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Administrative law ripe for reform?

April 6, 2016

Indiana may join the majority of states that have moved away from traditional administrative law models in favor of panels of administrative law judges that hear the appeals of decisions from dozens of state agencies.

murphy-elizabeth-mug Murphy

“Generally, I don’t think it’s a bad idea to have a centralized system of administrative law judges who can take on the issues for the agencies and resolve those matters,” said Elizabeth Murphy, of counsel at Taft Stettinius & Hollister LLP. “It would give a greater appearance and comfort level to individuals that administrative law judges are independent.”

That’s a concern Sen. Brent Steele has about the current system in which ALJs often are employees of the agencies in which they’re adjudicating disputes. Steele introduced Senate Bill 1 in the 2016 General Assembly that in its original form was an opus of more than 100 pages overhauling the system. The bill soon morphed into legislation assigning the matter of ALJs and administrative law to an interim study committee. It passed with wide bipartisan support and was signed by Gov. Mike Pence.

More than 40 state agencies use ALJs to hear appeals of myriad agency actions that include decisions on unemployment benefits, child welfare, regulating floodways and setting utility rates. Their rulings typically are subject to agency review, and final determinations are subject to judicial review.

Steele, R-Bedford, said there are good reasons other states have moved toward panels of ALJs to hear appeals, and a hard look at Indiana’s patchwork system is needed.

Steele Steele

“Number one, a lot of times, the ALJ is not a lawyer, and number two, a lot of times they’re hired by the agency and they think their job is to back the agency,” he said. “Most people go through life without ever having been in court. If their one time is in front of an administrative law court, they’re going to walk out thinking, ‘My God, that’s just the way it is.’ It’s not a healthy thing to happen to the citizens of any state.”

Murphy, a former administrative law judge who later supervised ALJs at the Bureau of Motor Vehicles, said because some agencies employ their own administrative law judges, there is a perception of bias, though that’s not been her experience. “Just because it doesn’t look as though they’re independent, at least from agencies I’ve worked at, they are independent.”

Lewis & Kappes director Joseph Rompala frequently represents clients before the Indiana Utility Regulatory Commission and has written about administrative law in Indiana. He said creation of panels isn’t necessarily a novel idea, and the concept been discussed in the state for years. Since the 1990s, the ABA has supported a model act to create panels.

rompala-joe-mug Rompala

“Like all things, the devil is somewhat in the details as to how it’s created,” Rompala said. “Proponents of central panels tend to argue, and I think somewhat rightly, that it helps reduce bias or the appearance of bias that comes when the ALJ is an employee of the agency. There is some argument it produces some cost savings as well.”

Rompala said he would be concerned if proposals removed the authority of ALJs in highly complex matters such as those heard by the IURC. He said agencies like IURC were exempted from the Administrative Orders and Procedures Act because of the high degree of specialization required, and those agencies should retain the ALJ processes they employ.

Along with IURC, the Department of Workforce Development and the Unemployment Insurance Review Board are among the agencies exempted under I.C. 4-21.5-2-4.

Steele thinks IURC and the Office of Environmental Regulation that resolves disputes arising from actions of the Department of Environmental Management are among those that should be exempted from a central panel system. “Those that are operating well need to be left out of the system,” he said.

But Steele believes there are problems beyond possible bias involved in staff ALJs hearing disputes. He believes there’s bloat that can be trimmed.

A few years back, Steele said letters were sent to agencies that use ALJs, asking four questions: Are the ALJs lawyers; how many cases a year does the agency dispose of; what are the ALJs’ salaries; and what are the ALJs’ benefits? He said only about three agencies replied.

“I can understand why they didn’t,” he said. “They could see where we were going with this.” Steele said a panel could set standard salaries and benefits that he anticipates would be in line with salaries of trial court magistrate judges.

Former Indiana Supreme Court Justice Frank Sullivan wrote an Indiana Law Review article in 2004 about central panels of ALJs. At that time, 26 states had adopted some form of panel system. Sullivan said his position hasn’t changed from his conclusion that there is much to be said for the goals of such a system, including recognition of the important roles ALJs play.

“I do think, from the standpoint of selling the concept to executive and legislative decision-makers, however, that central panels raise some concerns,” Sullivan wrote. He said policymakers need to ask questions such as whether panels are consistent with prerogatives and policy priorities of the executive branch, and whether they are inconsistent with traditional notions of judicial review of administrative actions.

Murphy said a key consideration is determining the volume of cases ALJs hear from all the agencies that would be affected. It’s not unusual for ALJs to have a constant stream of appeals, she said.

Rompala said there could be benefits in a central panel system if the state adopted one that handled administrative appeals in a more standardized way where everyone knows the ground rules.

“As the summer study session goes forward and presumably this is considered in other forums as well, the question is, ‘How do you structure it for Indiana?’” he said. “I think part of that discussion has to be how we view the role of agencies within the state in terms of instruments of policy implementation, especially in a larger political environment, and especially in a state where we have a hesitancy to implement regulations.

“This is a complex question and it touches on a lot of agencies, it touches on a lot of lives of people in Indiana,” Rompala said. “It really needs careful thought and consideration.”•

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