text:
    2001 ND 209
    CONSOLIDATED TELEPHONE COOPERATIVE, Plaintiff and Appellant, v. WESTERN WIRELESS CORPORATION, Defendant and Appellee, and North Dakota Public Service Commission, Defendant.
    No. 20010146.
    Supreme Court of North Dakota.
    Dec. 28, 2001.

      Michael J. Maus (argued), Hardy, Maus & Nordsven, P.C., Dickinson, N.D., and Michael A. Bosh (appeared), Pringle & Herigstad, P.C., Minot, N.D., for plaintiff and appellant.
    Mark J. Ayotte (argued), Lisa M. Agri-monti (on brief), Briggs and Morgan, P.A., St. Paul, MN, and Thomas D. Kelsch (appeared), Kelsch, Kelsch, Ruff & Kranda, Mandan, N.D., for defendant and appellee.
   NEUMANN, Justice.

[¶ 1] Consolidated Telephone Cooperative (“Consolidated”) appealed from a judgment upholding the Public Service Commission’s ruling that Western Wireless Corporation (“Western”) need not obtain a certificate of public convenience and necessity before offering wireless residential service in Regent. We conclude the Commission’s finding that Western’s wireless residential service is a commercial mobile radio service as defined by federal law is supported by a preponderance of the evidence. We further conclude the Commission correctly ruled Western need not obtain a certificate of public convenience and necessity under N.D.C.C. ch. 49-03.1 for its wireless residential service because that requirement is preempted by 47 U.S.C. § 332(c)(3)(A) of the Communications Act of 1934, as amended. We, therefore, affirm.

I

[¶ 2] Consolidated is an incumbent local exchange carrier headquartered in Dickinson that provides landline local exchange telephone service to customers in and around Regent in southwestern North Dakota. Consolidated has acquired certificates of public convenience and necessity from the Commission under N.D.C.C. ch. 49-03.1 to provide this service. Western, also known as Cellular One, provides mobile cellular telephone service to customers in North Dakota under licenses issued by the Federal Communications Commission (“FCC”). In August 1998, Western requested direct interconnection and direct inward dialing numbers from Consolidated at Regent, and Consolidated provided those services for Western. On January 7, 1999, Western began offering wireless residential service to its customers in Regent to compete with the local exchange service provided by Consolidated. On January 11, 1999, Consolidated disconnected the service and telephone numbers that were being used for interconnecting Western’s customers with Consolidated’s local exchange service network, resulting in Western’s customers being unable to receive local telephone calls.

[¶ 3] On January 15, 1999, Western filed a complaint with the Commission, alleging Consolidated’s actions violated state and federal law. Consolidated alleged in its answer and counterclaim that Western could not offer wireless residential service to its Regent customers unless Western obtained a certificate of public convenience and necessity from the Commission. Following an administrative hearing, the Commission found Consolidated violated N.D.C.C. §§ 49-21-07 and 49-21-10, and N.D. Admin. Code § 69-09-05-02, and fined the company $15,000, with $13,500 of the amount suspended on the condition Consolidated have no other violations for a two-year period. The Commission dismissed Consolidated’s counterclaim, ruling Western’s wireless residential service was a commercial mobile radio service as defined by federal law, thereby rendering the Commission without authority to require Western to comply with the certificate of public convenience and necessity law.

[¶ 4] Consolidated appealed to the district court, requesting it to reopen the record so the Commission could review additional evidence. The district court granted Consolidated’s request and remanded the case to the Commission for reconsideration of its decision in light of the additional evidence. The Commission held a second hearing on the matter on September 26, 2000, considered the additional evidence, and reaffirmed its earlier ruling. Consolidated appealed from the Commission’s decision, and the district court affirmed.

II

[¶ 5] On appeal, Consolidated argues the Commission erred in finding Western’s wireless residential service qualifies as a commercial mobile radio service under federal law and in ruling North Dakota’s certificate of public convenience and necessity law is preempted by federal law.

[¶ 6] When an administrative agency decision is appealed to the district court and then to this Court, we review the decision of the agency and look to the record compiled before the agency. Northern States Power Co. v. North Dakota Pub. Serv. Comm’n, 502 N.W.2d 240, 242 (N.D.1993). Our review of an agency decision is governed by N.D.C.C. § 28-32-46, which requires us to affirm unless:

1. The order is not in accordance with the law.
2. The order is in violation of the constitutional rights of the appellant.
3. The provisions of this chapter have not been complied with in the proceedings before the agency.
4. The rules or procedure of the agency have not afforded the appellant a fair hearing.
5. The findings of fact made by the agency are not supported by a preponderance of the evidence.
6. The conclusions of law and order of the agency are not supported by its findings of fact.
7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.
8. The conclusions of law and order of the agency do not sufficiently explain the agency’s rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.

[¶ 7] We will affirm the Commission’s findings of fact if a reasoning mind reasonably could have determined the findings were proven by the weight of the evidence. Aggie Inv. GP v. North Dakota Pub. Serv. Comm’n, 470 N.W.2d 805, 813 (N.D.1991). Questions of law, including an interpretation of a statute, are fully reviewable on appeal. Klein v. North Dakota Workers Comp. Bureau, 2001 ND 170, ¶ 6, 634 N.W.2d 530. However, we give some deference to a reasonable interpretation of a statute by the agency responsible for enforcing it, and give appreciable deference to agency expertise if the subject matter is highly technical. Cass County Elec. Coop. Inc. v. Northern States Power Co., 518 N.W.2d 216, 220 (N.D.1994).

A

[¶8] Some background about regulation of the telecommunications industry is necessary to fully understand the issues on appeal. Telecommunications companies are regulated by state law. See N.D.C.C. ch. 49-21. Section 49-21-08, N.D.C.C., provides in part:

Whenever any telecommunications company furnishes adequate local exchange telecommunications service and supplies the reasonable wants of the people of the city or community in which it is operating, and complies with the orders of the commission, the commission shall not grant to any other telecommunications company the right to compete with such telecommunications company in the provision of local exchange telecommunications service until after a public hearing of all parties interested, and a finding by the commission that the public convenience and necessity may require such competing plant.

Therefore, a telecommunications company generally must apply for a certificate of public convenience and necessity under N.D.C.C. ch. 49-03.1 if it wishes to compete with another company furnishing adequate local exchange telecommunications service. See generally Shark v. U.S. West Communications, Inc., 545 N.W.2d 194, 195-96 (N.D.1996).

[¶ 9] Before 1993, the regulation of wireless telecommunications services was divided between federal and state authorities, largely along an interstate/intrastate line. Ball v. GTE Mobilnet of California, 81 Cal.App.4th 529, 96 Cal.Rptr.2d 801, 804 (2000). The FCC distinguished between common carrier service and private carrier service, and regulated the former to a much greater degree than the latter. Connecticut Dep’t of Pub. Util. Control v. Fed. Communications Comm’n, 78 F.3d 842, 845 (2nd Cir.1996). Recognizing the rapid growth of the cellular telecommunications industry, Congress, in 1993, dramatically revised the regulation of that industry by amending the Communications Act of 1934 (“Act”) in the Omnibus Budget Reconciliation Act of 1993; Pub.L. No. 103-66,107 Stat. 312 (1993). Tenore v. AT & T Wireless Services, 136 Wash.2d 322, 962 P.2d 104, 110 (1998). Congress created new statutory classifications of “commercial” and “private” mobile radio services (“CMRS” and “PMRS,” respectively), and directed the FCC to implement these categories in its regulations and provide for comparable regulation of substantially similar CMRS systems. Cellnet Communications, Inc. v. Fed. Communications Comm’n, 149 F.3d 429, 433 (6th Cir.1998); see also Connecticut Dep’t of Pub. Util. Control, 78 F.3d at 846 (noting “congressional intent of creating regulatory symmetry among similar mobile services”). To foster the growth and development of cellular and related mobile wireless communications that, by their nature, operate without regard to state lines, Ball, 96 Cal.Rptr.2d at 804, Congress also enacted 47 U.S.C. § 332(c)(3)(A):

Notwithstanding sections 152(b) and 221(b) of this title, no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services. Nothing in this subpara-graph shall exempt providers of commercial mobile services (where such services are a substitute for land line telephone exchange service for a substantial portion of the communications within such State) from requirements imposed by a State commission on all providers of telecommunications services necessary to ensure the universal availability of telecommunications service at affordable rates. Notwithstanding the first sentence of this subpara-graph, a State may petition the [FCC] for authority to regulate the rates for any commercial mobile service and the [FCC] shall grant such petition if such State demonstrates that—
(i) market conditions with respect to such services fail to protect subscribers adequately from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory; or
(ii) such market conditions exist and such service is a replacement for land line telephone exchange service for a substantial portion of the telephone land line exchange service within such State. The [FCC] shall provide reasonable opportunity for public comment in response to such petition, and shall, within 9 months after the date of its submission, grant or deny such petition. If the [FCC] grants such petition, the [FCC] shall authorize the State to exercise under State law such authority over rates, for such periods of time, as the [FCC] deems necessary to ensure that such rates are just and reasonable and not unjustly or unreasonably discriminatory.

[¶ 10] Congress had two principal objectives in enacting this state preemption provision: (1) to ensure that similar mobile services are subject to consistent regulatory treatment; and (2) to impose only the level of regulation necessary to promote competition and protect mobile communications customers. Bell Atlantic Mobile, Inc. v. Dep’t. of Pub. Util. Control, 253 Conn. 453, 754 A.2d 128, 132 (2000). Amendments to the Act since 1993 have further emphasized the intention of Congress to foster competition in local and long distance telephone markets by neutralizing the competitive advantage inherent in incumbent carriers’ ownership of the physical networks required to supply telecommunications services. U.S. West Communications, Inc. v. Washington Utilities and Transp. Comm’n, 255 F.3d 990, 992 (9th Cir.2001). Congress intended to provide a pro-competitive, deregula-tory national policy framework designed to accelerate the private sector deployment of advanced telecommunications and information technologies and services, and to stop local authorities from keeping wireless providers tied up in the hearing process. See, e.g., Sprint Spectrum L.P. v. Town of Easton, 982 F.Supp. 47, 49-50 (D.Mass.1997); Westel-Milwaukee Co., Inc. v. Walworth County, 205 Wis.2d 244, 556 N.W.2d 107, 109 (App.1996).

[¶ 11] Congress has defined the statutory term “mobile service” as:

a radio communication service carried on between mobile stations or receivers and land stations, and by mobile stations communicating among themselves, and includes (A) both one-way and two-way radio communication services, (B) a mobile service which provides a regularly interacting group of base, mobile, portable, and associated control and relay stations (whether licensed on an individual, cooperative, or multiple basis) for private one-way or two-way land mobile radio communications by eligible users over designated areas of operation, and (C) any service for which a license is required in a personal communications service established pursuant to the proceeding entitled “Amendment to the Commission’s Rules to Establish New Personal Communications Services” (GEN Docket No. 90-314; ET Docket No. 92-100), or any successor proceeding.

47 U.S.C. § 153(27). The statutory term “mobile station” is defined in 47 U.S.C. § 153(28) as “a radio-communication station capable of being moved and which ordinarily does move.” Cellular telephone services fall within the definition of “mobile service.” Gilmore v. Southwestern Bell Mobile Systems, Inc., 156 F.Supp.2d 916, 920 n. 3 (N.D.Ill.2001).

[¶ 12] The FCC has been given broad preemption authority under the Act to regulate carriers for the public convenience and necessity. GTE Serv. Corp. v. Fed. Communications Comm’n, 224 F.3d 768, 770 (D.C.Cir.2000); Cellular Phone Taskforce v. Fed. Communications Comm’n, 205 F.3d 82, 96 (2nd Cir.2000). The FCC has the authority to make rules to fill any gap in the Act left by Congress, provided the FCC’s construction of the statutes is reasonable. Iowa Utilities Bd. v. Fed. Communications Comm’n, 219 F.3d 744, 752 (8th Cir.2000), cert. granted, 531 U.S. 1124, 121 S.Ct. 878, 148 L.Ed.2d 788 (2001). In the exercise of its authority, the FCC has promulgated 47 C.F.R. § 22.99, which defines a “mobile station” as “[o]ne or more transmitters that are capable of operation while in motion.”

[¶ 13] The FCC has also issued orders further defining what it considers to be CMRS and has indicated that services having both fixed and mobile capabilities fall within the statutory definition. In a 1994 order, In the Matter of Implementation of Sections 3(n) and 332 of the Communications Act Regulatory Treatment of Mobile Services, Second Report and Order, GN Docket No. 93-252, FCC 94-31, 9 FCC Red. 1411, ¶ 38 (March 7, 1994), the FCC said:

38. We also agree with Rockwell that satellite services provided to or from a transportable platform that cannot move when the communications service is offered should not be included within the definition of mobile service. These fixed services are used to provide disaster relief, temporary communications for news reporters and expeditions, and temporary communications in remote areas and cannot be used in a mobile mode. Services provided through dual-use equipment, however, such as Inmar-sah-M terminals which are capable of transmitting while the platform is moving, are included in the mobile services definition. We also agree with New York that the substitution of a radio loop for a wire loop in the provision of BETRS does not constitute mobile service for purposes of our definition. As the Commission noted in the BETRS proceeding, this service was intended to be an extension of intrastate basic exchange telephone service. Thus, the radio loop merely takes the place of wire or cable, which in rural and geophysically rugged areas is often prohibitively expensive to install and maintain,

(footnote omitted; emphasis added). In a 1996 order, In the Matter of Amendment of the Commission’s Rules to Permit Flexible Service Offerings in the Commercial Mobile Radio Services, First Report and Order and Further Notice of Proposed Rule Making, WT Docket No. 96-6, FCC 96-283, 11 FCC Red. 8965, ¶7 (Aug. 1, 1996), the FCC reiterated:

7. The current rules also place some limits on the ability of licensees on CMRS spectrum to offer fixed services, however. In reviewing the definition of “mobile service” under the Communications Act, “we have concluded that services having both fixed and mobile capabilities, e.g., services provided through dual-use equipment, fall within the statutory definition.” In contrast, we have concluded that services that are solely fixed in nature, e.g., fixed point-to-point services such as Basic Exchange Telephone Radio Service (BETRS), do not constitute “mobile service” within the meaning of the statute.

(footnotes omitted; emphasis added).

B

[¶ 14] The hearings before the Commission proceeded against this legal backdrop. Western argued its wireless residential service constituted CMRS under federal law and FCC rulings and regulations because it functioned as a hybrid fixed/mobile service. Western’s special projects manager described the “tellular” device used with the system:

A. Wireless residential service is provisioned over the company’s existing cellular network infrastructure. Wireless residential service and other cellular service offerings are provided over the same network switching equipment, the same interconnection facilities, the same dedicated trunking facilities, the same cell site, the same antenna towers, the same cell site radio equipment and the same cellular spectrum.
A. Instead of using a handheld phone, a bag phone or other equipment typically used by cellular customers, wireless residential service customers use a device the size of a small laptop computer that consists of a standard cellular antenna to transmit and receive signals in the same manner as a han-dheld phone. The device enables customers to use their existing telephones to place and receive calls. The device operates using AC power or battery backup.
A. An important attribute of wireless residential service is its mobility. Unlike landline service, and like conventional cellular service, wireless residential service is a service associated with a customer, not a specific location. This feature of wireless residential service allows a customer to take its phone to a neighbor’s house, to the office, to another building or out in the field. Because the unit operates on either AC power or battery backup, it is mobile.

[¶ 15] Consolidated argued the “tellular” device is not CMRS under the federal statutory definition because it ordinarily does not move and was not intended for mobile use. Consolidated argued the device was heavy and awkward compared to handheld wireless phones and must be connected to a traditional telephone set, and there are no handles or other conveniences indicating the unit was designed or intended for mobile use. Moreover, Consolidated relied on the Western wireless service agreement signed by customers which stated: “The Unit is intended to remain stationary. Removing the Unit from the location where it was installed by us is a violation of this Agreement and may result in substantial additional fees to you, failure of the Unit, and/or termination of this Agreement.” Western’s manager of external affairs testified this language was inserted into the agreements by Western’s sales and marketing group for the purpose of ensuring “optimum signal quality.” She also testified Western knew of “some customers that were taking them and moving them from room to room within their house, ... moving them from inside the house to a garage or to a barn,” but Western took no action to terminate the agreements. She testified this language was removed from service agreements effective February 2000, and existing customers entered into an addendum to the agreements which removed the restrictive language from their service agreements.

[¶ 16] The Commission found Consolidated did not prove Western’s wireless residential service was “a solely fixed service,” but found the service “has mobile capabilities and is therefore a mobile service.” The Commission ruled Western’s “intent regarding mobility and its attempt to restrict mobility prior to February, 2000, do not create, eliminate or revise the technical capabilities of the residential wireless service.... ” The Commission therefore concluded, “[a]s a mobile service, [wireless residential service] is exempt from state entry regulation.”

C

[¶ 17] Express preemption of state law occurs when Congress specifically declares in a federal statute that it intends to preempt state law in a particular field. See State v. Liberty Nat’l Bank and Trust Co., 427 N.W.2d 307, 309 (N.D.1988); Northwest Airlines v. State Bd. of Equalization, 358 N.W.2d 515, 517 (N.D.1984). The plain language of 47 U.S.C. § 332(c)(3)(A) manifests a clear congressional intent to preempt the field with respect to rates and market entry of commercial and private mobile services. Bryceland v. AT & T Corp., 122 F.Supp.2d 703, 707 (N.D.Tex.2000). There is no dispute in this case that if Western’s wireless residential service qualifies as CMRS under federal law, the requirement of a certificate of public convenience and necessity under N.D.C.C. ch. 49-03.1 would constitute state market entry regulation that is preempted by 47 U.S.C. § 332(c)(3)(A).

[¶ 18] A reasoning mind reasonably could have determined by the weight of the evidence in the record that Western’s wireless residential service is not a solely fixed service, but has mobile capabilities regardless of Western’s attempt to restrict mobility in the services agreements signed by customers. Consolidated argues that Western’s wireless residential service nevertheless is not a CMRS under federal law because the statutory phrase, “ordinarily does move,” contained in the definition of “mobile station” under 47 U.S.C. § 153(28), has been wholly ignored by the Commission in its analysis of this case. Consolidated argues although Western’s wireless residential service technically may be capable of moving, it is not a mobile station under the federal statutory definition because Western has made no showing that the service “ordinarily does move.” Consolidated contends the federal statutory definition must prevail over any FCC regulations or rulings which may appear to have done away with the “ordinarily does move” requirement.

[¶ 19] Consolidated’s argument that the Commission or this Court has the power to declare invalid, or to simply ignore, a questionable FCC regulation or interpretive ruling is incorrect. The federal courts of appeal have exclusive jurisdiction to review the FCC’s declaratory rulings, policies, practices and regulations. See 47 U.S.C. § 402(a); 28 U.S.C. § 2342(1); Fed. Communications Comm’n v. ITT World Communications, Inc., 466 U.S. 463, 468, 104 S.Ct. 1936, 80 L.Ed.2d 480 (1984); United States v. Neset, 10 F.Supp.2d 1113, 1114-15 (D.N.D.1998), aff'd, 235 F.3d 415 (8th Cir.2000). Unless the FCC’s rulings and regulations have been appropriately challenged in the proper federal forum, we are not at liberty to review the FCC’s statutory interpretation even if we doubted its soundness, and we must apply the rulings and regulations as written. See U.S. West Communications, Inc. v. Hamilton, 224 F.3d 1049, 1055 (9th Cir.2000); In re Fed. Communications Comm’n, 217 F.3d 125, 136-141 (2nd Cir.2000); United States v. Any and All Radio Station Transmission Equipment, 207 F.3d 458, 463 (8th Cir.2000); Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm’n, 738 F.2d 901, 907 (8th Cir.1984), vacated and remanded on other grounds, 476 U.S. 1167, 106 S.Ct. 2885, 90 L.Ed.2d 973 (1986). Because the FCC’s regulations and rulings are not subject to “collateral attacks,” In re Fed. Communications Comm’n, 217 F.3d at 139, whether the FCC has exceeded the authority granted by Congress in promulgating 47 C.F.R. § 22.99 and in its interpretive rulings and orders is a question the Commission and this Court have no jurisdiction to consider.

[¶ 20] Consolidated also argues the definition of “mobile station” in 47 C.F.R. § 22.99 is inapplicable in this case because the definitions in that section apply only to “Public Mobile Services.” However, the definition of “Public Mobile Services” in 47 C.F.R. § 22.99 as “[r]adio services in which common carriers are authorized to offer and provide mobile and related fixed radio telecommunication services for hire to the public,” is broad enough for the Commission to conclude it encompasses Western’s services.

[¶ 21] Consolidated argues the Commission’s decision is erroneous as a matter of law because a proposed presumption referenced in the FCC’s 1996 order has since been rejected by the FCC. In In the Matter of Amendment of the Commission’s Rules to Permit Flexible Service Offerings in the Commercial Mobile Radio Services, First Report and Order and Further Notice of Proposed Rule Making, WT Docket No. 96-6. FCC 96-283, 11 FCC Red. 8965, ¶ 39 (Aug. 1, 1996), the FCC said “we conclude that further development of the record is needed to resolve the issue of how fixed services allowed by this Report and Order should be regulated.” The FCC explained:

47. Based on our review of the record in this proceeding, we believe it is premature to attempt a final comprehensive determination regarding the regulatory treatment of these various types of fixed services that may be offered by licensees. While some commented argue that all of the fixed offerings described above should be treated as sufficiently related to CMRS to justify uniform regulatory treatment, we believe that a uniform approach would be premature at this time. Instead, we believe that the regulatory issues raised by this proceeding require further development of the record and more specific analysis related to the particular fixed service offerings that carriers develop. Therefore, we propose to refine the approach set forth in the Notice by seeking comment on additional guidelines for determining when fixed wireless services may fall within the scope of CMRS regulation.
48. At the outset, we emphasize that our decision to allow carriers to offer co-primary fixed services on spectrum allocated for CMRS does not alter in any way our regulatory treatment of fixed services that have been provided by CMRS providers under our prior rules. In the CMRS Second Report and Order, we stated that ancillary, auxiliary, and incidental services offered by CMRS providers fall within the statutory definition of mobile service, and are subject to CMRS regulation. We reaffirm that determination here. In our order today, however, we have broadened the potential scope of fixed services that may be offered by CMRS providers. We therefore seek further comment on the regulatory treatment of such fixed services that may not be considered ancillary, auxiliary or incidental to mobile service.

Id. at ¶¶ 47-48.

[¶ 22] In a 2000 order, In the Matter of Amendment of the Commission’s Rules to Permit Flexible Service Offerings in the Commercial Mobile Radio Services, Second Report and Order on Reconsideration, WT Docket No. 96-6, FCC 00-246, 65 Fed.Reg. 49,199, ¶8 (July 20, 2000), the FCC refused to adopt “the rebuttable presumption” proposed in the 1996 First Report and Order and Further Notice of Proposed Rule Making. The FCC said:

Just as we find the evolving nature of wireless services makes it inappropriate to adopt a bright-line test, we also find that the ongoing changes in technology and services make it difficult to set out in advance factors that we should consider in establishing such a presumption or otherwise determining the regulatory treatment of any particular fixed wireless or integrated fixed/mobile service. To the extent that a party requires a determination of whether or not a particular service that includes a fixed wireless component should be treated as CMRS, that party should petition the Commission for a declaratory ruling.

Id.

[¶ 23] Consolidated contends the Commission erred because Western’s wireless residential service was not entitled to any presumption that it was mobile. However, the Commission did not find that Western’s wireless residential service is a solely fixed service and, in any event, there is no indication in the record that the Commission gave presumptive effect to any of the evidence in these proceedings. The FCC determined the issue should be decided on a case-by-case basis, which is the analysis used by the Commission in this case. The Commission was not laboring under a misapprehension of the law.

[¶ 24] Consolidated also argues that none of the FCC’s rulings and orders are applicable in this case because the FCC has not ruled on whether Western’s specific tellular device used with its wireless residential service is CMRS. Relying on Louisiana Pub. Serv. Comm’n v. Fed. Communications Comm’n, 476 U.S. 355, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986), Consolidated argues the FCC has not taken preemptive action with respect to the tellular unit and, therefore, state regulation of Western’s wireless residential service is not preempted by federal law. We reject this argument.

[¶ 25] Under 47 U.S.C. § 332(c)(3)(A), states have no authority to regulate the rates and market entry of CMRS. The relevant inquiry here is not whether the FCC has specifically preempted state regulation of Western’s wireless residential service, but whether Western’s wireless residential service is CMRS, thus preempting state market entry regulation under 47 U.S.C. § 332(c)(3)(A). Although the FCC said in its 2000 order that a party could petition the FCC for a determination, if required, of whether a fixed wireless or integrated fixed/mobile service should be treated as CMRS, neither the parties nor the Commission petitioned the FCC in this case. Nevertheless, state regulatory bodies and state courts have concurrent jurisdiction to determine preemption questions arising under the Act. See GTE Mobilnet of Ohio v. Johnson, 111 F.3d 469, 478-82 (6th Cir.1997). Regulatory bodies and courts routinely interpret FCC regulations, rulings and orders. See, e.g., Bell Atlantic Maryland, Inc. v. MCI WorldCom, Inc., 240 F.3d 279, 286 (4th Cir.), cert. granted, — U.S. —, 121 S.Ct. 2548, 150 L.Ed.2d 715 (2001); Hamilton, 224 F.3d at 1055. The FCC’s 1994, 1996 and 2000 orders are not product or service specific, but refer to products or services “such as” the specific products or services mentioned, and are obviously intended to provide guidance. We conclude the Commission had the authority to determine whether Western’s wireless residential service was CMRS under federal law.

D

[¶ 26] In the exercise of its regulatory authority granted by Congress, the FCC has said telecommunications services provided through dual-use equipment and having both fixed and mobile capabilities fall within the statutory definition of “mobile service” under the Communications Act. The FCC’s interpretation of federal law is not subject to collateral attack in this case. The Commission, exercising its expertise in a highly technical field, determined Western’s wireless residential service has both fixed and mobile capabilities and constitutes commercial mobile radio service under federal law. The Commission’s findings are supported by a preponderance of the evidence, and the findings support its conclusion that Western need not obtain a certificate of public convenience and necessity under N.D.C.C. ch. 49-03.1 because that market entry requirement is preempted by 47 U.S.C. § 332(c)(3)(A).

Ill

[¶ 27] The judgment is affirmed.

[¶ 28] GERALD W. VANDE WALLE, C.J., BRUCE BOHLMAN, D.J., WILLIAM A. NEUMANN, MARY MUEHLEN MARING, and CAROL RONNING KAPSNER, JJ., concur.

[¶ 29] The Honorable BRUCE E. BOHLMAN, D.J., sitting in place of SANDSTROM, J„ disqualified.

      . A court’s standard of review of administrative agency decisions was formerly governed by N.D.C.C. § 28-32-19. Section 28-32-19, N.D.C.C. was recodified as N.D.C.C. § 28-32-46 and amended to include factors 7 and 8. See 2001 N.D. Sess. Laws ch. 293, § 12; 2001 N.D. Sess. Laws ch. 296, § 3.


source: Caselaw Access Project

author: PER CURIAM. SANDSTROM, Justice,

license: Public Domain

text:
    2001 ND 210
    In the Matter of the Application for DISCIPLINARY ACTION AGAINST John V. BOULGER, a Member of the Bar of the State of North Dakota. Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner, v. John V. Boulger, Respondent.
    No. 20010093.
    Supreme Court of North Dakota.
    Dec. 31, 2001.

      Paul W. Jacobson, Bismarck, ND, for petitioner.
    Timothy G. Richard and Ronald H. McLean (argued), Serkland Law Firm, Fargo, ND, for respondent.
   PER CURIAM.

[¶ 1] Disciplinary counsel filed a petition for discipline against John V. Boulger, alleging multiple violations of the North Dakota Rules of Professional Conduct. Boulger contested the allegations of misconduct and was granted a hearing before a hearing panel. The hearing panel concluded Boulger had committed no act in violation of the professional conduct rules and ordered the petition against him be dismissed. Under N.D.R. Lawyer Discipl. 3.1(f), disciplinary counsel petitioned this Court for review of the hearing panel’s order. This Court granted the petition for review only for the alleged violation of N.D.R. Prof. Conduct 1.8(c). We hold Boulger violated Rule 1.8(c) by drafting a codicil and a will for a client including provisions giving himself a substantial contingent testamentary gift. We issue this opinion as a reprimand of Boulger’s misconduct and remand for assessment of costs to be determined by the Disciplinary Board.

I

[¶ 2] The facts in this case are not in dispute. Boulger was a high school classmate and friend of Jay Swanson, who owned and operated Swanson Health Products and other businesses in Fargo. Boulger provided legal services for Swanson and his businesses. In 1992, Swanson, his wife, and his two teenage sons planned a seven-day trip to Jamaica. Before leaving on the trip, Swanson requested Boul-ger prepare a codicil to his will providing that in the event the entire family were to die during the trip, Jay Swanson’s estate would be divided between his former wife, his brother, and specific friends, including Boulger. Under that codicil, if all contingencies were met, Boulger could have received one-third of twenty five percent of Swanson’s estate. The codicil was self-terminating and none of its provisions were implemented.

[¶ 3] In 1993, at Jay Swanson’s request, Boulger prepared a new will bequeathing Swanson’s estate to his two sons and providing that, in the event the sons should predecease Swanson and leave no living issue, Boulger would receive twenty percent of the estate. Jay Swanson subsequently executed a new will, and upon his death in November 1996, Boulger did not receive any property from the estate.

II

[¶ 4] Upon the complaint of Jay Swanson’s brother, disciplinary counsel filed a petition for discipline against Boulger alleging, among other things, Boulger’s drafting of the 1992 codicil and the 1993 will violated N.D.R. Prof. Conduct 1.8(c), which provides:

A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, unless the client is related to the donee.

The Official Comment to this rule explains its intent:

A lawyer may accept a gift from a client, if the transaction meets general standards of fairness. For example, a simple gift such as a present given at a holiday or as a token of appreciation is permitted. If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide. Paragraph (c) recognizes an exception where the client is a relative of the donee or the gift is not substantial.

[¶ 5] We review disciplinary proceedings against attorneys de novo on the record. In re Disciplinary Action Against Howe, 2001 ND 7, ¶ 4, 621 N.W.2d 361. Disciplinary counsel must prove each violation by clear and convincing evidence. Id. We decide each case on its own facts and, although we give due weight to the findings, conclusions, and recommendations of the Disciplinary Board, we do not automatically accept those findings. In re Disciplinary Action Against Dooley, 1999 ND 184, ¶ 12, 699 N.W.2d 619.

Ill

[¶ 6] Boulger concedes he drafted will instruments for his client, Jay Swanson, which provided testamentary devises to himself. Boulger also concedes that had he inherited property under either of those contingent devises he would have received a substantial gift, amounting to perhaps hundreds of thousands of dollars, because Swanson was a successful businessman with substantial assets. Nevertheless, Boulger argues, and the Disciplinary Board’s hearing panel concluded, Boulger’s drafting of the will instruments did not violate Rule 1.8(c) because the contingencies to trigger the testamentary gifts to Boulger were so unlikely to happen that it was improbable Boulger would receive anything under the will instruments and, consequently, the contingent bequests did not constitute substantial gifts to Boulger. We disagree.

[¶ 7] Rule 1.8(c) expressly forbids an attorney from drafting an instrument for a client which gives the attorney a substantial gift, and the official comment makes clear the intent of the rule is to insure the client receives “detached advice” from a lawyer with no interest in the matter. Although the rule does not define “substantial gift,” we find guidance in other cases interpreting similar rules, wherein the courts have concluded that a gift is not rendered insubstantial merely because it is contingent.

[¶ 8] The Supreme Court of Indiana in In the Matter of Watson, 733 N.E.2d 934, 936 (Ind.2000), applying a similar rule of attorney conduct, concluded that when a legal document has “the potential for providing a substantial testamentary gift” to an attorney, that attorney should not draft the instrument. Watson, an attorney practicing in Indiana, drafted a will for a client who owned stock in a telephone company for which Watson served as director, president of its board of directors, and as its general counsel. Watson also owned a share of stock in the company and his mother was beneficiary of a trust which controlled 92 shares of stock in the company. The will drafted by Watson allowed the telephone company to purchase the client’s stock upon his death at the stated “book value.” When the client died the company purchased the stock at book value of $9,600 per share. About two years later the company sold the stock for $21,000 per share, realizing a substantial gain.

[¶ 9] Indiana’s disciplinary commission brought proceedings against Watson, alleging he violated the professional rules of conduct by drafting a legal document for a client which he should have known had the potential of providing a substantial gift to himself and to his mother and which constituted, therefore, an impermissible conflict of interest. The disciplinary commission argued the book value of the stock was substantially less than its market value when the instrument was drafted, but Watson argued the book value at that time was equal to or greater than the fair market value. The Indiana Supreme Court held the attorney’s conduct constituted a violation of the professional rules of conduct and explained:

We find that the mere potential for the shares’ book value to be less than the fair market value created a situation that should have precluded the respondent from accepting employment as the testator’s attorney to draft the codicils. Indiana Professional Conduct Rule 1.8(c) provides that a lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as a parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee. At that time, the respondent knew or should have known that the codicils had the potential for providing a substantial testamentary gift to himself or his mother....
Where it is possible, as it was here, that a testamentary gift has the potential substantially to benefit the drafting attorney or his family, the ethical propriety of drafting the instrument should be evaluated in light of reasonably foreseeable circumstances and not the capriciousness of market values years in the future. Because the respondent drafted the codicils when it was reasonably foreseeable that the instruments had the potential for providing a substantial gift to the respondent and his mother, the respondent violated Prof.Cond.R. 1.8(c).

Watson, 733 N.E.2d at 936-87.

[¶ 10] In The Florida Bar v. Miller, 555 So.2d 854, 855 (Fla.1990), the Florida Supreme Court concluded that an attorney violated professional conduct rules by drafting a will making himself a contingent beneficiary to an estate, in the event the testator’s wife, who was “somewhat younger” than the testator, should predecease the testator. The Florida Supreme Court concluded the attorney’s conduct in drafting the will constituted “serious” misconduct, and the court issued a public reprimand as a sanction for the attorney’s wrongdoing.

[¶ 11] The intent of Rule 1.8(c) is to have clients get independent advice before executing legal documents which give their attorneys a substantial gift. In our view, a contingent devise of twenty percent of a sizeable estate, potentially amounting to receipt of thousands of dollars to the drafting attorney, constitutes a substantial gift for purposes of the rule. Although Boulger argues it was unlikely both of Jay Swanson’s sons would predecease him, without issue, and therefore the gift has to be considered not to be substantial, we do not view the rule as inviting a debate about probabilities and foreseeability. If there is a potential for receiving a substantial gift, the rule indicates a lawyer should not participate in drafting a document that creates such potential. Rule 1.8(c) prohibited Boulger from drafting the 1992 codicil and the 1993 will. Boulger should have urged Swanson to seek independent advice from another lawyer, and Boulger’s drafting of the instruments constituted professional misconduct.

[¶ 12] This Court in Disciplinary Board v. Amundson, 297 N.W.2d 433, 442 (N.D.1980), admonished lawyers “do not draft wills in which they are named as beneficiary.” Unless the lawyer is related to the testator, that admonition clearly still applies. If a client insists upon including an unrelated attorney as a beneficiary under a will or other legal instrument, the attorney, rather than guessing whether the bequest is substantial or not, should refrain from drafting the instrument and should direct his client to seek the advice of another attorney.

IV

[¶ 13] At the hearing, Boulger introduced “expert testimony” that Boul-ger’s conduct in drafting the will did not violate Rule 1.8(c). Disciplinary counsel asks this Court on review to rule that such testimony, regarding the appropriate interpretation of the rules of professional conduct, is never admissible in disciplinary proceedings. In resolving a similar issue in In re Disciplinary Action Against Howe, 2001 ND 7, ¶¶ 6-7, 621 N.W.2d 361, this Court ruled that, in determining if the professional conduct rules have been violated, expert testimony is unnecessary if it will not assist the disciplinary hearing panel in understanding the evidence or in deciding a fact in issue. See Hawkins v. Commission for Lawyer Discipline, 988 S.W.2d 927, 936 (Tex.App.1999), cert. denied, 629 U.S. 1022, 120 S.Ct. 1426, 146 L.Ed.2d 317 (2000) (concluding, in a disciplinary proceeding where the interpretation of the rules of conduct and whether certain conduct violates the rules are at issue, but the standard of care is not at issue, there is no need for expert witness testimony). We conclude the expert witness testimony presented in this case was inappropriate, and this Court, in its de novo review, will ignore it.

V

[¶ 14] For Boulger’s misconduct, disciplinary counsel requests this Court to impose a public reprimand, under N.D. Stds. Imposing Lawyer Sanctions 4.33, which provides:

Reprimand is generally appropriate when a lawyer is negligent in determining whether the representation of a client may be materially affected by the lawyer’s own interests, or whether the representation will adversely affect another client, and causes injury or potential injury to a client. The issuance of a private reprimand should be limited to cases of negligence which cause no serious injury or little or no injury to a client. A public reprimand is not a sufficiently harsh sanction in an instance where the lawyer’s negligence causes substantial injury to a client.

[¶ 15] Under this standard a private reprimand appears to be the most appropriate sanction. Boulger’s misconduct did not result in injury to his client. The standards for imposing lawyer sanctions also provide for consideration of aggravating and mitigating circumstances under N.D. Stds. Imposing Lawyer Sanctions 9.2 and 9.3. There are considerable mitigating circumstances in Boulger’s favor. Boulger has practiced law in this state for many years and has no prior disciplinary record or history of prior misconduct. While Boulger acknowledges having drafted the instruments with contingent devises to himself, he has made full and free disclosure of the circumstances of this case to the Disciplinary Board and has been cooperative throughout the proceedings.

[¶ 16] Under these circumstances, an admonition would have perhaps been the most appropriate sanction. However, as we recognized in Disciplinary Board v. Amundson, 297 N.W.2d 433, 444 (N.D.1980), it is not possible for this Court to issue a private reprimand. An admonition which is nonpublic discipline under N.D. Stds. Imposing Lawyer Sanctions 2.5 is a sanction to be issued by the district inquiry committees under N.D.R. Lawyer Dis-cipl. 2.4 (E)(3), not by this Court. Instead, we shall allow this opinion to serve as the sanction of reprimand.

[¶ 17] In addition, assessment of costs is an appropriate sanction under N.D. Stds. Imposing Lawyer Sanctions 2.7(b). Disciplinary counsel concedes that most of the time expended in these disciplinary proceedings involved a “fact intensive” issue on an alleged violation not accepted for review by this Court. Consequently, disciplinary counsel has requested that a partial assessment of costs be imposed against Boulger. We agree that under these circumstances a partial assessment of costs is appropriate, and we order that Boulger pay the expenses of the disciplinary proceedings in an amount the Disciplinary Board determines Boulger, in fairness, should be held responsible.

VI

[¶ 18] We hold John V. Boulger violated N.D.R. Prof. Conduct 1.8(c) by drafting instruments for a client under which he was the donee of a substantial, though contingent, gift and we issue this opinion as a reprimand for that misconduct. We also remand to the Disciplinary Board for assessment of costs to Boulger.

[¶ 19] GERALD W. VANDE WALLE, C.J., CAROL RONNING KAPSNER, WILLIAM A. NEUMANN, JJ., LAURIE A. FONTAINE, D.J., concur.

[¶ 20] The Honorable LAURIE A. FONTAINE, D.J., sitting in place of MARING, J., disqualified.

SANDSTROM, Justice,

concurring.

[¶21] I write separately to note that this decision goes further than any other decision in the United States in proscribing lawyer conduct under a disciplinary rule such as we have in North Dakota.

[¶22] On two occasions, Jay Swanson specifically directed his attorney, John Boulger, to write into Swanson’s will or codicil bequests to Boulger to be received only if unlikely contingencies were to occur.

[¶ 23] On the first occasion, Boulger would have received a bequest if Swanson’s entire family had died on a particular trip. On the second occasion, Boulger would have received a bequest if Swanson’s children had died before their father, with no heirs of their own.

[¶ 24] The Florida case, The Florida Bar v. Miller, 555 So.2d 854, 855 (Fla.1990), is the only contingent-beneficiary disciplinary case that has been found after diligent search. Under the Florida case, the lawyer was to inherit if the somewhat younger spouse were to die first. Most adults probably know personally of couples in which the somewhat younger spouse has died first. Many may have heard of entire families being killed in a single accident, but how many personally have known such a family? Probably all have heard of persons winning the lottery, but how many can say they have personally known someone who won the lottery?

[¶ 25] Not all contingencies are equally likely to occur. The contingencies of Jay Swanson’s codicil and will were always unlikely to occur, and did not occur.

[¶ 26] There is absolutely no evidence of the lawyer overreaching or exerting undue influence, as the disciplinary rule is designed to prevent. ABA/BNA Lawyer’s Manual on Professional Conduct 51:601 to 51:602 (2001); Charles W. Wolfram, Modern Legal Ethics 486-87 (1986). Jay Swanson was an alert, successful businessman in his forties when his lawyer, Boul-ger, at Swanson’s initiative and specific direction, included the contingent bequests.

[¶ 27] This opinion demonstrates that a lawyer is not always protected by following the client’s specific directions.

[¶ 28] This opinion stands for the proposition that a contingency to receive a substantial gift is a substantial gift under the rule, and it makes no difference how unlikely the contingency is to occur. On careful reflection, I concur, concluding this interpretation is the appropriate one necessary to protect the public in the future.

[¶ 29] While John Boulger, concededly a fine lawyer with an otherwise unblemished record, is the nominal subject of the Court’s action, the real admonition is to all lawyers: a bright line has been drawn and is not to be crossed.

[¶ 30] Dale V. Sandstrom

      . Under N.D. Stds. Imposing Lawyer Sanctions 2.4 the term ''reprimand” is defined as "a form of public discipline.” Under N.D. Stds. Imposing Lawyer Sanctions 2.5 the term "admonition” is defined as "a form of non-public discipline.” Although N.D. Stds. Imposing Lawyer Sanctions 4.33 refers to issuing a "private reprimand,” it is essentially suggesting that an admonition should issue in cases of negligence which caused no serious injury or little or no injury to a client.


author: GILBERTSON, Chief Justice.

text:
    2001 SD 143
    David HOLLAND, Plaintiff and Appellant, v. FEM ELECTRIC ASSOCIATION, INC., A South Dakota Corporation, Defendant and Appellee.
    No. 21835.
    Supreme Court of South Dakota.
    Considered on Briefs Oct. 1, 2001.
    Decided Dec. 12, 2001.

      Drew C. Johnson, Aberdeen, South Dakota, Attorney for plaintiff and appellant.
    R. Alan Peterson of Lynn, Jackson, Schultz & Lebrun, Sioux Falls, South Dakota, and Vaughn Beck, Ipswich, South Dakota, Attorneys for defendant and ap-pellee.
   GILBERTSON, Chief Justice.

[¶ 1.] David Holland (Holland) was the General Manager and CEO of FEM Electric Association, Inc. (FEM), until August 2, 1999, when he was asked to voluntarily resign or he would be fired in response to employee complaints of personal harassment. Initially, Holland signed the proffered resignation but later rescinded it. The FEM Board of Directors then terminated his employment. The trial court denied both parties’ Motions for Summary Judgment and remanded to the FEM Board of Directors for a post-termination hearing in accordance with FEM Employment Policy § 422. Both parties appeal. We affirm in part, reverse in part and remand for further proceedings.

FACTS AND PROCEDURE

[¶ 2.] Holland worked for FEM for over twenty years, but served most recently as General Manager and CEO of the company. Until the week before August 2, 1999, Holland had received no poor performance appraisals, warnings or reprimands regarding his job performance.

[¶ 3.] During the weék before August 2, 1999, two FEM employees approached FEM’s attorney with allegations of employee mistreatment and harassment by Holland. The attorney advised the two employees to obtain written statements from other employees with similar complaints. The employees acted on this advice and presented statements from seven of the ten full-time employees to the FEM Board of Directors. The Board met on August 1, 1999, without Holland’s presence, reviewed the letters and voted to offer him the choice of resigning or being terminated, effective immediately.

[¶ 4.] The offer and letter of resignation, prepared by FEM’s attorney, was presented to Holland on August 2, 1999. Holland signed the letter that day, but on August 6, he rescinded his resignation through his attorney. After he appeared before the Board to appeal his case, Holland’s termination was affirmed by Board vote on August 17.

[¶ 5.] Holland filed suit for wrongful termination. Both parties’ Motions for Summary Judgment were denied. Without making any determinations as a matter of law, the trial court remanded the case for a post-termination hearing in front of the FEM Board of Directors in compliance with FEM’s Personnel Policy § 422. Contending that their respective Motions for Summary Judgment should have been granted, both Holland and FEM appeal raising numerous issues which in substance amount to the following:

1. Whether Holland voluntarily resigned his position and therefore waived his right to sue for wrongful termination.
2. Whether Holland, as General Manager and CEO, was an employee at will and therefore subject to termination without cause.
3.Whether FEM’s failure to provide Holland with a pre-termination hearing violated his Fourteenth Amendment right to procedural due process, thus making a post-termination hearing ineffective and improper.

STANDARD OF REVIEW

[¶ 6.] This case involves determining whether FEM’s Personnel Policy Manual amounts to an implied contract, exempting an employee from termination at will. “The existence and governing terms of any implied contract present questions of fact to be decided by a jury.” Jurrens v. Lorenz Mfg. Co. of Benson, Minn., 1998 SD 49, ¶ 9, 578 N.W.2d 151, 154 (citing Lien v. McGladrey & Pullen, 509 N.W.2d 421, 424 (S.D.1993)) (additional citations omitted).

[¶7.] Both parties appeal the denial of their Motions for Summary Judgment. A trial court’s denial of summary judgment is reviewed as follows: “[a]ll reasonable inferences drawn from the facts must be viewed in favor of the non-moving party. The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law.” Holzer v. Dakota Speedway, 2000 SD 65, ¶ 8, 610 N.W.2d 787, 792 (citing Kimball Investment Land, Ltd. v. Chmela, 2000 SD 6, ¶ 7, 604 N.W.2d 289, 292) (additional citations and internal citations omitted). “As we take an independent review of the record, we are not bound by the trial judge’s factual assessments in granting [or denying] summary judgment.” Fritzel v. Roy Johnson Constr., 1999 SD 59, ¶ 7, 594 N.W.2d 336, 338 (citing Spenner v. City of Sioux Falls, 1998 SD 56, ¶ 7, 580 N.W.2d 606, 609).

ANALYSIS AND DECISION

[¶ 8.] 1. Whether Holland voluntarily resigned his position and therefore waived his right to sue for wrongful termination.

[¶ 9.] FEM contends that Holland has no cause of action for wrongful termination because he voluntarily resigned his position. It is undisputed that Holland signed the letter of resignation offered to him on August 2, 1999. It is also undisputed that he withdrew his resignation in writing, through his attorney, on August 6, 1999. Thus, the question is whether Holland’s rescission of his resignation was legally effective.

[¶ 10.] Holland argues that the resignation was not signed voluntarily and is therefore, subject to rescission. Herein, it appears the Board made an offer not to terminate Holland involuntarily in exchange for his agreement to “voluntarily” resign. Board claims Holland accepted its contractual offer by his execution of the resignation. SDCL 53-11-2 sets forth the grounds on which one may rescind a contract:

A party to a contract may rescind the same in the following cases only:
(1) If consent of the party rescinding or of any party jointly contracting with him was given by mistake or obtained, through duress, fraud, or undue influence exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party;

(emphasis added). Holland does not indicate whether his resignation was signed under duress, fraud or undue influence; he alleges only that his resignation was not voluntary. This is a factual issue that must be determined by the trial court, with Holland bearing the burden of proof. See Scotland Vet Supply v. ABA Recovery Service, Inc., 1998 SD 103, ¶ 10, 583 N.W.2d 834, 837; Northwestern Pub. Serv. Co. v. Chicago & N.W. Ry. Co., 87 S.D. 480, 210 N.W.2d 158, 161 (S.D.1973). Holland must produce clear and convincing evidence of duress, fraud, or undue influence before the rescission of his resignation may be considered valid. Id. Thus, Holland’s assertion that the rescission or withdrawal of the resignation was effective merely because the Board had not acted upon it puts the cart before the horse.

[¶ 11.] 2. Whether Holland, as General Manager and CEO, was an employee at will and therefore subject to termination without cause.

[¶ 12.] South Dakota is an employment-at-will state. SDCL 60-4-4 provides “[a]n employment having no specified term may be terminated at the will of either party on notice to the other, unless otherwise provided by statute.” Under certain circumstances, however, an employer may choose to surrender this statutory power to hire and fire at will. See Butterfield v. Citibank of South Dakota, 437 N.W.2d 857, 859 (S.D.1989); Osterkamp v. Alkota Mfg., 332 N.W.2d 275 (S.D.1983). For such a surrender to be effective, the employer must affirmatively indicate its intent by adopting a personnel policy or manual explicitly providing that a for-cause termination procedure must be followed. Hollander v. Douglas County, South Dakota, 2000 SD 159, ¶ 14, 620 N.W.2d 181, 185 (citing Butterfield, 437 N.W.2d at 859); Richardson v. East River Elec. Power Co-op., Inc., 531 N.W.2d 23 (S.D.1995). Alternatively, an implied contract may be created when the policy or manual “contains a detailed list of exclusive grounds for employee discipline or discharge and a mandatory and specific procedure which the employer agrees to follow prior to any employee’s termination.” Hollander, 2000 SD 159 at ¶ 14, 620 N.W.2d at 185 (quoting Butterfield, 437 N.W.2d at 859). If this surrender is made by express or implied contract, and the employer does not follow the proper procedure for terminating the employee, the employee may have a claim for wrongful termination.

[¶ 13.] In this case, FEM does have an established Personnel Policy Manual, which sets forth the procedure to be used for the discipline or termination of general co-op employees. FEM argues, however, that Holland was the General Manager and CEO of FEM, the only existing position appointed by the Board. As such, FEM contends Holland was subject to the “termination-at-will” provision in Article VI § 3 of FEM’s Bylaws. In the alternative, FEM argues if Holland was not an officer or agent terminable at will, then he is an employee subject to the “termination-without-notiee” provision in § 422(B)(2)(c) of FEM’s Personnel Policy Manual. Accordingly, the question of whether FEM followed proper procedure in terminating Holland depends upon the type of employment relationship that existed between the parties.

[¶ 14.] The type of employment relationship that existed between FEM and Holland, derived largely from the parties’ intent, is a question of fact to be determined by the trial court. Likewise, the existence and terms of any implied contract between the parties, by virtue of FEM’s Personnel Policy Manual, is also a question of fact to be determined by the trial court. Jurrens, 1998 SD 49 at ¶ 9, 578 N.W.2d at 154. Article VI § 3 of FEM’s Bylaws provides “[a]ny officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Cooperative will be served thereby.” Article VI § 8 of FEM’s Bylaws provides that the Manager/CEO is one of the positions that may be appointed by the Board. Thus, it seems clear to us that if the analysis were to stop here, Holland’s employment as a Manager/CEO is employment at will. Yet, the trial court made no findings or conclusions on this issue.

[¶ 15.] In continuing the analysis as required by this Court’s precedent, Holland’s employment relationship with FEM may override the at-will provision in FEM’s bylaws. We have held that an employment contract, express or implied, may operate as a rescission or amendment to the bylaws if the board of directors possessed the power to make such an alteration under the business’ articles of incorporation. See Nelson v. WEB Water Dev. Ass’n, Inc., 507 N.W.2d 691, 694-95 (S.D.1993); Blote v. First Federal Sav. and Loan Ass’n of Rapid City, 422 N.W.2d 834, 837 (S.D.1988). Therefore, Holland’s employment relationship with FEM may give rise to an implied contract, amending or rescinding the at-will provision in the bylaws, and requiring a particular termination procedure be followed. Again, the trial court made no findings or conclusions on this issue. Therefore, we remand for a determination of the issues identified herein.

[¶ 16.] 3. Whether FEM’s failure to provide Holland with a pre-termi-nation hearing violated his Fourteenth Amendment right to procedural due process, thus making a post-termination hearing ineffective and improper.

[¶ 17.] Holland claims his Fourteenth Amendment right to procedural due process was violated when he did not receive a pre-termination hearing as required by this Court’s precedent. See Hollander, 2000 SD 159 at ¶ 18, 620 N.W.2d at 186. Holland contends that, because his rights have already been violated, a post-termination hearing cannot “un-ring” the proverbial constitutional bell. We do not agree.

[¶ 18.] “To establish a procedural due process violation, a plaintiff must demonstrate that he has a protected property or liberty interest at stake and that he was deprived of that interest without due process of law.” Hopkins v. Saunders, 199 F.3d 968, 975 (8th Cir.1999) (citation omitted). First, the property interest must be derived from a source independent from the Constitution. See Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548, 561 (1972); Hollander, 2000 SD 159 at ¶ 14, 620 N.W.2d at 185. Second, the individual must have been deprived of this right by a state actor. See DeShaney v. Winnebago County Dep’t of Soc. Servs., 489 U.S. 189, 195, 109 S.Ct. 998, 1003, 103 L.Ed.2d 249, 258 (1989). The Fourteenth Amendment due process protections only proscribe state action that creates a deprivation of life, liberty, or property without due process of law. See U.S. Const, amend. XIV, § 1. It does not protect citizens from the actions of private individuals or private companies. While Holland may be able to demonstrate a legitimate property interest in continued employment, he cannot demonstrate that a state actor deprived him of that interest. Therefore, there is no valid Fourteenth Amendment due process claim in this case.

CONCLUSION

[¶ 19.] Despite the lack of any constitutional violation, the trial court’s remand for a post-termination hearing is premature. As discussed above, if the trial court determines Holland is subject to being fired without cause, no hearing is necessary. If the trial court determines that Holland’s conduct falls within FEM’s Personnel Policy § 422(B)(2)(c), again no hearing is nee-essary. Finally, if the trial court determines that a post-termination hearing is necessary, it must then decide whether this requirement was satisfied by Holland’s August 17 appeal before the Board. In addition, this case is replete with genuine issues of material fact, making summary judgment improper at this time. Therefore, we affirm the trial court’s denial of the parties’ Motions for Summary Judgment, vacate the trial court’s remand for a post-termination hearing, and remand the case for a determination of the issues identified in this opinion.

[¶ 20.] SABERS, AMUNDSON, KONENKAMP, Justices, and GORS, Acting Justice, concur.

      . The parties stipulated to the facts on pages 1-4 of the Joint Petition for Intermediate Appeal. There is no evidence, however, of a similar stipulation of facts before the trial court.

      . FEM has adopted a Personnel Policy Manual, which contains various provisions governing the discipline and termination of employees.

      . Holland cites 76 Am.Jur.2d Unemployment Compensation, 114, for the proposition that if an employer has not yet acted upon the resignation before refusing to permit its withdrawal, the employee is presumed to have been involuntarily terminated.

      .Despite the claim of FEM that this is a termination-at-will employment relationship, when it served its letter of termination upon Holland, the letter drafted by FEM’s attorney specifically stated the following reasons for an immediate resignation or termination:
      1. Incompetence of [sic] inefficiency.
      2. Violation of safety rules.
      3. Refusal to obey the policies of the Cooperative.
      4. Deceit and/or falsification of records.
      5. Continual tardiness.
      6. Personal harassment of another person while on the job.
      7. Improper handling of material bidding procedures.
      8. General inability to effectively work with company personnel.
      The letter went on to declare ”[a]s a result of these violations” Holland must immediately resign or be terminated, (emphasis added).
      Compare the above reasons for termination of Holland with the provisions for employee termination found in FEM’s employee manual:
      1. Inadequate performance of work....
      2. Habitual disregard of established hours of attendance....
      3. Refusal to obey the policies of the Cooperative ....
      4. Unjustified absence without leave....
      5. Failure to follow established safety procedures ....
      6. Physical assault or personal harassment of another person while on the job.

      . This does not necessarily leave a person in Holland’s position without any legal remedies. Remedies may exist to enforce property rights by suit for breach of contract or violation of state statutes.


author: KONENKAMP, Justice SABERS, Justice AMUNDSON, Justice

text:
    2001 SD 144
    STATE of South Dakota, Plaintiff and Appellee, v. Michael KOEHN, Defendant and Appellant.
    No. 21659.
    Supreme Court of South Dakota.
    Argued April 25, 2001.
    Reassigned Aug. 24, 2001.
    Decided Dec. 12, 2001.

      Mark Barnett, Attorney General, John M. Strohman, Assistant Attorney General, Pierre, for plaintiff and appellee.
    Michael Abourezk of Abourezk Law Firm, Rapid City, for defendant and appellant.
   KONENKAMP, Justice

(on reassignment).

[¶ 1.] Defendant admitted to law enforcement officers that he had recently smoked marijuana. He consented to a urinalysis, which confirmed his marijuana use. Later, as the target of a drug investigation, he admitted under immunity before a grand jury that he used marijuana for medicinal purposes. Forewarned with this information, the prosecutor obtained an order prohibiting defendant from asserting a medicinal use defense at trial. The court denied defendant’s motions to interrogate the prosecutor and to dismiss on the ground that the prosecution gained a tactical advantage with defendant’s immunized testimony. Although the prosecutor used defendant’s compelled testimony to forestall his medicinal use defense, we find no prejudice because such defense is not recognized in South Dakota.

A.

[¶2.] On July 31, 1998, along a local highway in Fall River County, law enforcement officers contrived a mock drug checkpoint. Positioned on the shoulder of the road, a large, lighted sign flashed the words “Drug Check Ahead — Drug Dogs in Use.” Spotters hid in positions to observe vehicles going past the sign. At 4 p.m., a car approached the sign and stopped abruptly. It had one occupant. The driver reached toward the back of the vehicle, then made a throwing motion out the window. A spotter saw “an object skip across the road.” The car pulled away from the sign. But it stopped again momentarily, the driver appearing to contemplate his next action. Then it drove off.

[¶ 3.] A short distance down the road, an officer pulled the car over after being alerted by radio to what the spotters had observed. Defendant, Dr. Michael Koehn, was the driver. After a brief conversation, Koehn was released. On the roadside where the object had been thrown, an agent found a small brown vial. A field test incorrectly registered negative for methamphetamine and positive for cocaine. Later, a chemist found that the vial contained a half-gram of methamphetamine.

[¶ 4.] On the same night, around midnight, four officers supplied with a search warrant went to Koehn’s home. After explaining their presence, the agents requested that Koehn give them a urine sample. He responded, “OK, I can give you a sample of my urine.” He asked what substance they were seeking to find. An officer said, “cocaine, controlled substance, methamphetamine.” Koehn replied, “I don’t use methamphetamine. Okay, but I did have a college buddy come out and visit me not so long ago and we smoked a joint.”

[¶5.] Concerned that publicity might hurt his chances in his upcoming political campaign, Koehn asked if the presence of marijuana in his urine would result in charges. The chief investigator responded, “We’re not gonna, you’re not gonna be charged with anything like that, okay?” But a little later the investigator said, “Normally what we, what we do is if people have a little pot in their urine, you don’t have any prior history or anything .... We don’t charge that out and as a law enforcement officer I can’t promise you that’s gonna happen, you know, but....” After briefly speaking with his attorney wife, Koehn offered to give a blood sample to gain a faster result, but the officers thought a urine sample would be sufficient. At the state health lab, Koehn’s urine tested negative for methamphetamine, but positive for marijuana.

[¶ 6.] A special prosecutor was appointed to handle Koehn’s case. At the prosecutor’s behest, Koehn was commanded to testify in a grand jury hearing. On two occasions in January 1999, he appeared before the grand jury and invoked his Fifth Amendment right against self-incrimination. The special prosecutor granted him use and derivative use immunity under SDCL 23A-14-29. Koehn was then compelled to testify about his marijuana use. He told the grand jury that he took marijuana medicinally for a condition he suffered.' Later, the prosecutor moved the court to order discovery of any medical records that would “form the basis of any defense to be presented by the defendant.” On the prosecutor’s motion, the court prohibited Koehn from offering a medicinal use defense at trial.

[¶ 7.] Following further investigation, the grand jury indicted Koehn for possession of methamphetamine (SDCL 22-42-5), ingesting a substance to become intoxicated (SDCL 22-42-15), and possession of less than two ounces of marijuana (SDCL 22-42-6). The circuit court dismissed the indictment, however, when it was learned that the “chief investigator” and “others” were in attendance with the grand jury while the case was under consideration, a violation of SDCL 23A-5-11. Five months later, the special prosecutor filed a complaint against defendant, and later an information, charging him with the same offenses as in the former indictment.

[¶ 8.] At trial, Koehn was found guilty of possession of marijuana and not guilty of the other two charges. He was given a thirty-day jail sentence, suspended, and a fine of $250, plus court costs. He raises the following issues on appeal: (1) whether the state used his immunized testimony in violation of his constitutional rights; (2) whether his statements were obtained in violation of Miranda v. Arizona; (3) whether he voluntarily consented to the urine sample taken at his residence; and (4) whether the testing of his urine for THC (tetrahydrocannabinol) was outside the scope of the search warrant.

B.

Prosecutor’s Use of Immunized Testimony

[¶ 9.] The Fifth Amendment prohibits the government from compelling people to testify against themselves. In upholding a federal use immunity statute, the United States Supreme Court explained the limits of Fifth Amendment protection:

The privilege [against self-incrimination] has never been construed to mean that one who invokes it cannot subsequently be prosecuted. Its sole concern is to afford protection against being forced to give testimony leading to the infliction of “penalties affixed to ... criminal acts.” Immunity from the use of compelled testimony, as well as evidence derived directly and indirectly therefrom, affords this protection.

Kastigar v. United States, 406 U.S. 441, 453, 92 S.Ct. 1653, 1661, 32 L.Ed.2d 212, reh’g denied, 408 U.S. 931, 92 S.Ct. 2478, 33 L.Ed.2d 345 (1972) (internal citations omitted). Any grant of immunity, the Court ruled, should leave the witness and the government “in substantially the same position as if the witness had claimed his privilege.” Kastigar, 406 U.S. at 457, 458-59, 92 S.Ct. at 1663, 1664, 32 L.Ed.2d 212. Testimony compelled under a grant of immunity may not be used against the witness in any respect. Id., 406 U.S. at 453, 92 S.Ct. at 1661, 32 L.Ed.2d 212. Kasti-gar disallows any attempt to “obtain leads, names of witnesses, or other information not otherwise available that might result in a prosecution.” Id., 406 U.S. at 459, 92 S.Ct. at 1664, 32 L.Ed.2d 212. The prosecutor’s burden is to prove “that all of the evidence it proposes to use was derived from legitimate independent sources.” Id., 406 U.S. at 461-62, 92 S.Ct. at 1665, 32 L.Ed.2d 212.

[¶ 10.] South Dakota’s immunity statute is similar to the federal statute the Supreme Court considered in Kasti-gar. Our statute provides in part:

No testimony or other information compelled under an order or a grant of immunity, or any information directly or indirectly derived from such testimony, may be used against the witness in any criminal proceeding, except a prosecution for perjury, giving a false statement, or otherwise failing to comply with the order.

SDCL 23A-14-29. As the parties agree that the Kastigar analysis applies here, we will examine how various federal courts interpret that decision. Because we are interpreting our own statute, however, we do not consider ourselves bound by any particular federal circuit’s interpretation. Under Kastigar, a defendant “need only show that he or she testified under a grant of immunity in order to shift to the government the heavy burden of proving that all of the evidence was derived from legitimate independent sources.” Kastigar, 406 U.S. at 461-62, 92 S.Ct. at 1666, 32 L.Ed.2d 212. This burden imposes on the prosecution an “affirmative duty to prove that the evidence it proposes to use is derived from legitimate source[s] wholly independent of the compelled testimony.” Kastigar, 406 U.S. at 460, 92 S.Ct. at 1665, 32 L.Ed.2d 212, citing Murphy v. Waterfront Comm’n, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678 (1964). The prosecutor’s burden must be established by a preponderance of the evidence. See John A. Darrow, White Collar Crime: Fifth Survey of Law—Immunity, 26 AmCrimLRev 1169, 1179 & n.62 (1989).

[¶ 11.] Although the most common time to hold a Kastigar hearing is before trial, a court may conduct the hearing before, during, or after trial, or in a combination these times. See United States v. De Diego, 511 F.2d 818, 823-24 (D.C.Cir.1975). Whether the prosecutor made use of immunized grand jury testimony is an issue of fact; accordingly, a court must make factual findings on the independent nature of the evidence. United States v. Rinaldi, 808 F.2d 1579, 1584 (D.C.Cir.1987). On review, the circuit court’s findings will not be reversed unless they are clearly erroneous. United States v. Garrett, 849 F.2d 1141, 1142 (8th Cir.1988); United States v. Gallo, 863 F.2d 185, 190 (2d Cir.1988), cert. denied, 489 U.S. 1083, 109 S.Ct. 1539, 103 L.Ed.2d 843 (1989).

[¶ 12.] When a court concludes that a prosecutor improperly used immunized testimony given before a grand jury, generally the remedy for the violation is the suppression of the tainted evidence at trial, not a dismissal of the charges. United States v. Rivieccio, 919 F.2d 812, 816 (2d Cir.1990). But see United States v. McDaniel, 482 F.2d 305, 312 (8th Cir.1973) (vacating conviction because of prohibited use of immunized testimony). However, if the prosecution fails to show that its case rests on evidence independent of a defendant’s immunized testimony, then dismissal is the proper remedy. State v. Peters, 637 N.E.2d 145, 150 (Ind.App.1994).

[¶ 13.] In its pretrial Kastigar hearing, after considering the testimony of the chief investigator, the circuit court concluded that the State proved, “by a preponderance of the evidence, that the evidence it will use for the prosecution was derived from legitimate sources wholly independent of the defendant’s immunized testimony.” The court also found that the State’s proposed evidence was “not in any way tainted, directly or indirectly, as a result of the defendant’s immunized testimony.” Nothing in the record suggests that these findings were erroneous.

[¶ 14.] Notably, although Koehn was charged with several offenses, he was convicted of only one: possession of less than two ounces of marijuana, a misdemeanor. It is this conviction we must review for constitutional and legal error. The evidence supporting the conviction was Koehn’s voluntary admission on the night in question: “I did have a college buddy come out and visit me not so long ago and we smoked a joint.” He consented that night to give a urine sample. The resulting analysis revealed that he had marijuana residue in his system, confirming he had recently ingested the substance. This evidence, sufficient in itself to convict Koehn for marijuana possession, was obtained long before the grand jury proceedings, where his testimony was given under immunity.

[¶ 15.] In his appellate brief, Koehn “concedes that no evidence presented at trial appears to have been derived from [his] immunized testimony.” On the contrary, Koehn insists that his conviction should be set aside because of the “nonevi-dentiary” use of his immunized testimony. See McDaniel, 482 F.2d 305. In McDaniel, the court prohibited “all prosecutorial use” of coerced statements, “not merely that which results in the presentation of evidence before the jury.” Id. at 311. A majority of courts reject the per se McDaniel rule prohibiting all noneviden-tiary use of immunized testimony.

[¶ 16.] Even if we were to adopt the minority view that any tangential influence privileged information may have on the prosecutor’s trial preparation is impermissible, it would avail Koehn nothing here. The nonevidentiary use Koehn complains of was the special prosecutor’s knowledge gained from the immunized testimony that Koehn “used marijuana for medicinal purposes.” Thus, according to Koehn, the prosecutor “was able to preempt this defense by filing a pretrial motion with the trial court to prevent defendant from introducing any evidence that defendant used marijuana for medicinal purposes.” Koehn fails to explain what legal basis he would have had to maintain a “medicinal use” defense to possession of marijuana. Most states refuse to recognize such a defense for those who self-prescribe illegal substances. South Dakota grants no authority, by statute or precedent, for medicinal use of marijuana.

[¶ 17.] Koehn protests the unorthodox procedures adopted by the special prosecutor. As the target of the investigation, Koehn was forced to give an official statement against himself. Even the South Dakota Attorney General’s office acknowledges that its handling of this appeal “should not be viewed by this Court as an approval of the procedures involved in the grand jury investigation in this case .” Perhaps, as Koehn suggests, the special prosecutor sought to use his immunized testimony in an attempt to build a stronger case against him. If that was the intent, improper though it may have been, it was unsuccessful. In the end, there was no evidentiary use of immunized testimony at trial, as Koehn concedes.

[¶ 18.] Koehn next contends that the trial court erred in not allowing him to examine the special prosecutor to ascertain his “motives” and to explore any use he may have made of the immunized testimony. We believe that the appropriate focus of a challenge on self-incrimination grounds should be on the direct and indirect evidentiary uses of immunized testimony, rather than on nonevidentiary matters. United States v. Byrd, 765 F.2d 1524, 1529-31 (11th Cir.1985) (disagreeing with United States v. Semkiw, 712 F.2d 891 (3d Cir.1983), and McDaniel, 482 F.2d 305). “The government is not required to negate all abstract ‘possibility’ of taint.” Id. at 1529. Furthermore, even if immunized testimony was used, a conviction may be upheld on a finding that the use of such tainted evidence was harmless beyond a reasonable doubt. Schmidgall, 25 F.3d at 1529. Even constitutional error can be harmless. State v. Stanga, 2000 SD 129, ¶ 20, 617 N.W.2d 486, 491.

[¶ 19.] Although the special prosecutor used Koehn’s immunized testimony concerning his medicinal use of marijuana to preclude this defense at trial, given Koehn’s admission and his positive urine test, such use was harmless beyond a reasonable doubt. It is not our role to overturn improper procedures if they produce no effect on the outcome. We uphold the circuit court’s finding that the State made no evidentiary use of Koehn’s grand jury testimony, either directly or indirectly, and that the conviction was based on evidence derived from a legitimate source wholly independent of his immunized testimony.

[¶ 20.] Koehn’s misdemeanor conviction for possession of marijuana is affirmed.

[¶ 21.] GILBERTSON, Chief Justice, and MILLER, Retired Chief Justice, concur.

[¶ 22.] SABERS, and AMUNDSON, Justices, dissent.

SABERS, Justice

(dissenting).

[¶ 23.] I join in Justice Amundson’s dissent for all of the reasons stated therein.

[¶ 24.] In addition, I condemn the tactics of the special prosecutor in “targeting” the Defendant and “compelling” his testimony against himself in violation of the letter and spirit of the Constitutions of the United States and South Dakota. To this extent, I differ with McDaniel’s statement that “we cast no reflection upon the integrity or motives of [the special prosecutor]....”

[¶ 25.] Although the conduct of the Defendant is incredible considering his position in the community, two wrongs do not make a right. To make things worse, the trial court judge prevented the defense from questioning the special prosecutor and the Attorney General’s Office supported the conduct, despite its admission that it is not “our preferred practice.”

AMUNDSON, Justice

(dissenting).

[¶ 26.] I respectfully dissent on issue one.

[¶ 27.] On June 19, 2000, the trial court held a Kastigar hearing to determine whether the State’s evidence to be used against Koehn was derived directly or indirectly from Koehn’s immunized testimony. After hearing testimony from the leading investigator, DCI Agent Beyer, the trial court held that “there was no evidentiary advantage to the prosecution contained in the immunized testimony of Mr. Koehn.” The trial court further found that the evidence to be used was “derived from legitimate sources wholly independent of the Defendant’s grand jury testimony.”

[¶ 28.] The State and Koehn agree that our inquiry into the propriety of the State’s use of immunized testimony is controlled by Kastigar, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212. In Kastigar, the United States Supreme Court held that the grant of immunity by the government must be coextensive with the privilege against self-incrimination under the Fifth Amendment. 406 U.S. at 453, 92 S.Ct. at 1661, 32 L.Ed.2d 212. In so holding, the Court announced that the government has a “heavy burden” of proving that the evidence to be used by the government was not “directly or indirectly” procured from the immunized testimony.

[¶ 29.] Relying on Kastigar, the Eighth Circuit Court of Appeals added:

[T]o enforce the statutory prohibition on any use if the immunized testimony and adequately protect the witness’s fifth amendment privilege, an immunized witness subsequently prosecuted need only show that he testified under a grant of immunity in order to shift to the government the heavy burden of proving that all of the evidence it proposes to use was derived from legitimate independent sources. This burden, the Court explained, provides a very substantial protection; it is not limited to a negation of taint, rather it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony.

United States v. Garrett, 797 F.2d 656, 659-60 (8th Cir.1986) (internal citations omitted). Therefore, since there is no dispute that Koehn’s testimony was compelled, and he was then granted immunity, the State had a substantial burden in showing that the evidence to be used in Koehn’s prosecution not only was free from taint, but also that it came from wholly legitimate sources.

[¶ 30.] At the Kastigar hearing, Agent Beyer stated that he used Koehn’s immunized testimony to contact potential witnesses. Further, when asked if it would be helpful to know what the defense will be, Agent Beyer answered: “I suppose. If you are playing in a football game and you know what play is coming, I suppose that helps.”

[¶ 31.] In addition, Koehn called the special prosecutor, Rod Lefholz, at the Kastigar hearing to determine whether the prosecution had procured evidence to be used at trial stemming from Koehn’s immunized testimony. The trial court prevented Koehn from calling Lefholz as a witness. Koehn, however, made an offer of proof where he would ask Lefholz questions relating to his preparation for trial and the grand jury testimony. In other words, Koehn attempted to delve into Lef-holz’ state of mind to determine what ef-feet the grand jury testimony had on his handling of the ease.

[¶ 32.] In interpreting Kastigar, there is a split of authority among the federal circuits in defining the proper use of evidence derived from immunized testimony. In the Eighth Circuit, the case of McDaniel, 482 F.2d 305, controls the scope of immunized testimony in federal court where “any use” taints the evidence used by the prosecution. In the Seventh Circuit, the Velasco case, 953 F.2d 1467, takes a narrower view than McDaniel on the proper use of immunized testimony. In McDaniel, the Eighth Circuit court held that immunity protection includes “all prosecutorial use of the testimony, not merely that which results in the presentation of evidence before the jury.” 482 F.2d at 311 (emphasis added). While the testimony adduced on cross-examination at the Kastigar hearing could be characterized as “non-evidentiary” rather than evi-dentiary, the Eighth Circuit does not draw a distinction between the two. As described above, the State made motions in limine and discovery motions based on Koehn’s grand jury testimony. The State also interviewed a witness that it gained knowledge of from the immunized testimony. Such use of testimony, under McDaniel, is clearly forbidden. The State has offered no evidence to the contrary.

[¶ 33.] The State urges this Court to follow the Velasco case. In rejecting McDaniel, the Velasco court stated that “the mere tangential influence that privileged information may have on the prosecutor’s thought process in preparing for trial is not an impermissible ‘use’ of that information.” 953 F.2d at 1474 (citations omitted). Therefore, according to Velasco, a prosecutor may read the grand jury transcript, be involved in the grand jury proceeding itself, and even file motions it would not have otherwise have filed but for the immunized testimony. It is important to note that the Velasco decision relies upon Mariani, 851 F.2d 595 for departing from McDaniel. In Mariani, however, the Second Circuit subscribed to the notion that “the government bears a heavy burden to show that the evidence it uses in the subsequent prosecution was not derived directly or indirectly from the witness’s immunized testimony” and “[t]o sustain its burden ... the government must prove that it ‘relied solely on evidence from legitimate sources.’” 851 F.2d at 600 (emphasis added).

[¶ 34.] The State, through the lone testimony of Agent Beyer, failed to show that it relied solely on evidence from legitimate sources. The entire Kastigar hearing revolved around Agent Beyer’s investigation of Koehn’s alleged drug use without any mention of whether the information used in his investigation came from legitimate sources. The State presented no evidence of legitimate sources at the Kastigar hearing, therefore, under either McDaniel or Velasco, the State in this case failed to meet its heavy burden of proving Koehn’s immunized testimony was not directly or indirectly used in his subsequent criminal trial. Based on this record, the State failed to carry its heavy burden under either of the aforementioned decisions.

[¶ 35.] As it is clearly evident that the State used Koehn’s immunized testimony, additional proceedings would be futile. Like the McDaniel case, “the unusual circumstances attending the controversy renders the government’s burden of proof in this case virtually undischargeable.”

[¶ 36.] For these reasons, I would reverse and remand, vacating Koehn’s conviction with instructions to dismiss the case.

      . As we conclude that the circuit court did not err in finding that defendant voluntarily consented to give a urine sample and voluntarily spoke to the officers in a noncustodial setting, we deem defendant's Issues 2, 3, and 4 nonmeritorious. The search warrant was not executed and defendant was apparently unaware of its existence on the night in question.

      . See United States v. Velasco, 953 F.2d 1467, 1474 (7th Cir.1992) (“The burden on the prosecution to establish an independent source for evidence against a defendant is a heavy one indeed, but we decline to make it an impossible one to bear.”); United States v. Serrano, 870 F.2d 1, 17 (1stCir.1989) ("Such an approach amounts to a per se rule that would in effect grant a defendant transactional immunity once it is shown that government attorneys or investigators involved in the prosecution were exposed to the immunized testimony.”); United States v. Mariani, 851 F.2d 595, 600-01 (2d Cir.1988), cert. denied, 490 U.S. 1011, 109 S.Ct. 1654, 104 L.Ed.2d 168 (1989); United States v. Crowson, 828 F.2d 1427, 1431-32 (9th Cir.1987), cert. denied, 488 U.S. 831, 109 S.Ct. 87, 102 L.Ed.2d 63 (1988); United States v. Schmidgall, 25 F.3d 1523, 1528-29 (11th Cir.1994).

      . See State v. Poling, 207 W.Va. 299, 531 S.E.2d 678 (2000) (medical necessity unavailable as affirmative defense to marijuana charge); Carlson v. State, 240 Ga.App. 589, 524 S.E.2d 283 (1999) (defendant not entitled to have witness testify about the beneficial use of marijuana for certain ailments in support of defense of justification and not entitled to justification defense instruction); Murphy v. Commonwealth, 31 Va.App. 70, 521 S.E.2d 301 (1999) (necessity defense unavailable to charge of possession of marijuana); Seeley v. State, 132 Wash.2d 776, 940 P.2d 604 (1997) (no constitutional right to use marijuana for medical treatment).

      . See also Humble, Nonevidentiary Use of Compelled Testimony: Beyond the Fifth Amendment, 66 TexLRev 351, 355-56 (1987) (''[JXQeither the immunity statute nor the fifth amendment requires the government to prove that it made no nonevidentiary uses of the defendant’s compelled testimony.”)

      . See, e.g., Serrano, 870 F.2d at 16; Byrd, 765 F.2d at 1529 n.8 (use of immunized testimony does not result in dismissal if found to be harmless beyond a reasonable doubt); United States v. Gregory, 730 F.2d 692, 698 (11th Cir.1984) (same), cert. denied, 469 U.S. 1208, 105 S.Ct. 1170, 84 L.Ed.2d 321 (1985); United States v. Beery, 678 F.2d 856, 860 n.3, 863 (10th Cir.1982) (same).

      . A review of the Findings of Fact made by the trial court does not disclose specifically the independent sources claimed by the prosecution. Rather, the court generally found, based on the testimony of one witness and the transcript of the grand jury proceeding, that all evidence to be used against Koehn came from legitimate sources.

      . For example, the record reflects that the special prosecutor made a pre-trial discovery motion to procure Koehn's medical records. During the grand jury testimony, Koehn admitted that he suffered from a bipolar mental condition, which is why, he explained, he smoked marijuana. While the significance of the medical records themselves may be of little value, it does show that the immunized testimony had some effect on how the prosecutor was handling the case. Like the McDaniel case, "we cast no reflection upon the integrity or motives of the [special prosecutor] .... Thus, although he asserts he did not use [Koehn's] testimony in any form, we cannot escape the conclusion that the testimony could not be wholly obliterated from the prosecutor’s mind in preparation and trial of the case.” 482 F.2d 312.

      . It is important to note that special prosecutor Lefholz conducted the grand jury proceeding and DCI agent Beyer was present to hear the grand jury testimony of Koehn. In McDaniel, the Circuit Court found a violation of Koehn's Fifth Amendment privilege due merely from the prosecutor reading the defendant's immunized testimony.
      [O]nce the subject matter was touched upon in the privileged testimony, and the prosecutor had read it, he could have used it in a variety of ways in this criminal prosecution. The possibility of such use, and the impossibility of clearly showing that the use did not occur calls for a holding in this case that the defendants were denied the constitutional protection that their silence would have given them.

        McDaniel, 482 F.2d at 311-12 (citing United States v. Dornau, 359 F.Supp. 684 (S.D.N.Y.1973)). Under McDaniel, the fact that Lef-holz and Beyer had read the grand jury testimony alone is sufficient for this Court to find a Kastigar violation. If we were to follow McDaniel, the examples of the special prosecutor's use of immunized testimony, however tangential, only support our decision to reverse the trial court.