LIQUID CHEMICAL CORPORATION v. DEPARTMENT OF HEALTH SERVICES (1991)

OPINION UPON DENIAL OF PETITION FOR REHEARING

Respondent petitions for rehearing limited to the issue of standard of review.   Any further consideration of this issue will not affect the outcome of this case;  the superior court found the administrative law judge's determination in favor of respondent was supported under both the substantial evidence and independent judgment tests, and we affirmed.   We discuss the issue further to dispel respondent's broad-sweeping implicit contention that Tex-Cal Land Management Inc. v. Agricultural Labor Relations Bd. (1979) 24 Cal.3d 335, not cited previously, empowers the Legislature to deprive virtually all administrative law parties of an independent judgment court review in cases substantially affecting a fundamental vested right.   As will be discussed, Tex-Cal applies narrowly to proceedings possessing the relatively unique circumstances and safeguards as are provided in Agricultural Labor Relations Board (ALRB) proceedings;  enforcement actions taken by the Department of Health Services (DHS), as here, lack those compelling features.

The bases upon which respondent asserts the test must be “substantial evidence” are Health and Safety Code sections 25187, subdivision (g), and 25189.3, subdivision (d), both stating in part:  “In all proceedings pursuant to this subdivision, the court shall uphold the decision of the hearing officer if the decision is based upon substantial evidence in the whole record.”

Tex-Cal in part tested the constitutionality of the legislatively established standard of review in the Agricultural Labor Relations Act (ALRA).   This act “was enacted in 1975 to fill a long-standing void left by the National Labor Relations Act [citation], which expressly excludes agricultural laborers from its definition of ‘employees.’ ”  (Pasillas v. Agricultural Labor Relations Bd. (1984) 156 Cal.App.3d 312, 327, fn. omitted.)

The ALRA established the ALRB to hear certain labor disputes.   Part of the ALRA, Labor Code section 1160.8, provided in relevant part that a decision of the ALRB would be upheld by the Court of Appeal if supported by substantial evidence in the whole record.   Tex-Cal argued that such a standard was unconstitutional in that “the California Constitution's restrictions on judicial power require courts to reject the findings unless, after an independent review of the record, they are ruled to be supported by the weight of the evidence.”  (Tex-Cal, supra, 24 Cal.3d at p. 342.)

Tex-Cal discussed the case of Bixby v. Pierno (1971) 4 Cal.3d 130, 144, in part, as follows:  “The majority opinion expressed two reasons for rejecting the dissent.   First it pointed out that [Code of Civil Procedure] section 1094.5 was intended to leave to courts the establishment of standards for deciding which cases require independent judgment and which substantial evidence review.  (‘In view of this judicial history, the court would now assert a doubtful prerogative if it were to rule that no cases at all require an independent judgment review, and that the Legislature created an empty category in section 1094.5.’)  [Citation.]  Second, the majority opinion urged that independent judgment review be retained because it may help cure due process violations at the administrative level.  [Citation.]”  (Tex-Cal, supra, 24 Cal.3d at p. 344.)

Tex-Cal noted that Labor Code section 1160.8, providing for the substantial evidence test, is “apparently identical to that which since 1947 has appeared in sections 10(e) and 10(f) of the National Labor Relations Act [citations], the models for section 1160.8.   Indeed the entire ALRA is designed to provide agricultural workers with protection of their collective bargaining rights comparable to that provided nonagricultural workers by the NLRA.   To that end the ALRA was patterned after the NLRA, with changes necessary to meet special needs of California agriculture.  [Citation.]  The ALRA incorporates procedural safeguards of the NLRA including the separation of prosecutorial from adjudicatory functions [citations], notice, written pleadings, evidentiary hearings [citations], and a requirement that orders be accompanied by findings based on the preponderance of the reported evidence [citations].   To make full use of the board's expertise and to minimize delay from judicial review, both the ALRA and the NLRA provide for direct review of board orders by appellate courts and require that findings be conclusive if supported by substantial evidence on the record as a whole.  [Citations.]  [¶]  The Legislature thus intended to adapt to California needs the proved federal instrumentality for protecting rights of employees and employers with respect to collective bargaining.  [Citation.]”  (Tex-Cal, supra, 24 Cal.3d at p. 345.)

The court then went on to note that appellant was asking the court to “invalidate a deliberate legislative choice of the substantial evidence standard.”  (Tex-Cal, supra, 24 Cal.3d at p. 345.)

The court commented, “There are good reasons for our declining to do that-particularly where, as here, the ALRA review standard is an integral part of a statutory scheme that contains ample safeguards of fair procedure at the administrative level.  [Citations.]  For us to create a new constitutional restriction would frustrate the Legislature's intent that the ALRB serve as ‘one of those agencies presumably equipped or informed by experience to deal with a specialized field of knowledge, whose findings within that field carry the authority of an expertness which courts do not possess and thus must respect.’  [Citation.]6”  (Tex-Cal, supra, at 24 Cal.3d at p. 346.)

Footnote 6 appended to the quoted section provided as follows:  “See Gardner & Greenberger, Judicial Review of Administrative Action in Responsible Government (1974) 63 Geo.L.J. 7, 36:  ‘The fact remains that men of ordinary ability who have spent some time, in the case of agency heads and members, or many years, in the case of the staff, dealing with specialized issues do have a special competence in their fields.   In unnoticed accretions prior proceedings, luncheon conversations, the daily press, and countless other sources add to their knowledge and understanding.   As a rule, we consider their judgment likely to be better than that of the most brilliant of judges, confined as the judge is to the accidents of a single record and perhaps influenced by the skill or the ineptitude of the accidentally chosen counsel.   As a rule, the confusion and delays of cross-examination are more likely to be of comfort to the reviewing court than they are to be of real aid to men already familiar, personally or through their staffs, with the issues.’ ”   (Tex-Cal, supra, 24 Cal.3d at p. 346, fn. 6.)

The Tex-Cal court added:  “Moreover, imposition on [Labor Code] section 1160.8 of rules that now govern section [Code of Civil Procedure] 1094.5, subdivision (c) would cause the standard for reviewing an unfair labor practice order to vary according to whether the order did or did not deprive the aggrieved party of ‘a fundamental vested right.’   The possible variety of orders, which range from simple restraint against minor interference with union activities to requirements of reinstatement and payment of back wages, would make the distinction ‘on a case-by-case basis' [citation] a prolific source of the litigious delay that the Legislature indisputably sought to avoid.”   (Tex-Cal, supra, 24 Cal.3d at p. 346.)

As noted by respondent, the Supreme Court then stated:  “We therefore hold that the Legislature may accord finality to the findings of a statewide agency that are supported by substantial evidence on the record considered as a whole and are made under safeguards equivalent to those provided by the ALRA for unfair labor practice proceedings, whether or not the California Constitution provides for that agency's exercising ‘judicial power.’ ”  (Tex-Cal, supra, 24 Cal.3d at p. 346.)

Respondent then argues that the statutory scheme set out in the Hazardous Waste Control Act (Health & Saf.Code, § 25100 et seq.) should be considered “safeguards equivalent to those provided by the ALRA for unfair labor practice proceedings.”  (Tex-Cal, supra, 24 Cal.3d at p. 346.)

Under the provisions for an ALRA hearing contained in Labor Code sections 1160.2 and 1160.3, the administrative law judge issues findings, conclusions and recommendations to the ALRB.   Those findings, conclusions and recommendations, along with the transcript of the hearing and the remaining record, are submitted to the ALRB.   The ALRB, then, makes the final findings and issues the order.

One of the requirements contained in Labor Code section 1160.3 is that the ALRB's orders must be accompanied by findings based on the preponderance of the testimony.  (See also Montebello Rose Co. v. Agricultural Labor Relations Bd. (1981) 119 Cal.App.3d 1, 8-10.)

The findings of the ALRB are determinative.  “[T]he ALJ findings are merely part of the record to be reviewed along with the other evidence.”  (Vessey & Co. v. Agricultural Labor Relations Bd. (1989) 210 Cal.App.3d 629, 642.)

Direct review then may be taken from the order of the ALRB to the appellate court.

Thus, we see several important distinctions between this case and Tex-Cal.

(1) For the policy reasons stated in Tex-Cal, the ALRA proceedings skip the trial court.   The ALRB essentially serves as the trial court subject to substantial evidence review by the Court of Appeal.   The instant proceedings are subject to review by the trial court;  only after resort has been made to the trial court may a party receive appellate review.   The stage of these proceedings that parallels the ALRA Court of Appeal proceedings is appellate review in our court, not the trial court review as is argued by respondent.

(2) With exceptions noted therein, Health and Safety Code sections 25187, subdivision (g) and 25189.3, subdivision (d), provide that Code of Civil Procedure section 1094.5 will govern the hearing procedures herein.   Tex-Cal was not governed by Code of Civil Procedure section 1094.5 but by Labor Code section 1160.8.   Indeed the Tex-Cal court specifically declined to “create a new constitutional restriction” and impose “on [Labor Code] section 1160.8 [the] rules that now govern [Code of Civil Procedure] section 1094.5, subdivision (c).”  (Tex-Cal, supra, 24 Cal.3d at p. 346.)

(3) The provision in Labor Code section 1160.8 for the substantial evidence review standard was apparently identical to the provision of the NLRA.   The Tex-Cal court found it significant that that procedure used by the NLRB was a “proved federal instrumentality for protecting rights of employees and employers with respect to collective bargaining.”  (Tex-Cal, supra, 24 Cal.3d at p. 345.)

The People note that the substantial evidence standard is found in the federal Environmental Protection Agency regulations, regarding administrative decisions to revoke, deny or modify “interim status” under the Resource Conservation and Recovery Act (42 U.S.C. § 6921 et seq.).   That is certainly not the same “proved federal instrumentality” that the Tex-Cal court considered.

(4) Tex-Cal also puts great importance on the fact that the ALRB would serve as “ ‘one of those agencies presumably equipped or informed by experience to deal with a specialized field of knowledge, whose findings within that field carry authority of an expertness which courts do not possess and thus must respect.’ ”  (Tex-Cal, supra, 24 Cal.3d at p. 346.)

No such argument can be made here.  Health and Safety Code sections 25187, subdivision (e) and 25189.3, subdivision (b) vest in the hearing officer, not the agency, the authority to make the final decision.   An administrative law judge handles a panoply of cases and can hardly be expected to possess expertness in the field of hazardous waste law.

Even if the hearing officer did not make the final decision, the DHS is hardly the small board of experts “ ‘presumably equipped or informed by experience to deal with a specialized field of knowledge’ ” that Tex-Cal considered.   Following the usual administrative hearing, the final decision must be made by the agency or person in whom the law vests the power of decision, regardless of who actually hears the case, usually the head of an agency or a multimember board or commission.   The hearing officer makes a proposed decision consisting of findings of fact, determination of issues, and the penalty, if any.   (Gov.Code, § 11518.)   If the agency fails to act within 100 days after receiving the proposed decision, the proposed decision is considered adopted by the agency.  (Gov.Code, § 11517, subd. (d).)  In Administrative Procedure Act proceedings (Gov.Code, § 11500 et seq.), due process does not require that the agency read or hear the evidence put before the hearing officer.   The agency may rely on a report made by such hearing officer.  (Fichera v. State Personnel Board (1963) 217 Cal.App.2d 613, 620.)   See also Hohreiter v. Garrison (1947) 81 Cal.App.2d 384, 399, where the court determined that Government Code section 11517, subdivision (b) “properly interpreted, provides that where the hearing officer acts alone the agency may adopt his decision without reading or otherwise familiarizing itself with the record.”

Historically the independent judgment standard of review traces it heritage to Standard Oil Co. v. State Board of Equal. (1936) 6 Cal.2d 557.   That decision reasoned that article VI, section 1 of the California Constitution vests the judicial power in the courts, and unless an agency was granted judicial powers by another constitutional provision it could not exercise judicial functions.  (Id. at pp. 559-560.)   As to those agencies not granted judicial powers by the Constitution, the question then arose as to when they were exercising judicial powers.

In Drummey v. State Bd. of Funeral Directors (1939) 13 Cal.2d 75, 84-85, the court concluded that in a proceeding where the governmental agency sought to revoke a professional license, the agency would be exercising judicial power if its factual findings on conflicting evidence were binding on the courts and that the courts reviewing such agency decision must exercise an independent judgment on the facts.  Drummey then set a requirement of independent judgment review.  McDonough v. Goodcell (1939) 13 Cal.2d 741, 752-753, restricted that review to cases of persons possessing “valuable property rights” and to cases where the order “if unlawful or otherwise unjustified from a judicial viewpoint, would ․ deprive the aggrieved party of the constitutional right without due process of law.”

The landmark case of Bixby v. Pierno, supra, 4 Cal.3d 130 concluded that the determination of the appropriate standard of review must be made on a case-by-case basis.   If “the right has been acquired by the individual, and if the right is fundamental the courts have held the loss of it is sufficiently vital to the individual to compel a full and independent review.   The abrogation of the right is too important to the individual to relegate it to exclusive administrative extinction.”  (Id. at p. 144.)

Indeed courts continue to analyze cases based upon whether there is a vested fundamental right involved to determine whether the independent review standard applies.  (See, for example, Interstate Brands v. Unemployment Ins. Appeals Bd. (1980) 26 Cal.3d. 770;  County of Alameda v. Board of Retirement (1988) 46 Cal.3d 902 [where the Supreme Court upheld the independent judgment test as the appropriate standard of review to be applied by the superior court when the county seeks a writ of mandate to review a decision of its retirement board granting a service-connected disability pension to a deputy sheriff].)

If respondent's argument that the Legislature has the constitutional power to require the standard of review to be substantial evidence in this case were correct, we can see no reason why the Legislature could not make the same imposition for all administrative hearings regardless of subject matter.   We are convinced that Tex-Cal does not reach so far.

The petition for rehearing is denied.   In view of the fact that our discussion of the appropriate standard of trial court review is not dispositive of this case, we grant respondent's alternative request that part I of our opinion filed January 31, 1991, not be certified for publication.

VARTABEDIAN, Judge.

STONE (W.A.), Acting P.J., and FRANSON, J.*, concur.