Court: FERC's Dual Investigatory And Adjudicatory Functions Risk "Inherent Bias"; Says De Novo Review of Generator Penalty Shall Proceed As Ordinary Civil Action

Citing the "inherent bias" in cases where a decision-maker performs both investigatory and adjudicatory functions, the U.S. District Court for the District of Massachusetts said the "de novo" review of a FERC penalty against Maxim Power shall proceed as an ordinary civil action governed by the Federal Rules of Civil Procedure that culminates, if necessary, in a jury trial

While federal law allows parties to request that a court engage in a "de novo" review of a FERC penalty, FERC had argued that the court's review is simply to take a fresh look at the materials FERC used in reaching its decision, without requiring a trial and the attendant procedures.

Maxim Power had sought de novo review of a $5 million penalty levied against the generator for what FERC said was manipulating reliability payments (click here for story)

The Court rejected FERC's interpretation of the de novo review process, citing, in part, due process concerns with FERC's process.

"[T]he simple fact that the Commissioners perform both investigatory and adjudicatory functions in the same case risks an inherent bias in the decision-making process, even if that bias is entirely unintentional and even if the 'combination of functions does not alone violate due process,'" the Court said

The Court said that due process concerns were, "compounded by the fact that, according to FERC, 'the Commissioners and their staff need to be able to communicate freely with investigative staff on a wide range of topics' in order to perform their supervisory function properly during the investigative stage."

In its arguments, the Court noted that FERC has implied that an adversarial proceeding is needed to satisfy due process, "but the court is not persuaded the proceeding that actually took place was as adversarial as FERC claims."

"While Respondents were free to submit evidence and responsive arguments, they were unable to seek discovery, depose witnesses interviewed by FERC, gain any insight into the presentation of the case made by FERC’s enforcement staff to the Commissioners during the investigative phase, or present their own witnesses ... And given FERC’s representation that the penalty was based on communications involving Respondents, the universe of relevant additional information that Respondents could obtain and present through additional process is limited," the Court said

Civil No. 15-30113-MGM