Pennsylvania Case of the Month: Commonwealth Court Finds Bias Claims Must Be Raised First Before Hearing Tribunal

February 2011Newsletters In the Zone

In HYK Construction Company, Inc. v. Smithfield Township et. al, 8 A.3d 1009 (Pa. Commw. November 19, 2010), the Commonwealth Court of Pennsylvania relied on prior case law to determine that where a conflict of interest or appearance of impropriety has been found, the prevailing remedy is and has been to remand the matter to the hearing tribunal (in this case, the Board of Supervisors of Smithfield Township) to conduct a new hearing. It reasoned if the courts became involved every time a party alleges of bias, the courts, rather than the board, would be reviewing conditional use applications, and it would create infinite challenges to interlocutory determinations and defeat or, at the very least disrupt, the Commonwealth’s structure for review of zoning decisions by local boards and governing bodies.

In this case, HYK Construction Company, Inc. (HYK) filed a conditional use application on April 3, 2007, with Smithfield Township to construct and operate a concrete manufacturing facility. Hearings before the Board of Supervisors of Smithfield Township, which is the governing body of the township, commenced on June 7, 2007. The Smithfield Township Environmental Advisory Council (EAC), along with approximately 75 neighbors, was granted party status by the board.

While the hearings before the board were proceeding, HYK filed a complaint on May 9, 2008, in the Court of Common Pleas of Monroe County seeking declaratory and equitable relief. HYK alleged it was improper for the EAC to participate as a party because it was funded by the township to prepare evidence, expert opinion and argument, presumably contrary to the application, and its right to a fair and impartial hearing was abrogated on this basis. HYK requested the trial court void the ongoing conditional use hearings before the board, preclude and enjoin the board from hearing the application, appoint a neutral hearing examiner to rule on the application and preclude EAC from participating as a party. The trial court ruled in favor of HYK, and the township and board appealed.

The township, board and EAC contended the trial court erred in finding it had equity jurisdiction because HYK failed to utilize and exhaust an exclusive statutory remedy set forth in the Municipalities Planning Code (MPC), and HYK’s equity action amounted to an improper interlocutory appeal from the determinations of the board. HYK countered that the mere potential for bias or the appearance of nonobjectivity was enough to constitute a violation of due process and necessitated the trial court’s action to remove the matter from the board.

The procedures for a land use appeal set forth in Article X-A of the MPC are “the exclusive mode for securing review of any decision rendered pursuant to Article IX [Zoning Hearing Board and other Administrative Proceedings] or deemed to have been made under this act.” Section 1001-A of the MPC, 53 P.S. § 11001-A (emphasis added). It is well-settled that where the General Assembly provides a “statutory remedy which is mandatory and exclusive, equity is without power to act.” DeLuca v. Buckeye Coal Company, 345 A.2d 637 (Pa. 1975). A fair trial conducted in a fair tribunal is a basic and fundamental requirement of due process. Horn v. Township of Hilltown, 337 A.2d 858 (Pa. 1975).

For example, in Horn, the Pennsylvania Supreme Court held it was improper for the same individual to serve as a zoning board’s solicitor and to appear before that same zoning board as the municipality’s solicitor to oppose an application for a variance. The Supreme Court found such a procedure to constitute a denial of due process, even though there had been no showing of actual prejudice to the applicant resulting from the solicitor’s dual role. The Court explained “a governmental body charged with certain decision-making functions ... must avoid the appearance of possible prejudice, be it from its members or from those who advise it or represent parties before it.”

Similarly, in Newtown Township Board of Supervisors v. Greater Media Radio Co., 587 A.2d 841 (Pa. Commw. 1991), the Commonwealth Court held the board failed to keep its role as an unbiased tribunal where the township’s solicitor served as a legal adviser to the board of supervisors while also representing the township at the hearing in opposition to a conditional use application. Despite agreeing with the trial court that the procedures used by the board were prejudicial to the applicant, it found the trial court erred in disregarding this irregularity and deciding the case on its merits. “The appropriate action would have been to remand the matter to the Board, with an order to conduct new public hearings in a manner which is in accordance with its role as an impartial decision-making tribunal.”

In Lyness v. State Board of Medicine, 605 A.2d 1204 (Pa. 1992), the Supreme Court held that because the members of the State Board of Medicine made both the decision to prosecute and the final adjudication to revoke a physician’s license to practice medicine, they impermissibly commingled their functions and violated the physician’s due process right to a fair and impartial tribunal. The Court noted the defect can be readily cured by placing the prosecutorial functions in a group of individuals or entity distinct from the board that renders the ultimate adjudication. The Court remanded the matter to the board for further proceedings in accordance with its opinion. In Stone and Edwards Insurance Agency, Inc. v. Department of Insurance, 636 A.2d 293, (Pa. Commw.), aff’d 648 A.2d 304 (Pa. 1994), the Commonwealth Court opined that a single administrative agency may exercise both prosecutorial and adjudicative functions if “walls of division” are constructed within an agency that clearly separate those two functions.

In HYK, the exclusive mode of review for a conditional use application is before the board. While HYK filed its conditional use application with the Board, it failed to exhaust this exclusive statutory remedy, claiming the remedy is inadequate. In its complaint, HYK asserted the board cannot sit as an impartial adjudicator of a conditional use application while at the same time funding the EAC to participate as a party litigant and likely adversary to the application. HYK also asserted that by funding EAC’s preparation of evidence, expert opinion and argument, presumably contrary to the application, the board created a potential conflict of interest. HYK maintains its equity action was necessary to avoid the potential bias and the appearance of nonobjectivity of the board based upon the board’s relationship with the EAC.

In hearing the appeal, the Commonwealth Court determined the facts of the instant case failed to rise to the level necessary to invoke equity. It reasoned there was not the same commingling of prosecutorial and adjudicative functions as contemplated in Lyness and Stone. The court noted that, while the EAC is funded by the township and was granted party status by the board, it is a separate and distinct entity from the board. Thus the court determined the requisite walls of division were in place to overcome any appearance of impropriety. To the extent any similarity could be drawn between EAC’s role in this matter and the solicitor’s role in Horn and Newtown, the court noted that even HYK conceded the apparent conflict of interest could be remedied by the removal of the EAC as a party litigant, which issue was required to be raised before the board in order to preserve it for appeal.

The court noted, as illustrated by the prior cases, that where a conflict of interest or appearance of impropriety has been found, the prevailing remedy has been to remand the matter to the hearing tribunal to conduct a new hearing as an impartial decision maker. The court believed HYK’s equity action represented an improper attempt to circumvent the mandatory statutory review process. The court noted that to allow equity jurisdiction to usurp the power of the board would create infinite challenges to interlocutory determinations and defeat or, at the very least disrupt, the Commonwealth’s structure for review of zoning decisions by local boards and governing bodies. It reasoned if the courts became involved every time a party makes an allegation of bias, the courts, rather than the board, would be reviewing conditional use applications. The court concluded any claims of unfairness or bias should be raised first before the hearing tribunal (in this case the board) and then ultimately on appeal. Otherwise such claims may be deemed waived.

For more information, please contact Ellen M. Enters at 610.397.6505 or [email protected].