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Rendell v. Pennsylvania State Ethics Commission

November 30, 2009

EDWARD G. RENDELL, GOVERNOR OF PENNSYLVANIA, AND JOHN QUIGLEY, ACTING PENNSYLVANIA SECRETARY OF CONSERVATION AND NATURAL RESOURCES, APPELLEES
v.
PENNSYLVANIA STATE ETHICS COMMISSION, APPELLANT
EDWARD G. RENDELL, GOVERNOR OF PENNSYLVANIA, AND JOHN HANGER, ACTING PENNSYLVANIA SECRETARY OF ENVIRONMENTAL PROTECTION, APPELLEES
v.
PENNSYLVANIA STATE ETHICS COMMISSION, APPELLANT



Appeal from the Order of the Commonwealth Court at Nos. 268 & 269 MD 2007 dated 10/03/08.

The opinion of the court was delivered by: Mr. Justice Saylor

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.

ARGUED: May 12, 2009

OPINION

This appeal concerns the issue of whether a non-profit corporation is a "business" as the term is defined in Pennsylvania's Public Official and Employee Ethics Act.*fn1

The Ethics Act, among other things, prohibits public officials from engaging in conduct that constitutes a conflict of interest. See 65 Pa.C.S. §1103(a). Such a conflict arises when a public official or public employee uses the authority of his or her office for the private pecuniary benefit of himself, a family member, or a "business with which he or a member of his immediate family is associated." 65 Pa.C.S. §1102. The act defines "business" as:

Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit.

65 Pa.C.S. §1102.

In April 2007, Pennsylvania's General Counsel requested an advisory opinion or advice of counsel from the Pennsylvania State Ethics Commission, inquiring whether, under Section 1103(a) of the Ethics Act, the then-Secretary of the Department of Environmental Protection ("DEP") and Secretary of the Department of Conservation and Natural Resources ("DCNR") were required to recuse themselves from their respective departments' grant-making process due to potential conflicts of interest.*fn2 In DCNR's case, the Secretary's wife was employed by the Pennsylvania Horticultural Society, a non-profit organization that has received grant funding from the DCNR. In DEP's case, the Secretary's husband performed consulting work on projects receiving grants from the DEP. In both instances, the Governor's office believed that recusal was unnecessary, but sought an additional opinion or advice of counsel from the Commission. See 65 Pa.C.S. §1107(10), (11) (authorizing the Commission to provide advice and opinions on such matters).

In advisory opinions, the Commission concluded that both Secretaries would be in violation of the Ethics Act's conflict provision if they participated in their agencies' grant-making processes involving such entities. It recommended that, to avoid such a conflict, the Governor should appoint someone outside each Secretary's chain of command to take his or her place in that process. See In re DiBerardinis, Case No. 07-010 (Pa. Ethics Comm'n Apr. 30, 2007); In re McGinty, Case No. 07-009 (Pa. Ethics Comm'n Apr. 30, 2007).

Both Secretaries, together with the Governor (collectively, "Appellees"), filed petitions for review addressed to both the Commonwealth Court's appellate jurisdiction and to its original jurisdiction. The appellate-jurisdiction petitions sought review of the advisory opinions, alleging that the Commission had committed errors of law and that the opinions would disrupt the effective administration of state government. The original-jurisdiction petitions requested declaratory relief regarding a number of issues raised in the opinions. The Commission filed a motion to quash the appeals and preliminary objections. The petitions were then consolidated for disposition.

Initially, on December 19, 2007, the unanimous en banc Commonwealth Court, see Rendell v. State Ethics Comm'n, 938 A.2d 554 (Pa. Cmwlth. 2007), granted the Commission's motion to quash the appeal, granted the Commission's preliminary objections in part and denied them in part, and permitted the declaratory judgment action to go forward on two substantive questions, namely: (1) whether non-profit organizations are included in the definition of businesses under Section 1102 of the Ethics Act; and (2) whether, when a departmental head has a conflict of interest, the Governor must appoint someone outside the department head's chain of command to avoid the conflict. In response, Appellees and the Commission filed cross-motions for summary relief as to these issues.*fn3

On October 3, 2008, the en banc Commonwealth Court issued a published opinion and order, see Rendell v. State Ethics Comm'n, 961 A.2d 209 (Pa. Cmwlth. 2008), concluding that the term "business," as defined in the Ethics Act, excludes nonprofit entities. In reaching this conclusion, the court relied upon In re Nomination Pet. of Carroll, 586 Pa. 624, 896 A.2d 566 (2006), where this Court suggested that, in the context of required financial disclosures for election matters, a non-profit organization is not a business as defined by the Ethics Act.*fn4 In this respect, the court rejected the Commission's contention that Carroll was not controlling because it did not definitively hold that non-profits are not businesses under the Ethics Act. Although the Commonwealth Court agreed with the Commission that different policies underlie the Act's requirements in connection with candidates' financial interest statements and with the avoidance of conflicts by public officials, it noted that the term "business" is specifically defined in the Act and indicated that it was not free to disregard this Court's interpretation of that term as excluding non-profits. Thus, in view of precedent, the court granted summary relief to Appellees and denied it to the Commission, declaring that the Secretaries would not be under a conflict of interest. See Rendell, 961 A.2d at 216. In light of its disposition, the court declined to reach the second substantive issue --whether the act requires the Governor to appoint someone outside the department head's chain of command in the event of a conflict. See id. at 216 n.9.

Judge Cohn Jubelirer, joined by Judge Leavitt, filed a dissenting opinion, expressing that Carroll had declared "business" to be ambiguous on the issue of whether it included non-profits. The dissent stated that, in election matters, the Act must be read in pari materia with the Election Code, which tempers the definition of "business" to protect voter choice. Here, however, the salient rule of construction is that the Act, as remedial legislation, should be liberally construed to accomplish its goal of avoiding the appearance of impropriety. The dissent pointed out that employees and contractors of non-profit corporations may receive substantial pecuniary gain occasioned by a governmental grant, thus rendering the non-profit versus for-profit status of a corporation immaterial within the framework of the present issue. The dissent would thus have denied declaratory relief to Appellees on the question of the scope of the Act's definition of business. However, the dissent would have granted them relief on the issue of whether the Governor must appoint someone outside of the Secretary's chain of command to perform the grant-making function. In this latter respect, the dissent opined that the Secretary's personal recusal would be sufficient to avoid the conflict of interest, particularly as the Act does not impute a conflict based on a person's being in a chain of command. See id. at 217-19 (Cohn Jubelirer, J., dissenting).

The Commission filed a notice of appeal from the Commonwealth Court's order, limited to the issue of whether the court correctly interpreted "business" to exclude nonprofit entities, and probable jurisdiction was noted.

Presently, the Commission argues that, as remedial legislation designed to promote public trust in government, the Ethics Act should be liberally construed. See Maunus v. State Ethics Comm'n, 518 Pa. 592, 598-600, 544 A.2d 1324, 1327-28 (1988). More specifically, the Commission emphasizes that the General Assembly expressly declared in Section 1101.1(a) of the enactment that its purpose is to assure the citizens of Pennsylvania that the financial interests of their representatives and public servants will not conflict with their duties to the Commonwealth.*fn5 See Brief for Commission at 26. The Commission also argues that, on its face, Section 1102's definition of business expressly includes any corporation and any organization, without qualification. It submits that, in the final phrase of the definition ("or any legal entity organized for profit"), the "or" is disjunctive, and the independent use of the word "any" in this clause precludes an interpretation that would apply the "for profit" qualification to corporations and organizations. Further, the Commission avers that the qualifier "organized for profit" does not apply to "corporation" or "organization," because it does not extend to all of the other preceding entities listed in the definition. As an example, the Commission observes that receiverships are not organized for profit.

The Commission's argument with regard to Carroll is two-fold. First, it contends that the Court in Carroll had been erroneously misinformed that the Commission had no rulings as to whether non-profit entities were considered businesses under the act. Citing several of its previous rulings, the Commission submits that it has consistently interpreted the term "business" as it is defined in Section 1102 to include non-profit corporations and organizations. See Brief for Commission at 29-30. Alternatively, the Commission attempts to distinguish the holding in Carroll by arguing that the Carroll decision did not definitively decide the status of non-profits under the Ethics Act, particularly with respect to situations involving financial interests or relationships. Rather, this Court simply decided that any ambiguity in the definition of "business" should be construed most favorably to candidates seeking ballot access, and that it would not be a fatal defect to a candidate's nomination petition for the candidate to fail to disclose on his Statement of Financial Interests his involvement with a non-profit corporation from which he receives no compensation and that has nothing to do with his financial interests.

Id. at 34 (emphasis is removed). The Commission avers that this factual distinction renders Carroll inapposite to the instant matter. As such, the Commission maintains that Carroll should be distinguished as only applying to election cases involving a candidate's failure to disclose non-financial associations on a Statement of Financial Interests filed with nomination petitions.

In response, Appellees urge this Court to abide by its prior interpretation of the scope of the Ethics Act. In this regard, Appellees rely heavily on Carroll, which they view as holding definitively that Section 1102 excludes non-profit organizations from the statutory definition of "business." In addition to their more general stare decisis argument, Appellees contend that the plain language of the Ethics Act supports the conclusion that non-profit entities are not covered by the statute. Appellees argue that, when several words are followed by a modifying phrase, the natural construction of the language demands that the modifying phrase be read as applicable to all. See Brief for Appellees at 10 (citing Commonwealth v. Rosenbloom Fin. Corp., 457 Pa. 496, 500, 325 A.2d 907, 909 (1974)). Further, Appellees aver that there ...


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