Public Interest Law

Public Interest Law and Practice

2007 /2008

General Info

Board/Commission v. Dept/Bureau
1. Board/Commission: multimember regulatory agency; decisions are made in a public forum; more advantageous from a Public Interest perspective
2. Dept/Bureau: headed by a single appointee; decisions generally made in closed settings

Bagley-Keene opening Meeting Act

* Brown Act is the local government counterpart

*Basic Requirements

Notice: Agencies must give notice of the meeting with an agenda by mail and on internet at least 10 days prior

Agenda: must be given with notice of the meeting time and give brief description of all action to be taken; no action can be taken unless its on the agenda

Background Documents: must be provided upon request

Public Comment: agency must give time for comment on both agenda items and non-agenda items, members cannot take action or speak about the non-agenda issues

Exceptions:

Closed/Executive session: must be during a regularly scheduled or special meeting; must be on the agenda; must give reason given; notes must be taken as to discussion and action taken
Special Meetings: may be held on fewer than 10 days notice where the 10 day notice requirement would impose substantial hardship and where subject matter is within specified criteria
Emergency Meetings: held on fewer than 10 days notice under narrow criteria

Remedies for Violations:

Criminal Sanctions: P must prove that Agency had actual knowledge of violation
Injunction: to stop the meeting from being held or the violation from being made
Mandamus
Statute of Limitations: 30 days

Underlying Principle: the public should know what the govt. (agency) is going to do before they do it, and be able to take part in the action

Board, Committee, Subcommittee, Task Force Meetings
1. Meeting Defined: any congregation of a majority of the members of a state body at the same time and place to hear, discuss or deliberate upon any item that is within the subject matter jurisdiction of the state body to which it pertains;
  1. Exceptions: other meetings, gathering and conversations as long as a majority of the members do not discuss, other than part of a scheduled program, items within the subject matter jurisdiction
2. Board Meetings: where a quorum of the board members are present
3. Committee Meeting: consisting of less than a quorum; includes subcommittee and task force meetings; members of the board who are not members of the committee may attend as long as the attend only as observers

Types of Meetings:
1. Regularly Scheduled Meetings: board, committee, subcommittee or task force may hold a regularly scheduled meetings
  1. Notice:
    1. Baord: 10 calendar days written and internet notice; must include name, address and phone number of a person who can provide further info and agenda items and brief description

NOTE: Agencies generally wait to give notice until the last minute (on the 10th required day) in order to allow enough time to include everything on the agenda that is intended

1. 1. 1. Committee: same notice requirements apply as above, unless committee if made up of less than 3
  2. Subject Matter: may be held to conduct customary business subject matter dictated by jurisdiction of the board under its enabling act; only items listed on the agenda and given 10 days notice may be discussed.
2. Special Meetings: may only be called where the 10 day notice requirement would impose substantial hardship on the state body and immediate action is required to protect the public interest, and meeting is to:

1. - - To consider pending litigation
    - To consider proposed legislation
    - To consider issuance of a legal opinion
    - To consider disciplinary action involving a state officer or employee
    - To consider the purchase, sale or exchange or lease of real property
    - To consider license examinations and applications
    - To consider an action on a loan or grant provided pursuant to div. 31 of Health and Safety Code
    - To consider response to a confidential final draft audit report

1. 1. Notice: must be given as soon as practicable after decision to hold meeting is made, notice to news must be given within 48 hours of meeting time, must be posted online 48 in advance of meeting
  2. Subject: no business matter other than that noticed
  3. Specific Requirements: agency must make a finding at the commencement of the meeting that providing 10 day advance written notice of the meeting would pose a substantial hardship or that immediate action is necessary to protect public interest; finding must be adopted with 2/3 vote of the agency members present
  4. Non-Agenda Items: may be discussed on 2/3 vote as long as need occurred after agenda was posted
2. Emergency Meetings: may be held in that case of an emergency, defined as:

1. - - Work Stoppage or other activity that severely impairs public health safety or both
    - Crippling disaster that severely impairs public health or safety or both

1. 1. Notice: news must be notified within one hour of the meeting, but if telephone services are not functioning, notice requirement is waived; notice must be posted online as soon as practicable after decision to hold meeting is made
  2. Specific Requirements: the following must be posted in a public place and on the interest for a min 10 days, as soon as possible after the meeting
    1. Minute
    2. List of persons notified or attempted to be notified
    3. Action taken
    4. Rollcall vote on the action taken
2. Closed Session:

1. - - Personnel Matters: consider the appointment, employment, evaluation or dismissal of a public employee or to hear complaints to charges against an employee, unless that employee requests a public hearing
    - Examination Matters:
    - Matters Effecting Individual Privacy: a committee consisting of less than a quorum may meet to discuss matters that would constitute an unwarranted invasion of privacy of an individual licensee or applicant
    - Administrative Disciplinary Matters:
    - Board of Accountancy Matters
    - Pending Litigation
    - Response to Confidential Final Draft Audit Report
    - Threat of Criminal Terrorist Activity
    - Advisory Bodies/Committees

1. 1. Notice: board must disclose in an open meeting the nature of the item to be discussed in the closed session
  2. Reporting: board must report publicly at a subsequent meeting any action taken and any Rollcall vote thereon
  3. Procedural Requirements:
    1. must be held during a regularly scheduled or special meeting and may not be scheduled independently
    2. must announce the general reasons for the closed session and cite legal authority under which the session is held
    3. only matters covered in the statement may be discussed
    4. staff person must attend and record minutes
    5. minute book available only to members of the agency, information received and discussed must be kept confidential
Deliberations and Voting:
1. Ex Parte Contacts: between an outside party and a board member, contacts regarding general matters are lawful and are not required to be disclosed (except at PUC), but contacts regarding disciplinary matters are barred
2. Seriatim Communications: series of conversations/emails; board members cannot have non-public conversations with other board members to discuss agenda items and intended action
3. Conference Calls: phone calls to individual agency members sufficient to constitute a quorum are prohibited

Public REcords Act [PRA]

Purpose

Designed to enable anyone to inspect records at public agency during regular office hours
Increase freedom of information and make govt. more public
Unique aspect: no Standing requirement

- Anyone can request and receive records from a state or local agency
- Usually done via written request
- Agency has 10 days to respond with whether or not they will produce the documents
- Agency can unilaterally extend the deadline by up to 14 days
- Agency must produce all requested records which are not exempt, or given reason why they are exempt
- Agency only has to produce pre-existing docs and don’t need to produce new docs in accordance with your request
- Agency can only charge the direct cost of duplication, not staffing charges associated with retrieval, duplication, etc (North County)

Who’s Covered:
1. § 6253.4. All state and local agencies: including: (1) any officer, bureau, or dept.; (2) any “board, commission or agency” created by the agency (including advisory boards); and (3) nonprofit entities that are legislative bodies of a local agency. (§ 6252(a),(b)). Many state and regional agencies are required to have written public record policies.
2. Who is not Covered:
  1. Courts: (§§ 6252(a), 6261) except itemized statements of total expenditures and disbursement)
  2. Legislature: (§ 6252)
  3. Private, non-profit corporations and entities
  4. Federal agencies ( 5 U.S.C. § 552)
What’s Covered:
1. “Records” includes all forms of communication related to public business “regardless of physical form or characteristics, including any writing, picture, sound, or symbol, whether paper, fiber, magnetic, or other media.” (§ 6252(e)) Electronic records are included, but sorftware may be exempt. (§§ 6253.9(a),(g), 6254.9(a,(d))
Process:
1. Access is immediate and allowed at all times during business hours. (§ 6253(a)). Staff need not disrupt operations to allow immediate access, but a decision on whether to grant access must be prompt. An agency may not adopt rules that limit the hours records are open for viewing and inspection. (§§ 6253(d); 6253.4(b))
2. The agency must provide assistance by helping to identify records and information relevant to the request and suggesting ways to overcome any practical basis for denying access. (§ 6253.1)
3. An agency has 10 days to decide if copies will be provided. In “unusual” cases (request is “voluminous,” seeks records held off-site, OR requires consultation with other agencies), the agency may upon written notice to the requestors give itself an additional 14 days to respond. (§6253(c)) These time periods may not be used solely to delay access to the records. (§ 6253(d))
4. The agency may never make records available only in electronic form. (§ 6253.9(e)
5. Access is always free. Fees for “inspection” or “processing” are prohibited. (§ 6253)
6. Copy costs are limited to “statutory fees” set by the Legislature (not by local ordinance) or the “direct cost of duplication”, typically 10-25 cents per page. Charges for search, review or deletion are not allowed. (§ 6253(b));
  1. North County Parents v. DOE, 23 Cal.App.4th 144 (1994).
  2. If a request for electronic records either (1) is for a record normally issued only periodically, or (2) requires data compilation, extraction, or programming, copying costs may include the cost of the programming. (§ 6253.9(a),(b))
7. The agency must justify the withholding of any record by demonstrating that the record is exempt or that the public interest in confidentiality outweighs the public interest in disclosure. (§6255)

*Access Tip: Always ask for both copies and access; after inspection you can reduce the copy request (and associated costs) to the materials you need.

The Request:

Plan your request; know what exemptions may apply.
Ask informally before invoking the law. If necessary, use this guide to state your rights under the Act.
Don’t ask the agency to create a record or list.
A written request is not required, but may help if your request is complex, or you anticipate trouble.
Put date limits on any search.
If the agency claims the records don’t exist, ask what files were searched; offer any search clues you can.
Limit pre-authorized costs (or ask for a cost waiver), and pay only copying charges.
Demand a written response within 10 days.

Exemptions:
1. Waiver: when an exempt document is disclosed, the exemption is presumed to be waived
2. Attorney-Client discussions: even if the agency is the client, but the agency (not the lawyer) may waive secrecy.
3. Appointment calendars and applications, phone records, and other records which impair the deliberative process by revealing the thought process of government decision-makers may be withheld only if “the public interest served by not making the records public clearly outweighs the public interest served by disclosure of the records.” The agency must explain, not merely state, why the public interest does not favor disclosure.
4. Preliminary drafts, notes and memos may be withheld only if: 1) they are “not retained…in the ordinary course of business” and 2) “the public interest in with-holding clearly outweighs the public interest in dis-closure.”
  1. Drafts are not exempted if:
    1. staff normally keeps copies; or
    2. the report or document is final even if a decision is not.
  2. Where a draft contains both facts and recommendations, only the latter may be withheld. The facts must be disclosed.
5. Home Addresses in DMV, voter registration, gun license, public housing, local agency utility and public employee records are exempt, as are addresses of certain crime victims.
6. Records concerning pending litigation are exempt, but only until the claim is resolved or settled. The complaint, claim, or records filed in court, records that pre-date the suit
7. “Personnel, medical and similar files” are exempt only if disclosure would warrant an unreasonable invasion of personal privacy
  1. employee contracts are not exempt
  2. NOTE: CA €’s right of privacy complicates things
8. Police Incident reports, rap sheets and arrest records are exempt unless disclosure would endanger an investigation of the life of an investigator.
  1. Investigative files may be withheld, even after an investigation is over, but the primary purpose of the files must be investigatory
  2. Identifying data in police personnel files and misconduct complaints are exempt
  3. DA can request and receive files without privilege being waived
9. Financial Data submitted for licenses, certificates, or permits, or given in confidence to agencies that oversee insurance, securities, or banking firms;
10. Tax, welfare, and family/adoption/birth records are all exempt. (§§ 6254(d), (k), (l), 6276).

Remedies
1. Administrative law requires you to exhaust the agency’s remedies before going to court
2. Fee Shifting Statute: Prevailing P has a right to atty fees

Rulemaking

* Note the 10 day notice requirement for meeting and agenda under PRA, but 45 day notice requirement for rulemaking decision under APA

Administrative Procedure Act [APA]: every regulation is subject to the rulemaking procedures (see II, below) unless expressly exempted
1. Mandatory Compliance (Armistead v. State Personnel Board)

NOTE: if the policy or procedure is contained in an applicable statute or duly adopted regulation, adoption as a regulation under the APA is not necessary

1. “Regulation:” every regulation, rule, order, standard, amendment, supplement or revision of any rule, regulation, order or standard adopted by any state agency it implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure.
  1. Rule v. Adjudication: a rule applies to a class or group of persons, whereas an adjudication applies only to a single person (Greer)
  2. Internal enforcement decisions can be made without rulemaking process, but rulemaking process is needed where it may affect those outside the agency
2. “Underground Regulation:” a regulation or rule that has not been adopted pursuant to APA; APA prohibits the making use of such rules
  1. Because the rulemaking process is time consuming and arduous, agencies try to avoid and often do so through these “underground regulations” – though they are subject to having that rule voided by OAL (who almost always does so on review by deeming them as rules)
3. Exemptions: regulations regarding the following are exempt from procedure:
  1. Internal Management: narrow exemption; regulation must:
    1. Directly affect only the employees of the issuing agency
    2. Not address a matter of serious consequence involving an important public interest
  2. Forms: regulation is not needed if the form’s contents consist only of existing, specific legal requirements
  3. Audit Guidelines: regulation that establishes criteria or guidelines to be used by the staff or an agency in performing an audit, investigation, examination, or inspection, settling a commercial dispute, negotiating a commercial arrangement, or in the defense, prosecution, or settlement of a case, if disclosure would:
    1. Enable a law violator to avoid detection
    2. Facilitate disregard of requirements imposed by law
    3. Give clearly improper advantage to a person who is in an adverse position to the state
  4. Only Legally Tenable interpretations of a provision of law
  5. Rate, Price, Tariffs
  6. Legal Ruling of Tax Counsel issued by the Franchise Tax Board or State Board of CA
  7. Precedent Decision: quasi-judicial decision by a state agency
Steps of the Rulemaking Process
1. Agency Staff Prepares and Board/Dept. approves the concepts and draft language of the proposed regulation or change
2. Agency publishes notice of proposed rulemaking in Notice Register including:
  1. Information on the regulation sought to be enacted
  2. Date comment period ends
  3. Date time and place of hearing if one applies
  4. Agency contact person
3. 45 day Public Comment Period
4. Public Hearing (optional)
5. Agency either:
  1. Adopts regulatory change at open meeting
  2. Adopts proposal but modifies language, then releases modified test for 15 days
  3. Rejects proposal
6. If within DCA, Agency submits proposed action to DCA direction for review and approval
7. Agency prepares rulemaking record for submission to OAL
8. OAL has 30 working days to review for APA compliance and six criteria
  1. Authority/Consistency:; agency’s actions must be affirmatively authorized (strictly derivative)
  2. Reference
  3. Consistency: must be consistent with the existing authority superseding that of the agency
  4. Clarity: understandable by those persons affected by it
  5. Non-duplication
  6. Necessity: reasonably necessary to effectuate the purpose of the statute, supported by substantial evidence
9. OAL either:
  1. Approves and publishes approval in Notice Register
  2. Disapproves and publishes disapproval in Notice Register, then
    1. Agency corrects and resubmits to OAL within 120 days
    2. OAL approves and publishes in Notice Register
10. Regulatory Changes published in CA Code of Regulation (CCR)
Standards for Regulations
1. Must be easily understandable
2. Must have a rationale
3. Must be the least burdensome, effective alternative
4. Cannot alter, amend, restrict or enlarge a statute
Need for Regulations – Three Types of Statutory Provisions:
1. 1. Self Executing: so specific that no implementing of interpreting regulation is necessary to give it effect
  2. Wholly Enabling: cannot be legally enforced without a regulation
  3. Susceptible to Interpretation: may be enforced without a regulation but may need a regulation for its efficient enforcement
Emergency Regulations
1. Rule: agency can adopt an emergency regulation, which takes affect before any opportunity for public comment can be given, only if it can show that the regulation is necessary for the immediate preservation of public peace, health, safety or general welfare, or if a statute deems the regulation to be an emergency for purposes of APA.
2. Public Comment: within 5 days after reg is submitted to OAL for review, and agency may submit a rebuttal up to 8 days after submittal to OAL
3. OAL Review: OAL has up to 10 days to review reg to determine whether emergency has been demonstrated or deemed by statute; must meet the following standards
  1. 1. 1. Authority/Consistency:; agency’s actions must be affirmatively authorized (strictly derivative)
      2. Reference
      3. Consistency: must be consistent with the existing authority superseding that of the agency
      4. Clarity: understandable by those persons affected by it
      5. Non-duplication
      6. Necessity: reasonably necessary to effectuate the purpose of the statute, supported by substantial evidence
4. Effect: on approval, the reg goes into effect for 120 days; agency must conduct the regular rulemaking process to keep the reg permanently in existence; agency may request
5. *Bob:

Emergency rulemaking is not meant to evade formal rulemaking process, its just a way to get something in place while going through formal process
Saving money is not an emergency requiring immediate action
Director of OAL serves at the pleasure of the governor – which can impact what gets approved as an emergency (not much of a check

Initiating Rulemaking:

*the following provisions give any person the right to propose a rule or amendment

*practice tip: get agency staff on your side before proposing it

1. How to Initiate:

Cal Govt. Code §11340.6 – Except where the right to petition for adoption of a regulation is restricted by statute to a designated group or where the form of procedure for such a petition is otherwise prescribed by statute, any interested person may petition a state agency requesting the adoption, amendment, or repeal of a regulation as provided in Article 5 (commencing with Section 11346). This petition shall state the following clearly and concisely:

1. 1. The substance or nature of the regulation, amendment, or repeal requested.
  2. The reason for the request.
  3. Reference to the authority of the state agency to take the action requested.
2. Agency Response:

Cal Govt. Code §11340.7.

(a) Upon receipt…state agency shall notify the petitioner in writing of the receipt and shall within 30 days deny the petition indicating why the agency has reached its decision on the merits of the petition in writing or schedule the matter for public hearing in accordance with the notice and hearing requirements of that article.

(b) A state agency may grant or deny the petition in part, and may grant any other relief or take any other action as it may determine to be warranted by the petition and shall notify the petitioner in writing of this action.

(c) Any interested person may request a reconsideration of any part or all of a decision of any agency on any petition submitted…include the reason or reasons why an agency should reconsider its previous decision no later than 60 days after the date of the decision involved.

(d) Any decision of a state agency denying in whole or in part or granting in whole or in part a petition requesting the adoption, amendment, or repeal of a regulation pursuant to Article 5 (commencing with Section 11346) shall be in writing and shall be transmitted to the Office of Administrative Law for publication in the California Regulatory Notice Register at the earliest practicable date. The decision shall identify the agency, the party submitting the petition, the provisions of the California Code of Regulations requested to be affected, reference to authority to take the action requested, the reasons supporting the agency determination, an agency contact person, and the right of interested persons to obtain a copy of the petition from the agency.

OAL Review
1. Reviewing and Underground Rule:

*OAL determines whether something is a rule subject to the APA, but doesn’t actually do the voiding, the court must do so

1. 1. Request OAL to make a regulatory determination
  2. OAL makes regulatory determination as to whether it’s a rule and therefore was unlawfully adopted
  3. File writ of mandamus or request for declaratory relief in court, using OAL determination as evidence
2. *Bob – Problems with the OAL Review Process:
  1. Huge Paper Reliance:
    1. OAL made up primarily of young attorneys lacking experience in the area, so they rely mostly on the paper trail in reviewing the rule
      1. Problem: the agencies gets the last word in this paper trail, weakening the public’s opportunity to impact the rulemaking process
      2. Problem: Additional criteria added due to bureaucracy and paper reliance:
        
        Statement on housing impact
        
        Statement on small business impact
        
        Whether there are alternatives
        
        Whether rule varies from the federal rule
      3. Problem: Rulemaking files are now increasing in length because of the additional criteria and reliance on paper trails
      4. Problem: Agencies don’t want to go through these hoops, and so go underground instead
      5. Positive: Prior to OAL, the only time rules were examined was when someone challenged them in court, not OAL reviews every rule prior to adoption
  2. Ex-parte contacts of lobbyists with OAL
    1. Problem: OAL person reviewing the rule was not at the hearing combined with the ability to unilaterally accept or reject a rule and no checks on OAL
  3. Solution: combine the needed independence of OAL with expertise of those who can rely less on lobbyists and the paper trail

State Legislative process

*Administrative agencies are created by the legislature, so they can un-create them

The Legislature:
1. Senate:
  1. 40 Senators – 1 per district
  2. Can serve 2 consecutive 4 year terms
  3. Headed by the President Pro Tempore (Pro Tem), who is also the chair of the Rules Committee
2. Assembly:
  1. 80 members – 2 per district
  2. Can serve 3 consecutive 2 year terms
3. Legislative Term: 2 years; governed by series of deadlines:
  1. Introduce
  2. Last day for policy committee to hear
  3. Last day for appropriations committee to hear
  4. Not absolute, author can ask for “rule waiver”
  5. “Two year Bills”- where there is too much opposition or the bill needs additional drafting, the bill becomes a 2 year bill
  6. During the 2^nd year, all bills (old and new) have to get passed by both houses and onto governor’s desk, or they die and must be reintroduced during the first year of the next session
The Legislative Process
1. Sponsor: the person/group who is the major proponent of the idea for the bill and who introduces the idea to a legislator
2. Author: A Legislator sends the idea for the bill to the Legislative Counsel where it is drafted into the actual bill. The draft of the bill is returned to the Legislator for introduction. If the author is a Senator, the bill is introduced in the Senate. If the author is an Assembly Member, the bill is introduced in the Assembly.
3. First Reading/Introduction: A bill is introduced or read the first time when the bill number, the name of the author, and the descriptive title of the bill is read on the floor of the house. The bill is then sent to the Office of State Printing. No bill may be acted upon until 30 days has passed from the date of its introduction.
4. Committee Hearings:
  1. Committees:
    1. Rules Committee of the House of Origin – here it is assigned to the appropriate policy committee for its first hearing.
    2. Policy committee – assigned according to subject matter; each house has a number of policy committees; bills can be subject to more than one committee if subject matter pertains to more than one
    3. Senate/Assembly Appropriations Committee – only bills that require the expenditure of funds; requires 2/3 vote of this committee
  2. Process:
    1. a bill analysis is prepared that explains current law, what the bill is intended to do, and some background information and often lists organizations that support or oppose the bill.
    2. during the committee hearing the author presents the bill to the committee and testimony can be heard in support of or opposition to the bill.
    3. The committee votes by passing the bill, passing the bill as amended, or defeating the bill. Bills can be amended several times. It takes a majority vote of the full committee membership for a bill to be passed by the committee.
5. Second and Third Reading (House Floor):
  1. Second: bills passed by committees are read a second time on the floor in the house of origin and then assigned to third reading.
  2. Third: Bill analyses are prepared prior to third reading; bill is explained by the author, discussed by the Members and voted on by a roll call vote.
  3. Votes: generally require a majority (21 Senate and 41 Assembly); Bills that require an appropriation or that take effect immediately, generally require 27/40 Senate votes and 54/80 Assembly votes
  4. Reconsideration: If a bill is defeated, the Member may seek reconsideration and another vote.
6. Repeat Process in other House: Once the bill has been approved by the house of origin it proceeds to the other house where the procedure is repeated.
7. Resolution of Differences: If a bill is amended in the second house, it must go back to the house of origin for concurrence, which is agreement on the amendments. If agreement cannot be reached, the bill is referred to a two house conference committee to resolve differences. Three members of the committee are from the Senate and three are from the Assembly. If a compromise is reached, the bill is returned to both houses for a vote.
8. Enrolled to Governor: after both houses approve a bill, it is “enrolled” to the Governor, to:
  1. Sign the bill into law
  2. Allow it to become law without his or her signature
  3. Veto with descriptive veto message (which can be overridden by a two thirds vote in both houses)
9. California Law
  1. Assigned a chapter number by the Secretary of State
  2. Chaptered Bills (Statutes) become part of the California Codes, and are published in another source in chronological order
  3. Most bills go into effect on the first day of January of the next year. Urgency measures take effect immediately after they are signed or allowed to become law without signature.
Problems:

1. Non-Votes and Lack of Accountability: a non-vote is a no vote, so legislators escape accountability by not voting
2. Supermajority:
  1. Caucus Votes are organized to prevent the 2/3 vote required to pass an appropriations bill
  2. Gerrymandering: (drawing districts so as to put all the conservative votes into as few a districts as possible) affects the outcome of bills requiring 2/3 votes
3. Passivity: (tendency of legislators to become increasingly passive)
  1. “nose-counting”
  2. 90% of legislation enacted is meaningless after being revised so many times to appease those in opposition
4. Corruption:
  1. Money buys access to legislators
  2. No limitations on ex parte contacts
  3. Too much money influence
  4. Some limitations on campaign contributions, but limits that do exist are generally too high to make any difference
5. Suspense File: controversial bills put in the “suspense file” where they die if not removed
6. Spot Bills: useless bill introduced to act as a space filler until the last minute, when the author “gut and amend(s)” the bill

APA Adjudication Process

In General:
1. Scope:
  1. Agencies are quasi-judicial in nature and are thus authorized to discipline licensees who violate agency adopted rules of practice
  2. Agencies can petition courts to enjoin the unauthorized practice of a non-licensee in their respective trade
  3. Disciplinary authority extends to misdeeds committed by licensees prior to licensing (Hughes v. Board of Architectural Examiners)
2. Policy:
  1. Due Process: because a license is considered a property right, licensees are entitled to due process
  2. Combine expertise and independence
3. No particular model dictated by APA: Process varies from agency to agency
  1. APA only guarantees:
    1. 1. licensee will get fair notice of the charges
      2. written accusation
      3. public hearing before neutral tribunal
      4. opportunity for council as own expense
      5. written decision
      6. and opportunity for review
4. Note the difference being adjudication dealing with a vested right (license) and a prospective right
  1. 1. License revocation is the taking of a vested right
    2. Anything that attacks a vested right requires due process and state carries the burden of proving violation by C&C evidence
      1. notice
      2. opportunity for hearing
      3. representation (not paid for)
      4. hearing in front of neutral decision maker – in this case an ALJ
    3. Denial of access does not request due process and thus APA adjudication process does not apply
      1. Notice of Issues – right to know what that right is being denied
      2. No right to hearing in front of ALJ – but may be able to compel by mandamus
APA Adjudication Process (some exceptions according to agency)
1. Complaint or Report Filed with Agency

1. - Most agencies have mandatory reporting schemes (i.e. malpractice and criminal)

1. Agency Staff Screens Complaints

1. - Determined whether there is jurisdiction
  - Consider whether the complaint rises to the level of a Bus & Prof Code violation, justifying disciplinary action

1. Formal Investigation

1. - Conducted by agency or DCA investigator

1. Agency Staff Reviews Completed Investigation

1. - For minor violations, agency can impose citations, fines ranging from $0-5000, or orders of abatement

1. Executive Officer Sign-Off; Complaint goes to Attorney Generals office
2. AG Files Accusation with Office of Administrative Hearings (OAH)

1. - Now becomes public record (except contractor’s board)

1. Within 15 days of service of accusation, respondent may file notice of defense
2. Limited Discovery by Both Sides

1. - Depositions allowed only for someone who is not available for hearing

1. Pre-hearing conference on motion (or order of ALJ) or settlement conference (on order of ALJ)
2. Public Evidentiary Hearing Before OAH ALJ

1. - Board is represented by Deputy AG
  - Board must prove guilt by clear and convincing evidence

1. ALJ issues proposed decision

1. - Really just a recommendation to the Agency

1. Board members review ALJ’s proposed decision
2. Agency Decision
3. Judicial Review
  1. Superior Court (as of right)
  2. Appellate Court (as of right- Except MBC)
  3. Supreme Court (discretionary)
Problems/Controversies:
1. Final determination made by the agency:
  1. They are often dominated by members of the trade/profession (creating bias)
  2. No independence or expertise: those serving on the board are not experts, were not present at the hearing and did not hear the evidence
2. Lengthy adjudication process
  1. Decreases deterrence among licensees – the perceived likelihood of being caught is correlated to the length of time between violation and sanction.

- Fellmeth’s Solution: have some restriction on the license during the process, similar to a preliminary injunction, with the same requirements

1. Ex parte contacts
  1. Agency is quasi-judicial so they should abide by standard court rules that prohibit ex part contacts, but they are also quasi-legislative, so they need to have these contacts
Cost Recovery
1. Rule:
  1. Most agencies are statutorily authorized to request an ALJ to direct a licentiate found to have committed a violation of the licensing act to reasonable costs of the investigation and enforcement up to the date of the hearing;
  2. ALJ will make a proposed finding as the reasonable costs, and the board may reduce but not increase the proposed amount
  3. The agency may enforce the order for repayment in any appropriate court, and shall not renew or reinstate the license of any licensee who has failed to pay
2. Zuckerman v. Board of Chiropractic Examiners
  1. Facts: Z (chiropractor) argued that Cal. Code Regs., tit. 16, § 317.5 violated his due process rights by encouraging chiropractors accused of misconduct from requesting a hearing on the charges. The appellate court found that the 317.5 violated his due process rights.
  2. Held: Reversed;
    1. The purpose of the reg. is € permissible
    2. The regulation was discretionary, because the ALJ had to determine whether the board’s costs were reasonable, and the board could reduce or eliminate the cost award.
    3. The board could not assess the full costs of investigation and prosecution when to do so would unfairly penalize a chiropractor who committed some misconduct, but who used the process to obtain dismissal of other charges or a reduction in the severity of the discipline imposed.
    4. Reg. does not need to be reciprocal – to require the board to reimburse chiropractors who prevailed at disciplinary hearings for their costs would impair its ability to protect the public from chiropractors who injured the public.
Recent Changes
1. SB523 (effective July 1997):
  1. Administrative Bills of Rights:

1. 1. - Notice and opportunity to be heard
    - Prohibits ex parte contacts between interested outside parties and agency adjudicators
    - Separation of functions between prosecutors and adjudicators
    - Agency must state findings and reasons for its decisions
    - Reviewing court must give great weigh to the credibility findings of ALJ

1. 1. Flexible Enhancing Provisions:

1. 1. - ADR
    - Informal Hearings
    - Allows agencies to give administrative declaratory judgments
    - Allows for use of electronic media/phone in decision making

1. 1. Modernizing Existing APA:

1. 1. - Discovery disputes to be resolved by ALJ
    - Subpoena procedure to allow documents to be inspected prior to hearing
    - Ban on penalty guidelines that were not properly adopted

1. 1. Exemptions:

1. 1. - State Board of Equalization
    - CPUC
    - UC Regents
    - State Bar Court

APA Precedential Decision Provision
1. 1. RULE: There is generally no stare decisis in administrative practice – a decision may not be relied on as precedent unless it is designated as precedent; but under this provision, an agency may designate as precedent (thus be binding on future cases), a decision or part thereof that…is likely to recur
    1. Agencies have to keep an annually updated index of their precedential decisions on their website and make it available by subscription – so that practitioners can keep track of these additional “rules”
    2. Stipulations (accusation settlement) cannot be made precedential

1. 1. - Insurance commissioner tried to designate a stipulation as a precedential decision, which was struck down

1. 1. Hybrid Process: adopt regulations or set standards w/o rulemaking process, through adjudication process
Non-APA Adjudicative Proceedings
1. State Bar:
  1. Adjudication Process:
    1. Own ALJ
    2. Old System:
      1. cases were heard by examiners at local level
      2. review by State Bar review committee with 18 members that would allocated cases out to 2 members of the Bar – volunteer attorneys – who then make a final decision
      3. not much expertise or independence
      4. every case goes to CA SC for review
    3. New System – CPIL implemented State Bar Court:
      1. Hearing dept and panel of 6 State Bar Court Judges – like ALJ
      2. Accusation called Notice of Disciplinary Charges (NDC)
      3. Office of Chief Trial Council – makes decisions about investigations and whether to issue NDC
      4. Judges independent, appointed by supreme court
      5. Independent Review Dept of 3 judges, one of which used to be a non- attorney but now all 3 attorneys
      6. SC discretionary review
      7. 2 step, 8-10 month process
  2. In Re Rose
    1. Facts: The State Bar charged Rose with willful disobedience of a court order constituting cause for disbarment or suspension and the State Bar Court found willful violations with aggravating circumstances, recommending disbarment. After SC of California denied the petition for review, Rose argued that summary denial deprived him of due process and € right to judicial determination of disbarment.
    2. Held: SC may properly utilize the State Bar Court as its administrative arm to conduct preliminary determination of complaints; Cal. Const., art. VI, § 2, does not confer an independent right to oral argument in this context;
2. Medical Board:
  1. Procedure: 3 step process
    1. ALJ hearing with a panel of specialists
    2. ALJ OAL specialized office
    3. Discretionary review by Court of Appeal by writ (licensee can also file for agency review, but more difficult due to time limit)

*Fellmeth advocates for this process in other agencies – moving from 4.5 steps to 2.5 steps

1. 1. Leone v. MBC
    1. Facts: A physician disciplined by MBC could obtain judicial review of such order by commencing an administrative mandate proceeding. While the superior court had original jurisdiction of these proceedings, the legislature provided that the Court of Appeal should review the superior court’s decision pursuant to a petition for an extraordinary writ rather than by direct appeal. P’s argue that statute is un€, as CA € appellate jurisdiction clause grants them the right to direct appeal.
    2. Held: The appellate jurisdiction clause did not require the legislature to provide for direct appeals in all cases within the original jurisdiction of the superior courts.
    3. Problem: the statute allows the appellate court to just only a “postcard” denial, rather than a written opinion – without a written opinion parties and the public do not have the evaluate the decision.
2. DOI
  1. Run by a single, elected, commissioner
  2. Adjudication:
    1. In-house ALJ
    2. final decision made by commissioner, acting with individual authority on recommendation from ALJ (which he also hires)
    3. *Problem: because of on-house ALJ, there is not the same degree of independence
    4. Intervener Compensation: compensation of attorney’s fees up to $200/hour for consumer group advocacy in rulemaking and investigation, attempts to make up for industry advocacy
3. PUC
  1. 5 commissioners
  2. Not subject to APA, Badgley Keene
  3. Adjudication:
    1. In-house ALJ
    2. ALJ opinion goes to commission
    3. Commission makes the final decision, can adopt ALJ recommendation or not
    4. Review by Court of Appeal on writ
  4. Office of Ratepayer Advocates:
    1. utility companies have the right to pass certain costs on the their consumers, one of which is the cost of advocating in front of PUC
    2. Intervener Compensation: compensation of attorney’s fees up to $200/hour for consumer group advocacy in rulemaking and investigation, attempts to make up for industry advocacy (Ucan)
    3. In reality, utility companies still have more power
  5. Public Advisor for public exposure and to open up process to the public
Hybrid Proceedings
1. Safeco v. Garamendi: Commissioner’s “amended decision” was quasi-legislative in nature, and not adjudicatory. A legislative action is the formulation of generally applicable rules to be applied in future cases, whereas an adjudicatory act is an actual application of a rule to a specific set of circumstances.
Other forms of adjudication
1. Diversion – primarily for substance abuse
  1. Licensee pleads guilty but requests diversion, then court suspends the case until rehab program is completed, at which time the case is dismissed
  2. Problem:
    1. “Gaming” with MBC where doctors don’t actually complete the program
      1. State Bar can be diverted for psych reasons in addition to substance abuse – possible that attorneys are gaming the system
2. Mediation: Generally for low level offense/ quasi civil (i.e. consumer complaints)
3. Citation and Fine
  1. Agency cites someone for violating the law, the seeks to fine them
  2. Primarily used with non-licensees

 € Issue: whether or not agency that does not have JD over someone can cite and fine them

Judicial review and court action

Declaratory and Injunctive Remedies
1. Rulemaking:
  1. Remedy: Declaratory and injunctive relief
  2. Process: both remedies may be sought together by writ of ordinary mandamus to challenge agency action that has already occurred or is threatening to occur
  3. Basis: un€ or conflict with federal law or jurisdiction
  4. Standing: any person likely to be affected, liberally interpreted
2. Agency Adjudications: writ of administrative mandamus
3. Other Agency Actions: writ of ordinary mandamus or action for injunctive relief
4. Reverse OAL determination of a rule:
  1. Who: agency or party benefiting from the rule
  2. Remedy: declaratory relief
  3. Process: court must determine that the rule meets 6 criteria test (same criteria as used for approval)
    1. 1. Authority
      2. Reference
      3. Consistency
      4. Clarity
      5. Non-duplication
      6. necessity
5. Non-APA rules:
  1. Remedy: injunction or mandamus
  2. Standing: any person likely to be affected, liberally interpreted
6. Prevent Enforcement of Rule/Agency Action:
  1. Remedy: injunction, temporary restraining order pendante lite
Declaratory Action to Invalidate APA Rule:
1. Criteria:
  1. Substantially fails to comply with APA
  2. Facts recited to adopt on an emergency basis do not constitute an emergency
  3. Agency’s determination that the rule is “reasonably necessary to effectuate the purpose of the statute, € provision, or court decision is not supported by “substantial evidence”
  4. compliance with 6 substantive criteria
    1. Authority/Consistency
    2. Reference
    3. Consistency
    4. Clarity
    5. Non-duplication
    6. Necessity

Writ of Ordinary Mandamus Review – CCP §1085

*Adjudicatory actions only, not quasi-legislative functions such as rulemaking (subject to stricter administrative mandamus standard)

1. In General:
  1. may issue to compel performance of a ministerial act or mandatory duty if there is a clear legal right in the person seeking relief, a corresponding duty in the defendant, and a lack of any other adequate remedy Applies to all public officials
  2. Can be filed in the first instance in any court, does not need to be in superior court (as with Administrative Mandamus 1094.5)
  3. Can be used to challenge the abuse of discretion of superior court – directly to court of appeal, supreme court
  4. In general, no attorney fees awarded unless you are invoking a fee shifting statute or 1021.5 private attorney general fee clause (benefiting a group beyond that of the petitioner)
2. Requirements:
  1. Duty to perform/no adequate remedy at law (court discretion)
  2. Standing: petitioner must be “beneficially interested”
  3. Present duty and refusal to perform
    1. Duty must be mandatory, not discretionary
    2. Duty must exists contemporaneously with filing of petition
    3. Demonstrate that official has been requested to perform and refused, unless the duty affects the public interest
  4. Real Controversy (not ripe/moot)
  5. Exhaustion of administrative remedies
3. Statute of limitations
  1. Depends on the right or obligation sought to be enforced
    1. Statutory liability: 3 years
    2. Generic 4 year limit if no other applies
  2. Starts when demand first could have been made, not when first demand is actually made
4. Test: abuse of discretion (Official is not doing something that they are required to do, or are doing something that they don’t have the authority to do)
5. Standard of Review:
  1. §1085:
    1. Whether it was arbitrary or capricious
    2. Whether it was entirely lacking in evidentiary support, or
    3. Whether the agency failed to give noticed required by law
6. Procedures:
  1. Writ is issued upon the petition of party beneficially interested
7. Deference to Agency Policy and Quasi-Legislative Judgments
  1. Common Cause v. Board of Supervisors of LA County: court will act to correct abuse of discretion, but will not compel the exercise of discretion
Writ of Administrative Mandamus - CCP §1094.5
1. In General:
  1. Challenges an adjudicatory decision
  2. Action in equity, considerations of fairness
  3. Applies to non-govt. administrative agencies and public regulatory agencies
  4. Challenger can be the agency or the person affected by the decision/agency action
2. Requirements
  1. Must first exhaust all administrative remedies, including final decision by the agency before review; if no agency decision has been made, the court will remand it to the agency
    1. TIP: write and keep track of letters to the agency, to show that they made a decision, or neglected to do so (state in letter that no response is a denial)
  2. File writ in Superior Court
  3. Writ must inquire into the validity of any final administrative order made as the result of a proceeding required by law:
    1. A hearing is required to be given
    2. Evidence is required to be taken
    3. Discretion in the determination of facts is vested in the board/officer
3. Nature and Scope of Review
  1. Questions Asked:
    1. Did agency exceed its jurisdiction
    2. Was there a fair trial
    3. Was there an abuse of discretion
      1. Findings of fact must be on sufficient evidence
      2. Conclusions of law must connect to findings of fact/evidence
        
        Agency: want lots findings of fact and obvious conclusions of law
        
        Challenger: want questionable conclusions of law
  2. Standards of Review:
    1. Substantial Evidence: if no vested right and agency has fact finding power
    2. Independent Review: if there is a vested right at stake
      1. judge can take new evidence
4. Procedure:
  1. Not jury trial
  2. Normal rules of appellate practice apply
  3. Also an opportunity to raise € and error of law issues
5. Outcome:
  1. Win: reverse the case with remand to cure as appropriate
  2. Lose: agency decision stands
Agencies Subject to Special Review
1. Worker’s compensation Appeals Board (writ of mandate, court of appeal)
2. PUC (writ of review, CA Supreme Court)
3. State Bar (writ of review, CA Supreme Court)
4. Dept. of Alcoholic Beverage Control (writ of review, court of appeal or CA supreme court)

Theories and Methods of regulation

*in theory the market should serve the public interest, through bottom up democracy and consumer choice

Market Flaws
1. Natural Monopoly
2. Scarcity
3. Adhesion
4. External Costs
  1. Dishonesty/Damages
  2. Possible inability to collect damages
  3. Irreparable harm
5. Collusion
Solutions:
1. Regulation
  1. Permit: no prior restraint (no prescreening), but can be withdrawn upon mistake

1. 1. - Good solution when there is no risk of irreparable harm

1. 1. Certification: prior restraint; can function in the market without it but makes business better when you have it;

1. 1. - Good solution for adhesion/imperfect information

1. 1. License: substantive prior restraint and inability to practice without; most onerous but provides the most protection –

1. 1. - Good solution for irreparable harm
    - Problem: 1^st amendment doctrine against prior restraint
2. Alternatives to Regulation
  1. Bond/insurance
  2. Disclosure
  3. Rule of liability
  4. Prohibition
  5. Tax incentives
  6. Taxes/fees
  7. sale of marketing rights
  8. rewards
  9. restructuring

Identifying the Right Regulation Method
1. What market flaw exists?
2. Is there sufficient irreparable harm to justify prior restraint?
3. Does the regulation assure competence?/Is the method efficient?
4. Lack of alternative check to prevent?

i.e. can consumers judge competence?

Why so many Licensing agencies?
1. Fellmeth: too many!
  1. horizontally organized industries seek regulation to limit the competition and the supply of practitioners, thus driving the prices up
  2. legislature is familiar with licensing and with resort to predetermined licensing scheme rather than look at alternatives

*if there is no risk of irreparable harm, there is no prior restraint needed!

Flaw	Defined	Solution	Regulate?
Natural Monopoly	when only one entrepreneur can operate effectively across the range of demand	Structural change Rate regulation Govt. Ownership	yes
Scarcity	Not enough to service the demand	Market Sale (auction) Qualification First Come Line	yes
Adhesion/ Imperfect Information	Customer doesn’t get all the information and can’t make informed choice	Competition Consumer education Disclosure requirements Certification Permit/Rulemaking	yes
External Costs (Damages)	Production imposes costs on those apart from the buyer and the seller	Internalize by tie-in Internalize by tax transfer Internalize by selling marketing rights Equipment standards Harm/output standards Rule of liability	yes
External Costs (possible inability to assess/collect)	Production imposes costs and there is no assurance of restitution	Bonding/insurance requirements Preliminary relief	yes
External Costs (irreparable harm)	Production imposes health/safety costs that no damages will rectify	Mechanical tie-in by statute Straight Prohibition Public Prosecution (civil/criminal) License revocation	yes
Collusion	Top down coercion, no bottom-up choice (i.e. monopoly)	antitrust prosecution restructure the industry	no

Sunset Review

*the way to make sure that the agencies are necessary and are preventing harm

Defined: a provision in a statute or regulation that terminates or repeals all or portions of the law after a specific date, unless further legislative action is taken to extend it
Process:
1. A date in the agencies enabling statute determines when that agency is to “sunset”
2. Prior to expiration, agency must submit a report and leg. will hold public hearings
3. If program/agency is deemed unnecessary, leg. will let the date pass – deregulation
  1. In CA, just the board is abolished, not the licensing scheme
4. If program/agency is deemed necessary, leg. passes a bill extending the date
Who it Applies to
1. Originally did not apply to DCA agencies
2. Now applies to some non-DCA boards
3. Does not apply to State Bar or any commissions
Standards of Review
1. In the beginning the committee looked at 2 issues
  1. Is regulation necessary?
  2. How is the board performing?
2. SR now looks more at performance of the boards

Sunrise Process

9148. Any state board proposed for creation by the Legislature on or after January 1, 1991, or any category of licensed professional proposed for creation by the Legislature on or after January 1, 1995, shall be subject to this article.

9148.2. “state board” means any administrative or regulatory board, commission, committee, council, association, or authority consisting of more than one person, whose members are appointed by the Governor, the Legislature, or both

9148.4. Prior to consideration…a plan for the establishment and operation of the proposed state board or new category of licensed professional shall be developed by the author or sponsor of the legislation. The plan shall include, but not be limited to, all of the following:
1. A description of the problem …including the specific evidence of need for the state to address the problem.
2. The reasons why this proposed state board or new category of licensed professional was selected to address this problem, including the full range of alternatives considered and the reason why each of these alternatives was not selected. Alternatives that shall be considered include, but are not limited to, the following:
  1. no action
  2. use of a current state board or agency or the existence of a current category of licensed professional to address the problem,
  3. the various levels of regulation or administration available to address the problem.
  4. addressing the problem by federal or local agencies.
3. The specific public benefit or harm that would result…the specific manner in which the proposed state board or new category of licensed professional would achieve his benefit, and the specific standards of performance which shall be used in reviewing the subsequent operation of the board or category of licensed professional.
4. The specific source or sources of revenue and funding to be utilized by the proposed state board or new category of licensed professional in achieving its mandate.

————————————————————————————————————

Constitutional Limits

Constitutional Limits on Regulatory Actions
1. State Board of Dry Cleaners v. Thrift-D-Lux Cleaners: no need for the Board or the regulation
  1. Facts: Act provided for the creation of the Board and provided that the Board could establish minimum price schedules for dry cleaning services. Thrift-D-Lux charged a price below the board’s established minimum price. The board filed a complaint charging them with violations of the price schedule. The dry cleaning business sought a demurrer, which the trial court sustained, based on the ground that the minimum price provisions of the Act were in violation of the due process clauses of the state and federal constitutions.
  2. Held: affirmed, the price fixing provision of the Act was invalid because it was not an enactment that provided for the public health, safety, morals, or general welfare and that both the board and the price schedule violated the due process clauses of the state and federal €
2. Gibson v. Berryhill: Board too biased to hold its own license revocation hearings
  1. Facts: Appellee optometrists filed suit under § 1983 of seeking an injunction against scheduled hearings regarding revoking appellees’ licenses, alleging that the Board was biased and could not provide appellees with a fair and impartial hearing.
  2. Held: The Court affirmed the lower court’s conclusion that appellant Alabama Board of Optometry was so biased that it could not constitutionally conduct licensure revocation hearings but vacated the district court’s injunction.
3. Bayside Timber Co. v. Board of Supervisors
  1. Facts: Bayside Timber obtained an operations permit under the Forest Practice Act, , but the board of supervisors refused to issue local permits. The trial court ordered appellant to issue the permits. On appeal, appellants raised for the first time the constitutionality of the act.
  2. Held: the part of the act which provided for the promulgation of forest practice rules was unconstitutional
  3. Rationale: The court noted that the act had delegated to timber interests the power to formulate forest practice rules which, when adopted, had the force and effect of law, but had provided no guides or standards to prevent its abuse. Such a grant of authority was an unconstitutional delegation of legislative power. The court also noted that the fact that the authority had been delegated to persons with a pecuniary interest in the subject matter of the rules, therefore not protecting the public interest
    1. FPA delegated the authority to makes rules to those people who were directly affected by the rules (the trade regulated)
4. Moore v. Board of Accountancy
  1. Facts: Unlicensed accountants (non-CPA’s) challenged the Board of Accountancy rule forbidding non-CPA’s to use the terms “accountant” or “accounting” in their advertising.
  2. *CPIL Arguments:
    1. The rule infringes on first amendment commercial speech rights of independent accountants
    2. Legislature specifically authorized unlicensed accountants performing lawful accounting services to use the terms “accountant” and “accounting” in their advertising
  3. Court upheld but rewrote the rule (which they can’t really do) saying that non-CPA can use the terms if they provided a disclaimer that what they do does not require a CPA
  4. Motion for reconsideration denied
  5. Board still hasn’t changed the rule, and occasionally enforced the rule
5. Cornwell v. California Bd. of Barbering & Cosmetology
  1. Facts: African hairbraiders brought an action against state agencies and officials, alleging that the licensing requirements of the Cosmetology and Barbering Act, as applied to hairbraiders, violated the due process, equal protection, and privileges and immunities clauses of the federal and state constitutions.
  2. Held: The training requirements of the CBA were un€ as applied to P’s, as they were not rationally related to the means
  3. Rationale: the majority of the training was unrelated to the hair braiding profession and did not further the state interest in protecting the health and safety of the public
*Bob:
1. Arguments against state agencies:
  1. Everything state agencies do is limited by € concepts
  2. State € can create a higher floor than fed € in terms of individual liberty
  3. Employ strict scrutiny, heightened scrutiny or rational relation
    1. SS applies when FLI or equal protection of suspect class is involved
      1. political speech
      2. commercial speech (though in a HS manner)
      3. race
      4. religion
    2. HS applies in equal protection for questionable classification – in flux
      1. Disability
      2. Gender
      3. sexual orientation
    3. RR applies in all other contexts (what state attorney wants)
  4. Freedom of Contract
    1. Minimum Rate Regulation
    2. Entry Controls
    3. Generally not a viable argument, but may be in terms of minimum rate regulation
      1. Thrifty-Lux: struck minimum rates as violative of freedom of contract because there was a lack of nexus (RR standard)
  5. Due Process – Taking
    1. vested rights require higher procedural due process standards than prospective rights,
    2. what is not a taking is generally broadly interpreted, including property rights
    3. Maximum rate regulation: due process argument is in favor of commercial enterprise (i.e. insurance), argument is that they are entitled to a fair rate of return on their investment, and if they cannot obtain such through regulated rates then the regulation is a taking
    4. Entry Controls (Cornwell)
    5. Standards
    6. Enforcement/Discipline: SS usually met because there is a legitimate state interest in protection of the public, but turns on nexus – Gibson v. Berryhill
  6. Due Process – Procedure
    1. Maximum Rate Regulation
    2. Entry Controls
    3. Standards
    4. Enforcement/Discipline
      1. Gibson v. Berryhill: cannot regulate private and corporate optometrists be creating a board consisting of private optometrists discriminating against corporate
  7. Interstate Commerce
    1. Almost anything affects interstate commerce
    2. When state agencies burden interstate commerce (DCC):
      1. State agencies all create barriers for out of state competitors – are they concerned about out-of-staters flooding the market and decreasing the value of services, or are they legitimately concerned about protecting the public from lower standards used in other states?
      2. Case law has allowed the states to vary in their regulations to a certain amount – depends on what is being regulated
      3. Dairy Cases (Dean Milk, Shamrock)
  8. 1^st Amendment Free Speech
    1. Limitations on what standards (rules) can be set
    2. Commercial Free Speech – standard similar to HS
      1. VA Board of Pharmacy
        
        Argument: there shouldn’t be price regulations on pharmaceuticals because prices should be based on doctor’s advice
        
        Generic drug manufacturers wanted to advertise price
        
        Court found no nexus b/w pharmaceutical safety, doctor guidance and control and pricing prohibition
        
        Still can’t be misleading or deceptive
      2. Attorney Advertising case:
        
        Bar prohibits attorney advertising
        
        Courts says that the Bar can’t restrict advertising unless its misleading
    3. Political Free Speech – SS
  9. 4^th Amendment Search and Seizure
    1. Enforcement/Discipline
  10. 14 Amendment
    1. Equal Protection

Antitrust law limitations

Policy:
1. 1. Allocate economic resources
  2. Ensure lowest prices
  3. Ensure quality
  4. Ensure material progress
  5. Preserve democracy
  6. *Bob:
    1. Marketplace function: needs to be many actors acting independently and consumer choice for there to be a market – antitrust laws were designed to guarantee that bottom-up structure is going to work
    2. antitrust laws are focused on horizontal restraints
Excessive Regulation – Analysis
1. Threshold
  1. Market flaw:
    1. Risk of irreparable harm, and
    2. Market cannot assess quality

 YES: regulation ok

1. 1. Type of Regulation (licensing, certification, etc):
    1. Nexus: is the type of regulation appropriate – is there a nexus between the regulations and the need for regulation?
2. Scope/Degree:
  1. Does the agency regulate in areas without a need, or
  2. Does the agency regulate beyond the scope of the risk?
Federal Antitrust Laws
1. Sherman Act: (parallel to Cartwright Act – see below)
  1. In General: Prevents combinations in the restraint of trade
  2. State Action Immunity Doctrine:
    1. Parker v. Brown: State actions are not subject to the Sherman Act
    2. Midcal: Private actions are not subject to antitrust laws if:
      1. Actions are undertaken pursuant to a clearly articulated and affirmatively expressed state policy, and
      2. The actions are adequately supervised by the state
        
        MidCal:
        
        Facts: wine distributor challenges vertical price fixing on wine by liquor dealers assn
        
        Held: no immunity – clearly articulated and affirmatively expressed requirement is met, but there was no state supervision
        
        Hudson v. Chula Vista: municipalities immune if acting pursuant to state policy
        
        Facts: P sought to compete for trash collection contracts with City of Chula Vista. The City offered the contract to another provider without offering bidding opportunities to others, including P. P argues that the City acted in violation of the Sherman Act.
        
        Held: No violation – the City was operating under authority granted by the State and that state supervision need only be shown were private persons claim state immunity.
        
        Patrick v. Burget: peer-review practices not immune
        
        Facts: Physician who was given bad reviews and terminated by competing physicians on peer-review board challenges the peer-review practices under federal anti-trust law.
        
        Held: no immunity for peer-review practices; state procedural oversight is not “state supervision” within the meaning of the Midcal test; there is no “state supervision” unless the state has and exercises ultimate authority over private-privelige termination
2. Federal Trade Commission Act
3. Clayton Act

Must affect

interstate commerce

for federal antitrust law to apply

State Antitrust Laws
1. Cartwright Act: Provides a cause of action and remedies for antitrust violations occurring in CA, independent of federal law
  1. Parallel to Sherman Act: decision under Sherman Act are important guides in analyzing Cartwright matters, but are not binding
  2. Prohibited Conduct:
    1. Trusts: a combination of capital, skill or acts by two or more person for:
      1. Creating or carrying out restriction in trade/commerce
      2. Limit or reduce production or increase prices
      3. Prevent competition in manufacturing, transportation, sale or purchase
      4. Price fixing
      5. Enter into or carry out agreements fixing or limiting prices or competition
    2. Tying Arrangements: agreement requiring that a as a precondition of purchasing or obtaining services, that other services must be purchased and must be purchased through the seller
    3. Exclusive Dealing: a seller of a product may not by contract or coercion set the price at which the buyer may resell the product
    4. *Bob:
      1. Prohibits monopolization, not monopolies
        
        Legal monopolies arise by out-performing competitors
        
        Monopolization is acquisition through unlawful exclusionary acts
      2. Must be a combination:
        
        Ogopolistic structure: only a few competitors
        
        US v. Container: within 48 hours competitors raised their prices but govt. couldn’t prove that it was the result of any agreement. Court said that it was a combination because there was no reason to raise prices. Defense rebuts combination by showing that they had an independent reason to raise prices.
  3. Exemptions:
    1. State Action: government entities are not “persons” under the act, so the Act does not apply to the activities of govt. entities
      1. Exception: business discrimination provision applies to govt.
    2. Regulatory Action: certain regulatory statute provide exemptions for what would otherwise be an antitrust violation, such as CPUC and Food and Agriculture
    3. Noerr-Pennington: under the First Amendment, it cannot be a violation of the federal antitrust laws for competitors to lobby the government to change the law in a way that would reduce competition
      1. “Mere Sham Doctrine” – Noerr Pennington does not apply in the absence of a purpose to actually obtain government action
    4. Res Judicata: a P who was unsuccessful on a Sherman Act theory in federal court is barred from bringing Cartwright action in state court
    5. Collateral Estoppel: D may be bound where the facts of restraint of trade were established in another proceeding
    6. Reasonableness Standard: broad analysis of the facts specific to the business, the history of the restrain, and the reasons why it was imposed

*Bob – considerations:

1. 1. 1. 1. Relevant product market: elasticity of demand, product and all possible substitutes for that product; is a consumer looking for one also looking for the other?
      2. Relevant geographic market
      3. Goal: bottom-up choices rather than top-down offering
    2. Per Se Doctrine: 5 practices conclusively presumed to be unreasonable:
      1. Price fixing among competitors
      2. Market division among competitors
      3. Certain forms of group boycotts
      4. Tying arrangements
      5. Vertical price fixing or resale price maintenance
2. Unfair Practice
3. Unfair Competition
Conflict of Law:
1. Statute v. Regulation:
  1. Statutes are broad
  2. Regulations carve out an exception to the statute
2. Federal v. State:
  1. Federal statute entitled to supremacy as to matters that affect interstate commerce
  2. State can carve out exception to federal if:
    1. Clearly articulated and affirmatively expressed in the statute, and
    2. Subject to independent state supervision

state/private action

Limitations on Licensing Boards
1. The Problem:
  1. The majority of board members are licensed professionals in the industry – so they are also competitors of those they are regulating
2. The law:
  1. Supreme Court: state agencies are not immune from antitrust laws by virtue of their status alone
  2. State Action Immunity Doctrine:
    1. State actions are not subject to the Sherman (under Parker) or Cartwright Acts (under the language of the Act itself)

Private actions (Midcal) are not subject to antitrust laws if:

1. 1. 1. 1. Actions are undertaken pursuant to clearly articulated state policy, and

 the anticompetitive action must be foreseeable under the state grant of authority governing the subdivision, agency or board

 requires either state action itself or action in furtherance of clearly articulated policy

 may be anticompetitive if outside the scope of the board’s authority (thus members may be personally liable)

1. 1. 1. 1. The actions are adequately supervised by the state

 usually not necessary to prove for regulatory board members, but would be necessary for anticompetitive acts of non-board members

 amount of supervision required is proportional to the amount of discretion exercised by private parties

Ethical Standards for State/Local Officials

Basic concept: decisions should be made by the body politic on the merits, and if there is a vested profit stake there is an intensity of interest
Issues
1. Balance: to what extend should decisions be influenced by profit stake of lobbyists before the decision makers
2. Bribery:
  1. *Bob: The highest concern for all 3 branches
  2. Defined: a corrupt intent to influence
  3. To prove, you need to establish a quid pro quo
  4. Occurs most often in campaign contributions
3. Extortion:
  1. Defined: using a threat to get some to perform an official act
4. Conflict of Interest – §1090
  1. Defined: when there an interest/detriment that is disproportionate to the interest of the public (proportionality is key)
  2. Remedy is recusal
  3. Rule of necessity: if your vote is necessary to hold a vote, necessity may overcome the prohibition
5. Campaign Contribution:
  1. Amount Limits:
    1. There were fairly tights limits in 1960-1970’s
    2. There was an attempt in the 1980’s to enact a system of public finance for state legislative office, where support from local district would be matched 5x by the govt., and legislators put forward prop 73 to compete with it, which was sold as “more ethical” and had some limits but no public finance option – both won

- - Prop 73 was thrown out because limits were by year and not by campaign
  - No limits at all in CA until prop 34
  - Prop 34: (now in effect) $3k per person per election for state office, 20k for political committees

Bob

1. 1. Disclosure

- - Contributors have to disclose who and how much
  - Lobbyists have to disclose who they are, how much was given and to whom
  - Information is now online

1. Honoraria/Gifts:
  1. Cant take more than 250 from one source per year
  2. Lobbyists can only give $10 a month
  3. State officials and agency officials cant lobby the legislative or staff committee or agency that they served on for 1 year after leaving office

Budget Process

The agency’s budget enables them their enforcement capabilities
Mechanics/Timeline
1. 1-10 budget proposed
2. 2-18 LAO report
3. 5-14 may revise
4. 6-15 adoption
5. 7-1 effective date
Problems:
1. usually the 6/15 adoption timeline is not met
2. CA has supermajority requirement, 2/2 vote to enact the budget, which is exacerbated by caucus vote
Special Fund structure:
1. Does not come out of general fund
2. Comes from renewal fees coming from the industry
3. usually there is a ceiling under which agencies can request additional money
4. Problems:
  1. Regulations are subject to change according to special interests that may contribute financially to the agency
  2. Proprietary control: agencies are actually funded through consumers of that industry – regulatory structure allows the costs pass to the consumers
  3. Stealing from the funds by using accounting tricks to avoid taxes on new revenue
  4. State govt does not have the ability to go into debt like the federal govt.

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