CA License Law 101

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In California professional license law, at a contested hearing deciding an accusation or a statement of issues an administrative law judge only has the power to make a proposed decision, not a final decision.  The administrative agency – for example, the Medical Board of California or the California Department of Insurance – has delegated the task of hearing the case to an administrative law judge, but retains the ultimate power to make a decision on the case.  After an administrative law judge issues a proposed decision, the proposed decision goes to the state agency for adoption.  If the state license agency doesn’t agree with the administrative law judge’s decision, there is a non-adoption.  Non-adoptions are addressed in the law in California Government Code section 11517(c)(2)(E).

The first question that often comes to mind when we receive an Order of Non-Adoption from a state agency is: Why did they non-adopt?  The Order of Non-Adoption often spells out the reason for non-adoption.  Usually, the reason for non-adoption is that the state licensing agency – the board, bureau, department or agency deciding the case – does not agree with the terms of discipline in the proposed decision.  This can mean the proposed penalty is too light, but it can also mean the penalty is unsuitable for the case in the view of the licensing agency.  The administrative law judge might have proposed a penalty that is different than the penalty typically resulting from like cases.

Non-adoption gives the state agency the opportunity to review the record of the administrative hearing to figure out why the judge reached the decision that was proposed.  The parties also are given the opportunity to present written arguments, and sometimes even oral arguments, to the decision makers.  In the non-adoption process, our experience as professional license defense attorneys is key.  At Ray & Bishop, our years of experience as a law firm exclusively devoted to representing professionals before state agencies enables us to intuit the concerns of the state agency and fashion effective arguments for the best possible outcome.  Without this important insight, a less experienced attorney may misstep and even anger or alienate the decision makers, aggravating the situation.

Non-adoption is also a critical stage between hearing and appeal.  If a licensing agency is likely to come down hard on our client, we can use this stage of the proceedings to raise and preserve crucial issues that might be important later on appeal.  Another opportunity in non-adoption can be the chance to negotiate or renegotiate a settlement with a licensing agency, if the agency is open to settlement.

Ray & Bishop, PLC, exclusively represents professionals and businesses before their licensing agencies and regulators.  Non-adoption is a complex and confusing process.  Let us put our experience and expertise to work to navigate the legal challenges and find the opportunities that may exist in the non-adoption process.

After a license hearing, the administrative law judge (ALJ) will issue a proposed decision.  Under Government Code section 11517(c)(1), the ALJ has 30 days to issue the proposed decision.  (However, there is no penalty if this deadline is not met.)  Thirty days after the ALJ issues the proposed decision, each side in the case has the right to get a copy of the decision.  Under 11517(c)(2), starting with the date the agency receives the proposed decision, the licensing board or agency has 100 days to decide whether to adopt the proposed decision, reject it, make changes to it that don’t require rejection.

The proposed decision is a unique feature of administrative law.  Most of the time, the proposed decision is an accurate sneak peak of the final outcome of the case.  If the proposed decision is favorable, the licensee or license applicant can breathe a sigh of relief knowing that a good outcome may be just around the corner.  If the proposed decision is unfavorable, the licensee or license applicant can review their options for reconsideration or appeal and consider the career impact of the likely final decision.

However, sometimes a licensing agency will reject a proposed decision.  This most often happens because, 1) the proposed decision imposes a result that is too lenient or generous, or 2) the proposed decision has a technical flaw that is so serious it must be rewritten or decided again.  This rejection is called “non-adoption”.  ALJs try to write proposed decisions that square with the practices and expectations of licensing agencies, and ALJs also try to avoid mistakes, because “non-adoption” is a big headache for everyone – the government attorney, the defense attorney, and the clients on each side.  A non-adoption means extra work, added expense for the client, and months of uncertainty.

If a proposed decision is rejected, under law, it becomes a nullity.  The case can be re-litigated to a completely different decision by the licensing board or agency.  However, as a practical matter, the proposed decision still looms large as an influence on the process.  If a board or agency makes a different decision after non-adoption, it usually will copy large parts of the proposed decision into its final decision.

If you have a proposed decision you are not happy with, or your good proposed decision has been non-adopted, call us for legal advice.  Don’t wait until your non-adoption or adverse proposed decision becomes a final, bad result.

One of the most confusing parts of licensing law is the concept of “who makes the final decision?”  Even though licensees have the right to an administrative hearing before they are disciplined in any way by the agency, the written result of hearing is called the “proposed decision” and doesn’t become final until the agency itself reviews it and makes it official, a process called “adoption.”  If the agency rejects the proposed decision, that is called a "non-adoption."  The same term is also applied to a rejected proposed settlement. 

So, our clients ask, what’s the point?  Why go to hearing if I’m just going to have to deal with whatever the agency wants in the end?

First of all, non-adoptions are fairly rare.  Administrative law judges are legally trained to produce decisions that will be acceptable to state agencies, using disciplinary guidelines provided by the agencies themselves to create acceptable decisions.  The most common reason a proposed decision is non-adopted is not because the ultimate outcome is unacceptable to the Board, Bureau, Department or Agency but because the decision itself has left out something that an individual agency requires.  In that case, the decision often is revised in a minor, technical way, and then reissued with the same result.  A proposed decision can even be non-adopted in the client’s favor, to remove some condition that the judge proposed that the agency doesn’t want to be responsible for enforcing.

However, in many non-adoptions after hearing, the client usually has achieved a successful result at hearing, persuading the judge of the merits of his/her case, only to have the agency return the proposed decision because the agency fundamentally disagrees with the result.  This result is most common when the licensee is disciplined less harshly than the agency would like to see.  An agency may outright refuse to grant a license or insist on the outright revocation of a license.  Or, an agency may want probation where perhaps a judge would have allowed the client to practice freely, or an agency will insist on a condition that the judge did not find necessary.

Non-adoptions happen more frequently with cases handled by experienced license defense attorneys, because we sometimes will achieve a surprisingly good result for the client that the agency doesn’t expect.  However, after the agency studies the decision, they may come to understand the reasons for it and adopt it as written by the administrative law judge.

The agency holds most of the cards in this scenario, but the battle is not over for the licensee.  The client has the right, under the Administrative Procedure Act, to obtain a copy of the transcript and a chance to produce written argument directly to the agency (and occasionally, if granted, make an oral argument) about how the proposed decision should be treated.  Sometimes the agency ends up adopting the proposed decision in its entirely after written argument—a successful outcome in the end, albeit a frustrating path to success.  Sometimes a compromise is reached where the outcome isn’t quite the vindication offered by the proposed decision, but is better than the alternative the agency would prefer.  It is sometimes possible to negotiate a slightly different outcome after non-adoption and avoid the need for further proceedings.

The hypothetical problems posed by a non-adoption can best be answered by qualified counsel.  An attorney who has litigated many hearings will be in the best position to know when a proposed settlement or resolution is a good deal for the licensee.  If the licensee might do better at hearing, then the attorney needs to know whether “doing better” is likely to be kicked back by the agency, or whether the settlement offer represents the best deal.  An attorney in this position knows when the agency is being unreasonable, as they will have seen cases where the agency insisted on conditions that a judge ultimately did not order.  Further, the attorney will have seen how the agency adopted a better result for the client than they were willing to offer in settlement.  That’s the most important factor—if your attorney knows that the agency is likely to accept a proposed decision from a judge, then hearing is the best way to achieve the result you want.

The agreement by which almost all California license discipline or denial cases are settled is called a stipulated settlement.  In a stipulated settlement, a licensee or license applicant usually makes admissions of some wrongdoing and agrees to accept an administrative sanction.  The stipulated settlement is usually prepared by the attorney for the licensing agency, which is often a deputy attorney general.  The stipulated settlement is a proposal sent to the agency head or license board for adoption, which in the case of a board usually means a vote.  Although the stipulated settlement is binding upon the licensee or license applicant unless it is rejected, it does not bind the licensing agency unless it is approved.

The language of the stipulated settlement is usually provided by the licensing agency’s disciplinary guidelines, which almost all agencies have.  However, certain parts of the stipulated settlement can be negotiated, including what if any admissions will be made, and if so what, the amount of cost recovery to be paid by the licensee, the duration of probation (if probation is included), and what conditions will be required during probation or what tasks are to be performed.

The agency’s attorney, often a deputy attorney general, receives settlement terms from a representative of the agency’s enforcement unit.  That representative sets the terms based upon what they believe will be acceptable to the decision making body or agency head.  There can sometimes be a range of possible outcomes, and within that range negotiations can take place.  If the agency does not adopt the settlement, the decision maker(s) will sometimes indicate what settlement terms would be acceptable.  The alternative is to proceed to hearing.

I advise clients who we represent in settlement negotiations to set priorities for what terms are most important to avoid or reduce.  For some clients, they might want  the shortest possible probation, if probation is the best possible outcome.  For other clients, their priority might be reducing the amount of cost recovery, or avoiding making damaging admissions of wrongdoing.

The stipulated settlement should never be viewed as a take-it-or-leave-it proposition. Sometimes the offered settlement is just so painful and punitive that it is preferable to put the case before an administrative law judge.  An experienced license law attorney will have a good idea of what a case is worth in settlement, in order to strike the best possible deal.

A Notice of Defense is the document a licensee and some license applicants submit to preserve their right to a hearing after receiving an accusation or denial.  If a Notice of Defense is not timely filed, a licensing agency can take the licensee or license applicant’s default.  A default usually means that the harshest sanction sought, revocation or license denial, is imposed.

A Notice of Defense must be filed with the agency or attorney for the agency within 15 days of service.  This means that if the agency mails out the Notice of Defense on that 1st, the completed  Notice of Defense must come back to the agency counsel (or agency, as specified) by the 16th.  Due to mailing times, therefore, the period of response is less than 15 days.  Some licensees or license applicants mistakenly believe that the 15 days start to run upon receipt of the Notice of Defense, but this is incorrect and could lead to default.

The statute that creates and sets forth the functions of the Notice of Defense is Government Code section 11506.  This statute provides that a Notice of Defense constitutes a request for hearing and a general denial of all the allegations in the accusation.  The Notice of Defense is typically a form supplied by the licensing agency with the accusation, and in the case of a license denial, with the statement of issues (when a request for hearing has not been previously made).

In a Notice of Defense, the respondent can object to the form of the accusation or object that the accusation is uncertain or ambiguous.  These objections are rarely applicable, particularly if the agency is represented by experienced administrative law counsel.

Finally, the Notice of Defense need only contain the respondent’s mailing address and be signed by the respondent.  Nevertheless, it is not unusual for the Notice of Defense to have blanks and check boxes for various other information.  One common feature is a box to check if a respondent objects to recording the hearing (and instead demands a court reporter); alternatively, the check box may give permission for recording instead of court reporting.  We always demand a court reporter (decline electronic recording), because a court reporter provides a record superior to an audio recording which can be faint, jumbled, or has participants talking over one another at hearing.

Occasionally an attorney representing a respondent licensee or license applicant will draft an elaborate Notice of Defense to file.  We have rarely if ever found this necessary.  The pre-prepared Notice of Defense form is sufficient for 99% of all cases.  Also, in the rare case where the accusation is poorly drafted, early objections in the Notice of Defense give the agency a chance to correct mistakes that might inure to the respondent’s benefit at hearing.  Therefore, making objections in the Notice of Defense may be a poor strategic decision.

 

 An accusation is the document that commences formal license discipline against a California licensee.  If you know something about law, you might have heard of a civil or criminal complaint; it is similar.  Simply put, it is a letter from the executive officer or an administrative chief of a licensing agency to the governing body (such as a board) or individual (such as a commissioner) asking them to impose discipline.  Now you might ask yourself, why would an executive officer have to write a document to the agency head(s) he or she works for, of even sometimes, write a letter to himself or herself (if the executive officer and the agency head are the same person)?    

The answer is that the primary function of the accusation is to give notice to a licensee of what discipline a license agency is seeking and why.  

Government Code section 11503 tells us what an accusation is: "[t]he accusation shall be a written statement of charges which shall set forth in ordinary and concise language the acts or omissions with which the respondent is charged, to the end that the respondent will be able to prepare his defense."  Unfortunately, the accusation is never in ordinary language, and often is not concise.  The rest of this definition states the most important function of the accusation.  It frames the disciplinary case.  This can become important if, for example, at a very late stage of the proceeding, the agency finds it cannot make its case.  At that time it may be too late to step outside the accusation and allege different wrongdoing, because that would violate due process.

The accusation tells a licensee, and importantly his or her attorney, why the agency has jurisdiction, or power over, the conduct alleged in the accusation.    The accusation spells out a theory of the case.  It is like a flight plan the agency’s lawyer must follow.  

Importantly, the accusation does one other thing, it gives the public notice of the allegations within.  The accusation is a public record.  As the accusation only tells one side of the story – written by the agency seeking discipline – it can be quite damning, and even sensational.  A scandalous accusation can do more damage than the discipline it seeks by ruining a reputation well before the disciplinary case is over.

Not every agency puts out its accusations for public consumption, and some who do are careful to explain that the accusation contains just unproven allegations.  However, most agencies will just put the accusation out there, sort of a ‘shoot first and ask questions later’ approach.  

A lawyer for a licensee must carefully study the accusation to challenge the laws invoked, the discipline sought, and to hold the agency to its "flight plan" so that it follows the rules of fairness and due process.  The public must understand that the accusation is an advocacy tool seeking to put an individual or organization in a bad light to begin to persuade a fact finder to impose license discipline.  It is not fact and should not be treated as such.

For the start of 2014, I am creating a new line of articles I am calling "CA License Law 101".  With a sorry lack of good information on the internet that explains how license law works for the California licensing agencies that follow the Administrative Procedure Act (basically all of them), I will strive to get "back to the basics" and explain common terms, documents, issues and procedures that make up the law that controls the California process for regulating, issuing licenses to and disciplining California licensees.

So here I begin with the Statement to Respondent.  I am starting here because when the dreaded big manila envelope shows up from your licensing Board, Bureau, Department or Agency, with a stack of legal documents inside, the document on top is the Statement to Respondent.  The Statement to Respondent is intended to be a notice that educates a licensee or license applicant about their most important rights and obligations.  However, we find in our practice that it accomplishes two basic tasks – first, scaring the heck out of the recipient with intimidating legal language, then in much simpler and friendlier language, encouraging settlement by just contacting the agency attorney.  

The Statement of Respondent must contain these four pieces of information:

1) that you need to request a hearing within 15 days, or you will be deprived of a hearing (found in default),;

2) that you can ask for discovery, that is, all the evidence that the agency has accumulated to build this case against you;

3) that once a hearing is set, if you need to postpone it, you need to let OAH know you want to postpone it within 10 days of learning of the reason to postpone it; and

4) that you can, but need not be, represented by counsel.

When a licensee or license applicant reads the Statement to Respondent, they tend to do one of two things – call a license lawyer, or call up the agency attorney (often the Deputy Attorney General).  Unfortunately, we are so often later told by our clients, that if they called the agency attorney, the first thing they are often told is they do not need to hire an attorney. 

As you can tell, I am pretty critical of the Statement to Respondent.  First, I think that the Statement to Respondent should counsel every recipient to get as much legal help as they can afford.  After all, agencies don’t handle disciplinary cases themselves, they have a staff attorney or the Attorney General represent them.  If a staff member at the Board of Registered Nursing, for example, cannot handle an accusation on their own, how is a nurse supposed to?  Secondly, this document is used to promote settlement at a stage when settlement is very premature.  The priority upon receipt of the Statement to Respondent and accompanying documents is to preserve the right to a hearing, get information, research the law and issues, advocate for the best possible outcome, and then, and only then, settle if, and only if, the facts and law support settlement.

If you have received a stack of documents topped with a Statement to Respondent, I am sorry for your news.  I encourage you to call our office for a consultation to see how we can help.  Stay tuned for more CA License Law 101 articles, I hope you found this one informative.