Northwestern Bell Telephone Co., Inc. v. Stofferahn

• Citation: 118 P.U.R.4th 77,461 N.W.2d 129
• Decision Date: 12 September 1990
• Docket Number: 16861,Nos. 16856,s. 16856
• Parties: NORTHWESTERN BELL TELEPHONE CO., INC., d/b/a US West Communications, Plaintiff and Appellee, v. Kenneth D. STOFFERAHN, Defendant and Appellant, and State of South Dakota and the Public Utilities Commission of the State of South Dakota, Intervenors.
• Court: Supreme Court of South Dakota

Page 129

461 N.W.2d 129

118 P.U.R.4th 77

NORTHWESTERN BELL TELEPHONE CO., INC., d/b/a US West

Communications, Plaintiff and Appellee, v. Kenneth D. STOFFERAHN, Defendant and Appellant, and State of South Dakota and the Public Utilities Commission of

the State of South Dakota, Intervenors.

Nos. 16856, 16861.

Supreme Court of South Dakota.

Argued March 21, 1990.

Decided Sept. 12, 1990.

Thomas J. Welk and Michael S. McKnight of Boyce, Murphy, McDowell & Greenfield, and William P. Heaston, Omaha, Neb., for plaintiff and appellee.

C.E. Light of Light Law Office, Yankton, for defendant and appellant.

Diane Best, Asst. Atty. Gen., Pierre, for intervenors; Roger Tellinghuisen, Atty. Gen., on the brief.

TAPKEN, Circuit Judge.

Kenneth D. Stofferahn (Stofferahn) appeals from a circuit court declaratory judgment which prohibited Stofferahn from participating as a member of the Public Utilities Commission (PUC) in certain pending and future cases involving Northwestern Bell Telephone Co., Inc., d/b/a US West Communications (USWC). USWC has filed a notice of review challenging the trial court's refusal to grant a writ of mandamus requiring Stofferahn to disqualify himself in all future PUC proceedings involving USWC. We affirm in part and reverse in part.

Stofferahn was first elected to the PUC in 1978 and has continuously served in that capacity. His current term will expire at the end of 1990.

In 1987 and 1988, the South Dakota legislature considered bills to deregulate the telecommunication industry. No deregulation legislation was enacted in 1987 but Senate Bill 42 (SB 42) was adopted in 1988. ¹ In both of those years there is little question that Stofferahn became a zealous and active opponent of deregulation legislation under consideration. He issued press releases, gave public speeches, and testified in front of legislative committees, expressing his opposition to the proposed legislation. His words and actions left little doubt of his opinion of USWC which was a proponent of the legislation.

Pursuant to SDCL 49-1-9, ² USWC on November 22, 1988, asked Stofferahn to disqualify himself as a member of the PUC for the remainder of his term in any pending or future proceedings where USWC was or might be a party. Stofferahn refused the request. USWC started an action against Stofferahn seeking declaratory relief and mandamus based upon allegations of bias and prejudice as a result of Stofferahn's activities and statements involving deregulation legislation in 1987 and 1988.

The trial court bifurcated the trial issues and conducted two separate hearings. The first hearing, held on January 4, 1989, was limited to the four deregulation dockets then pending before the PUC. The trial court found that Stofferahn's public statements and conduct relating to SB 42 required his disqualification from participating as a member of the PUC on the four pending deregulation dockets. ³ The trial court issued a writ of mandamus compelling Stofferahn's disqualification in the four pending deregulation dockets. Stofferahn appealed that decision to this court but subsequently abandoned the appeal and certified his disqualification to the Governor pursuant to SDCL 49-1-9.

The second trial relating to USWC's request for a blanket disqualification of Stofferahn on all pending and future cases where USWC was or would be a party began June 13, 1989. As a result, the trial court entered a declaratory judgment which disqualified Stofferahn "in all pending and future dockets involving USWC where a timely request for disqualification has been made, and where the material facts, law or policy involved in the docket involves the deregulation or classification of telecommunication services, or involves the determination of the competitive status of telecommunication services." The trial court denied USWC's request that Stofferahn be disqualified in all other cases.

The trial court adopted lengthy findings of fact about Stofferahn's bias against USWC: Stofferahn made apparent references to USWC as "jackals in lambskins"; Stofferahn made statements to a legislative committee vigorously attacking the credibility of Dr. Frank Alessio, a witness for USWC during the legislative process in 1987; Stofferahn adhered to and would continue to adhere to economic theories which were adverse to the economic theories supported by USWC; Stofferahn obtained and adhered to economic theories of individuals obtained outside any official PUC investigation while a member of the PUC; Stofferahn made reference to USWC by stating, "This Bill [SB 42], which Northwestern Bell so desperately wants, represents the biggest premeditated robbery since Jesse James rode the plains, except he had more ethics. He only stole from the rich!"; Stofferahn became an active member of organizations which opposed SB 42 and his personal expenses were paid by these organizations; Stofferahn became actively involved in a referendum process after the passage of SB 42 in 1988 in an attempt to defeat the legislation by referendum; and Stofferahn referred to USWC in a press release stating that USWC was "lying to the public about wanting fair competition" and the deregulation effort was "blatantly anti-competitive ... and is nothing more than a hoax and a planned rip-off of the public." The trial court based the declaratory judgment upon these basic findings.

Stofferahn argues that pursuant to SDCL 49-1-9, he determined that he had no conflict of interest and was not incapacitated, and should not have been disqualified from participating in any cases involving USWC. Even though SDCL 49-1-9 appears to be permissive and subjective in nature as it relates to the disqualification of a PUC commissioner, i.e., the respective commissioner determines if he should be disqualified, this court has held that a fair trial in a fair tribunal is a basic requirement of due process which is applicable to administrative agencies. Strain v. Rapid City School Bd., 447 N.W.2d 332 (S.D.1989). In Mordhorst v. Egert, 88 S.D. 527, 223 N.W.2d 501, 505 (1974) we indicated that the trier of fact must be disinterested and free from bias or predisposition of the outcome and the "very appearance of complete fairness" must be present (quoting Wall v. American Optometric Association, Inc., 379 F.Supp. 175 (N.D.Ga.1974)). In South Dakota Real Estate Com'n. v. Haggar, 446 N.W.2d 66, 68 (S.D.1989) we stated, " 'Appearance of fairness' is of course sought in each case, but the standard to be applied is 'due process'." Accordingly, under the due process clause of the federal and state constitutions, the trial court has authority to determine and declare the rights and status of the parties relating to whether a PUC commissioner has any conflict of interest, even though the commissioner refuses to disqualify himself. SDCL 21-24-1; South Dakota Real Estate Com'n. v. Haggar, supra; Application of Union Carbide Corp., 308 N.W.2d 753 (S.D.1981).

We apply the following principles to the present case. Administrative officials are presumed to be objective and capable of judging controversies fairly on the basis of their own circumstances. Moran v. Rapid City Area School Dist., 281 N.W.2d 595 (S.D.1979); United Steelworkers of America, Etc. v. Marshall, 647 F.2d 1189 (D.C.Cir.1980); United States v. Morgan, 313 U.S. 409, 61 S.Ct. 999, 85 L.Ed. 1429 (1941); Skelly Oil Company v. Federal Power Commission, 375 F.2d 6 (10th Cir.1967). Further, an official is not necessarily disqualified to hear a particular case when the official has a predisposition derived from participation in earlier proceedings on the same issue or because expressed or developed opinions have been acquired from his work experience. Strain v. Rapid City School Bd., supra; Federal Trade Com. v. Cement Institute, 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed 1010 (1948); United Steelworkers, Etc. v. Marshall, supra. If an official reflects subjective partiality, this does not mean a proceeding conducted in good faith is necessarily invalidated. Lead Industries Ass'n. v. Environmental Protection, 647 F.2d 1130 (D.C.Cir.1980). This court has recognized a distinction between an agency's findings in an adjudicatory proceeding and a rule-making proceeding. Application of Union Carbide, supra. But whether an official is engaged in adjudication or rule-making, the fact that the official has taken a public position, or has expressed strong views, or holds an underlying philosophy with respect to an issue in dispute cannot alone overcome the presumption that the official will be objective. United Steelworkers of America, etc. v. Marshall, supra; Hortonville Dst. v. Hortonville Ed. Asso., 426 U.S. 482, 96 S.Ct. 2308, 49 L.Ed.2d 1 (1976). This does not mean that an official is free to express or act in any manner and still be allowed to participate in a proceeding. The type of proceeding the official is involved in necessarily influences the burden of proof as to whether he has a conflict of interest under the due process standard adopted by this court.

We defined adjudicatory and rule-making decisions in Application of Union Carbide Corp., supra, 308 N.W.2d at 757: "Administrative action is ' "[A]judicatory in character if it is particular and...