June 30, 1994
The Honorable Harlan E. Boyles Chairman The Boards of Trustees of the Teachers’ and State Employees’ Retirement System and the North Carolina Local Governmental Employees’ Retirement System Albemarle Building 325 North Salisbury Street Raleigh, North Carolina 27603-1385
Re: Advisory Opinion: Ex Parte Communications under the Administrative Procedure Act. G.S. § 150B-35.
Dear Mr. Boyles:
We are writing in reply to your request for our opinion regarding ex parte communications between members of the Boards of Trustees of the Teachers’ and State Employees’ Retirement System and the North Carolina Local Governmental Employees’ Retirement System ("boards") and the Director of the Retirement Systems Division, Department of State Treasurer, ("Director") or between those boards and persons having contested cases pending before the boards ("petitioners").
The issues that you have presented are as follows: (1) Are ex parte communications relating to a contested case pending before the boards, including communications concerning matters of fact, between the Director or petitioners and members of the boards prohibited by G.S. § 150B-35? (2) If such communications are prohibited, what sanctions may be imposed for violating the prohibition?
The Administrative Procedure Act
Article 3 of the Administrative Procedure Act (APA), Chapter 150B of the General Statutes, is applicable to contested cases pending before the boards. If a party believes that he or she has been aggrieved by a determination of the Director, that person may petition for a contested case hearing in the Office of Administrative Hearings. G.S. § 150B-23. After an evidentiary hearing, the administrative law judge assigned to the case will issue a recommended decision containing proposed findings of fact and conclusions of law. G.S. § 150B-23 to § 150B-34. This recommended decision is then forwarded along with the official record of the contested case to the appropriate board, which makes the final agency decision. G.S. § 150B-36. The board making the final agency decision may accept the recommended decision in whole or in part, or may reject the recommended decision. It is, then, ultimately the province of the board, not the administrative law judge, to determine the facts in a contested case and to determine how the law is to be applied to those facts. Jarrett v. N.C. Department of Cultural Resources, 101 N.C. App. 475, 400 S.E.2d 66 (1991).
G.S. § 150B-35 addresses the issue of ex parte communications. That statute provides: Unless required for disposition of an ex parte matter authorized by law, neither the administrative law judge assigned to a contested case nor a member or employee of the agency making a final agency decision in the case may communicate, directly or indirectly, in connection with any issue of fact, or question of law, with any person or party or his representative, except on notice and opportunity for all parties to participate.
This general statutory prohibition applies to members of the boards in contested case matters and begins upon commencement of the contested case. While the Director is not, strictly speaking, a party to the contested case, his determination forms the issues of fact and of law that must ultimately be resolved by the boards.
It is clear that the General Assembly, in enacting G.S. § 150B-35, intended that Article 3 administrative hearings should conform to due process requirements of fairness. This subject was succinctly addressed by a majority of the North Carolina Supreme Court in Crump v. Board of Education, 326 N.C. 603, 392 S.E.2d 579 (1990). There, in finding that the plaintiff was deprived of due process when one or more members of a school board which conducted an administrative hearing involving charges against the plaintiff were biased against the plaintiff prior to the hearing, the Court said: [W]henever a government tribunal, be it a court of law or a school board, considers a case in which it may deprive a person of life, liberty or property, it is fundamental to the concept of due process that the deliberative body give that person’s case fair and open-minded consideration. "A fair tribunal is a basic requirement of due process." Id., page 613 (citing and quoting In re Murchison, 349 U.S. 133 (1955)) . . . . "[I]f the administration of public affairs by administrative tribunals is to find a place within the present framework of our government it is essential that it proceed, on what may be termed its judicial side, without too violent a departure from what many generations of English-speaking people have come to regard as essential to fair play. One of these essentials is the resolution of contested questions by an impartial tribunal." Id., page 619, quoting Berkshire Employees Association, Etc. v. National Labor Relations board, 121 F.2d 235 at 238-39 (3d Cir. 1941) . . . . "[A] fair trial by an unbiased and non-partisan trier of the facts is the essence of the adjudicatory process as well when the judging is done in an administrative proceeding by an administrative functionary as when it is done in a court by a judge. Indeed, if there is any difference, the rigidity of the requirement that the trier be impartial and unconcerned in the result applies more strictly to an administrative adjudication where many of the safeguards which have been thrown around court proceedings have, in the interest of expedition and a supposed administrative efficiency, been relaxed." Id., page 622, quoting National Labor Relations board v. Phelps, 136 F.2d 562, 563 (5th Cir. 1943). Crump v. Board of Education, 326 N.C. at 613.
Thus, the General Assembly, through legislation appearing in G. S. Chapter 150B, has sought to prevent bias in administrative hearings, while the Supreme Court, in Crump, has determined that a deprivation of due process by a biased tribunal can result in a compensable injury under 42
U.S.C. §1983, and has affirmed a monetary award against the defendant school board. Id., pages 623-25.
Contested cases before the boards are almost invariably adversarial in nature. It is, therefore, axiomatic that the boards should hear matters on appeal from decisions of the Director and on recommended decisions from an administrative law judge only (i) after notice and opportunity for all parties to be present, (ii) upon a complete record, and (iii) without any prior consideration or preconceived determination of the matter. Given the concern of both the legislative and judicial branches that administrative hearings be fair and impartial, it is our opinion that ex parte communications between the Director or petitioners, concerning an issue which is the subject of a contested case, and the boards, which are to ultimately rule on the issue, can raise substantial questions concerning the impartiality of the boards with regard to its proceedings and decisions. These questions, in turn, can lead to legal challenges to the boards’ decisions on the grounds of bias, which could result in those decisions being set aside by the courts and, possibly, in the award of monetary damages against the boards.
It is our view, therefore, based on the foregoing, that both statutory and case law mandate against ex parte communications between the Director or petitioners and any member(s) of the boards with regard to a pending contested case. It is our opinion that when a contested case has been initiated, members of the boards must refrain from discussing matters of fact or matters of law regarding the contested case with the Director or his employees or representatives or with the petitioner or the petitioner’s representatives. The Director and petitioners should also refrain from distributing – and the board members should refrain from receiving – any information on a contested case except the record on appeal and any legal briefs or memoranda submitted by the parties, information relating to the time and place of the hearing, and similar factual information not touching on the merits of the case. We note with approval that the Director currently sends all board members and petitioners notice of initiation of a contested case at the time that the petition is filed. This notice reminds board members and parties of the prohibition against ex parte communications.
Sanctions
There are no sanctions specifically directed toward violation of the prohibition against ex parte communications. Board members who engage in ex parte communications, however, may find their decisions attacked in a Crump-type proceeding and themselves subject to monetary damages. Moreover, willful efforts on the part of a State official to engage in prohibited ex parte communications may constitute good cause for removal from office.
We trust that we have addressed your concerns, but if we may be of further assistance, please let us know.
Ann Reed Senior Deputy Attorney General
Alexander McC. Peters
Assistant Attorney General