Amicus Curiae Brief — Southwestern Bell Telephone Co. v. Oklahoma Corp. Commission

No. 94-73

In The :

Supreme Court of the United States

October Term, 1994

¢

SOUTHWESTERN BELL TELEPHONE COMPANY,

Petitioner,

OKLAHOMA CORPORATION COMMISSION,

Respondent.

=e —

Petition For Writ Of Certiorari

To The Supreme Court Of Oklahoma

+

BRIEF OF AMICUS, PROFESSOR BERNARD

SCHWARTZ, IN SUPPORT OF THE

PETITION FOR WRIT OF CERTIORARI

+

BERNARD SCHWARTZ

Chapman Distinguished

Professor of Law

University of Tulsa

College of Law

3120 East 4th Place

Tulsa, Oklahoma 74104

(918) 631-3706

Dated: August 4, 1994

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether the Supreme Court of Oklahoma may

decline to be bound by the decisions of this Court inter-

preting the Due Process Clause of the Fourteenth Amend-

ment and hold, despite those decisions, that a regulatory

agency member may never be disqualified for bias in a

ratemaking proceeding.

TABLE OF CONTENTS

Page

SE NI oo oa css 60 xk ne ve i

ae ie Fa kao oo oo oa he kh whee ee iil

Sn eer A en sg acc e bv anne 1

Pe re reer er eee mT ae es 2

I. The Oklahoma Supreme Court’s Decision Vio-

lates Due Process Because it Failed to Kequire

an Impartial and Unbiased Decisionmaker in a

Particularized Ratemaking Proceeding........ 2

II. The Oklahoma Supreme Court Erroneously

Applied the Rule of Necessity............... 12

Ae PTO e PEP ET PEL UTe eT Oe Tee rn hee re pl 13

ill

TABLE OF AUTHORITIES

Page

Cases:

American Cyanamid Co. v. FTC, 363 F.2d 757 (6th

EET eee Tee ee CTE ee eee Te re Tee 11

Bi-Metallic Investment Co. v. State Board of Equaliza-

I RS MEE CAO 6 owe vse vide sevens nase cwscc ws 6

Business and Professional v. Barnich, 614 N.E.2d 341

I ee 1]

Cinderella Career & Finishing Schools v. FTC, 425

re 11

Concrete Pipe & Prod. v. Const. Laborers Pen. Tr., 113

rr ae Fe

Delta Air Lines, Inc. v. CAB, 497 F.2d 608 (D.C. Cir.

REE Re 2 rr 12

General Motors Corp. v. Rosa, 624 N.E.2d 142 (N.Y.

ey iia ve Wan s4 0 os oc nn esses s ody BO

Gibson v. Berryhill, 411 U.S. 564 (1973)............... 11

Goldberg v. Kelly, 397 U.S. 254 (1970) ..............0.. 3

Jarrott v. Scrivener, 225 F.Supp. 827 (D.D.C. 1964) .... 13

Liteky v. United States, 114 S.Ct. 1147 (1994) .......... 3

Londoner v. Denver, 210 U.S. 373 (1908)............... 6

Mass. Auto Rating & ACC v. Commissioner, 516

ee OO OE a kw ce cc ceccdwevvces 11

Michigan Intra-State Motor v. PSC, 504 N.W.2d 677

cc vas cascdeneacedeavasseds 11

National Labor Relations Board v. Phelps, 136 F.2d

a A S| Se OSURUN SARE K ONS 3

TABLE OF AUTHORITIES —- Continued

Page

New England Tel. & Tel. Co. v. PUC, 448 A.2d 272

i ES xo ba FEN 8 RK) OK RN CoN oe we bee ees 11

New Orleans Public Serv., Inc. v. Council of the City

or New Civiagus, 49% U.S. FOG (ISGF) «wens ces cneses, 5

Ohio Bell Telephone Co. v. Public Utilities Commis-

Sh, Se Ge ee LT Ls 5 bn edna haba tenn a 7

Pillsbury Co. v. FTC, 354 F.2d 952 (5th Cir. 1966) .... 12

Reagan v. Abourezk, 785 F.2d 1043 (D.C. Cir. 1986),

aff'd by an equally divided Court, 484 U.S. 1 (1987) .... 12

Southwestern Bell Telephone Co. v. Oklahoma Corpo-

ration Commission, 873 P.2d 1001 (Okla. 1994)....... 2

Spring Valley Water-Works v. Schottler, 110 U.S. 347

oe RS ER eee oF oka epee y ere: be 4,11

Stahl v. Board of Supervisors, 175 N.W. 772 (lowa

neat ln eee ot ee re ee ee ste 12

State v. Aldridge, 103 So. 835 (Ala. 1925)............. 13

Ce ee Mes kh Go 2) ee rrr 11

Withrow v. Larkin, 421 U.S. 35 (1975) ............4.. i

United States v. Florida East Coast R. Co., 410 U.S.

Sa WI a Sarena ee Pe 6

Vermont Yankee Nuclear Power v. Natural Resources

Defense Council, 435 U.S. 519 (1976) . «2. 262 .0504.. 7

Ward v. Village of Monroeville, Ohio, 409 U.S. 57

ss vba fa bake SAS Ree ee aR EE KeRSE 1]

West Ohio Gas Co. v. Public Utilities Commission,

ee ee ee ee cate See ae 7

TABLE OF AUTHORITIES —- Continued

Page

STATUTES:

Cena. Conese. ont. G. Sees TB on ci wwes tot backs eee es 10, 12

Ox a. Stat. tit. 75, Sec. 250.3 (West Supp. 1994) ....5, 9

Mopec. STATE ADMINISTRATIVE PROCEDURE Act Sec.

1 1 Ss. ee ee eee 8

MopeE.L STATE ADMINISTRATIVE PROCEDURE AcT Sec.

TAOS CAEN ois ingga ee ee ee 8

RevisEpD Mopet STATE ADMINISTRATIVE PROCEDURE ACT

Proceeding in the Committee of the Whole,

August 23, 1960, at 8 (comments of Professor

WIT si vn hs cee ci Daa eee 8

Revisep MopeEL STATE ADMINISTRATIVE PROCEDURE ACT

Sec. 1(2) commentary at 11 (1968) 0. 10 cccessecans 8

ReviseED Mopet STATE ADMINISTRATIVE PROCEDURE ACT

a. BE) CEE css abs ee 0d oe ak ee ee eER eae 8

ARTICLES AND TREATISES:

Michael Asimow, Toward a New California Adminis-

trative Procedure Act: Adjudication Fundamentals,

39 UCLA: LL. Rev. 2067 CIGD oo ou ei cece se ce eaecns +

Il KENNETH Cute Davis AND RICHARD J. Pierce, JR.,

ADMINISTRATIVE LAW TREATISE (1994). ............05- 4,7

Henry Friendly, “Some Kind of Hearing,” 123 PENN.

Ln WM A RESTO 6 sk och nore stots ctaeesees 4

Maurice H. Merrill, Oklahoma’s New Administrative

Procedure Act, 17 Oxta. L. Rev. 1 (1964)......... 9, 12

vi

TABLE OF AUTHORITIES —- Continued

Page

Martin Redish and Lawrence Marshall, Adjudica

tory Independence and the Values of Due Process

95 Yate L.J. 455 (1986)

EN a OT rd Me Ree RE 4

BERNARD SCHWARTZ, ADMINISTRATIVE Law (3d ed.

REO NG rg be or ie ae tee ole in . &£ 7, 20. fs

BERNARD SCHWARTZ, ADMINISTRATIVE LAW: A CASE-

BOOK (Little Brown, 4th ed. 1994) .. ?

No. 94-73

+

In The

Supreme Court of the United States

October Term, 1994

+

SOUTHWESTERN BELL TELEPHONE COMPANY,

Petitioner,

OKLAHOMA CORPORATION COMMISSION,

Respondent.

+

Petition For Writ Of Certiorari

To The Supreme Court Of Oklahoma

+

BRIEF OF AMICUS, PROFESSOR BERNARD

SCHWARTZ, IN SUPPORT OF THE

PETITION FOR WRIT OF CERTIORARI

S

INTEREST OF AMICUS

[ am not representing a client, and the views

expressed in this Petition are my own. I have no mone-

tary interest in this or any other ratemaking case (though

[ am a customer of Petitioner). Aside from wishing to

assist the Court, my interests in the case are entirely

academic. I am the Chapman Distinguished Professor of

Law at the University of Tulsa College of Law. I have

taught administrative law since 1947, both at New York

University and the University of Tulsa. I am author of a

treatise and a casebook on administrative law — ApMINIs-

TRATIVE Law (Little Brown, 3d ed. 1991): ADMINISTRATIVE

]

No

Law: A Casesooxk (Little Brown, 4th ed. 1994) — as well as

numerous articles on the subject.!

e

ARGUMENT

The Oklahoma Supreme Court’s decision in South-

western Bell Telephone Co. v. Oklahoma Corporation Commis-

sion, 873 P.2d 1001 (Okla. 1994), violates basic

constitutional and administrative law principles. Its cava-

lier disregard for that fundamental principle of due pro-

cess — a “fair trial in a fair tribunal,” Withrow v. Larkin,

421 U.S. 35, 46 (1975) -— warrants this Court’s review and

reversal. The Oklahoma Court’s conclusion that partic-

ularized ratemaking is “legislative” in nature, and, there-

fore, without need of an impartial decisionmaker ignores

the reality that particularized ratemaking affects and is

directed toward specific persons in specific factual set-

tings; it is not an exercise of general policy making

authority. The fatal flaw in the Oklahoma Court’s logic is

that it allows an historical label — ratemaking is legisla-

tive — to dictate the parameters of the procedural require-

ments without inquiry into the nature of the ratemaking

proceeding.

This amicus brief will address two issues: 1) the

applicability of the due process requirement of an impar-

tial decisionmaker in a particularized ratemaking pro-

ceeding; and 2) the inapplicability of the Rule of

| Letters reflecting written consent of the parties to the

submission of this brief have been filed with the Clerk of this

Court.

Necessity where a quorum of the decisionmaking body

remains after one member is disqualified for bias.

I. THE OKLAHOMA SUPREME COURT'S DECISION

VIOLATES DUE PROCESS BECAUSE IT FAILED

TO REQUIRE AN IMPARTIAL AND UNBIASED

DECISIONMAKER IN A PARTICULARIZED RATE-

MAKING PROCEEDING.

The Fourteenth Amendment mandates that any indi-

vidualized state deprivation of property be preceded by

“due process.” An unbiased tribunal lies at the core of the

due process requirement; it has, indeed, been charac-

terized as “[o]ne of the very objects of Law.” Liteky v.

United States, 114 S.Ct. 1147, 1158 (1994) (Kennedy, J.,

concurring in judgment). See e.g. Concrete Pipe & Prod. v.

Const. Laborers Pen. Tr., 113 S.Ct. 2264, 2277 (1993) (“Even

appeal and a trial de novo will not cure a failure to

provide a neutral and detached adjudicator); Withrow v.

Larkin, 421 U.S. 35, 46 (1975) (“a ‘fair trial in a fair

tribunal is a basic requirement of due process.’ . . . This

applies as much to administrative agencies which adjudi-

cate as to courts”); and Goldberg v. Kelly, 397 U.S. 254, 271

(1970) (“of course, an impartial decisionmaker is essen-

tial).2 From the dawn of the modern administrative state,

2 See also e.g., National Labor Relations Board v. Phelps, 136

F.2d 562, 563 (5th Cir. 1943) (right to an unbiased adjudicator is

the essence of due process and may be even more important in

agency adjudications where other procedural safeguards may

have been relaxed); and General Motors Corp. v. Rosa, 624 N.E. 2d

142, 144 (N.Y. 1993) (“The participation of an independent,

unbiased adjudicator . . . is an essential element of due process,”

fully applicable to administrative proceedings). Many

the courts have applied these principles to administrative

agencies; including those engaged in ratemaking. See e.g.,

Spring Valley Water-Works v. Schottler, 110 U.S. 347, 354

(1884) (municipal agency charged with setting water rates

had “duties [that] are judicial in nature, and they are

bound in morals and in law to exercise an honest judg-

ment as to all matters submitted for their official deter-

mination.” This includes “the principle that no man shall

be judge in his own cause,” Ibid, and the requirement of

“an impartial tribunal,” Id. at 383, Field, J., dissenting).

Indeed, the Oklahoma Supreme Court acknowledges

as much. For the Oklahoma Court, the distinction

between adjudication and rulemaking and the placement

commentators have also recognized the pivotal importance of

an unbiased tribunal to meeting the demands of due process.

See e.g., I] KENNETH Cutp Davis AND RICHARD J. Pierce, Jr., ADMINIS-

TRATIVE LAW TREATISE Sec. 9.8 (1994) (“Scholars and judges consis-

tently characterize provision of a neutral decisionmaker as one

of the three or four core requirements of a system of fair adjudi-

catory decisionmaking”); Michael Asimow, Toward a New Cali-

fornia Administrative Procedure Act: Adjudication Fundamentals, 39

UCLA L. Rev. 1067, 1143 (1992) (“An essential element of adjudi-

cation is that a decisionmaker be impartial); BERNARD SCHWARTZ,

ADMINISTRATIVE Law Sec. 6.17 (3d ed. 1991) (“Due process

requires an impartial tribunal to ensure a fair hearing before a

neutral and unbiased decision-maker”); Martin Redish and

Lawrence Marshall, Adjudicatory Independence and the Values of

Due Process, 95 Yate L.J. 455, 475 (1986) (“It is our position that

the participation of an independent adjudicator is such an

essential safeguard, and may be the only one.”); and Henry

Friendly, “Some Kind of Hearing,” 123 Penn. L. Rev. 1267, 1278-79

(1975) (“there is wisdom in recognizing that the further the

tribunal is removed from... any suspicion of bias, the less may

be the need for other procedural safeguards”).

of ratemaking within the latter category was “determina-

tive of the issue presented, for . . . proceedings which are

legislative in nature do not implicate judicial process and

do not require application of [ ] judicial standards.” 873

P.2d at 1005. The Oklahoma Court’s error was that it

allowed labels and not the nature of the proceeding to

dictate the parameters of due process.*

The implication of the due process guarantee

depends upon the nature of the proceeding not its histori-

cal and artificial label. As this Court has recognized, the

characterization of ratemaking as rulemaking, see e.g.,

New Orleans Public Serv., Inc. v. Council of the City of New

Orleans, 491 U.S. 350, 371 (1989) (exploring the contours

of the Younger abstention doctrine) is not dispositive of

the due process issue. In Ohio Bell Telephone Co. v. Public

Utilities Commission, 301 U.S. 206 (1937), the Court said:

“The fundamentals of a trial were denied to the appellant

when rates previously collected were ordered to be

refunded upon the strength of evidential facts not spread

upon the record.” Id. at 300 (emphasis added). In revers-

ing the decision of the Ohio Supreme Court upholding

3 Tronically, Oklahoma administrative law does not juxta-

pose “rulemaking” and “adjudication”, preferring instead the

labels “rulemaking” and “individual proceeding” for the very

purpose of excising ratemaking from “rulemaking.” Compare

Oxia Stat. tit. 75, Sec. 250.3(2)(b) (West Supp. 1994)

(“Rule ... does not include: ... the approval, disapproval or

prescription of rates”) with id. at Sec. 250.3(6) (individual! pro-

ceeding). See infra at 9.

+ Like Ohio Bell, the instant case involved a rate proceeding

where the regulatory body was to determine the extent of a

refund to utility customers.

the Commission’s rate order, the Court said that espe-

cially in these quasi-judicial administrative proceedings

“the ‘inexorable safeguard’ of a fair and open hearing be

maintained in its integrity. The right to such a hearing is

one of ‘the rudiments of fair play’ assured to every liti-

gant by the Fourteenth Amendment as a minimal require-

ment.” Id. at 304-305 (citations omitted).

This Court, in United States v. Florida East Coast R. Co.,

410 U.S. 224 (1973), citing Ohio Bell along with Londoner v.

Denver, 210 U.S. 373 (1908) and Bi-Metallic Investment Co.

v. State Board of Equalization, 239 U.S. 441 (1915), estab-

lished guidelines for determining when an agency pro-

ceeding is judicial in nature for purposes of due process

analysis. The Court said that its “decisions represent a

recognized distinction in administrative law between

proceedings for the purpose of promulgating policy-type

rules or standards, on the one hand, and proceedings

designed to adjudicate disputed facts in particular cases

on the other.” 410 U.S. at 245.5 The particularized

[T]he most frequently used test to distinguish

{rulemaking and adjudication] is that of time: Judicial

power determines the rightfulness of acts done; legis-

lative power prescribes the rules for acts to be

done.... Even if agency action is legislative under the

time test, if it is particular in its applicability, its effect

may be much the same as that of an adjudicatory

decision. .. . If the administrative process is directed

at particular persons —- even if it be termed rulemak-

ing — those affected should be given the same hearing

rights as in proceedings that are clearly judicial in

nature.

ratemaking of Ohio Bell, where the “fundamentals of a

trial” were required, was distinguished from “across the

board” or generalized rate orders, which involved “the

formulation of a basically legislative-type judgment.” Id.

at 245-46. See also Vermont Yankee Nuclear Power v. Natural

Resources Defense Council, 435 U.S. 519, 542 (1978) (“even

in a rulemaking proceeding when an agency is making a

‘quasi-judicial’ determination by which a very small

number of persons are ‘exceptionally affected, in each

case upon individual grounds,’ in some circumstances

additional procedures may be required in order to afford

the aggrieved individuals due process”); and West Ohio

Gas Co. v. Public Utilities Commission, 294 U.S. 63, 70

(1935) (“fundamentals of a fair hearing” must be afforded

utilities in particularized rate cases).

The National Conference of Commissioners on Uni-

form State Laws (“NCCUSL”) followed the Court’s teach-

ing that a quasi-judicial or adjudicative tone inheres in

particularized ratemaking proceedings. The NCCUSL has

adopted three Model State Administrative Procedure

Acts: in 1946, 1961, and 1981. Each model act excises

BERNARD SCHWARTZ, ADMINISTRATIVE Law Sec. 5.8 (3d ed. 1991). See

e.g., Il] KeNNetH Cup Davis AND Ricnarp J. Pierce, Jr., ADMINISTRA-

TIVE LAw Treatise Sec. 9.2 (1994) (“The Due Process Clause

requires a hearing of some kind only when government

deprives an individual of ‘life, liberty, or property’ based on

resolution of contested factual issues concerning that individ-

ual... . The distinction between individualized deprivations,

that are protected by procedural due process, and policy-based

deprivations of the interests of a class, that are not protected by

procedural due process, is central to an understanding of the

U.S. legal system”).

particularized ratemaking from the rulemaking nomen-

clature, placing it, instead, within the adjudicative rubric.

The 1961 Model Act, which was adopted with modifica-

tion in Oklahoma, clearly treats ratemaking as adjudica-

tive in nature. It defines “contested case”® as “a

proceeding, including but not restricted to ratemak-

ing,” ... in which the legal rights, duties, or privileges of

a party are required by law to be determined by an

agency after an opportunity for hearing.” ReviseD MovpeEL

STATE ADMINISTRATIVE PROCEDURE Act Sec. 1(2) (1961).® In

6 “The term ‘contested case’ is used in the Model Act,

instead of the word ‘adjudication’ as found in the Federal Act,

to avoid the possible confusion in terminology that might result

from the fact that ratemaking under the Federal Act is classified

as ‘rule making’ with special procedures applicable to it,

whereas under the Model Act it is desired to apply the contested

case procedures to ratemaking.” Revisep Mopet State ApDMINIS-

TRATIVE PROcEDURE Act Sec. 1(2) commentary at 11 (1961).

7 The NCCUSL had intended to include particularized

“ratemaking” within the definition of “contested case” in 1946

when it defined that term as a “proceeding before an agency in

which the legal rights, duties, or privileges of specific parties

are required by law or constitutional right to be determined

after an agency hearing.” Movet Sta1e ADMINISTRATIVE PROCEDURE

Act Sec. 1(3) (1946). The 1961 Model Act made this explicit

because courts, on occasion, had erroneously treated ratemak-

ing as a rulemaking proceeding under the 1946 Act; “[t]he real

purpose of it is to evade the possibility of other courts following

that unfortunate precedent.” Revisep Mopet State ADMINISTRATIVE

Procepure Act, Proceeding in the Committee of the Whole,

August 23, 1960, at 8 (comments of Professor Merrill).

8 The 1981 Model Act is more nuanced in its distinction

between an agency’s quasi-legislative and quasi-judicial func-

tions. It defines “Order” as “an agency action of particular

applicability” affecting “one or more specific persons.” Mover

StaTE ADMINISTRATIVE PROCEDURE AcT Sec. 1-102(5) (1981). In

adopting the 1961 Model Act in modified form, Okla-

homa explicitly excluded ratemaking from rulemaking: “

‘Rule’ .. . does not include: .. . b. the approval, disap-

proval or prescription of rates.” See OKLa Stat. tit. 75, Sec.

250.3(2)(b) (West Supp. 1994). The purpose of this provi-

sion was to make clear that “a modern rate fixing pro-

ceeding, with its specified parties, its adversary

procedure .. . preeminently is adjudicative.” Maurice H.

Merrill, Oklahoma's New Administrative Procedure Act, 17

Oxia. L. Rev. 1, 9 (1964).

Although the Oklahoma Corporation Commission is

not bound by the Oklahoma Administrative Procedures

Act,? the Oklahoma constitutional provisions creating the

Commission recognize the distinction between partic-

ularized and generalized fact finding and determination.

“Before the Commission shall prescribe or fix any rate

... directed against any one or more companies by name,

the company or companies to be affected by such rate

. shall first be given notice . . . and shall be afforded a

reasonable opportunity to introduce evidence and be

contrast, “Rule” is defined as “an agency statement of general

applicability.” Id. at (10). Particularized ratemaking requires an

“Order” and ratemaking of general applicability can be created

by “Rule.”

9 “[P]ractical politics” exempted the Corporation Commis-

sion from the Oklahoma APA. See Maurice H. Merrill, Okla-

homa’s New Administrative Procedure Act, 17 Ox.a. L. Rev. 1, 4

(1964). For Merrill, excluding the Corporation Commission was

not cause for too great an alarm because the Commission “oper-

ate[s] under very fully developed and sophisticated pro-

cedures. . . . The [APA] provides minimal standards of fair

procedure. A large part of the procedural requirements of [the

Corporation Commission] go beyond these minima.” Id.

10

heard thereon, to the end that justice may be done.”

Oxia. Const. art, 9, Sec. 18. In contrast, in the process for

promulgating “any general order, rule, requirement, not

directed against any specific company or companies by

name” only newspaper notice with a general opportunity

to object is all that is required. Id. The Oklahoma Consti-

tution and the Oklahoma statutes reflect the correct

understanding that agency action of particular appli-

cability, including ratemaking, implicates constitutional

due process concerns.

Academia also recognizes ratemaking’s duality;

when the ratemaking process leads to an “Order” of

general applicability, it is legislative in nature, but when

it leads to an “Order” directed at one or few entities, it is

essentially adjudicative in function.

Ratemaking .. . is normally particular in appli-

cability since it involves the fixing of prices to

be charged utilities. When an agency fixes the

rates charged by an electric utility, where there

is only one company whose rates are being

fixed, the impact on the company is virtually

that of a judicial decision, and it has a due process

right to be heard. Regardless of its theoretical

legislative nature, the proceeding is an adver-

sary one, with the company and the agency as

opposing parties who can best present their

sides in.a trial-type format.

The same is not true when rates are general

rather than particular in applicability .. . in

which the separate fact pattern of each member

of the class was not evaluated.

BERNARD SCHWARTZ, ADMINISTRATIVE Law Sec. 5.8 (3d ed.

1991).

1]

In accord with this Court’s cases, when the Okla-

homa Corporation Commission sits in judgment to deter-

mine the amount of refund Southwestern Bell must give

to its customers, the Commission is engaged in a judicial

type decision. In the words of this Court, in setting rates

“their duties are judicial in nature.” Spring Valley Water-

Works v. Schottler, 110 U.S. at 354. It follows that in rate-

making, as in purely adjudicatory proceedings, South-

western Bell “was entitled to an impartial

decisionmaker.” Michigan Intra-State Motor v. PSC, 504

N.W.2d 677, 682 (Mich. App. 1993). Indeed, the Oklahoma

Supreme Court’s decision to the contrary stands aione.

For other recent cases, see Business and Professional v.

Barnich, 614 N.E.2d 341, 345 (Ill. App. 1993); New England

Tel. & Tel. Co. v. PUC, 448 A.2d 272, 281 (Me. 1982). Cf.

Mass. Auto Rating & ACC v. Commissioner, 516 N.E.2d

1132, 1141 (Mass. 1987).

The due process requirement of an unbiased decision

maker is essential to providing Southwestern Bell, or any

other party involved in a particularized rate case, a fair

hearing. The cases are replete with instances where

administrative decision makers have been disqualified

for bias. See e.g., Gibson v. Berryhill, 411 U.S. 564 (1973);

Ward v. Village of Monroeville, Ohio, 409 U.S. 57 (1972);

Tumey v. Ohio, 273 U.S. 510 (1927); Cinderella Career &

Finishing Schools v. FTC, 425 F.2d 583, 591 (D.C. Cir. 1970)

(disqualification necessary where “a disinterested

observer may conclude that [the agency] has in some

measure adjudged the facts as well as the law of a partic-

ular case”); and American Cyanamid Co. v. FTC, 363 F.2d

757, 767 (6th Cir. 1966) (“It is fundamental that both

unfairness and the appearance of unfairness should be

12

avoided”). Cf. Concrete Pipe & Prod. v. Const. Laborers Pen.

Tr., 113 S.Ct. 2264, 2277 (1993) (“Justice, indeed, must

satisfy the appearance of justice, and this stringent rule

may sometimes bar trial even by judges who have no

actual bias. .. . [T]he possibility of bias ... would suffice”

as a bar.) (internal quotations and cite omitted).

Il. THe OKLAHOMA SUPREME CourRT ERRONEOUSLY APPLIED

THE Rute or NECEssITy.

In dicta, the Oklahoma Supreme Court said that the

“Rule of Necessity” would require a biased Corporation

Commissioner to sit even when performing judicial func-

tions. 873 P.2d at 1009. The Oklahoma Court reasoned

that the rule of necessity needed to be invoked because

disqualification of one Commissioner would only leave

two, with the possibility of a tie vote. This is simply

wrong; a tie vote does not destroy the forum since two

commissioners constitute a quorum. See OKLA. Const. art,

9, Sec. 18a; Delta Air Lines, Inc. v. CAB, 497 F.2d 608, 615

(D.C. Cir. 1973) (2-2 vote); and Stahl v. Board of Super-

visors, 175 N.W. 772, 776 (lowa 1920) (rule of necessity not

applicable even where remaining members may split 1-1).

Cf. Reagan v. Abourezk, 785 F.2d 1043 (D.C. Cir. 1986), aff'd

by an equally divided Court, 484 U.S. 1 (1987).

Where employed, the Rule of Necessity is viewed as

a necessary evil.!° “The rule of necessity forces the

10 The Oklahoma “legislature has shown unequivocally its

intent to repudiate the ‘rule of necessity.’ ” Maurice H. Merrill,

Oklahoma's New Administrative Procedure Act, 17 Ox ta. L. Rev. 1,

35 (1964).

13

individual to submit to trial before a biased adjudicator.

As such, its application should be strictly confined.”

BERNARD SCHWARTZ, ADMINISTRATIVE Law Sec. 6.20 (3d ed.

1991). The Rule of Necessity applies “if and only if the

dispute cannot otherwise be heard.” General Motors Corp.

v. Rosa, 624 N.E.2d 142, 144 (N.Y. 1993). “ ‘{[N]ecessity’

must be construed strictly.” Id. at 145. Due process con-

cerns dictate that “disqualification is the paramount pol-

icy, and is only to yield when the necessity is so great and

overwhelming that there may be an entire failure of jus-

tice.” E.g., State v. Aldridge, 103 So. 835, 838 (Ala. 1925);

Pillsbury Co. v. FTC, 354 F.2d 952, 965 (5th Cir. 1966)

(court must “seek to find a solution that guarantees a fair

tribunal”); and Jarrott v. Scrivener, 225 F.Supp. 827, 836

(D.C. 1964) (court ordered creation of new zoning board

solely for purpose of hearing matter on which the sitting

Board was disqualified). The possibility of a tie vote

should not stand between a party and a fair adjudication

before an unbiased tribunal.

III. CONCLUSION

In short, this Court has clearly concluded that partic-

ularized ratemaking proceedings require a fair hearing,

which must include an unbiased decision maker. Other

courts, state legislatures, through the Model Acts, and the

scholarly commentary agree. It seems painfully obvious

to all but the Oklahoma Supreme Court’s majority that its

decision violates basic principles of administrative law.

By sanctioning an agency’s use of a biased decision

maker in ratemaking cases, it has denied the most basic

14

of due process rights to all persons, individual or corpo-

rate, who find their “property” the subject of a rate

hearing in Oklahoma.

For these reasons, this Court should grant certiorari

and reverse the decision of the Oklahoma Supreme Court.

Respecttuliy submitted,

BERNARD SCHWARTZ

Chapman Distinguished Professor

University of Tulsa

College of Law

3120 East 4th Place

Tulsa, Oklahoma 74104

(918) 631-2404

Dated August 4, 1994