Chapter 3 Introduction to Adjudications

1. Chapter 3Introduction to Adjudications

2. Defining an Adjudication • Adjudications are the process used to find facts involving specific identified parties and to make a decision, sometimes state as an order. • Adjudications are enforcement proceedings and thus can only be done by executive branch agencies. • Adjudications range in formality from an online form evaluated by a computer to years long proceedings that look like complex litigation trials.

3. Adjudications in the Old Days • “Jury of your peers" originally meant people who knew you who would know if you were lying – or perhaps that you were a bad person and should be in jail. • How has that changed? • Did you get a hearing when the King told you what to do? • Was there a right to a jury in civil law trials? • While the courts had to come into alignment with the US constitution when LA joined the union, the old trial by document still affects civil procedure.

4. Examples of Adjudications

5. Social Security Disability Determinations • More than 80% of the federal administrative law judges (ALJs) do SSD determinations. • Initial application reviewed by claims manager. If not approved, you get reasons and can amend the record. • You can then appeal the initial denial to a higher level claims examiner. If denied again, you can get a de novo review by an ALJ. • The ALJ’s decision becomes final after 30 days if not reviewed by the Secretary. • You can appeal the final decision to the courts.

6. Permits as Adjudications • Wetlands development requires a permit from the Army Corps of Engineers • The developer must submit proof that the land to be developed is not a wetland, or, if it is, that there will be appropriate mitigation • The Corps evaluates the application and makes a decision, which can then be appealed to an internal Corps appeals board • If the application meets the standards, the Corps will issue a permit. • In the absence of regulations, the decision reflects the Corps' policy on how it defines and regulates wetlands.

7. Inspections as Adjudications • Restaurants need a food handling permit to sell to prepare food and sell it to the public • Must show that you have the proper equipment • Must show proper training for employees • These permits provide for surprise inspections to assure that the conditions are still being met • The inspector views the facts • The owner can provide input during the inspection • The inspector provides written findings

8. Limited Process (No Hearing) Adjudications • FAFSA (Free Application for Federal Student Aid • Medicare/Medicaid claims processing • Hunting and fishing licenses

9. Adjudications to Make Policy • In most cases, Article III courts make legal decisions about individual parties and specific facts. • Do their opinions make law and policy? • Outside of constitutional construction, legislatures can change these decisions, but often do not. • There are many examples of policy changes through litigation in areas where the legislature could/would not act. • Agency adjudications can work the same way.

10. Adjudications to Set Policy - California Dental Association v. FTC, 526 U.S. 756 (1999) • What did the FTC accuse the CDA of? • What was the sequence of the agency review? • Trial type hearing before an ALJ • De novo review before the Commission • How does this adjudication set national policy, if the adjudication is not precedent? • Who will be deciding future cases?

11. Why Make Policy Through Adjudications? • As we will learn later in the course, rulemaking is very time consuming and it is difficult to modify rules once they are finalized. • Adjudications are not bogged down in the requirements of rulemaking. • It is faster to set policy through an adjudication than through a rule. • It is easier to change an adjudication if you need to fine tune the policy. • We will later learn how Louisiana prevents effective policy making though adjudication by many agencies.

12. Agency Adjudications v. Article III Trials

13. Science in the Courtroom • The common law trial system – judge and jury – evolved to make decisions about relatively simple facts and complex human motivations such as mens rea. • It is based on adversary advocacy and unbiased/uninformed decisionmakers. • It absolves lawyers of moral responsibility through the doctrine of zealous advocacy. • Zealous advocacy focuses on telling stories without directly lying rather than looking for truth in a scientific sense. • This makes courts uniquely unsuitable for making complex scientific or technological decisions.

14. Science in Agencies (in theory) • Agencies are intended use expertise and experts to make policy decision. • Agency adjudicators are intended to be experts. • Agency hearings are based on the inquisitorial system, rather than the adversary system, so that the judge can seek truth and not depend on the advocates stories. • Generally agencies are not bound by the rules of evidence, so the advocates have a greater duty to tell the truth.

15. The Core Importance of Expertise in Understanding Agencies • A primary reason for Congress delegating rulemaking to agencies is so that agency experts can resolve the technical and scientific issues necessary to translate a law into enforceable standards. • For example, before the Clear Air Act could be enforced, the agency had to determine which pollutants caused the most serious health problems and what would be safe levels of exposure. • As we will see later in the section on judicial review, the courts generally defer to agencies. • This is partially due to separation of powers concerns – policy decisions arising under ambigious statutes belong to the executive. • It is also due to deference to agency expertise. • We will also see how state efforts to make ALJs impartial undermine expertise.

16. Federal Agency Adjudications versus Article III Trials • Inquisitorial rather than adversarial • What does this mean? • How does this change the nature of trials? • Why is this the norm internationally? • Expertise versus impartiality/cluelessness • Do we choose federal judges based on expertise in the matter before them? • How does an expert judge and an inquisitorial system change the nature of trials?

17. Article III Judges Protections Lifetime tenure Cannot reduce salary Cannot fire, only impeach Cannot discipline Why do we have these protections? How are state judges different? ALJs Civil service protections Can be fired (Lucia) Can have salary lowered, but hard to do this Can set work standards and discipline How are the pressures different than those on an Article III judge? What about contract ALJs that some states use? ALJs versus Article III Judges

18. The Administrative Procedure Act

19. Administrative Law When the APA Was Passed in 1946 • No Social Security Disability Insurance, Medicare, and Medicaid, thus few federal adjudications. • Few informal adjudications, thus the APA provides little guidance/restriction on the procedures of informal adjudications • History of ratemaking procedures which were effectively multi-party negotiations, and which drive the formal adjudication regs. • Limited rulemaking, with the APA structured to encourage “informal” (notice and comment) rulemaking as a flexible adjunct to legislation.

20. Administrative Procedure Acts • Federal APA • https://biotech.law.lsu.edu/Courses/study_aids/adlaw/index.htm • Louisiana APA • LA - 955, et seq.

21. Basic Procedure for Adjudications:Section 555 • While Section 555 only applies to formal adjudications and formal rulemaking, it is a good general review of the basics of a hearing. • Right to bring your own lawyer • No right to appointed counsel • Right to a record • Right to notice of the findings and reasons • No right to an oral hearing, can be by written documents.

22. Notice • What is notice? • Why is it required? • What has to be provided in the notice? • What can complicate notice? • What about in immigration? • Welfare benefits?

23. Burden of Proof • The movant has the burden of proof in an administrative proceeding. • What is the Social Security Disability example? • Sometimes the movant is not clear - SSI recertification. • License revocation? • This follows the judicial notion of burden of persuasion, which can be different from the burden of going forward or the burden of production.

24. Shifting the Burden • Old welfare system - Goldberg • Beneficiary gets benefit until agency moves to disqualify • New system - TANF • Benefits have limited term • No action necessary to terminate benefits. • Recertification schedules • Shift the burden to recipient to show qualifications. • License renewals can do the same.

25. Standard of Proof • What is the standard of proof required in an agency proceeding, unless otherwise specified in the law? • Are there other standards in administrative proceedings? • The United States Supreme Court has upheld a clear and convincing standard in mental health commitments. • Congress is free to require even higher standards of proof. • When we learn about judicial deference to agencies, we will rethink what preponderance of the evidence really means.

26. Rules of Evidence in Administrative Proceedings (Formal and Informal) • What is the purpose of the rules of evidence in Article III trials? • What is the underlying theory of the rules? • How does this change when there is no jury? • Why would this be different in an inquisitorial proceeding? • Does the APA set the standard of evidence? • Do all agencies use the same standards?

27. Hearsay • What is hearsay? • Why is it excluded in the rules of evidence, except for the zillion exceptions? • Why would the hearsay rule not be as important in an agency proceeding? • The Residuum Rule • Once prevented adjudications from being based solely on hearsay evidence • This has been replaced by the "substantial evidence" standard used for all agency evidence • LA uses "sufficient evidence" - may not be the exactly same standard.

28. Discovery • Not provided for by the APA • Some agencies allow discovery • Freedom of information/Open Records Acts make access to the information less of an issue than in Art. III trials. • Parties may also be entitled to have the agency use its subpoena power on their behalf against other third parties, if the agency can order discovery for itself.

29. APA Provisions - Formal Adjudications • Formal (APA) Adjudications under the US APA • US - 554, et seq.

30. Formal (APA) v. Informal (Non-APA) Adjudications • What is the language in 554 that triggers a formal adjudication? • "on the record after opportunity for an agency hearing“ • What are the subsequent provisions this triggers? • 556, 557 • Why do we call informal adjudications non-APA adjudications?

31. What is the Legal Status of an ALJ's Opinion? • The authority to make a final decision rests with the agency (secretary or commission). • An ALJ initial decision is a decision that will become final if not review by the agency. • 557(b) • Why did the EPA switch to allowing ALJ decisions to be final decisions if the agency did not act and there were no internal appeals in 45 days? • A recommended decision will not become final unless the agency acts to adopt it. • We will discuss agency rejection of ALJ opinions in the chapter on judicial review.

32. Formal Adjudications in the Real World • Formal adjudications, triggered by 554 and conducted under 556 and 557, look like trials. • Most are like simple trials. • Since they can have multiple parties with the right to present evidence and cross examine, they can be very long and complex. • As we will see later, not as bad as formal rulemaking. • Most are SSI disability determinations.

33. Informal (Non-APA) Adjudications • The procedure for informal adjudications are determined by the legislature as part of the enabling law or left to the agency, subject to Constitutional minimums. • Most adjudications are informal. • Many are “mechanical” • Paying for medical care under Medicare and Medicaid. • Student aid decisions • Some are like trials, it just depends on the legislation and agency regulations.

34. Administrative Cost and Formal Adjudications • Administrative cost is a key concept in adlaw • Administrative agencies carry out huge numbers of adjudications • What would it cost if Medicare payment determination looked like a trial? • What sort of delays would you expect? • What if FEMA used trials to decide on compensation checks? • This is revisited next chapter in the tension between due process and agency costs

35. Practice Issues • The book spends a lot of time on examples of arguments for and against the court ordering a formal adjudication. • You do not need this level of detail for this course • As with formal rulemaking, the courts are reticent to order formal rulemaking unless the statute is clear. • If the statute is ambiguous, most circuits defer to the agency – Chevron deference discussed later. • A few do not defer, reading the law themselves. • In practice, if the issue has not been settled for your hearing type, you have to argue the issue to the court based on the circuit’s precedent. • Louisiana judges and lawyers think adjudications are trials, despite our APA.

36. Practical Considerations in Adjudications • Except for the APA provision for formal adjudications, the agencies can set their own procedures for adjudications, or congress can set them in the enabling act • Some agencies have developed rules based on the Federal Rules of Civil Procedure and Evidence, which make their hearings look like trials. • Even if the proceeding looks like a trial, the ALJ's power is both more limited and broader than that of an Article III judge.

37. The Nature of the Agency and Formality of the Process • The broader the reach of the agency actions and the more controversial the agency function, the more formal the agency process • Social Security Disability ALJs deal with individuals and their decisions do not set policy. • National Labor Relations Board adjudications set policy for unionization for whole industries • It usually does not use rules for these questions, so adjudications are even more important

38. Ex parte Communications in Formal Adjudications • No ex parte communications - 557(d) • What is the extreme sanction for a party who violated this ban? • What communications are allowed? • 554(d)(1)(A-C)

39. Separation of Functions • What is separation of functions? • How does this mitigate the loophole of communication with agency personnel? • Why do we care? • Separation of function has very different results in a large federal agency than in small state agencies • Federal - still in the agency and focused in one area • States - often outside the agency (central panel), losing all expertise

40. EPA Example • Can the EPA ALJ consult with an EPA scientist to better understand a case? • What if it is about advice on facts in issue? • Can the EPA ALJ consult with an agency lawyer about law? • What about the lawyer prosecuting the case? • Can the ALJ consult with a party in the case, outside of the proceeding, to get additional facts? • How can these consultations be accomplished - what would you do in an Article III trial?

41. Consumer Product Safety Commission Example • Can the commissioner consult with his staff? • Are they considered legally the same person? • What about the head of the prosecution staff? • What is the key question? • What about consulting with the heads of companies not currently before the agency? • Can ex parte contacts occur before a proceeding? • Why should the agency be cautious about ex parte contacts? • Why do they invite remand from the courts?

42. Stopped here

43. Licensing and Permitting as Non-Trial Adjudications • A license is defined as an agency permit, certificate, approval, registration, charter, membership, statutory exception, or other form of permission. ... In short, licensing is the process by which someone obtains, is denied, or has revoked any form of federal agency permission.

44. Licensing and Permitting is the Core of State and Federal Agency Enforcement • Every regulated party must meet a standard set of criteria, usually established by administrative rules. • These criteria may include exams, such as the bar or medical licensing exam, and/or inspections, such as building permits and food handling permits. • Outside of competitive licensing, if you meet the criteria, you are entitled to the license. • There is usually an ongoing regulatory review process to assure that you continue to meet the criteria.

45. Administrative Cost Issues • What are the enforcement advantages of requiring a license or permit as compared to having the agency look for violations in an ongoing activity? • Drugs • Drugs – extensive pre-market testing. • Health food supplements – count the bodies. • Food handling • Enforcement based on cases of food poisoning versus based on inspections. • Dangerous animals • Restrictions on ownership and housing versus the one bit rule.

46. Licensing under the APA Section 558 • (This is generally applicable to state licensing as well.) • Who is the movant when you are applying for the bar? • Who has the burden of proof to establish that you meet the criteria? • Who is the movant for a license revocation? • Who has the burden of proof? • What does this tell you about your behavior before you are licensed?

47. Competitive Licensing • Why are there a limited number of broadcast television licenses available in a given area? • How would this change the licensing process as compared to law licensing? • How does the state limit the number of lawyers? • Competitive licensing/permitting is a way to manage limited resources. • These can be land use permits, air pollution permits, or the right to emit carbon dioxide. • This can also be handled by auctioning the right to do business, such as a bandwidth auction.

48. Dues Process for Disciplining License Holders - Section 558 • Notice and a hearing before revocation • Exception for imminent threats to public health and safety. • A hearing as soon as possible for summary suspensions. • More in the due process chapter.

49. LA Law Note - Title 49, Chapter 13, §961. Licenses • C. No revocation, suspension, annulment, or withdrawal of any license is lawful unless, prior to the institution of agency proceedings, the agency gives notice by mail to the licensee of facts or conduct which warrant the intended action, and the licensee is given an opportunity to show compliance with all lawful requirements for the retention of the license. If the agency finds that public health, safety, or welfare imperatively requires emergency action, and incorporates a finding to that effect in its order, summary suspension of a license may be ordered pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined.

50. Bias in Licensing Boards • Professional licensing is generally delegated to the profession. • Some state include consumer members on state licensing boards. • Trade licensing is mostly delegated to the folks in the business as well. • What are the inherent conflicts in peer licensing supervision? • What about the ones for small industries? • This is a subset of the general problem of regulation by interested parties. • New Orleans Criminal Judges Case