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

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No. 94-73 S AUG 15 1994

IN THE OFFICE OF THE CLERK

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1994

SOUTHWESTERN BELL TELEPHONE COMPANY,

Petitioner,

V.

OKLAHOMA CORPORATION COMMISSION,

Respondent.

On Petition for a Writ of Certiorari to the

Supreme Court of Oklahoma Circuit

BRIEF OF THE NATIONAL ASSOCIATION OF

REGULATORY UTILITY COMMISSIONERS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

WILLIAM PAUL RODGERS, JR.

GENERAL COUNSEL & COUNSEL OF RECORD

CHARLES D. GRAY

ASSISTANT GENERAL COUNSEL

JAMES BRADFORD RAMSAY

DEPUTY ASSISTANT GENERAL COUNSEL

NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS

Post Office Box 684

Washington, D.C. 20044-0684

(202) 898-2200

Counsel for Amicus Curiae

Dated: August 15, 1994

i

QUESTIONS PRESENTED

a Whether the Oklahoma Supreme Court’s decision to

deny recusal of an allegedly biased commissioner in a pending

ratemaking proceeding is ripe for review;

AND, if this Court determines this case is ripe --

2. Whether, under the facts of this Case,* the procedures

suggested by the Oklahoma court** to deal with the state

constitutional strictures satisfies federal due process concerns.

° This case is a civil proceeding where (a) actual bias

concerning the merits of the case has not been demonstrated,

(b) the alleged bias is not pecuniary, but stems directly from

purportedly unlawful and unethical actions taken by persons

representing the entity seeking recusal, (c) senior

representatives of that entity were informed by the allegedly

biased commissioner of these actions in 1990 and of the

pending FBI probe in 1991, and did not seek recusal until late

1992 -- acting only when the commissioner publicly

announced his cooperation with the FBI probe of, inter alia,

the unethical actions, (d) the state Supreme court lacks

authority to replace the commissioner and his presence will be

necessary to conclude proceedings, if, at the end of the

proceedings, the two other commissioners deadlock on any

issue, and (e) no allegations of bias have been made against

the two remaining commissioners

“* If disappointed with the commission’ s disposition of the

pending proceedings, the entity has an opportunity to

Challenge the action on appeal under a heightened standard. If

a violation of constitutional rights is asserted, the review

includes an independent review of the law and facts as to,

inter alia, whether the order is confiscatory or the utility was

denied the right to make a fair presentation.

ili

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ...........___

wIRTEMENS OF THECASE............__ 3

ts aa 6

THE PETITION IS NOT RIPE FOR REVIEW . 6

IF THIS COURT FINDS THIS PROCEEDING RIPE

FOR REVIEW, IT IS APPARENT THAT THE

REMEDIES POSED, UNDER THE SPECIFIC

FACTS OF THIS CASE, ACCORD

SOUTHWESTERN DUE PROCESS ........ 8

th a le ee 17

iV

TABLE OF AUTHORITIES

Cases Page

Abbott Laboratories v. Gardner,

aut 4.0. Sam Pe CED. ow 6 vc es ew eas 6,7

Brock v. Roadway Express, Inc.,

pe Se OE A ek tee eee eee 9

Cinderella Career and Finishing Schools, Inc. v. FTC,

sg ee Re rer 12,13,14

Concrete Pipe and Products of California, Inc. vy.

Construction Laborers Pension Trust for Southern

California, 508 U.S. __, 113 S.Ct 2264, 2277

Ee era rarer ar ere a aera H

Cox Broadcasting Corp. v. Cohn,

RR Op) rr a 7

Gibson v. Berryhill,

ee ee. ee) re 13

Hortonville Joint School District v. Hortonville Education

Association, 426 U.S. 482 (1976) .......... 11

Jarrott v. Scrivener,

225 F.Supp 827 (D.C.D.C. 1964) ......... 13

Liteky v. United States,

S10 U.S. _, 114 S. Ct. 1147 (1994) ....... 8

Mathews v. Eldridge,

ee Wat Pee RET os 4 8 eee es hoes 9,15

Marshall v. Jerrico, Inc.,

MAO U.S. BCID... ok onc ek. 11

National Association of Regulatory Utility Commissioners vy.

FCC, 525 F.2d 630 (D.C. Cir.), cert. denied, 425

U.S. 992 (1976)

National Association of Regulatory Utility Commissioners vy.

FCC, 423 U.S. 836 (1975) .............. 2

National Labor Relations Board v. Phelps,

136 F.2d 562 (Sth Cir. 1943) ............ 13

Tumey v. Ohio,

era WE. SIO GST). nw ev ccc. 14

U.S. v. Western Electric Co., et al.,

569 F.Supp. 1057 (D.C.D.C. 1983) at note 17... 2

U.S. v. Southern Motor Carrier Rate Conference, et al.,

S73 Wis WB, TS Cg ov ook oo vv ee ec z

Ward v. Village of Monroeville,

409 U.S. 57, 61-62 (1972) .............. 13

Withrow v. Larkin,

oe SH OP CIPTOD oc ee oe owed 11

Other Authorities:

as Se I SI sg go A we oc ve ee 6

U.S. Supr.Ct. Rule 37, 28 U.S.C.A. | rare 6

28 U.S.C. § 1257 (1988)

Rotunda, The Combination of Functions in Administrative

Actions, 40 Ford.L.Rev. 101 (1971)

+ 4. @°°8 @° S64) £284.86 ee

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

No. 94-73

SOUTHWESTERN BELL TELEPHONE COMPANY,

Petitioner,

Vv.

OKLAHOMA CORPORATION COMMISSION,

Respondent.

On Petition for a Writ of Certiorari to the

Supreme Court of Oklahoma

BRIEF OF THE NATIONAL ASSOCIATION OF

REGULATORY UTILITY COMMISSIONERS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

INTEREST OF AMICUS CURIAE

The National Association of Regulatory Utility

Commissioners (NARUC) is a quasi-governmental nonprofit

organization founded in 1889. NARUC, which Congress calls

"the national organization of the State commissions", 47

U.S.C.A. §410(c) (1971), presents the collective interest of

State commissions charged with regulating the rates and

conditions of service of electric, natural gas and telephone

utilities operating within their respective jurisdictions. Both

2

Congress and the federal courts have long recognized that

NARUC is a proper party to represent the collective interest

of State regulatory commissions.'

NARUC’s member commissions, which includes the

Oklahoma Corporation Commission (OCC), are obligated

under State law to ensure that the rates charged to retail

consumers are just and reasonable. NARUC’s mission is to

serve the public interest by seeking to improve the quality and

effectiveness of public utility regulation in America.

NARUC submits this brief as amicus curiae * in

support of the OCC -- respondents to the petition for certiorari

filed by Southwestern Bell Telephone Company (SWB) --

because of the deleterious impact upon the ability of State

regulatory commissions to effectively scrutinize and regulate

' See, e.g., U.S. v. Southern Motor Carrier Rate

Conference, et al., 471 U.S. 48, 53 (1985) at 10,

"[t}hroughout this litigation, the NARUC has represented the

interests of the Public Service Commissions..."; National

Association of Regulatory Utility Commissioners v. FCC, 525

F.2d 630 (D.C. Cir.), cert. denied, 425 U.S. 992 (1976);

U.S. v. Western Electric Co., et al., 569 F.Supp. 1057 (D.C.

D.C. 1983) at note 17; National Association of Regulatory

Utility Commissioners v. FCC, 423 U.S. 836, (1975).

> Pursuant to Rule 37.2, U.S. Supr.Ct. Rule 37, 28

U.S.C.A. (1994), NARUC has obtained the consent of the

parties to the filing of this brief. Copies of the letters of

consent have already been filed with the Clerk of the Court.

3

utilities that could potentially ensue should this Court chose to

review and ultimately reverse the decision below.

STATEMENT OF THE CASE

The OCC derives its authority directly from the

Oklahoma Constitution and is subject to the direct and

exclusive appellate jurisdiction of the Oklahoma Supreme

Court. In October 1992, Robert Anthony, one of three

popularly elected OCC commissioners, announced that he had

been cooperating as a witness in an Federal Bureau of

Investigation probe of the agency since 1988. According to

his statement, industry representatives paid him thousands in

cash, usually in the guise of purported "campaign

contributions", in exchange for influence. Where cash was

received, the FBI received the funds immediately. Mr.

Anthony’s statement came six weeks after an August 1992

$93.7 million rate reduction and $183 million refund order, in

OCC Docket PUD-260, directed to the regulated entity most

heavily implicated in the 1989 "cash for votes" scheme --

telecommunications giant SWB.

Although in 1990, well in advance of his

announcement, Mr. Anthony advised a SWB senior corporate

officer of improper conduct by SWB spokesmen, and, in

1991, discussed the "ongoing FBI investigation" with a SWB

4

corporate attorney -- no recusal action in the PUD-260 docket

was sought until he publicly announced his cooperation in the

FBI investigation. As issues related to the source of cash

delivered to Mr. Anthony and the potential culpability of other

actors are currently pending in other forums, at note 1, page

3, of its petition, SWB proffers "for the record" its "position"

that no "impropriety" was "authorized or attributable" to it.

SWB appealed the October 1992 PUD-260 order. The

appeal resulted in a remand of several issues. In November

1992, SWB filed an original action with the Oklahoma

Supreme Court seeking to recuse Mr. Anthony from the still

pending PUD-260 proceedings, and all future SWB cases,

citing his alleged bias. SWB’s recusal actions resulted in two

decisions. First, on May 23, 1993, the court disqualified Mr.

Anthony from participating in the ongoing proceeding, but

rejected a SWB request for a blanket recusal for future

proceedings pending resolution of any federal criminal

prosecutions. The OCC moved for rehearing suggesting that

the decision was contrary to existing precedent construing the

OCC’s power as legislative under the state’s constitution.

On April 14, 1994, the court granted the OCC request

and held that it is unable to recuse Mr. Anthony through the

SWB writ action. The opinion found that, in the context of

the SWB rate proceeding, the OCC was exercising legislative

5

authority and that due process considerations requiring a

neutral decision-maker did not attach. The court also

contended that, regardless of how the proceeding is

characterized -- quasi-judicial o: legislative -- the "rule of

necessity" will make it impossible for Mr. Anthony to be

recused as (a) there is no Oklahoma constitutional or statutory

authority to allow either the governor or the Supreme Court

to replace a commissioner with the appearance of bias and (b)

after the proceedings have been completed, without a third

sitting commissioner, the two remaining commissioners might

deadlock over individual issues or the entire proposed order.

The court also noted that any company challenging a

commissioner for bias, regardless of how the proceeding is

characterized, will still have a remedy via its ability to

challenge the agency action on appeal under a heightened

standard of judicial review -- a review which, under

Oklahoma law -- includes an independent review of the law

and facts if a violation of constitutional rights is asserted.

SWB’s writ asks this Court to reverse the April 1994 decision.

6

ARGUMENT

NARUC supports all of the arguments presented by the

OCC in its Opposition. Mindful of Rule 37.1’s

admonishment, U.S. Supr.Ct. Rule 37.1, 28 U.S.C.A. (1994),

NARUC seeks only to complement the OCC arguments with

a brief discussion of related doctrines and relevant arguments.

I. THE PETITION IS NOT RIPE FOR REVIEW

The U.S. Constitution’s Article If] mandate limiting

federal judicial power to "cases and controversies" requires a

court to consider whether a case has matured or ripened into

a controversy worth of adjudication before addressing its

merits. This ripeness doctrine assures that federal courts do

not decide purely abstract or theoretical claims, or render

advisory opinions. The ripeness defense also often reflects

prudential considerations.

In the leading case of Abbott Laboratories v. Gardner,

387 U.S. 136, 148 (1967), this court defined the primary

factors that determine if a case is ripe for review: the court

must "evaluate both the fitness of the issues for judicial

decision and the hardship to the parties of withholding court

consideration." NARUC contends that both the "hardship to

the parties" criterion, and the "fitness" factor are wrapped up

in the open-ended posture of the case presented for review.

7

Indeed, a crucial factor in assessing whether an issue is "fit"

for review under Abbot, is whether the agency’s action is

"final" in the sense that the agency has reached a definitive

conclusion. Id. 387 U.S. at 149-50. Thus, in this regard, the

Article III derived ripeness doctrine significantly overlaps the

statutory "finality" mandate found in 28 U.S.C. § 1257(1988).

As the OCC exhaustively analyzed this statutory "finality"

requirement in its Opposition - finding that, under the tests

enunciated in Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

(1975), the Oklahoma court’s decision is not eligible for

review under the finality doctrine -- NARUC will not replicate

its efforts here. However, it is important to note that the

PUD-260 proceeding has not been completed. Thus, even if

we assume, arguendo, Commissioner Anthony is actually

biased, SWB could still achieve the result it desires at the

close of the OCC proceeding without implicating any

constitutional concerns due to the presence of a majority (two)

of "unbiased" commissioners. In any case, other than the

"routine" presentation of its case in chief, SWB is not

required to make any additional efforts until completion of the

OCC ratemaking proceedings. At that time, the action it is

prematurely proffering for this Court’s consideration will

clearly have matured -- if it appears either (i) the OCC’s final

order is unreasonable or confiscatory, or (ii) if the OCC

ee

a

bine

8

procedure, i.e., allowing Mr. Anthony to participate, actually

violates the requirements of fundamental fairness by denying

SWB a proper opportunity to create a fair record during its

presentation of its case. Moreover, as discussed below, even

if constitutional issues do subsequently arise, SWB will have

sufficient protection of its due process rights via the posited

"heightened review" of both legal and factual issues before a

completely unbiased body -- the Oklahoma Supreme Court.

Il. IF THIS COURT FINDS THIS PROCEEDING

RIPE FOR REVIEW, IT IS APPARENT THAT

THE REMEDIES POSED, UNDER THE

SPECIFIC FACTS OF THIS CASE, ACCORD

SWB THE PROCESS THAT IS DUE.

It is axiomatic that, once the Court determines that a

constitutionally protected liberty or property interest has, in

fact, already been infringed upon and the case is thus ripe for

review -- the next stage of a due process analysis is to decide

exactly what procedural protections the U.S. Constitution

requires.°

> Federal and state cases like Liteky v. United States,

114 S. Ct. 1147 (1994), which require recusal on statutory

grounds, often even when no actual bias is demonstrated, are

not relevant to making this Constitutional analysis.

{

;

9

In Mathews v. Eldridge, 424 U.S. 319, 335 (1976),

this Court demonstrated its determination to retain flexibility

in making these determinations, specifically noting that it

would examine three factors to decide what due process

requires in a given situation: "first, the private interest that

will be affected by the official action; second, the risk of an

erroneous deprivation of such interest through the procedures

used, and the probable value, if any, of additional or

substitute safeguards; and finally, the Government’s interest,

including the function involved and the fiscal and

administrative burdens that the...substitute procedural

requirement would entail." *

The first stage of this analysis is not difficult. SWB’s

"private interest" is, of course, its capital infrastructure and its

* Although initially, the Court used the Mathews test

predominantly in cases involving government benefits, more

recently, it has adopted this approach in a more tradition-

bound area of administrative law -- coercive regulation of

business. Cf. Brock v. Roadway Express, Inc., 481 U.S. 252

(1987), where the test was used to decide the procedural rights

of an employer ordered to reinstate an employee while the

employee’s allegations of retaliatory discharge was pending.

10

related ability to earn a return on its investment. Both will

likely be significantly affected by the OCC "official action",

1.e., final ratemaking order, regardless of whether any

constitutional infringements actually occur.

The more difficu!t inquiry is assessing how that interest

can possibly be placed at risk by the alleged bias of

Commissioner Anthony. SWB has not even attempted to

explain how Anthony’s participation in OCC proceedings will

violate its due process rights. It has merely waved the

"neutral decision-maker" banner and pointed out certain facts -

(i) SWB representatives made allegedly improper overtures to

Mr. Anthony that included cash inducements, (ii) the FBI

instigated an investigation of corruption at the OCC; and (iii)

Mr. Anthony determined to cooperate with the federal

authorities. These facts do not demonstrate any improprieties,

other than those apparently committed by SWB. Nor do they

demonstrate that Mr. Anthony is in any way biased against

SWB in its pending rate case. Indeed, as SWB admits. in its

11

petition, at 2, the only subsequent action related to these SWB

contacts taken was a discovery request seeking "documents not

related to any regulatory issues, but" to an "investigation of

alleged corruption." {Emphasis Added}

As the request was not related to the merits of the

pending PUD-260 proceeding, it was entirely proper. This

Court has recognized that a single hearing officer or agency

may be given a combination of investigative and adjudicative

functions without implicating the 14th Amendment. Thus, a

decision-maker can be charged with investigating and

compiling facts in a case and making decisions based on those

facts. See generally, Withrow v. Larkin, 421 U.S. 35 (1975);

Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Hortonville

Joint School District v. Hortonville Education Association, 426

U.S. 482 (1976), Rotunda, The Combination of Functions in

Administrative Actions, 40 Ford.L.Rev. 101 (1971). Certainly,

as an OCC Commissioner, Mr. Anthony has the option, if not

the duty, to instigate investigations of corruption affecting the

12

OCC’s procedures.

An examination of the other cases cited by SWB and

its allies is instructive. For example, Petitioner SWB suggests

the remedy of "heightened review" posed by the Oklahoma

Supreme court "is in conflict with this Court’s precedents,"

SWB Petition at 11, and cites Concrete Pipe and Products of

California, Inc. v. Construction Laborers Pension Trust for

Southern California, 113 S.Ct 2264, 2277 (1993), as

"holding" that "[e]ven appeal and a trial de novo will not cure

a failure to provide a neutral and detached adjudicator." While

the Court did make the quoted statement in dictum, the

"holding" was a bit more specific -- finding that the "judge"

in an enforcement setting, did not have to meet otherwise

applicable standards of neutrality if, as in the instant case, a

neutral decision-maker was subsequently available to conduct

a de novo review of all factual and legal issues.

SWB’s argument also ignores those federal cases, it

and its supporting amici cite, where a subsequent second

13

hearing by a separate and “unbiased" decision-maker was

deemed adequate to correct due process violations. See, ¢.g.,

Cinderella Career and Finishing Schools, Inc. v. FTC, 425

F.2d 583 (1970), vacating an FTC order because of the

participation of a clearly biased commissioner and requiring

a second hearing before a differently constituted "decision-

maker": Jarrott v. Scrivener, 225 F.Supp 827 (DC DC.

1964), finding improper bias on the part of the majority of a

five member board and requiring a second hearing before a

different decision-maker; National Labor Relations Board vy.

Phelps, 136 F.2d 562 (Sth Cir. 1943) where the court found

clear evidence of bias on the part of a single presiding

Administrative Law Judge and vacated an NLRB order based

on that judge’s decision for a second hearing before a different

decision-maker.

In any case, the only cases SWB cites where this Court

has required both (a) a neutral decision-maker in the first

instance AND (b) suggested that a subsequent review de novo

14

might be inadequate to cure due process concerns have a very

restricted factual context. In each case, the decision-makers

have had either a direct monetary interest in the outcome or

they were professional competitors of the individuals seeking

a ruling. See, SWB Petition at 4 & 11; citing, Gibson v.

Berryhill, 411 U.S. 564, 579 (1973); which cites both Ward

v. Village of Monroeville, 409 U.S. 57, 61-62 (1972) and

Tumey v. Ohio, 273 U.S. 510 (1927) ° as supporting a finding

that "...those with substantial pecuniary interest in legal

proceedings should not adjudicate these disputes" and

extending that interest to encompass a Board of Optometrists

disqualifying competitors.

In all these cases, unlike the case on review, the

purported bias was directly connected to the merits of the

matter submitted to the decision-maker. The Cinderella case,

425 F.2d 583 (1970), illustrates the point. There, the FTC

5

Both Ward and Tumey are cases where a single judge

enforcing criminal fines against individuals had a direct

financial interest in the collection of those fines.

15

order was vacated because of possible influence of one

commissioner upon the other four commissioners at the

agency. The focal point of the decision was a finding of

actual bias on the part of the subject commissioner. More

specifically, in that case, the "biased" commissioner was

found to have basically prejudged the merits of the case. As

it appears no evidence has been presented showing any actual

bias by Commissioner Anthony concerning the merits of the

pending PUD-260 proceedings, NARUC respectfully suggests

that the procedures outlined by the Oklahoma court are

adequate to protect SWB’s rights.

Finally, the Mathews test instructs the Court to

examine the probable value of the proposed safeguard -- in

this case -- requiring the recusal of Mr. Anthony -- and the

Government’s interest, including the function involved and the

fiscal and administrative burdens that the substitute procedural

requirement would entail. As the decision on review notes,

there is no provision for the appointment of a pro tempore

16

commissioner to substitute for a biased commissioner. If Mr.

Anthony is recused and the remaining two commissioners

deadlock on any aspect of the decision, it would appear that

certain aspects of the case presentations will have to be

reargued and/or resubmitted before Mr. Anthony to allow him

to break the deadlock. This would unnecessarily burden the

OCC staff. Moreover, even if one discounts NARUC’s

arguments concerning the impact of Mr. Anthony’s alleged

bias on the proceeding, the presence of a majority of

"unbiased" commissioners participating in the OCC

deliberations, in tandem with the subsequent availability of a

remedial "heightened review" before the Oklahoma Supreme

Court as discussed earlier, assures that SWB’s rights will be

adequately protected.

17

CONCLUSION

For the foregoing reasons, the petition for certiorari

should be denied.

Respectfully submitted,

WILLIAM PAUL RODGERS, JR.*

General Counsel

CHARLES D. GRAY

Assistant General Counsel

JAMES BRADFORD RAMSAY

Deputy Assistant General Counsel

National Association of Regulatory

Utility Commissioners

1102 ICC Building

Post Office Box 684

Washington, D.C. 20044

(202) 898-2200

* Counsel of Record

August 15, 1994