22-6381-16304-CV

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

 

Michael D. Johnson, Complainant, vs. Nancy Levitz, formerly known as Nancy Havelish, and the Levitz for City Council Campaign, Respondents.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

         

The above-entitled matter came on for hearing on January 19, 2005, before a panel of three Administrative Law Judges:  Allan W. Klein (presiding judge), George A. Beck, and Barbara L. Neilson.  The hearing record closed on January 31, 2005, at the filing of the final written submission.

Jay Benanav, Esq. of the firm of Weinblatt & Gaylord, 111 E. Kellogg Blvd., Suite 300, St. Paul, MN  55101 appeared representing the Complainant, Michael Johnson.  Nancy A. Levitz, 10155 119^th St. North, Grant, MN 55082, represented herself without counsel, but was assisted by Gary Erichson.

NOTICE

This is the final decision in this case, as provided by Minn. Stat. § 211B.36, subd. 5.  A party aggrieved by this decision may seek judicial review as provided in Minn. Stat. § § 14.63 to 14.69.

STATEMENT OF ISSUE

          Did the Respondents violate Minn. Stat. § 211B.06, by making false statements in a campaign flyer?

          Did the Respondents know the statements were false or make them in reckless disregard of their truth or falsity?

If so, what remedy, if any, is appropriate?

Based upon the record in this matter, the panel makes the following:

FINDINGS OF FACT

1.           In the November 2, 2004 election Nancy Levitz and several other candidates, including incumbent City Council member Charles “Rick” Vanzwol, ran for election to the Grant City Council.  Ms. Levitz won a seat on the Council by 9 votes out of approximately 2500 votes cast.  Mr. Vanzwol was not reelected.

2.           On October 27, 2004, shortly before the election, Ms. Levitz distributed a half-page flyer to households in Grant supporting her candidacy.  The flyer had material on both sides and contained statements that the Complainant alleges are false.[1]

Road Plan Benefits

3.           The flyer stated that “If you live on a gravel, state, county or recently paved road, you will NOT BENEFIT from the new taxes of the road plan.”

4.           The population of Grant is estimated to be approximately 4200.  There are approximately 600 residences on city gravel roads and 600 residences on city paved roads and 278 properties located on county or state roads within the city.

5.     The Revised Road Plan adopted by the City Council in 2004 provides for an upgrade in city streets that will result in higher taxes for all City residents.[2]

6.           The Road Plan states that one of the goals of the road plan is to, “Over time, improve the quality of all the roads in Grant whether they are gravel or paved.”  It shows budget increases in the following categories for gravel roads:  new gravel, dust control, and additional funding provided under the five-year plan.[3]  The Revised Plan also shows increases in many categories that benefit both gravel and paved roads including:  snow & ice removal, brushing & mowing, signs, safety fund, and equipment fund.[4]

7.           Residents living on county or state roads would not see an improvement on the streets in front of their residence under the Revised Plan, but would benefit since they would use city streets.

8.           In his campaign material candidate Rick Vanzwol stated that under the new road policy he would “pay higher taxes too but receive no personal benefit as he lives on a county road.”[5]  In his campaign material the Mayor opposed the new road policy by observing that “if you live on a County road or State highway you will pay the increase in taxes to cover city road projects but will not receive any direct benefit.”[6]

Utility Bill Tax

9.           The Levitz flyer stated that “I am opposed to the new 5% Utility Bill Tax imposed by the City of Grant.”

10.       During 2003, the Grant City Council passed Ordinance No. 2003-104,[7] which imposed a flat $2.35 per premise city fee beginning with February 2004 utility bills.

11.       During the City Council discussion in 2003 leading up to the passage of the ordinance, fees based upon a percentage of the utility bill, such as 1% or 2½%, were discussed.[8]  On September 2, 2003 the City Council voted to impose a 2 ½% franchise fee on electrical usage.[9]  This was part of a proposed budget, however, and the ordinance that was finally adopted imposed only a $2.35 flat fee on each utility bill.

12.       Beginning in March of 2004, utility bills sent to Grant residents contain a line under Current Charges that states “City Fees - $2.35.”  The initial bill stated that “Grant has adopted a city fee on electric bills effective this billing.”[10]

Three to Four Times More Expensive

13.       The Levitz flyer stated in regard to the city’s purchase of a road grader and snow plow equipment that “City of Hugo Councilman Haas informs us that owning and operating equipment costs 3 to 4 times more than contracting out for the same City services.”  He discussed this subject in a telephone conversation with Joyce Welander, Ms. Levitz’s campaign manager.

14.       Councilman Haas could neither confirm nor deny whether he stated that contracting the same services would cost three or four times as much in that telephone conversation.

15.       The City of Hugo notified the City of Grant in a letter dated November 19, 2004 that the statement that “owning & operating equipment costs 3 to 4 times more than contracting for the same City services was false.”[11]

16.       Mr. Haas wrote to Ms. Levitz on November 3, 2004 expressing his surprise at seeing his name mentioned in her literature since permission had not been granted and he had never spoken to her.[12]

17.       Ms. Levitz wrote a letter to Mr. Haas dated November 6, 2004 in which she apologized to him for using his name in her campaign literature without his permission.[13]  Ms. Levitz did not speak to Mr. Haas or the City of Hugo directly about the cost of owning equipment.[14]

Space for New Grader

18.       The Levitz flyer also stated that a proposed tax increase would be used to “BUILD A NEW HEATED FIRE STATION with an addition to house our new grader.”

19.       The grader is currently stored in a farm building on the property of the person that is responsible for operating it.  The space is leased for $200 per month.  There are no plans in place to change this policy.

20.       The Spring 2004 City Newsletter for Grant reported that “We expect to use the new motor grader to help reduce this [snow removal] contract cost but it is clear that one piece of equipment can never meet the quality and timeliness of this task.  We will scale this up gradually to avoid any service degradation.”[15]  The scaling up referred to using the grader to its full capacity rather than adding equipment.

21.       The 2005 Grant draft budget has a category with $15,000 appropriated in it for Townhall/Firestation.[16]  This amount was set aside for mold removal in the Town Hall.

22.       The 2005 capital funds budget shows additional revenues of $77,000 with no expenditures listed for 2005.[17]

Used Fire Truck Purchase

23.       The campaign flyer also stated that a proposed tax increase would be used to “PURCHASE A USED FIRE TRUCK from Mahtomedi, although we are already served very well by Mahtomedi and Stillwater Fire Departments and joint responders.”

24.       During 2004 the Grant City Council engaged in a brief discussion at a Council meeting about the City’s Insurance Services Organization (ISO) rating.  Some Grant homeowners were located over 5 miles from a fire truck.  The Mahtomedi Fire Chief told the Council that any Grant homes that were not located within 5 miles of a fire station would receive a higher ISO rating.  He informed the Council that this could be avoided by putting a Mahtomedi fire truck in a new substation in Grant.  He also mentioned that an option would be for Grant to purchase a fire truck for the substation.  There was no response from the City Council and no action was taken concerning the purchase of a fire truck.  A similar discussion took place at a later budget meeting, but no action was taken.

Museum in Town Hall

25.       The Levitz flyer stated that a proposed tax increase would be used to “PUT A MUSEUM IN THE BASEMENT of City Hall with Bonded Funds.”

26.       The Spring/Summer 2003 Grant newsletter noted that a current focus of the Grant Heritage Preservation Committee was “Evaluating the feasibility and cost of renovating the basement of our City Hall (originally a one-room schoolhouse built in 1900) to accommodate an archive for City records and a repository for material collected by our Committee.”[18]

27.       The Fall 2003 Grant newsletter stated that the Town Hall basement had a severe mold problem that needed to be repaired before it affected those persons gathering on the first floor.  It stated that, “Maps and historical artifacts have had to be removed from the basement because of the mold problem.”  Grant’s Heritage Preservation Committee has recommended that the City Council work towards making the basement space usable again as an environmentally sound area to store items of historic significance to the City of Grant.[19]

28.       Initially the City proposed a bonded indebtedness of $3,970 to deal with the basement mold problem[20] but later included this amount as a budget item since it didn’t need to be bonded.

Based upon the foregoing Findings of Fact, the Panel makes the following:

CONCLUSIONS

1.           Minn. Stat. § 211B.35 authorizes the Administrative Law Judge Panel to consider this matter.

2.           The Respondent received proper notice of the hearing in this matter.

3.           That the Complainant may properly bring the complaint filed in this matter.

4.           Minn. Stat. § 211B.01, subd. 2 amended in 2004, defines “campaign material” to mean “any literature, publication, or material that is disseminated for the purpose of influencing voting at a primary or other election…” 

5.           The Levitz campaign flyer that was distributed in this case constitutes campaign material since it was literature that was distributed in order to try to influence the election.

6.           Minn. Stat. § 211B.06, subd. 1, provides that:  “’A person is guilty of a gross misdemeanor who intentionally participates in the preparation [or] dissemination … of … campaign material with respect to the personal or political character or acts of a candidate … that is designed or tends to elect, injure, promote, or defeat a candidate for nomination or election to a public office … that is false, and that the person knows is false or communicates to others with reckless disregard of whether it is false.”

7.           Minn. Stat. § 211B.32, subd. 4, provides that:  “The burden of proving the allegations in the complaint is on the complainant.  The standard of proof of a violation of section 211B.06, relating to false statements in … campaign material, is clear and convincing evidence.”

8.           The Complainant has shown by clear and convincing evidence that the Respondents violated Minn. Stat. § 211B.06, subd. 1, by preparing and disseminating campaign material that was false and was communicated with reckless disregard for its truth, as set out in Findings of Fact Nos. 9-12 (Utility Bill Tax) 18-22 (Space for new grader) and 23-24 (Used Fire Truck Purchase).

9.           The Complainant has not shown by clear and convincing evidence that the Respondents violated Minn. Stat. § 211B.06, subd. 1, by the conduct in Findings of Fact Nos. 3-8 (Road Plan Benefits), 13-17 (Three to Four Times More Expensive), or 25-28 (Museum in Town Hall).

10.       These Conclusions are reached for the reasons discussed in the Memorandum below, which is incorporated into these conclusions by reference.

          Based upon these Conclusions, and for the reasons stated in the following Memorandum, the Panel of Administrative Law Judges makes the following:

ORDER

IT IS HEREBY ORDERED:  that Nancy Levitz and the Levitz for City Council Campaign pay a civil penalty of $4800 by March 15, 2005 for violations of Minn. Stat. § 211B.06.[21]

 

Dated this

8th

day of

February

2005.

                                                                

S/ Allan W. Klein

ALLAN W. KLEIN

Administrative Law Judge

 

 

S/ Barbara L. Neilson

BARBARA L. NEILSON

Administrative Law Judge

 

 

 

S/ George A. Beck

GEORGE A. BECK

Administrative Law Judge

 

Reported: Taped

No Transcript Prepared.

 

MEMORANDUM

          Complainant argues that the Respondents prepared and distributed campaign material that was false, and that they knew it was false, or that it was communicated to others with reckless disregard for its truth.  The Complainant argues that a piece of campaign literature distributed during the campaign contained six separate violations of Minn. Stat. § 211B.06.  Each alleged violation must be proved by clear and convincing evidence.  Each of the specific alleged violations will be discussed separately.

“If you live on a gravel, State, County, or recently paved road, you will NOT BENEFIT from the new taxes of the road plan.”

          The Complainant alleges that this is a false statement because the road plan will in fact benefit people who live on the roads cited.  He argues that those living on state and county roads will benefit as they use city streets that will be improved.

          However, despite the impact that this statement may have had on the election, it does not fall within the jurisdiction of the statute as interpreted by the Minnesota Supreme Court.  In Kennedy v. Voss,[22] the court decided that the predecessor statute to § 211B.06 was directed against the evil of making false statements of fact and not against criticism of a candidate or unfavorable deductions derived from a candidate’s conduct.

          The use of the word “benefit” in the sentence at issue indicates that this statement is not a question of fact that falls within the jurisdiction of the statute.  An essential element of policymaking involves candidates considering the costs and benefits of different policies through their public statements.  These statements are often not easily ascertainable statements of fact.  There is no universally shared understanding and meaning to the word “benefit.”  This conclusion is underlined by the statement in candidate Vanzwol’s literature that he would receive no personal benefit from the new road policy.  Since the phrasing of the flyer is oriented in terms of argument, with little factual content, it is not within the jurisdiction of the statute.

“I am opposed to the new 5% Utility Bill Tax imposed by the City of Grant.”

          The complainant alleges that this is a false statement because the City of Grant never established such a tax.  In reality, the City of Grant established a $2.35 flat fee.  There is no question that this is a false statement since the ordinance contains no new 5% utility bill tax.  Whether or not the Respondents knew it was false, they clearly acted with reckless disregard for the truth.  Advising Grant voters that the City Council, of which one of her opponents was a member, had adopted a new 5% tax, had a potentially large impact on the election.

          The Respondents offer two arguments in response.  First, they argue that $2.35 was 5% of the $48 bill that Ms. Levitz had to pay, and as a result, she assumed it was a percentage fee and not a flat fee.  She also stated that the percentage fee is the only thing that she ever remembers the City Council discussing.  However, Ms. Levitz never presented a copy of her utility bill showing that this was in fact the case, and the lack of an actual bill substantially decreases the credibility of this testimony.  Because electric bills are rarely the exact same amount from month to month, it seems unlikely that Ms. Levitz would fail to notice that the amount of the fee never changed with the different amounts of her electric bills.  The fact that she relied on her electric bill as her exclusive source for reliable information for her campaign literature is illustrative of a reckless disregard for the truth.  The ordinance or City Hall could have easily been consulted.

          The Levitz Campaign also argues that the City Council never discussed flat fees.  They suggest that it only discussed percentages and because some of these percentages evidently ended up on the city website, this proves that Ms. Levitz never had knowledge of the false nature of this statement.  There was evidence that the City Attorney said the fee could go “as high as” 5%.  If the website mislead the campaign into believing the new tax was 2.5%, it would have been expected that that number would appear in the campaign literature, but it did not.  Additionally, the 2.5% argument appears to contradict the first argument that Ms. Levitz was deceived by the electric bill.

“City of Hugo Councilman Haas informs us that owning & operating equipment costs 3 to 4 times more than contracting out for the same city services.”

          There does not seem to be any question that the 3 to 4 times statement is factually false.  However, the question is whether Councilman Haas said this.  The Levitz Campaign argues that this information was conveyed to its campaign manager by Councilman Haas.  Since Councilman Haas was unable to state, in his testimony, whether he made the statement or not, there is insufficient evidence to meet the Complainant’s clear and convincing standard of proof.

“BUILD A NEW HEATED FIRE STATION with an addition to house our new grader.”

          The argument made by the complainant is that this is a false statement because there are no plans to store the new grader in a new fire station.  The Respondents argue that the statement is reasonably based on the fact that $77,000 was appropriated in the capital budget and the fact that the newsletter stated that the current grader would need to be “scaled up.”  The Respondents apparently misinterpreted a vague statement in the newsletter about “scaling up” grader service and then guessed that the capital budget addition referred to new space for the grader to arrive at their conclusion that there would be an addition for the grader.  The conclusion is false and reckless.  It adds to the inaccurate picture of a free-spending City Council.

“PURCHASE A USED FIRE TRUCK from Mahtomedi”

          The complainant argues that this is a false statement because there was never any consideration by the city council of the purchase of a fire truck.  The Levitz campaign points out that Mahtomedi Fire Chief Todd Rogers suggested that the City could purchase a fire truck, and several people indicated that the city might purchase the fire truck and build a firehouse.  Chief Rogers only said that the City had  the options of purchasing a fire truck, or storing the Mahtomedi fire truck in Grant.  However, he was only stating options.  There is no evidence that the city council even discussed, let alone considered, the purchase of a fire truck.  Second, the Levitz Campaign argues that there were some people moving in the direction of building a firehouse and purchasing a fire truck.  However, no names of people were ever provided.  The claim of the Levitz Campaign in its campaign materials that the city was going to raise taxes to purchase a used fire truck lacks any basis.  The statement was made with at least reckless disregard for whether it was false because the campaign had no reasonable basis for the statement.

 

“PUT A MUSEUM IN THE BASEMENT of City Hall with Bonded Funds.”

          The complainant argues that there were no plans to place a museum in the basement of the City Hall and that money was only being provided for mold removal.  However, the Grant Heritage Preservation Committee said specifically that it wanted the city to solve the mold problem so that the basement could be used to store maps and documents of historic value and it made a recommendation to the City Council which led to an appropriation to solve the problem.  Creating a place to store things of historical value to the community is consistent with a common understanding of what a museum is, at least within the meaning of Kennedy v. Voss.

Civil Penalties

          The Respondents committed three separate violations of Minn. Stat. § 211B.06 in the same campaign brochure.  The evidence does not clearly establish that the violations were knowing or intentional.  But they were clearly reckless, negligent and ill-considered.  The Respondents made little effort to collect accurate information when it would have been easy to do so.  The appropriate level of willfulness in the penalty matrix is therefore “negligent.”  In considering the gravity of the violation, two factors are significant.  First, this was a very close election, with Ms. Levitz winning her seat by nine votes out of 2500 cast.  It is likely that the flyer affected the outcome of the election.  Secondly, the flyer was distributed within a week of the election which made it difficult to counter and likely created an unfair advantage for Ms. Levitz.  The appropriate gravity category on the penalty matrix is “Many voters misled, process corrupted, unfair advantage created.”

          The OAH penalty matrix calls for a civil penalty of $1200 to $2400 for each violation with the above-described level of willfulness and gravity of violations.  The Respondent’s false statements claimed that higher taxes were being imposed by the City Council and created an inaccurate picture of a “spendthrift” governing body in Grant.  The statements were blatant misrepresentations on issues of great importance to residents of a small city and likely affected the election.  The Panel therefore assigns a civil penalty of $1600 for each violation.

          Ms. Levitz also argued that Mr. Johnson has no standing to bring a complaint since he was not a city council member and was not therefore damaged by the flyer.  She suggests that allowing anyone to file a complaint will result in abuse of the process.  As the Respondent notes, Chapter 211B does not limit who may file a complaint.  However, Minnesota election law specifically provides that any eligible voter may contest the election of a person for whom they had to right to vote.[23]  This suggests that the Legislature favors a broad interpretation of standing.  And it seems logical that, at the very least, each eligible voter in a municipality would be injured by false statements in campaign literature.  The Complainant is an eligible voter in Grant and he may properly complain of violation of Minn. Stat. Ch. 211B.

                                                                      A.W.K., B.L.N., G.A.B.