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FELIX ABRAMOVICH v. PENNSYLVANIA LIQUOR CONTROL BOARD AND W. W. ANDERSON (07/03/80)

SUPREME COURT OF PENNSYLVANIA


decided: July 3, 1980.

FELIX ABRAMOVICH, INDIVIDUALLY AND T/A ABRAMS STORAGE COMPANY, APPELLANT,
v.
PENNSYLVANIA LIQUOR CONTROL BOARD AND W. W. ANDERSON, DEPUTY ATTORNEY GENERAL OF THE COMMONWEALTH OF PENNSYLVANIA

No. 42 May Term, 1979, Appeal from Order of Commonwealth Court dated April 5, 1979 at No. 37 T.D. 1978, wherein the Commonwealth Court affirmed the Opinion of the Court of Common Pleas of Dauphin County at No. 3661 Equity 1977.

COUNSEL

Robert G. Sable, Pittsburgh, for appellant.

Kenneth Makowski, Harrisburg, for appellee.

Eagen, C. J., and O'Brien, Roberts, Nix, Larsen, Flaherty and Kauffman, JJ.

Author: Roberts

[ 490 Pa. Page 292]

OPINION OF THE COURT

We are asked to decide whether, in a Pennsylvania Liquor Control Board statutory proceeding, an individual who acted as legal counsel to the PLCB may also act as arbitrator. We conclude that the individual so acting may not arbitrate the dispute. Thus we reverse the Commonwealth Court order affirming the arbitration award.

Appellee Pennsylvania Liquor Control Board contracted with appellant Felix Abramovich for the distribution of liquor and supplies in the northwestern region of the Commonwealth. Shortly after the contract was executed, appellant experienced a labor dispute which threatened his ability to perform under the contract. Appellant settled the dispute, but incurred additional labor expenses as a result. Pursuant to paragraph 42 of the contract, appellant sought an adjustment for the increased labor costs.*fn1 The PLCB denied appellant's request.

[ 490 Pa. Page 293]

As required under paragraph 41 of the contract, appellant requested a hearing before the Attorney General.*fn2 The Attorney General appointed appellee, Deputy Attorney General W. W. Anderson, to act as the sole arbitrator of the dispute. Appellant did not know that Anderson was the Deputy Attorney General assigned to the PLCB.

Pursuant to his representation of the Board, Anderson consulted with members of the Board as their legal counsel. Anderson wrote opinions of the Attorney General on issues involving the PLCB. On behalf of the PLCB, Anderson reviewed all contracts exceeding $500,000, like the contract involved here. Finally, Anderson's representation of the Board required him to review and to approve contract language identical to that presently placed in controversy by appellant.

While this arbitration proceeding was pending, Anderson met with the Board's counsel assigned to this case and also met with various employees of the Board. At those meetings Anderson discussed both the possibility of settling this controversy and the financial status of appellant's business. Prior to the arbitration hearing, Anderson failed to disclose this past and continuing relationship with the Board because he "did not consider it to be an issue." Once

[ 490 Pa. Page 294]

    informed of Anderson's involvement with the PLCB, appellant challenged Anderson's appointment as hearing officer.*fn3

On May 6, 1978, after the arbitration hearing, Anderson denied appellant's claims and entered an award in favor of the PLCB. Appellant's petition for reconsideration was denied and appellant petitioned for review in the Commonwealth Court. That court declined jurisdiction and transferred the case to the Court of Common Pleas of Dauphin County. See Act of April 25, 1927, P.L. 381, as amended, 5 P.S. § 161 et seq. The common pleas court denied appellant's petition for review. An appeal improperly taken to the Superior Court was transferred to the Commonwealth Court. After argument a three judge panel affirmed, without opinion, the trial court's denial of relief. We granted allowance of appeal.

In an arbitration proceeding a party is entitled to a "full and fair" hearing. Smaligo v. Fireman's Fire Insurance Co., 432 Pa. 133, 247 A.2d 577 (1968). As this Court has previously held, procedural due process requires that a fair hearing be conducted by one not involved with a party to the proceeding. See Dussia v. Barger, 466 Pa. 152, 351 A.2d 667 (1976) (unconstitutional commingling of investigative and adjudicative functions where Commissioner of State Police had sole discretion to investigate and determine guilt of state trooper).*fn4 By statute our Legislature has also recognized

[ 490 Pa. Page 295]

    the importance of impartial arbitrators, allowing parties to challenge the award on grounds of the arbitrator's partiality. Section 10(b) of the Act of April 25, 1927, P.L. 381, 5 P.S. § 170(b) provides:

"In either of the following cases the court shall make an order vacating the award upon the application of any party to the arbitration:

(a) . . .

(b) Where there was evident partiality or corruption on the part of the arbitrators, or any of them.

(c) . . .

(d) . . ."

See also Commonwealth Coatings Co. v. Continental Casualty Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968); 11 Standard Pa.Prac. Ch. 49, § 78. This requirement of an impartial arbitrator is even more compelling where, as here, a party contracting with the Commonwealth must consent to arbitration as the method of resolving disputes. See Act of April 25, 1927, P.L. 381, § 16, 5 P.S. § 176; Pennsylvania Turnpike Commission v. Sanders & Thomas, Inc., 461 Pa. 420, 336 A.2d 609 (1975).*fn5

On this record we cannot permit the arbitration award entered by Mr. Anderson to stand. Not only was Mr. Anderson intimately associated with the agreement he was to review, Mr. Anderson also disclosed that he had discussed several aspects of this particular case with members of the Board and the Board's counsel. Discussions of this nature, absent the inclusion of counsel for both parties, are highly inappropriate in an adjudicatory proceeding. Compare

[ 490 Pa. Page 296]

Pennsylvania Human Relations Commission v. Feeser, 469 Pa. 173, 364 A.2d 1324 (1976) (no contact between arbitrator and agency). We must therefore vacate the arbitration award in favor of the PLCB.*fn6

Order of the Commonwealth Court reversed and the arbitration award is vacated.


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