The Dawning of the Age of ALJ Final Decisions

by Poyner Spruill LLP
Contact

[author Pamela A. Scott]
​The Age of ALJ Final Decisions has dawned for many clients whose businesses involve regulatory actions or decisions by North Carolina administrative agencies.  As part of the General Assembly’s regulatory reforms in the 2011 session, legislators made contested case decisions of administrative law judges final, eliminating the final agency decision step of the process.  Under the law commonly known as the Regulatory Reform Act (Session Law 2011-398, 2011 SB 781), beginning with contested cases filed on or after January 1, 2012*, the decisions of administrative law judges (ALJs) will now be final, subject to any further appeal to court.  This change applies to contested cases challenging decisions or actions of regulatory agencies subject to the North Carolina Administrative Procedure Act (APA), with the limited exception of cases involving decisions of professional and occupational licensing boards.

The fundamental questions in contested cases appealing regulatory decisions will be what they always have been:   whether the petitioner has met its burden of demonstrating that the challenged agency action or decision deprived the petitioner of property, ordered it to pay a fine or civil penalty, or otherwise substantially prejudiced its rights, and that the agency erred in one or more of the ways enumerated by statute in N.C. Gen. Stat. § 150B-23(a).   The contested case hearing will continue to be the fact-finding proceeding of record where evidence is presented, witness credibility is evaluated and determined, and facts are established.   

Likewise, the ALJ’s role in presiding over the contested case will remain the same.  The major reform is that the decision of the ALJ who fulfills this fact-finder role will now be the final decision in the contested case.  Agencies will no longer have an opportunity at the final decision stage to reverse unfavorable ALJ decisions or bring them in line with the agencies’ perspective on the factual circumstances or law at issue.  

Only time will tell whether the dawning of this new ALJ final decision era will bring improved harmony and understanding between agencies and the individuals and entities they regulate.  What seems almost certain is that the move to ALJ final decisions will trigger a corresponding shift in the course and tactics of contested cases.  There will likely be a heightened focus on evidence relating to agency expertise, and the correctness of, and bases for, the agency’s interpretation of the controlling law.  The fact that the agency will no longer get a second bite at the decision apple will make it important for parties on both sides of the case to develop and present before the ALJ persuasive evidence regarding whether and how the agency decision being challenged fits within the law as well as any supporting agency expertise or lack thereof. 

Due Regard to the Agency’s Demonstrated Knowledge and Expertise.  A long-standing provision of the APA which will now garner more attention is the requirement that the ALJ give “due regard to the demonstrated knowledge and expertise of the agency with respect to facts and inferences within the specialized knowledge of the agency.”  N.C. Gen. Stat. § 150B-34(a).  Under the prior law which gave Agencies final decision authority, parties gave limited attention to the ALJ’s duty to give “due regard” to the agency’s demonstrated knowledge and expertise.  Consequently, this provision has been the subject of limited judicial construction by our State’s courts.  However, the brighter spotlight on this due regard provision resulting from the move to ALJ final decisions will likely lead to further consideration and gloss of this provision by our courts. 

There is no provision of the APA or any other statute which speaks to how to establish an agency’s demonstrated knowledge or expertise, or lack thereof, as part of the record in a contested case.  Of course, the guidepost is the standard established in N.C. Gen. Stat. § 150B-34(a), which means that the agency’s position or approach is entitled to appropriate regard by the ALJ concerningfacts and inferences within the specialized knowledge of the agency” where there is demonstrated knowledge and expertise of the agency”.  N.C. Gen. Stat. § 150B-34(a) (emphasis added).

Parties will want to lay the foundation in the official record for their contentions regarding what type of consideration the ALJ should give to the agency’s position concerning  the facts underlying the decision or action at issue in a contested case.  Any specialized knowledge or expertise of the Agency, including, but not limited to support for the agency’s interpretation of controlling statutes and regulations, should be specifically established and addressed in the official record for the case.  Likewise, any contentions against the agency’s position should be established through record evidence.   
 
The statutory mandate for an ALJ to give due regard to an agency’s demonstrated knowledge and expertise is consistent with the fundamental precept which has long been recognized by North Carolina’s appellate courts that an agency’s knowledge or expertise should be accorded appropriate consideration and weight on judicial review.  However, it is important to distinguish regard or deference to an agency’s application of the law in the context of judicial review where a court is sitting in an appellate capacity, from consideration of an agency’s knowledge or expertise in the context of an evidentiary contested case where the ALJ sits as the trier of fact. 

Simplified Contested Case Process.  Because the ALJ’s decision will be final, the contested case process should be simpler and more efficient.  Procedural and substantive legal issues involving the agency final decision-maker’s acceptance or rejection of the ALJ’s decision and supporting findings and conclusions which historically have been an inherent part of the contested case process, will no longer exist.  Instead, any issues arising from differences between the ALJ’s decision and the agency’s position, will be addressed on judicial review or appeal from the ALJ’s decision.  Appeals involving tension or differences between the ALJ’s decision and the agency’s position will likely lead to further development of appellate case law regarding a reviewing court’s appropriate consideration of both the ALJ’s determinations - flowing from his or her unique role as the fact-finder in the contested case, and the agency’s position regarding the appropriate outcome - stemming from its delegated responsibility to construe and implement the controlling statutes and regulations.   

Challenges on the Horizon?  Since before the Regulatory Reform Act became law, there have been rumblings of potential legal actions challenging the lawfulness of ALJ final decisions.  A number of agency advocates have suggested that it might be unconstitutional to allow ALJs who are outside the agency delegated with authority over a given area of law, to render final decisions in contested cases.  Others in defense of the new law have maintained there is no constitutional bar to giving independent ALJs final decision authority. 

To date, the one case that has been filed is based upon a limited theory.  On February 8th, Piedmont Behavioral Healthcare (PBH), a multi-county area mental health, development disabilities and substance abuse authority, initiated a federal lawsuit in the Eastern District of North Carolina seeking temporary and permanent injunctions requiring the Acting Secretary of the N.C. Department of Health and Human Services to render final decisions in appeals involving eligibility for certain Medicaid services and prohibiting ALJs in the N.C. Office of Administrative Hearings (OAH) from making final decisions in such cases.  According to its Complaint, PBH is seeking to preserve the final decision authority of N.C. DHHS in these Medicaid appeals unless and until the U.S. Department of Health and Human Services waives the requirement under the federal Social Security Act that a single State agency must administer the State’s Medicaid program. 

In their March 1st responses opposing the preliminary injunctive relief sought by PBH, the DHHS Acting Secretary and the Director of OAH argued that PBH failed to establish the necessary elements to support a preliminary injunction.  Among other things, these responsive arguments included: (1) PBH lacks standing to litigate its claims because its alleged harm is conjectural and hypothetical and it has not suffered any imminent, concrete injury;  (2) PBH’s ability to serve Medicaid recipients and receive payment for that service has not been impacted by the change in the law, and its position is the same regardless of which entity makes the final decision in Medicaid recipient appeals; (3) PBH failed to exhaust its administrative remedies in that it did not challenge rules promulgated by OAH to implement the statutory change in the contested case process; and (4) it is in the public interest to allow the amended contested case process to continue in effect and to allow the federal Centers for Medicare and Medicaid Services to proceed with its review and decision of the requested waiver of the single State agency requirements for final administrative decisions.  

It remains to be seen whether any other legal challenges to the new ALJ final decision authority, perhaps on broader constitutional grounds, may be lurking around the corner. 

* For cases concerning agency decisions involving certain environmental programs established under federal legislation, the amended contested case process will take effect when the United States Environmental Protection Agency approves OAH as an agency responsible for administering those programs, or June 15, 2012, whichever occurs first.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Poyner Spruill LLP | Attorney Advertising

Written by:

Poyner Spruill LLP
Contact
more
less

Poyner Spruill LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.