C038246
IN THE CALIFORNIA COURT OF APPEAL
THIRD APPELLATE DISTRICT
FAIR POLITICAL PRACTICES COMMISSION,
Plaintiff and
Respondent,
vs.
CALIFORNIANS AGAINST CORRUPTION, et al,
Defendants
and Appellants.
Appeal from Superior Court for the County of
Sacramento
Hon. Charles C. Kobayashi
[Case No. 96AS00039]
APPELLANTS’
REPLY BRIEF
LAW OFFICE OF BRUCE ADELSTEIN
Bruce Adelstein (Cal.
Bar No. 157607)
11661 San Vicente Boulevard, Suite 1010
Los Angeles, California 90049
(310) 979-3565
FAX: (310) 820-1594
Attorney for Defendants and Appellants
CALIFORNIANS AGAINST CORRUPTION, CARL RUSSELL HOWARD,
treasurer, and STEPHEN J. CICERO, treasurer
INTRODUCTION
The central issue
in this case is whether the appellants should be procedurally barred from
presenting two meritorious defenses, thereby allowing the FPPC to obtain a
civil judgment based on an unconstitutionally excessive and improperly imposed
fine.
The FPPC brought
this suit under Government Code, section 91013.5, which allows it to
file an ordinary civil case and obtain a civil judgment to enforce a penalty,
provided that the FPPC demonstrates that it follows the relevant statutory and
regulatory procedures in imposing the penalty.
The appellants Carl
Russell Howard and Stephen Cicero (“Howard” and “Cicero”) have two meritorious
defenses to this claim. First, the
$808,000 fine the FPPC imposed on them was unconstitutionally excessive. It is the largest fine the FPPC has ever
imposed, and the FPPC imposed it on a small (and now defunct) grass-roots
political organization and its two treasurers without regard to the financial
condition of any of these parties.
Howard and Cicero cannot pay this fine, or even the post-judgment
interest on this fine. This fine was
not imposed for money laundering, theft, fraud, or any serious crime involving
real financial loss to the state or the public; instead, it was imposed for
omissions in the appellants’ financial disclosure reports and for recordkeeping
violations. If Howard and Cicero had
simply refused to file any of the six financial reports at issue, the maximum
fine would have been $12,000. But the
FPPC counted each of the approximately 90 omitted donors as four separate
violations, imposed the maximum $2,000 fine per violation, and — after adding
in a few other violations — thereby obtained an $808,000 fine.
Second, the FPPC
did not follow the requisite statutory and regulatory procedures. The officials who prosecuted and decided the
case had not been properly appointed by the FPPC acting as a body as explicitly
required by statute. Instead, they had
been appointed by the chairman of the FPPC.
In a previous case against the FPPC, the Superior Court ruled that these
appointments were improper, and the FPPC is now bound by this determination
under collateral estoppel.
Ordinarily, these
two defenses would preclude the FPPC from obtaining a judgment (and certainly
from obtaining summary judgment). And
the FPPC has not presented in its respondent’s brief any significant reason to
think that these defenses, if allowed to be presented, would not succeed.
However, Howard and
Cicero failed to attend the underlying FPPC hearing and failed to prosecute
their petition for a writ of administrative mandamus. All parties agree that the consequence of this failure is that
Howard and Cicero have lost the right to challenge the factual determinations
made in the underlying proceedings.
The issue here,
however, is whether Howard and Cicero have lost the right to argue, on
undisputed facts, that the fine is unconstitutionally excessive and that the
FPPC failed to follow the requisite procedures. Howard and Cicero demonstrated in the opening brief that they had
not lost this right. The FPPC
disagrees.
The FPPC is wrong,
as explained in detail in the opening brief and further explained in this
brief. But one general problem runs
throughout the FPPC’s argument. In every
case brought under Government Code, section 91013.5, the defendant either
failed to seek writ review of the underlying order or did so and lost. If the FPPC is correct that this bars the
party from asserting any defenses, then the FPPC will necessarily win every
case brought under this statute. This
will reduce the enforcement statute to a mere formality.
The legislature has
provided for summary enforcement of orders of other administrative agencies,
and it certainly could have done so here if it had wished to do so. But the legislature did not do this. Instead, it required the FPPC to bring a
civil suit and to demonstrate that it in fact had followed the necessary
procedures when it imposed its fine. Short
circuiting this requirement by barring this defense would render this entire
statute meaningless. Nothing suggests
that this is what the legislature intended.
The better approach
is that a party who failed to seek writ review or failed to prevail on his writ
petition, has now lost the right to challenge adverse factual findings. However, that party — like every party in a
civil suit — retains the right to argue that the fine is unconstitutional and
that the FPPC has not met the required elements of its cause of action. And when these two defenses are examined on
their merits here, they demonstrate that the judgment cannot stand.
LEGAL
ARGUMENT
I. HOWARD AND CICERO MAY PRESENT THEIR TWO DEFENSES TO THIS ACTION.
A. Government Code, Section 91013.5
Requires The Trial Court To Determine Whether The FPPC Followed The Procedures
Set Forth in the Government Code and Allows Defendants To Present
Constitutional Defenses.
Howard and Cicero
have presented two defenses in this case: the fine is unconstitutionally
excessive and the FPPC did not follow certain procedures. The FPPC asserted, and the trial court
found, that Howard and Cicero were procedurally precluded from presenting these
defenses. The FPPC and the trial court
are wrong.
Once the FPPC has
issued an order imposing a fine, Government Code, section 91013.5 allows the FPPC to
bring a civil action to enforce this fine.
But “[i]n order to obtain a judgment in a proceeding under this section,
the commission or filing officer shall show, following the procedures and rules
of evidence as applied in ordinary civil actions . . . (a) That the monetary
penalties, fees, or civil penalties were imposed following the procedures set
forth in this title and implementing regulations. . . .” (Gov. Code, § 91013.5.)
Under this statute,
a court must review the actions of the FPPC in imposing the underlying fine and
verify that this fine was imposed following the appropriate procedures. Also, since this statute requires the FPPC to
bring a civil action and litigate under “the procedures . . .
applied in ordinary civil actions,” the statute contemplates that the court
will allow constitutional defenses and all other defenses ordinarily available
in civil actions.
The reason for this
judicial oversight is straightforward. Unlike most other administrative agencies, the FPPC can impose
large penalties based on speech and conduct involved in elections. Thus, there is a real danger that the FPPC will
not just impose excessive and unwarranted fines, but also that these fines — or
the risk of these fines — will also chill core protected political speech. The courts may defer to the FPPC’s factual
findings, but the legislature has determined that before the judiciary enters a
judgment based on an FPPC order imposing a fine, the judiciary must
independently satisfy itself that this fine was properly imposed and is
constitutional.
Each of the
doctrines that might limit Howard and Cicero’s defenses are discussed in detail
in the following subsections. But the
explicit language of Government Code, section 91013.5 makes it clear that
these doctrines should not be applied to this statute. This statute explicitly provides that the
FPPC must bring a civil suit and demonstrate that it imposed the fine pursuant
to the proper procedures. If, as the
FPPC suggests, Howard and Cicero are precluded from arguing that the proper
procedures were not followed or that the fine is unconstitutional — under any
doctrine or rule — then this statute is rendered meaningless. That is, whenever the FPPC brings an
enforcement action, it will always be the case that the FPPC has imposed an
order fining the defendants and the defendants either failed to challenge this
through a petition for a writ of administrative mandamus or did file such a
petition and lost. In either case,
according to the FPPC, the defendants would thereby have lost their right to
raise any defenses, and the court will simply have to enter an order eliminating
all defenses and enter summary judgment for the FPPC.
This is clearly not
what the legislature intended. As noted
in the opening brief, the legislature has provided for summary enforcement of
orders of numerous administrative agencies.
(AOB 16 fn. 8.) Under these
procedures, an agency merely has to file a certified copy of its order, and the
clerk of the court will issue a judgment.
The legislature knew how to allow summary enforcement or administrative
orders, and it certainly could have done the same here. But it did not. Instead, it explicitly provided that to obtain a judgment, the
FPPC must file a civil suit and must demonstrate that it followed the proper
procedures. There is no reason for the
legislature to have mandated this procedure only to have it rendered
meaningless by various doctrines that automatically eliminate all defenses.
Howard and Cicero
also demonstrated in the opening brief that no doctrine limited their two
defenses asserted here. (AOB
17-29.) More particularly, Howard and
Cicero showed that they were not barred from asserting (1) that the fine was
unconstitutionally excessive, and (2) that the FPPC commissioners who imposed
the fine were not properly appointed.
These defenses were not barred by either collateral estoppel or the
exhaustion of judicial remedies doctrine.
The FPPC does not
dispute Howard and Cicero’s argument regarding collateral estoppel. However, the FPPC asserts that these
defenses are barred by the exhaustion of judicial remedies doctrine (RB 21-23)
and laches (RB 10-13), and further argues that — despite its explicit language
— Government Code, section 91013.5 does not allow any meaningful review of its
prior administrative decisions (RB 13-21).
The FPPC is wrong on all three claims, as we show in this and the
following two subsections.
B. The Exhaustion of Judicial Remedies Doctrine Does Not Bar Howard And
Cicero From Asserting Their Defenses.
In the opening
brief, Howard and Cicero demonstrated that the exhaustion of judicial remedies
doctrine does not bar their two defenses.
(AOB 22-29.) This doctrine makes
factual issues actually determined in a prior administrative action binding on
the parties in a subsequent action, unless the aggrieved party successfully
challenged these findings in a petition for a writ of administrative mandamus.
As shown in the
opening brief, cases interpreting this doctrine hold that it is based on
respect for the agency’s quasi-judicial fact-finding procedure, and thus it
limits the factual issues a party may assert in later litigation, but
does not categorically eliminate legal defenses. (See AOB 23-24 and cased cited.) In response, the FPPC argues that this doctrine
has the effect of establishing not just the facts determined in the prior
administrative proceeding, but also “the propriety of the [agency’s] action”
(RB 22, quoting Johnson v. City of Loma Linda (2000) 24 Cal.4th
61, 70 [“Johnson”], quoting Westlake Community Hosp. v. Superior Court
(1976) 17 Cal.3d 465, 484 [“Westlake”].) The FPPC misunderstands Westlake and Johnson, and
incorrectly and improperly inserts the word “agency’s” based on this
misunderstanding.
In Westlake, a doctor’s hospital privileges were
revoked. The doctor had the right to
challenge this decision by a writ of administrative mandamus but did not do
so. The doctor then sued the hospital
and others arguing that the hospital acted improperly in revoking her
privileges. The California Supreme
Court held that the doctor’s failure to seek a writ petition established the
propriety of the hospital’s action.
“[P]laintiff’s
position rests on a contention that defendants intentionally and maliciously
misused a quasi-judicial procedure in order to injure her; such a claim is
necessarily premised on an assertion that the hospital’s decision to revoke
plaintiff's privileges was itself erroneous and unjustified. Although a quasi-judicial decision reached
by a tribunal of a private association may not be entitled to exactly the same
measure of respect as a similar decision of a duly constituted public agency
[citation], we believe that so long as such a quasi-judicial decision is not
set aside through appropriate review procedures the decision has the effect
of establishing the propriety of the hospital’s action.” (Id. at p. 484, emphasis added.)
There is an ambiguity in the last
sentence. The hospital took two actions
relevant to the case — it initially revoked the doctor staff privileges, and it
later acted in a quasi-judicial capacity in determining that this decision was
proper. The final quoted sentence does not
explain which of these “actions” was deemed proper by the failure to seek a
writ of administrative mandamus.
This same ambiguity
occurs in Johnson.
There, the defendant city took
two actions: it terminated the plaintiff, and its personnel review
board, acting in a quasi-judicial role, found that this decision was made on
economic grounds, not in retaliation for enforcing the city’s anti-harassment
policy. The Supreme Court in that case
quoted Westlake but substituted the word “defendant”
for “hospital”: “We explained [in Westlake] that ‘so long as such a
quasi-judicial decision is not set aside through appropriate review procedures
the decision has the effect of establishing the propriety of the [defendant’s]
action.’ [Citation]” (Johnson, 24 Cal.4th 61, 70.) It is still not clear from the language used
whether the Johnson court was referring to the propriety of the city in
initially terminating the plaintiff or the propriety of the city personnel
board’s review of this decision.
However, other
cases resolve this ambiguity and make clear that this doctrine only establishes
the propriety of the underlying events, not the propriety of the quasi-judicial
determination itself. Numerous cases
have held that the exhaustion of judicial remedies doctrine is a form of
collateral estoppel. “The underpinnings
of this rule of exhaustion of judicial remedies . . .are buried in the doctrine
of res judicata or that portion of it known as collateral estoppel ” (Knickerbocker v. City of Stockton (1988) 199 Cal.App.3d 235, 241.) “[T]he prior judgment is not a complete bar
but it operates against the party against whom it was obtained as an estoppel
or conclusive adjudication as to those issues in the second action which were
actually litigated and determined in the first action.” (Id. at p. 242.) Other courts have reached the same
conclusion. (Risam v. County of Los Angeles (2002) —
Cal.App.4th — [2002 WL 1315551] [quoting Knickerbocker for conclusion
that exhaustion of judicial remedies is a form of collateral estoppel]; Castillo v. City of Los Angeles (2001) 92
Cal.App.4th 477, 481 [terminated employee who lost petition for writ of
administrative mandamus challenging decision of city civil service commission
was bound by factual findings of commission; “The applicable principle that
bars relitigation is issue preclusion, also known as collateral estoppel.”]; Briggs v. City of Rolling Hills Estates (1995)
40 Cal.App.4th 637 [landowner’s failure to challenge zoning decision by
administrative mandate was bound by factual findings and precludes civil rights
action; Court of Appeal quoted Knickerbocker
regarding collateral estoppel].)
Collateral estoppel
does not categorically establish the correctness of the prior judicial
determination; instead, it merely “prevents ‘relitigation of issues argued and
decided in prior proceedings.’” (Lucido v. Superior Court (1990) 51 Cal.3d 335,
341, quoted in Castillo v. City of Los Angeles, supra,
92 Cal.App.4th at p. 481.) Moreover,
for collateral estoppel to apply, the party invoking the doctrine must show
that “the issue was actually litigated in the former proceeding” and that “the
issue was necessarily decided in the former proceeding.” (Ibid.) “Consequently, ‘a former judgment is not a
collateral estoppel on issues which might have been raised but were not;
just as clearly, it is a collateral estoppel on issues which were raised, even
though some factual matters or legal arguments which could have been presented
were not.’ [Citation.]” (Branson v. Sun‑Diamond Growers (1994) 24
Cal.App.4th 327, 346, citing 7 Witkin, Cal.Procedure (3d ed. 1985) Judgment, §
257, p. 696, emphasis in original; see also Mobilepark West Homeowners Association v. Escondido
Mobilepark West (1995) 35 Cal.App.4th 32, 48 [“‘[A] former judgment is not
a collateral estoppel on issues which might have been raised but were not; . .
.’”].) Nothing in Westlake or Johnson suggests that the Supreme Court meant
to overturn or modify these well-established doctrines.
Thus, the Supreme
Court in both Westlake and Johnson was merely stating that the
effect of the plaintiff’s failure to seek judicial review of the underlying
quasi-judicial proceeding had the effect of establishing the factual issues
determined in that proceeding, namely, the propriety of the hospital in
terminating the doctor’s hospital privileges in Westlake and the propriety
of terminating the plaintiff in Johnson. The same applies here.
The exhaustion of judicial remedies doctrine (assuming arguendo that it
applies here) has the effect of establishing the underlying factual issues
determined in the FPPC’s hearing, namely that Howard and Cicero committed the
acts of which they were accused. It
does not conclusively establish the validity of all aspects of the underlying
administrative proceeding.
In Westlake and Johnson, that factual determination was fatal
to each of the plaintiffs’ subsequent lawsuits. But that is not the case here.
Since “a former judgment is not a collateral estoppel on issues which
might have been raised but were not,” (Branson, supra, 24 Cal.App.4th at p.
346), and since Howard and Cicero did not actually raise their two legal
defenses in the underlying proceedings, these defenses are not precluded under
the exhaustion of judicial remedies doctrine.
Thus, assuming this doctrine applies, it does not bar Howard and
Cicero’s legal defenses.
However, as also
explained in the opening brief, the exhaustion of judicial remedies doctrine
should not be applied in this case. In County of Sauk v. Trager (1984) 118 Wis.2d 204 [346 N.W.2d 756], the Wisconsin
Supreme Court set forth four factors a court should consider when deciding
whether to apply the exhaustion of judicial remedies doctrine. (AOB 26-27.)[1] All of these factors weigh against applying
the doctrine here. (See AOB 27-28.)
As discussed in
detail above, the exhaustion of judicial remedies doctrine is a form of
collateral estoppel, and the four Trager factors are similar to the
factors California courts consider when determining whether or not to apply
collateral estoppel. Collateral
estoppel is not an absolute doctrine, and a court will not apply it when public
policy concerns weigh against its application.
“Generally, collateral estoppel bars the party to a prior
action . . . from relitigating issues finally decided against
him in the earlier action. [Citation] ‘But when the issue is a question of law
rather than of fact, the prior determination is not conclusive either if
injustice would result or if the public interest requires that relitigation not
be foreclosed. [Citations.] . . . .’ [Citation]” (City of Sacramento v. State of California
(1980) 50 Cal.3d 51, 64 [holding collateral estoppel did not apply].) “However, even where the minimal
prerequisites for invocation of the doctrine are present, collateral estoppel
‘“is not an inflexible, universally applicable principle; policy considerations
may limit its use where the . . . underpinnings of the doctrine are outweighed
by other factors.”’ [Citations.]” (Vandenberg v. Superior Court (1999) 21 Cal.4th
815, 829.)
California courts
have applied these public policy limitation to the exhaustion of judicial
remedies doctrine. As noted in the
opening brief, this Court of Appeal in Hypolite v. Carleson (1975) 52 Cal.App.3d 566
refused to apply the exhaustion of judicial remedies doctrine because doing so
“would also render a class action, which we have held to be proper in the
present case, both unnecessary and meaningless.” (Id. at p. 584, quoted in AOB 26.) Similarly, in Castillo v. City of Los Angeles, supra,
92 Cal.App.4th 477, the Court of Appeal noted the public policy limitation on
collateral estoppel as part of its exhaustion of judicial remedies analysis
(but ruled in that case that the doctrine would apply).
These factors used
to decide whether each doctrine should be applied are similar. For example, the second Trager factor is whether there are no factual
disputes being raised. And collateral
estoppel is less likely to be applied to legal issue as opposed to factual
issues. (City of Sacramento v. State of California, supra,
50 Cal.3d at p. 64.) Similarly, the
fourth Trager factor is whether its application would be harsh on the
party denied the opportunity to present his defense, and under California law,
collateral estoppel is less likely to be applied “if injustice would
result.” (Ibid.)
Moreover, applying
the exhaustion of judicial remedies doctrine would not further the purposes of
collateral estoppel. In Castillo v. City of Los Angeles, supra,
92 Cal.App.4th 477, the Court of Appeal noted that “When those requirements
[for collateral estoppel] are met, the propriety of preclusion depends upon
whether application will further the public policies of ‘preservation of the
integrity of the judicial system, promotion of judicial economy, and protection
of litigants from harassment by vexatious litigation.’” (Id. at p. 581, quoting Lucido v.
Superior Court, supra, 51 Cal.3d at p. 343.) There is no threat to the integrity of the
judicial system from not applying the doctrine here. Judicial economy is less important in this case, since the
legislature has explicitly provided that the FPPC must file a civil suit to
recover a judgment rather than directly vesting the FPPC with judicial powers
or allowing it to enforce its orders in some other summary fashion. In fact, as was the case in Hypolite v. Carleson, supra, 52
Cal.App.3d 566, applying this doctrine would render Government Code, section
91013.5 “both unnecessary and meaningless.”
(Id. at p. 584.) And
there is no need to protect the FPPC from vexatious litigation; it is the FPPC
— not Howard and Cicero — who brought this enforcement action. This last point is reflected in Trager,
where the Wisconsin Supreme Court noted that its holding applied in situations
where the party the doctrine is asserted against “is the reluctant defendant in
a court action initiated by the administrative agency.” (Trager, 118 Wis.2d at p. 212 [346
N.W.2d at p. 760].)
Thus, the Wisconsin
Supreme Court (discussing exhaustion of judicial remedies as a separate
doctrine) and the California courts (discussing it as a type of collateral
estoppel) have both identified various public policy factors that can weigh against its application. As explained in detail in the opening brief,
those factors are met here.
In response, the
FPPC does not claim that the Trager factors weigh in favor of applying this
doctrine. Instead, the FPPC tries to
distinguish Trager. It notes
that Trager defendant did not file a petition for a writ of
administrative mandamus, but Howard and Cicero did so but did not prosecute
it. (RB 23.) Also, the enforcement action in Trager was based on case
law and the enforcement action here is based on a statute. (RB 23.)
The FPPC has correctly identified some minor differences between this
case and Trager. But the FPPC
has not explained why these differences are of any legal significance. They are not.
In short, the
holding in Trager fits comfortably within California law. There is no reason why it should not be
followed here.
C. Howard and Cicero’s Defenses Are Not Barred by the Defense Of
Laches.
The FPPC asserts
that Howard and Cicero’s defenses are barred by laches. The FPPC simply misunderstands this
doctrine. Laches is a defense.
“The doctrine of laches bars a
cause of action when the plaintiff unreasonably delays in asserting or
diligently pursuing the cause . . . .” (Johnson, supra, 24 Cal.4th at p. 77, emphasis added.) Laches bars a plaintiff from asserting
claims; it does not bar a defendant from asserting defenses. No case that the FPPC cites or that the
appellants are aware of even suggests that laches can be used to bar a defense.[2]
Of course, the
FPPC’s real complaint is not that Howard and Cicero delayed in asserting these
defenses in this action; it is that they failed to assert and prevail on
these defenses in the underlying administrative proceeding and the petition for
the writ of administrative mandamus.
But that objection is not based on laches.
D. None of the FPPC’s Remaining Arguments Prevail.
The FPPC makes
several other arguments in support of its claim that Howard and Cicero may not
assert their defenses in this case.
None prevail.
First, the FPPC
asserts that a petition for a writ of administrative mandamus is the “exclusive
remedy for attacking the validity of an administrative order.” (RB 14-15.)[3] It is not, and none of the cases the FPPC
cites say that it is.
As noted above (see
Section I.A., ante), the FPPC’s claim is refused by the explicit
statutory language of Government Code, section 91013.5. If the FPPC were correct, then there would
be no need for the FPPC to show that it followed the “procedures set forth in
this title and implementing regulations” since the defendants would either have
prevailed on their administrative writ (and thus there would be no valid order)
or would have lost the right to assert this claim. Similarly, the defendants could never show that the fine was
unconstitutional since they would have lost the right to assert such a claim if
they did not prevail on it in the writ proceeding. In fact, there would be no need for the FPPC to file this lawsuit
at all, since all defenses would be precluded and the FPPC would
automatically win all of its cases.
Howard and Cicero
certainly could have challenged the FPPC’s order in their petition for a writ
of administrative mandamus, and they lost an important opportunity by failing
to prosecute this claim. But nothing
suggests that their failure to prosecute their writ petition leaves them with
no defenses in this action.
Second, the FPPC
concedes that Government Code, section 91013.5 allows a defendant to
argue that the FPPC did not follow “enforcement” procedures, but does not allow
a defendant to argue that the FPPC did not follow other procedures. (RB 15-20.)
The FPPC claims that under Howard and Cicero’s understanding, every
“peripherally related procedure . . . including the procedure governing the
appointment of executive directors” is grounds for refusing to enforce a
judgment. (RB 18.)
The statute does
not limit itself to “enforcement” procedures.
To the contrary, the statute says that the FPPC must show the penalties
it imposed “were imposed following the procedures set forth in this title
and implementing regulations.” (Gov. Code, § 91013.5, subd. (a).) The only qualification on “procedures” is
that these procedures be contained in “this title” or the relevant
regulations. Government Code, section
91013.5 is part of Title 9 (entitled “Political Reform”) of the Government
Code. Title 9 also contains Government Code, section 83107, which requires the
FPPC as a body to appoint the executive director and certain other
employees. If the legislature had
intended to limit the statute further, it would have done so.
Moreover, the
appointment of the executive director and the delegation of the right to
conduct hearings is not an unimportant and “peripherally related
procedure.” Because the FPPC regulates
core protected political speech and there is a real danger of political abuse,
the Political Reform Act carefully regulates the appointment of the decision
makers of the FPPC. The FPPC is
composed of five members, and no more
than three of the five members of the FPPC may be from the same political
party. (Gov. Code, § 83100.)
The governor must appoint two members from different political parties (Gov. Code, § 83101), and other elected state officials
appoint the other three members (Gov. Code, § 83102).
The power to appoint members of the FPPC is carefully dispersed among
different elected executive branch officials, and it is this carefully chosen
body — acting as a whole — that must appoint the FPPC’s Executive Director,
officers, directors, and employees. (Gov. Code, § 83107.)
This is not a peripheral issue; it is the carefully crafted means of keeping
this potentially dangerous body as impartial and apolitical as possible.[4]
Third, the FPPC
correctly notes that this enforcement statute is not “another mechanism for
wholesale judicial review.” (RB
15.) The FPPC is correct, and Howard
and Cicero are not seeking wholesale judicial review of the order. Howard and Cicero are bound by adverse
factual determinations, and the only limited arguments that Howard and Cicero
may present at this point — and the only ones that they are presenting — are
that the undisputed fact show that the FPPC failed to meet the procedural
requirements explicitly set forth in Government Code, section 91013.5 and that the penalty
is unconstitutional.
Fourth, the FPPC
suggests that this case is analogous to a voidable act made in excess of a
court’s jurisdiction, not a void act may beyond a court’s jurisdiction. (RB 19-20.)
The FPPC is incorrect. The
orders of a person who does not have the right to issue such orders are void, not
voidable. Thus, the orders of a
disqualified judge are void. (Zilog, Inc. v. Superior Court (2001) 86
Cal.App.4th 1309, 1323 [“When a disqualification motion is erroneously denied,
any subsequent orders and proceedings by the disqualified judge have been
characterized as 'void for want of jurisdiction.”].) Similarly, if the parties have not properly stipulated to having
a commissioner hear a case, the commissioner’s orders are void. (In re Steven A. (1993) 15 Cal.App.4th 754, 772 [“‘Absent a valid stipulation,
Commissioner Tetley had no jurisdiction to act at the permanency planning
hearing, and his order was void’”] citing People v. Tijerina (1969) 1
Cal.3d 41, 49.) The same is true
here. If (as shown in detail in the
opening brief and in Section III, ante) the “Acting Executive Director”
of the FPPC was improperly appointed, his orders are void, not voidable.
But the FPPC cannot
prevail in this case if its orders are either void or voidable. One statutory element of its cause of action
is showing that it followed the correct procedures in imposing its fine. It makes no difference if the order is void
or voidable; in either case, it was not imposed pursuant to the proper
procedures.
Fifth, the FPPC
suggests that the court cannot consider constitutional claims in actions to
enforce an administrative order. This
may be correct in enforcement actions that do not involve any judicial
oversight or review of the underlying judgment. But in this case, the statute explicitly requires that the court “follow[] the procedures and rules of evidence as
applied in ordinary civil actions . . . .”
(Gov. Code, section 91013.5.) As discussed
in the opening brief, a civil defendant may always raise constitutional
defenses, and thus this challenge is part of the “procedures” applied in civil
actions. (AOB 19-20.)
In conclusion, the
trial court erred in concluding that Howard and Cicero were precluded from
raising their affirmative defenses. Government Code, section 91013.5 explicitly requires
that the FPPC demonstrate that it imposed its fines according to the proper
procedures, and this determination is to be made following the rules in ordinary
civil cases. Various doctrines could
potentially restrict Howard and Cicero’s ability to present these claims, but a
careful examination of these doctrines shows that they are inapplicable here,
especially when the statute contemplates increased judicial review of FPPC
fines. This court should decide Howard
and Cicero’s defense on their merits.
II. THE FPPC’S PENALTY IS UNCONSTITUTIONALLY EXCESSIVE.
In the opening brief,
Howard and Cicero demonstrated that the Due Process Clause, the Excessive Fines
Clause, and the Judicial Powers Clause all prohibit an administrative agency
from imposing an excessive or unreasonable fine. (AOB 30-35.) Because
there is a tremendous danger of abuse, courts do not favor such fines and must
carefully examine a fine to be sure it is constitutional. (AOB 31; Waterman Convalescent Hosp. v. Jurupa Community
Services Dist. (1997) 53 Cal.App.4th 1550, 1556; Harmelon v. Michigan (1991) 501 U.S. 957, 978
n.9 [111 S.Ct. 2680, 2693 n. 9, 115 L.Ed.2d 836].) Courts make this determination by examining
several non-exclusive factors and determining, on balance, whether the fine is
excessive or unreasonable. (AOB
31.) The FPPC does not take issue with
these general points; instead, it asserts that after applying these factors,
its $808,000 fine was constitutional.
Howard and Cicero
identified four factors that overwhelmingly demonstrated that the fine was
unconstitutional.
First, Howard and
Cicero noted that they (and the defunct CAC) simply could not pay this fine, or
even come close. In fact, with
post-judgment interest accruing at over $100,000 per year, it is unlikely that
Howard and Cicero could even pay the interest on this fine. (AOB 35-37.) In Balmoral Hotel Tenants Association v. Lee (1990)
226 Cal.App.3d 686, the fine exceeded 50% of the defendant’s net worth. The Court of Appeal noted that the
“financial impact on appellant . . . is catastrophic” and “[r]eprehensible as
[appellant’s] conduct may have been, such an award strikes us as
unconscionable.” (Id. at p.
696.)
In response, the
FPPC suggests that this factor is not really very important. As support, the FPPC misquotes U.S. v. Emerson (1st Cir. 1997) 107 F.3d 77,
81: “The First Circuit, however, has held that the “the ‘touchstone’ [of the
excessiveness inquiry] is the value of the fine in relation to the particular
offense, not the defendant’s means.”
(RB 31.) However, the FPPC never
closes its quotation. The actual quote
from Emerson ends after “to the particular offense” and the FPPC added “not
the defendant’s means.” It was the
FPPC, not Emerson, that suggested that the defendant’s means are not an
important factor. In fact, Emerson
holds that this is an important factor. The District Court in Emerson
reduced the defendant’s fine because the defendant could not afford to pay the
full fine, and the First Circuit affirmed after noting that “the district
court’s judgment reflects a careful balance between Emerson’s means and the
justifiable punishment for these latest violations.” (Id. at p. 81.)
The FPPC also notes
that it concluded that Howard and Cicero’s violations were intentional and part
of a pattern. (RB 29-30.) Howard and Cicero cannot now dispute this
factual claim, and thus concede that it must be accepted for purposes of this
appeal.[5] However, for all the other reasons discussed
in this section, the fine is excessive and unreasonable, even if Howard and
Cicero’s actions were intentional and part of a pattern. Thus, for example, in numerous cases
discussed above and in the opening brief — Balmoral Hotel Tenants Association v. Lee, supra, 226 Cal.App.3d 686 and U.S. v. Emerson,
supra, 107 F.3d 77, for example — the imposed or requested fine was
deemed unconstitutionally excessive, even though the defendants engaged in
egregious and intentional conduct.
Second, Howard and
Cicero demonstrated that their $808,000 fine — the largest in the FPPC’s
history — imposed for filing incomplete reports was disproportionate (1) to
other fines the FPPC imposed on other defendants, and (2) to the offense
committed, since it was orders of magnitude more than the maximum penalty that
could be imposed if Howard and Cicero had committed the more egregious act of
failing to file any reports.
(AOB 37-39.)
The FPPC does not
dispute that this was the largest fine it had ever imposed. (RB 30.)
However, it claims that the U.S. Supreme Court in Butz v. Glover Liverstock Commission (1973) 411
U.S. 182 [93 S.Ct. 1455, 36 L.Ed.2d 142], held that “this is not a factor for determining
whether a fine is unconstitutionally excessive.” (RB 30.) The FPPC
misreads this case. In Butz, the
U.S. Supreme Court held that a more
severe penalty did not by itself render a penalty unconstitutional. Howard and Cicero do not assert that the
size of the fine alone renders it unconstitutional. However, the fact that the FPPC fined a small grassroots
organization and two individuals more than it fined anyone else in its entire
history for recordkeeping and reporting violations adds an additional perspective
on the disproportionateness and excessiveness of this fine.
Howard and Cicero
also explained that the fine was disproportionate to the relatively modest
$12,000 fine that could have been imposed on them if they had simply filed none
of the six reports at issue. (AOB
39.) The FPPC simply ignores this
claim. This argument cannot be ignored,
and it demonstrates that this fine was grossly disproportionate a fine for more
egregious offenses that could have been imposed on these defendants.
Third, the underlying
offense was relatively minor: Howard
and Cicero filed to report certain contribution and expense information. As was the case in U.S. v. Bajakajian (1998) 524 U.S. 321 [118
S.Ct. 2028, 141 L.Ed.2d 314], neither the government nor the public suffered
any direct harm or monetary loss from Howard and Cicero’s actions, and as the
U.S. Supreme Court held, this factor weighs in favor of a lesser penalty. (AOB 39-41.)
In response, the
FPPC asserts that recordkeeping and reporting requirements are important
too. (RB 31.) Howard and Cicero do not dispute this, but the FPPC’s argument
misses the point. Howard and Cicero do
not contend that this factor should immunize them from any fine. Instead, as the U.S. Supreme Court has held,
an extremely high fine for a less egregious violation is less likely to be
considered constitutional.
Fourth, the FPPC
was able to reach such a high fine by charging four violations for each omitted
name, and doing this for the 90 or so omitted names. (AOB 41.) “Uniformly, we have looked with disfavor on
ever-mounting penalties and have narrowly construed the statutes which either
require or permit them.” (Hale v. Morgan (1978) 22 Cal.3d 388, 401,
emphasis added.) The FPPC simply
ignores this argument.
This fine is larger
than any other fine the FPPC has imposed.
It is orders of magnitude larger than the fine that would have been
imposed had Howard and Cicero simply filed no reports. It was imposed on defendants who cannot pay
it, and was imposed for relatively minor recordkeeping and reporting
offenses. The FPPC was able to reach
this huge fine by charging approximately 350 violations for omitting
approximately 100 donors and then imposing the maximum penalty for each
one. Although the FPPC nitpicks at some
of these claims, nothing it says alters the fact that this fine is excessive
and unreasonable. This court should not
allow the trial court to enter judgment
based on an unconstitutional fine.
III. BECAUSE THE FPPC DID NOT FOLLOW ITS STATUTORY AND REGULATORY
PROCEDURES, GOVERNMENT CODE SECTION 91013.5 PRECLUDES THE FPPC FROM OBTAINING A
CIVIL JUDGMENT.
Government Code, section 91013.5 provides that the
FPPC may obtain a civil judgment to enforce an order, provided that the FPPC
show that several requirements are met, including “[t]hat the monetary
penalties, fees, or civil penalties were imposed following the procedures set
forth in this title and implementing regulations.” (Gov. Code, § 91013.5.) In the
opening brief, Howard and Cicero demonstrated that the FPPC failed to follow
two critical procedures mandated either by statute or regulation: (1) the
administrative proceedings were prosecuted and adjudicated by “Acting Executive
Directors” who were not properly appointed by the FPPC acting as a body, and
(2) the FPPC failed to consider exculpatory and mitigating evidence it actually
knew about. The first issue has already
been conclusively resolved against the FPPC in Horcher v. FPPC, and the
FPPC is collaterally estopped by that determination.
The Government Code
requires that the FPPC acting as a body must appoint its executive director and
other employees. (Gov. Code, §
83017.) It is undisputed that Ravi
Mehta, the Chairman of the FPPC in 1995, appointed Robert Tribe as FPPC Chief
Deputy Director and Jeevan Ahuja as FPPC Senior Commission Counsel. (AA 400.)
Mehta claimed to delegate to Ahuja and Steven Churchwell the authority to
conduct probable cause hearings and to determine the existence of probable cause
(AA 400, 401), despite the fact that only the FPPC acting as a body or the
Executive Director may conduct probable cause hearings (Gov. Code, §§ 83115.5, 83116; Cal.Code Regs., tit. 2, § 18361, subd. (d)(4)). The FPPC as a body did not appoint Tribe and
Churchwell as “Acting Co-Executive Directors” until April 4, 1996, well after
Howard and Cicero’s proceedings were completed. (AA 415-416.) As noted in the
opening brief, this not only was an illegal delegation of authority, but this
issue has already been adjudicated against the FPPC in Horcher v. FPPC,
and the FPPC is bound by this decision under collateral estoppel. (See AOB 7-8, 13, 42-47.)
The FPPC argued,
and the trial court found, that collateral estoppel did not apply because of a
minor difference between the Horcher case and this case. (AA 456-457, 486.) Howard and Cicero explained in the opening brief that this
argument does not prevail. (AOB 45-46.) On appeal, the FPPC has not attempted to
defend the trial court’s ruling on this basis and apparently has abandoned this
argument. Instead, FPPC cites (but does
not quote) Government Code, section 83108 for the proposition that Mehta was
acting for the FPPC as a body when he made his appointments. (RB 26-28.)
The reason the FPPC does not quote this statute is that the statute only
give the FPPC the right to delegate this authority, but the authority is
not actually deleted until the FPPC actually does so. “The Commission may
delegate authority to the chairman or the executive director to act in the name
of the Commission between meetings of the Commission.” (Gov. Code, § 83108, emphasis added.) Nothing in the record suggests that the FPPC
ever did delete this authority to Chairman Mehta, even though the FPPC could
have done so (although might not have).
In fact, if the FPPC had delegated this authority, there would be no
need for the FPPC to have later appointed Tribe and Churchwell as “Acting
Co-Executive Directors” (AA 415-416) since their earlier appointment by
Chairman Mehta would presumably have been valid.
In any case, there
is no need to relitigate this issue.
This issue has already been litigated in the Horcher case, and as
Howard and Cicero explained in detail, the FPPC is bound by this determination
under collateral estoppel. On appeal, the FPPC ignores this collateral
estoppel argument, and instead tries to reargue the merits of this claim. But since the FPPC is collaterally estopped
from rearguing this (just as Howard and Cicero are collaterally estopped from
rearguing factual issues decided in the underlying FPPC hearing), there is no
need for this court to reach the merits of this issue.
Howard and Cicero
also demonstrated that the FPPC failed to follow a second important procedure. The FPPC’s regulations require it to
consider mitigating information it knew about.
“The probable cause report shall contain a summary of the law and
evidence gathered in connection with the investigation, including any
exculpatory and mitigating information of which the staff has knowledge and any
other relevant material and arguments.”
(Cal.Code Regs., tit. 2, § 18361, subd. (d)(1).) As explained in the opening brief, the FPPC
knew that Howard had refused to provide donors’ street addresses and other
identifying information because of a well-founded fear that the donors would be
harassed or vandalized. However, the
FPPC failed to consider this explanation and incorrectly stated that there were
no mitigating factors. (AOB 47-48.)
The FPPC notes that
Howard and Cicero raise this issue for the first time on appeal. (RB 33.)
However, a party may raise a new legal theory on appeal if it involves
undisputed facts. (Luck v. Southern Pacific Transportation Co.
(1990) 218 Cal.App.3d 1, 17, n. 10; Ward v. Taggart (1959) 51 Cal.2d 736, 742.)
The FPPC also
claims that including mitigating information is not a “procedure” and thus its
failure to do so does not defeat its claim under Government Code, section 91013.5. The FPPC is wrong. “The probable cause report shall contain a summary of the law and
evidence gathered in connection with the investigation, including any exculpatory
and mitigating information of which the staff has knowledge and any other
relevant material and arguments.” (Cal.Code Regs., tit. 2, § 18361, subd. (d)(1).) This regulation mandates the contents of the
probable cause report. Issuing a
probable cause report without these mandatory contents is a failure to follow
the mandated procedures.
Finally, the FPPC
asserts that its omission was acceptable because a respondent might
misrepresent the facts to place himself in a favorable light. (RB 33.)
But Howard was not making an unsupported claim that donors had been
harassed. Roberti opponents were in
fact depicted in the media as right-wing pro-gun extremists (AA 277, 279, 283),
and the harassment was independently verified by two other CAC supporters and
was reported in the press. (AA 274, 275, 281.)
In any case, it was up to the FPPC officers reviewing the probable cause
report, not the officers preparing it, to determine whether Howard’s claims
were credible.
Despite the FPPC’s
claims, the record shows that the FPPC failed to follow its own procedures in
two significant ways. It cannot enforce
this improper order.
CONCLUSION
For the reasons set
forth above, the judgment should be reversed.
Dated: July 8, 2002 ___________________________________
Bruce Adelstein
Attorney for Appellants
CALIFORNIANS AGAINST CORRUPTION, CARL RUSSELL HOWARD, treasurer, and STEPHEN J.
CICERO, treasurer
CERTIFICATE REGARDING WORD COUNT
Pursuant to California Rules of
Court, rule 14(c), appellate counsel
hereby certifies that this brief contains 7,696 words.
Dated: July 8, 2002 ___________________________________
Bruce Adelstein
Attorney for Appellants
CALIFORNIANS AGAINST CORRUPTION, CARL RUSSELL HOWARD, treasurer, and STEPHEN J.
CICERO, treasurer
TABLE OF CONTENTS
TABLE OF
CONTENTS i
TABLE OF
AUTHORITIES... ii
INTRODUCTION 1
LEGAL ARGUMENT......... 3
I. HOWARD
AND CICERO MAY PRESENT THEIR TWO DEFENSES TO THIS ACTION. 3
A.
Government Code, Section 91013.5 Requires
The Trial Court To Determine Whether The FPPC Followed The Procedures Set Forth
in the Government Code and Allows Defendants To Present Constitutional
Defenses........ 3
B. The
Exhaustion of Judicial Remedies Doctrine Does Not Bar Howard And Cicero From
Asserting Their Defenses. 6
C. Howard
and Cicero’s Defenses Are Not Barred by the Defense Of Laches. 13
D. None
of the FPPC’s Remaining Arguments Prevail. 14
II. THE
FPPC’S PENALTY IS UNCONSTITUTIONALLY EXCESSIVE. 18
III. BECAUSE
THE FPPC DID NOT FOLLOW ITS STATUTORY AND REGULATORY PROCEDURES, GOVERNMENT
CODE SECTION 91013.5 PRECLUDES THE FPPC FROM OBTAINING A CIVIL JUDGMENT. 22
CONCLUSION 26
CERTIFICATE
REGARDING WORD COUNT.... 27
TABLE OF AUTHORITIES
Cases
Balmoral Hotel Tenants Association v. Lee (1990)
226
Cal.App.3d 686..... 19, 20
Branson v. Sun‑Diamond Growers (1994)
24
Cal.App.4th 327....... 9, 10
Briggs v. City of Rolling Hills Estates (1995)
40
Cal.App.4th 637.......... 8, 9
Butz v. Glover Liverstock Commission (1973)
411
U.S. 182 [93 S.Ct. 1455, 36 L.Ed.2d 142]................. 20
Castillo v. City of Los Angeles (2001)
92
Cal.App.4th 477 8, 9, 11, 12
City of Sacramento v. State of California (1980)
50
Cal.3d 51.. 11
County of Sauk v. Trager (1984)
118
Wis.2d 204 [346 N.W.2d 756].... 10‑13
Hale v. Morgan
(1978)
22
Cal.3d 388 21-22
Harmelon v. Michigan (1991)
501
U.S. 957 [111 S.Ct. 2680, 115 L.Ed.2d 836]............. 18
Hypolite v. Carleson (1975)
52
Cal.App.3d 566..... 11, 12
In re Steven A.
(1993)
15
Cal.App.4th 754............ 17
Johnson v. City of Loma Linda (2000)
24
Cal.4th 61........ 6‑10, 13
Knickerbocker v. City of Stockton (1988)
199
Cal.App.3d 235.......... 8, 9
Lucido v. Superior Court (1990)
51
Cal.3d 335.. 9
Luck v. Southern Pacific Transportation Co. (1990)
218
Cal.App.3d 1.................. 25
Mobilepark West Homeowners Association v.
Escondido Mobilepark West (1995)
35
Cal.App.4th 32................ 9
Risam v. County of Los Angeles (2002)
—
Cal.App.4th — [2002 WL 1315551].... 8
U.S. v. Bajakajian (1998)
524
U.S. 321 [118 S.Ct. 2028, 141 L.Ed.2d 314].......... 21
U.S. v. Emerson
(1st Cir. 1997)
107
F.3d 77 19, 20
Vandenberg v. Superior Court (1999)
21
Cal.4th 815 11
Ward v. Taggart
(1959)
51
Cal.2d 736 25
Waterman Convalescent Hosp. v. Jurupa Community
Services Dist. (1997)
53
Cal.App.4th 1550......... 18
Westlake Community Hosp. v. Superior Court (1976)
17
Cal.3d 465............... 6‑10
Zilog, Inc. v. Superior Court (2001)
86
Cal.App.4th 1309......... 17
Statutes, Regulations, and Constitutions
Cal.Code Regs., tit. 2, § 18361, subd. (d)(1) 23, 24, 25
Government Code
§
83100....... 16
§ 83101...... 16
§ 83102....... 16
§
83107. 15, 16
§ 83108. 23,
24
§ 83115.5.... 23
§
83116....... 23
§
91013.5........... passim
[1]/ The
factors are whether (1) the legal issues are the same in the writ petition and
the enforcement action, (2) there are no factual disputes being raised, (3) the
administrative agency’s decision is suspect on its face, and (4) not permitting
the defendant to present his defense would be harsh. (Id. at p. 215-216 [346 N.W.2d at pp. 761-762].)
[2]/ One
reason laches bars a plaintiff’s complaint but not a defendant’s defenses is
that a plaintiff can file a lawsuit whenever he wishes, but a defendant can
only assert a defense once the plaintiff files its lawsuit. Moreover, given the time limits to file an
answer, a defendant typically asserts its defenses shortly after service of the
plaintiff’s complaint. These time limits
restrict a defendant’s ability to delay asserting its defenses.
That is the
case here. The FPPC filed its complaint
on January 3, 1996. (AA 3) Howard and Cicero answered on January 30,
1996 (AA 18). In their answer, they
denied that the FPPC’s order “was rendered in accordance with California law”
(AA 18), and asserted as an affirmative defense that the FPPC’s fine was
unconstitutionally excessive (AA 19.)
[3]/ Howard
and Cicero presume that the FPPC meant “forum” or “type of litigation,” not
“remedy.”
[4]/ The
FPPC suggests that if Howard and Cicero were correct, it would face the onerous
burden of proving in every case that it had complied with every statute and
regulation. (RB 18-19.) But presumably the burden of production of
showing that the FPPC has not complied with some statute or regulation would
lie with the defendants, even if the FPPC retained the ultimate burden of proof
at trial.
[5]/ Part of
the evidence the FPPC considered in reaching this conclusion was the defiant
statement Howard supposedly made to a reporter. (AA 156.) This statement
is of course hearsay, and Howard contends that he never made this statement and
that the reporter misquoted him.
However, Howard recognizes that his failure to object to this evidence
in the underlying proceeding prevents him from contesting this factual issue in
this proceeding, and for this procedural reason, Howard does not do so now.