Opinion ID: 1129577
Heading Depth: 1
Heading Rank: 2

Heading: jurisdiction to consider alleged conflict of interest

Text: Appellants next contend that the Commission erred when it ruled it lacked jurisdiction to consider an alleged conflict of interest involving the Attorney General and a principal of Sunflower Racing. On July 9, 1988, the Commission voted to grant conditional organizational and facility licenses to Sunflower and TRAK East and requested its counsel to draft an order containing findings of fact and conclusions of law. On July 15, 1988, appellant KRM submitted a letter to the Commission, alleging improprieties in the licensing process, and requested the letter be filed confidentially. On July 22, 1988, after ruling the letter would be filed publicly, the Commission had the letter read into the record and then ruled it had no jurisdiction to consider the issues raised. It is the appellants' position that the Commission had jurisdiction to hear and decide the allegations raised by the letter under the doctrine of primary jurisdiction, citing Western Kansas Express, Inc. v. Dugan Truck Lines, Inc., 11 Kan. App.2d 336, 720 P.2d 1132 (1986). We disagree. This doctrine only applies to determine jurisdiction between an agency and a court when both have concurrent jurisdiction over an action and thus is not applicable to this case. The doctrine is invoked when the courts have initial jurisdiction over a claim but when it is likely that the action will require resolution of issues which, under a regulatory scheme, have been placed in the hands of the administrative body. The doctrine usually relates to particular issues in the proceeding rather than the entire proceeding and typically operates through a suspension of the judicial process pending referral of such issues to the administrative agency. It is the Commission's position that, since the appellants raised these issues after the Commission had announced its intention to award the conditional licenses to Sunflower and TRAK East, appellants' July 15 letter constituted a request for review of the licensing decision. Since K.S.A. 1988 Supp. 74-8813(v) provides that any act for judicial review shall be by appeal to the Supreme Court, the Commission determined it had no jurisdiction to consider these issues after it announced its intention to license other applicants. The Commission failed to note that K.S.A. 1988 Supp. 74-8813(v) provides that the decision on licensure shall be final upon the grant of a license to one of two or more competing applicants. Therefore, the Commission's decision was not final on July 9 when the Commission voted to grant the licenses to Sunflower and TRAK East. The decision became final on July 22, 1988, when the Commission filed its order. Therefore, the Commission did have jurisdiction to consider the issues raised by appellants' letter. During oral argument to this court, the Commission conceded, even under its interpretation of the Act, that it retained jurisdiction to determine the issues until it granted the final licenses on July 22, 1988. In addition, jurisdiction for the Commission to review a license after it has been granted is contained in the Act, specifically K.S.A. 1988 Supp. 74-8813(i), which provides that the Commission may review an organization license more often than annually upon its own initiative or upon the request of any interested party. The legislature intended that the Commission have continuing jurisdiction to review a license if there are claims that the license holder has failed to comply with all the provisions of the law or the Commission's rules and regulations, or has failed to meet the statutory requirements for the issuance of a license. This statutory authority makes such review discretionary with the Commission. Therefore, the Commission does indeed have statutory jurisdiction to consider issues concerning the qualifications of an applicant for a license raised after the order granting the license becomes final. We now must consider the substance of appellants' July 15 letter in which KRM alleged a conflict of interest between Attorney General Robert T. Stephan and a principal of Sunflower, R.D. Hubbard; bias on the part of Assistant Attorney General Janet A. Chubb; an improper connection between Sunflower and a funding source identified as Delaware North; and that the appellees had been whitewashed and the appellants blackwashed in the licensing process. Appellants requested a second background check to be performed by the Kansas Highway Patrol, an opportunity to review the KBI investigations, an opportunity to present evidence, an identification of the source of all loans, an examination into the Delaware North entity, the removal of Assistant Attorney General Chubb, and a delay of the final decision. After Chairman Alfred G. Schroeder commented that the letter appeared to be an attack on the successful applicants, the Commission ruled that the letter raised issues not under its jurisdiction and that it was not in a position to take further action. On appeal, in their briefs, appellants have chosen to address only the alleged conflict of interest. The alleged conflict stems from the fact that a 50% shareholder of Sunflower, Inc., R.D. Hubbard, contributed $10,000 to settle a sexual harassment suit involving the Kansas Attorney General, Robert Stephan, and that Hubbard and Stephan were partners in a business venture. As a result of the state-wide media coverage, the general public was aware of Hubbard's contribution to the settlement of the lawsuit against the attorney general in 1986. Information that Hubbard and Stephan were partners in a business venture is also contained in various public records. We observe that, although facts regarding the business venture were public record and the settlement of the sexual harassment suit had received extensive publicity, appellants sat through eleven months of hearings and chose not to raise the issue until one week after the Commission announced that it would award the licenses to other applicants. We have reviewed the record on appeal and find that the Commission was notified of Hubbard's personal and business relationship with the attorney general when Hubbard disclosed the payment and the business connection to the KBI during its background investigation of Hubbard and later when Hubbard appeared before the Commission during an executive session. The record shows that the Commission carefully considered the connection between Hubbard and the attorney general after it was disclosed to the Commission in September 1987, and determined that the relationship did not affect the merits of Sunflower's application. We have found nothing in the record to indicate that the Commission's determination of this issue was incorrect. We must now recall that the Commission initially concluded that provisions of the Open Records Act and the Parimutuel Racing Act precluded disclosure of any information contained in the KBI report. Had the Commission avoided this narrow interpretation of the two acts and informed both the appellants and the public that it had previously considered the conflict of interest issues raised in KRM's letter during executive sessions, it would have been unnecessary for the appellants to raise the conflict of interest issue on appeal. Release of this information by the Commission to the public would not have violated the restrictions of the KORA and would have made both the appellants and the public aware of the depth of the Commission's investigation of Hubbard's background. Finally, we must also reject appellants' allegation that, since the attorney general is the statutory head of the KBI, this relationship tainted the KBI investigations as well as the conduct of the two assistant attorneys general assigned as counsel to the Commission. We note that appellants rely on an appearance of impropriety argument and present no facts to substantiate their allegations, specifically how the alleged bias influenced any of the five Commission members. Appellants have failed to recognize that the legislature specifically directed the attorney general to appoint not more than two assistant attorneys general who shall be assigned to assist the commission in all matters. K.S.A. 1988 Supp. 74-8809. In addition, pursuant to the Kansas Code of Professional Responsibility, those assistant attorneys general who were appointed to assist the Commission are solely responsible to the Commission. We find this contention to be without merit.