Copyright (c) 1996 The University of Tulsa
Tulsa Law Journal
Winter, 1996
32 Tulsa L.J. 297
LENGTH: 18341 words
THE FIFTIETH ANNIVERSARY OF THE ADMINISTRATIVE PROCEDURE ACT: PAST AND PROLOGUE:
THE INFLUENCE OF THE FEDERAL ADMINISTRATIVE PROCEDURE ACT ON CALIFORNIA'S NEW
ADMINISTRATIVE PROCEDURE ACT
Michael Asimow*
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Professor of Law, UCLA Law School. The opinions herein are the author's, not
necessarily those of the California Law Revision Commission. Thanks to Karl
Engeman and Nat Sterling for reading drafts of this article.
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SUMMARY:
... On October 15, 1995, Governor Pete Wilson signed Senate Bill 523 ("S.B.
523"), California's new Administrative Procedure Act, into law. ... California
administrative adjudication has two tiers. ... The SBE is California's tax
adjudication agency. ... The bill of rights extends various fundamental due
process projections to all Tier 1 and Tier 2 adjudications. ... The original
California APA contained no provision prohibiting ex parte contact. In 1986, the
APA was amended to prohibit ex parte contact with ALJs (though not agency heads)
in Tier 1 agencies. ... Neither the 1981 Model Act nor the new California
statute contains an agency head exception. ... The Federal APA now empowers a
presiding officer to use ADR techniques and to require the attendance of parties
at settlement conferences. ... The prior California APA and the Federal APA
provide for only one kind of hearing -- formal trial-type adjudication. ...
California's new APA provides for an "informal hearing" model that approximates
the Model Act's conference hearing. ... Under the California approach, the
informal hearing model can be used without adoption of an authorizing rule in
cases involving no disputed issue of material fact or, if facts are disputed, a
relatively trivial impact on the private party, or in cases where due process,
but no statute, calls for a hearing. ...
TEXT:
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The Federal Administrative Procedure Act ("APA"), n1 celebrating its fiftieth
birthday in this symposium, dominates the field of administrative law. Like the
Federal Rules of Civil or Criminal Procedure, the APA prescribes the manner in
which countless thousands of federal adjudicatory and rulemaking proceedings are
conducted each year. In that sense, the APA has achieved quasiconstitutional
status. The Act has been the subject of innumerable judicial decisions and vast
quantities of scholarship.
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n1 Administrative Procedure Act, ch. 324, 60 Stat. 237 (1946) (codified as
amended in scattered sections of 5 U.S.C.).
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A reformer who sets out to modernize a state's APA necessarily turns first to
what is most familiar: the Federal APA. The pathways of that statute are
embedded in every administrative lawyer's mental map. If a federal provision
seems to have worked well, that provision is the logical starting point in
drafting a state law. If a provision has generated major problems in
application, that lesson should also be taken to heart.
On October 15, 1995, Governor Pete Wilson signed Senate Bill 523 ("S.B. 523"),
California's new Administrative Procedure Act, into law. n2 This was a happy day
for quite a few people, including the author of this article who served as
consultant for the California Law Revision Commission ("Commission") in its
seven-year effort to propose and enact a new APA. n3 The Tulsa [*298] Law
Journal's invitation to contribute an article to this symposium provided a
welcome opportunity to reflect on the lengthy law reform process that culminated
in enactment of S.B. 523. In particular, the invitation prompted an inquiry
about the influence of the Federal APA on California's S.B. 523.
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n2 Cal. Gov't Code <sect><sect> 11400-11529 (West Supp. 1996) (enacted by S.B.
523, ch. 938, <sect><sect> 21-51, 1995 Cal. Legis. Serv. 5533-62 (West)). The
APA revisions are applicable to an administrative proceeding commenced on or
after July 1, 1997. The new APA, together with most of the Law Revision
Commission's section-by-section comments, can be found in West's Annotated
California Codes (Supp. 1996).
n3 The California Law Revision Commission is an independent state agency charged
with recommending reforms of state law. The Commission has considerable
credibility with the legislature which was of great assistance in getting the
new APA passed. In addition to a small paid staff, the members of the Commission
are volunteer lawyers, judges, legislators and legislative staff members.
Commission members convene for one-day or two-day meetings several times a year
to review studies and recommend legislation on a wide variety of subjects. I
would like to take this opportunity to pay tribute to the members of the
Commission and the staff who made a massive effort to draft and enact the new
APA. I would also like to acknowledge the efforts of Senator Quentin Kopp (I-San
Francisco) and his staff. Senator Kopp carried the bill and his unflinching
support for it helped to navigate the legislative shoals and bring the bill
safely into port.
Readers who wish to obtain documents or studies cited herein can write the
Commission at 4000 Middlefield Rd., Ste. D-2, Palo Alto, CA 94303-4739. The
Commission's phone number is (415) 494-1335 and its e-mail address is
nsterling@clrc.ca.gov.
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I. California's APA and S.B. 523
California's original APA was a pioneering effort. It was proposed by the
California Judicial Council n4 whose report cited the report of the Federal
Attorney General's Committee on Administrative Procedure n5 on nearly every
page. Enacted in 1945, n6 a year before the Federal APA, California's APA was
the first state administrative procedure statute of any consequence. n7 The Act
flew in the face of the conclusion of New York's Benjamin Commission that a
state APA was inadvisable. n8
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n4 Judicial Council of Cal., Tenth Biennial Report to the Governor and the
Legislature of 1944, at 8-30 (1944) [hereinafter Judicial Council Report]. See
also John G. Clarkson, The History of the California Administrative Procedure
Act, 15 Hastings L.J. 237, 246-47 (1964).
n5 Attorney General's Committee on Administrative Procedure, Administrative
Procedure in Government Agencies, Final Report, S. Doc. No. 8, 77th Cong., 1st
Sess. 195 (1941). The majority of the Committee recommended a federal statute
whose provisions on adjudication had quite limited scope. See id. at 195-202.
California's 1945 APA was vastly more ambitious than that recommended by the
Committee's majority.
n6 Administrative Procedure Act, ch. 867, 1945 Cal. Stat. 1626. The provisions
on rulemaking were added in 1947, Act of July 17, 1947, ch. 1425, 1947 Cal.
Stat. 2984, and were heavily amended in 1979, Act of September 11, 1979, ch.
567, 1979 Cal. Stat. 1778.
n7 California's existing APA is contained in Cal. Gov't Code <sect><sect>
11340-11529 (West 1992). The portion of the APA concerned with adjudication is
sections 11500-11529; the adjudication provisions were amended, but not
repealed, by S.B. 523.
n8 Robert M. Benjamin, Administrative Adjudication in the State of New York
35-36 (1942).
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In many respects California's 1945 legislation was far ahead of its time. For
example, it created a central panel of independent hearing officers n9 -- an
idea that is only now spreading throughout the states and has yet to be adopted
by the federal government. But as the decades passed, the defects in the 1945
statute became apparent. The most significant shortcoming was that the 1945 APA
applied only to occupational licensing agencies and a few others. n10 Per-
[*299] haps 95% of the adjudicatory proceedings conducted by state agencies
were not covered by the APA at all.
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n9 See <sect> 11502. Originally, the Act allowed agencies to choose between
their in-house hearing officers and those from the central panel. See Judicial
Council Report, supra note 4, at 14-15; Norman Abrams, Administrative Law Judge
Systems: The California View, 29 Admin. L. Rev. 487, 495 (1977). Beginning in
1961, agencies were required to use central panel hearing officers to the
exclusion of in-house officers. See id. at 495-98. Hearing officers were renamed
administrative law judges (ALJs) in 1985. See Act of July 29, 1985, ch. 324,
<sect><sect> 16-17, 1985 Cal. Stat. 1434-35 (codified at Cal. Gov't Code
<sect><sect> 11502-11502.1 (West 1992)).
n10 The Judicial Council's recommendations for a new APA covered only licensing
agencies because resource limitations prevented the Council from studying other
agencies, but the Council expressed hope that its work would be adapted to
nonlicensing agencies such as tax, workers' compensation, public utilities, and
benefit adjudications. See Judicial Council Report, supra note 4, at 9-10,
28-29. See also Ralph N. Kleps, California's Approach to the Improvement of
Administrative Procedure, 32 Cal. L. Rev. 416, 419 (1944). The Council's
proposed judicial review provisions covered all state and local agencies. See
Cal. Civ. Proc. Code <sect> 1094.5 (West Supp. 1996). Over the years, the APA
adjudication sections were expanded to cover a few non-licensing agencies
engaged in prosecutorial activity such as the Fair Employment and Housing
Commission and the Fair Political Practices Commission. It also covers certain
personnel decisions of local school boards and community colleges. For a handy
though somewhat outdated list of agency hearing requirements, see Cal.
Continuing Educ. of the Bar, California Administrative Hearing Practice 287-370
(1984).
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Starting in 1989, the Law Revision Commission began studying administrative law
in the hope that it could recommend a new statute to the legislature. n11 The
project was complex and difficult, far more controversial than the relatively
non-political law reforms usually tackled by the Commission. Yet the Commission
has no independent political base in the legislature; its recommendations stand
little chance of passage unless they command broad bipartisan consensus. In
1994-95, the legislative environment was particularly difficult because of
intense partisan squabbling over the speakership of the Assembly.
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n11 The administrative law study was authorized by the legislature. See Res. ch.
47(24), 1987 Cal. Stat. 5897, 5899. The author prepared four studies on
administrative adjudication and three studies on judicial review. These studies
are as follows:
1. "Administrative Adjudication: Structural Issues" (1989)
2. "Appeals Within the Agency" (1990)
3. "Administrative Impartiality" (1991)
4. "The Adjudication Process" (1991), in California Law Revision Comm'm,
Administrative Adjudication by State Agencies 447-542 (1995) [hereinafter "The
Adjudication Process"]
5. "Judicial Review: Standing and Timing" (1992)
6. "The Scope of Judicial Review" (1993)
7. "A Modern Judicial Review Statute to Replace Administrative Mandamus" (1993)
See Michael Asimow, Toward a New California Administrative Procedure Act:
Adjudication Fundamentals, 39 UCLA L. Rev. 1067 (1992) [hereinafter Asimow,
Adjudication Fundamentals] (incorporating studies 1, 2, and 3); Michael Asimow,
The Scope of Judicial Review of Decisions of California Administrative Agencies,
42 UCLA L. Rev. 1157 (1995) [hereinafter Asimow, Scope of Review] (incorporating
study 6).
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The Commission split the administrative law project into three parts
-adjudication, judicial review, and rulemaking. This was shrewd political
strategy because each of the three parts was likely to attract a different set
of opponents. Taking each part separately at least minimized the chances that a
strong coalition would emerge to kill the entire bill in the legislature or
persuade the governor to veto it. In addition, each of the three reforms were
quite complex and each presented many points of controversy as well as difficult
drafting problems, even for the nonpareil draftspersons employed by the Law
Revision Commission. After seven years, the Commission had only finished with
adjudication, although the judicial review project was far advanced. n12 It made
sense to complete one discrete part of the package and take it to the
legislature before consuming any more time and without creating even more
complexity and confusion.
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n12 Discussion of the judicial review bill is beyond the scope of this article.
Among many other provisions, that bill will abolish California's baroque system
of judicial review through various forms of the writ of mandamus and will limit
or abolish California's idiosyncratic system of judicial independent judgment of
agency fact findings. See Asimow, Scope of Review, supra note 11; Studies 5, 6
and 7, supra note 11. The study of rulemaking is on the drawing board but has
not yet begun.
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The Commission's objective was to produce a good bill that would command as
close to consensus as possible. Yet there were numerous players before [*300]
the Commission, in the legislature, and in the governor's office. Many agencies
tenaciously represented their perceived interests during the Commission's
deliberations. The Attorney General, the Office of Administrative Law, private
practitioners, Bar associations, administrative law judges, n13 and regulated
parties all had their own axes to grind. Some factions vigorously opposed
portions of the Commission's original proposals. The members of the Commission
themselves approached the issues with sharply differing points of view toward
government regulation and toward the differences between adjudication in court
and before agencies. That nearly all the players could ultimately join together
in support of a single bill was a fairly miraculous event. Possibly, the seven
year deliberative process exhausted everyone.
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n13 The term "administrative law judges" (and the abbreviation ALJs) is used
herein to refer to the whole panoply of California administrative trial judges
and hearing officers. It includes but is not limited to central panel ALJs.
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Because of the need to attract consensus, truly radical changes in
administrative adjudication were never seriously considered. For example, early
in the process, there were calls from Bar groups and ALJs for an external
separation of prosecutorial and adjudicatory functions, especially in licensing
cases. n14 These proposals would have stripped agency heads of their
adjudicatory powers, either by empowering ALJs to make final agency decisions or
by creating appellate tribunals to make the final agency decisions. This sort of
change was never in the cards. Even if it was a good idea, and I had deep
reservations about applying external separation across the board, n15 it would
have been politically impossible. Similarly, calls to expand California's system
of independent ALJs to new domains (remember, California's APA applies now only
to occupational licensing agencies and a few other areas) also foundered; the
merits of separating in-house ALJs from their agencies seemed problematic n16
and the opposition was intense. Nor was any attempt made to prescribe
administrative procedure for the vast and diverse array of local government
agencies. n17
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n14 In reality, large portions of administrative adjudication are already
subject to an external separation of functions. Workers' compensation,
unemployment compensation, state personnel, attorney discipline, alcoholic
beverage licensing, worker safety, and welfare cases are all adjudicated by
tribunals separated from agencies responsible for law enforcement, prosecution,
and advocacy. However, numerous important agencies, including those responsible
for professional licensing, exercise combined functions.
n15 See Asimow, Adjudication Fundamentals, supra note 11, at 1152-65.
n16 See id. at 1181-91.
n17 See Cal. Gov't Code <sect><sect> 11410.30, 11410.40 (West Supp. 1996)
(allowing local agencies to voluntarily adopt the Act or any of its provisions.)
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The dire fiscal condition of California government was an ever-present backdrop
for Commission and legislative consideration of S.B. 523. The recession of the
early 1990's hit California hard and triggered a series of harrowing budget
crises. The budgets of state agencies were cut to the bone. Staffs were sharply
pared. Yet these cuts were seldom accompanied by any diminution in regulatory
responsibility. As a result of all this, it was an accepted constraint that APA
reform could not cost very much, if anything.
Therefore, the Commission decided early on not to disturb the basic and familiar
pattern of California administrative adjudication. Most cases would [*301]
continue to be heard by ALJs who would prepare proposed decisions; the final
agency decision would remain the responsibility of the agency heads. ALJs who
were in-house would remain in-house. The challenge to the Commission was to
craft a set of modest procedural protections for private sector litigants
consistent with these political and economic constraints while also seeking ways
to make agency adjudication less costly, formal and adversarial.
The Commission conducted innumerable public hearings. Always open to input from
the public and private sectors and always in search of consensus, the Commission
struck countless compromises along the way. By the time S.B. 523 reached the
legislature, there was little left to fight about. n18 The ultimate product was
less ambitious than the one I envisioned in my studies for the Commission and
less ambitious than what I would have preferred, but it was probably the most
far reaching legislation that had any chance of passage.
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n18 Only two significant amendments of the Bill occurred during the legislative
process. The State Board of Equalization's successful effort to get out of the
bill is described in text at notes 47-50. The second was a classic example of
special interest politics. The present APA calls for all adjudicatory
proceedings to be transcribed; the consent of both parties is necessary in order
to dispense with a stenographic reporter and to tape the proceedings. See Cal.
Gov't Code <sect> 11512(d) (West 1992). The bill that went to the legislature
would have allowed a central-panel ALJ discretion to dispense with the reporter
in licensing cases. This would have resulted in a clear and obvious cost saving.
In the vast majority of cases, the agency heads accept the ALJ's proposed
decision (or accept it and lower the penalty) without calling for a transcript
and the case is never judicially reviewed. In those cases, paying a reporter to
take down the proceedings is a sheer waste of money. In numerous non-APA cases,
taping is already employed without any significant technical problems. See "The
Adjudication Process," supra note 11, at 104-06. But political realities
overwhelmed common sense. The shorthand reporters are well organized; their
trade association had the Senate Government Operations Committee wired. That
committee gave the proponents the choice of deleting the taping provision or
deferring consideration of the bill. Hearing on S.B. 523 Before the Senate Gov't
Ops. Comm., 1995-1996 Reg. Sess. (Cal. 1995). That was the end of taped
licensing hearings.
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II. The Structure of the New California APA
The attempt to revamp the adjudication provisions of California's APA was
bedeviled from the start by a difficult structural problem. California
administrative adjudication has two tiers. Tier 1, to which the adjudication
provisions of the existing APA apply, covers some sixty-three agencies, n19 most
of which handle occupational licensing (I refer to these as the "licensing
agencies," although that is not completely accurate n20 ). Hearings in licensing
cases are conducted by a panel of approximately forty ALJs employed by the
Office of Administrative Hearings ("OAH") and assigned to the various agencies
as needed. n21 The law governing Tier 1 works reasonably well; although some
tinkering was desirable, the existing Act did not require wholesale revision.
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n19 See Cal. Gov't Code <sect> 11501(b) (West 1992).
n20 See supra note 10.
n21 See Cal. Gov't Code <sect><sect> 11370.1-11370.5 (West 1992).
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However, the adjudication provisions of the existing APA cover less than 5% of
the total number of state-level adjudications. As a result, there is a huge Tier
2 which includes major state adjudicating agencies, such as those deciding
workers' compensation, unemployment compensation, welfare, personnel, labor
[*302] relations, and environmental cases. Additionally, numerous minor
adjudicating agencies are not covered by the existing Act. n22 Each Tier 2
agency has its own procedural statute and regulations, its own stable of
in-house ALJs, and its own uncodified hearing practices and customs.
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n22 Some licensing cases are not covered by Tier 1. See Asimow, Adjudication
Fundamentals, supra note 11, at 1073 n.12. These fall into Tier 2.
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Maintaining and improving the two-tier system, within the political and economic
constraints already described, presented a difficult drafting problem. The
drafters wanted to maintain the high level of procedural protection provided in
Tier 1 licensing cases. They also wanted to achieve some base-line procedural
projections for Tier 2 cases, but without significantly increasing the cost and
formality of the process. It was infeasible to transplant the minutely-detailed
procedures required under Tier 1 into all Tier 2 cases because of cost concerns
and because Tier 2 cases vary enormously. Tier 2 cases run the gamut from the
twenty minute hearings provided in unemployment cases to complex and time
consuming labor and environmental adjudication. Obviously, the same procedures
cannot be appropriate for all Tier 2 agencies. For example, the carefully
wrought discovery provisions applicable under Tier 1 could not possibly be
extended without major modification to the vast array of Tier 2 adjudications.
Finally, to compound the drafting problem, the Commission wanted to enact a set
of procedural reforms applicable to both Tier 1 and Tier 2 adjudication that
would encourage alternate dispute resolution ("ADR") and would make adjudication
less formal and costly.
Therefore, the legislation somehow had to embody three APAs within one: 1) one
APA would insure a fundamental level of procedural protection in both Tier 1 and
2 adjudications; 2) a second APA would provide modest reforms in Tier 1 cases
covered by the existing APA; 3) a third APA would provide for ADR and authorize
other flexibility and informality-promoting practices in both tiers. This
structural problem of having three APAs within one made the resulting
legislative product complex to draft and the final legislation difficult to
explain.
My original solution was to enact some modifications to the existing APA, then
apply that existing APA (as modified) to all Tier 2 agencies, with most
provisions functioning as defaults. Then the Tier 2 agencies would be invited to
adopt regulations to change or delete the default provisions. For example, the
Tier 2 agencies would be required to provide the same scheme of discovery as
Tier 1 agencies unless they chose to adopt regulations modifying or totally
deleting the discovery provisions. n23 The provisions applying ADR and
informality would apply across-the-board. This came to be known as the "big
bang" approach to adjudication reform.
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n23 See "The Adjudication Process," supra note 11, at 2-3. Provisions
representing due process fundamentals, such as the ban on ex parte contacts,
could not be altered or dispensed with by regulation.
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In my opinion, the rulemaking process called for by the big bang approach would
have been a healthy one. It would have provided the impetus for agen- [*303]
cies to examine all of their procedures, often for the first time in many years,
and would have resulted in an updated and comprehensive procedural code. Members
of the public and regulated industries would have been involved in this
reconsideration and the viewpoints of commentators would have been considered in
making final rules.
However, the big bang approach provoked a firestorm of criticism. The Attorney
General was the leading critic. n24 While the Attorney General conceded that
some provisions of the big bang proposal were desirable, he argued that no case
had been made for root and branch reform. In particular, the Attorney General
noted that big bang required all Tier 2 agencies to engage in rulemaking to
adapt the default provisions of the Act to their own special situations. Yet the
fiscal austerity confronting virtually all agencies powerfully militated against
any new chores or new costs. The California rulemaking provisions are exacting
and costly to comply with; the rulemaking path bristles with time-consuming
hurdles. n25 As a consequence, agencies complained that they would have to go
through a complex and costly rulemaking proceeding -- for which they lacked the
personnel and budget -- to get back to where they were in the first place.
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n24 See letter from Daniel E. Lungren, Attorney General, to the California Law
Revision Commission (May 11, 1994) (on file with the author).
n25 See Michael Asimow, California Underground Regulations, 44 Admin. L. Rev.
43, 48-51 (1992).
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The Attorney General's criticism led to a creative compromise that avoided the
rulemaking imbroglio and satisfied all sides -- the "little bang" approach.
Under little bang, the three-in-one structure of S.B. 523 emerged: 1) an
administrative adjudication bill of rights, setting forth basic fundamentals of
administrative justice and applicable to both Tier 1 and 2 agencies; n26 2) a
modest set of improvements applicable only to Tier 1 agencies; n27 and 3) a set
of flexibility enhancing provisions applicable to both Tier 1 and Tier 2
agencies. n28
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n26 See 1995 Cal. Legis. Serv. 5517, 5536-42 (West) (examining Articles 6-8 of
<sect> 21 of S. B. 523) (codified at Cal. Gov't Code <sect><sect>
11425.10--11435.65).
n27 See 1995 Cal. Legis. Serv. 5517, 5550-62 (West) (amending <sect><sect>
11500-11530).
n28 See 1995 Cal. Legis. Serv. 5517, 5535-36, 5542-50 (West) (codified at Cal.
Gov't Code <sect><sect> 11420.10-11420.30, 11440.10-11470.50).
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III. Critical Issues In S.B. 523 and the Impact of the Federal APA
This section will provide an overview of a number of the most important policy
decisions embodied in S.B. 523. The objective is not to discuss these provisions
in any detail but instead to explain their background. Was a provision inspired
by the Federal APA, by the various amendments to the Federal APA, or by the 1981
Model State APA ("Model Act")? n29 Or can a provision be explained by a desire
to depart from the model of the Federal APA or the Model Act? Did a provision
emerge from a political compromise or was it the product of an exercise of
political power? n30 Can it be explained by some exist- [*304] ing peculiarity
of California law or government? Or by the desire to conserve budgetary
resources?
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n29 Model State Admin. Procedure Act of 1981, 15 U.L.A. 1 (1990).
n30 See supra note 18 and infra text accompanying notes 47-50.
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As already mentioned, n31 there is no doubt that the federal experience was a
significant factor in shaping the various provisions in S.B. 523. I am steeped
in the Federal APA; my original studies that led to the Commission's
recommendations discussed the federal statute and case law at every point. The
federal model fits California well because California's bureaucratic apparatus
rivals that of many nations. Its agencies have large, well-trained staffs and a
heavy caseload. They administer an enormous range of regulatory statutes and
adjudicate cases ranging from simple, mostly pro se hearings to lengthy and
complex cases with specialized counsel. Many agencies are headed by full-time
members. Thus, federal models may be more appropriate in California than in
smaller states. n32
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n31 See supra text following note 1.
n32 See Arthur Earl Bonfield, State Administrative Rule Making <sect> 2.1.2, at
30-36 (1986).
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The 1981 Model Act was also an important guidance document for the drafters of
the California Act. n33 The Model Act represents a recent, carefully considered,
state-of-the-art approach to state administrative law that is just now beginning
to be adopted by the states. It is much more sophisticated and ambitious than
its predecessors (the 1948 and 1961 Model Acts). It was obviously desirable for
California to capitalize on the enormous investment made by the scholars,
draftsmen, and members of the National Commissioners on Uniform State Laws.
Indeed, the Model Act was frequently the starting point for Commission
consideration. However, as the Commission was compelled to make compromises and
face the inevitable tradeoffs, many of the more ambitious ideas in the Model Act
fell by the wayside.
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n33 See Asimow, Adjudication Fundamentals, supra note 11, at 1079-80.
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A. What Agencies Should Be Covered?
As already explained, S.B. 523 contains three acts in one: an administrative
adjudication bill of rights, a flexibility-enhancing package, and a set of
relatively minor improvements for licensing agencies. n34 Ideally, the bill of
rights and flexibility-enhancers should apply across the board to adjudicatory
hearings of all Tier 2 agencies. n35
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n34 See supra text accompanying notes 19-28.
n35 See Asimow, Adjudication Fundamentals, supra note 11, at 1073-79.
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In fact, the objective of "universal coverage" came close to being met. n36
Numerous agencies tried to persuade the Commission to exclude all or part of
their functions from the new APA. For the most part, the Commission stoutly
resisted these blandishments. Instead, it designed statutory exceptions to deal
[*305] with particular problems presented by particular regulatory schemes
rather than entirely excluding agencies or regulatory schemes.
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n36 See Cal. Gov't Code <sect> 11405.30 (West Supp. 1996) which defines "agency"
comprehensively, and <sect> 11410.20(a) which provides: "except as otherwise
expressly provided by statute: (a) This chapter applies to all agencies of the
state. (b) This chapter does not apply to the Legislature, the courts or
judicial branch, or the Governor or office of the Governor."
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Universal coverage was the objective of the 1981 Model Act, which includes all
adjudication of every agency. n37 On the surface, this is also the approach
taken by the Federal APA. Provided that some other statute requires a hearing on
the record, n38 the Federal APA covers the adjudications of every federal
agency. n39 However, the reality at the federal level is entirely different from
the surface appearance. Congress has repeatedly excluded new adjudicating
schemes from the Federal APA, largely to escape the rigidity of the ALJ hiring
and performance evaluation provisions of the Act. As a result, there is a vast
amount of non-APA federal adjudication. n40 As a practical matter, the
adjudication provisions of the Federal APA now apply to Social Security
disputes, plus cases in a few traditional agencies such as the NLRB. n41 The
rest of the federal adjudication universe is a motley collection guided by no
overarching procedural limitations other than due process.
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n37 See Model State Admin. Procedure Act of 1981 <sect> 1-102(1), 15 U.L.A.
10-11 (1990). The reality, of course, is different. In states that have adopted
part or all of the Model Act, the legislatures have exempted numerous agencies
from its coverage. See, e.g., Kan. Stat. Ann. <sect> 77-503 (1989), discussed in
Steve A. Leben, Survey of Kansas Law: Administrative Law, 37 U. Kan. L. Rev.
679, 683 (1989); Utah Code Ann. <sect> 63-46b-1(2) (1993); Wash. Rev. Code Ann.
<sect> 34.05.030 (West Supp. 1996).
n38 See 5 U.S.C. <sect> 554(a) (1994). See also infra discussion in text
accompanying notes 52-53, 57-58.
n39 See 5 U.S.C. <sect> 551(1).
n40 At the federal level, there are more than twice as many "administrative
judges," adjudicating cases outside the APA, as there are ALJs who adjudicate
cases under the APA. See Administrative Conference of the U. S., 1992
Recommendations and Reports 789 (1992) [hereinafter ACUS Report].
n41 See id. at 843-49, 863.
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California's new APA has done much better than the federal government in
imposing universal coverage for the bill of rights and flexibility enhancers.
Nevertheless, the Commission and the legislature fell short of imposing
universal coverage for all California adjudications in which hearings are
required by either statutes or due process. n42
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n42 See infra text accompanying notes 51-78.
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1. The California Public Utilities Commission ("CPUC")
The CPUC persuaded the Commission to exclude it from S.B. 523. n43 The CPUC
engages in considerable adjudication, including individualized public utility
ratemaking and a wide variety of licensing and penalty cases. n44 Nevertheless,
the CPUC engaged in a tenacious and ultimately successful campaign to win an
exemption from the new APA. The CPUC's representative showed up at every
Commission meeting, arguing that ratemaking should be treated as rulemaking
rather than adjudication. He argued persistently that whatever spe- [*306]
cific provision was under discussion, it would not work at the CPUC and would
have to be extensively modified to take account of the CPUC's eccentric
practices. For a while, the Commission tried to accommodate the CPUC, but the
result was a series of narrowly focussed provisions that complicated and
distended the Act. n45 Finally, the Commission relented and completely excluded
the CPUC from the Act. The CPUC's lobbying campaign was a stellar success.
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n43 See S.B. 523, <sect> 85, amending Cal. Pub. Util. Code <sect> 1701. In 1947,
the CPUC was similarly successful in gaining an exemption from the rulemaking
provisions of the APA. See Cal. Gov't Code <sect> 11351(a) (West 1992).
n44 An adjudicative "decision" is defined as "agency action of specific
application that determines a legal right, duty, privilege, immunity, or other
legal interest of a particular person." Cal. Gov't Code <sect> 11405.50(a) (West
Supp. 1996). The comment to this section makes clear that adjudication covers
individualized ratemaking and licensing decisions.
n45 Two such provisions survived elimination of the CPUC from the Act. Section
11430.70(b) allows ex parte contact with an agency head in individualized
ratemaking proceedings if the content of the communication is disclosed on the
record and all parties have an opportunity to comment on it. See Asimow,
Adjudication Fundamentals, supra note 11, at 1130-34. Section 11430.30(c)(1)
allows adversary staff members to advise decisionmakers concerning a technical
issue in a nonprosecutorial matter, where the advice is needed by and not
otherwise reasonably available to the presiding officer. See Cal. Gov't Code
<sect> 11430.30(c)(1) (West Supp. 1996). Again such advice must be disclosed on
the record and an opportunity to comment provided.
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2. Regents of the University of California ("Regents of U.C.")
The Regents of U.C. conduct a large amount of adjudication -- for example,
student disciplinary proceedings and personnel disputes. However, early in the
process the Regents of U.C. were excluded from the Act on the ground of their
constitutional immunity from regulation. n46 Thus, the ironic result is that
adjudication relating to students or employees that is conducted by the
California State University and College System is covered by the APA, but
similar proceedings conducted by the Regents of U.C. are not.
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n46 See Cal. Const. art. 9, <sect> 9. See also S.B. 523, <sect> 6, adding Cal.
Educ. Code <sect> 92001 (West Supp. 1996).
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3. State Board of Equalization ("SBE")
The SBE is California's tax adjudication agency. It administers the business
taxes (such as the sales tax) and adjudicates disputes under those taxes. In
addition, it adjudicates income tax disputes, but does not administer the income
tax statute. The members of the SBE are elected by popular vote. They tend to
view themselves more as politicians with responsibility to their constituents
than as adjudicators or rulemakers.
SBE's system of adjudication is primitive. n47 For example, the 5-member Board
hears every income tax case en banc. It has a rudimentary system of hearing
officers who hear business tax cases; however, it has staunchly rejected
classification of these hearing officers as ALJs (apparently because
reclassification would give them a pay increase). Ex parte contact between
taxpayers and Board members is said to be commonplace, because Board members
view such contacts as a legitimate constituent service. Additionally, Board
members decide cases of persons who have contributed to their campaigns, n48 and
separation of [*307] functions is largely ignored. The SBE believes in a true
institutional method: its advocates engage in off-record discussions with both
hearing officers and Board members about specific cases.
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n47 See Asimow, Adjudication Fundamentals, supra note 11, at 1165 n.334
(describing California's tax adjudication system as a patchwork based on
historic accidents or, less charitably, as a mess).
n48 Under <sect> 15626(c), a Board member is disqualified from deciding or
influencing a case in which "the member knows or has reason to know that he or
she received a contribution [of $ 250] or more [from a taxpayer] within the
preceding 12 months." Cal. Gov't Code <sect> 15626(d) (West 1992). This
provision obviously places a premium on making the contribution more than 12
months before the matter comes on for decision. A huge loophole to this
provision permits a member who has received a contribution requiring
disqualification to return the contribution and then participate in the
decision. See id. Anecdotal evidence available to the author suggests this
loophole is frequently employed; the returned contribution can then be
recontributed when the member stands for reelection.
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Thus, the Bill of Rights provisions relating to separation of functions,
pecuniary bias, and ex parte contact would have fundamentally changed the way
the SBE functions. After a few initial submissions, the SBE remained silent
during Commission deliberations. But once S.B. 523 reached the legislature, the
SBE conducted an all-out lobbying campaign to win exclusion from the Act.
Several Board members were former legislators; they contacted the present
legislators with their concerns. The California Taxpayers Association ("CTA"),
which represents the largest corporate taxpayers, lobbied vigorously to exclude
SBE, even though the reforms in the Bill were primarily pro-taxpayer. But CTA
persuaded the Republican caucus that the bill was "unfriendly to taxpayers." n49
These largest taxpayers, evidently, wanted to maintain their backdoor access to
decisionmakers and their ability to influence decisions through making strategic
campaign contributions.
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n49 Memorandum from Assembly Republican Caucus to members of the Assembly
Consumer Protection, Governmental Efficiency, and Economic Development Committee
(June 20, 1995) (on file with the author). The memorandum disingenuously argued
that the bill of rights would lead to costly formalization of SBE procedures,
ignoring the provisions in the bill for informal hearings.
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In a dramatic confrontation before the Assembly Consumer Protection,
Governmental Efficiency, and Economic Development Committee, the SBE won
exclusion from the bill on a 7-6 party line vote. All Republicans voted for
exclusion, following the recommendation of their caucus; all Democrats voted to
keep SBE in the bill. To the author of this article, this Committee decision was
the biggest single disappointment of the entire process. n50
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n50 S. B. 523, <sect> 54, enacts Cal. Gov't Code <sect> 15609.5, excluding SBE
from the provisions of the APA; <sect> 87 amends Cal. Rev. & Tax Code <sect>
19044 (West Supp. 1996) to exclude Franchise Tax Board hearings.
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B. What Proceedings Should Be Covered?
The decision as to precisely which adjudications should be covered by the new
APA presented thorny policy problems. The original California APA applied only
to hearings that were specifically required by statute to be covered by the APA.
n51 As already noted, this meant largely licensing cases (and some of them were
excluded as well). The scope of the Federal APA is broader; it applies to "every
case of adjudication required by statute to be determined on the record after
opportunity for an agency hearing." n52 The federal formulation may, but
probably does not, include hearings required by procedural due pro- [*308]
cess. n53 The 1981 Model Act, like several modern state statutes, n54 takes a
different tack: it covers all adjudications, regardless of whether any external
source (statutory or constitutional) requires an on-the-record hearing. n55 As
will be explained, S.B. 523 struck a compromise between the federal and Model
Act approaches. The Model Act approach proved to be too broad, but the federal
approach was judged to be too narrow. This critical provision in the California
statute, therefore, reflects a determination that the Federal APA is seriously
flawed.
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n51 See Cal. Gov't Code <sect> 11501(a) (West 1992). Only California and
Connecticut use this approach. See Arthur Earl Bonfield, The Definition of
Formal Agency Adjudication Under the Iowa Administrative Procedure Act, 63 Iowa
L. Rev. 285, 339 n.200 (1977).
n52 5 U.S.C. <sect> 554(a) (1994).
n53 See Wong Yang Sung v. McGrath, 339 U.S. 33, 50-51 (1950). The Supreme Court
held that the APA applied to deportation cases where a hearing was required by
due process. In the Court's view, Congress would have desired at least the same
level of protection in cases where a hearing was mandated by the constitution as
in cases where the hearing was mandated by a mere statute. However, this
decision is unlikely to be followed today and is widely ignored. Since due
process requires hearings in mass justice situations, it is inappropriate to
require full-fledged formal APA adjudication procedure in every such case. See,
e.g., Chemical Waste Mgmt., Inc. v. EPA, 873 F.2d 1477, 1483-85 (D.C. Cir. 1989)
(holding the APA not applicable even though due process applies); Clardy v.
Levi, 545 F.2d 1241, 1246 (9th Cir. 1976) (holding the APA inapplicable to
prison hearings required by due process); Robert E. Zahler, Note, The
Requirement of Formal Adjudication under Section 5 of the Administrative
Procedure Act, 12 Harv. J. on Legis. 194, 218-41 (1975).
n54 See Asimow, Adjudication Fundamentals, supra note 11, at 1090 n.70
(referring to statutes in Delaware, Florida, Indiana, Oklahoma, and Wisconsin).
n55 See Model State Admin. Procedure Act of 1981 <sect> 1-102(5), 15 U.L.A. 11
(1990) ("order means an agency action of particular applicability"); <sect>
4-101(a) ("agency shall conduct adjudicative proceeding as the process for
formulating . . . an order").
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My original opinion was in favor of the 1981 Model Act approach. n56 The Federal
APA approach is unsatisfactory because it is often unclear whether a particular
external source actually calls for an on-the-record hearing that would fall
under the APA as opposed to some kind of informal hearing that would not be
covered. This uncertainty has led to quite a disparity in case law. n57 The
federal approach also encounters the due process enigma: when, if ever, should
hearings required by due process, but not a statute, fall under the APA? n58 In
the end, why should it matter whether another statute requires a hearing on the
record? Should not the default rule be that the APA applies to all important
adjudications? A departure from that default rule should require clear
legislation. These arguments made the 1981 Model Act provision seem attractive.
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n56 See Asimow, Adjudication Fundamentals, supra note 11, at 1081-94.
n57 Compare City of West Chicago v. NRC, 701 F.2d 632, 641-45 (7th Cir. 1983)
("hearing" in nuclear licensing case does not mean "hearing on the record") with
Seacoast Anti-Pollution League v. Costle, 572 F.2d 872, 877-79 (1st Cir. 1978)
(contra). More recent decisions have left this interpretive question to the
agency under the Chevron doctrine. See, e.g., Chemical Waste Mgmt., Inc. v. EPA,
873 F.2d 1477, 1480-83 (D.C. Cir. 1989). This author finds it disturbing that an
agency should be allowed to decide whether or not its hearings should comply
with the APA.
n58 See supra note 53.
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In an early Commission decision, however, the 1981 Model Act approach was
rejected in favor of the federal approach. Essentially, the Model Act approach
was subjected to death by ridicule. One Commission member asked -would the 1981
Model Act approach really require application of the APA to: the decision by a
state high school to select cheerleaders; imposition of a library fine; a state
forest ranger's decision in allocating campsites; every decision affecting a
state prisoner that the prisoner dislikes; a decision not to hire some- [*309]
one for a low-level state job or to buy a computer from vendor A rather than B?
The answer was -- well yes, but hearings in relatively trivial state/private
encounters could be provided through an informal summary hearing procedure. n59
But what if the summary hearing procedure statute left out a category of
relatively trivial cases? Would some of the categories be mushy? n60 What if the
agency neglected to adopt a rule providing for summary procedure for a
particular category? n61 And what if even the truncated summary procedure was
too much procedure for some relatively trivial encounter? n62 The Commission
thought it would be laughed out of town if it proposed a statute requiring any
sort of procedure in such trivial matters.
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n59 See Model State Admin. Procedure Act of 1981 <sect><sect> 4-502 to 4-506.
Summary procedure applies to "any matter having only trivial potential impact
upon the affected parties" which presumably takes in the campsite case and
arguably covers the cheerleader. It applies to "a reprimand, warning,
disciplinary report, or other purely verbal sanction without continuing impact
against a prisoner." Id. <sect><sect> 4-502(3)(ii), (viii). It includes monetary
sanctions up to $ 100 (which covers the library fine) and "denial of an
application for admission to an educational institution or for employment"
(which covers the job hypo), and "the acquisition . . . of property or the
procurement of goods or services by contract" (which covers the computer hypo).
Id. <sect> 4-502(3).
n60 Consider the case of the cheerleader supra note 59.
n61 Model Act <sect> 4-502(3) requires that an agency rule provide for summary
procedure.
n62 Summary procedure requires that a presiding officer (that is, anyone
exercising authority over the matter) allow "each party an opportunity to be
informed of the agency's view of the matter and to explain the party's view of
the matter." Model State Admin. Procedure Act of 1981 <sect> 4-503(b)(1). The
presiding officer must furnish "a brief statement of findings of fact,
conclusions of law, and policy reasons for the decision if it is an exercise of
agency discretion, . . . and a notice of any available administrative review."
Id. <sect> 4503(b)(2). These explanations can be oral unless a monetary sanction
is involved. See id. <sect> 4-503(c). The agency must review the order resulting
from a summary hearing if any party requests a review. See id. <sect> 4504. A
"reviewing officer must give each party an opportunity to explain the party's
view of the matter." Id. <sect> 4-505(3).
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I now believe the Commission's decision was correct. The 1981 Model Act approach
is overambitious. It would be a mistake to attempt to prescribe procedures --
any procedures -- for the infinite range of relatively trivial interactions
between government and the public. One recent Florida case n63 illustrates the
point well. The Florida APA applies "in all proceedings in which the substantial
interests of a party are determined by an agency." n64 The court held that the
denial of admission to the University of Florida College of Law did not "rise to
the level of a 'substantial interest.'" n65 Of course, to the disappointed
applicant, the denial of admission to this professional school was a very
substantial interest indeed. However, the court stated:
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n63 See Metsch v. University of Florida, 550 So. 2d 1149 (Fla. Dist. Ct. App.
1989).
n64 Fla. Stat. Ann. <sect> 120.57 (West 1996).
n65 Metsch, 550 So. 2d at 1151. In an alternative ground, the court held that
the applicant fell within an exception for "any proceeding in which the
substantial interests of a student are determined by the State University
System." Id.
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If such hopes and aspirations were deemed substantial interests, all
unsuccessful applicants for admission to a state university would be entitled to
a formal hearing upon the denial of their applications. While this scenario is
not the basis for our denial of Metsch's claim, we cannot ignore the
repercussions that would flow from granting the relief which he seeks. n66
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n66 Id. at 1150-51.
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[*310]
Clearly the Florida court was apprehensive that many of the thousands of
disappointed applicants to various Florida institutions of higher learning would
demand time-and-resource-consuming hearings. The court understandably drew back
from this abyss. Granted, Florida law did not contain a summary hearing
procedure, but even that procedure -- any procedure -- might not be worth the
bother in cases of disappointed applicants for the limited number of slots in
educational institutions. The same is true of many of the disputes that seem to
fall under the 1981 Model Act summary procedure provision.
In our litigation-oriented society (and perhaps California is even more
litigious than other states), a few people who resent being denied admission to
a university or being turned down for a job, a contract, or whatever, are going
to litigate the question of whether the procedure they received met the
requirements of the summary procedure statute. The near certainty of this sort
of pointless litigation was enough to persuade the Commission to jettison the
allinclusive Model Act approach to defining the scope of the Act.
California struck a compromise between the Federal APA approach and the 1981
Model Act approach. The bill of rights and flexibility enhancers apply "to a
decision by an agency if, under the federal or state Constitution or a federal
or state statute, an evidentiary hearing for determination of facts is required
for formulation and issuance of the decision." n67 This provision is
considerably more inclusive than the federal approach. First, the provision
explicitly applies to cases in which a hearing is required by either the federal
or state constitution. As previously noted, the federal statute probably does
not apply when a hearing is required by due process, although the point remains
unclear. n68 As a result, under federal law when a court determines that
individualized government action has deprived a person of liberty or property,
it is often necessary to apply the utilitarian, case-specific balancing test of
Mathews v. Eldridge n69 to custom tailor the necessary elements of a hearing and
its timing.
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n67 Cal. Gov't Code <sect> 11410.10 (West Supp. 1996). This language was drawn
from California's unique provision for administrative mandamus. See Cal. Civ.
Proc. Code <sect> 1094.5 (West Supp. 1996).
n68 See supra note 53.
n69 424 U.S. 319, 347-49 (1976).
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The array of cases in which a hearing is required by California due process is
much broader than under the U. S. Constitution. n70 California has rejected
Board of Regents v. Roth. n71 California law requires a hearing in many
situations in which a person lacks an entitlement to a state benefit, because
freedom from arbitrary procedure is itself a liberty interest protected by due
process. The process that is due is determined not only by the three-factor
Mathews v. Eldridge test but, by weighing a fourth factor -- the dignitary
interest of the person seeking the hearing. n72
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n70 See Asimow, Adjudication Fundamentals, supra note 11, at 1084-87.
n71 408 U.S. 564, 576-78 (1972).
n72 See People v. Ramirez, 599 P.2d 622, 627 (Cal. 1979).
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[*311]
The Commission thought it would be useful to have a framework in place for
situations in which federal or state due process calls for a trial-type hearing.
As discussed below, n73 the flexibility-enhancing provisions of S.B. 523
authorize an "informal hearing" which falls far short of a formal adversarial
trial. The informal hearing consists of the presentation of written evidence
plus oral argument with a minimum of live testimony and cross examination. n74
All provisions of the bill of rights apply to informal hearings. The statute
explicitly makes the informal hearing procedure available when an evidentiary
hearing is required by due process, even though the agency has not previously
provided for its use by regulations. n75 The informal hearing satisfies due
process in many situations in which full-fledged courtroom theatrics are not
required. n76
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n73 See infra text accompanying notes 133-47.
n74 See Cal. Gov't Code <sect> 11445.40 (West Supp. 1996).
n75 See id. <sect> 11445.20(d). Under <sect> 11445.10(b)(1), "the Legislature
finds and declares the following: (1) The informal hearing procedure is intended
to satisfy due process and public policy requirements in a manner that is
simpler and more expeditious than hearing procedures otherwise required by
statute, for use in appropriate circumstances."
n76 Of course, if due process requires oral testimony and cross examination, the
informal hearing procedure is not appropriate. Section 11445.20 begins "an
agency may use an informal hearing procedure in any of the following
proceedings, if in the circumstances its use does not violate another statute or
the federal or state Constitution."
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Granted, there will still be cases in which it is unclear whether due process is
satisfied by an informal hearing. Nevertheless, it seemed constructive and
helpful to put an informal procedure in place that will satisfy due process
demands most of the time. This is particularly true of the cases of
discretionary government action in which the California Constitution but not the
Federal Constitution requires a hearing. n77
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n77 See, e.g., Saleeby v. State Bar, 702 P.2d 525, 535-36 (Cal. 1985) (involving
denial of a discretionary application for reimbursement from the State Bar's
client security fund).
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Second, the California formulation avoids the need for the talismanic words "on
the record" which some federal cases say is needed to invoke the adjudication
provisions of the Federal APA. n78 Chances are, if another statute calls for a
"hearing" or uses similar language, the APA will kick in. That other statute
will probably be read as calling for an "evidentiary hearing for determination
of facts . . . required for formulation and issuance of the decision." n79 This
formulation was drawn from existing language in the administrative mandamus
statute which provides review of adjudicatory agency decisions. n80
Administrative mandate cases have liberally classified all sorts of
individualized administrative proceedings as sufficiently adjudicatory in nature
to trigger the provision. n81 Thus California's default rule is that the bill of
rights and flexibility enhancing provisions in the new APA will apply to all
state/private interactions in which an external statute calls upon the agency to
conduct some sort [*312] of administrative fact-finding evaluation in the
nature of a hearing. If the legislature does not intend that the APA should
apply, it must explicitly say so. That seems clearly superior to the federal
approach, which requires Congress to affirmatively provide that a hearing be "on
the record" before the APA will apply. Such a measure is also superior to the
overbroad Model Act approach that sweeps every state/private interaction under
the APA regardless of any external requirement that a hearing be held.
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n78 See supra note 57.
n79 Cal. Gov't Code <sect> 11410.10 (West Supp. 1996).
n80 See Cal. Civ. Proc. Code <sect> 1094.5(a) (West Supp. 1996).
n81 See Cal. Gov't Code <sect> 11410.10 cmt. (West 1992) (citing many of the
cases); Asimow, Adjudication Fundamentals, supra note 11, at 1083 n.45. For
example, if a statute provides a "right of appeal," this will probably be
considered a provision that calls for an evidentiary hearing and thus would be
sufficient to trigger the APA. See Eureka Teachers Ass'n v. Board of Educ., 244
Cal. Rptr. 240, 243-45 (Ct. App. 1988).
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C. Provisions In the Bill of Rights
The bill of rights extends various fundamental due process projections to all
Tier 1 and Tier 2 adjudications. n82 The most important rights relate to the
prohibition on ex parte contact n83 and the requirement of separation of
functions. n84 Here the Federal APA provides a useful signpost, because its
acrossthe-board provisions on ex parte contact and separation of functions have
proved to be practical and useful. n85 The successful federal provisions
inspired the drafters of the 1981 Model Act to go further. n86 California's new
APA builds on these models. n87
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n82 The bill of rights thus covers all adjudications in which a statute or
constitution requires an evidentiary hearing except in the few agencies excluded
from the Act.
n83 See Cal. Gov't Code <sect><sect> 11430.10-11430.80 (West Supp. 1996).
n84 See id. <sect><sect> 11425.30, 11430.10, 11430.30.
n85 See 5 U.S.C. <sect><sect> 554(d), 557(d) (1994).
n86 See Model State Administrative Procedure Act of 1981 <sect><sect> 4-213,
4-214, 15 U.L.A. 88-90 (1990).
n87 See supra notes 83-84.
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1. Ex parte communications
By the term "ex parte communication," I mean communications between interested
outsiders and agency adjudicators. n88 All APAs limit or prohibit outsider ex
parte communications, since such contacts are deeply antithetical to an
adversary system. n89 The original California APA contained no provision
prohibiting ex parte contact. In 1986, the APA was amended to prohibit ex parte
contact with ALJs (though not agency heads) in Tier 1 agencies. n90 Anecdotal
evidence available to the author indicated that agency heads occasionally engage
in ex parte contact. n91 A couple of recently enacted statutes and regula-
[*313] tions have prohibited or limited ex parte contact in specific agencies,
suggesting an emerging consensus that such contact is improper. n92
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n88 There are two different kinds of problematic off-record communications with
adjudicators: i) by outside "interested parties" and ii) by inside agency staff
members. These two types of communication present quite different
considerations. I refer only to the first as "ex parte contact." I consider the
second type as part of the problem of "separation of functions." The two types
of communication are treated separately in the Federal APA. See 5 U.S.C.
<sect><sect> 554(d), 557(d).
The Commission originally treated the two kinds of communications separately,
but these provisions proved unwieldy. Ultimately, the Commission found it easier
from a drafting perspective to describe both kinds of communications as ex parte
communications while designing special exceptions for staff communications. See
Cal. Gov't Code <sect><sect> 11430.10-11430.80 (West Supp. 1996). This approach
is also employed in the 1981 Model Act. See Model State Admin. Procedure Act of
1981 <sect> 4-213(a).
n89 See Asimow, Adjudication Fundamentals, supra note 11, at 1127-28.
n90 See Cal. Gov't Code <sect> 11513.5 (West 1992), repealed by S.B. 523 <sect>
41; Asimow, Adjudication Fundamentals, supra note 11, at 1128.
n91 See Asimow, Adjudication Fundamentals, supra note 11, at 1130-31.
n92 The Public Utilities Commission had long tolerated ex parte contact and
resisted attempts to limit it. CPUC capitulated by adopting a regulation that
does not prohibit ex parte communication but requires disclosure of the content
of the communications. See id. at 1130-34. The legislature required disclosure
of ex parte contact in connection with Coastal Commission determinations. See
Cal. Pub. Res. Code <sect><sect> 3032230324 (West Supp. 1996).
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The originally enacted Federal APA also contained no prohibition on ex parte
contact. However, as the result of some notorious instances of ex parte
contacts, especially by television license applicants with agency heads, n93 in
1976 Congress prohibited such contacts. n94 Similarly, the 1981 Model Act
broadly prohibits ex parte contacts. n95 The federal provision seems to have
worked well and has been resoundingly enforced by several well-known court
decisions. n96
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n93 See Cornelius J. Peck, Regulation and Control of Ex Parte Communications
with Administrative Agencies, 76 Harv. L. Rev. 233, 234, 239-43 (1962).
n94 See 5 U.S.C. <sect> 557(d) (1994), added by the Government in the Sunshine
Act, Pub. L. No. 94-409, <sect> 4(a), 90 Stat. 1241, 1246 (1976) (prohibiting
"an interested person outside the agency" from making "an ex parte communication
relevant to the merits of the proceeding" to any "employee who is or may
reasonably be expected to be involved in the decisional process").
n95 See Model State Administrative Procedure Act of 1981 <sect> 4-213(a), 15
U.L.A. 88 (1990).
n96 See, e.g., Portland Audubon Soc'y v. Endangered Species Comm., 984 F.2d 1534
(9th Cir. 1993); Professional Air Traffic Controllers Org. v. Federal Labor
Relations Auth., 685 F.2d 547 (D.C. Cir. 1982).
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The federal and Model Act provisions establish that it is both feasible and
desirable to force all significant communications between interested outsiders
and agency adjudicators n97 out of the office and onto the record. There are no
important exceptions to this principle in the Federal Act n98 and there are none
in California's adjudicatory bill of rights. n99
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n97 The California statute uses the term "presiding officers" to cover
adjudicators. This term includes the agency head or heads, an administrative law
judge, hearing officer, or other person who presides in an adjudicatory hearing.
See Cal. Gov't Code <sect><sect> 11405.80, 11430.70(a) (West Supp. 1996). The
term "presiding officer" is also used in the 1981 Model Act, but it is never
defined. Therefore, it is unclear whether the ban on ex parte contact includes
agency heads as well as hearing officers. In context, however, Model Act <sect>
4216(d) indicates that "presiding officer" probably does include agency heads.
n98 Unlike the Federal Act, California makes no exception for requests by
legislators to agency heads for "status reports." See 5 U.S.C. <sect> 551(14).
n99 In one respect, the California provision is narrower than both its federal
and Model Act counterparts. It does not prohibit ex parte contacts with
adjudicatory advisers unless such contacts are part of an indirect attempt to
influence the adjudicators. See Cal. Gov't Code <sect> 11430.10 (West Supp.
1996). Compare 5 U.S.C. <sect> 557(d)(1)(A); Model State Admin. Procedure Act of
1981 <sect> 4-213(b)(i). The Commission feared that a blanket ban on ex parte
contact with advisers (especially ones not yet tapped as advisers at the time of
the contact) might cause serious practical problems, especially in difficult
economic, technical, or environmental cases. See Michael Asimow, When the
Curtain Falls: Separation of Functions in the Federal Administrative Agencies,
81 Colum. L. Rev. 759, 762 (1981) [hereinafter Asimow, When the Curtain Falls].
There are some insignificant exceptions which are consistent with federal law.
For example, ex parte contact is permitted concerning "a matter of procedure or
practice, including a request for a continuance, that is not in controversy."
This reflects a comment in Model Act <sect> 4-214, and federal law. See Texas v.
United States, 866 F.2d 1546, 1555 (5th Cir. 1989) (holding that letters
concerning noncontroversial procedural question did not prohibit ex parte
communication because they did not concern merits). Also <sect> 11430.70(b) of
the California Government Code contains a narrow exception for ratemaking.
Communications with agency heads are not prohibited but must be disclosed. See
Cal. Gov't Code <sect> 11430.70(b) (West Supp. 1996).
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[*314]
2. Separation of functions
A historic administrative law dilemma concerns the combination of conflicting
functions within the same agency. Many agencies adopt regulations, investigate
violations of statute or regulations, prosecute alleged violators, adjudicate
the issue of whether a violation occurred and prescribe the appropriate penalty.
Combining all these functions in the same agency may well serve the causes of
efficiency and accuracy, but regulated parties generally find the combination
unfair and objectionable. n100
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n100 See Asimow, Adjudication Fundamentals, supra note 11, at 1154-68.
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In California, the inherent problem of combining functions is often solved by an
external separation; different agencies handle the conflicting roles. n101
Nevertheless, a number of California agencies combine functions, especially
those engaged in professional licensing. n102 Most agencies that incorporate
combined functions create an internal separation of functions, meaning that: i)
agency staff members or members of the Attorney General's staff who have played
adversary roles in a particular case (such as investigation, prosecution, or
advocacy) cannot play adjudicatory roles in that same case, and ii) adversaries
in a case cannot furnish ex parte advice to adjudicators in that case. n103
However, anecdotal evidence available to me suggests that the principle has
sometimes been ignored or fudged, especially in understaffed agencies, in
agencies where informal procedures prevail, or in nonaccusatory cases involving
utility regulation, tax, environmental, and land-use issues. n104
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n101 See supra note 14.
n102 See Asimow, Adjudication Fundamentals, supra note 11 at 1148, 1153.
n103 As previously noted, the State Board of Equalization, California's tax
adjudicating agency, does not observe internal separation of functions. See
supra text accompanying notes 47-48.
n104 See Asimow, Adjudication Fundamentals, supra note 11, at 1168.
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In my view, a system of internal separation of functions is imperative, given
the adversarial nature of administrative dispute settlement. n105 In most
situations, existing California law does not mandate internal separation of
functions. n106 In 1986, the legislature amended the California APA to prohibit
contact between a central panel ALJ and an employee of the agency that filed an
accusation. n107 However, this provision covers only Tier 1 agencies and appears
to apply only at the ALJ level, not the agency head level. n108 Some
particularly egregious cases of combined functions violate state or federal due
pro- [*315] cess, n109 but the contours of the constitutional separation of
functions doctrine are unclear.
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n105 For a theoretical defense of this proposition, see Asimow, When the Curtain
Falls, supra note 99, at 788-97.
n106 See Asimow, Adjudication Fundamentals, supra note 11, at 1168-70.
n107 See Cal. Gov't Code <sect> 11513.5(a) (West 1992), repealed by S. B. 523,
<sect> 41. The Assembly bill that produced <sect> 11513.5 contained a broader
separation of functions provision but it was struck out of the version that
passed the Senate, probably because of strong agency opposition. See Asimow,
Adjudication Fundamentals, supra note 11, at 1168 n.342.
n108 See Asimow, Adjudication Fundamentals, supra note 11, at 1128 n.194.
n109 See Asimow, When the Curtain Falls, supra note 99, at 779-88; Asimow,
Adjudication Fundamentals, supra note 11, at 1165-66 (federal cases), 1169
(California). By "particularly egregious," I mean a mixture of functions in a
particular individual below the level of agency heads which i) presents a high
risk of erroneous deprivation of a constitutionally-protected interest and ii)
which lacks a convincing practical justification. Id. at 1166. For example, the
Court of Appeal held that the County Counsel could advise an adjudicative board
even though a deputy county counsel had been an adversary in the same case, but
only if the County Counsel were screened from any prior communications about the
case with the deputy. See Howitt v. Superior Court, 5 Cal. Rptr. 2d 196, 203-04
(Ct. App. 1992).
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Here again, the Federal APA has lighted the way. From the beginning, it has
mandated internal separation of functions. n110 This provision appears to work
well, causes few practical problems, n111 and is seldom litigated. Federal
agencies customarily require internal separation, often in ways that go beyond
what is required by statute. n112 Following the Federal Act and the 1981 Model
Act, n113 the bill of rights mandates separation of adjudicatory functions from
adversarial functions such as prosecution, investigation, and advocacy. It
prohibits persons who have played adversarial roles in a case from functioning
as adjudicators in the same case. n114 It also prohibits adversary staff members
from making off-record contacts with adjudicators, for example by furnishing
advice. n115
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n110 See 5 U.S.C. <sect> 554(d) (1994).
n111 But see William F. Pedersen, Jr., The Decline of Separation of Functions in
Regulatory Agencies, 64 Va. L. Rev. 991, 1014-15 (1978) (suggesting a rollback
in separation of functions practice in non-prosecutorial cases such as
environmental protection).
n112 See Asimow, When the Curtain Falls, supra note 99, at 804-20.
n113 Model State Admin. Procedure Act of 1981 <sect> 4-214, 15 U.L.A. 89-90
(1990).
n114 See Cal. Gov't Code <sect> 11425.30 (West Supp. 1996). This provision also
disqualifies a person from serving as an adjudicative decisionmaker if that
person is subject to the supervision of one who has served as an adversary in
the same case. Section 11425.30 does not apply to drivers' license adjudications
because of the budgetary problems inherent in separating functions at the
Department of Motor Vehicles. See Cal. Veh. Code <sect> 14112 (West Supp. 1996).
Participation in a determination of probable cause or other equivalent
preliminary determination does not disqualify a person from serving as an
adjudicator. See Cal. Gov't Code <sect> 11425.30(b)(2). This provision follows
the Model Act <sect> 4-214(c) and federal case law. See Asimow, When the Curtain
Falls, supra note 99, at 767-68, 770-72. Thus agency heads can participate in
the decision whether to investigate a particular person or to issue a complaint
against that person, then subsequently adjudicate the case. Often this
preliminary exercise of prosecutorial discretion is the most important decision
in the case, since the person is likely to settle if the agency proceeds against
him. Nevertheless, such discussions inevitably expose decisionmakers to ex parte
information about the case and it may be better practice to avoid agency head
involvement even at preliminary stages, at least in prosecutorial cases. See id.
at 767-68.
n115 See Cal. Gov't Code <sect><sect> 11430.10(a), 11430.30(a) (West Supp.
1996).
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Of equal importance, the Act permits ex parte communication to adjudicators from
staff members who have not played adversary roles in the proceeding. n116 In my
view, it is imperative that agency decisionmakers (particularly at the agency
head level) in complex, unusually important, or unusually difficult cases have
the ability to draw on agency staff experts for legal, technical, or policy
advice. These are cases that involve substantial stakes for the parties and for
the public interest. The decisionmakers need the richest possible mix of [*316]
advisory resources. n117 Separation of functions must be defined and
administered in ways that permit decisionmakers access to needed staff advice
except in cases where the adviser has significant adversarial involvement in the
case under decision. n118
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n116 See id. <sect> 11430.30(a). This provision allows a communication for the
purpose of assistance and advice to the presiding officer from a staff member
who is not an adversary in the particular case. The "assistant or adviser may
evaluate the evidence in the record but shall not furnish, augment, diminish or
modify the evidence in the record." Id.
n117 See Asimow, When the Curtain Falls, supra note 99, at 764, 775-76, 800-03.
n118 The drafters of the California provision wanted to minimize some of the
efficiency costs of an overly strict system of separation of functions.
Therefore, the Act prohibits ex parte communications to adjudicators from
outsiders and staff adversaries but not communications from adjudicators to
outsiders or staff adversaries. See Cal. Gov't Code <sect> 11430.10(a) (West
Supp. 1996). Compare 5 U.S.C. <sect> 557(d)(1)(B) (1994) with Model State Admin.
Procedure Act of 1981 <sect> 4-213(a).
The provision was drafted this way to order to allow agency heads to impose
management controls over the way in which the staff conducts difficult or
complex cases. See Asimow, When the Curtain Falls, supra note 99, at 802-03. The
Comment to <sect> 11430.10 explains: "Thus [the section] would not prohibit an
agency head from communicating to an adversary that a particular case should be
settled or dismissed. However, a presiding officer should give assistance or
advice with caution, since there may be an appearance of unfairness if
assistance or advice is given to some parties but not others." Cal. Gov't Code
<sect> 11430.10 cmt. (West Supp. 1996).
In addition, the California Act allows certain adversary/adjudicator
communications concerning technical issues in non-prosecutorial cases provided
that the advice is disclosed on the record. See id. <sect> 11430.30(c)(1). And
to avoid disturbing existing decisionmaking patterns in statewide land use
planning agencies, such communications are allowed in several agencies. See id.
<sect> 11430(c)(2).
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The separation of functions provision in the Federal APA contains an "agency
heads" exemption. n119 The meaning of the agency head exemption remains obscure
to this day. The exemption apparently is intended to allow agency heads to
personally engage in combined functions; for example, an agency head could both
investigate, advocate the agency's side, then adjudicate the case. Although this
is obviously not an ideal situation from the point of view of fairness, it may
be supported by the principle of necessity, especially in a small, understaffed
agency. However, the agency head exception probably does not allow staff
adversaries to advise the agency heads ex parte; the statute permits only
non-adversaries to give advice. n120
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n119 "This subsection [section 554(d)] does not apply . . . (c) to the agency or
a member of members of the body comprising the agency." 5 U.S.C. <sect>
554(d)(C).
n120 See Asimow, When the Curtain Falls, supra note 99, at 766-67.
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Neither the 1981 Model Act nor the new California statute contains an agency
head exception. This omission reflects a policy decision that if an agency must
embody combined functions, all adjudicators -- up to and including the heads of
the agency -- should steer clear of adversary involvement and must be advised
only by non-adversaries. Administrative law has evolved substantially in the 50
years since the federal act was passed. At least in a state like California with
relatively large agency staffs, there is no persuasive argument that justifies
allowing agency heads to take a personal role in investigation, prosecution, or
advocacy and then adjudicate the same case, or that justifies allowing staff
adversaries to give off-record advice. n121
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n121 See Asimow, Adjudication Fundamentals, supra note 11, at 1177-78. For
similar reasons, the California act has no exceptions that correspond to the
federal exceptions for initial licensing or to proceedings involving the
validity or application of rates, facilities, or practices of public utilities
or carriers. See 5 U.S.C. <sect> 554(d)(A), (B).
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[*317]
3. ALJ credibility determinations
Under long-standing California law and practice, an ALJ's proposed decision
counted for nothing if it was rejected by the agency heads. n122 Agency heads
were free to substitute their own findings about witness credibility for those
of the ALJ, even though they did so without seeing or hearing the witnesses. As
a result, agency heads who disagreed with the result reached by the ALJ could
readily reach a different result by substituting their own credibility findings.
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n122 See Asimow, Adjudication Fundamentals, supra note 11, at 1113-15. In
workers' compensation cases, however, reviewing courts gave "great weight" to
the findings of Workers' Compensation Judges. See id. at 1116.
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Under existing law, reviewing courts that apply the substantial evidence test
consider only the findings of the agency heads, not those of the ALJ. Under
California's unique independent judgment test, applicable in cases where an
agency decision deprives a private party of a vested, fundamental right, n123
the fact findings of neither the ALJ nor the agency heads have any legal effect.
The reviewing court makes its own credibility determinations from the cold
record. n124
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n123 See "Scope of Judicial Review," supra note 11, at 1161-92.
n124 Review by appellate courts of trial court fact findings under the
independent judgment test is extremely narrow. See id. at 1168-69.
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One important goal of the Federal APA was to upgrade the status of
administrative hearing officers. n125 The famous Universal Camera n126 decision
helped to achieve that objective. In Universal Camera, the Supreme Court
emphasized that on judicial review, courts review the decision of the agency
heads, not the decision of the ALJ. n127 Nevertheless, the Court held that where
an ALJ's credibility findings differ from those of the agency heads, these
differences detract from the substantiality of the evidence supporting the
agency's decision. n128 As a practical matter, therefore, federal agency heads
seldom overturn the credibility determinations of their ALJs, since doing so
invites a reviewing court to overturn the agency's decision. n129
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n125 It did so by sharply restricting agency authority to hire, supervise,
monitor, and discharge its hearing officers (later renamed ALJs). See generally,
ACUS Report, supra note 40, at 803 passim.
n126 Universal Camera Corp. v. NLRB, 340 U.S. 474 (1951).
n127 See id. at 494-97.
n128 See id. at 496.
n129 See, e.g., Penasquitos Village, Inc. v. NLRB, 565 F.2d 1074 (9th Cir.
1977).
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Senate Bill 523 is concerned with agency adjudication, not judicial review.
Nevertheless, the bill of rights adopts the Universal Camera principle in
California, n130 although with a substantial refinement: the court must give
great [*318] weight to credibility findings n131 only to the extent that the
statement of factual basis for the decision identifies specific evidence of the
observed demeanor, manner, or attitude of the witness that supports the
determination. n132 Thus, when the bill of rights goes into effect in 1997, a
court in a substantial evidence case must downgrade the substantiality of
evidence supporting the agency heads' decision if the agency heads differ from
the ALJ on a credibility issue, assuming the ALJ made the appropriate findings.
In an independent judgment case, the court must give great weight to the ALJ's
credibility findings, thus significantly decreasing the court's power to impose
its own determinations.
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n130 Section 11425.50(b) provides: "If the factual basis for the decision
includes a determination based substantially on the credibility of a witness,
the statement shall identify any specific evidence of the observed demeanor,
manner, or attitude of the witness that supports the determination, and on
judicial review the court shall give great weight to the determination to the
extent the determination identifies the observed demeanor, manner, or attitude
of the witness that supports it." Cal. Gov't Code <sect> 11425.50(b) (West Supp.
1996).
The comment to this provision (omitted from the 1996 pocket part of West's
California Government Code) explicitly states that <sect> 11425.50(b) adopts
Universal Camera and codifies the prior workers' compensation practice.
n131 "Nothing in subdivision (b) precludes the agency head or court from
overturning a credibility determination of the presiding officer, after giving
the observational elements of the credibility determination great weight,
whether on the basis of nonobservational elements of credibility or otherwise .
. . nor does it preclude the agency head from overturning a factual finding
based on the presiding officer's assessment of expert witness testimony." Id.
<sect> 11425.50 cmt.
n132 As the comment to <sect> 11425.50 explains, this provision was derived from
Washington law. See Wash. Rev. Code Ann. <sect><sect> 34.05.461(3), 34.05.464(4)
(West 1990 & Supp. 1996); Asimow, Adjudication Fundamentals, supra note 11, at
1118.
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In my view, enactment of the Universal Camera principle in California is a
landmark achievement. It tends to mute complaints from the private bar that
agency heads, especially in agencies with combined functions, can carry out
their political agendas by substituting their own credibility findings for those
of the judge who actually heard the witnesses. It enhances the status of
administrative judges; they are trained, experienced, professional fact finders
who have lived with a case and whose determinations about who is telling the
truth should not be negated by agency heads who did not hear the witnesses, who
may have spent relatively little time on the case, and who may or may not have
read the transcript. n133
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n133 See Asimow, Adjudication Fundamentals, supra note 11, at 1114-16.
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This provision was staunchly opposed by several agencies and questioned by the
Attorney General. Nevertheless, the Commission stuck to its guns and the
provision was ultimately enacted. The federal model was enormously significant
in helping to secure enactment of the provision. When people questioned what the
"great weight" provision meant or argued that it improperly derogated from
agency head authority, the effective response was: the federal courts do it and
everyone at the federal level understands it. It works smoothly, without causing
much apparent problem for reviewing courts. Without the powerful Universal
Camera precedent, the principle would never have survived the opposition of
agencies and the Attorney General.
D. Flexibility Enhancing Provisions
The bill of rights provides a list of baseline due process requirements. These
constraints are balanced by a set of provisions designed to give agencies
additional flexibility and to make adjudication less formal, costly, and
adversarial. In my view, these provisions are more important in the long run
than [*319] the bill of rights because they will initiate the creation of a
new adjudicatory culture in California.
1. Alternate dispute resolution
In both civil litigation and in all facets of administrative law, the
alternative dispute resolution ("ADR") movement has won powerful support. n134
Virtually everyone agrees that mechanisms should be in place to facilitate and
encourage dispute settlement without formal adjudication. In most situations, a
negotiated settlement is preferable to the costly, slow, and emotionally
exhausting process of adjudication and judicial review. In this era of
backlogged dockets, staggering private and public litigation costs, and
diminishing resources available to agencies, ADR takes on enhanced importance.
Agencies and private attorneys cannot be compelled to develop a culture that
favors settlement over adversary struggle, but an APA can help by legitimizing
various ADR techniques (so that their legality cannot be questioned) and
encouraging agencies to put in place settlement-facilitating mechanisms.
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n134 Section 465(d) of the California Business and Professions Code declares
"courts, prosecuting authorities, law enforcement agencies, and administrative
agencies should encourage greater use of alternative dispute resolution
techniques whenever the administration of justice will be improved." Cal. Bus. &
Prof. Code <sect> 465(d) (West 1990).
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In 1990, Congress amended the Federal APA in order to require agencies to
explore and utilize ADR techniques in all agency functions, including
adjudication and rulemaking. n135 The Federal APA now empowers a presiding
officer to use ADR techniques and to require the attendance of parties at
settlement conferences. It also provides that the presiding officer may inform
the parties as to the availability of ADR techniques and to encourage their use.
n136 The statute authorizes and encourages agencies to use the whole range of
ADR techniques: settlement negotiations, conciliation, facilitation, mediation,
factfinding, minitrials, and arbitration. n137 The statute makes clear that
these techniques are voluntary and not always appropriate (for example, where an
authoritative resolution of a matter is required to establish a precedent). n138
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n135 See Administrative Dispute Resolution Act, Pub. L. No. 101-552, 104 Stat.
2736 (1990). The Act is concisely summarized in Administrative Dispute
Resolution Act, Report of the Committee on Governmental Affairs, S. Rep. No.
101-543, at 7-16 (1990), reprinted in 1990 U.S.C.C.A.N. 3931, 3937-46. The Act
requires agencies to appoint a dispute resolution specialist and provide
training for all employees engaged in implementing an ADR program. In 1990,
Congress also passed a related piece of legislation, the Negotiated Rulemaking
Act of 1990, Pub. L. No. 101-648, <sect> 3(a), 104 Stat. 497 (1990), to foster
ADR techniques in rulemaking.
n136 See 5 U.S.C. <sect><sect> 556(c)(6), (7), (8) (1994).
n137 See id. <sect><sect> 574-80. The most detailed provisions concern
arbitration. See id. To allay constitutional concerns, the head of an agency is
authorized to terminate an arbitration proceeding after the arbitrator makes an
award but before it becomes final. See id.
n138 See id. <sect> 572(b).
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Prior to enactment of California's new APA, the legality and propriety of the
use of ADR techniques in administrative law was open to doubt in California.
Some agencies employed settlement judges to facilitate negotiated settlement but
this procedure was often not available or was pursued half heartedly. [*320]
Mediation and arbitration were seldom, if ever, employed as substitutes for
formal adjudication.
The new APA broadly validates ADR in administrative adjudication. First it
provides for settlements on any terms the parties determine are appropriate.
n139 In general, settlement can occur before or after issuance of an agency
pleading. n140 Agency heads can delegate the power to approve a settlement to
lower level officials. n141 Second, the Act strongly validates all other ADR
methods, assuming both parties agree. It specifically empowers agencies to
engage in mediation and either binding or non-binding arbitration. n142
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n139 See Cal. Gov't Code <sect> 11415.60(a) (West Supp. 1996). "The settlement
may include sanctions the agency would otherwise lack power to impose." Id.
<sect> 11415.60(c). This provision confirms the decision in Rich Vision Centers,
Inc. v. Board of Medical Examiners, 192 Cal. Rptr. 455 (Ct. App. 1983). The Rich
decision holds that a licensing agency has implied power to settle cases,
including an agreement that imposes the agency's litigation and investigation
costs on the licensee. See id.
n140 See Cal. Gov't Code <sect> 11415.60(b) (West Supp. 1996). However, in a
"proceeding to determine whether an occupational license should be revoked,
suspended, limited or conditioned, a settlement may not be made before issuance
of the agency pleading." Id. This exception reflected concern that an agency
might be viewed as covering up violations if it settled cases prior to issuing a
complaint. The issue was unclear under prior law. See Richard H. Cooper,
Resolving Real Estate Disciplinary Matters Prior to Hearing, 47 Cal. St. B.J.
330, 363-64 (1972).
However, the exception is unfortunate; if a case can be settled prior to
issuance of a complaint to the satisfaction of the agency staff and the
respondent, it seems unnecessary and counterproductive to first issue a
complaint. If the staff believes that issuance of a complaint is necessary as a
matter of consumer protection, obviously it can insist on that as a condition of
settlement.
n141 See Cal. Gov't Code <sect> 11415.60(c) (West Supp. 1996). Under prior law
and practice, a significant deterrent to settlement of cases was that only the
agency heads had the authority to approve a settlement; a deal negotiated by the
parties, perhaps with the help of a settlement judge, could not be finalized
until it was passed on by the agency heads. Yet in many cases, the heads meet
infrequently and this entailed substantial delay and uncertainty. The general
consensus was that agency heads lacked power to delegate this authority.
Hopefully, the new provision will encourage such delegations.
n142 See id. <sect> 11420.10. The Act also provides for confidentiality of
communications made during the ADR process. See id. <sect> 11420.30. It empowers
OAH to adopt model ADR regulations relating to selection of mediators or
arbitrators, their qualifications, and confidentiality. See id. <sect> 11420.20.
The Commission was not impressed by arguments that binding arbitration
represented an invalid delegation of adjudicatory power. Since the decision to
enter into binding arbitration must be voluntarily made on a case-by-case basis
by both the agency and the outside party, it is difficult to see how any
important constitutional principle could be jeopardized. Here the California act
departs from the federal model which does not provide for truly binding
arbitration. See supra note 138.
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These ADR-validating provisions are of enormous importance in changing the
culture of administrative law. The Commission's proposals for ADR ran into an
uneasy reaction from agencies and the Attorney General. It is doubtful if these
provisions would have survived the lengthy process of Commission consideration
had there not been such a strong federal precedent.
2. Informal hearings
The prior California APA n143 and the Federal APA n144 provide for only one kind
of hearing -- formal trial-type adjudication. This procedure has virtually all
the formalities of a trial in court. n145 While this approach is appropriate
[*321] for many agency adjudications, particularly those that are prosecutorial
in nature, many other proceedings do not require such costly formality. An
informal, less adversarial approach would be cheaper, quicker, and less
emotionally exhausting to the participants, yet it would not sacrifice any
necessary protections for the litigants.
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n143 See Cal. Gov't Code <sect><sect> 11500-11529 (West 1992), especially <sect>
11513.
n144 See 5 U.S.C. <sect><sect> 554, 556-557 (1994).
n145 This generalization is not strictly true of the Federal APA which
authorizes various short-cuts from formal adjudicatory procedure in specific
types of cases. See, e.g., 5 U.S.C. <sect> 556(d) (determining claims for
benefits or initial licenses, agency can adopt procedure for submission of
evidence in written form where party will not be prejudiced thereby).
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Recently some state laws have institutionalized informal hearings n146 and the
1981 Model Act followed suit with its provision for conference hearings. n147 A
conference hearing is one that dispenses with direct and cross examination and
instead resolves issues through written submission and oral argument. n148
California's new APA provides for an "informal hearing" model that approximates
the Model Act's conference hearing. n149
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n146 See, e.g., Fla. Stat. Ann. <sect> 120.57 (West 1996); Va. Code Ann. <sect>
9-6.14:11 (Michie Supp. 1996); Del. Code Ann. tit. 29, <sect> 10123 (1991);
Mont. Code Ann. <sect> 2-4-604 (1995).
n147 See Model State Admin. Procedure Act of 1981 <sect><sect> 4-401 to 4-403,
15 U.L.A. 100-03 (1990). This provision was adopted in Kansas. See Kan. Stat.
Ann. <sect> 77-533 (1989).
n148 See Model State Admin. Procedure Act of 1981 <sect> 4-402.
n149 See Cal. Gov't Code <sect><sect> 11445.10-11445.60 (West Supp. 1996). In
<sect> 11445.10, the legislature declared:
(1) The informal hearing procedure is intended to satisfy due process and public
policy requirements in a manner that is simpler and more expeditious than
hearing procedures otherwise required by statute, for use in appropriate
circumstances.
(2) The informal hearing procedure provides a forum in the nature of a
conference in which a party has an opportunity to be heard by the presiding
officer.
(3) The informal hearing procedure provides a forum that may accommodate a
hearing where by regulation or statute a member of the public may participate
without appearing or intervening as a party.
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Under the California approach, the informal hearing model can be used without
adoption of an authorizing rule n150 in cases involving no disputed issue of
material fact n151 or, if facts are disputed, a relatively trivial impact on the
private party, n152 or in cases where due process, but no statute, calls for a
hearing. n153 In addition, the informal approach can be used in any other type
of case where the agency has authorized its use by regulation. n154
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n150 The Model Act requires that conference hearings be authorized by an agency
rule. See Model State Admin. Procedure Act of 1981 <sect> 4-401. California does
not require that an authorizing rule be adopted in cases where there is no
disputed issue of material fact or in which the sanction is relatively trivial.
California rulemaking is burdensome and costly and the Commission sought to
avoid unnecessary rulemaking requirements. In addition, a requirement of advance
rulemaking would surely operate to prevent use of informal hearings in many
situations where they would be useful, either because the agency has not gotten
around to adopting a rule or because rules already adopted overlooked particular
situations in which informal hearings would be appropriate.
n151 See Cal. Gov't Code <sect> 11445.20(a) (West Supp. 1996).
n152 These include cases that involve a monetary amount of not more than $ 1000;
a student disciplinary sanction short of expulsion or suspension for more than
ten days; an employee sanction that does not involve discharge, demotion, or
suspension for more than five days; a licensee sanction that does not involve
revocation or suspension for more than five days. See id. <sect> 11445.20(b).
n153 See id. <sect> 11445.20(d); see also supra notes 73-76.
n154 Obviously, this provision could not apply where a formal hearing is
required by some other statute or by state or federal due process. See id.
<sect> 11445.20 cmt.
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An informal hearing includes all of the protective provisions of the bill of
rights -- for example, prohibition on ex parte contact, protection against
biased adjudicators, separation of functions, proper notice, and a statement of
findings and reasons. n155 The officer who presides over an informal hearing
must permit [*322] the parties, and may permit others, n156 to offer written
or oral comments on the issues. However, "the presiding officer may limit the
use of witnesses, testimony, evidence n157 and argument, and may limit or
eliminate the use of pleadings, intervention, discovery, prehearing conferences,
and rebuttal." n158
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n155 The bill of rights applies to all adjudicative proceedings. See id.
<sect><sect> 11425.10(a), 11445.10 cmt.
n156 In this respect, California departs from the Model Act which allows only
the parties to participate. See Model State Admin. Procedure Act of 1981 <sect>
4-402(3), 15 U.L.A. 102 (1990). The draftsmen believed that the informal
approach might be very useful in cases involving substantial non-party
participation such as environmental and land use planning disputes.
n157 See Cal. Gov't Code <sect> 11445.50 (West Supp. 1996). The presiding
officer may permit cross-examination in an informal hearing, provided that the
delay, burden or complication due to allowing it will be minimal; if the burden
would be more than minimal, the case should be converted to a formal hearing.
See id. <sect> 11445.50(a). The "agency, by regulation, may specify categories
of cases in which cross-examination is deemed not necessary . . . under the
informal hearing procedure . . . [, but the] presiding officer may allow
cross-examination notwithstanding . . . a regulation if it appears . . .
necessary." Id. <sect> 11445.50(b). And the presiding officer's actions in
deciding to permit cross-examination, or in converting the proceeding to a
formal procedure in order to allow more cross examination, are not subject to
judicial review. See id. <sect> 11445.50(c).
n158 Id. <sect> 11445.40(b).
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The informal hearing procedure is an important innovation in administrative law.
The Model Act provisions are carefully thought out and provided a useful
starting point in drafting the California act. In this respect, the Federal Act
has lagged badly behind state law innovation. It calls for more formality than
is needed in many cases, thus needlessly increasing the costs, delays, and
adversariness of proceedings. Moreover, the rigidity of the Federal Act has
produced a very negative consequence. Because the Federal Act provides only for
formal hearings, presided over exclusively by ALJs whose hiring and retention
are heavily regulated by statute, Congress has increasingly circumvented the APA
entirely when it provides for new systems of regulation. n159 Thus the Federal
Act applies to a declining share of the total universe of federal adjudicatory
proceedings. This was an instance in which federal practice provided a model
that California wisely chose to avoid.
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n159 See supra text accompanying note 40.
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IV. Conclusion
California's new APA represents a sharp break with the past. For the first time,
most significant adjudication by California state agencies is subject to a firm
set of baseline provisions requiring fair adjudication. And for the first time,
those agencies have discretion to conduct their adjudication in ways that may be
less formal, costly, and adversarial than in the past. In this process, the
Commission drew on the experience of both state and federal governments. The
Federal APA provided a fixed star that the Commission could steer by. Often it
followed the star, as in the case of the provisions relating to ex parte
contact, separation of functions, deference to ALJ credibility decisions, and
ADR. Sometimes it steered away, as in the case of the provision defining which
adjudicatory proceedings would be covered and in the case of informal hearings.
And sometimes, peculiarities of California law, practice, or politics determined
[*323] the outcome, as in the case of the special treatment of licensing
agencies and the exclusion from the Act of the Public Utilities Commission and
State Board of Equalization.
Fifty years of experience under the Federal APA has validated the wisdom and
prescience of its draftsmen. Their work has endured while the world of federal
regulation changed in ways they could scarcely have imagined. This gold mine of
experience and precedent is of incalculable value to anyone who sets out on the
task of updating a state's APA. It is a tribute to the Federal APA, now in its
fifty-first year of existence, that so much of the new California act was
inspired by its provisions.
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