Opposition Brief — BP Exploration (Alaska) Inc. v. Baily

No. 89-1375

In The

MAR 30 1890

Supreme Court of the United! Btates — sso. 8.

October Term, 1989 a [eevee

— eae

+ ts 0

KPLORATION (ALASKA) IN(

‘Og () ( ) \ ON na ¢ \ ON . A N\ (

nes

yr l¢ \ ORN (SEN RRA ()

KA NI BOSTON-GOR Se

MM ON OF NA cA LESOURCES O

( \Sk . (,USTAPSON. DRE. tO

VISION (¢ AN DS AMES E. EASON

(iG «& DIVISION OF QO] AND GAS

WA ‘ CA S IUD OF TI

Ci O S OF AIASk

7,7) ,

t

Qn Petition For A Writ Of Certiorari To The United

States Court Of Appeals For The Ninth Circuit

+

RESPONDENTS’ BRIEF IN OPPOSITION

4 >

A 4

‘\ t AT r

, +

Dal

] if

\ ¥

( x «kK

~ | *

a

OUESTION PRESENTED FOR REVIEW

1

} + + } , ) ar

t ( > | Uy | < aiid

>

, na +} 1; f + r) f

> | Li ~~ mS MI OU iLdtli |

4 > ] > |

Y a ak TA ? 5

: ] . y 1 iaWSU reade;ra

i>

+. >t i>

vil

TABLE OF AUTHORITIES - Continued

Page

Federal Statutes:

AS? eRe Se, 24

SSSR Oe SE L,Y Sc a 8

Bails WE LDEE ca cc ieee ne wee ves eeeeseueeave 18

ee CE OS 2 |. <, re 2, 4, 7, 13

Alaska Statehood Act, § 6(a) and (b), 48 U.S.C.

GON. 645.4244 6 64 w E66 0400s 64650430b S55 e babes 17

OtHeR AUTHORITIES

Note, Disqualification of Judges and Justices in

the Federal Courts, 86 Harv. L. Rev. 736 (1973) .... 24

House Joint Resolution No. 13 (16th Alaska Legis-

a) cn 25

I3A C. Wright, A. Miller, E. Cooper, Federal Prac-

tice and Procedure (2d ed. 1984)............0..... 15

1959 Op. Alaska Att’y Gen. No. 7 ............ see eas 25

1975 Op. Alaska Att’y Gen. No. 9 0 .....0.0..000... 25

tJ

however, has never been construed by this Court to per-

mit such an intrusion in an ongoing state court proceed-

ing, and due regard for proper federal/state relations

requires that § 1983 not be so construed. The petition for

writ of certiorari should be denied.

B. Statement of the Facts

1. The Alaska Permanent Fund Dividend Pro-

gram

Approximately 1.7 million barrels of crude oil and

condensate are taken each day from the Prudhoe Bay and

Kuparuk River oil fields located on the North Slope (the

Arctic coast) of Alaska. Through 1986, production from

these fields exceeded 5.2 billion barrels; it is anticipated

that these two fields will ultimately yield a total of 10.7

billion barrels. With roughly 80 percent of the state gov-

ernment’s general tund revenues coming from the taxes

and royalties derived from the production of oil, oil con-

stitutes the backbone of Alaska’s governmental finances

In view of the nonrenewable nature of this vital state

resource, the Alaska Constitution was amended in 1976 to

create a Permanent Fund. Alaska Const. art. IX, § 15. In

its simplest terms, the Permanent Fund is a public sav-

ings and investment account; its purpose is to preserve

for future generations a fair portion of the income de

rived from the production of Alaska’s oil and to provide a

source of state revenue once the oil runs out. Williams v

bel, 619 P.2d 448, 453 (Alaska 1980), rev'd on other

yroumds, 457 U.S. 55 (1982). At least 25 percent of all

mineral royalties received by the State must be placed in

* Y> 5 ”» a . ~ . , } -

the Permanent Fund and invested: all income from that

t ‘

A \ Mac} t

thy > ~r ‘ ‘ b

t v\ >t i ’ i ‘

5 4

ce t \ ~* ,

; 2 ;

‘ ermart ,

’ he Mie he _

+ 4 ‘ ‘ / T 1¢

+ >e0> ry ,

4 ‘

+, m> ; ,

rr >

’ ‘ “ ~

2 i la H

7 a |

~ PIT é tidied i >>

’ ‘

, . , ,

\ xa 4 t \

i A}

mr } , , th,

\ Kaa C >» \ 44

r) . .

ll and gas leases w

; y 4 rT

ALA Cl Mcit Lid a

nNadernaumont ;

LAt a yii AE \

} } }

. | | ‘ ry

sequently tnere Na

Nosit

DOS]

rth Slope betw Ce! 197; a

™ sere yy ) )

including interest)

repeatedly and is cu

tion of every barrel

3. The Proceedings Below.

On November 2, 1987 - the day before the parties

were to meet with the state court to schedule Amerada

Hess for trial and more than five years after the creation

of the dividend program giving rise to their due process

claim — Petitioners filed the underlying lawsuit in the

United States District Court for the District of Alaska.

Brought under 42 U.S.C. § 1983, this suit is founded on

Petitioners’ claim that trial of Amerada Hess in any court

in Alaska would violate their due process rights to a fair

trial under the Fourteenth Amendment to the United

States Constitution. Petitioners claim that the judge and

all of the jurors will have a financial interest in the

outcome of the case by reason of their annual Permanent

Fund dividends, which would be increased as a result of

a State victory in Amerada Hess. More precisely Petitioners

allege that, if the State recovers al! the damages it seeks in

Amerada Hess, each year’s dividend would initially be

increased by approximately $45 and this figure would

ultimately rise to around $70 as the remainder of the

North Slope oil is recovered from the ground.!

Subsequent to the filing of Petitioners’ complaint, the

state officials, except for Judge Carpeneti?, moved to

' Given the procedural context of this case, Petitioners’

factual allegations were accepted as true. As a matter of actual

fact, however, many of Petitioners’ allegations may not be

accurate. [See Footnote 14, infra.]

* Represented by separate counsel, Judge Carpeneti re-

nounced an active role in this case, agreeing to be bound by the

result.

dismiss the action on four grounds, including two rele-

vant here: that abstention was appropriate under Younger

v. Harris, 401 U.S. 37 (1971), and that the case was not ripe

for federal court determination. The district court did not

reach the abstention issue and dismissed the action only

on ripeness grounds, finding that “the case is not ripe for

review because we do not know that Alaska cannot pro-

vide a fair forum.” [App. to Petition, at A-17.]

Petitioners appealed to the Court of Appeals for the

Ninth Circuit, claiming that the district court erred in

dismissing the case for lack of ripeness. Respondents

cross-appealed, claiming that the case should also have

been dismissed on both Eleventh Amendment and ab-

stention grounds.

The court of appeals affirmed, holding that the feder-

al action was not ripe. The court noted that Petitioners

had made no effect to utilize available state court pro-

cedures to assert their due process/disqualification claim,

and the court found no basis for concluding that the

available procedures would be inadequate to resolve the

issue. [Id. at A-9.] The court further found that a prompt

due process challenge in the state court could well result

in a ruling in Petitioners’ favor.? [Id. at A-10.] “Such a

ruling would eliminate the federal constitutional claim

without federal court interference and avoid a needless

3 This finding is supported by the fact that the district

court judge originally assigned to this case (Judge Andrew J.

Kleinfeld) disqualified himself pursuant to a motion by Peti-

tioners on the very grounds asserted as the basis for this § 1983

action.

conflict in this nation’s dual court system.”4 [/d. at A-10

to A-11.]

4 Besides affording the state court the opportunity to obvi-

ate the need for federal court interference, the court’s ruling

also gave the state court the opportunity to develop a record to

resolve uncertain factual issues. [Id. at A-10.] These issues

include:

a. Do all judges receive the Permanent Fund dividend?

While most Alaskans apply for dividends, all do not. There has

been no determination that any Alaska state court judge re-

ceives the dividend.

b. In the event that all judges currently apply for and

receive the dividend, are there any who would waive such

benefits to provide a forum?

c. What is the financial interest at stake? See Part II.B.,

infra.

d. Does the alleged financial interest rise to the level of

constitutional significance? As discussed below in Part II.B.,

only substantial interests can support a due process claim. See

Gibson v. Berryhill, 411 U.S. 564, 579 (1973); Tumey v. Ohio, 273

U.S. 510, 523 (1927).

e. Does the Alaska Legislature’s recent amendment to the

statutory dividend program, which precludes the payment of

dividends based on income earned from any damages awarded

in Amerada Hess, eliminate the basis for Petitioners’ due pro-

cess claim? See Alaska Stat. § 43.23.045(b), quoted at footnote

15, infra.

f. Is there another forum in which Amerada Hess could be

tried? Petitioners claim that their intent is not to prevent the

State from pursuing its claims, but only to require that it do so

in “an alternative, disinterested forum... such as the court of

another state.” [Petition at 6.] However, statute of limitations

objections could bar the State from adjudicating a major

(Continued on following page)

Il. REASONS FOR DENYING WRIT

Petitioners’ case for certiorari is premised upon two

claims: first, that the case has “broad implications for the

entire range of federal constitutional and civil rights liti-

gation,” and second, that the case involves Petitioners’

important due process right to a fair forum. [Petition at

10.] Properly viewed, neither of these claims provides

sufficient justification for the exercise of this Court’s dis-

cretionary jurisdiction.

A. This Case has no “Broad Implications” Suffi-

cient to Justify a Grant of Certiorari.

Any case which raises questions regarding the proper

relationship between state and federal courts carries the

potential for broad impact. To justify a grant of certio-ari,

however, Petitioners must demonstrate a true need for

this Court’s involvement in the particular issues raised.

Petitioners cannot carry that burden in this case.

As a general rule, § 1983 does not grant federal

courts jurisdiction to intervene in pending state court

(Continued from previous page)

portion of its claims in another state’s courts. Additionally,

there may be no forum that has personal jurisdiction over all of

the defendants. Even if there were such a forum, the burden of

trying a case like Amerada Hess could lead to dismissal on the

basis of the inconvenient forum doctrine or for lack of time and

space for trial of a matter of essentially local interest to Alaska.

If the State were effectively barred from trying Amerada Hess in

another forum, the rule of necessity may well apply to require

trial in Alaska state court. See Aetna Life Ins. Co. v. Lavoie, 475

U.S. 813 (1986); United States v. Will, 449 U.S. 200 (1980).

proceedings to rule piecemeal on federal constitutional

issues which may happen to arise in the course of those

proceedings.> Rather, parties are required to avail them-

selves of state court procedures to litigate their constitu-

tional claims. Should those claims be denied, the

appropriate avenue of federal court review and relief is

appeal to this Court following judgment. See 28 U.S.C.

§ 1257.

Proceedings in state court should normally be

allowed to continue unimpaired by intervention

of the lower federal courts, with relief from

error, if any, through the appellate courts and

ultimately this Court.

Atlantic Coast Line R.R. Co. v. Brotherhood of Loc. Eng., 398

U.S. 281, 287 (1970).

In this case, the question for this Court is whether

there is something sufficiently special about a due pro-

cess challenge seeking the disqualification of a judge (or

juror) to justify the creation of a new rule of law which

> In Allen v. McCurry, 449 U.S. 90, 100-01 (1980), this Court

stated,

In reviewing the legislative history of § 1983 in Mon

roe v. Pape .. . the Court inferred that Congress had

intended a federal remedy in three circumstances:

where state substantive law was facially unconstitu-

tional, where state procedural law was inadequate to

allow full litigation of a constitutional claim, and

where state procedural law, though adequate in the-

ory, was inadequate in practice. [Citation omitted.]

As will be elaborated below, the state court procedures avail-

able here are adequate, both in theory and practice, to permit

full litigation of Petitioners’ due process claim.

would permit a litigant to bypass available state court

procedures and seek a decision in the first instance direct-

ly from a federal court. The answer is no.

While the alleged financial interest at issue in this

case arises by virtue of a unique program, Petitioners’

due process claim is essentially indistinguishable from

the myriad disqualification claims which arise routinely

in many state court cases. Sound policy requires that such

claims be litigated in the state courts. Otherwise, § 1983

would be transformed into a vehicle allowing unprece-

dented interference with pending state court proceedings,

and the federal courts would be opened to a flood of

lawsuits, the sole purpose of which would be to seek the

disqualification, of state court judges. In view of these

considerations, the district court acted appropriately in

dismissing Petitioners’ complaint, and no justification ex-

ists for granting the instant petition.

1. The court of appeals’ ripeness ruling is con-

sistent with federal case law.

Petitioners have criticized the court of appeals’ deci-

sion in this case as lacking a “coherent theory” or “consis-

tent rationale.” [Petition at 8, 10.] Contrary to these

assertions, however, the decisions of both the district

court and the court of appeals are premised upon and

consistent with well-established principles of justi-

ciability and federalism. When confronted with the ques-

tion of whether federal court intervention is appropriate

to resolve a claim of state court bias, the lower federal

courts have consistently required that the claim of bias be

first presented to the state court for adjudication.

10

For example, in Flangas v. State Bar of Nevada, 655 F.2d

946 (9th Cir. 1981), a party to a bar disciplinary proceed-

ing before the Nevada Supreme Court argued that federal

court intervention was appropriate because the members

of the Nevada court were biased. The court of appeals

rejected this contention, stating, “Flangas may not simply

ignore the disqualification procedures based upon his

perception that his chances of success in disqu .i1ifying the

biased judges ‘are not auspicious.’ ” /d. at 950 (citation

omitted).

A similar result was reached in Dostert v. Neely, 498

F.Supp. 1144 (S.D.W.V. 1980). Following the example of

this Court in Kugler v. Helfant, 421 U.S. 117 (1975), which

required resort to state disqualification procedures, the

court abstained, stating,

West Virginia’s Judicial Code of Ethics, Canon 3,

sets rigid standards for insuring the impartiality

of judges. This court has every reason to believe

that the Canon’s strictures will be followed.

id. at 1150. Cf. Laird v. Tatum, 409 U.S. 824, 833 (1972) (in

which Mr. Justice Rehnquist ruled on a motion seeking

his own disqualification, noting that disqualification is a

matter of individual decision under the existing Court

practice).

Peterson v. Sheran, 635 F.2d 1335 (8th Cir. 1980), is

particularly instructive. There, a disbarred attorney

brought a § 1983 action challenging the refusal of the

justices of the Minnesota Supreme Court to reinstate him,

alleging that they were biased against him. The court of

appeals dismissed the case, stating, “The difficulty here is

that the bias claim, unless first presented to the state

court, does not reach constitutional ripeness.” Id. at 1341.

11

The holdings of these cases are consistent with the

general rule of ripeness which holds that when a chal-

lenge is made in federal court respecting the possibility

that a government official might act in an unconstitution-

al manner, the court must first allow that official to act

before assuming jurisdiction of a lawsuit premised on

that act. In conformity with this rule, cases have been

dismissed where suit was brought only upon the basis of

what a state court judge might do.

In Mendez v. Heller, 530 F.2d 457 (2d Cir. 1976), the

plaintiff brought a § 1983 action challenging the constitu-

tionality of a durational residency requirement for di-

vorce proceedings. Finding that the plaintiff had never

asserted her constitutional claim in the state court, the

Second Circuit dismissed her suit for lack of a justiciable

case or controversy. The court reasoned that it could not

predicate jurisdiction on the speculative assumption that

the constitutional claim would be rejected if raised in the

state court. Id. at 549.

Similarly, in Cross v. Lucius, 713 F.2d 153 (Sth Cir.

1983), the plaintiffs sought equitable relief in a § 1983

action against Louisiana state court judges to prevent

them from applying allegedly unconstitutional statutes of

limitations. However, because the plaintiffs had not filed

suit in state court, the federal court could only speculate

as to whether the challenged statutes would actually be

* Of course, where it is inevitable that the official will act

so as to work a deprivation of constitutional rights, the ag-

grieved party need not await the consummation of that act

before bringing an action. In this case, however, no such inev-

itability exists.

12

applied by the judges, and the action was dismissed for

lack of case or controversy.

The holdings of these cases are buttressed by this

Court’s decision in Pennzoil Co. v. Texaco, Inc., 481 U.S. 1

(1987), which arose out of a federal court due process

challenge by Texaco to a Texas law requiring the posting

of an appeal bond. This Court held that Texaco’s claim

should have been dismissed, and though that holding

was premised on abstention grounds rather than ripe-

ness, the rationale of the Court’s decision is applicable

here. In part, this Court reasoned that, because the consti-

tutional claims had never been asserted in the state court,

it was “impossible to be certain” that Texas law actually

gave rise to the claims alleged. Id. at 11. -

Further, this Court specifically rejected the claim that

the state court procedures were not adequate to afford a

remedy on the constitutional claims. This Court stated,

[D]enigrations of the procedural protections af-

forded by Texas law hardly come from Texaco

with good grace, as it apparently made no effort

under Texas law to secure the relief sought in

this case. . . . [W]Jhen a litigant has not at-

tempted to present his federal claims in related

state court proceedings, a federal court should

assume that state procedures will afford an ade-

quate remedy, in the absence of unambiguous

authority to the contrary.

Id. at 15. See also Pulliam v. Allen, 466 U.S. 522, 541 (1984)

(“[i]t no longer is proper to assume that a state court will

not act to prevent a federal court constitutional depriva-

tion or that a state judge will be implicated in that depri-

vation”); Peterson v. Sheran, 635 F.2d at 1340 (rejecting a

claim that it would be useless to request biased judges to

13

recuse themselves, “for it is a canon of judicial ethics that

a judge must decline to hear a case if biased”).

In conformity with these decisions, the courts below

properly held that a state court denial of Petitioners’ due

process/disqualification claim is a necessary predicate to

a ripened federai court cause of action. The authorities

cited by Petitioners do not contradict this conclusion.

The leading case relied upon by Petitioners is Gibson

v. Berryhill, 411 U.S. 564, 577 (1973). Petitioners argue that

in that case this Court authorized federal intervention in

a state optometry board proceeding where the board was

“incompetent by reason of bias to adjudicate the issues

pending before it.” Petitioners, however, fail to note the

narrow applicability of that decision. First, Gibson in-

voived federal intervention to restrain the actions of a

state administrative body. No federal court has expanded

upon the Gibson rationale to permit interference with

state judiciaries.

Second, in Gibson there was no indication that there

was even any procedure available to challenge the mem-

bers of the optometry board for bias.” See Flangas v. State

Bar of Nevada, 655 F.2d at 950. Further, as recognized in

Partington v. Gedan, 880 F.2d 116, 126 n.4 (9th Cir. 1989),

even if a procedure was available in Gibson for raising the

due process claim, an optometry board lacks the basic

expertise and competence to rule on such constitutional

? As recognized in Allen v. McCurry, 449 U.S. at 100-01

(quoted at footnote 5, supra), a § 1983 action may lie where

state procedural law is inadequate to allow full litigation of the

constitutional claim.

14

issues. Accordingly, Gibson may be distinguished from

the case at bar as involving a situation in which, consis-

tent with Allen v. McCurry, it was proper for a federal

court to assume jurisdiction under § 1983.

Petitioners also cite to New Orleans Public Service, Inc.

v. Council of City of New Orleans, 109 S.Ct. 2506 (1989), and

Ohio Civil Rights Comm’n v. Dayton Christian Schools, Inc.,

477 U.S. 619 (1986), but those cases addressed issues very

different from that raised here. In the former case, the

same party brought two actions, one in federal court and

one in state court, to contest the validity of a city coun-

cil’s utility rate order. This Court held that the district

court erred in abstaining, noting that “there is no doctrine

that the availability or even the pendency of state judicial

proceedings excludes the federal courts.” 109 S.Ct. at

2520. Without doubt, the quoted rule of law is correct, but

it does not address the ripeness question raised in this

case.

In Dayton, this Court merely reaffirmed the accepted

proposition that “a reasonable threat of prosecution for

conduct allegedly protected by the Constitution gives rise

to a sufficiently ripe controversy.” 477 U.S. at 625 n.1

(citation omitted). Again, the case is inapposite and has

no bearing upon the issue raised in this case.§

8 In addition to citing to these cases, Petitioners also argue

that the lower courts’ ripeness rulings require an exhaustion of

remedies which is not required for a § 1983 action. See Patsy v.

Board of Regents, 457 U.S. 496, 500-01 (1982). In making this

argument, however, Petitioners are confusing the doctrines of

ripeness and exhaustion. While the former “rests on the

(Continued on following page)

15

In sum, the courts below acted appropriately and

reasonably in dismissing Petitioners’ complaint on ripe-

ness grounds, and that dismissal was consistent with the

decisions of both this Court and other lower federal

courts. Before being heard to complain that they have

suffered a deprivation of due process in the state courts,

Petitioners must be required to present that claim to the

state courts. Unless and until that claim is presented and

denied, Petitioners should not be permitted to complain

in a federal court that they have been deprived of their

due process rights.

2. The decisions of the lower courts are also

affirmable on abstention grounds.

Because of the ruling on the ripeness issue, both of

the courts below declined to consider the merits of Re-

spondents’ assertion that abstention was appropriate un-

der the principles of comity and federalism embodied in

the doctrine of Younger v. Harris, 401 U.S. 37 (1971). In

assessing the merits of this petition, however, this court

(Continued from previous page)

i

ground that further state proceedings may forestall an injury

that is only anticipated, or may change the nature of the issue

presented.” 13A C. Wright, A. Miller, E. Cooper, Federal Practice

and Procedure, § 3521.1, at 126-27 (2d ed. 1984), the latter

presumes the existence of the injury and seeks to determine the

appropriate forum for redress. See Williamson County Regional

Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 192-93 (1985).

In this case, Petitioners must raise their due process challenge

in the state court, not as a remedial measure, but as a means of

clothing the due process issue with the finality necessary to a

ripened federal court claim.

16

should consider the fact that the Younger doctrine pro-

vides an independent and fully justifiable basis for af-

firming the actions of the courts below. Hence, there is no

compelling reason for this Court to grant certiorari.

Since the beginning of this country’s history

Congress has, subject to few exceptions, mani-

fested a desire to permit state courts to try state

cases free from interference by federal courts.

Id. at 43. In Younger, this Court gave expression to this

general policy and held that a federal court could not

enjoin a state court criminal action. Consistent with the

vital considerations of comity and “Our Federalism”

upon which that decision was based, this Court has ex-

tended the doctrine of Younger to bar interference with

some civil proceedings.? Ultimately, in Middlesex County

Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423 (1982),

this court delineated a three-pronged test for determining

whether Younger abstention is appropriate in a civil case.

[A]bstention is appropriate in favor of a state

proceeding if (1) the state proceedings are ongo-

ing; (2) the proceedings implicate important

state interests; and (3) the state proceedings pro-

vide an adequate opportunity to raise federal

questions.

In this case, there is an ongoing state judicial proceeding

(Amerada Hess). Thus, the question is whether the second and

third prongs of the Middlesex test are satisfied. They are.

° Trainor v. Hernandez, 431 U.S. 434 (1977) (civil action seeking

the return of wrongfully received welfare payments); Juidice v. Vail,

430 U.S. 327 (1977) (civil contempt proceeding); Huffman v. Pursue,

Ltd., 420 U.S. 592 (1975) (civil nuisance proceeding).

17

a. Vital state interests are implicated.

(1) Alaska’s interest in oil as a vital

economic resource.

Oil revenues play a paramount role in the gover-

nance of Alaska. With over 80 percent of general fund

revenues derived from oil production taxes and royalties,

income from the production of oil constitutes the primary

source of State revenue. It is this money which funds

State government in all its facets and permits it to per

form its basic functions.

In granting Alaska’s admission to the Union, Con-

gress expressly recognized Alaska’s special interest in its

royalties. Traditionally, Congress had limited statehood

land grants to non-mineral lands, retaining federal own-

ership of commercially valuable mineral properties.

Trustees of Alaska v. State, 736 P.2d 324, 333 (Alaska 1987),

cert. dented, 486 U.S. 1032 (1988). In considering statehood

for Alaska, however, some in Congress voiced the objec

tion that “the territory was economically immature and

would be unable to support a state government.” Id. at

335. To respond to this cbjection, Congress took the un-

precedented step of granting to the new state over 100

million acres of land with the attendant mineral rights.

Alaska Statehood Act, § 6(a) and (b), 48 U.S.C. § 21. “The

intent of Congress was, of course, to provide the new

state with a solid economic foundation.” United States v

Atlantic Richfield Co., 435 F. Supp. 1009, 1016 (D. Alaska

1977), aff'd, 612 F.2d 1132 (9th Cir. 1980), cert. denied, 449

U.S. 888 (1980). The “primary purpose” of this land grant

was “to ensure the economic and social well-being of the

new state.” Trustees of Alaska v. State, 736 P.2d at 335. See

18

also Udall v. Kalerak, 396 F.2d 746, 749 (9th Cir. 1968), cert.

denied, 393 U.S. 1118 (1969). In conformity with Congress’

express recognition of the importance of oil revenues for

Alaska, this Court should find that the oil royalties at

issue in Amerada Hess implicate a vital state interest with-

in the meaning of Younger.!°

(2) Alaska’s interest in the integrity of

its judiciary.

Alaska has an equally important interest in the integ-

rity and fairness of its judicial system, and this action

directly challenges that interest. As this Court recognized

in Huffman v. Pursue, Ltd., 420 U-S. at 604,

[I]nterference with a state judicial proceeding

prevents the state not only from effectuating its

substantive policies, but also from continuing to

perform the separate function of providing a

forum competent to vindicate any constitutional

objections interposed against those policies.

Such interference . . . can readily be interpreted

‘as reflecting negatively upon the state courts’

ability to enforce constitutional principles.’ [Ci-

tations omitted.]

10 There exists a strong federal policy of nonintervention

in state revenue matters. This policy is embodied in the Tax

Injunction Act, 28 U.S.C. § 1341, which prohibits a federal

court from issuing injunctions or ordering other equitable re-

lief which suspends or restrains the assessment, levy, or collec-

tion of any state tax. California v. Grace Brethren Church, 457

U.S. 393, 407-11 (1982). Though this act does not technically

apply to this case because the royalties in issue in Amerada Hess

(Continued on following page)

19

By this action, Petitioners threaten more than that

interference with the state judiciary which always accom-

panies an attempt to enjoin a pending state court action.

Petitioners’ due process claim directly impugns the fair-

ness and integrity of the Alaska Judicial system; it im-

pugns the state court’s ability to decide constitutional

questions and to safeguard basic constitutional rights.

The importance of the state interest implicated is great,

and abstention is appropriate."!

b. The petitioners have adequate oppor-

tunity to raise their constitutional

claim.

The procedures available in the state court accord

Petitioners ample opportunity to present federal claims.

(Continued from previous page)

are not taxes per se, the policy behind the act applies with

equal force to require federal court abstention. See Fair Assess-

ment in Real Estate Ass’n v. McNary, 454 U.S. 100, 103 (1981);

Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 525 n.33 (1981).

Ciaffont v. Supreme Court of Pennsylvania, 550 F. Supp

1246 (D.Pa. 1982), aff'd, 723 F.2d 896 (3d Cir. 1983), is directly

on point. There, the plaintiffs brought a § 1983 action, alleging

that they were denied a fair trial and impartial appellate re-

view by reason of the malevolence, conflicts of interest, and

bias of present and past members of the state judiciary. The

district court dismissed the case on a number of grounds,

including Younger abstention. In so ruling, the court found the

requisite important state interest, stating, “[T]here can be no

doubt that the state courts have a genuine interest in consider-

ing and resolving allegations of bias and prejudice ... .” Id. at

1251. See also Cadena v. Perasso, 498 F.2d 383 (9th Cir. 1974)

(court abstained under Younger in case challenging judge’s

failure to disqualify himself).

20

Apart from Alaska Statute § 22.20.020, which establishes

a procedure for disqualifying judges for cause, Petitioners

may assert their due process claim by motion in the state

court. }2

The fact that Petitioners’ claim goes to the bias of the

state court does not obviate the adequacy of these pro-

cedures. As this Court noted in Ohio Civil Rights Comm’n

v. Dayton Christian Schools, Inc., 477 U.S. 619, 628 (1986),

[W]e have repeatedly rejected the argument that

a constitutional attack on state procedures them-

selves ‘automatically vitiates the adequacy of

those procedures for purposes of the Younger-

Huffman line of cases.’ [Citation omitted.]

See also Flangas v. State Bar of Nevada, 655 F.2d at 950;

Dostert v. Neely, 498 F. Supp. at 1150. Similarly, as dis-

cussed above, this Court in Pennzoil Co. v. Texaco, Inc.,

supra, addressed the issue raised here in a broader ‘con-

text and held that comity required deference to pending

state court proceedings where the party bringing the

federal suit had made no effort to utilize available state

court procedures to raise its constitutional claim.

Consistent with the holdings of these cases, the avail-

able state court procedures do allow Petitioners adequate

opportunity to raise their due process claim. Abstention

2 Petitioners argue that such procedures are inadequate

since all state court judges are subject to disqualification, but

they do not refute the fact that they would be free to assert a

blanket motion, challenging the entire Alaska judiciary on due

process grounds. Petitioners may also file a like motion chal-

lenging the competence of all Permanent Fund dividend recip-

ients to serve as jurors.

21

—

under Younger v. Harris, therefore, provides an alternative

basis for upholding the decision of the lower courts.

B. Petitioners’ Due Process Claim Lacks the Merit

to Justify Present Review by this Court.

In assessing the merits of this petition, this Court

should also give some consideration to the merits of

Petitioners’ underlying claim of a due process depriva-

tion. While Respondents do not dispute Petitioners’ right

to raise their due process claim in the state court, they do

dispute the assertion that that claim is of sufficient merit

to justify this Court’s present review of the matter.

Properly, the precedents of this Court establish a

litigant’s due process right to an impartial and unbiased

tribunal. E.g., Connally v. Georgia, 429 U.S. 245 (1977) (per

curiam); Tumey v. Ohio, 273 U.S. 510 (1927). In contrast to

these cases, however, the financial interest alleged in this

case is not sufficiently substantial to support a finding of

a due process violation.!3 See Gibson v. Berryhill, 411 U.S.

13 In Tumey, a village mayor’s only compensation for sit-

ting as a judge in prohibition cases was the $12 fee which was

paid to him only upon conviction of the defendant. Over an

eight month period, the mayor received $696 (in 1920's dollars)

for serving as a judge. Connally involved a justice of the peace

who was virtually in the business of selling search warrants.

His only income was derived from the $5 fees he was paid

upon issuing warrants; within the previous few years he had

issued “some 10,000 warrants”; and he testified that in decid-

ing whether to issue a warrant, he considered the fee which

would be paid to him. 429 U.S. at 246 & n.3.

22

at 579 (those with “substantial” pecuniary interests

should not adjudicate disputes); Tumey v. Ohio, 273 U.S. at

523 (same).

Petitioners alleged in their complaint below that the

recovery of all of the damages sought by the State in

Amerada Hess would result in an ultimate $2.6 billion

recovery by the State, which would yield an eventual $70

increase in the annual Permanent Fund dividend. This

allegation was based on the claims that: 1) the State

would recover one billion dollars in damages for the

underpayment of past royalties; 2) the theory of that

damage award would entitle the State to an additional

one billion dollars in royalties on future oil production,

and 3) the damage award would entitle the State to

another $600 million in price adjustments on royalty oil

already sold by the State itself. Even assuming these

numbers to be correct,!4 Petitioners’ due process claim is

subject to considerable doubt as a matter of law.

14 With respect to the damages directly at issue in Amerada

Hess, Petitioners’ numbers are based on an inaccurate charac-

terization of a state document which estimated the value of

pending State oil royalty and tax claims. In fact, based on

expert reports completed subsequent to the initiation of this

lawsuit, it is the State’s position that Petitioners and the other

North Slope oil producers owe slightly in excess of $900 mil-

lion (including interest).

As to the effect of Amerada Hess on royalties on future

production, Petitioners’ estimate is highly speculative. Since

some of the major North Slope oil producers have already

adjusted their royalty accounting methodology, it is not clear

that the verdict in Amerad.: Hess will result in any meaningful

increase in future royalty payments.

(Continued on following page)

23

In the first place, subsequent to the filing of Peti-

tioners’ complaint, the State Legislature amended Alaska

Statute § 43.23.045(b) to provide that Permanent Fund

dividends would not be based on any money damages

awarded to the State in Amerada Hess. While a portion of

such money would be deposited into the Permanent Fund

(as required by the Alaska Constitution), any earnings on

that money would not be available for distribution as

dividends. Rather, the earnings would be returned to the

principal of the Permanent Fund.!°

Additionally, it is significant that any remaining por-

tion of the alleged dividend increase would flow neither

(Continued from previous page)

Finally, with respect to the recovery of amounts owing the

State pursuant to retroactive price adjustments to previous

sales of royalty oil, the State calculates its entitlement to be

$378 million. However, the purchasers’ actual ability to pay

this price adjustment is open to serious question and the

money may never be collected from them.

15 As amended, Alaska Stat. § 43.23.045(b) provides,

Notwithstanding any contrary provision of law,

each year the commissioner shall transfer to the divi-

dend fund 50 percent of the income of the Alaska

permanent fund earned during the fiscal year ending

on June 30 of the current year and available for

distribution. However, income earned on money awarded

after trial in State v. Amerada Hess, et al., 1JU-77-847

Civ. (Superior Court, First Judicial District) shall be

treated in the same manner as other income of the Alaska

permanent fund, except that it is not available for distri-

bution to the dividend fund, and shall be annually depos-

ited into the principal of the Alaska permanent fund.

{Emphasis added _]

ee a

24

immediately nor directly from a State victory in Amerada

Hess.'© First, the Permanent Fund itself would be in-

creased only upon the occurrence of future events: 1) the

payment of royalties on future oil production, which well

continue into the next century, and 2) the subsequent

recovery of the amounts due under the Amerada Hess

adjustment clauses, the collection of which may very will

require litigation or be impossible. Second, under the

statutory scheme, the full impact on dividends flowing

from the deposit of these monies into the Permanent

Fund would not occur until the fifth year after invest-

ment.!?7 Thus, Permanent fund dividends would not be

increased immediately even if the State were to win Am-

erada Hess; rather, the full impact would not be realized

for decades.

Furthermore, the alleged increase in dividends is

subject to additional contingencies. For example, the

'© As suggested by one commentator, the substantiality of

an alleged financial interest should depend on the size of the

interest and its remoteness or contingency. Note, Disqualifica-

tion of Judges and Justices in the Federal Courts, 86 Harv. L. Rev.

736, 753 (1973). This approach has been followed by a number

of lower federal courts in addressing disqualification motions

made under the federal recusal statute, 28 U.S.C. § 455. See In

re New Mexico Natural Gas Antitrust Litigation, 620 F.2d 794, 796

(10th Cir. 1980); In re Virginia Elec. and Power Co., 539 F.2d 357,

383 (4th Cir. 1976); Alaska Oil Co. v. State of Alaska, 45 B.R. 358,

361 (D. Alaska 1985) (addressing a disqualification motion

based on the interest arising out of increased Permanent Fund

dividends).

'7 Under the statutory dividend formula, dividends are

funded from 21 percent of the total net income from Permanent

Fund investment over the past five fiscal years. Alaska Stat.

§ 37.13.140.

25

annual payment of dividends is subject to legislative

appropriation, which, as evidenced by the legislature’s

recent action amending Alaska Statute 43.23.045(b), can-

not be guaranteed. Though Petitioners argue that the

payment of dividends is mandatory under state law, [Pe-

tition at 4 & n.2], the Alaska Constitution requires an

annual appropriation for all state expenditures. Alaska

Const. art. IX, § 7 (prohibiting the dedication of state

funds). See also 1975 Op. Alaska Att’y Gen., No. 9; 1959

Op. Alaska Att’y Gen., No. 7. More fundamentally, the

very existence of the Permanent Fund dividend program

cannot be guaranteed. Unlike the Permanent Fund itself,

which is established by the state constitution, the divi-

dend program is statutory and may be altered or abol-

ished by the legislature at any time. Again, the

amendment to Alaska Statute § 43.23.045(b) bears this

point out.!®

Thus, the basic merit of Petitioners’ due process

claim must be questioned. Contrary to Petitioners’ claim,

the Alaska judge and jurors will not have an interest in

the outcome of Amerada Hess sufficient to justify their

disqualification. Accordingly, Petitioners will not suffer a

deprivation of due process in the state court, and there is

no need for this Court to exercise its discretionary juris-

diction to safeguard Petitioners’ constitutional rights.

'8 On another front, Alaska Governor Steve Cowper is

actively and publicly promoting a proposal which would place

a cap on dividends and direct the remainder into an education

fund. House Joint Resolution No. 13 (16th Alaska Legislature).

If such a cap were imposed, no increase te the dividend would

be possible.

26

Il. CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

Bruce M. Bore.Ho*

Assistant Attorney General

Department of Law

Oil, Gas & Mining Section

P.O. Box K

Juneau, Alaska 99811-0300

Telephone: (907) 465-3600

Attorneys for Respondents Baily,

Boston-Gorsuch, Gustafson,

and Eason

* Counsel of Record

Witson L. CONDON

RicHarp W. Mak!

HeELLEN, PARTNOow & CONDON

510 L Street, Suite 500

Anchorage, Alaska 99501

Telephone: (907) 276-2713

Attorneys for Respondents Baily,

Boston-Gorsuch, Gustafson,

and Eason