd., supra, 69 Cal.App.3d at p. 987.)

Nevertheless, they are permitted to participate actively in

hearings on dealer-manufacturer disputes, hear the evi-

dence, and comment upon and advise other Board members

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in such matters. In other words, although they must stop

short of actually voting on a dispute, they may take part

in every other aspect of the decision-making process, de-

spite their financial interest in the outcome of that process.

The Board has numerous powers and duties other than

hearing protests by dealers, and the dealer Board mem-

bers’ participation in those other tasks is unrestricted. (See

§ 3050.) Because of their ongoing working relationship,

public members of the Board may be influenced by argu-

ments or facts suggested by the dealer members but not in-

cluded in the public record, and the parties themselves may

not have the opportunity to respond.

In short, the presence of biased members on the Board

presents a substantial probability that decisions in dealer-

manufacturer disputes will be made on the basis of inap-

propriate considerations, and the fact that those members

do not technically “decide” the dispute does not alter that

probability. Each of the factors enumerated in American

Motors is still present. The Board is still required by stat-

ute to have four dealer members. (See § 3001.) The statute

neither requires nor authorizes manufacturer members.

(See ibid.) The nature of the adversaries and the contro-

versies between them remains the same. These problems

have not been remedied by the subsequent changes in sec-

tions 3050 and 3066. Accordingly, the trial court did not err

when it concluded that participation of the Board’s dealer

members in these proceedings denied Chevrolet an un-

biased tribunal.

In light of our conclusion, we need not consider appel-

lants’ contention that the court also erred when it concluded

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that Chevrolet did not terminate or refuse to continue the

franchise within the meaning of section 3060.

Judgment is affirmed.

CERTIFIED FOR PUBLICATION

Scott, J.

We concur:

White, P.J.

7 Feinberg, J.

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Appendix B

California Vehicle Code Sections

§ 3000. Board Created

There is in the Department of Motor Vehicles a New Mo-

tor Vehicle Board, which consists of nine members.

§ 3001. Qualifications of board members

Four of the appointive members of the board shall be new

motor vehicle dealers as defined in Section 426 who have

engaged for a period of not less than five years preceding

their appointment in activities regulated by Article 1 (com-

mencing with Section 11700) of Chapter 4 of Division 5.

These members shall be appointed by the Governor.

Each of the five remaining appointive members shall be a

public member who is not a licentiate under Article 1 * * *

of Chapter 4 of Division 5 or an employee of such licentiate

at the time of such appointment and one of these five ap-

pointive members shall have been admitted to practice law

in the state for at least 10 years immediately preceding his

appointment. One public member shall be appointed by the

Senate Rules Committee, one by the Speaker of the Assem-

bly, and three by the Governor.

Each member shall be of good moral character.

§ 3003. Terms of office

Each appointive member of the board shall be appointed

for a term of four years and shall hold office until the ap-

pointment and qualification of his successor or until six

months shall have elapsed since the expiration of the term

for which he was appointed, whichever first occurs.

§ 3010. Quorum

Five members of the board shall constitute a quorum for

the transaction of business, for the performance of any

duty or the exercise of any power or authority of the board,

except that three members of the board, who are not new

motor vehicle dealers, shall constitute a quorum for the

purposes of Article 4 (commencing with Section 3060) of

this chapter.

§ 3050. Duties

The board shall do all of the following:

(d) Hear and consider, within the limitations and in accord-

ance with the procedure hereinafter provided, a protest

presented by a franchisee pursuant to Section 3060, 3062,

3064, or 3065. A member of the board who is a new motor

vehicle dealer may participate in, hear, and comment or

advise other members upon, but may not decide, any matter

involving a protest filed pursuant to Article 4 (commencing

with Section 3060).

§ 3060. Termination of Franchise

Notwithstanding the terms of any franchise, no franchisor

shall terminate or refuse to continue any existing franchise

unless :

(a) The franchisee and the board have received written

notice from the franchisor as follows:

(1) Sixty days before the effective date thereof setting

forth the specific grounds for termination or refusal to

continue.

A-l4

(2) Fifteen days before the effective date thereof setting

forth the specific grounds with respect to any of the fol-

lowing:

(i) Transfer of any ownership or interest in the franchise

without the consent of the franchisor, which consent shall

not be unreasonably withheld.

(ii) Misrepresentation by the franchisee in applying for

the franchise.

(iii) Insolvency of the franchisee, or filing of any petition

by or against the franchisee under any bankruptcy or re-

ceivership law.

(iv) Any unfair business practice after written warning

thereof.

(b) The board finds that there is good cause for termina-

tion or refusal to continue, following a hearing called pur-

suant to Section 3066. The franchisee may file a protest

with the board within 30 days after receiving a 60-day

notice, or within 10 days after receiving a 15-day notice.

When such a protest is filed, the board shall advise the

franchisor that a timely protest has been filed, that a hear-

ing is required pursuant to Section 3066, and that the

franchisor may not terminate or refuse to continue until

the board makes its findings.

(c) The franchisor has received the written consent of the

franchisee, or the appropriate period for filing a protest

has elapsed.

The franchisor shall not modify or replace a franchise with

a succeeding franchise if such modification or replacement

would substantially affect the franchisee’s sales or service

A-1o

obligations or investment, unless the franchisor shall have

first given the board and each affected franchisee notice

thereof at least 60 days in advance of such modification or

replacement. Within 30 days of receipt of such notice, a

franchisee may file a protest with the board and such modi-

fication or replacement shall not become effective until there

is a finding by the board that there is good cause for such

modification or replacement. If, however, a replacement

franchise is the successor franchise to an expiring or ex-

pired term franchise, such prior franchise shall continue in

effect until resolution of the protest by the board. In the

event of multiple protests, hearings shall be consolidated

to expedite the disposition of the issue.

§ 3061. Good Cause

In determining whether good cause has been established

for modifying, replacing, terminating, or refusing to con-

tinue a franchise, the board shall take into consideration

the existing circumstances, including, but not limited to:

(1) Amount of business transacted by the franchisee, as

compared to the business available to the franchisee.

(2) Investment necessarily made and obligations incurred

by the fanchisee to perform its part of the franchise.

(3) Permanency of the investment.

(4) Whether it is injurious or beneficial to the public

welfare for the franchise to be modified or replaced or the

business of the franchisee disrupted.

(5) Whether the franchisee has adequate motor vehicle

sales and service facilities, equipment, vehicle parts, and

qualified service personnel to reasonably provide for the

A-16

needs of the consumers for the motor vehicles handled by

the franchisee and has been and is rendering adequate

services to the public.

(6) Whether the franchisee fails to fulfill the warranty

obligations of the franchisor to be performed by the

franchisee.

(7) Extent of franchisee’s failure to comply with the terms

of the franchise.

. . .

§ 3066. Hearings on Protests

(a) Upon receiving a notice of protest pursuant to Section

3060, 3062, 3064, or 3065, the board shall fix a time, which

shall be within 60 days of such order, and place of hearing

and send by registered mail a copy of the order to the

franchisor, the protesting franchisee, and all individuals

and groups which have requested notification by the board

of protests and decisions of the board. The board, or a

hearing officer designated by the board, shall hear and

consider the oral and documented evidence introduced by

the parties and other interested individuals and groups,

and the board shall make its decision solely on the record

so made. Government Code Sections 11507.6, 11507.7,

except subdivision (¢), 11510, 11511, 11513, 11514, 11515,

and 11517 shall be applicable to such proceedings.

(b) In any hearing on a protest filed pursuant to Section

3060 or 3062, the franchisor shall have the burden of

proof to establish that there is good cause to modify,

replace, terminate, or refuse to continue a franchise. The

franchisee shall have the burden of proof to establish there

is good cause not to enter into a franchise establishing or

relocating an additional motor vehicle dealership.

A-17

(c) In any hearing on a protest filed pursuant to Section

3064 or 3065, the franchisee shall have the burden to estab-

lish that the schedule of compensation or the warranty

reimbursement schedule is not reasonable.

(d) A member of the board who is a new motor vehicle

dealer may participate in, hear, and comment or advise

other members upon, but may not decide, any matter in-

volving a protest filed pursuant to this article. Dealer

participation shall be recorded in the minutes of the

meeting.