|Each year, state and local governments make thousands of decisions that fundamentally affect the liberty and property rights of individuals and businesses. For an example, one need only look to the impact of state and local regulatory permit and licensing schemes in California. Permits and licenses govern such diverse business activities as construction, law, medicine, massage parlors, nightclubs, and liquor sales.1 An agency decision to revoke a license or permit will terminate the right to do business in California.
Before a government agency can take an action that deprives an individual of a liberty or property interest protected by the Fourteenth Amendment, due process requires that the agency provide the individual with an opportunity to present evidence and argument at an administrative adjudication.2 Consequently, the growth in the volume and importance of government actions affecting individuals and businesses has brought about a commensurate increase in administrative adjudications between government and those asserting a loss of their rights.3
While due process requires a hearing, courts have noted that "[t]he question remains, what process is due at the hearing?"4 It seems apparent that due process requires a fair and impartial adjudicator and procedural safeguards appropriate to the nature of the action taken by the government.5 Further, the wide range in the type and impact of actions taken by state and local governments dictates that flexibility should be the hallmark of administrative procedural safeguards. Recognizing the need for flexibility, the U.S. Supreme Court, in the seminal case of Matthews v. Eldridge, adopted a "balancing test" to determine the appropriate level of administrative due process required by a particular type of government action.6 The balancing test considers five factors: 1) the private interests that will be affected by the action, 2) the risk of erroneous deprivation of private interests through the procedures used, 3) the probable value of alternative or substituted procedural safeguards, 4) the government interest, including the function involved, and 5) the fiscal and administrative burdens that additional or substitute procedural requirements would entail.7
The balancing test, however, has no role in addressing the most fundamental, and perhaps most challenging, requirement of administrative due process: the right to a fair and impartial adjudicator. The California Supreme Court, in Haas v. County of San Bernardino-the court's most recent examination of administrative due process-rejected the use of the balancing test to analyze bias, explaining, "The unfairness that results from biased decision-makers strikes so deeply at our sense of justice that it differs qualitatively from the injury that results from insufficient procedures. In Justice Holmes' famous phrase, 'even a dog distinguishes between being stumbled over and being kicked.'"8 The Haas court concluded that while "[t]he requirements of due process are flexible, especially when administrative procedure is concerned,…they are strict in condemning the risk of bias…."9
California has adopted a statutory scheme that provides specific procedural safeguards to ensure due process in administrative adjudications. The California Administrative Procedure Act10 applies to state agencies-and local agencies may choose to be governed by the act.11
In addition to differentiating between local and state agencies, the APA also distinguishes between formal and informal APA proceedings.12 Whether a state agency will be governed by the formal APA requirements is determined by the statutes and regulations pertaining to the particular agency.13 A formal proceeding under the APA is conducted by an administrative law judge of the Office of Administrative Hearing.14 Informal proceedings are conducted by a presiding officer, who may be an agency head, a member of an agency, an administrative law judge, or a hearing officer.15
Administrative due process has proven a fertile ground for judicial review. Since Haas was decided on May 6, 2002, in addition to the 19 California appellate cases that have cited the decision, California appellate courts have issued no less than 30 decisions addressing administrative due process.16 Notwithstanding the factual variety of these decisions, they provide, in concert with the APA, clear guidelines to the minimum procedural safeguards required in administrative adjudications.
A Fair and Impartial Adjudicator
Courts have found two distinct types of bias that impair the fairness and impartiality of adjudicators: the personal bias of individual adjudicators and institutional bias that implicates the structure of the government and taints the independence of the adjudicative body. A distinct standard of review exists for each type of bias.17 The Haas case focused on personal bias, and another recent case, Southern California Underground Contractors, Inc. (SoCal) v. City of San Diego, addressed institutional bias.18
Haas involved a massage clinic in San Bernardino County operated by the plaintiff, Haas, under a license issued by the county. After a deputy sheriff reported that a massage technician at the clinic had exposed herself and proposed a sexual act to a client, the county board of supervisors revoked Haas's license. Haas appealed, and the board set the matter for hearing before a hearing officer hired by the county. On an ad hoc basis, the county unilaterally selected, retained, and paid the hearing officer as an independent contractor for the one case.
After voir dire, Haas, arguing that the hearing officer had a financial interest in the outcome of the case, asked the hearing officer to recuse herself. Despite Haas's objection, the hearing went forward with the same hearing officer and resulted in a decision affirming the license revocation.
Haas petitioned for a writ of administrative mandamus, asserting that the hearing officer was biased because the financial arrangement involving the hearing officer created a direct pecuniary interest in the ultimate resolution of the case. Haas claimed that he was denied administrative due process because of the hearing officer's personal bias.
The supreme court agreed with Haas, finding that bias "arises when an adjudicator's future income" will likely depend on an outcome of the case that is favorable to the hiring party.19 The court found that an allegation of a pecuniary interest was a unique type of personal bias justifying a presumption that the bias was sufficient to deprive an individual of due process. The court stated, "While adjudicators challenged for reasons other than financial interest, have, in effect, been afforded a presumption of impartiality, adjudicators challenged for financial interest have not. Indeed, the law is emphatically to the contrary."20 The court ruled that a hearing officer cannot be hired on a case by case basis unless procedures are in place to eliminate the risk of bias, such as limiting future assignments for a period of time.21
Avoiding personal bias, whether financial or otherwise, requires that the administrative agency provide a procedure to test the impartiality of its adjudicators.22 The traditional method to guarantee that adjudicators are fair and impartial and free of personal bias is voir dire, which was the procedure used in Haas.23 Once a request for voir dire is made, an individual adjudicator must submit to an examination or be excused from participating in the adjudication.24
Consistent with the flexibility afforded by the balancing test, an agency has some latitude in the procedure used to test the impartiality of the adjudicator. For example, an agency certainly could require voir dire at a deposition prior to the date set for the hearing.
Also, due process does not require that adjudicators be disqualified solely because of a perception or an appearance of bias. Concrete facts must demonstrate circumstances offering "possible temptation to the average person as an adjudicator."25
Although there are many factual scenarios that might establish bias, certain common situations, in addition to pecuniary interest, have been found by courts to constitute constitutionally impermissible bias, requiring the disqualification of an adjudicator. Principal among these are involvement by the adjudicator in matters directly concerning the entity or individual whose rights are being determined at the hearing, or prejudice on the part of the adjudicator due to his or her prior involvement as an accuser, investigator, fact finder, or additional decision maker in matters involving the individual or entity seeking adjudication.26
In SoCal, the court addressed institutional bias caused by the structure of the government body conducting the adjudication.27 The contractor, known as SoCal, argued that bias existed as the result of ongoing litigation between the contractor and the city of San Diego and by the city's combining investigative, prosecutorial, and adjudicative functions in one agency.
After the San Diego city council's initial decision to debar SoCal from future city contracts, SoCal petitioned for a writ of administrative mandamus challenging the merits of the debarment and the procedures. While the petition was pending, SoCal filed a multimillion dollar lawsuit against the city. The superior court issued a writ, finding that the procedure used by the city council did not provide SoCal with sufficient time to prepare its defense and thus denied SoCal administrative due process. The trial court ordered this problem to be rectified and sent the case back to the city council for a rehearing.28
After a second hearing by the city council, SoCal was once again debarred from city contracts. SoCal filed a second petition for writ of administrative mandamus. In one of many arguments, SoCal asserted that the debarment proceedings before the city did not provide a fair and impartial tribunal because the city was the investigator, prosecutor, and adjudicator and was the defendant in SoCal's lawsuit.
The court of appeal was not persuaded by this argument. It found that overlapping investigative, prosecutorial, and adjudicative functions are commonplace in government and do not necessarily deny a fair hearing.29 In fact, the structure of state and local governments often provides no reasonable means to avoid a combination of functions.30 Indeed, by itself, a combination of functions amounts to only the mere suggestion or appearance of bias.31 According to the court, without more concrete facts, a party claiming institutional bias based on overlapping functions has failed to demonstrate actual bias and a denial of due process.32 Absent demonstrated actual bias, the well-established "rule of necessity" precludes a claim of bias resulting from the structure of government.33
The court of appeal also rejected SoCal's assertion that both the city and individual council members had a pecuniary conflict of interest that denied SoCal due process. The court's reasoning blended evidentiary findings with the rule of necessity. In explaining its rationale, the court stated:
Although the probability of bias can arise from "the pecuniary interest of Board members" (citation omitted), the individual City Council members are not named as defendants in SoCal's lawsuit, and thus have no personal pecuniary interest in the outcome of that case. Further, any financial impact of the lawsuit against the City is remote, contingent and uncertain, and is thus insufficient to constitute the type of pecuniary interest necessary to disqualify City from participating in debarment proceedings….
Where, as here, an administrative body has a duty to act, and is the only entity capable of acting, the fact that the body may have an interest in the result does not disqualify it from acting. The rule of necessity precludes a claim of bias from the structure of the process. (Citation omitted.)34
Unlike the rule of necessity, however, the APA does not permit a combination of functions. The act specifically provides that the adjudicative function must be separate from the investigative, prosecutorial, and advocacy functions of the government body.35
Another form of bias specifically addressed by the APA arises from the adjudicator engaging in ex parte communications. The restriction on ex parte communications prevents communications regarding any issue of the adjudication, whether direct or indirect, between the adjudicator and a representative or employee of an agency that is a party to the adjudication. An adjudicator also must not communicate about the proceedings with any interested third parties.36 This prohibition against ex parte communications is especially significant in adjudications involving board hearings, because a board member may also be an employee or representative of a party to the adjudication.
The APA procedure for determining impartiality and the absence of bias, prejudice, or interest depends on whether the hearing is conducted pursuant to the formal or informal hearing provisions of the APA. In an informal hearing, traditionally recognized methods of voir dire are allowed for determining whether disqualification is appropriate. In a formal hearing, however, the only allowed method for seeking disqualification of the adjudicator is an affidavit alleging, with particularity, the grounds for disqualification.37
The Administrative Hearing
Fundamental due process requirements for the administrative hearing begin with the notification of the administrative action. The governmental agency that has decided to take action against an individual or entity must provide a written notice to the affected party that specifies, with particularity, the action that the agency is contemplating against that party and the information regarding the action that is known by the agency.38 The written notice should advise the party regarding the right to an administrative hearing on the action.
According to Government Code Section 11425.10(a)(1), a part of the codification of the APA's Administrative Adjudication Bill of Rights,39 "The agency shall give the person to which the agency action is directed notice and an opportunity to be heard, including the opportunity to present and rebut evidence." The APA Bill of Rights does not specify the contents of the notice,40 but Government Code Section 11509, which governs notice for formal hearings, provides greater detail regarding what the notice is required to contain.41
The notice of the hearing date must provide the affected party sufficient time to adequately prepare its response to the agency's action. Determining what constitutes sufficient time to satisfy due process requirements is a fact-specific process and also depends on whether the party requests additional time.42 In SoCal, the court found that three weeks was not sufficient time for the affected party to prepare for the hearing.43 SoCal was provided an additional 60 days to prepare for a second hearing, in large part to permit SoCal to conduct depositions of city employees.44
At the hearing, the party affected by the agency's action is entitled to be represented by counsel and present oral argument, briefs, and other support for its position.45 The party also may present the testimony of witnesses.46 However, the right to present testimonial evidence does not include the right to present live testimony at the hearing. Due process only requires the opportunity to conduct depositions of both favorable and adverse witnesses and present the transcripts at the hearing.47
The fundamental right to testimonial evidence also includes the right to cross-examine adverse witnesses.48 This right, however, does not mean that the cross-examination must occur live at the administrative hearing. Due process is satisfied by the opportunity to conduct depositions of adversarial witnesses and submit the deposition transcripts to the administrative entity.49 Thus, the hearing date must be set to allow sufficient time to depose witnesses.
Consistent with the dictates of constitutional due process, the APA identifies the right to present and rebut evidence. It does not provide for the right to present live witnesses, either on direct examination or cross-examination.50
Due process does not require that a party be able to subpoena witnesses in either formal or informal hearings: "[A party's] inability to subpoena witness[es] is not a per se violation of his right to procedural due process."51 Although due process does not require the availability of subpoenas, state agencies and some local agencies do have subpoena power. Under Chapter 4.5 of the APA, state agencies are expressly granted subpoena power for formal hearings and have the option to avail themselves of that power for informal hearings if they so desire.52 Local agencies, however, only have subpoena power for a hearing if the appropriate city charter or an ordinance grants them that power.53 If a local agency does not have subpoena power, however, there is no per se violation of procedural due process.54
In administrative proceedings, there is no absolute constitutional right to prehearing discovery.55 Each agency will establish the extent and scope of discovery applicable to its proceedings.56 However, discovery rights must be granted if refusing to do so denies parties their due process rights.57 Consistent with due process standards, agencies rely on the balancing test in determining whether parties should be allowed to conduct prehearing discovery and, if so, what methods are available.
Agencies that are governed by APA formal hearing procedures are subject to specific methods of discovery.58 Discovery is available only upon written request from the parties and generally applies to writings regarding the basis and subject matter of the proceedings and witness statements.59
Depositions should not be used for prehearing discovery. Instead, depositions may be taken in lieu of testimony at the hearing if witnesses are unavailable or if live testimony will not be heard at all at the hearing.60 The decision to allow depositions rests with the administrative law judge in formal APA hearings or with the agency in local or informal hearings.61
The adjudicator must provide a written decision to the parties. The decision should state the reasoning behind it and present the evidence relied upon by the adjudicator.62 The decision must be sufficiently detailed so that it informs the parties and reviewing courts of the basis for the decision and the mode of analysis used by the adjudicator63 and allows the affected party to determine whether to seek review by administrative mandamus-and if review is sought, on what grounds.64
Petitioning for a Writ of Administrative Mandamus
A party seeking to challenge the decision arising from an administrative adjudication may only do so through a petition for a writ of administrative mandamus under Code of Civil Procedure Section 1094.5.65 The failure to petition for a writ will render the decision of the adjudicator final and binding.66
Before seeking judicial review, however, all administrative remedies must be exhausted to allow the administrative agency a chance to correct its errors.67 Even if the claim is one of denial of due process, a writ cannot be pursued until there has been a final decision from the agency.68
A petition for a writ must be filed within 90 days of the date that the adjudicator's decision becomes final. The time may be extended by a request for a record within 10 days of the final decision. The written decision of the adjudicator must notify the affected party of the time period within which to file a writ.69
The reviewing court will apply an independent judgment test to determine whether the administrative process provided the procedural safeguards required by constitutional due process and, if applicable, the APA.70 The decision of the reviewing court must be based on the administrative record along with judicial evidence admitted under Code of Civil Procedure Section 1094.5.
As exemplified in SoCal, the reviewing court's independent judgment will be grounded upon a consideration of the flexibility permitted by the due process balancing test. The SoCal court succinctly set forth its analysis and conclusions:
Having analyzed the private and governmental interest at stake and the nature of the debarment procedures, we conclude that SoCal was afforded due process. [Citation omitted.] Although the private interest in this case was considerable because of the severe economic impact of debarment…[t]he City's interest in dealing with irresponsible contractors and administering its duties with efficiency is substantial. In view of the fiscal and administrative burdens additional procedural safeguards would impose, such safeguards are not warranted….Under the tests set forth in Matthews, SoCal received a fair hearing.71
Even in the face of a significant private interest, agencies have a substantial degree of discretion and flexibility in determining what procedural safeguards are necessary for an administrative adjudication.