BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2537
                                                                  Page  1

          Date of Hearing:   April 13, 2010

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                                 Mary Hayashi, Chair
                     AB 2537 (Silva) - As Amended:  April 6, 2010
           
          SUBJECT  :  State agencies: adjudications: presiding officers.

           SUMMARY  :   Requires agencies conducting adjudicative proceedings  
          with a presiding officer who is an administrative law judge  
          (ALJ) to develop regulations to allow a peremptory challenge  
          (PC) of that presiding officer, as specified.

          1)Requires an agency that conducts an adjudicative proceeding to  
            provide by regulation for PC of a presiding officer who is an  
            ALJ.

          2)Exempts agencies with five or fewer ALJs from developing PC  
            regulations if the agency has an internal appellate review  
            system for ALJ disqualification requests in which the  
            determination is made by the agency itself.    

           EXISTING LAW  :

          1)Provides for the conduct of administrative adjudication  
            proceedings of state agencies through the Administrative  
            Procedure Act. 

          2)Provides for the disqualification of a presiding officer for  
            bias, prejudice, or interest in the proceeding. 

          3)Authorizes an agency that conducts an adjudicative proceeding  
            to provide by regulation for PC of the presiding officer.

          4)Provides for PC of a judge, court commissioner, or referee in  
            superior court. 

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           Purpose of this bill  .  According to the author's office,  
          "Parties in administrative law proceedings have a substantial  
          stake in the outcome of that proceeding, and should have the  








                                                                  AB 2537
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          same right to have their matters heard by a fair and impartial  
          trier of fact as parties in a court proceeding. Many state  
          agencies, including the largest, the Office of Administrative  
          Hearings (OAH) under the Department of General Services, provide  
          for PCs of ALJs believed to be biased, prejudiced, or interested  
          in the matter, similar to that provided to civil litigants under  
          Code of Civil Procedure 170.6. 

          "Other agencies, however, do not permit PCs of ALJs - and may  
          not even provide an effective internal appeals process.  At best  
          this means that a party whose request for disqualification has  
          been denied by an ALJ must prepare detailed and costly  
          declarations, typically including extensive hearing transcript  
          documentation, to appeal the denial of disqualification.  At  
          worst, in cases where the agency in question does not have an  
          effective appeals process - or even places appeals in the hands  
          of the same ALJ who denied the initial request for his or her  
          disqualification - it means that the party must seek relief in  
          court, unnecessarily delaying a decision on the merits of the  
          case at great expense to both the party and the agency.

          "AB 2537 will rectify this inconsistent and unequal unfair  
          situation by providing that all agencies must permit parties the  
          opportunity to excuse administrative law judges on PC.  By doing  
          so, the bill will increase fairness, and should reduce costs for  
          both the administrative litigants and the agencies themselves."

           Background  .  A PC is disqualification without cause.  In the  
          case of this bill, PCs are presented as a motion by a party to  
          an administrative proceeding to remove the trier of fact without  
          giving a reason.  

          Presently, state agencies conducting adjudicative proceedings  
          are permitted to develop regulations governing PCs for their  
          presiding officers, whether ALJs or not.  Some agencies, such as  
          OAH, which provides ALJs for 1,400 local and state government  
          agencies, do allow PCs for ALJs in certain circumstances.  Other  
          agencies, such as the Department of Motor Vehicles and the Air  
          Resources Board, do not.  This creates an inconsistent  
          administrative adjudication structure in the state.   

          Existing law provides that adjudicative officers are subject to  
          disqualification for bias, prejudice, or interest in the  
          proceeding.  However, the methods of determining  
          disqualification vary widely between agencies, and some agencies  








                                                                  AB 2537
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          even permit the officer in question to determine his or her own  
          level of bias.  Permitting a PC would streamline this process  
          and create a greater sense of fairness.   

          The case of  Sutter Medical Center Sacramento (SMCS) v. Shewry,   
          2007, illustrates the current problem.  In this administrative  
          proceeding before the Department of Health Care Services' Office  
          of Administrative Hearings (OAHA), SMCS filed a voluminous  
          request for disqualification of an ALJ, with detailed  
          declarations and extensive pages of evidentiary support from  
          transcripts.  The challenged ALJ responded to this detailed  
          request for disqualification with a brief order that did not  
          address any of the specific grounds raised, and denied his own  
          disqualification with a conclusory finding of no bias, no  
          prejudice, and no interest in the proceeding.  SMCS sought  
          reconsideration before the OAHA Chief ALJ, who ruled that no  
          administrative review of an ALJ's finding against  
          disqualification was available.  SMCS then had to proceed to  
          superior court, at significant time and expense, to litigate and  
          obtain an order requiring disqualification of the ALJ.  This not  
          only caused significant expense, but the administrative delays  
          related to implementing the court's writ were significant,  
          further delaying a decision on the merits of the case.  

          A party to a civil or criminal matter in superior court may  
          issue one PC against a judge, court commissioner, or referee.   
          ALJs hear no less important cases than those in superior court:   
          disciplinary matters, terms of employment, tax concerns, health  
          care and business regulations fall in the purview of  
          administrative proceedings.  The author of this bill argues that  
          these parties should have the same ability to remove a trier of  
          fact they feel is biased as those in a superior court.  However,  
          this bill creates an exemption for agencies having 5 or fewer  
          available ALJs, if that agency has an internal appellate review  
          system for ALJ disqualification requests in which the  
          determination is made by the agency itself.  This was borne out  
          of a concern from some agencies that their limited staff  
          resources would make the automatic removal unduly burdensome.     
             

          This bill does not require agencies to develop PC regulations  
          for non-ALJ presiding officers, however; this option is still  
          permissive.  The author's office states that there have been no  
          demonstrated problems with non-ALJ presiding officers.









                                                                  AB 2537
                                                                  Page  4

           Committee amendments  :

          Remove "appellate" from 11425.40(e) to clarify the review system  
          as a non-judicial process.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Conference of California Bar Associations (sponsor)

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    Sarah Weaver / B., P. & C.P. / (916)  
          319-3301