"Regulated Parties Are Always Entitled To Fair Notice What Is Required Or Prohibited" Amen

Allen Matkins

Allen Matkins

The Fifth Amendment to the United States Constitution provides that “no person shall be … deprived of life, liberty, or property without due process of law.”   A  similar due process mandate is imposed on the states by the Fourteenth Amendment.   In the regulatory context, I have long been concerned that due process rights are violated when administrative agencies attempt to establish rules by enforcement.  Thus, I was pleased with the Court of Appeal's opinion in Kerman Telephone Co. v. P.U.C., 2023 WL 5014626.  

The case involved the California Public Utilities Commission's attempt to penalize several rural telephone companies for failure to disclose the amounts that they received for stock redemptions in notices filed with the PUC.  Rule 1.1 of the PUC's Rules of Practice and Procedure prohibits a person who signs a pleading or brief to submit to the Commission from misleading the commission or its staff “by an artifice or false statement of fact or law".   The problem was that the PUC never notified the companies that they were required to do make those disclosures.  The Court of Appeal moreover found that under the facts of the case, the telephone companies "had no basis to infer any disclosure requirement".  Thus, the Court found:

It makes no difference that Petitioners were penalized for violating an agency rule instead of a statute or regulation because the fair notice standard applies just the same.  No matter the type of law an agency is enforcing, regulated parties are always entitled to fair notice of what is prohibited or required before they can be punished for a violation.

The Court reached its decision under federal law.  It issued its opinion earlier this month and certified for publication yesterday. 

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