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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1983

## Text

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

A-10

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

A-1l
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.

A-12

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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_1122%3A1. Public record. Not legal advice.