When Administrative Law Judges Rule the World: Wooley v. State Farm-Does a Denial of Agency- Initiated Judicial Review of ALJ Final Orders Violate the Constitutional Doctrine of Separation of Powers?

• Author: April Rolen-Ogden
• Pages: 885-921

Page 886

This casenote is dedicated to the most supportive and loving parents a person can have, Wade and Sharon Rolen, whose undying encouragement has made me the person I am today. I must also thank one of my best friends, Jennifer Eck Frederickson, for suggesting this topic. Special thanks go to my most esteemed faculty advisor, Professor Paul R. Baier, for his advice and help throughout the writing process, as well as to Professor Edward P. Richards for his advice and assistance in locating sources. Last, but certainly not least, I must thank my husband, Joseph Ogden III, whose love and devotion have sustained me.

Introduction

As one scholar wisely noted, "at the very minimum, the availability of agency-initiated judicial review seems implicit to a constitutional scheme of ALJ finality."¹ Louisiana is the only state in the nation with an Administrative Procedure Act (hereinafter APA) specifically precluding agency-initiated judicial review of ALJ final orders. In Wooley v. State Farm,² the Louisiana Supreme Court faced the issue of whether this administrative scheme comports with the constitutional doctrine of separation of powers. Depending on the court's ultimate conclusion, the Louisiana Legislature could be praised for its ingenuity or chastised for substituting efficiency for inherent principles. This decision will be analyzed and followed closely by administrative and constitutional scholars, lawyers, and legislators around the country because Louisiana's unique APA places it on the brink of the modern administrative state.

The Louisiana Supreme Court ultimately held that both amendments to Louisiana's APA are constitutional.³ The court correctly held that the mere creation of a central panel of ALJs is constitutional. However, this comment contends that a proper analysis in Wooley should have found that the denial of agency- initiated judicial review in such a central panel system is Page 887unconstitutional because it impermissibly infringes on both the judicial and executive branches.

Agencies must be afforded some mechanism to perform their delegated duty to make and enforce law and policy, while respecting the fairness concerns of regulated entities and individuals. This comment illustrates the detrimental effect of focusing too much power in ALJs with no opportunity for judicial review when ALJs rule against the agencies involved. This comment also offers a critique on the court's rationales and ultimate decision, while simultaneously analyzing issues that were either missed, ignored, or not brought to the attention of the Wooley court. In an attempt to correct the damage wreaked by this decision, this comment explores two other states' APAs and their solutions to the issues presented. A constitutional scheme would respect both sides of this debate by allowing ALJ finality while providing agency-initiated judicial review which incorporates differing standards of review for issues of fact, issues of law, and issues of policy.

Section I provides the necessary background information on the administrative law aspects of this debate, while Section II examines Louisiana's current APA prior to discussing the Wooley matter in all its phases. Section III analyzes the constitutionality of Louisiana's denial of agency-initiated judicial review in a system of ALJ finality. Section IV engages in a comparative analysis between Louisiana and the Carolinas to fully comprehend the gravity of the constitutional concerns at stake. Finally, Section V offers two proposals for a constitutionally sound APA. Both proposals are equally capable of achieving the worthy goals attempted by the Louisiana Legislature.

I The Origins and Trends of Modern Administrative Law

A The Origins and Development of the Traditional Administrative Procedure Act

Congress and state legislatures alike delegate to administrative agencies the authority to promulgate, enforce, and interpret regulations for recently passed statutes. One of the primary vehicles for exercising this delegated duty includes administrative adjudications, where agencies often make and enforce law and policy. Since their inception, administrative agencies have been an anomaly because of the vast number of roles they integrate into a Page 888 single entity. These roles include that of investigator, prosecutor, regulator, and adjudicator.⁴

Most states modeled their APAs on the federal APA.⁵ Prior to the enactment of the federal APA, the political debate focused on the degree of division between the agency's traditional regulatory and adjudicatory functions.⁶ As a result, many people advocated reform of the traditional agency system.⁷ This reform is usually centered on separation of the adjudicatory function from other agency functions so the system will be fairer.

Unlike many recent state APA amendments, the federal APA does not remove administrative adjudications from the agency itself, despite many unsuccessful attempts at reform. Instead, federal hearing officers are placed outside of the control of agency officials engaged in prosecuting or investigating claims.⁸ The responsibility of the federal hearing officers is to make an initial decision, which later becomes part of the record. It is this record that is submitted for final review by the agency head or commission.⁹ With this structure, the agency is left with the discretion to follow the hearing officers' recommendation or to make different findings of fact, conclusions of law, and thus may reach a different determination than the hearing officer.¹⁰ As a result, under the federal APA, the ultimate decision remains with the agency.

In 1961, the National Conference of Commissioners on Uniform State Laws enacted the Model State Administrative Procedure Act.¹¹ The 1961 Model State APA did not address the primary concern of its federal counterpart: the seemingly coercive and inefficient relationship between agencies and hearing officers. Page 889

However, in 1981, a revised APA was issued.¹² This 1981 Model State APA adopted the prior federal APA standard of allowing the hearing officer or administrative law judge's (ALJ) decision to constitute an initial conclusion for the agency head to consider during his or her review of the matter.¹³

B Three Different Models of Administrative Adjudication

Despite differing terminology used by scholars, there are three generalized models of administrative adjudication in the several states.¹⁴ First, the agency staff approach, which is also known as the internal model, renders the ALJs the least amount of decisional independence.¹⁵ This is because the ALJs operate entirely within the agency. The ALJ decision is merely a suggestion subject to acceptance or rejection by the agency head or commission.¹⁶

Second, the central panel approach provides for full separation between agencies and ALJs. Traditional agency adjudications are not conducted by the agency involved in the matter; instead, the adjudications are managed and controlled completely outside of the agency involved.¹⁷ Central panel systems vary from state to state. As a generalized notion, a central panel is a non-political, merit-protected agency that is independent of the various state agencies.¹⁸ This independence allows the central panel to perform agency adjudications so that the ALJs will not feel compelled to render favorable decisions to the agencies involved.

Finally, the "administrative court" model, also known as the external model, is the most controversial approach. ALJs have the Page 890 greatest amount of autonomy under this approach because they have the authority to issue final, and immediately appealable, decisions.¹⁹ Review of such decisions is not open to the traditional agencies. Instead, these decisions go directly to a reviewing court in case of conflict.²⁰ An APA system that grants such ALJ authority is a system of "ALJ finality" or "ALJ final order authority." In comparing these three models, Professor Rossi noted that in contrast to the first two models, "the agency effectively submits to binding arbitration before the ALJ" with this external approach.²¹ There are only four states which utilize this model: Louisiana, Florida, South Carolina, and Missouri.²²

C The Trend Toward Central Panels

The concept of central panels in administrative agencies is not as new and revolutionary as one might think. In 1945, California was the first state to adopt a central panel for its administrative agencies.²³ Nearly...