Chapter 3 Introduction to Adjudications

1. Chapter 3Introduction to Adjudications Every new tribunal, erected for the decision of facts, without the intervention of jury, . . . is a step towards establishing . . . the most oppressive of absolute governments.

2. Adjudications in the Old Days • What did "jury of your peers" mean originally? • How has that changed? • Government regulation • Did you get a hearing when the King told you what to do? • Was there a right to a jury in civil trials?

3. Defining an Adjudication • Adjudications are the process used to make an order involving specific identified parties • What are examples of adjudications? • Why is your federal student loan application an adjudication? • What is the order? • What is the adjudication in paying a hospital’s Medicare bill? • These are examples of adjudications to find facts and apply law in individual cases

4. Examples of adjudication types

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 • You present your case to the ALJ and the ALJ makes a determination without adverse testimony by the government. • You can then appeal that to the courts.

6. Adjudications to Make Policy • Are courts charged with making law and policy through legal opinions? • Do their opinions make law and policy? • What is happening with gay marriage? • Are civil law courts bound by precedent? • Why do we read civil court opinions? • How do they set law and policy? • Agency adjudications can work the same way

7. 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?

8. Why Make Policy Through Adjudications? • Why don't legislatures write laws that are specific enough that courts have no room to set policy? • When might a legislature intentionally write an ambiguous law, knowing it will have to be resolved by a court or an agency? • Agencies face the same issues • While they can make rules, as we will see, that can be slow and cumbersome, while adjudications can be fast

9. 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.

10. 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

11. Agency Adjudications v. Article III Trials

12. 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?

13. The Core Importance of Expertise in Understanding Agencies • A primary reason for congress delegating rulemaking powers to agencies is that the agency has experts in the subject matter • As we will see later in the section on judicial review, the courts generally defer to agencies. This is based in part on agency expertise. • Agency adjudications have very different procedures and due process requirements from Article III trials because the decision is being made based on the judge's expertise, not just the presentation of materials by the parties. • We will see how state efforts to make ALJs impartial undermine this core value.

14. Stopped here

15. Administrative law when the APA was passed in 1946 • No Social Security Disability Insurance, Medicare, and Medicaid, thus few federal adjudications. • Limited 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.

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

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 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. What is the Legal Status of an ALJ's Opinion? • What is an initial decision, in contrast to a recommended decision? • 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? • We will discuss agency rejection of ALJ opinions in the chapter on judicial review.

19. Basic Procedure for Adjudications:Section 555 • Federal Administrative Procedure Act • Section 555 applies to all adjudications • Right to bring your own lawyer • No right to appointed counsel • Right to a record • Right to notice of the findings and reasons

20. 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?

21. 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.

22. 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.

23. 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.

24. 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?

25. 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.

26. 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, if the agency can order discovery for itself.

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

28. 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?

29. 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. • Not as bad as formal rulemaking.

30. 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. • These range from complex trials to inspections and other very simple procedures • Most are simple proceedings that do not resemble trials • Some are very like trials, it just depends on the legislation and agency regulations

31. 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

32. 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 thinks adjudications are trials, despite our APA.

33. 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. • As we will discuss later, even if the proceeding looks like a trial, the ALJ's power is much more limited than that of an Article III judge.

34. 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

35. 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)

36. 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

37. 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?

38. 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?

39. 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. • A license/permit requires that the party show compliance with the law before undertaking the regulated activity.

40. Administrative Cost Issues • What are the enforcement advantages of requiring a license as compared to having the agency look for violations in an ongoing activity? • Health food supplements v. drugs? • Dangerous dogs • Law allows the agency to put special restrictions on dangerous dogs, but whether a dog is dangerous is decided case by case. • Law provides for special restrictions on pit bulls • How is the cost of enforcement different?

41. Licensing under the APA • How are the legal standards for initial licensing different from a license review or revocation? • Why? - (Who is the movant?) • How are the potential parties different for a law license than for a TV station license? • Competitive licensing • How does this change the adjudication?

42. Disciplining License Holders - Section 558 • Section 558 applies to licensing • Notice and a hearing before revocation • Exception for imminent threats to public health and safety

43. 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.

44. Bias in Licensing Boards • Who sits on state licensing boards? • What about the ones for small industries? • Why does the nature of state licensing boards potentially lead to bias? • What due process problems does this pose?

45. Law Licenses • Using lawyers as an example, what are the basic legal requirements for getting a license? • Are there opportunities for due process hearings? • What if you flunk the bar? • What if they decide you do not have the character and fitness to take the bar?