This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
In the Matter of the Commission Inquiry Regarding Potential
Proscribed Ex Parte Contacts Regarding Commissioner Scott
In the Matter of the Complaint of the Minnesota Department of
Commerce Against Qwest Corporation Regarding Unfiled Agreements
In the Matter of the Complaint of AT&T Communications
of the Midwest, Inc. against Qwest Corporation
Filed July 31, 2007
Affirmed in part, reversed in part, and remanded
Minnesota Public Utilities Commission
File Nos. P-999/CI-05-1419, P-421/C-02-197, P-421/C-01-391
Marianne D. Short, Heather D. Redmond, Dorsey & Whitney LLP, 50 South 6th Street, Suite 1500, Minneapolis, MN 55402 (for relator Qwest Corporation)
Lori Swanson, Attorney General, P. Kenneth Kohnstamm, Steven H. Alpert, Assistant Attorneys General, 1100 Bremer Tower, 445 Minnesota Street, St. Paul, MN 55101 (for respondent Minnesota Public Utilities Commission)
Mark J. Ayotte, Thomas Erik Bailey, Andrew M. Carlson,
Briggs and Morgan, P.A., 2200 IDS Center,
Considered and decided by Halbrooks, Presiding Judge; Minge, Judge; and Hudson, Judge.
Relator Qwest Corporation challenges the June 30, 2006, and July 24, 2006, orders issued by the Minnesota Public Utilities Commission, arguing that (1) the Commission’s determination that former Commissioner Greg Scott did not engage in prohibited ex parte communications with Mary Tribby, counsel for respondent AT&T Corporation, is not supported by substantial evidence and (2) the Commission’s determination that Scott’s code-of-conduct violations did not unduly and improperly influence the outcome of a claim against Qwest filed with the Commission is not supported by substantial evidence. Because we conclude that the Commission’s determination that the communications between Scott and Tribby did not constitute impermissible ex parte communications is supported by substantial record evidence, we affirm in part. But because we conclude that the Commission’s determination that Scott did not improperly influence the outcome of the claim filed against Qwest is not supported by substantial evidence, we reverse in part and remand.
The UNE-P Testing Case
On March 22, 2001, AT&T Communications of the Midwest, Inc. (AT&T) filed a complaint against relator Qwest Corporation (Qwest), alleging that Qwest violated the terms of an agreement between the two companies as well as state and federal law by failing to perform cooperative tests of the unbundled network element platform (UNE-P) that AT&T planned to purchase from Qwest to facilitate AT&T’s entry into the local telephone service market in Minnesota. AT&T sought temporary relief and requested that Qwest be penalized pursuant to Minn. Stat. § 237.462 (2000). In response, Qwest filed a counterclaim against AT&T, alleging that AT&T had violated federal law and its agreement with Qwest by not negotiating in good faith. Qwest also requested that AT&T be assessed penalties under Minn. Stat. § 237.462, subd. 2 (2000).
On April 30, 2001, the Minnesota Public Utilities Commission (Commission) referred the matter to the Office of Administrative Hearings for a contested-case proceeding. On February 25, 2002, the administrative law judge (ALJ) filed his findings of fact, conclusions of law, and recommendation with the Commission, concluding that Qwest committed a knowing, intentional and material violation of its obligation to engage in cooperative testing under the agreement. The ALJ therefore recommended substantial penalties against Qwest. Following its deliberations, the Commission, in two separate orders, both dated June 18, 2002, accepted and adopted the ALJ’s report with two minor modifications, thereby concluding that Qwest committed a “knowing, intentional and material violation” of both the parties’ agreement and of state and federal law. The Commission imposed a penalty of $900,000 against Qwest.
The Unfiled Agreements Case
In a separate matter, on February 14, 2002, the Minnesota Department of Commerce (DOC) filed a complaint with the Commission alleging that Qwest, by failing to make public and seek Commission approval for interconnection agreements it had entered into with competitive local exchange carriers (CLECs), had acted in a discriminatory and anti-competitive manner. AT&T intervened in the proceedings. The Commission subsequently referred the DOC’s complaint to the Office of Administrative Hearings for a contested-case proceeding.
On September 20, 2002, the ALJ submitted his findings of fact, conclusions, and recommendation to the Commission, concluding that Qwest knowingly and intentionally violated both federal and state law by failing to file the agreements with the Commission. The ALJ recommended that the Commission penalize Qwest for its violations pursuant to Minn. Stat. § 237.462, subds. 2, 3 (2000). On November 1, 2002, the Commission issued an order adopting the ALJ’s report “in its entirety, including the ALJ’s findings that Qwest knowingly and intentionally” violated both federal and state law. The Commission also adopted the ALJ’s recommendation that a penalty was justified under section 237.462, subdivisions 2 and 3, and thus established a comment period to address potential remedies.
After deliberating at length about the appropriate penalty for Qwest’s violations, the Commission issued an order on February 28, 2003, concluding that Qwest should pay a penalty of $25,955,000, but stating that the penalty would be stayed if Qwest agreed to make retroactive and prospective restitution payments and discounts. Although the Commission denied a petition by Qwest for reconsideration, the Commission reconsidered the penalty on its own motion on April 14, 2003. The Commission decided, in part, to shorten the length of the look-back period with regard to the retroactive discounts, to eliminate the prospective discounts, and to eliminate Qwest’s opportunity to stay the $25,955,000 penalty by paying restitution.
appealed the Commission’s penalty decision to the United States District Court
for the District of Minnesota, which upheld the monetary penalty but vacated
the restitution as being beyond the Commission’s authority under
The Investigation into Communications Between Former Commissioner Greg Scott and AT&T Counsel Mary Tribby
On August 16, 2005, Qwest filed a written comment with the Commission, requesting that it investigate allegedly improper communications between former Commissioner Greg Scott and Mary Tribby, former senior regulatory counsel with AT&T. Specifically, Qwest alleged that e-mail and telephone records contained in the “Drawz Report” raised questions about Scott’s and Tribby’s contacts. Therefore, Qwest requested “that the Commission take immediate steps to preserve evidence and to undertake an independent investigation of this matter.” Although Tribby was not directly involved in the Unfiled Agreements case, she personally litigated the UNE-P Testing case before the Commission.
On October 7, 2005, the Commission voted to retain an independent investigator “to develop the facts and submit a report” regarding whether Scott, while acting in his capacity as Commissioner, violated Minnesota law or rules in the course of his contacts with Tribby between May 2002 and the time of Scott’s departure from the Commission in May 2004. Two retired ALJs conducted the investigation under the direction of the Minnesota Department of Employee Relations (DOER).
On April 4, 2006, the ALJs issued their investigative report to the Commission. The report concluded that “there [wa]s no reasonable cause to believe that former Commissioner Scott engaged in prohibited ex parte communication with Ms. Tribby from May of 2002 through May of 2004,” despite the fact that they spent an “unusual amount of time talking to each other at the same time that cases involving AT&T were pending with the [Commission].” But the report also concluded that “[t]here [wa]s reasonable cause to believe that Commissioner Scott engaged in actions that might have resulted in or created a conflict of interest, or an appearance of impropriety, including affecting adversely the confidence of the public in the integrity of the [C]ommission.”
Specifically, the ALJs found that after one of Tribby’s appearances in the UNE-P Testing case, Scott invited Tribby and another AT&T employee to his office for a brief conversation prior to their leaving for the airport. Later, Scott met Tribby for a private dinner in Sante Fe while both were attending separate meetings there. The ALJs stated that “[t]his meeting was the beginning of a friendship that developed into a close personal relationship over the next two years.” The ALJs found that Scott and Tribby subsequently “met in person several times,” often over dinner.
In addition, the
ALJs found that during the period under investigation, Scott and Tribby
“exchanged an extensive series of e-mails.” In her e-mails to Scott, Tribby would often
forward articles and decisions concerning telecommunications issues to Scott. The ALJs found that “the information provided
to [Scott] often was critical of or related to Qwest.” Scott e-mailed Tribby regarding fines
assessed against Qwest in another state, as well as notice of a
In addition, the ALJs found that Scott and Tribby “communicated extensively by telephone” during the period under investigation, highlighted by “[a] large number of calls [that] exceeded [one] hour.” The ALJs specifically noted that Tribby called Scott on February 5, 2003, the day after the Commission deliberated on the penalty in the Unfiled Agreements matter, “to ask exactly what the Commission had decided.” Later that day, Tribby sent an e-mail to her supervisor and other colleagues at AT&T captioned “PRIVILEDGED AND CONFIDENTIAL; PREPARED IN ANTICIPATION OF LITIGATION.” The e-mail relayed the substance of her telephone call with Scott. The ALJs found that Scott and Tribby continued to engage in lengthy telephone conversations during the remainder of 2003.
After reviewing the ALJ’s investigative report, the Commission issued a public notice, seeking comment on the following four issues:
1. Does the record establish that former Commissioner Scott violated the prohibition on ex parte communications found in Minn. Stat. Sect. 216A.037?
2. Does the record establish that former Commissioner Scott violated the Commission’s code of conduct, specifically Minn. Rules Part 7845.0400 which prohibits certain actions that might result in a conflict of interest or the appearance of impropriety?
3. If there has been a violation of statute or rule, what further action should the Commission take?
4. Are there other issues the Commission should consider in this matter?
After holding hearings on June 1, June 5, and June 6, 2006, the Commission issued a written order on June 30, 2006, stating:
The Commission finds that the record does not establish reasonable cause to believe that former Commissioner Scott violated the prohibition on ex parte communications found in Minn. Stat. § 216A.037 and accepts and adopts the findings of the Independent Investigators on this issue.
The Commission finds that the record does establish that former Commissioner Scott violated the Commission’s code of conduct, specifically Minnesota Rule 7845.0400, which prohibits certain actions that might result in a conflict of interest or the appearance of impropriety, and accepts and adopts the findings of the Independent Investigators on this issue.
The Commission finds that former Commissioner Scott’s code of conduct violations require the Commission to reexamine the penalty determinations in the two cases in which Qwest seeks redeliberation, the UNE-P Testing case and the Unfiled Agreements case, to determine whether either penalty determination should be vacated and reopened for de novo determination.
After examining the factors set forth in PATCO v. Fed. Labor Relations Auth., 685 F.2d 547 (D.C. Cir. 1982), the Commission determined that the penalty imposed in the Unfiled Agreements case should not be vacated because of Scott’s violation of the Commission’s code of conduct. The Commission found that “the penalty determination rendered in the [Unfiled Agreements] case [wa]s reasonable, fully supported by record evidence, based on reasoned and principled judgments, and not the result of improper or undue influence.”
But with regard to the UNE-P Testing case, the Commission found that because Tribby personally litigated the case and because Scott was the deciding vote in determining the penalty to be imposed, “it would serve the public interest, the interests of justice, and public confidence in the Commission’s decision-making processes, to vacate, reopen, and reconsider the penalty determination reached in the [UNE-P Testing] case.” Accordingly, the Commission vacated and redeliberated the penalty determination reached in the UNE‑P Testing case, reducing the penalty amount from $900,000 to $360,000. Qwest subsequently moved for reconsideration, but the Commission denied the motion on July 24, 2006.
This appeal follows.
In a judicial review [of a contested-case hearing], the court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative finding, inferences, conclusion, or decisions are:
(a) in violation of constitutional provisions; or
(b) in excess of the statutory authority or jurisdiction of the agency; or
(c) made upon unlawful procedure; or
(d) affected by other error of law; or
(e) unsupported by substantial evidence in view of the entire record as submitted; or
(f) arbitrary or capricious.
Substantial evidence is defined as:
“(1) such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion; (2) more than a scintilla of evidence; (3) more than some
evidence; (4) more than any evidence; or (5) the evidence considered in its
Qwest argues that “the Commission’s determination that former Commissioner Scott and AT&T’s counsel Tribby engaged in no prohibited ex parte communications resulted from an incorrect interpretation of the statue and is not supported by substantial evidence.” Specifically, Qwest contends that
[t]he substance of at least the February 5, 2003, telephone conversation between Scott and Tribby was more than a mere status inquiry and allowed AT&T . . . unfair access to the Commission’s deliberative process and, ultimately, a private preview of Scott’s views regarding how the remedy against Qwest would be structured.
“The construction of a statute or a regulation is a
question of law to be determined by the court.”
Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (
As a general rule, this court defers to an agency’s interpretation [of its own rule] when the language subject to construction is so technical in nature that only a specialized agency has the experience and expertise needed to understand it, when the language is ambiguous or when the agency interpretation is one of long standing. We do not defer when the language employed or the standards delineated are clear and capable of understanding.
Resident v. Noot, 305 N.W.2d 311, 312 (
in N. States Power Co. v.
Minn. Stat. § 216A.037, subd. 1 (2006), states that “[t]he commission shall adopt rules . . . prescribing permissible and impermissible ex parte communications” and that “[t]he ex parte rules may prohibit only ex parte communications, directly or indirectly, between a commissioner and a participant . . . relating to . . . a material issue during a pending contested case proceeding.” Accordingly, Minn. R. 7845.7200, subp. 1 (2005), which was adopted pursuant to section 216A.037, provides:
An ex parte communication, either direct or indirect, must not be made or attempted to be made between a commissioner and a party concerning:
A. a material issue during a pending contested case proceeding, from the date the matter is referred to the Office of Administrative Hearings until the commission issues its final order and the time to petition for reconsideration expires, or until the commission issues a final order responding to the petition for reconsideration, whichever is later[.]
Minn. R. 7845.7000, subp. 4 (2005), defines “ex parte communication” as
an oral or written, off-the-record communication made to or by commissioners or commission decision-making personnel, without notice to parties, that is directed to the merits or outcome of an on-the-record proceeding. This term does not include procedural, scheduling, and status inquiries or other inquiries or requests for information that have no bearing on the merits or the outcome of the proceeding.
(Emphasis added.) Further, Minn. R. 7845.7000, subp. 5 (2005), states that “‘[m]aterial issue’ means an issue that may affect the merits or outcome of an on-the-record proceeding.” Minn. R. 7845.0300 indicates that the purpose of the Commission’s code of conduct
is to preserve the integrity and independence of commission decision making and to promote public confidence in the objectivity of commission decisions. Commissioners and employees should maintain high standards of conduct to prevent a conflict or the appearance of a conflict between private interests and official duties. This code must be construed to secure these objectives in keeping with the quasi-judicial function of the commission.
In determining whether Scott’s and Tribby’s contacts constituted impermissible ex parte communications, the ALJs specifically focused on the February 5, 2003, telephone conversation between Scott and Tribby—the one contact which most closely resembled an improper ex parte communication. The record indicates that on February 5, 2003, the day after the Commission deliberated on the appropriate penalty in the Unifiled Agreements case, Tribby and Scott spoke on the telephone. The record further shows that later that day, Tribby sent her colleagues at AT&T an e-mail stating:
Scott’s view (let’s not attribute this to him outside of this circle) is that Qwest has absolutely no choice to make between making restitution payments and paying a fine. They are obligated to make both the retroactive and the prospective payments to competitors. He acknowledges that the order needs to make this clear. This may happen on recon rather than in the initial order because of Commission procedure. It sounded like in case the court finds that the Commission did not have the authority to order prospective payments, the fine might take the place of the prospective, but not the retroactive, payments. However, the current intent is Qwest has no choice not to make both the retro and prospective payments to competitors.
The issue is whether the February 5 telephone call between Scott and Tribby was an impermissible ex parte communication or whether the contact constituted merely a “status inquiry” under rule 7845.7000, subpart 4.
Qwest argues that the “conversation between . . . Scott and . . . Tribby was not a mere status inquiry; rather, the subject of the conversation was the substance of an order in a pending contested proceeding, the structure of penalties or restitution that Qwest may pay, and Scott’s or the Commission’s future plans regarding that order.” The Commission ultimately disagreed with Qwest’s position, adopting the ALJs’ findings, conclusions, and recommendation, and concluding “that the telephone conversation described in the e-mail is more fairly described as a status inquiry than an ex parte communication.” We agree.
First, as the Commission noted, the communication between Scott and Tribby actually took place on the day after the Commission deliberated on the appropriate penalty in the Unfiled Agreements case, therefore making it less likely that the communication was improperly directed at either the merits or the outcome of the proceeding. Second, there is reason to believe that AT&T was genuinely confused about the details of the Commission’s penalty decision in the Unfiled Agreements case. The case involved a significant number of agreements which were further divided by the Commission into numerous groupings of contract terms to aid in the Commission’s analysis. Moreover, the remedies adopted by the Commission included complex calculations of both retroactive and prospective credits to non-favored competitors, as well as a penalty, all of which required the Commission to consider several statutory factors. As a result, the Commission’s deliberations and its ultimate determinations were lengthy and confusing, and it is reasonable to conclude that Tribby contacted Scott to question the status of the case.
Furthermore, two experienced ALJs, who deposed both Scott and Tribby and performed a detailed examination of the record, including the review of several phone records and e-mails, concluded that there was no reasonable cause to believe that the telephone call referenced in the e-mail constituted an impermissible ex parte communication. Finally, the actual language of the e-mail indicates that the telephone call was an inquiry into the status of the proceedings rather than an impermissible ex parte communication. The e-mail begins with the words “Scott’s view” and appears to be a recitation of the Commission’s determination in the matter rather than an indication that Tribby spoke with Scott in an attempt to influence Commission action.
Qwest argues that the communication offered Tribby a “private preview of the ultimate direction Scott intended to push the Commission and that the Commission ultimately followed at his strong urging.” Qwest contends that the call gave Tribby information regarding “Scott’s or the Commission’s future plans for reconsideration.” But the record indicates that the Commission itself notified participants during deliberations that reconsideration may occur. For instance, Chair Koppendrayer stated during the proceedings that “once the order is written and you don’t agree with those details, we can reconsider this order and work out those details.” Similarly, in response to concerns raised over the impact of the proposed remedial order, Commissioner Reha stated “[p]erhaps we can order it and then agree—address it on reconsideration.” The potential for eventual reconsideration of the penalty by the Commission was an issue discussed on the record during deliberations. Thus the telephone conversation, if it did involve a discussion of the issue of reconsideration, did not offer AT&T a “private preview” of the actions of the Commission.
Qwest also contends that one could conclude from the e-mail that Scott gave Tribby a preview of the ultimate decision the Commission would make if its penalty decision was overturned on appeal. The e-mail states: “It sounded like in case the court finds that the Commission did not have the authority to order prospective payments, the fine might take the place of the prospective, but not the retroactive, payments.” But again, the Commission had identified during the proceedings what actions it might take if such a situation were to arise. Commissioner Reha stated:
Because I think Mr. Bradley indicated that it would be difficult—or at least at this point he hasn’t researched that issue. That he’s certain that the restitution going backward in time can be upheld; but what we’re asking Qwest to do, going forward and giving the option, having that available, is probably not quite as defensible. And so this way we would have a fine; and if we’re told that we can’t do the going forward, we can just institute the fine.
In addition, Commissioner Scott similarly commented that “if a court says we don’t have the authority to do the going forward part, we get to come back and revisit the penalty and decide what’s appropriate based on what’s happened.” Thus, the Commission’s position with regard to what actions it might take if the penalty decision were to be overturned on appeal were also made known during deliberations. And, therefore, the telephone call did not improperly offer Tribby a preview of the Commission’s ultimate decision, should its penalty be reversed.
Finally, Qwest suggests that the fact that Tribby made the inquiry rather than the attorney assigned to represent AT&T during the Unfiled Agreements penalty hearing “shows an effort to exert influence within the Commission.” Qwest further contends that Tribby could have called a Commission staff member in an attempt to clarify the order rather than contacting Scott, thus evidencing “that AT&T sought to exploit its lawyer’s close relationship with . . . Scott.” But, as AT&T argues, the text of the e-mail itself does not indicate that Tribby attempted to exert any undue influence over Scott.
Accordingly, we conclude that the Commission’s determination that the telephone call between Scott and Tribby described in Tribby’s February 5, 2003 e-mail was not an impermissible ex parte communication, but instead constituted a permissible inquiry into the status of the case, is supported by substantial record evidence.
Despite the Commission’s determination that Scott’s and Tribby’s numerous communications, including the February 5, 2003 telephone call, did not constitute impermissible ex parte communications, the Commission did conclude that Scott’s contact with Tribby violated the Commission’s code of conduct, which prohibits behavior that might create a conflict of interest or create the appearance of impropriety. Specifically, the Commission determined that “[i]t clearly created an appearance of impropriety for a Commissioner to maintain an undisclosed, long-term, emotionally intense friendship, marked by frequent and lengthy communications, with a person who regularly represented a party in cases involving millions of dollars and major policy decisions reshaping Minnesota’s telecommunications industry.”
Accordingly, the Commission then reexamined the penalty decisions in both the Unfiled Agreements case and the UNE-P Testing case “to ascertain whether they [we]re fully supported by record evidence, whether they [we]re based on reasoned and principled judgments, and whether they b[ore] the marks of improper or undue influence.” PATCO v. Fed. Labor Relations Auth., 685 F.2d 547, 564-65 (D.C. Cir. 1982), set forth the following standards for determining whether an agency’s decision should be vacated:
[A] court must consider whether, as a result of improper ex parte communications, the agency’s decisionmaking process was irrevocably tainted so as to make the ultimate judgment of the agency unfair, either to an innocent party or to the public interest that the agency was obliged to protect. In making this determination, a number of considerations may be relevant: the gravity of the ex parte communications; whether the contacts may have influenced the agency’s ultimate decision; whether the party making the improper contact benefited from the agency’s ultimate decision; whether the contents of the communications were unknown to opposing parties, who therefore had no opportunity to respond; and whether vacation of the agency’s decision and remand for new proceedings would serve a useful purpose.
(Footnotes omitted.) Applying the factors set forth in PATCO, the Commission found:
The first PATCO factor is the gravity of the ex parte communications at issue. Here there were no ex parte communications, but there was serious potential for conflict of interest, there was an appearance of impropriety, and there was an adverse effect on public confidence in the integrity of the Commission’s decision-making process. These harms are serious and cut in favor of reexamining the penalty determinations in these two cases.
The second PATCO factor is whether the ex parte contacts may have influenced the agency’s ultimate decision. By analogy, the issue is whether former Commissioner Scott’s undisclosed relationship with Ms. Tribby may have influenced the agency’s ultimate decision. Without reexamining the decisions, it is impossible to gauge or discount Mr. Scott’s influence on them, and this factor therefore cuts in favor of reexamining the penalty decisions.
The third PATCO factor is whether the party making the improper ex parte contacts benefited from the agency’s ultimate decision. This factor cuts mildly in favor of reexamination, since AT&T, the other party implicated by the improper relationship, probably benefited to some degree from Qwest’s financial loss and by the deterrent effect it was intended to have on Qwest’s future conduct in regard to competitors.
The fourth PATCO factor is whether the contents of the ex parte communications (or in this case, the fact of the close relationship) were unknown to opposing parties, who therefore had no opportunity to respond. This factor, too, points to reexamination, since Qwest was unaware of the relationship and could therefore take no action to challenge or neutralize it.
The fifth and final PATCO factor is whether reexamining the agency’s decision would serve a useful purpose. This factor, too, cuts in favor of reexamination, since only reexamination can assure stakeholders, the public, and the Commission itself that the penalties assessed in this case are reasonable, fully supported by record evidence, based on reasoned and principled judgments, and not the result of improper or undue influence.
The Commission will therefore reexamine the penalty determinations in the Unfiled Agreements and UNE-P Testing cases, based on their existing evidentiary records—which were developed by independent Administrative Law Judges, employed by an independent state agency—and supplemented by written and oral argument from interested parties.
The Commission then reexamined the entire record in both the Unfiled Agreements case and the UNE-P Testing case in an attempt to determine whether the decisions were the result of improper or undue influence and, therefore, whether they should be vacated. After examining the record in the UNE-P Testing case, which Tribby personally litigated, the Commission found “that it would serve the public interest, the interests of justice, and public confidence in the Commission’s decision-making processes, to vacate, reopen, and reconsider the penalty determination reached in the case.” The Commission subsequently reduced the penalty in that case from $900,000 to $360,000. But unlike its decision in the UNE-P testing case, the Commission determined by a 4-1 vote that it would not vacate and reopen its penalty decision in the Unfiled Agreements matter, instead finding “that the penalty determination rendered in the case [wa]s reasonable, fully supported by record evidence, based on reasoned and principled judgments, and not the result of improper or undue influence.”
Qwest argues that the Commission’s determination that Scott’s code-of-conduct violation did not unduly and improperly influence the outcome of the Unfiled Agreements penalty decision is not supported by substantial evidence. We agree.
The Commission first analyzed whether the penalty determination was supported by substantial evidence. The Commission concluded that the penalty determination was reasonable, finding that: (1) the determination was based on a record developed by independent ALJs after holding exhaustive evidentiary proceedings which have not been challenged; (2) the penalty determination was deliberated on five occasions, which were “all marked by thoughtful, informed, and vigorous discussion among the Commissioners”; (3) the Commission “conducted a painstaking analysis of the factors the Minnesota Legislature . . . directed it to consider,” and set “different penalty amounts for different violations in accordance with the statutory standards”; and (4) the Commission’s penalty determination was upheld on appeal by both the United States District Court for the District of Minnesota and the Eight Circuit Court of Appeals.
The Commission also analyzed the deliberative process to determine whether it was improperly or unduly influenced by Scott. The Commission concluded that the deliberative process did not show evidence of bias, of decision-making based on improper factors, or that the judgment of other Commissioners was compromised by the actions of Scott. Specifically, the Commission found the following evidence supported its conclusion: (1) the penalty was set by unanimous vote; (2) the Commission devoted a substantial amount of time and energy in fashioning the appropriate penalty; (3) the transcripts “show no signs that the deliberative process was unduly influenced” by Scott and indicate that all of the Commissioners were “fully engaged” during each hearing; and (4) the deliberations were not “dominated” by Scott, as Commissioner Reha was the person who “took the lead in crafting the penalty determination that was ultimately adopted.” It is with this latter conclusion that we take issue.
The record indicates that at the time the penalty decision in the Unfiled Agreements case was rendered, there were four sitting Commissioners: Phyllis Reha, LeRoy Koppendrayer, Marshall Johnson, and Scott. The record further indicates that the Commission voted unanimously to require Qwest to pay a penalty of $25,955,000. But during Commission hearings to determine whether Scott’s code of conduct violations required the Commission to vacate and redeliberate the penalty determination in the Unfiled Agreements matter, Commissioner Koppendrayer stated:
[I]t completely ignores how I myself perceived Commissioner Scott’s influence through the process of these cases, whether or not it – you can pick it out of specific records . . . that had he recused himself from the case, which I believe he should have, the outcome would have been different.
. . . .
I believe the influence was substantial and I believe the taint was substantial, I believe we have to take a new look . . . .
. . . .
I would have taken Commissioner Scott’s position that he took in a different light had I known what was going on. Had I known that, I would not have given the deference to his opinions that I did. So was I influenced? Yes, because I didn’t know what was going on. And then I – Most of the weight I put in, the reason I get to where I do, is would have the outcome have been different if he had not been here? And I just feel that I can say, at least in my own mind, that the outcome would have definitely been different.
. . . .
I believe the outcome would have been dramatically different. I think that is supported by the record in the discussions that took place.
. . . .
[AT&T’S COUNSEL]: What I heard you say was that you would have taken . . . former Commissioner Scott’s views differently had you been informed.
CHAIR KIPPENDRAYER: And argued differently. If I take his . . . positions and argue for or against his positions . . ., had I known he had a relationship with the other party, I certainly would have taken his position and his arguments in a different light and made my own arguments in a different light; and I believe the outcome would have been different.
[AT&T’S COUNSEL]: Well, and I guess I don’t know if that’s a long-winded way of saying then that you were influenced by him –
CHAIR KOPPENDRAYER: Yes, it is.
The result of Commissioner Koppendrayer’s comments, when considered in conjunction with the fact that Commissioner Scott should have recused himself from the penalty determination altogether, is a determination in the Unfiled Agreements matter that was supported by only Commissioners Reha and Johnson. Despite statements made by Commissioners Reha and Johnson that they were not influenced by Commissioner Scott, we conclude that the Commission’s determination that Scott did not improperly influence the deliberative process and ultimate outcome of the Unfiled Agreements penalty is not supported by substantial evidence, as the record indicates that the Unfiled Agreements penalty was at least partially the result of Scott’s improper influence. We conclude that redeliberation of the penalty would serve the public interest, the interests of justice, and public confidence in the Commission’s decision-making processes. Therefore, we reverse and remand, thereby ordering the Commission to vacate the Unfiled Agreements penalty and redeliberate an appropriate penalty.
Affirmed in part, reversed in part, and remanded.
 The Commission also denied Qwest’s counterclaim against AT&T.
 The “Drawz Report” was an investigation into the propriety of Scott’s conduct upon leaving the Commission after accepting other employment.
 AT&T, citing Minn. Stat. § 216B.27 (2006), argues that Qwest’s appeal of the issue of whether Scott’s and Tribby’s contacts constituted impermissible ex parte communications should be denied because Qwest failed to exhaust all administrative remedies. Section 216B.27 provides that a party to a proceeding must apply to the Commission for a rehearing within 20 days after the service of any decision constituting an order or determination as a condition precedent to judicial review, and that “[t]he application for a rehearing shall set forth specifically the grounds on which the applicant contends the decision is unlawful or unreasonable.” AT&T contends that because Qwest’s motion for reconsideration of the Commission’s June 30, 2006 order did not seek reconsideration of the Commission’s decision that Scott’s and Tribby’s contact did not constitute an impermissible ex parte communication, Qwest failed to exhaust its administrative remedies, and therefore its claim on appeal that the contact constituted prohibited ex parte communications must be denied. But because we conclude on the merits that the Commission properly determined that Scott’s and Tribby’s contact did not constitute impermissible ex parte communications, we decline to address whether Qwest failed to exhaust its administrative remedies.
 Minn. R. 7845.0400, subp. 1 (2005), provides that “[a] commissioner or employee shall respect and comply with the law and shall behave in a manner that promotes public confidence in the integrity and impartiality of the commission’s decision making process.” Minn. R. 7845.0400, subp. 2 (2005), further states:
Commissioners and employees shall avoid any action that might result in or create a conflict of interest or the appearance of impropriety, including:
A. using public office for private gain;
B. giving preferential treatment to an interested person or entity;
C. impeding the efficiency or economy of commission decision making;
D. losing independence or impartiality of action;
E. making a commission decision outside official channels; and
F. affecting adversely the confidence of the public in the integrity of the commission.