Rendell v. Pennsylvania State Ethics Commission

OPINION BY

President Judge LEADBETTER.

Petitioners, Edward G. Rendell, Governor of the Commonwealth of Pennsylvania (Governor), Michael DiBerardinis, the Secretary of the Department of Conservation and Natural Resources (DCNR) (Secretary DiBerardinis), and Kathleen A. McGinty, the Secretary of the Department of Environmental Protection (DEP) (Secretary McGinty), have filed an Application for Summary Relief in this court’s original jurisdiction, seeking declaratory judgment regarding the interpretations and applications of the Public Official and Employee Ethics Act (Ethics Act)¹ in the above-consolidated matter with respect to two issues, namely, whether non-profit organizations may be included in the definition of “business” in Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102; and, if so, whether the Ethics Act requires the Governor to appoint a person outside the Department head’s chain of command when the Department head has a conflict of interest.

In response, the Ethics Commission has filed an Answer to the Governor’s Application for Summary Relief and also a Cross-Application for Summary Relief requesting that this court enter judgment in its favor with respect to the same two issues now before us.

Before addressing these issues, a review of the underlying facts is necessary for a proper understanding of our disposition of this case. Pursuant to Section 1107 of the Ethics Act, 65 Pa.C.S. § 1107,² General Counsel Barbara Adams requested an opinion or advice of counsel from the Ethics Commission regarding Secretary McGinty. In her letter regarding Secretary McGinty, Adams explained that DEP administered many grant programs to assist businesses, non-profit entities and individuals with environmental issues, one of which was the Growing Greener Watershed Restoration and Protection Grant Program (Growing Greener). All grants under the Growing Greener program are awarded through a publicly noticed, competitive process that requires the submission of a grant application, evaluation of the application by DEP personnel, and a decision to award or not award a grant under the program. The Pennsylvania Environmental Council (PEC), a non-profit organization, received more than $6.5 million in grants from DEP between 1995 and 2002. Enterprising Environmental Solutions, Inc. (EESI), an organization established and controlled by PEC, has received more than $600,000.00 in grants from DEP. Adams stated that DEP anticipated that both PEC and EESI will continue to seek new grants under the Growing Greener program as well as possibly seeking amendments to existing Growing Greener grants. Adams further explained in her letter that Dr. Karl Hausker, a nationally recognized consultant on environmental matters and Secretary McGinty’s husband, has in the past acted as a consultant to both PEC and EESI on projects for which they were awarded Growing Greener grants, and that DEP expected Dr. Hausker to be asked to do future consulting work for either PEC, EESI, or some other grant recipient. Adams explained that Secretary McGinty’s role was limited to reviewing and approving a list of proposed grant awards which had already been initially approved by other DEP officials, including the Regional Watershed Managers, the Central Office Watershed Management Staff, the District Mining Office Watershed Managers, and staff from the Grants Center. Given these facts, Adams requested an opinion as to whether Secretary McGinty’s involvement in the grant award process would give rise to a conflict of interest under Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a).³

In a separate letter, Adams requested an opinion or advice of counsel from the Ethics Commission regarding Secretary DiBerardinis. Adams stated that DCNR, through its Bureau of Recreation and Conservation, has awarded numerous grants under the Community Conservation Partnerships Program to municipalities and non-profit organizations alike for a variety of community conservation projects. Similar to the grants awarded by DEP under the Growing Greener program, the Community Conservation grants are awarded through a publicly noticed, competitive process that involves the submission of a grant application, evaluation by DCNR personnel, and a decision to award or not award a grant under the program. One such grant recipient was the Pennsylvania Horticultural Society (PHS), a non-profit organization, which has receivéd $1.5 million for a tree cover program called “TreeVitalize.” Adams further stated that one of PHS’s fourteen managers is Joan Reilly, the wife of Secretary DiBerardinis, and that Reilly manages the PHS program called “Philadelphia Green,” a program which supports community gardens, neighborhood parks and high-profile public green spaces in Philadelphia, but which does not manage or have any direct involvement in the TreeVitalize program. Again, based on these facts, Adams requested an opinion as to whether it would be a violation of the Ethics Act for Secretary DiBerardinis to participate in the grantmaking process.

On April 30, 2007, the Ethics Commission issued two advisory opinions in response to Adams’s letters. In the McGinty Opinion, the Ethics Commission concluded that Secretary McGinty would have a conflict of interest if she participated in the grantmaking process and that such participation would constitute a use of her authority which would result in a private pecuniary benefit under the Ethics Act. The Ethics Commission recommended that, in order for Secretary McGinty to avoid a conflict of interest under the Ethics Act, “the Governor could designate someone not within the Secretary’s chain of command to perform the Secretary’s role as to the prospective grants in question, as well as the grant applications of competitors for the Growing Greener Watershed Program grant monies.” McGinty Opinion, Opinion 07-009, at 12. The Ethics Commission also stated that Secretary McGinty could not select the person to take her place in the grantmaking process and that she would need to be “removed/insulated from any involvement in the grant process in question, as well as any access to confidential/non-public information involving the grant process, such as, for example, ratings, evaluations and recommendations by DEP staff members involved in the grant process.” Id.

In the second opinion, the DiBerardinis Opinion, Opinion 07-010, the Ethics Commission concluded that Secretary DiBer-ardinis would have a conflict of interest under the Ethics Act as to a proposed grant from DCNR to PHS because PHS employs his wife. Further, the Ethics Commission concluded that PHS, as a non-profit organization, was a “business” as that term is defined in Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102.⁴ The Commission concluded that Secretary DiBerardinis could avoid a conflict of interest under the Act if the Governor “would designate someone not within the Secretary’s chain of command to perform the Secretary’s role as to the proposed PHS grant as well as the grant applications of competitors for the grant program grant monies.” DiBerardinis Opinion, Opinion 07-010, at 12. In addition, the Commission recommended steps similar to that in the McGinty Opinion for Secretary DiBer-ardinis to avoid a conflict of interest.

The Governor and each Secretary filed a “Petition for Review in the Nature of an Appeal of an Opinion of the Pennsylvania State Ethics Commission and in the Nature of an Action for Declaratory Judgment” with respect to both advisory opinions. A responsive Motion to Quash and Preliminary Objections were filed by the Commission and, thereafter, this court granted the Commission’s Motion to Quash and also overruled in part and sustained in part the Commission’s Preliminary Objections. We allowed the Governor’s declaratory judgment action to proceed as to the limited issues of whether a non-profit organization may be included in the definition of “business” under the Ethics Act and whether, when a department head is affected by a conflict of interest, the Ethics Act requires the Governor to appoint a person outside the department head’s chain of command in order to avoid the conflict of interest.

Summary relief in the form of judgment on the pleadings pursuant to Rule 1532(b) of the Pennsylvania Rules of Appellate Procedure, Pa. R.A.P. 1532(b), states that we “may on application enter judgment if the right of the applicant thereto is clear.” In Fisher v. Commonwealth, 926 A.2d 992, 994 n. 6 (Pa.Cmwlth.2007) (citations omitted), we stated the standard under which we review such applications:

Summary relief is proper where the moving pai’ty establishes the case is clear and free from doubt, there are no genuine issues of material fact to be tried, and the movant is entitled to judgment as a matter of law. When ruling on a motion for judgment on the pleadings in our original jurisdiction, we must view all of the opposing party’s allegations as true, and only those facts that the opposing party has specifically admitted may be considered against the opposing party. We may only consider the pleadings themselves and any documents properly attached thereto. A party’s motion for judgment on the pleadings will only be granted when there is no issue of material fact and the moving party is entitled to judgment as a matter of law.

Both sides having agreed that there are no issues of material fact and that the issues are purely legal, we will proceed to a review of the cross-applications for summary relief.

The Governor argues that a nonprofit organization is not a “business” under the Ethics Act and that we are bound by the Supreme Court’s decisions in In re Nomination Petition of Timothy J. Carroll, 586 Pa. 624, 896 A.2d 566 (2006) (finding that the Act did not require Carroll to disclose his “interest” in the non-profit Mayors Club), and Pilchesky v. Cordaro, 592 Pa. 15, 922 A.2d 877 (2007) (candidate failed to disclose his directorship in a for-profit community bank, and to that extent, candidate’s reliance on Carroll was misplaced because that case explained that a non-profit was not a “business”). The Governor further argues that the Commission is not free to sidestep the holding in Cartvll and that unless or until the Supreme Court overrules its own precedent or the legislature sees fit to amend the Ethics Act, the fact remains that Carroll is controlling.

According to the Commission, Carroll is not controlling, because there the court did not definitively hold that non-profits are not “businesses” under the Ethics Act; the court merely construed the definition of “business” under the Ethics Act in a way most favorable to the candidate in order to promote the express purpose of the Election Code, which is to protect a candidate’s right to run for office and, concomitantly, the voters’ right to elect the candidate of their choice. Moreover, the Commission argues that because Carroll and Pilchesky involve election matters, we can distinguish them from conflict of interest issues. Specifically, because election matters are decided in the narrow context of the Election Code and during the frenzy of the election season, the Commission argues that their holdings should be limited to election cases. The Commission also argues that with a conflict of interest, we must keep in mind the broader purpose of the Ethics Act, which seeks to “strengthen the faith and confidence of the people ... in their government ... by assuring [them] of the impartiality and honesty of public officials,”⁵ and accordingly, this court should construe the definition of “business” to include non-profits in order to promote complete financial disclosure.

Finally, the Commission argues that, as the administrative agency charged with overseeing the implementation of the Ethics Act, its interpretation of the definition of “business” is entitled to great deference. Therefore, the Commission argues, had the court in Carroll known that since 1989 the Commission has interpreted the definition of “business” in the Ethics Act to include non-profits, citing Confidential Opinion, 89-007 (1989); McConahy Opinion, 96-006 (1996); Soltis-Sparano, Order 1045 (1997); and Maduka, Order 1277 (2008), the court would have deferred to its interpretation and ruled accordingly.

In his reply brief, the Governor argues that the Commission’s attempts to distinguish Carroll and its progeny on the grounds that they are election cases, are unavailing. This is because, the Governor asserts, the Commission ignores the fact that the statute being interpreted in each instance is Section 1102 of the Ethics Act and its definition of “business,” and there is no legal basis to support the Commission’s suggestion that the legislature intended the definition to vary depending upon whether it is an election case or a conflict of interest case. Additionally, the Governor argues that, while the substantive focus of the Ethics Act is on complete disclosure of financial interests, there is also a compelling need for “clear guidelines ... in order to guide public officials and employees in their actions.” 65 Pa. C.S. § 1101.1(a). The Governor further argues that the plain language of the Ethics Act and the applicable rules of statutory construction all compel the conclusion that non-profit organizations are not within the definition of “business” as found in Section 1102 of the Ethics Act. Lastly, the Governor argues that, where the Supreme Court has interpreted a statute, deference to an agency’s contrary interpretation is inappropriate. See Carbondale Nursing Home, Inc. v. Dep’t of Pub. Welfare, 120 Pa.Cmwlth. 186, 548 A.2d 376, 378 (1988).

The Ethics Act is a remedial statute designed to promote the public trust in their government and in their public officials and employees by requiring complete financial disclosure and delineating clear guidelines to guide those public officials and employees in their actions. Section 1103 of the Act sets forth a number of restricted activities that a public official is to avoid, such as a conflict of interest. Section 1102 of the Ethics Act, entitled “Definitions” provides in pertinent part:

“Conflict” or “conflict of interest.” Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated....

65 Pa.C.S. § 1102. The definitions of “business” and “business with which he is associated” also appear in this same section, to wit:

“Business.” 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.

“Business with which he is associated.” Any business in which the person or a member of the person’s immediate family is a director, officer, owner, employee or has a financial interest.

65 Pa.C.S. § 1102.

In Carroll, the court was faced with the issue of whether Carroll’s failure to disclose his unpaid public position as a board member and Assistant Secretary of the Dallas Area Municipal Authority (DAMA) and his uncompensated presidency of the non-profit organization “Timothy J. Carroll’s Mayors Club of Dallas Borough,” was fatal to his nomination petition under Section 1104(b) of the Ethics Act, 65 Pa. C.S. § 1104(b).⁶ After noting that the Ethics Act “is not shrouded in mystery” and that, “the substantive focus of this declaration is on financial interests, and particularly, how complete disclosure of financial interests may further the ‘public trust,’ [and] ‘strengthen the faith and confidence of the people’ in their government,” Carroll, 586 Pa. at 687-38, 896 A.2d at 573-74, our Supreme Court concluded that, “the [Ethics] Act did not require Carroll to disclose his ‘interest’ in the nonprofit Mayors Club.” Id. at 640, 896 A.2d at 575. Although acknowledging that there were two possible constructs of the modifying phrase “organized for profit” in the definition of “business” in Section 1102, the court agreed that Carroll’s reading of the statute to exclude non-profits from the definition of “business” was “in keeping with the purpose of the legislation announced in Section 1101.1” and that it was clear that this definition “intends to cover only for-profit entities.” Id. at 638, 639 n. 10, 640, 896 A.2d at 574 n. 10, 575.

Carroll was followed shortly thereafter by Pilchesky, in which the Supreme Court reinforced its decision in Carroll when it ordered candidate Cordaro’s name stricken from the primary ballot because he failed to disclose on his Statement of Financial Interests his position on the Board of Directors of Landmark Community Bank, a for-profit entity. In a footnote, the Supreme Court explained:

Landmark Community Bank’s status as a for-profit entity renders the Commonwealth Court’s and the trial court’s reliance upon In re Nomination Petition of Carroll, 586 Pa. 624, 896 A.2d 566 (2006), misplaced. See id. at 574-76 (explaining that a non-profit organization does not constitute a business entity under the Ethics Act, removing it from the reporting requirements of Section 1105(b)(8))....

592 Pa. at 16 n. 1, 922 A.2d at 877 n. 1.

We followed Carroll in In re Nominating Petition of Brady, 923 A.2d 1206, 1211 (Pa.Cmwlth.), app. den., 591 Pa. 738, 921 A.2d 498 (2007), in which we stated that, “our Supreme Court held that a non-profit was not a ‘business entity’ because by definition, a non-profit was not organized for profit);,/’ and therefore, “because there is no dispute that the Carpenters Union was a non-profit organization, the trial court properly determined that Candidate was not in violation of the Ethics Act by not listing the Carpenters Union in Box 13.”

We recognize the merit in the Commission’s argument that different policies underlie the Act’s requirements in connection with candidates’ financial interest statements and with avoidance of conflicts of interests by public officials. Nonetheless, while those policies may vary, the term “business” is specifically defined in the Act and our Supreme Court has unequivocally interpreted that definition to include only business entities. We are not free to disregard our Supreme Court’s clear holding on this issue.

Finally, we reject the Commission’s arguments that the decision in Carroll should be limited to election cases because the court was misinformed of the Commission’s own opinions in which it had interpreted the definition of “business” in the Ethics Act to include non-profits.⁷ We decline to speculate about whether our Supreme Court might have reached a different result if it had been aware of the Commission’s view because, for our purposes, that is entirely irrelevant. We are bound by our Supreme Court’s holding, regardless of how it came to its conclusion.

We must also conclude, therefore, that the Secretaries do not have a “conflict of interest” as that term is defined Section 1102 of the Ethics Act. That definition is concerned with the “[u]se by a public official ... of the authority of his office or employment or any confidential information received ... for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated), j”⁸ and because there is no “business” involved where the grants are being made to non-profit entities, it follows there is no conflict of interest.⁹

For the reasons stated above, we grant Petitioners’ application for summary relief and declare that a non-profit corporation is not included in the definition of “business” under Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102.

ORDER

AND NOW, this 3rd day of October, 2008, the application for summary relief filed by Edward G. Rendell, Governor of Pennsylvania, and Michael DiBerardinis, Secretary of Conservation and Natural Resources, and Kathleen A. McGinty, Secretary of Environmental Protection in the above captioned matter, is hereby GRANTED. The application for summary relief filed by the Pennsylvania State Ethics Commission is DENIED.

1 . 65 Pa.C.S. §§ 1101-1113.

2 . This Section provides in pertinent part: “In addition to other powers and duties prescribed by law, the commission shall: ... (10) [i]ssue to any person upon such person’s request or to the appointing authority ... of that person upon the request of such appointing authority ... an opinion with respect to such person’s duties under this chapter.” 65 Pa.C.S. § 1107.

3 .Section 1103(a) states that, "[n]o public official or public employee shall engage in conduct that constitutes a conflict of interest.”

4 . “Business” is defined by the Act as: "[a]ny 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.

5 . See, 65 Pa.C.S. § 1101.1(a).

6 . Section 1104(b) provides in pertinent part that, “[a]ny candidate for a State-level office shall file a statement of financial interests ... with the commission ...” and that, "[n]o petition to appear on the ballot for election shall be accepted by the respective State or local election officials unless the petition has appended thereto a statement of financial interests as set forth in paragraphs (1) and (2)....” 65 Pa.C.S. § 1104(b)(1) and (3). Section 1105(b)(8) requires the candidate to disclose on the statement, ”[a]ny office, directorship or employment of any nature whatsoever in any business entity.” 65 Pa.C.S. § 1105(b)(8) (emphasis supplied).

7 .Prior opinions of the Commission are not binding upon the court. See, e.g., Carbondale Nursing Home, Inc. v. Dep’t of Pub. Welfare, 120 Pa.Cmwlth. 186, 548 A.2d 376, 378 (1988).

8 . 65 Pa.C.S. § 1102.

9 . Because there is no conflict of interest, we need not reach Petitioners’ second issue.