Overview

The contested case provisions of the North Carolina Administrative Procedure Act (“NCAPA”) are contained in Chapter 150B, Articles 3 and 3A of the General Statutes.  Article 3 governs most administrative agencies.  Article 3A governs occupational licensing boards and a few additional agencies such as the Department of Insurance, State Banking Commission and the State Board of Elections.  See § 150B-38(a).  A few agencies are not subject to Article 3 or Article 3A and have their own procedures for handling contested cases.  See §150B-1(e).

Article 3 of the NCAPA provides that Administrative Law Judges (“ALJ”s) in the Office of Administrative Hearings (“OAH”) hear contested cases of the covered agencies.  Contested cases governed by Article 3A are heard by the board or agency that made the initial decision at issue in the contested case.  Article 3 prescribes much more thoroughly than Article 3A the procedures to be followed throughout the contested case process.  Nevertheless, Article 3A does establish certain required procedures the agencies governed by it must follow while permitting them to adopt their own additional procedural rules.  This paper discusses only contested case hearings under Article 3, and though much of this discussion is applicable to Article 3A cases the specific procedures adopted by the decision-making agency for such cases must be consulted.

NOTE:  The day before this paper was submitted, the General Assembly overrode Governor Perdue’s veto of Senate Bill 781 and Senate Bill 496.  Those bills are attached as Appendix “A” and Appendix “B” respectively.  Among other things, these bills grant Final Decision making authority to ALJs.  Judicial review in Superior Court will be review of the ALJ’s decision, not the agency’s decision following a decision by the ALJ. 

Senate Bill 781 is popularly known as the “Regulatory Reform Act”.  Part II of Senate Bill 781 amends Article 3, as well as Article 4 of the NCAPA, which governs judicial review.  The amendments become effective January 1, 2012 and apply to contested cases commenced on or after that date.

Senate Bill 496 makes significant amendments to North Carolina law governing the Medicaid program.  Section 1 of the law amends G.S. § 108C-12 governing “Appeals by Medicaid providers and applicants” to provide that the contested case is subject to Article 3 of the NCAPA and that the ALJ shall make a Final Decision within 180 days of the filing of the appeal.  Section 3 of Senate Bill 496 deletes the exemption of the Medicaid program from the contested case provisions of the NCAPA.  In conjunction with those changes, Section 32 and Section 33 of Senate Bill 781 amend the statute governing Medicaid appeals to make it clear Article 3 whereby the ALJ makes a final decision applies, and that Article 4 of the NCAPA which governs Judicial Review of an ALJ’s decision also applies.

This paper was written initially to discuss the NCAPA currently in effect.  However, the important changes enacted by Senate Bill 781 have been noted or incorporated.

Fundamentals Of Article 3

Scope of Article 3

The NCAPA defines a proceeding involving a dispute between: an  “agency” and a “person” involving that person’s rights, duties or privileges as a “contested case.”  See § 150B-2 for definitions and §§ (1a), (2) and (7) in particular for the definitions of “agency”, “contested case” and “person”.  Under the current NCAPA, “decision” is made by the ALJ after a contested case hearing.  See §150B-34, then, the ALJ’s decision is forwarded to the agency which made the initial decision at issue and that agency makes the final decision.  Beginning January 1, 2012, the ALJ’s decision will be the final decision.  See §150B-36.  This final decision may then be appealed to the courts.  See Article 4 of the NCPA, §§150B-43-52. 

Requirement of Attempt to Settle
The NCAPA requires that agencies attempt to settle a dispute with a person before it rises to the level of a “contested case”. N.C.G.S. § 150B-22 states:

It is the policy of this State that any dispute between an agency and another person that involves the person’s rights, duties, or privileges, ... should be settled through informal procedures.... If the agency and the other person do not agree to a resolution of the dispute through the informal procedures, either the agency or the person may commence an administrative proceeding to determine the person’s rights, duties, or privileges, at which time the dispute becomes a ‘contested case.’”

The Supreme Court of North Carolina has said that a party must pursue informal review procedures established by an agency before the party can initiate a contested case. Failure to exhaust informal remedies will likely result in the agency making a motion to dismiss a contested case for failure to exhaust informal remedies.  Thus, such an attempt should be made, particularly where the agency has implemented informal review procedures, and it should be alleged in the petition filed to initiate the contested case that an effort to settle the matter informally was made.

Role of Administrative Law Judges

Article 3 hearings are conducted by the ALJs who are employed by the OAH, an executive branch agency that is independent of and not related to any other administrative agency.

With few exceptions, however, currently under the NCAPA the ALJ does not make the final decision in the case. Instead, the decision of the ALJ made after the contested case hearing is forwarded to the agency whose initial decision is in question. That agency then makes the final decision after giving each party an opportunity to file exceptions to the ALJ’s decision and to present written arguments.

The agency is required to adopt the ALJ’s decision unless it can show the ALJ’s findings of fact are clearly contrary to the preponderance of the admissible evidence, giving due regard to the opportunity of the ALJ to evaluate the credibility of witnesses.  The agency may not make any new findings inconsistent with the ALJ’s findings unless it demonstrates the ALJ’s findings are not adequately supported.  Agencies are required to set out specific detailed reasons why they did not adopt the ALJ’s decision.  See §150B-36.  The agency’s decision is the “final decision” that may then be appealed to the courts.

The ALJ is empowered to make the final decision when determining  OAH has no jurisdiction, that the case should be dismissed pursuant to motion for failure to prosecute or otherwise comply with procedural requirements, and that the case should be dismissed pursuant to motion for any of the other reasons set forth in Rule 12(b) of the N.C. Rules of Civil Procedure.

Beginning with cases initiated after January 1, 2012, the ALJ will make the final decision.  Consequently, the above provisions governing the relationship of ALJ’s decisions and Agency’s final decisions will be moot.

The ALJ has broad powers to regulate the conduct of the hearing, including the power to rule on certain prehearing motions, control discovery, stay the contested action pending the outcome of the hearing, and impose sanctions for failure to appear at a hearing or comply with an order. The sanctions the ALJ may impose include excluding evidence, or dismissing a petition or a particular claim or defense. See §150B-33.  An ALJ does not have the power to hold a person in contempt for failure to comply with an order, but is empowered to issue an order that a person appear in Superior Court to show why the person should not be held in contempt for failure to comply with an order of the ALJ. See §150B—33(b)(8).

Grounds for Overturning an Agency Decision

Under the NCAPA, the ALJ can decide an agency decision should be reversed on any one of the following grounds:

• The agency exceeded its authority or jurisdiction. 
• The agency acted erroneously.
• The agency failed to use proper procedure. (A procedural defect, such as improper notice, would constitute grounds for challenge under this standard.)
• The agency acted arbitrarily or capriciously. (The Supreme Court of North Carolina has noted that courts have found agency decisions to be arbitrary and capricious: when such decisions are “whimsical” because they indicate a lack of fair and careful consideration; when they fail to indicate “any course of reasoning and the exercise of judgment”; or when they impose or omit procedural requirements that result in manifest unfairness under the circumstances though within the letter of statutory requirements.)
• The agency failed to act as required by law.

Sources of Procedural Rules

Article 3 of the NCAPA sets out certain procedural requirements for contested case hearings held pursuant to that Article. In addition, the Office of Administrative Hearings has established additional procedural requirements. These are set forth at 26 NCAC 03.0101-.0208. Finally, the rules provide that the North Carolina Rules of Civil Procedure apply unless another specific statute or rule of the OAH provides otherwise.

Bringing a Contested Case

Identifying the Nature of the Dispute

A contested case proceeding may be initiated when an agency and another party have a “dispute” that involves:

• the issuance or revocation of a license,
• the levy of a monetary penalty, or
• other rights, duties or privileges of the party.

Notwithstanding the above, the NCAPA provides that a contested case proceeding cannot be brought to challenge an agency decision involving a scholarship or grant. Contested cases also may not be used to challenge declaratory rulings issued by agencies.  Declaratory rulings are subject to challenge in Superior Court.

A contested case must involve a current dispute between an agency and another party that arises from some action or inaction of the agency affecting that party. It cannot serve as a way for a party simply to challenge the propriety of a rule the party may object to; that action must be taken by commenting in a public hearing or by the filing a declaratory judgment action.

Although the NCAPA defines a contested case as involving a “dispute” between an agency and a private party, the NCAPA does not make clear at what point an agency has sufficiently taken action so that it may be said that a “dispute” exists. The NCAPA requires a person filing a petition initiating a contested case to show that the agency: (1) has deprived the petitioner of property, (2) has ordered the petitioner to pay a fine or civil penalty, or (3) has otherwise substantially prejudiced the petitioner’s rights.

There is no requirement in the NCAPA that the agency must have made a decision it considers to be final. However, the action must be sufficiently final to actually affect the rights of the aggrieved person. In addition, an agency may deprive a person of his or her rights by a failure to act, so an agency’s failure to act may be sufficient to give a person the right to file a contested case petition.  The petition should allege all facts that exist to show that the agency has done something (or failed to do something) to cause a substantial deprivation of rights.

Identifying the Person Aggrieved

The NCAPA states that any “person aggrieved” may seek a contested case hearing, and defines a “person aggrieved” as one who has been affected substantially in a personal, property or employment right. It defines the term “person” to include a partnership, corporation, public body, and unincorporated association.  See §§150B-2(6) and (7).

The North Carolina courts have had little difficulty in determining whether a person’s rights have been substantially affected by an agency action. For example, the North Carolina Supreme Court has held a third party may file a contested case to object to an administrative decision to grant a permit to another person or a company. See Empire Power Co. v. North Carolina Dept. of Environment, Health and Natural Resources, 1994, 337 N.C. 569, 447 S.E. 2d, 768, reh. Den. 338 N.C. 314, 451 S.E. 2d 634.

If a person meets the requirements of the NCAPA as a “person aggrieved,” and is not excluded by a separate statute, then he or she can file a petition to initiate a contested case even if the separate statute does not specifically reference the right to file a contested case.  The substantive statute defines the right to be protected, while the NCAPA provides the right to bring a contested case and the procedure.  See Empire at p. 583.

Drafting and Filing a Petition

A contested case governed by Article 3 is commenced by filing a petition with the OAH.  OAH has developed a relatively simple form that may be used to file a petition.  The petition may be filed by faxing it to OAH, if a hard copy is received by OAH within five business days following the faxed transmission.  See 26 NCAC .03 .0101.

The petition must “state facts tending to establish that the agency has deprived the petitioner of property, ordered the petitioner to pay a fine or civil penalty, or has otherwise substantially prejudiced the petitioner’s rights.” Additionally, the petition must allege that the agency:

• Exceeded its authority or jurisdiction;
• Acted erroneously;
• Failed to use proper procedure;
• Acted arbitrarily or capriciously; or
• Failed to act as required by law or rule.”

The NCAPA provides that unless another State statute or a federal statute or regulation sets a time limit for filing a contested case petition, the general limit for filing a contested case petition is 60 days from the time the agency serves written notice of its decision. It is important to check whether another statute or regulation sets a different time limit since there are different time limits applicable in certain situations, such as in filing a contested case petition involving certain environmental permits.  In fact, most substantive statutes provide a thirty day time limit, while a few provide for a twenty day time limit.

The time limit commences when notice of the agency decision is given to all “persons aggrieved” known by the agency by personal or postal delivery. Notice of the decision must be in writing, “set forth the agency action” in writing, and “inform the persons of the right, the procedure, and the time limit to file a contested case petition.” See §150B-23(f).  The Court of Appeals has held that the petition must be actually filed by the 60-day deadline, not just mailed. See Huntington Manor of Murphy v. North Carolina Dept. of Human Resources, 1990, 99 N.C. App. 52, 393 S.E.2d. 104.  An informal settlement request made after notice is issued does not stop the running of the 60 days.

Serving a Petition

Under the NCAPA, the party filing a contested case petition must serve the petition on all other “parties” to the matter and, in cases involving a license, to the license holder.

The NCAPA does not specify how the petition must be served. The Attorney General’s Office takes the position that a state agency must be served by sending a copy of the petition to the process agent that the agency has designated in the administrative rules rather than just to the agency head or the Attorney General. The Courts have held that service should be either on the registered agent or the Agency head.  Service on opposing counsel is not sufficient.  We strongly recommend service be on the registered agent.

The OAH rules state that unless other rules or statutes say otherwise, “service” means personal delivery or delivery of U.S. Mail or a licensed overnight express mail service. The petition must include a certificate of service and the petitioner must sign, or have a representative sign, the petition. If an attorney is involved, he or she must sign the petition and include his or her name, address, telephone number, and N.C. State Bar number. The Act does not require verification of the petition.

Assignment of the ALJ And Setting of Hearing

Within five days after the time a contested case petition is filed, the Chief Administrative Law Judge assigns the case to an ALJ and schedules a tentative week for the hearing, between 120 and 150 days from the filing of the petition.  The OAH has established this fast-track procedure as part of its effort to see that cases are disposed of as quickly as possible.

The NCAPA provides that where there is one private party, a contested case hearing will be in the county where that person lives and if there is more than one private party, it will be where the agency has its principal office.  However, the NCAPA also gives the ALJ the right to set the hearing in a different county if necessary to “promote the ends of justice” or to better serve the convenience of witnesses. Using this power, OAH has decided that rather than schedule hearings in all 100 counties of the state, it is more efficient to set the hearing in one of the various “regional cities” that is closest to the petitioner’s place of residence.

The regional cities are Asheville, Charlotte, Elizabeth City, Fayetteville, High Point, New Bern, Raleigh, and Wilmington.  Still, if a party requests that the hearing be held in his home county for reasons such as accommodating a great number of witnesses, it is possible the hearing will be scheduled there.

OAH has a policy of scheduling hearings to be held 120 to 150 days from the date a petition is filed, unless there is a demonstrated need for a hearing to be held sooner or later than that.  More complex cases are often placed on a slightly longer track than other less complex cases.

Parties may file, in good faith, a “timely and sufficient affidavit of personal bias or disqualification” of an ALJ.” Upon such a filing, the ALJ will determine this matter himself.

Within ten days after a petition is filed, OAH will serve a Notice of Contested Case Filing and an Order of Assignment of Administrative Law Judge on all parties.” These notices will contain the case name and date, identify the ALJ assigned to hear the case, and request the agency to send within 30 days a copy of the document constituting the agency action that caused the filing of the petition. The scheduling order setting the date and place of hearing will also be served at this time.

The NCAPA requires that these notices be served on the parties by personal delivery or by certified mail. If notice by these methods fails, then it may be given by publication in a newspaper.

Preparing The Prehearing Statement

Contents of the Prehearing Statement

The ALJ routinely requires a prehearing statement from the parties, and thus may serve an Order for Prehearing Statements with the Notice of Contested Case Filing and Assignment.” Within 30 days of such an order, or less at the discretion of the ALJ, the parties must file statements that include the following information:

• The nature of the proceeding and the issues to be resolved;
• A brief statement of the facts and reasons supporting the party’s position on each matter in dispute;
• A list of proposed witnesses with a brief description of his or her proposed testimony;
• A description of what discovery, if any, the party will seek to conduct prior to the contested case hearing and an estimate of the time needed to complete discovery;
• Venue considerations;Estimation of length of the hearing;
• The name, address, and telephone number of the party’s attorney, if any; and
• Other special matters.

Identifying All Legal Issues

The information given in the prehearing statement will assist the parties in preparing for the hearing. It serves as the statement by the petitioner of the legal issues to be resolved, and as the “answer” of those parties other than the petitioner, since the parties are not required to file a formal answer as they would have to do in response to a complaint filed in court.  The ALJ may limit the issues to those stated in the prehearing statements, consequently it is important that a party carefully state all the issues it wishes to litigate.

Requesting Prehearing Conference

The ALJ has the power to require that the parties participate in a prehearing conference to discuss procedural questions relating to the hearing and any other preliminary matters that need to be resolved. Parties may also request that such a conference be held. The parties may be asked to attend the conference in person, but often the conference is held by telephone.

Intervention

Motion to Intervene

Interested persons other than those named in the original petition may petition to intervene in the contested case. Intervention is frequently important where the state agency’s issuance of permits is being contested.  Though the agency that issues the permit is the respondent, the permittee is the party with the greatest interest and should intervene to protect that interest.  In fact, it is generally accepted that in such cases the permittee may intervene as a matter of right.  The rules require that the motion to intervene:

• show how the movant’s rights, duties, or privileges may be determined or affected by the contested case;
• show how the movant may be directly affected by the outcome or that the movant’s participation is authorized by statute, rule or court decision;
• set forth the grounds and purposes for which intervention is sought; and
• indicate the movant’s statutory right to intervene if one should exist.

Allowing Intervention

The ALJ decides whether the petition will be allowed. A request to intervene does not have to be filed at any specific time; the rules simply provide that a filing must be “timely” in light of the circumstances at the time of the filing.  Naturally, it is best to file a request to intervene as early as possible.

If there is sufficient time before the hearing, parties who wish to object to intervention may do so in writing to the ALJ within five days of service of the motion. The objection must give reasons for the objection and must be served on all parties. If there is not enough time before the hearing, the objection may be made at the hearing.

Extent of Intervention

When allowing intervention, the ALJ will issue an order specifying the extent of the intervention allowed, and stating the reasons for allowing the motion. The ALJ has several options concerning the extent to which he may allow intervention. An intervenor may be allowed to:

• file a written brief without acquiring the status of a party.
• intervene as a party with all the rights of a party; or
• intervene as a party with all rights of a party but limited to specific issues and to the means necessary to present and develop those issues.

Mediation Of The Contested Case

The rules adopted by the OAH provide that the Chief Administrative Law Judge may require parties to attend a mediated settlement conference. The order requiring the conference has to be issued within ten days of the filing of the contested case petition. In addition, any party may request the presiding ALJ to order a mediated settlement conference. There is no deadline for filing such a motion.  If a mediated settlement conference is ordered, the parties have 21 days to select a mediator. If they do not agree, the ALJ will appoint a mediator.

Parties may select a mediator who has already been certified by the Administrative Office of the Courts as a mediator. The OAH keeps a list of certified mediators.  If the parties select a non-certified mediator, the petitioner’s attorney must file a Nomination of Non-Certified Mediator with the ALJ within 21 days of the order requiring mediation identifying the mediator, the training, experience or other qualifications of the mediator, the rate of compensation and the agreement of the parties as to the selection of the mediator and rate of compensation. The ALJ will rule on the nomination without a hearing.”

Unless otherwise agreed by the parties and the mediator, the mediation conference will be held in the courthouse or other public building in the county where the contested case is pending. It must be held by a date set by the Chief ALJ, no less than 90 days and no more than 120 days after the issuance of the order requiring mediation. The mediator schedules the conference.

The parties themselves must attend the hearing. If the party is a corporation, an officer, director or employee having authority to settle the claim must attend. The party’s counsel of record must also attend.  After the mediation conference, the mediator files a report with the parties and the ALJ stating whether an agreement was reached and if one was, whether the action will be concluded by consent judgment, voluntary dismissal or withdrawal of the petition.

The OAH rules also allow a party, the presiding ALJ, or the Chief Administrative Law Judge to request a settlement conference presided over by another ALJ. It is to be conducted at an agreed upon time and place or by telephone if any party would be required to travel more than 50 miles to attend. If during the conference a settlement is not reached but agreement is reached on any facts or other issues, then an order confirming the matters agreed on will be entered by the ALJ handling the settlement conference. It will be binding on the ALJ assigned to hear the case.

The OAH rules should be consulted for other requirements applicable to mediations or settlement conferences. 

Conducting Discovery

The NCAPA allows parties to use any method that would be allowed in a state court case for the discovery of evidence to present at the hearing including depositions and issue interrogatories and requests for documents. The OAH rules require parties to exhaust all less formal opportunities to obtain relevant material before resorting to formal discovery requests, and sometimes informal requests are used. Nevertheless, formal measures are usually necessary.

The Scheduling Order served on the parties will set a discovery deadline, which will be at least two weeks before the hearing date. A party must serve any formal request for discovery on all other parties, but need not file it with the OAH. Within 15 days of receipt of the request for discovery, the receiving party must: “(1) move for relief from the request; (2) provide the requested information, material or access; or (3) offer a schedule for reasonable compliance with the request.”

The ALJ has the power to sanction a party for failing to respond to discovery requests. However, the party seeking discovery will have to show that the discovery sought is not a tactic of delay and is significant to the party’s case. The ALJ has the authority to issue subpoenas for witnesses, for depositions or for the production of documents. 

Making Motions

Procedure for Motions

Prehearing motions must be submitted in writing to the ALJ. Any motion must be filed and served on all parties at least ten days before the hearing on the merits or the hearing on the motion, if any. Parties have ten days from the date of service to respond in writing to motions.

Written motions are decided without oral argument unless directed by the ALJ. A party may request oral argument when making the motion or filing a response. The OAH rules state that the ALJ will grant a hearing only “if it is determined that a hearing is necessary to the development of a full and complete record on which a proper decision can be made.”  If a hearing is allowed, it is often held by telephone.

Particularly useful types of motions in a contested case are for a stay of the contested agency action or for a prehearing ruling on the validity of an agency’s rule involved in the contested case. Other motions are typical of civil litigation and include motion to dismiss, to consolidate, to stay the agency action or to overturn an agency rule.

Motion to Stay the Agency Action

A motion for a stay can be important since the decision of the agency involved in a contested case is not automatically stayed when a petition to initiate a contested case is filed unless the substantive statute provides that it is stayed. Often, an agency will stay its action on its own, but if it does not, the ALJ has the power to order the agency to stay the contested action pending the outcome of the case either by temporary restraining order or by a preliminary injunction which may be for the duration of the case. This can be very important since the agency decision may require a party to take actions that would require significant expenditures or that might be detrimental to its business or other interests. Nothing in the NCAPA allows a party to recover any damages from the agency if it ultimately prevails in the contested case but has suffered damages from having to comply with the agency order while the case was pending.

An ALJ may impose a stay in accordance with the principles set forth in Rule 65 of the Rules of Civil Procedure.  A party wanting to obtain a stay order may have to post a bond, the amount of which will be set by the ALJ.

Motion to Invalidate an Agency Rule

The motion to invalidate an agency rule can be particularly important in a contested case.  The ALJ may rule that an agency rule is not valid as applied in the case when he or she determines that:

• It is not within the statutory authority of the agency,
• It is not clear and unambiguous to persons it is intended to direct, guide, or assist, or
• It is not reasonably necessary to enable the agency to fulfill a duty delegated to it by the General Assembly.

It is permissible to ask the ALJ to rule on the validity of a rule prior to the hearing.  If the ALJ rules that the rule is invalid, the ruling becomes part of the ALJ’s decision in the case.

Conduct Of Hearings

Applicable Procedures

Hearings conducted under Article 3 must conform to Article 3 procedures, except where other statutes govern. The practitioner should make sure that no other statute applies before preparing for the hearing because there often are other statutes or rules applicable to a specific agency. For example, special time limits for hearings are set in the Certificate of Need provisions of the Department of Human Resources and for some environmental permits.

OAH rules provide that hearings be conducted “in accordance with the practice in the Trial Division of the General Court of Justice.” For this reason, the hearings generally follow the procedures of court trials, although the proceeding may be a little more informal than a trial. The ALJ may interject questions of his own more than a trial judge would, especially if a party is not represented by an attorney if doing so is necessary to aid in a full development of material facts in the case.

Legal Representation

The NCAPA provides that the ALJ may conduct the hearing in the absence of a party if that party has been properly notified and fails to appear.  There is no requirement in the NCAPA that a party be represented by an attorney at the hearing, although North Carolina law governing the appearance of corporations governs their appearance.  However, parties frequently are represented since contested case hearings can involve legal issues that would be difficult for a layperson to argue. In addition, it should be remembered that the agency will be represented by legal counsel, usually an attorney from the Attorney General’s Office.

Evidence

The NCAPA states that except as provided in other statutes, the rules of evidence applicable to trials in the North Carolina courts shall be followed.  However, the NCAPA also provides that when evidence is not reasonably available to show the relevant facts, the ALJ may allow a party to use the “most reliable and substantial evidence available.”  In practice, evidence that would not be allowed in the courts is often used in contested case hearings.

Under the NCAPA and the OAH rules, the ALJ may exclude evidence that is “irrelevant, immaterial and unduly repetitious.” Also, the rules provide that an ALJ may, in his discretion, exclude any evidence if its probative value is substantially outweighed by the risk that its admission will: (a) necessitate undue consumption of time, or (b) create substantial danger of undue prejudice or confusion.”

Only evidence that is introduced and made part of the record can be considered in the determination of the case except that the ALJ can take “notice” of facts that are: (a) generally known, (b) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned, or (c) within the specialized knowledge of the agency.

It is permissible to use copies of documents rather than originals, but if a party makes a timely request, it must be permitted to compare the copy to the original if available. The NCAPA also provides that materials may be “incorporated by reference” if the materials are available for examination by the parties. This means that you could just identify the document on the record and not have it copied into the record. Still, you should have a copy of the material at the hearing if this is not too impractical.

Under the current statute it has been very important to present all relevant evidence at the hearing. When the agency reviews the ALJ’s recommended decision, it may not consider new evidence. This will no longer be an issue after January 1, 2012 when the ALJ’s decision is final. 

The rules provide that it is not necessary to make an objection to evidence at the time it is used in the hearing in order to have the right to object to the consideration of the evidence by the ALJ or upon judicial review. Thus, although it is best to make an objection known at the hearing when the evidence is presented, it is permissible to raise the objection for the first time in a closing argument to the ALJ, a post-hearing brief filed with the ALJ, or on appeal. However, you should be aware that the ALJ will not always grant parties time to submit briefs before making a ruling; thus, if you have not made an objection at the hearing, you may have no opportunity to argue to the ALJ that he should not consider the evidence.

Witnesses

A party has the right to present witnesses and insure their presence by subpoena. OAH rules provide that witness testimony will be under oath and recorded. A party may call an employee of the agency as an adverse party and use leading questions, contradiction and impeachment “on material matters in all respects as if that party had been called by the adverse party.”  The NCAPA specifically provides that a party may examine the author of a document prepared by, on behalf of, or for the use of the agency and offered in evidence.

A party should be certain to issue subpoenas to witnesses it wants to examine at the hearing. The OAH has a form for subpoenas and an information sheet that explains who may serve subpoenas, how they may be served, and the methods for showing that service was properly accomplished.

Burden of Proof

The NCAPA does not address which party has the “burden of proof” or the burden of going first with evidence and putting on sufficient evidence to support a finding in that party’s favor. Thus, this is governed by other applicable statutes or case law. Generally, the petitioner will have the burden of proof. However, the agency will have this burden in cases in which the agency seeks to withdraw a permit or license or impose a penalty.

NOTE:  Senate Bill 496 governing Medicaid appeals provides that the burden of proof in Medicaid cases is on the Agency.

Final Agency Decision Or Order

ALJ’s Decision

After the hearing, the ALJ may allow time for the parties to file proposed findings of fact and conclusions of law, as well as briefs, but is not required to do this. The decision about whether to allow the parties to file these documents will be influenced by the complexity of the case and the urgency of the need to reach a decision.

OAH rules provide that the ALJ’s decision in the case be issued within 45 days after the end of the hearing or the date he or she receives any proposed findings of fact and written arguments from the parties. The Chief Administrative Law Judge may extend this period if requested by the ALJ, for good cause shown. The decision will contain findings of fact and conclusions of law and may include an explanatory memorandum.

The OAH rules provide that the decision must be based exclusively on:

• the competent evidence and arguments presented during the hearing and made a part of the official record;
• stipulations of fact;
• matters officially noticed;
• any proposed findings of fact and written arguments submitted by the parties . . . ; and
• other items in the official record that are not excluded by a provision of the NCAPA.

The OAH will send a copy of the decision to each party.

Agency’s Final Decision

After issuing a decision, in cases brought before January 1, 2012, the ALJ loses jurisdiction to substantively change that decision. The matter goes to the agency which will make the final decision in the case. Agencies are required to give parties the opportunity to file exceptions to the ALJ’s decision and to present written arguments to the final decisionmakers. The agency’s final decision must be based on the “official record” including the recommended decision, the pleadings and prehearing rulings, evidence offered at the hearing, and a transcript of the hearing, if one has been ordered by a party.

After review of the official record, the agency generally has 90 days to make a final decision in writing that includes findings of fact and conclusions of law. If the agency rejects the ALJ’s recommendation, then it must set out its reasons for so doing. The final decision must be supported by substantial, admissible evidence. Copies of the final decision will be served on the parties, their attorneys, and the OAH.

An agency has 90 days from the receipt of the contested case record from OAH to render a final decision. Extensions are limited to 90 additional days by agreement of the parties or for good cause shown by the agency. Boards or commissions subject to Article 3 have 90 days after receipt of the record or 90 days after their next regularly scheduled meeting, whichever is longer, to make a decision, with the same rule for extensions. If there is no decision within 90 days, the agency is deemed to have adopted the ALJ’s decision.

NOTE:  Beginning with cases filed after January 1, 2012, the above procedures no longer will be applicable, except that the time limits imposed on agencies for issuing final decisions will apply to ALJs for contested c