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S_________

 

 

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

 

 

FAIR POLITICAL PRACTICES COMMISSION,

Plaintiff and Respondent,

 

vs.

 

CALIFORNIANS AGAINST CORRUPTION, CARL RUSSELL HOWARD, treasurer, and STEPHEN J. CICERO, treasurer,

Defendants and Appellants.

 

After a Decision by the Court of Appeal

Third Appellate District

(Case No. C038246)

 

 

PETITION FOR REVIEW

 

 

 

 

 

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 and ISSUES PRESENTED

This case involves a confusing statute (Government Code, section 91013.5), the limits of two procedural doctrines (the de facto officer doctrine and the exhaustion of judicial remedies doctrine), improper actions by the FPPC resulting in the largest fine it ever imposed, and — regrettably — less than diligent conduct by the defendants themselves. The case provides this court with an opportunity to decide several important related issues and to resolve the uncertainty and case law conflicts the Court of Appeal’s opinion created or reflected.

The defendants are a defunct grass-roots political organization and its two former treasurers. The raised approximately $140,000 as part of a statewide campaign and ran afoul of the disclosure, reporting, and recordkeeping rules contained in the Political Reform Act of 1974 (Gov. Code, § 81000 et seq.) (the “PRA"). The Fair Political Practices Commission (“FPPC") began an investigation and accused the defendants of 404 violations, most of which involved multiple violations for a single omission, and each of which was subject to a $2,000 fine. The defendants did not attend the FPPC’s hearing. Even thought the PRA and its regulations require that the FPPC itself or its Executive Director conduct such hearings, the Chairman of the FPPC had purported to delete the authority to conduct such hearings to senior FPPC staff members. These FPPC staff members spent most of their time enforcing the FPPC rules, but after this delegation would occasionally adjudicate such disputes. The hearing officer in this case ignored mitigating evidence and the fact that the defendants could not pay the fine and — irked by the defendants failure to attend the hearing — imposed the $808,000 maximum fine. This was the largest fine the FPPC had ever imposed.


The FPPC then sued under Government Code, section 91013.5. This statute allows the FPPC to enforce its fines by obtaining a civil judgment, but requires the FPPC (unlike many other state agencies) to file an ordinary civil action and to show that its fine was “imposed following the procedures set forth in this title and implementing regulations."

The defendants asserted two defenses that appear to be meritorious on their face: the FPPC did not follow the procedures set forth in the statute since the wrong person conducted the hearing, and the FPPC’s fine was unconstitutionally excessive. However, the trial court refused to reach these defenses on the merits; it held the defendants had lost their right to assert these defenses and granted summary judgment for the FPPC. The Court of Appeal affirmed. It held that the de facto officer doctrine precluded the defendants from defending against the FPPC’s claim by asserting that the improper delegation of authority meant that the fine was not imposed pursuant to the proper procedures. And it held that the exhaustion of judicial remedies doctrine precluded the defendants from asserting that the fine was unconstitutionally excessive.

There are three broad areas of confusion or case law conflicts that the Court of Appeal’s published opinion either creates or reflects.

First, the de facto officer doctrine precludes a party from collaterally attacking a judgment or order issued by a de facto officer on the ground that there was some technical problem with the officer’s appointment. This court last decided a case involving this doctrine in 1964. Since then, developments in the law in both California and elsewhere have generated conflicts or confusion regarding the de facto officer doctrine in at least four areas.


One line of California cases have held that orders imposed after an improper delegation of authority are void and may be set aside. Another line of cases has held that orders after an improper appointment are protected by the de facto officer doctrine. The Court of Appeal’s opinion here held that there is no meaningful difference between an improper delegation and an improper appointment and the de facto officer doctrine applies to both types of cases. The Court of Appeal’s reasoning makes little sense, and the court implicitly overruled — or at least severely limited — the line of improper delegation cases.

Another area of confusion is the precise meaning of “collateral attack" as used by the de facto officer doctrine. Previous cases have held that a collateral attack is one where the appointment requirement is not directly at issue. In this case, the appointment requirement was at issue; the FPPC was required to show that its fine was imposed pursuant to the procedures set forth in the PRA and its regulations. However, the Court of Appeal narrowly interpreted Government Code, section 91013.5 and concluded that the defendants’ claim was a collateral attack, not a direct defense. In doing so, the Court of Appeal muddled the distinction between direct and collateral set forth in earlier cases.

It is also not clear whether California recognizes an important limitation on the de facto officer doctrine. Several other jurisdictions have concluded that this doctrine does not apply where the purpose of the appointment requirements was to protect people subject to the de facto officer’s authority. Commentators have supported this rule, and other California case law suggests that California would do the same. However, the Court of Appeal narrowly interpreted the appointment requirements here and refused to reach this issue. In doing so, the Court of Appeal generated additional and unnecessary confusion about the doctrine and the FPPC’s appointment requirements.

Finally, several federal appellate courts including the Ninth Circuit have concluded that the de facto officer doctrine is simply bad law and refused to apply it. This court should grant review and decide whether California will follow these federal cases and not apply the de facto officer doctrine at all, limit the doctrine in some way, or leave the doctrine as it is.


Second, the Wisconsin Supreme Court in County of Sauk v. Trager (1984) 118 Wis.2d 204, 215-216 [346 N.W.2d 756, 761-762] held that courts have limited but important discretion to refuse to apply the exhaustion of judicial remedies doctrine against a “reluctant defendant" sued by an administrative agency. The Court of Appeal here refused to recognize this exception because it concluded that this court’s opinion in Johnson v. City of Loma Linda (2000) 24 Cal.4th 61 did not leave it with any discretion as to whether to apply the doctrine. This court can grant review and clarify whether California will follow Wisconsin in adopting this narrow but important limitation to the exhaustion of judicial remedies doctrine.

Third, the preceding two issues are intertwined with the interpretation of Government Code, section 91013.5. A defendant in one of these actions must have already lost in the FPPC hearing and either lost or failed to bring a petition for a writ of administrative review. The plain language of the statute requires that the courts exercise some oversight of the FPPC’s actions and determine whether the fine was properly imposed. However, several procedural bars, like the exhaustion of judicial remedies doctrine and collateral estoppel, bar a party from relitigating issues already lost or not previously asserted. These doctrines, if applied, would prevent the courts from providing any review of the FPPC’s actions as required by the statute. This court can grant review on the following issues and clarify the relationship between the statute itself and the various procedural bars that appear to render the statute meaningless.


Issue 1: Does the de facto officer doctrine preclude defendants from asserting that they were fined by an FPPC staff member who had been improperly delegated the authority to conduct hearings, and thus the fine was not “imposed following the procedures set forth in this title and implementing regulations." (Gov. Code, § 91013.5) There are four closely related sub-issues pertaining to the de facto officer doctrine:

1.a. Does the doctrine cover improper delegations of authority?

1.b. Does defending against the FPPC’s enforcement lawsuit constitute a collateral attack on the FPPC’s order within the meaning of the doctrine?

1.c. Is there an exception to the doctrine where the purpose of the appointment requirements is to protect people subject to the de facto officer’s authority?

1.d. Should California still follow the doctrine at all?

Issue 2: Does a court have the limited discretion not to apply the exhaustion of judicial remedies doctrine to a “reluctant defendant" sued by an administrative agency, as the Wisconsin Supreme Court held in Trager, supra, 118 Wis.2d 204, 215-216 [346 N.W.2d 756, 761-762]?

Issue 3: In an action brought under Government Code, section 91013.5, do procedural bars like the exhaustion of judicial remedies doctrine and collateral estoppel prevent the trial court from determining whether the government imposed the fine pursuant to the procedures in the PRA and its regulations as required by the statute?

 

STATEMENT OF FACTS AND PROCEDURAL HISTORY

A The Political Reform Act of 1974.

The PRA is a comprehensive statute that governs campaign finance, lobbyists, and other election-related activities. (See generally Gov. Code, § 81001.) It imposed campaign disclosure and recordkeeping requirements. (See Gov. Code, § 84100 et seq.) The FPPC to enforces, administers, and implements the PRA. (Gov. Code, § 83111.)


The FPPC. Because the FPPC regulates political speech and political activities, the Act imposes limitations on the FPPC itself to prevent politically motivated decisions. No more than three of the five commissioners 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). This carefully balanced body must appoint its Executive Director, officers, directors, and employees. (Gov. Code, § 83107.) Unless otherwise restricted by law, the FPPC may delegate these duties to the chairman or the executive director. “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.)

Enforcement Procedures. The FPPC can investigate possible violations of the Act. (Gov. Code, § 83115.) The Chief of the FPPC’s Enforcement Division may prepare a “Probable Cause Report" that “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).) The subject of the investigation may request an informal probable cause conference. (Cal.Code Regs., tit. 2, § 18361, subd. (d)(3).)


The PRA requires the FPPC itself to determine whether there is probable cause to believe a violation occurred. “When the commission determines there is probable cause for believing this title has been violated, it may hold a hearing to determine if a violation has occurred." (Gov. Code, § 83116.) However, by regulation, the FPPC has explicitly delegated this authority to the Executive Director. “The Executive Director may then find there is probable cause to believe a violation has occurred . . . ." (Cal.Code Regs., tit. 2, § 18361, subd. (d)(4).)

“If the Executive Director makes a finding of probable cause, he or she shall cause an Accusation to be prepared . . . ." (Cal.Code Regs., tit. 2, § 18361, subd. (d)(4).) The FPPC must serve the Accusation on the accused, and if the accused requests, the FPPC must hold a hearing pursuant to the Administrative Practices Act set forth in Government Code, §§ 11500 et seq. (Gov. Code, § 83116; Cal.Code Regs., tit. 2, § 18361, subd. (d)(4).) If the FPPC finds in fact that a violation occurred, it can impose a monetary penalty of up to $2,000 per violation. (Former Gov. Code, § 83116.)[1] Since its establishment in the mid-1970s, the FPPC has imposed many fines, most of which were a few thousand dollars. (See generally AA 291-292, 294-347.)[2]

Judicial Review and Enforcement. A party subject to a penalty can seek judicial review through a petition for a writ of administrative mandamus. (Code Civ. Proc., § 1094.5.)

If the FPPC wishes to enforce its order, it must file an ordinary civil action and affirmatively show that the fine was properly imposed. “In 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, all of the following: [¶] (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.)


B CAC Violated Reporting and Recordkeeping Requirements.

Defendant California’s Against Corruption (“CAC") was a “general purpose recipient committee" that was organized in 1992 and is now defunct. (AA 228, 272; Opn. 2.) Defendants Carl Russell Howard (“Howard") and Stephen Cicero (“Cicero") were treasurers of CAC. (AA 215, Opn. 2.)

In 1993 and 1994, CAC was engaged in a contentious campaign for the recall of State Senator David Roberti. (AA 143, Opn. 2.) The recall election was held in April 1994. (AA 143.) Between January 1, 1992 and June 30, 1994, CAC raised approximately $141,559 and spent approximately $103,091. (AA 143, Opn. 2.) However, CAC committed several reporting and recordkeeping violations of the election laws, including failing to disclose certain information about donors and payees. (See generally AA 221-235.) The FPPC began investigating.

 

C In Violation of Government Code, Section 83107, The Chairman of the FPPC Acting Alone Purports To Delegate To Three FPPC Senior Staff Members The Authority To Act As Executive Director.

The PRA specifies that FPPC acting as a body must appoint its Executive Director and other officers. “The Commission shall appoint an executive director . . . ." and “The Commission shall appoint and discharge officers, counsel, and employees . . . ." (Gov Code, § 83107.) In January 1995, the FPPC’s Executive Director resigned and the position remained vacant. (AA 431, 433.)


On January 18, 1995, Ravi Mehta, the Chairman of the FPPC, acting alone, purported to delegate to Jeevan Ahuja, the FPPC Senior Commission Counsel, the authority to conduct probable cause hearings and to determine the existence of probable cause. (AA 400, Opn. 3.) He also purported to delegate to two other FPPC staff members — Robert Tribe, the FPPC Chief Deputy Director, and Steven Churchwell, the FPPC General Counsel — the remaining duties of the Executive Director. (AA 400.)

 

D Ahuja Finds Probable Cause To Find That CAC Committed 404 Election Law Violations.

On May 9, 1995, the FPPC issued a Report In Support of Finding Probable Cause, accusing CAC, Howard, and Cicero of committing 406 violations of the election laws. (AA 140-157.) The FPPC mailed copies of this report to Howard and Cicero. (AA 137-139, 158-159).

The FPPC held a probable cause hearing on June 14, 1995, with Ahuja presiding. (AA 160-161, Opn. 3.) CAC, Howard, and Cicero did not appear at the hearing. (AA 160.) Ahuja dismissed two of the 406 alleged violations and found that there was probable cause to believe that CAC, Howard, and Cicero committed the other 404 violations. (AA 160-161, Opn. 3.) Ahuja signed an order to this effect on June 29, 1995. (AA 161.)

 

E Again In Violation of Government Code, Section 83107, The Chairman of the FPPC Acting Alone Purports To Delegate To Tribe and Churchwell — Two Members of the FPPC Staff — The Authority To Act As Executive Director.


On July 6, 1995, seven days after Ahuja signed the order finding probable cause, Chairman Mehta purported to delegate to Tribe and Churchwell (but not Ahuja) the authority to act as the Executive Director. (AA 401.)

 

F Ahuja Finds Probable Cause To Find That CAC Committed 404 Election Law Violations.

On August 8, 1995, Tribe issued a formal Accusation detailing these alleged violations. (AA 162-179, Opn. 3.) The defendants had 15 days to request a hearing (Gov. Code, § 11506, subd(a)(1)) but did not do so (AA 219, Opn. 4). On October 20, 1995, Tribe, now calling himself “Acting Executive Director" of the FPPC, entered a Default Decision and Order finding that CAC, Howard, and Cicero had committed all 404 violations and imposing the maximum fine of $2,000 per violation, or $808,000 total. (AA 218-219, Opn. 4.)

The FPPC found the appellants had committed numerous but relatively minor reporting or recordkeeping violations. (See generally Opn. 4.) The FPPC counted each omitted contribution as 4 separate violations: failing to itemize contributions of more than $100 and failing to disclose these contributors’ street addresses, occupations, and employer information. Of the 404 violations, 352 (Counts 4 - 355) — representing $704,000 of the $808,000 fine — fell in this category. Another 35 violations (Counts 358 - 392) — representing another $70,000 of this fine — were for failing to disclose the street addresses of payees.


On November 2, 1995, the FPPC met and considered whether to impose the recommended fines. (AA 468-471.) The FPPC Chief of Enforcement Darryl East explained that the FPPC has not been able to obtain compliance for over two years and that the respondents have “blatantly spoken out in the media on their disregard for the laws of the FPPC." (AA 470.) One commissioner asked East about the likelihood of collecting on such a large fine. (AA 470.) East did not indicate that CAC was defunct or that it had raised only $141,559 in its 3-year history; instead, “Mr. East responded that the CAC is still a viable committee, and that staff is in the process of searching for assets and he is, therefore, optimistic that collection efforts will be successful." (AA 470.) Based on this erroneous information, the FPPC adopted the Default Decision and Order and imposed the full $808,000 fine. (AA 220, 470, Opn. 4.)

 

G The FPPC Sues Howard, Cicero, and CAC.

On January 3, 1996, the FPPC sued CAC, Howard, and Cicero under Government Code, sections 83116 and 91013.5, seeking a civil judgment for its $808,000 fine. (AA 1-17, Opn. 5.) On January 17, 1996, the appellants answered and filed a cross-complaint and petition for a writ of mandate, seeking to vacate the order. (AA 18-21, 22-26, 38, Opn. 5.)

 

H The FPPC Appoints Tribe and Churchwell As Acting Co-Executive Directors and Ratifies Mehta’s Earlier Delegation of Authority to Them. The FPPC Does Not Purport to Ratify Mehta’s Improper Delegation of Authority to Ahuja.

On April 4, 1996 — well after the FPPC proceedings involving these defendants were completed and the litigation had begun — the FPPC met and appointed Tribe and Churchwell as “Acting Co-Executive Directors." (AA 415-416.) The FPPC purported to ratify Mehta’s earlier improper delegation of authority to Tribe and Churchwell, but did not purport to ratify Mehta’s delegation of authority to Ahuja. (AA 415-416.)

 


I The Trial Court Dismisses The Defendants’ Writ Petition For Failure to Prosecute and Grants Summary Judgment for the FPPC.

On May 12, 2000, the FPPC successfully moved to dismiss the defendant’s writ petition for delay in prosecution. (AA 32-56, 107-109, 110-111.)

The FPPC then moved for summary judgment. (AA 112-248, Opn. p. 5.) Howard and Cicero defended against the motion on several grounds. They argued that the fine was unconstitutionally excessive (AA 260-266) and that the FPPC’s order imposing the fine was void because the FPPC “acting executive director" had not been properly appointed by the FPPC as a body at the time of the probable cause hearing. (AA 356-364.)

The trial court granted the FPPC’s summary judgment motion. (AA 485-488, 489-492, Opn. 5.) The court ruled that the FPPC’s order “may have been in excess of its jurisdiction and therefore voidable, but not void ab initio." (AA 490.) Since the defendants had not challenged this order in the FPPC hearing and since their petition for a writ of administrative mandamus had been dismissed, it was simply too late for them to raise this argument as a defense in this lawsuit. (AA 490-491.) Similarly, the trial court ruled that the defendants’ constitutional claims could not be raised here since the defendants did not appear at the administrative hearing. (AA 487.)

The court entered judgment for the FPPC for $808,000 plus $287,513.33 in pre-judgment interest. (AA 493, Opn. p. 5.) The defendants appealed. (AA 495-499.)


J After Supplemental Briefing on the De Facto Officer Doctrine, The Court of Appeal Affirms.

The defendants argued that the fine was not imposed pursuant to the proper procedures, it was unconstitutionally excessive,[3] and they were not precluded from asserting these claims.

The FPPC had not raised the de facto officer doctrine in the trial court or its respondent’s brief. After briefing was complete but before oral argument, the Court of Appeal ordered full supplemental briefing on the applicability of this doctrine. The Court of Appeal then affirmed in a published opinion, Fair Political Practices Commission v. Californians Against Corruption (2003) 109 Cal.App.4th 269.

The court did not reach the issue of whether the fine was “imposed following the procedures set forth in this title and implementing regulations" as required by Government Code, § 91013.5. Instead, the Court of Appeal held that “even assuming Mehta’s delegation was ineffectual, defendants’ challenge of the authority of Ahuja and Tribe is preclude by the de facto officer doctrine." (Opn. 8-9, citing In re Redevelopment Plan for Bunker Hill (1964) 61 Cal.2d 21, 42.)


The defendants made four independent arguments against the applicability of the de facto officer doctrine, but the Court of Appeal rejected all four. First, the defendants argued that since the FPPC’s cause of action required it to show affirmatively that its fine was imposed following the procedures set forth in the PRA and regulations, the defendants were not collaterally attacking the order but were simply arguing that the FPPC could not show a required element of its claim. Second, the defendants argued that there is an exception to the de facto officer doctrine when the appointment requirements were imposed to protect the person subject to the officer’s authority. Third, the defendants argued that Ahuja and Tribe were not in fact de facto officers, but instead held other positions and were improperly delegated their authority. And fourth, the defendants noted that several federal cases have held that the de facto officer doctrine should not be followed at all and argued that California should do the same. The Court of Appeal rejected these claims for various reasons, discussed in detail below. (Opn. 9-15.)

Similarly, the Court of Appeal did not reach the issue of whether the fine was unconstitutionally excessive. It held that the exhaustion of judicial remedies doctrine precluded the defendants from asserting that the fine was unconstitutionally excessive.

Pursuant to California Rules of Court, rule 29(b)(1), the defendants have now filed this petition for review “to secure uniformity of decision or to settle an important question of law."


LEGAL DISCUSSION

 

I. THIS COURT SHOULD GRANT REVIEW TO CLARIFY FOUR IMPORTANT ASPECTS OF THE DE FACTO OFFICER DOCTRINE.

 

A The De Facto Officer Doctrine.

The de facto officer doctrine prevents a party from collaterally attacking the validity of an order on the ground that there was a technical defect in the appointment of the officer who issued the order. As this court explained in 1964:

“‘Persons claiming to be public officers while in possession of an office, ostensibly exercising their functions lawfully and with the acquiescence of the public, are de facto officers. * * * The lawful acts of an officer de facto, so far as the rights of third persons are concerned, are, if done within the scope and by the apparent authority of office, as valid and binding as if he were the officer legally elected and qualified for the office and in full possession of it.’ [Citations.]" (In re Redevelopment Plan for Bunker Hill, supra, 61 Cal.2d at p. 42.)

“The reason for the doctrine is that it is necessary to the supremacy and execution of the laws and that private challenge of the authority of officers in fact would produce inconsistency, confusion and insecurity of rights and of titles to property." (Ensher, Alexander & Barsoom v. Ensher (1965) 238 Cal.App.2d 250, 255.)


This court first adopted this doctrine in People v. Sassovich (1866) 29 Cal. 480, and it has been followed numerous times since. The doctrine is routinely applied where a losing party seeks to challenge the judgment by challenging a technical defect in the qualification of the judge who heard his case. (See, e.g., People v. Bowen (1991) 231 Cal.App.3d 783, 789-791 [trial judge violated residency requirement by living in different county]; Ensher, Alexander & Barsoom v. Ensher, supra, 238 Cal.App.2d 250, 255 [trial judge had accepted executive branch position]; Elliott v. Van Delinder (1926) 77 Cal.App. 716, 719 [justice of the peace allegedly holding executive office]; Matter of Danford (1910) 157 Cal. 425, 431 [judge alleged to be an alien]; People v. Mellon (1871) 40 Cal. 648, 655-656 [judge from different county tries part of case].)

The court last applied this doctrine in 1964, in In re Redevelopment Plan for Bunker Hill, supra, 61 Cal.2d 21. Since then, there has been considerable development in other aspects of California law that bear on this doctrine, in federal law involving the de facto officer doctrine, and in the law of other states involving this doctrine. As we explain in detail below, these more recent developments in the law have left either conflicts or doctrinal confusion pertaining to four separate aspects of the de facto officer doctrine. This case presents an ideal opportunity for this court to revisit the doctrine and clarify the law.

 

B The Court of Appeal’s Opinion Creates Conflict and Confusion By Implicitly Overruling A Line of Improper-Delegation Cases.


Several “improper delegation" cases hold that if a statute or regulation mandates that an administrative agency or a particular officer must conduct a hearing, the agency cannot delegate the authority to conduct the hearing to a different officer; if the agency does so, any order entered pursuant to this improper delegation can be set aside. (Langan v. City of El Monte (2000) 79 Cal.App.4th 608 [city improperly delegated authority to conduct hearing to a hearing officer in disability retirement benefits appeal hearing]; Usher v. County of Monterey (1998) 65 Cal.App.4th 210 [same]; Moyer v. State Board of Equalization (1956) 140 Cal.App.2d 651 [city improperly delegated authority to conduct hearing on motion to reconsider suspension of liquor license]; National Automobile & Casualty Ins. Co. v. Downey (1950) 98 Cal.App.2d 586 [insurance commission improperly delegated authority to conduct hearing to deputy insurance commissioner].)

These cases involve an improper delegation of authority, not an improper appointment, and thus are closer to this case than the de facto officer doctrine cases. However, the Court of Appeal attempted to distinguish these cases, holding that the difference between an improper appointment and an improper delegation of powers “is a distinction without a difference." (Opn. 15.) In doing so, the Court of Appeal equated two contradictory lines of cases. If there really is no difference, then the improper delegation cases would have been decided differently if the agency had simply argued that the order could be upheld under the de facto officer doctrine. The Court of Appeal’s opinion here creates a solid conflict between these two line of cases.


Moreover, the Court of Appeal did so without any clear justification. There are important differences between an improper delegation and an improper appointment. An officer does not have divided loyalties if his appointment violates some technical requirement. He works full-time as an officers and simply did not meet some technical requirement. However, an officer may have divided loyalties if he receives an improper delegation of authority. The officer then has two jobs. His primary jobs is doing something else, and his secondary job is acting as a officer. If his primary job involves advocacy, and his secondary job involves acting as an impartial adjudicative officer, he will have divided loyalties. This case provides a perfect example of this problem. Ahuja, Tribe, and Churchwell were all senior FPPC staff members. Their primary job was to investigate and prosecute PRA violations. However, because of Mehta’s improper delegation of authority, they occasionally adjudicated cases involving PRA violations. This divided loyalty makes their judgment suspect.[4] And the result in this case — the largest fine ever imposed by the FPPC against a small organization and two individuals — raises the same troubling questions about their impartiality. This case involves divided loyalties, a suspect decision, and an improper delegation of authority; there is simply no public policy reason to preclude the defendants from defending against the FPPC’s lawsuit on the grounds that this was improper.

The Court of Appeal overruled the improper-delegation line of cases for no compelling reason. If this is the correct decision, this court should clearly state so. If this is not the correct decision, this court should correct the Court of Appeal. In either case, this court should grant review.

 

C The Court of Appeal’s Opinion Creates a Conflict Over The Meaning of “Collateral Attack" For Purposes of the De Facto Officer Doctrine.

The de facto officer doctrine limits collateral attacks on a judgment or order entered by an improperly appointed official; it does not limit direct attacks. “[T]he right of a de facto officer to an office cannot be collaterally attacked." (In re Redevelopment Plan for Bunker Hill, supra, 61 Cal.2d 21, 42.) The difference between direct and collateral attacks was clear until the Court of Appeal’s opinion in this case.


An attack is direct if the officer’s qualifications are directly at issue in the case, as in a quo warranto proceeding. An attack is collateral where the officer’s qualifications are not directly at issue but are only an indirect means of attacking the judgment or order itself. In People v. Bowen, supra, 231 Cal.App.3d 783, a convicted defendant challenged his conviction on the ground that his trial judge violated an appointment requirement by not living in the same county as he sat. The Court of Appeal rejected this claim. (Id. at pp. 789-791.) In doing so, the court held the claim was collateral, not direct:

“Defendant urges the issue is not collateral ‘but was a direct challenge to the proceedings prior to the entry of judgment.’ It is true his attack was not undertaken following a final judgment and is not ‘collateral’ in that sense, but it is nonetheless an issue wholly removed from the question of his guilt or innocence or the fairness of the trial." (Id. at p. 789-790.)

Here, the propriety of the Ahuja’s and Tribe’s appointments are directly at issue. One required element of the FPPC’s claim is that the fine was “imposed following the procedures set forth in this title and implementing regulations." (Gov. Code, § 91013.5, subd. (a).) The defendants’ claim that the delegation to Ahuja and Tribe violated the PRA and its regulations directly negates an element of the FPPC’s case. This is not a collateral attack on the underlying order.

The Court of Appeal rejected this claim. It held that the appointment requirements were general structural requirements but not part of the required procedures for imposing a fine. (Opn. 10-11.) By reading this statute so narrowly, the Court of Appeal tried to reclassify this defense as a collateral attack.


The Court of Appeal’s narrow reading of this statute is incorrect. The FPPC thus regulates core protected political speech. Partisanship, or even the appearance of partisanship, in FPPC proceedings could lead to serious abuse and erode confidence in the basic structure of state government. Accordingly, the political makeup of the FPPC is carefully balanced, with four different elected state officials appointing the FPPC commissioners (Gov. Code, §§ 83101, 83102) and a restriction that no more than three of the commissioners members be members of the same political party (Gov. Code, § 83100). The obvious purpose of these requirements — and that the hearing be conducted by the FPPC itself or its duly appointed Executive Director — is to guarantee that the FPPC does not act in a partisan or biased manner.

The Court of Appeal’s narrow reading of the statute is unfounded, and its attempt to reclassify the defendants’ claim as a collateral attack simply creates confusion. This court should grant review to clarify this issue as well.

 

D The Court of Appeal’s Opinion Reflects The Uncertainty About Whether California Law Recognizes That The De Facto Officer Doctrine Does Not Apply Where The Appointment Requirements Were Enacted To Protect People Subject To The Officer’s Authority.


In general, there are two interests that are implicated by the de facto officer doctrine: the public’s interest in the stability and finality of government decisions, and an individual’s personal interest in procedural due process, fairness, and impartiality. The typical de facto officer case involves only the first interest. However, if the purpose of a particular requirements is to protect the person subject to the officer’s authority, the doctrine should not apply. Cases from other jurisdictions have applied this limitation, academic commentators have supported it, and California case law in other areas suggests that California would do so as well. However, the Court of Appeal’s opinion adds to the uncertainty about whether this is so.

Several federal cases have refused to apply the de facto officer doctrine where the purpose of the appointment requirement is to protect the person subject to the authority of the judicial officer. For example, in several draft cases, federal courts have allowed a defendant to challenge an induction order on the ground that the draft board was not properly constituted. In U.S. v. Beltran (N.D.Cal.1969) 306 F.Supp. 385, the defendant successfully argued for an acquittal on the ground that the draft board members resided outside of their jurisdiction in violation of the federal appointment requirements. The district court noted that the purpose of this requirement was to promote impartiality, justice, and better decision-making in controversial cases. (Id. at p. 387-388.) Because these requirements were not just formalities, but were specifically designed to protect potential draftees from poor decisions, the District Court ruled that the de facto officer doctrine did not apply. (Id. at pp. 388-390.) Other courts have reached the same decision on the same grounds (see U.S. v. Cabbage (6th Cir. 1970) 430 F.2d 1037, 1041-1042; U.S. v. Williams (E.D. Penn. 1970) 317 F.Supp. 1363; U.S. v. Machado (N.D.Cal.1969) 306 F.Supp. 995, 999-1002), although some courts have disagreed and held that this defense would not be permitted (see, e.g., Czepil v. Hershey (7th Cir. 1970) 425 F.2d 251).


The Illinois Supreme Court recognized this exception in Daniels v. Industrial Commission (2002) 201 Ill.2d 160 [775 N.E.2d 936], a case very similar to this one. There, an injured worker obtained worker’s compensation benefits, but a three-member panel of the Industrial Commission (the Illinois agency that reviews worker’s compensation awards) reduced this award. On appeal, the injured worker argued that the three-member panel was improperly appointed. Illinois law requires that the governor appoint Industrial Commission commissioners and limited the commissioners by political party and sets up a careful balance between political parties and employees and employers. (Id. at p. 164 [775 N.E.2d at p. 939].) However, the governor did not appoint two of the three commissioners that reduced the appellant’s award. Instead, the chairman of the Industrial Commission appointed a series of arbitrators as “acting commissioners," a procedure authorized in limited circumstances. (Id. at pp. 162-163 [775 N.E.2d at pp. 938-939].) On appeal, the Illinois Supreme Court noted that the appointments requirements were instituted to protect the litigants, were circumvented here, and thus the de facto officer doctrine did not apply:

“No considerations of public policy militate in favor of preventing workers’ compensation claimants from challenging the legal status of the commissioners who passed on their claims where, as here, the challenge is raised on direct review of the workers' compensation award and the commissioners were appointed in a manner that threatens the Act's basic objectives. (Id. at pp. 166-167 [775 N.E.2d at p. 940].)

A Columbia Law Review note reviewed the history and case law of the de facto officer doctrine, and summarized this limited exception as follows:

“Although the de facto officer doctrine generally denies individuals an interest in enforcing title requirements, the doctrine should not apply when a qualification for a specific office aims to protect the individuals subject to that official’s authority. A breach of these statutes gives individuals a sufficiently personalized injury to challenge official action on the ground of defective title." (Kathryn A. Clokey, Note, The De Facto Officer Doctrine: The Case for Continued Application (1985) 85 Colum. L. Rev. 1121, 1135.)


Other areas of California law strongly suggest that California would recognize this exception. For example, a criminal defendant may challenge his conviction on the ground that the prosecutor improperly excused jurors on account of their race. (See generally People v. Wheeler (1978) 22 Cal.3d 258; accord Batson v. Kentucky (1986) 476 U.S. 79 [106 S.Ct. 1712, 90 L.Ed.2d 69].) However, if a jury is formed after a prosecutor excused potential jurors on account of their race, the jurors — who are “in possession of an office" and “ostensibly exercising their functions lawfully and with the acquiescence of the public" — are nonetheless de facto judicial officers. They are exercising the judicial function of deciding disputed factual issues and rendering a verdict, they are treated as jurors by the judge and attorneys, they took the oath of office, and they received payment (albeit not much) for their services. If the de facto officer doctrine applied in all cases, it would apply to these judicial officers. The prosecution could then exclude juror on account of their race and avoid People v. Wheeler by simply citing the de facto officer doctrine. This absurd result can be avoided only if the de facto officer doctrine does not apply when the appointment requirement — here, one free of racial discrimination — is instituted to protect the defendant.

The Court of Appeal rejected this claim. It concluded that the appointment requirements at issue here — that the hearing be conducted by the FPPC itself or the Executive Director who was appointed by the FPPC — were not meant to protect individuals subject to the FPPC’s jurisdiction, since the FPPC had in fact later ratified Mehta’s actions. (Opn. 12-13.)

The Court of Appeal’s analysis is incorrect. As noted above (see Section I.C., ante), the purpose of the requirement that the carefully balanced FPPC or its duly appointed Executive Director conduct hearings is to reduce the likelihood of partisanship and biased decisionmaking. The same is true of the similar appointment requirements in Daniels.


The violation of this rule is not ameliorated by the fact that the FPPC later ratified Mehta’s improper appointment. First, the FPPC only ratified Mehta’s appointment of Tribe and Churchwell, but not Ahuja. (AA 415-416.) Second, putting aside this problem, the FPPC ratified these actions after the litigation in this case began. At that point, the FPPC might have felt both internal and external pressure not to abandon the $808,000 order as well as all of the other orders entered by these FPPC officials, even if the FPPC was displeased with some of the decisions they entered. The administrative cost of retrying these hearings would have been tremendous.

The law in this area is confused. There are good policy reasons why California should follow Illinois and several federal courts and adopt this important limited exception to the de facto officer doctrine, and People v. Wheeler and cases following it seem to suggest that California has already done so. But no California case has explicitly adopted this exception, and the Court of Appeal’s opinion in this case simply creates additional confusion by relying on unpersuasive distinctions.

 

E This Court Should Grant Review To Determine If California Will Follow Several Federal Courts And Abandon The De Facto Officer Doctrine.


Several federal courts have abandoned the de facto officer doctrine entirely. In Silver v. United States Postal Service (9th Cir.1991) 951 F.2d 1033, the Ninth Circuit noted that only two federal circuits had adopted the doctrine, one circuit had limited the doctrine, and the United State Supreme Court in two cases had entertained challenges based on the Appointments Clause without considering the de facto officer doctrine. (Id. at p. 1036 fn. 2.) Similarly, in U.S. v. Gantt (9th Cir. 1999) 194 F.3d 987, the Ninth Circuit stated, “[f]ollowing the modern trend we choose not to ratify the actions of an improperly appointed officer of the United States under the ancient ‘de facto officer’ doctrine." (Id. at p. 998.) In both cases, the Ninth Circuit refused to apply the doctrine and reached the merits of whether the officer had been properly appointed.

There are two fundamental problems with the de facto officer doctrine. First, it gives no weight to the party’s and the public’s interest in seeing that appointment requirements are met. Second, since no particular individual has an incentive to pursue a quo warranto action seeking to remove an improperly appointed officer, the doctrine allows such officers to retain their office without meaningful consequences. The defendants here recognize that not applying the doctrine could allow for some otherwise proper government orders to be invalidated. But in numerous areas of the law, we tolerate other social costs to protect an important right.[5] And courts and other government officials respond to these protections by making sure that these rights are protected. Here, we should tolerate the costs of an occasionally invalidated order to protect society’s right to see that its government officers are properly appointed.

This court should grant review to determine whether California will follow these federal authorities, will limit or clarify the doctrine as discussed above, or will retain the doctrine.


II. THIS COURT SHOULD GRANT REVIEW TO DETERMINE WHETHER CALIFORNIA WILL ADOPT THE LIMITATION ON THE EXHAUSTION OF JUDICIAL REMEDIES DOCTRINE SET FORTH BY THE WISCONSIN SUPREME COURT.

The Court of Appeal never reached the merits of whether the fine was unconstitutionally excessive. Instead, it held that the defendants could not assert this claim since they had failed to exhaust their judicial remedies. “[U]nless a party to a quasi-judicial proceeding challenges the agency’s adverse findings made in that proceeding, by means of a mandate action in superior court, those findings are binding in later civil actions. [Footnote omitted]." (Johnson v. City of Loma Linda, supra, 24 Cal.4th 61, 69-70.)


The doctrine is typically used against a plaintiff who is suing an administrative agency. However, the Wisconsin Supreme Court has held that courts have the limited discretion not to apply the doctrine when an agency sues a “reluctant defendant." In Trager, supra, 118 Wis.2d 204 [346 N.W.2d 756], a zoning board found that defendant Trager’s garage violated a recently enacted zoning ordinance; Trager did not file a petition for writ of administrative mandamus challenging this order. The county then sued Trager seeking a mandatory injunction that he remove his garage. Trager defended against this claim on the ground that the ordinance did not apply to him. On appeal, the Wisconsin Supreme Court held that Trager could assert this claim, even though he had failed to exhaust his judicial remedies. The court noted that in many cases the party challenging the order is suing, but in some cases “the administrative agency initiates a civil proceeding to enforce the agency’s decision and the party aggrieved by the decision has not sought judicial review pursuant to the statutes but seeks to defend against the enforcement action by challenging the validity of the agency decision." (County of Sauk, supra, 118 Wis.2d at pp. 212 [346 N.W.2d at pp. 760].) “Trager is the reluctant defendant in a court action initiated by the administrative agency." (Id. at 212 [346 N.W.2d at p. 760].)

The Trager court reaffirmed the rule that a writ petition was generally the exclusive method for challenging an administrative agency’s decision. (Trager, supra, 118 Wis.2d at pp. 213-214 [346 N.W.2d at p. 761].) However, it held that a court should permit a defendant in an enforcement proceeding who did not prevail on a writ petition to challenge an administrative decision if, on balance, the following four factors weigh in favor of permitting such a defense: (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].)

The defendants here argued that California should follow Trager, hold that courts had limited discretion to refuse to apply the exhaustion of judicial remedies doctrine against a defendant in an enforcement action. The four Trager factors strongly weigh in favor of allowing the defendants to defend against the FPPC’s enforcement action on the ground that the fine is unconstitutionally excessive. (See AOB 24-28.) However, the Court of Appeal rejected this claim. It concluded that under this court’s opinion in Johnson v. City of Loma Linda, supra, 24 Cal.4th at pp. 69-70, it had no discretion not to apply the exhaustion of judicial remedies doctrine. (Opn. 20-21.)


At least one case holds that California courts will not apply the exhaustion of judicial remedies doctrine in an appropriate case. In Hypolite v. Carleson (1975) 52 Cal.App.3d 566, 584, the Court of Appeal held that the doctrine would not be applied to plaintiffs in class action suit, almost all of whom had not exhausted their judicial remedies, because doing so “would also render a class action, which we have held to be proper in the present case, both unnecessary and meaningless." This case holds the doctrine is discretionary under the appropriate circumstance, but the Court of Appeal’s opinion here holds that it is not discretionary. Moreover, the reasoning of the Wisconsin Supreme Court in Trager is persuasive. This court should grant review to resolve this conflict, decided whether the doctrine is discretionary under the appropriate circumstance, and decide whether California will follow the holding of the Wisconsin Supreme Court in Trager.

 

III. THIS COURT CAN RESOLVE THE UNCERTAINTY OVER WHAT PROCEDURAL BARS APPLY TO GOVERNMENT CODE, SECTION 91013.5 ACTIONS.

As discussed in detail above, the Court of Appeal’s resolution of several of the issues in this case required that it interpret Government Code, section 91013.5. This statute allows the FPPC to enforce a fine by filing a separate civil action and show that it imposed the fine pursuant to the procedures of the PRA and its regulations. However, by the time the FPPC brings such an action, the defendants must necessarily have lost the underlying FPPC hearing and either lost or not brought a petition for writ of administrative mandamus. A variety of procedural bars — like the exhaustion of judicial remedies doctrine and collateral estoppel — prevent a party who lost an administrative hearing and failed to prevail on a petition for writ of administrative mandamus from later challenging the results of the underlying hearing. If these doctrines apply and the defendant cannot even assert that the proper procedures were not followed, the defendant in an FPPC enforcement action will always lose. This will render the requirement in Government Code, section 91013.5 meaningless.


The legislature has allowed other administrative agencies to enforce an order by filing a certified copy with the court clerk that then functions as an enforceable judgment. (See, e.g., Health. & Saf. Code, § 25184.1; Food & Agr. Code, § 12999.5, subd. (a); Wat. Code, § 13328.) The legislature did not do so here, and this implies that the legislature intended the courts to exercise some meaningful oversight or review of the FPPC’s actions before allowing the FPPC to enforce its orders. Since the FPPC regulates core protected political speech, the legislature presumably want some meaningful judicial review of the FPPC’s orders before permitting it to enforce fines imposed on people and groups based on their political activities.

The regulation of political speech is inherently important, and an unclear statute can create great harm. By granting review and clarifying this enforcement statute, this court can give critical guidance to both the FPPC and people and groups engaged in political campaigns and subject to their jurisdiction.

 

CONCLUSION

For the reasons set forth above, this court should grant the petition for review.

 

 

Respectfully submitted,

 

Dated: July 7, 2003 ___________________________________

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 petition for review contains 8222 words.

 

Respectfully submitted,

 

Dated: July 7, 2003 ___________________________________

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.............................................................................. iv

INTRODUCTION and ISSUES PRESENTED................................................ 1

 

STATEMENT OF FACTS AND PROCEDURAL HISTORY....................... 5

 

A. The Political Reform Act of 1974............................................... 5

 

B. CAC Violated Reporting and Recordkeeping Requirements..... 8

 

C. In Violation of Government Code, Section 83107, The Chairman of the FPPC Acting Alone Purports To Delegate To Three FPPC Senior Staff Members The Authority To Act As Executive Director........................................................................ 8

 

D. Ahuja Finds Probable Cause To Find That CAC Committed 404 Election Law Violations. 9

 

E. Again In Violation of Government Code, Section 83107, The Chairman of the FPPC Acting Alone Purports To Delegate To Tribe and Churchwell — Two Members of the FPPC Staff — The Authority To Act As Executive Director.............................. 9

 

F. Ahuja Finds Probable Cause To Find That CAC Committed 404 Election Law Violations........................................................................................................ 10

 

G. The FPPC Sues Howard, Cicero, and CAC............................... 11

 

H. The FPPC Appoints Tribe and Churchwell As Acting Co-Executive Directors and Ratifies Mehta’s Earlier Delegation of Authority to Them. The FPPC Does Not Purport to Ratify Mehta’s Improper Delegation of Authority to Ahuja............... 11

 

I. The Trial Court Dismisses The Defendants’ Writ Petition For Failure to Prosecute and Grants Summary Judgment for the FPPC. ............................................ 12

 

J. After Supplemental Briefing on the De Facto Officer Doctrine, The Court of Appeal Affirms........................................................................................................ 13

 

LEGAL DISCUSSION...................................................................................... 15

 

I. THIS COURT SHOULD GRANT REVIEW TO CLARIFY FOUR IMPORTANT ASPECTS OF THE DE FACTO OFFICER DOCTRINE........................................................ 15

 

A. The De Facto Officer Doctrine.................................................. 15

 

B. The Court of Appeal’s Opinion Creates Conflict and Confusion By Implicitly Overruling A Line of Improper-Delegation Cases.......................................... 16

 

C. The Court of Appeal’s Opinion Creates a Conflict Over The Meaning of “Collateral Attack" For Purposes of the De Facto Officer Doctrine...................... 18

 

D. The Court of Appeal’s Opinion Reflects The Uncertainty About Whether California Law Recognizes That The De Facto Officer Doctrine Does Not Apply Where The Appointment Requirements Were Enacted To Protect People Subject To The Officer’s Authority. 20

 

E. This Court Should Grant Review To Determine If California Will Follow Several Federal Courts And Abandon The De Facto Officer Doctrine.............. 24

 

II. THIS COURT SHOULD GRANT REVIEW TO DETERMINE WHETHER CALIFORNIA WILL ADOPT THE LIMITATION ON THE EXHAUSTION OF JUDICIAL REMEDIES DOCTRINE SET FORTH BY THE WISCONSIN SUPREME COURT........................... 26

 

III. THIS COURT CAN RESOLVE THE UNCERTAINTY OVER WHAT PROCEDURAL BARS APPLY TO GOVERNMENT CODE, SECTION 91013.5 ACTIONS............... 28

 

CONCLUSION.................................................................................................... 29

 

CERTIFICATE REGARDING WORD COUNT................................................ 30

 

 

 




TABLE OF AUTHORITIES

 

Cases

 

Batson v. Kentucky (1986)

476 U.S. 79 [106 S.Ct. 1712, 90 L.Ed.2d 69] ..................................... 23

 

County of Sauk v. Trager (1984)

118 Wis.2d 204 [346 N.W.2d 756]........................................ 4, 5, 26‑28

 

Czepil v. Hershey (7th Cir. 1970)

425 F.2d 251............................................................................................ 21

 

Daniels v. Industrial Commission (2002)

201 Ill.2d 160 [775 N.E.2d 936]..................................................... 21‑23

 

Elliott v. Van Delinder (1926)

77 Cal.App. 716....................................................................................... 16

 

Ensher, Alexander & Barsoom v. Ensher (1965)

238 Cal.App.2d 250.......................................................................... 15, 16

 

Fair Political Practices Commission v. Californians Against Corruption (2003)

109 Cal.App.4th 269....................................................................... passim

 

Hypolite v. Carleson (1975)

52 Cal.App.3d 566............................................................................ 27, 28

 

In re Redevelopment Plan for Bunker Hill (1964)