A Michigan Administrative Law Primer Don LeDuc

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assistance of counsel claims without contradicting their prior reasoning.

Both the Eighth and Eleventh Circuits do not exercise jurisdiction over either ineffective assistance of counsel or procedural due process claims because an alien cannot have a constitutionally protected liberty or property interest in discretionary relief.168 The Fifth and First Circuits have also held that they do not have jurisdiction over procedural due process claims because the petitioner does not have a protected interest at stake if he or she is seeking purely discretionary relief.169 However, while the Third and Ninth Circuits have held that they do have jurisdiction over both types of claims, it is not because they have found a protected interest in discretionary forms of relief.170 In fact, the Ninth Circuit has noted that “discretionary relief is a privilege created by Congress” and that a noncitizen cannot expect to receive this relief because the Attorney General has complete discretion.171 Therefore, noncitizens do not have a fundamental right to this type of relief.172 The Third Circuit has likewise recognized that noncitizens do not have a constitutional right to discretionary relief.173

Nonetheless, by holding that non-citizens have a protected interest in fundamentally fair removal proceedings, the type of relief sought by the petitioner is no longer significant to the analysis of whether he or she has a protected interest supporting a due process claim. As the Ninth Circuit has noted, “procedural due process claims and ineffective assistance of counsel claims . . . are not affected by the nature of the relief sought” because “they are predicated on the right to a full and fair hearing.”174 Therefore, courts do not have to differentiate between these claims “based on whether the petitioners raising them [are seeking] discretionary or mandatory relief.”175 Because all non-citizens have this interest at stake, even if a

168. See Pinos-Gonzalez v. Mukasey, 519 F.3d 436, 441 (8th Cir. 2008); Scheerer v. U.S. Att’y Gen., 513 F.3d 1244, 1253 (11th Cir. 2008). 169. Assad v. Ashcroft, 378 F.3d 471, 475–76 (5th Cir. 2004); Rivera v. Sessions, 903 F.3d 147, 150–51 (1st Cir. 2018). 170. Munoz v. Ashcroft, 339 F.3d 950, 954 (9th Cir. 2003); Tovar-Landin v. Ashcroft, 361 F.3d 1164, 1167 (9th Cir. 2004); Cham v. Att’y Gen. U.S., 445 F.3d 683, 691 (3d Cir. 2006). 171. Munoz, 339 F.3d at 954. 172. Tovar-Landin, 361 F.3d at 1167. 173. Cham, 445 F.3d at 691. 174. Fernandez, 439 F.3d at 602 n.8. 175. Calderon-Rosas, 957 F.3d at 385.

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petitioner is seeking only discretionary relief, such as asylum or cancellation of removal, the circuit court will be able to exercise jurisdiction.

Although some circuit courts have held that they have jurisdiction over both types of claims while others have not, the reasons behind these distinctive holdings are not actually in conflict. The circuit courts agree that a non-citizen does not have a constitutionally protected liberty or property interest in receiving a discretionary form of relief during his or her removal proceedings.176 Nevertheless, the Third and Ninth Circuit Courts have taken the analysis a step further and found a protected interest in fundamentally fair removal hearings instead, which provides the basis for a due process claim.177

This approach would allow circuit courts, such as the Eighth and Eleventh Circuits, to hold that they have jurisdiction over noncitizens’ ineffective assistance of counsel or procedural due process claims, even if they are seeking only discretionary relief, without contradicting their previous reasons.178 Furthermore, for circuits that have held that they do have jurisdiction to hear one or both of these types of claims without expressly providing a protected interest, this approach would allow them to ground their holdings in a clearly defined protected interest. Ultimately, holding that aliens have a protected interest in fundamentally fair removal hearings would not disturb long-recognized precedent that there cannot be a protected interest in “an act of grace” provided by the Attorney General.179 Moreover, such a holding would fit well with Supreme Court and Board of Immigration Appeals precedent recognizing an entitlement to, and expectation of, a full and fair hearing before a noncitizen is ordered to be removed.180

176. See Mejia Rodriguez, 178 F.3d at 1146–47; Ashki v. I.N.S., 233 F.3d 913, 921 (6th Cir. 2000); Munoz, 339 F.3d at 954. 177. See Calderon-Rosas, 957 F.3d at 386; Fernandez, 439 F.3d at 602, n.8. 178. See Pinos-Gonzalez, 519 F.3d, at 441; Mejia Rodriguez, 178 F.3d at 1146–48. 179. Jay v. Boyd, 351 U.S. 345, 354 (1996). 180. See supra Part III (examining Supreme Court and Board of Immigration Appeals precedent stating that noncitizens have a right to fundamentally fair removal hearings).

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THIS APPROACH IS PREFERABLE BECAUSE IT AVOIDS INCONSISTENT RESULTS AND POTENTIAL ISSUES

If the circuit courts hold that they do have jurisdiction because petitioners have a protected interest in fundamentally fair removal hearings, they will be able to avoid the issues that plague a finding of no jurisdiction. The circuit courts’ reasoning in concluding that aliens seeking discretionary relief may not bring procedural due process and ineffective assistance of counsel claims is dubious and could ultimately lead to inconsistent results.

Recognizing the Distinction Between the Right to Relief and a Fair Opportunity to Seek Relief

While noncitizens are not entitled to receive discretionary forms of relief, “it does not logically follow that noncitizens are [thus] not entitled to a fair hearing” in which they may present their applications and supporting evidence before an impartial tribunal.181 There is a distinction between a right to receive or even be eligible for relief and a right to a fair opportunity to seek that relief. However, as the Third Circuit noted, the arguments set forth by the circuit courts that have held that they do not have jurisdiction “conflate[] the existence of a statutory entitlement with the fairness of the process” that a petitioner is entitled to receive.182 As discussed earlier, the petitioner must rely upon a favorable exercise of discretion to successfully obtain this form of relief. Yet, even in hearings where the petitioner is seeking only discretionary relief, he or she must be given “all opportunity to be heard upon the questions involving his right to be and remain in the United States.”183

Removing the Artificial Distinction Between Stages in the Removal Proceeding

The approach taken by the circuit courts that do not exercise jurisdiction is also problematic because it produces an artificial distinction between disputing the alleged immigration violations and presenting a case for one’s application for discretionary relief.184 Supreme Court precedent has held that noncitizens can only be

181. Chapman, supra note 12, at 1558. 182. Calderon-Rosas, 957 F.3d at 386. 183. Yamataya, 189 U.S. at 101. 184. Chapman, supra note 12, at 1558.

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removed after a full and fair hearing.185 Nonetheless, many of these circuits have not required that the relief stage in the merits hearing “conform to traditional standards of fairness on the grounds that noncitizens have no liberty interest in discretionary forms of relief.”186 Thus, in cases where the noncitizen alleged that the immigration judge prohibited the noncitizen from introducing witnesses or other evidence to support his or her application for discretionary relief, for instance, these courts have held that the noncitizen does not have a valid claim.187

Nevertheless, the due process protections guaranteed to noncitizens under the Fifth Amendment do not stop at the end of the first hearing or even after the first part of the inquiry is answered. Most immigration removal proceedings involve at least two hearings—a master calendar hearing and a merits hearing.188 Further, the merits hearing involves the consideration of two questions: “whether the noncitizen is removable” as well as whether the noncitizen “qualifies for any form of relief for removal” and merits “a favorable exercise of discretion.”189 Nevertheless, both inquiries and both hearings compose only one removal proceeding.190

As the Supreme Court has provided, noncitizens may only be removed after a full and fair proceeding that comports with the Due Process Clause. As such, this means that “throughout all phases of deportation proceedings, petitioners must be afforded due process of law.”191 Thus, even at the relief stage of the proceeding, regardless of the type of relief sought, noncitizens are entitled to a fundamentally fair hearing on their applications. By exercising jurisdiction, the circuit courts will thus be able to remove this distinction and correctly extend due process protections to the entirety of a removal proceeding.

185. Yamataya, 189 U.S. at 101. 186. Chapman, supra note 12, at 1555. 187. See Sanchez-Velasco v. Holder, 593 F.3d 733, 737 (8th Cir. 2010). 188. Koehl, supra note 27, at 111 (citing Immigration Court Practice Manual, U.S. DEP’T OF JUST. at 65, https://www.justice.gov/sites/default/files/eoir/legacy/2012/11/08/Chap%204.pdf) (last revised Apr. 1, 2008)). 189. Lauritzen, supra note 31, at 113 n.13, 117 (2020). 190. Id. at 117. 191. Serrano-Alberto v. Att’y Gen. U.S., 859 F.3d 208, 213 (3d Cir. 2017).

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Supporting Congress’s Intent to Provide Avenues for Relief

Furthermore, “providing noncitizens with avenues for relief but denying that they have a right to a fair hearing in adjudicating an application for relief” conflicts with Congress’s intent.192 Congress has extended several forms of relief available to non-citizens, providing the circumstances and qualifications that a non-citizen must demonstrate to be eligible for that particular form of relief..193 In so doing, Congress has intentionally provided opportunities for noncitizens to seek forms of mandatory relief as well as discretionary relief, including forms that would allow the noncitizen to remain in the country.194

By providing these avenues for noncitizens to seek relief from removal, Congress has demonstrated that “there should be some flexibility built into otherwise strict immigration laws.”195 The purpose of these provisions, then, is “to soften the rigor of the law in deserving cases.”196 Nevertheless, by “holding that the procedures employed in adjudicating applications for [discretionary] relief [need not] comport with due process, the circuits are frustrating Congress’s intent in providing these forms of relief” to noncitizens.197 As discussed earlier, if applicants are unable to receive a full and fair hearing while presenting their application for discretionary relief, they lose a fair opportunity to seek the relief that Congress has intentionally made available.

Remaining Focused on the Due Process Violation and Avoiding Dubious Results

By focusing the analysis on “the discretionary nature of the relief” that the noncitizen is seeking, many of the federal circuit courts also “overlook what the actual due process violation alleged is.”198 It is undisputed that a denial of discretionary relief is not a violation of due process because this form of relief is given at the discretion of the Attorney General.199 As such, there cannot be an

192. Chapman, supra note 12, at 1558. 193. Id. at 1558–59. 194. See Koehl, supra note 27, at 112–14. 195. Chapman, supra note 12, at 1545. 196. Chapman, supra note 12, at 1545 n.69. 197. Chapman, supra note 12, at 1559. 198. Id., at 1558. 199. See Assad, 378 F.3d at 475.

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entitlement to that relief.200 However, these courts have failed to recognize that the procedures, including the effect of ineffective assistance of counsel, is what renders the removal proceeding fundamentally unfair..201 That should be the focus of the analysis. These petitioners are not bringing their claims forth because of an expectation that they will receive the discretionary relief for which they have applied. Rather, these claims are brought forth because the noncitizen was not provided the full and fair hearing that they are entitled to receive before being ordered removed.

Additionally, by holding that an alien seeking only discretionary relief does not have a valid due process claim that gives the court jurisdiction, circuit courts may also be permitting “absurd results.”202 This holding means that a noncitizen affected by ineffective assistance of counsel or a procedural due process issue would have no recourse, even if their due process claims are otherwise meritorious. As such, the procedures that Congress has provided would not have to be “administered fairly and impartially” before resulting in a removal order.203 As the Third Circuit noted, the immigration judge could conduct hearings and deny relief “based on the flip of a coin” and the petitioner would be unable to seek a new hearing, effectively denying them the opportunity to fairly present their evidence and application for relief.204

Countervailing Reasons for the Concern of Burdening Court Systems Although concerns may arise regarding the possibility of burdening the court systems if the circuit courts hold that they do have jurisdiction, these concerns must be considered in light of the standards that still must be met for these claims as well as the countervailing legal and public policy reasons for why courts should still hold that they have jurisdiction. First, no federal court in the current circuit split has expressed concern that, by exercising jurisdiction, these cases will burden their court system.205 Secondly,

200. Nativi-Gomez, 344 F.3d at 807–09. 201. Chapman, supra note 12, at 1558; See Calderon-Rosas , 957 F.3d at 386. 202. Calderon-Rosas, 957 F.3d at 386. 203. Id. 204. Id. 205. See e.g., Fernandez v. Gonzales, 439 F.3d 592 (9th Cir. 2006); Delgado v. Holder, 674 F.3d 759 (7th Cir. 2012); Assaad v. Ashcroft, 378 F.3d 471 (5th Cir. 2004); Omar v. Mukasey, 517 F.3d 647 (2d Cir. 2008); Salgado-Toribio v. Holder, 713 F.3d 1267 (10th Cir. 2013); Pinos-Gonzalez v. Mukasey, 519 F.3d 436 (8th

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even if courts do hold that they have jurisdiction, this holding does not change the standards by which procedural due process claims and ineffective assistance of counsel claims are analyzed on the merits.206 For both ineffective assistance of counsel and procedural due process claims, prejudice must be demonstrated.207 This requires that aliens demonstrate that there is a “reasonable probability” that the outcome of the hearing was affected.208 This difficult standard still limits a noncitizen’s ability to bring a claim, indicating that courts will likely not become burdened with these claims if they hold that they have jurisdiction.

Even still, Congress has deliberately allowed federal circuit courts to hear constitutional claims or questions of law arising out of removal proceedings, including due process claims.209 As evidenced by this authority, courts are “called upon to protect” individual and due process rights, including those of immigrants who are present in the United States unlawfully.210 Furthermore, because the Board of Immigration Appeals does not have jurisdiction to hear constitutional issues, due process claims must be left to the federal circuit courts.211 Ultimately, while this concern of burdening the courts is valid, it is unavailing when balanced by the difficult standard of prejudice that must be met, limiting a noncitizen’s ability to bring a claim as well as the duty of the court to hear these constitutional claims.

PUBLIC POLICY CONCERNS ALSO DEMONSTRATE THAT COURTS SHOULD EXERCISE JURISDICTION

From a public policy perspective, holding that federal circuit courts have jurisdiction to hear these types of claims is preferable because it provides noncitizens with the protections that the Constitution provides. Additionally, this holding aligns with the

Cir. 2008); Mejia Rodriguez v. Reno, 178 F.3d 1139 (11th Cir. 1999) (indicating that the circuit courts have not expressed any concern that exercising jurisdiction will burden the court system in their analyses). 206. Fadiga v. Att’y Gen. U.S., 488 F.3d 142, 158–59 (3d Cir. 2007); Matter of Lozada, 19 I&N Dec. 637, 638 (BIA 1988). 207. Fadiga, 488 F.3d at 158–59; Matter of Lozada, 19 I&N Dec. at 638. 208. Fadiga, 488 F.3d at 158 (quoting Strickland v. Washington, 466 U.S. 668, 694 (1984)). 209. 8 U.S.C. § 1252(a)(2)(D); Menke, supra note 46, at 605. 210. See Chehazeh v. Att’y Gen. U.S., 666 F.3d 118, 130 (3d Cir. 2012). 211. Dree K. Collopy et al., Challenges and Strategies Beyond Relief, AM. IMMIGR. LAW. ASS’N 518, 529-30 (2014), https://www.aila.org/File/Related/11120750b.pdf.

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country’s immigration-law-related goals and core values of justice and fairness.

Providing Noncitizens with the Minimal Protections Guaranteed by the Constitution

In holding that federal circuit courts do have jurisdiction, noncitizens, a portion of the population with next to no power or protection, will receive the minimal guarantees of the Constitution that they are entitled to receive. As noted above, all noncitizens, whether present in this country lawfully or unlawfully, are protected by the Due Process Clause of the Fifth Amendment. However, if circuit courts continue to hold that they do not have jurisdiction, these immigrants will be forced to bear the brunt of issues within the legal system that they have no power over and from which the law should protect them. This concern is only heightened when considering additional factors.

For one, despite a noncitizen’s need for effective counsel to aid them “in navigating through” “[t]he complexity of the immigration system,”212 a system described as “a maze of hyper-technical statutes and regulations that engender waste, delay, and confusion for the Government and petitioners alike,”213 noncitizens are “disproportionally saddled with low-quality counsel.”214 For instance, attorneys “(1) may not have the appropriate legal expertise, (2) may be overloaded with too many cases, (3) may not give due attention and care to individuals, or (4) may even be fraudulent.”215 Other barriers include language differences and long distances between detention facilities where a noncitizen is detained and available legal counsel.216 Additionally, even if the attorney representing an immigrant is later disbarred for “pattern[s] of neglect,” this does not provide any relief for an immigrant seeking relief from removal.217

212. LaJuana Davis, Reconsidering Remedies for Ensuring Competent Representation in Removal Proceedings, 58 DRAKE L. REV. 123, 140 (2009). 213. Drax v. Reno, 338 F.3d 98, 99 (2d Cir. 2003). 214. Calderon-Rosas v. Att’y Gen. U.S., 957 F.3d 378, 381 (3d Cir. 2020). 215. Andrew I. Schoenholtz & Hamutal Bernstein, Improving Immigration Adjudications Through Competent Counsel, 21 GEO. J. LEGAL ETHICS 55, 58–59 (2008). 216. Davis, supra note 214, at 146–150. 217. See Calderon-Rosas, 957 F.3d at 381–82 (explaining that the petitioner’s attorney was later disbarred for “‘multiple violations of the Rules of Professional

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Oftentimes, the only way that a noncitizen can seek relief from such a situation, especially if the Board of Immigration Appeals does not provide a new hearing, is to bring a claim of ineffective assistance of counsel to a federal circuit court of appeals.

Furthermore, there are a wide array of additional procedural due process issues that can affect an immigrant’s removal proceeding. Courts have found due process violations in immigration proceedings based on: “[f]ailure to advise of eligibility for relief;218 [d]enial of continuance;219 [r]efusal to change venue;220 [f]ailure to permit testimony;221 [r]eliance on unreliable hearsay;222 [f]ailure to consider evidence or give a reasoned explanation;223 [i]mmigration judge bias;224 [d]efective notice;225 and [r]eliance on extra-record facts.”226 This list is not exhaustive, but it demonstrates the abundance of ways that a noncitizen may be prejudiced during his or her removal hearing. If the circuit court is unable to hear a noncitizen’s claims regarding any of these potential procedural due process issues because it does not exercise jurisdiction over them, the noncitizen could potentially be ordered to be deported without having had a full and fair hearing.

The significance of these concerns is only magnified by recognizing that the consequences of being impacted by ineffective assistance of counsel or a procedural due process issue are drastic. While removal is not considered a punishment, the Supreme Court has recognized the “high and momentous” stakes that accompany a removal order as well as the “drastic deprivations.”227 This is especially true when the individual being removed has established a

Conduct in seven separate client matters’ amounting to ‘a troubling pattern of neglect’”). 218. Collopy et al., supra note 213, at 530(citing United States v. MelendezCastro, 671 F.3d 950, 954 (9th Cir. 2012)). 219. Id. (citing Gjeci v. Gonzales, 451 F.3d 416 (7th Cir. 2006)). 220. Id. (citing Campos v. Nail, 43 F.3d 1285 (9th Cir. 1994)). 221. Id. (citing Oshodi v. Holder, 729 F.3d 883, 889 (9th Cir. 2003)). 222. Id. (citing Pouhova v. Holder, 726 F.3d 1007, 1012 (7th Cir. 2013)). 223. Id. at 531 (citing Bosede v. Mukasey, 512 F.3d 946, 950–51 (7th Cir. 2008)). 224. Id. (citing Abulashvili v. U.S. Att’y Gen., 663 F.3d 197, 207–08 (3d Cir. 2011)). 225. Id. (citing Burger v. Gonzales, 498 F.3d 131, 133 (2d Cir. 2007)). 226. Id. (citing Getachew v. I.N.S., 25 F.3d 841, 845 (9th Cir. 1994)). 227. Delgadillo v. Carmichael, 332 U.S. 388, 391 (1947); Woodby v. I.N.S., 385 U.S. 276, 285 (1966).

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life with family, friends, work, and more and is required to “forsake all the bonds formed here and go to a foreign land.”228 Furthermore, these proceedings can lead to the deportation of an individual who has lived in the country for years, decades, or maybe even the majority of his or her life. They must suddenly begin a new life in a location where they have “no contemporary identification,” often with little hope of returning soon.229 Depending on the facts and circumstances involved in a noncitizen’s removal, the government may bar the individual from reentering the United States for a period ranging from five to twenty years or, occasionally, even permanently.230

Moreover, the use of removal as a form of immigration regulation has increased significantly in recent decades.231 From 1950 to 1969, a total of slightly less than 250,000 individuals were deported.232 This number nearly doubled in the years between 1970 and 1989.233 Since 1997, the United States has removed hundreds of thousands of noncitizens from the country per year.234 According to the Department of Homeland Security’s Yearbook of Immigration Statistics, the number of removals per year within the last decade has ranged from a low of 295,364 to a high of 432,448 individuals, indicating a sharp increase in orders of removal.235

Today, there are also concerns that the immigration system has become weaponized, effectively turning immigration courts and immigration judges into “the [A]ttorney [G]eneral’s proxies for enforcing deportations.”236 The Immigration and Nationality Act requires the Attorney General “to craft a functioning immigration court system: a system that provides genuine case-by-case adjudications by impartial judges who apply existing law to the

228. Woodby, 385 U.S. at 285. 229. Id. 230. 8 U.S.C. § 1182(a)(9). 231. Moore, supra note 52, at 851–52. 232. Stumpf, supra note 47, at 1719–20. 233. Id. 234. Table 39. Aliens Removed or Returned: Fiscal Years 1892 to 2017, DEP’T OF HOMELAND SEC., https://www.dhs.gov/immigrationstatistics/yearbook/2017/table39 (last modified Apr. 9, 2019). 235. Id. 236. The Attorney General’s Judges: How the U.S. Immigration Courts Became a Deportation Tool, INNOVATION L. LAB & S. POVERTY L. CTR. at 3 (June 2019), https://www.splcenter.org/sites/default/files/com_policyreport_the_attorney_genera ls_judges_final.pdf.

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evidence on the record following a full and fair hearing.”237 Nevertheless, driven by the attorneys general’s leadership and actions over the last several years, including the “[reassignment] [of] case dockets to align with enforcement priorities” and “enforcementdriven case quotas,” immigration judges have been pitted against due process and the conduction of a hearing that is impartial and fair.238

Ultimately, if federal circuit courts do have jurisdiction, they can ensure that a noncitizen who presents a meritorious claim has a fair opportunity to bring his or her case forward because they have the power to vacate the Board’s decision and remand for a new hearing.239 This does not ensure that all noncitizens seeking discretionary relief will prevail or that all claims that are brought will be meritorious. It does, however, ensure that an immigrant has a full and fair hearing, including a fair opportunity to seek discretionary relief before the noncitizen is removed from the country, which is especially important in light of the abundant hardships that noncitizens may face.

Upholding Underlying Immigration-Law Goals

Furthermore, by exercising jurisdiction over these claims and providing redress when necessary, the federal circuit courts will be able to continue supporting the United States’ underlying goals in immigration law. Using its plenary power,240 the federal government has an interest in maintaining the national welfare, safety, and security of the country.241 As such, when determining whether to remove a noncitizen, “[t]he INA relies heavily on the inadmissibility and deportability grounds,” which “identify undesirable characteristics or conduct of noncitizens” that may threaten this goal.242

237. Id. 238. Id. 239. See Calderon-Rosas v. Att’y Gen. U.S., 957 F.3d 378, 390 (3d Cir. 2020). 240. Moore, supra note 52, at 848–849; Bridges v. Wixon, 326 U.S. 135, 167 (1945). 241. Sara McElmurry, et al., Balancing Priorities: Immigration, National Security, and Public Safety, CHI. COUNS. ON GLOB. AFF. AND BIPARTISAN POL’Y CTR. at 1 (Oct. 2016), https://www.thechicagocouncil.org/research/report/balancing-prioritiesimmigration-national-security-and-public-safety. 242. Stumpf, supra note 47, at 1729.

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Nevertheless, as evidenced by the various forms of relief that the federal government has made available to noncitizens undergoing removal proceedings, the United States also has an interest in permitting certain immigrants to remain in the country.243 In fact, [i]mmigration policy in the United States reflects multiple goals. First, it serves to reunite families by admitting immigrants who already have family members living in the United States. Second, it seeks to admit workers with specific skills and to fill positions in occupations deemed to be experiencing labor shortages. Third, it attempts to provide a refuge for people who face the risk of political, racial, or religious persecution in their country of origin. Finally, it seeks to ensure diversity by providing admission to people from countries with historically low rates of immigration to the United States.244

Many forms of relief, including discretionary relief, reflect a purposeful implementation of these immigration-law-related goals. One such example is cancellation of removal. 8 U.S.C. § 1229b(b)(1) provides that “the Attorney General may cancel removal of, and adjust to the status of an alien lawfully admitted for permanent residence, an alien who is inadmissible or deportable from the United States” if the noncitizen establishes, among other requirements, that the noncitizen “has been a person of good moral character” and “removal would result in exceptional and extremely unusual hardship to the alien’s spouse, parent, or child, who is a citizen of the United States or an alien lawfully admitted for permanent residence.”245 This discretionary form of relief demonstrates the nation’s objectives of reuniting families while also prioritizing national security.

Thus, by exercising jurisdiction over these claims, the federal circuit courts will be able to ensure that noncitizens are able to fairly present their case for relief. This exercise of jurisdiction, in turn, will allow the federal government—through its administrative agencies— to grant relief effectively to the noncitizens who will contribute to the nation’s immigration law policies and goals, which will enable these noncitizens to remain in the country under lawful status.

243. Stumpf, supra note 47, at 1730. 244. Immigration Policy in the United States, THE CONG. OF THE U.S. & CONG. BUDGET OFF. at 9 (Feb. 2006), https://www.cbo.gov/sites/default/files/109thcongress-2005-2006/reports/02-28-immigration.pdf. 245. 8 U.S.C. § 1229b(b)(1).

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Aligning with the Country’s Core Values of Justice and Fairness

Holding that federal circuit courts do have jurisdiction to hear these claims also aligns with the United States’ core values of justice and fairness—values that are significant to the identity of the country. When our Founding Fathers wrote the Constitution, they used the phrase “all persons” in the Due Process Clause of the Fifth Amendment.246 Thus, it is evident that they believed and intended that these protections should extend to all who are present in the country.247

Reflecting on this in Shaughnessy v. United States ex rel. Mezei, the Supreme Court provided that once a noncitizen has “passed through our gates, even illegally,” he or she “may be expelled only after proceedings conforming to traditional standards of fairness encompassed in due process of law.”248 In so holding, the Court expressed the significance that the United States has placed in the just and fair treatment of all who are present on this land, even those who have no right to remain in the country.249

With the Constitution serving as a guiding beacon, “a vision of law as a realm of value, based on fairness . . . [and] justice” arises, shaping the American legal order.250 In placing confidence in the judicial system, this country’s society expects that every individual who finds themselves in an American courtroom will receive fair, even-handed treatment by whoever exercises judicial authority of any kind. It is a hallmark of the American system of justice that anyone who appears as a litigant in an American courtroom is treated with dignity and respect. That expectation must be met regardless of the citizenship of the parties or the nature of the litigation. In a country built on the dreams and accomplishments of an immigrant population, a particularly severe wound is inflicted on that principle when an immigration matter is not conducted in accord with the best of our tradition of courtesy and fairness.251

In keeping true to the country’s core values, then, and the continual identity of the country as one rooted in justice and fairness, the federal circuit courts should hold that they have jurisdiction to

246. Zadvydas v. Davis, 533 U.S. 678, 693 (2001). 247. See id. 248. Shaughnessy v. United States ex rel. Mezei, 345 U.S. 206, 212 (1953). 249. See id. 250. Philip Selznick, American Society and the Rule of Law, 33 SYRACUSE J. INT’L L. &COM. 29, 36 (2005). 251. Iliev v. I.N.S., 127 F.3d 638, 643 (7th Cir. 1997).

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hear these claims. In doing so, these courts will have the power to ensure the continual fair treatment of those in this country and in its court systems, including noncitizens.

CONCLUSION

In light of the increased use of removal as an immigration regulation tool and other issues affecting the immigration system, it is vital that noncitizens have the ability to bring ineffective assistance of counsel and procedural due process claims to a federal circuit court of appeals before being removed from the United States. This opportunity can provide them with a new removal hearing, enabling them to present their claims and applications for relief fairly. While federal circuit courts are split on whether they have jurisdiction to hear these claims if the noncitizen is seeking only discretionary forms of relief, the courts should ultimately hold that they can exercise jurisdiction. Both Supreme Court precedent252 and decisions from the Board of Immigration Appeals253 recognize that noncitizens are entitled to a fundamentally fair removal hearing, and this creates a protected interest that can support a due process claim, giving the court jurisdiction.

Additionally, the circuit courts should hold that they have jurisdiction because doing so does not contradict the reasoning of the courts that do not exercise jurisdiction. Further, such a holding would avoid the inconsistent results and potential issues that can arise if the court does not exercise jurisdiction over these claims, such as the disruption of Congress’s intent to make these forms of relief available and the conflation of a right to discretionary relief and a right to a fair opportunity to seek relief.254 Finally, this holding aligns with public policy concerns, such as the protection of noncitizens’ constitutional rights, the nation’s immigration objectives, and the United States’ continued identity based on the core values of justice and fairness.

The purpose of this Article is not to argue that all noncitizens are entitled to discretionary relief or even that all claims brought to a

252. See Sung v. McGrath, 339 U.S. 33, 50 (1950); Low v. Backus, 225 U.S. 460, 467-68 (1912); Shaughnessy v. United States ex rel. Mezei, 345 U.S. 206, 212 (1953); Landon v. Plasencia, 459 U.S. 21, 32–33, 36 (1982). 253. See Matter of Toro, 17 I&N Dec. 340, 343 (BIA 1980); Matter of RamirezSanchez, 17 I&N Dec. 503, 505 (BIA 1980); Matter of Lam, 14 I&N Dec. 168, 170 (BIA 1972); In re Rodriguez-Carrillo, 22 I&N Dec. 1031, 1033 (BIA 1989). 254. Chapman, supra note 13, at 1558–59.

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circuit court will be meritorious and require redress. However, because noncitizens have a protected interest in fundamentally fair removal hearings before being removed, they do merit the opportunity to voice their due process claims to the court and, if the claims are meritorious, receive redress in the form of a new hearing. Ultimately, by holding that they have jurisdiction to hear these claims, the federal circuit courts of appeals will be able to ensure that noncitizens can fairly present their case, regardless of the type of relief the noncitizen is seeking.

DON LEDUC

PREFACE........................................................................................122

CHAPTER 1: FUNDAMENTAL CONCEPTS OF ADMINISTRATIVE LAW..123 Introduction...........................................................................123 Powers and Limitations.........................................................123 Principles of Administrative Law..........................................126 Ten Steps to Successfully Analyze an Administrative Law Case.......................................................................................130 Sources ..................................................................................131 CHAPTER II: DELEGATION OF POWER ...............................................133 Introduction...........................................................................133 Constitutional Basis of the Delegation Doctrine ..................133 Application of the Adequate Standards Test .........................136 Other Delegation Principles .................................................136 Ten Steps to Successful Delegation Analysis ........................137 Sources ..................................................................................138 CHAPTER III: AGENCY ACCESS TO INFORMATION ............................139 Introduction...........................................................................139 Requirement to Keep Records and Provide Information ......140 Inspections.............................................................................142 Subpoenas..............................................................................145 Fifteen Steps to Successful Analysis of Agency Access to Information Cases ............................................................148 Sources ..................................................................................149 CHAPTER IV: RULES AND RULEMAKING...........................................152 Introduction...........................................................................152 Authority................................................................................152 Nature, Definition, Types and Effects of Rules .....................153 Policy Development and the Use of Rules ............................156 Validity of Rules ....................................................................159 Ten Steps to Successfully Analyzing Agency Rules and Rulemaking .......................................................................162 Sources ..................................................................................162

CHAPTER V: INFORMAL ADJUDICATION AND DUE PROCESS.............165 Introduction...........................................................................165

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Orders and Adjudication.......................................................165 General Concepts..................................................................167 Fundamentals of Due Process...............................................168 Due Process Interests and the Right to Hearing...................168 Scope of Due Process Hearings............................................170 Timing of Due Process Hearings ..........................................172 Ten Steps to Successful Michigan Due Process Analysis .....173 Sources ..................................................................................174

CHAPTER VI: FORMAL ADJUDICATION AND CONTESTED CASES ......178 Introduction...........................................................................178 Applicability of the Michigan Administrative Procedures Act..........................................................................................178 Parties and Intervention........................................................181 Prehearing Procedures and Powers of Hearing Officers.....181 Hearing Procedures ..............................................................184 Decision Procedures .............................................................185 Twenty Steps in Successful Contested Case Analysis............186 Sources ..................................................................................188 CHAPTER VII: LICENSING.................................................................191 Introduction...........................................................................191 Nature, Authority, and Constitutionality...............................191 Definitions .............................................................................192 Licensing Procedures............................................................192 Fifteen Steps to Successful Licensing Analysis .....................194 Sources ..................................................................................196

CHAPTER VIII: METHODS AND COURT OF JUDICIAL REVIEW OF

AGENCY ACTION.......................................................................200 Introduction...........................................................................200 Sources of Judicial Review Methods.....................................201 Constitutional Right to Judicial Review................................201 Statutory Methods of Judicial Review...................................202 Non-Statutory Judicial Review..............................................203 Ten Steps to Successful Identification of Court and Method 205 Sources ..................................................................................206

CHAPTER IX: SCOPE OF JUDICIAL REVIEW OF ADMINISTRATIVE

AGENCY ACTION.......................................................................211 Introduction...........................................................................211 Constitutional Scope of Review.............................................211 Administrative Procedures Act Scope of Review ..................214 Scope Of Review Under Other Methods ...............................218 Special Review Considerations .............................................219

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Judicial Review of Local Action............................................219 Ten Steps to Successful Identification of Proper Scope of Judicial Review.................................................................221 Sources ..................................................................................222

CHAPTER X: AVAILABILITY OF JUDICIAL REVIEW OF ADMINISTRATIVE AGENCY ACTION.......................................................................224 Introduction...........................................................................224 Standing.................................................................................224 Ripeness and Finality............................................................228 Exhaustion of Administrative Remedies................................229 Primary Jurisdiction .............................................................233 Steps to Successful Availability of Judicial Review ..............235 Sources ..................................................................................238 CHAPTER XI: ACCESS TO AGENCY INFORMATION ............................244 Introduction...........................................................................244 The Freedom of Information Act...........................................244 Sources for FOIA Discussion................................................248 The Open Meetings Act .........................................................251 Sources for OMA Discussion ................................................255

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PREFACE

This document is intended for the use of two groups: to serve students as a summary overview of the Michigan Administrative Law course and to serve practitioners new to the field as an orientation or introduction to the principles of administrative law. The material is drawn from the text published by Thomson Reuters entitled LeDuc, Michigan Administrative Law.

The abridged version is not intended to provide in-depth analysis of the topics or the cases, but as a primer that summarizes the principles and describes the major aspects of administrative law under each main topic. Subtleties largely remain unexplored, as do the conflicts and uncertainties which characterize this area of the law. Statements in the primer are not footnoted in order to promote readability. At the end of each chapter, the basic source material is listed. For fuller exploration of the subject matter, additional cases, and discussion of Michigan Administrative Procedures Act references, readers should refer to Michigan Administrative Law. That text, not this one, should be cited when discussing the principles of administrative law in legal documents and materials.

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CHAPTER 1: FUNDAMENTAL CONCEPTS OF ADMINISTRATIVE LAW

Introduction

Although this chapter’s topic has been one of the most judicially active over the past three decades, few cases have discussed the general fundamentals of administrative law comprehensively, so the fundamentals must be deduced from reading numerous cases and considering their interrelationship. While case law provides examples of specific basic concepts, even the most frequently cited cases regarding administrative matters offer little instruction on the overall fundamentals or how they interrelate.

Powers and Limitations

Agency Authority

Agencies have no inherent power and must obtain their power from the Legislature through statutes—commonly referred to as underlying or enabling statutes—although a limited number of agencies have some power conferred by the Michigan Constitution. How explicit the statutory transmittal of authority must be remains somewhat uncertain under Michigan case law. Coffman v. State Board of Examiners in Optometry is frequently cited to support the proposition that agency power can be implied. But Coffman actually involved a statute that granted rulemaking power expressly, and the issue was whether the rulemaking authority extended to a specific aspect of the agency’s action which expanded that authority.

The language from Coffman and the case on which it relied, Ranke v. Corporations & Securities Commission, remain the leading authority for finding implied power. The Michigan Supreme Court adopted in Coffman a passage from American Jurisprudence which called for liberal construction of statutes in order to carry out legislative intent and purpose. This passage seems to reflect the current judicial attitude that power can be implied and need not be explicit, as demonstrated in Chesapeake and Ohio Ry. Co. v. Public Service Commission. But like Coffman, the issue in Chesapeake and Ohio was not whether rulemaking power had been conveyed to the agency, but whether that conveyance empowered the agency to act in a particular manner.

Once a determination is made that an agency has general authority, seven different sources limit the exercise of that authority by agencies: (1) the state and federal constitutions, (2) underlying

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statutes that create agencies and authorize agency actions, (3) the Administrative Procedures Act, (4) agency rules, (5) executive orders of the Governor, (6) the Freedom of Information and Open Meetings acts, and (7) judicial review.

Constitutions

The state and federal constitutions limit agency authority and its exercise in several ways. The Michigan Constitution includes the general principle of separation of powers, which limits the ability of the Legislature to transmit or delegate its own power to an executive or judicial branch official or agency and prohibits each branch from exercising the powers of the others. The principle of separation is not inherent and may be altered by the Constitution itself, as demonstrated by the provision that grants legislative power to the Governor in certain matters of governmental reorganization. The Governor’s constitutional power to reorganize the executive branch was upheld by the Michigan Supreme Court in House Speaker v. Governor.

Both constitutions limit an agency’s investigative and information-gathering authority. For example, both constrain agency inspections and searches and limit an agency’s ability to require information, reports, and records. Constitutional due process limits an agency’s power to deprive persons of certain interests without observing appropriate procedural restraints.

Underlying Statutes

Various powers are given to administrative agencies by underlying statutes (also called enabling statutes) that serve as the connection between the Legislature and the agencies. Those powers may relate to the subject matter or substantive authority given to an agency, such as to protect the public from fraud or unprofessional conduct. They may also relate to the manner in which an agency can conduct itself regarding its substantive authority—in other words, to an agency’s procedural power in implementing its substantive power, such as licensing procedure.

The first fundamental principle of administrative law analysis is to examine the underlying statute that authorized the agency action in question. What makes administrative agencies unique is that they have powers that seem to go beyond the perceived executive branch role (investigation, prosecution, and regulation) and appear to be

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legislative (rulemaking) or judicial (adjudicatory) in nature; these are called “quasi-legislative” and “quasi-judicial” to emphasize that they are not truly legislative or judicial and unconstitutional.

Michigan Administrative Procedures Act

The procedures that govern many proceedings of state agencies, namely rulemaking, adjudication, and licensing, are contained in a special statute—the Michigan Administrative Procedures Act, or the APA. While that act governs state agency procedure, it provides little substantive power and does not apply to local government procedure.

Administrative Rules

An agency that is given the power to make rules is required to follow those rules once it makes them. In many respects, rules have the same force and effect as statutes. Provisions included in rules may provide checks on an agency’s action, because they bind their makers.

Executive Orders

Executive orders do not have the effect of statutes or agency rules, but generally comprise instructions to administrative agencies and create no private rights or obligations. The most significant executive orders are those implementing the Governor’s constitutional authority to reorganize the executive branch.

Open Government

A relatively recent aspect of the administrative process is the emphasis on open government. Concerns over governmental secrecy culminated in the passage of two statutes mandating public access to government activity. The Freedom of Information Act (FOIA) requires that most records possessed by both state and local agencies be made available to the public. The Open Meetings Act (OMA) requires that all sessions of most collegial public bodies be open to the public and that the deliberations and decisions of those bodies occur at meetings open to the public.

Courts

The story of administrative law is in large part the story of judicial review of agency action. Judicial policy shapes

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administrative agency actions and facilitates the ability of those affected by agency action to seek the assistance of the courts in challenging that action.

Principles of Administrative Law

Agency Policy

Michigan administrative law is largely about public policy as enunciated in the Michigan Constitution and by legislative bodies in statutes implemented by executive branch agencies. The substantive content of particular public policy is embodied in statutes— sometimes in the portion of an underlying statute empowering an agency that comes under consideration in a particular administrative matter. Administrative law as a field generally does not consider the wisdom or content of public policy directly, but rather examines the procedures by which that policy is refined, elaborated, and implemented by agencies. Often the procedural focus is on how an agency is constrained by the controls discussed in Part B, above.

Definitions

The product of an agency’s efforts to execute the mandate given to it by the Legislature through its underlying statute can take several forms. In general, a product or outcome is called agency “action,” while the process for its development is called an agency “proceeding.” The action may be a “rule,” an “order,” or a “license;” the proceeding may in turn be called “rulemaking,” “adjudication,” or “licensing.”

The Michigan Administrative Procedures Act includes definitions of several of the significant actions and proceedings, but it is an imperfect vehicle for adequate definition of the operative structure of administrative law. The important Michigan APA definitions follow.

“Agency” means a state department, bureau, division, section, board, commission, trustee, authority or officer, created by the constitution, statute, or agency action. Agency does not include an agency in the legislative or judicial branch of state government, the governor, an agency having direct governing control over an institution of higher education, the state civil service commission, or an association of insurers created under the insurance code.

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“Contested case” means a proceeding, including ratemaking, pricefixing, and licensing, in which a determination of the legal rights, duties, or privileges of a named party is required by law to be made by an agency after an opportunity for an evidentiary hearing.

“Guideline” means an agency statement or declaration of policy that the agency intends to follow, that does not have the force and effect of law, and that binds the agency, but does not bind any other person.

“License” includes the whole or a part of an agency permit, certificate, approval, registration, charter, or similar form of permission required by law. [License does not include a license required solely for revenue purposes, or a license or registration under [the Motor Vehicle Code].

“Licensing” includes agency activity involving the grant, denial, renewal, suspension, revocation, annulment, withdrawal, recall, cancellation, or amendment of a license.

“Party” means a person or agency named, admitted, or properly seeking and entitled of right to be admitted, as a party in a contested case.

“Person” means an individual, partnership, association, corporation, limited liability company, limited liability partnership, governmental subdivision, or public or private organization of any kind other than the agency engaged in the particular processing of a rule, declaratory ruling, or contested case.

“Rule” means an agency regulation, statement, standard, policy, ruling, or instruction of general applicability that implements or applies law enforced or administered by the agency, or that prescribes the organization, procedure, or practice of the agency, including the amendment, suspension, or recission thereof, but does not include any [of the listed exceptions]. [This definition is modified by the author to cover the Legislature’s mistaken reference to amendment, suspension, or rescission of “the law,” which should have been a reference to the rule, as it originally was articulated in the APA.]

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Other important definitions necessary to understanding the structure and principles of administrative law are not included in the Michigan APA. But the federal APA includes several useful definitions which follow.

“Adjudication” means [the] agency process for the formulation of an order.

“Agency action” includes the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or the denial thereof, or failure to act.

“Agency proceeding” means an agency process defined [as rulemaking, adjudication, and licensing].

“Order” means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rulemaking but including licensing.

“Rulemaking” means the agency process for formulating, amending, or repealing a rule.

Two additional definitions derived from federal administrative practice but not included among the federal or Michigan APA definitions are helpful. These complete the definitional framework regarding agency administrative law.

“Formal adjudication” means an adjudication in which an agency is required by an underlying statute to use the APA adjudication procedures to produce an order. [In Michigan, formal adjudication is called a contested case; the invoking language in the federal APA is “required by statute,” while the invoking language in the Michigan APA is “required by law,” a difference that makes a difference, as will be seen in Chapters 5 and 6.]

“Informal adjudication” means any process for the formulation of an order which is not based on a record following a hearing.

This definitional framework is important in tying underlying statutes to the Michigan APA provisions. Michigan statutes may at times refer specifically to the Michigan APA, either to invoke it or to

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prohibit its application. But the definitions in the Michigan APA can make the APA applicable to an agency action, even if an underlying statute is silent in that regard.

Nature of Administrative Agencies Structure— Administrative agencies exist in all levels of government and have numerous forms and structures. One helpful key is understanding the nature of agency administration or leadership. In general, a reference to an “agency” in a statute and in the APA is actually a reference to the “head” of the agency; the “head” is the entity or individual created by an underlying statute, another relevant statute, or the Constitution that is empowered to act as the “agency.” The agency head may be either a collegial group, such as a board or commission, or an individual, such as a director or a secretary. Except in a few situations, it does not matter whether the agency head is one or the other of these entities. But it is important to differentiate between an agency’s head and its body, comprising all of its employees.

Executive Action—Some actions taken by executive branch agencies can be analogized to actions taken by the other branches of government. But while the outcomes and procedures of the agency may resemble or be modeled after those of the other branches, they remain executive actions intended to implement a statute. They are not truly legislative or judicial; in effect, rulemaking is “quasilegislative,” and adjudication is “quasi-judicial.” If they were truly legislative or judicial, the exercise of those powers by the executive branch would then violate the doctrine of separation of powers incorporated in the Michigan Constitution. Decision-making resembling that in the other two branches of government can be that of either an individual agency head or of a board or commission that heads an agency. But it remains an executive branch function regardless of who performs it, and it effectuates executive power, not legislative or judicial power.

Combination of Functions—As the definitional structure recognizes, agencies are sometimes parties in contested cases that the agency itself decides. An agency can be both an advocate and a judge in an adjudication, and its employees may also be witnesses. This unique arrangement of power—when properly structured and implemented through an internal separation of functions—satisfies due process and

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is recognized in Michigan APA provisions protecting against potential abuses inherent in this combination of functions. That combination is not always present, because agencies sometimes serve as “neutral” administrative tribunals, acting only in a quasi-judicial capacity and not participating as a party. What is common to both settings is that the agency tribunal is still acting as an executive branch body and not as a true judicial tribunal. What is important to comprehend is that administrative tribunals are established to resolve disputes without involving the courts, at least initially. The decisions reached by administrative tribunals are executive actions, not judicial decisions, whatever the procedures used to resolve a matter may be. The role of the judiciary is to review those decisions, not make them. This system allows administrative tribunals to use specialized expertise and experience in making decisions regarding the subject matter, something not generally found in courts.

Administrative Law Cases

Understanding of the judicial cases that review administrative action requires: first, consideration of the nature of the action taken by the agency; second, the potential application of the state and federal Constitutions to the actions of both the Legislature and the agency; third, parsing the underlying statute involved; fourth, the application, if any, of the Michigan APA; fifth, the propriety of the procedures followed by the agency; and, sixth, appreciating the proper role of the courts in reviewing agency action. The role of the courts includes (1) in what court review should take place, (2) by what method the court obtains jurisdiction, and (3) what scope of review should the court apply to the challenged agency action, which limits how fully the court can substitute its judgment for that of the agency.

Ten Steps to Successfully Analyze an Administrative Law Case 1. Read the underlying statute thoroughly to discover its standards and potential constitutional defects. 2. Review the statute in detail to determine the extent of the agency’s powers, the constraints imposed on the agency, the rights owed to the affected party, the procedures required of the agency, and the nature of the outcome permitted.

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3. Note those aspects of the statute that are relevant to the situation and the potential conflicts between the statute and the agency’s position. 4. Determine whether there are relevant agency rules and, if so, study them in detail, just as was done with the statute. 5. Evaluate the validity of those rules and the agency’s compliance with its own rules. 6. Establish whether the Michigan APA applies to any or all of the aspects of the agency’s action, including language in the underlying statute which may trigger the application of the

APA by virtue of the APA definitions. 7. Identify the specific agency action involved and compare it to the agency’s own characterization of its action. 8. Consider the importance of the particular facts. 9. Articulate the specific areas where the agency action is subject to question on constitutional, statutory, or procedural grounds. 10. Structure the potential attack on the agency’s decision, including at the judicial level.

Sources

Texts and Treatises 42 American Jurisprudence, Process § 26 (1942) LeDuc, Michigan Administrative Law, Chapter 1 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Chesapeake & Ohio Railway Co. v. Public Service Commission, 59 Mich. App. 88, 228 N.W.2d 843 (1975) City of Detroit v. Sledge, 223 Mich. App. 43, 565 N.W.2d 690 (1997) Coffman v. State Board of Examiners in Optometry, 331 Mich. 582, 50 N.W.2d 322 (1951) Consumers Power Co. v. Public Service Commission, 460 Mich. 148, 596 N.W.2d 126 (1999) Fellows v. Michigan Commission for the Blind, 305 Mich. App. 289, 854 N.W.2d 482 (2014) Ghidotti v. Barber, 459 Mich. 189, 586 N.W.2d 883 (1998) House Speaker v. Governor, 443 Mich. 560, 506 N.W.2d 190 (1993)

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In re Public Service Commission for Transactions Between Affiliates, 252 Mich. App. 254, 652 N.W.2d 1 (2002) Ranke v. Corporations & Securities Bureau, 317 Mich. 304, 26 N.W.2d 898 (1947) Straus v. Governor, 459 Mich. 526, 592 N.W.2d 53 (1999) Taxpayers of Michigan Against Casinos v. State of Michigan, 478 Mich. 99, 732 N.W.2d 487 (2007) Toaz v. Department of Treasury, 280 Mich. App. 457, 760 N.W.2d 325 (2008) UAW v. Green, 498 Mich. 282, 870 N.W.2d 867 (2015) York v. City of Detroit, 438 Mich. 744, 475 N.W.2d 346 (1991)

Constitutions United States Constitution, Amendments IV, V, and XIV Michigan Constitution 1963, Articles I, III, IV, V, and VIII

Statutes Administrative Procedures Act, 5 U.S.C.A. §§ 551-576. Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.201 to 24.328 Michigan Freedom of Information Act, M.C.L. §§ 15.231 to 15.246 Michigan Open Meetings Act, M.C.L. §§ 15.261 to 15.575

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CHAPTER II: DELEGATION OF POWER

Introduction

Because administrative law is closely tied to statutes, it is important to examine two aspects of every underlying statute.

First, the constitutionality of the statute that forms the basis of an agency’s action should be explored; if that statute is invalid, so is an agency action on which it is premised. Two grounds for attacking a statute are predominant: (1) the statute fails to satisfy substantive due process, meaning the statue bears no rational relationship to a legitimate purpose of government or to the police powers of the state; and (2) there is an improper delegation of legislative power to an administrative agency, meaning that the statute reflects a violation of the principle of separation of powers contained in Article III, Section 2, of the Michigan Constitution. Both grounds question the validity of the legislative action, rather than that of an agency.

Second, assuming the validity of the statute, the issue becomes whether an agency involved has complied with the statute in its implementation, regardless of whether its action is embodied in a rule, an order, or some other exercise of the power granted to the agency in the statute. Often this aspect is an exploration of whether the agency action is ultra vires or in excess of the statutory power granted to the agency. Delegation analysis is important to the implementation analysis because it forces a thorough reading of an underlying statute and helps to define the powers of the agency, so that the exercise of that power can be assessed for compliance with the legislative grant of authority to the agency. Further, delegation analysis can shape the structure of a party’s defenses and strategy in dealing with a matter before an agency and in judicial review, although delegation is too often an argument of last resort rather than the starting place.

Constitutional Basis of the Delegation Doctrine

Although the delegation doctrine—or more accurately the nondelegation doctrine—is dormant in federal law, it remains an active and viable consideration in every challenge to agency action at the state level, as the Governors of Michigan have learned from time to time. Most recently, the Michigan Supreme Court struck down as an unconstitutional delegation of legislative authority the major emergency powers act being used by the Governor in response to the

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Covid-19 pandemic. See In re Certified Opinion, Midwest Institute of Health, PLLC v. Governor.

Michigan’s delegation law has been confused by the Michigan Supreme Court, but the fundamental concept of delegation as a constitutional separation of powers matter is actually clear: One branch cannot delegate its own power to the others, nor can it undertake to exercise the powers of the other branches—except as specifically provided in the Constitution itself, as shown in House Speaker v. Governor.

The starting place for analysis is with the provisions of the Michigan Constitution, which establish three distinct branches of government. Article IV, Section 1, establishes the legislative branch. Article V, Section 1, vests the executive power in the Governor. Article VI, Section 1, places the judicial power in one court of justice. And Article III, Section 2, specifically provides that “[n]o person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution.” Neither aspect of Michigan’s Article III provision is found in the United States Constitution.

Adequate Standards Test

The basic test for proper delegation is set forth in Department of Natural Resources v. Seaman: (1) read the act “as a whole;” (2) determine if the standards are “as reasonably precise as the subject matter requires or permits;” and (3) construe the statute, if possible, “to ‘render it valid, not invalid,’ as conferring ‘administrative, not legislative’ power, and as vesting ‘discretionary, not arbitrary authority.’ “

The Seaman decision integrated two theories which predate the standards test: “proper” delegation and “true” delegation. In proper delegation, the issue is whether the action of the executive is based on a “fixed” or “named” contingency, while in true delegation the issue is whether the statute “marks the field” and the agency action “fills in the details.” In federal delegation parlance, these are known respectively as “contingent” and “subordinate” delegation. Overall, the statute must include adequate standards to measure the limits of legislative delegation of power; if the language is too indefinite, it represents an improper transmittal of true legislative power to an executive branch officer or agency.

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Michigan’s Confusion

Unfortunately, one cannot read the Michigan delegation cases without becoming confused. The cause is a number of cases which carelessly intermingle the concepts of substantive and procedural due process with separation of powers principles, mainly because the search for adequate standards, at least in part, is common among these concepts.

Due process analysis, whether substantive or procedural, is not a part of delegation analysis, and no Michigan case with a controlling majority has ever so held. The apparent source of the confusion is Milford v. People’s Community Hospital Authority, which confusingly introduced language about standards. While an examination of statutory standards is important in both due process and delegation analyses, the key to understanding the relationship of the constitutional doctrines to standards is not the use of the standards analysis, but the purpose of the analysis. In substantive due process analysis, the focus on the standards is to reveal a rational relationship to a legitimate purpose of government, whereas, in delegation analysis, the focus is on the standards to determine if the legislative branch has improperly given its powers to an agency in another branch of government, usually the executive.

Procedural due process deals with the way an agency exercises power. In Seaman, Justice Williams found that due process was satisfied by the presence of agency rulemaking and licensing procedures. But he was never successful in persuading a majority of the Court that due process analysis was part of delegation. Justice Williams’ major opposition to this assertion came from Justice Ryan, whose central point was that procedural due process and accountability issues were part of the application of a statute and appropriate for the determination of constitutional validity of an agency’s actions, not for constitutionality of the Legislature’s actions. Due process in the application of a statute cannot and should not save an improper delegation of legislative authority. If the action of the Legislature is a violation of the separation of powers, how can implementation by an executive agency save it? Michigan courts have not yet explored whether a statute can be struck down because it contains inadequate procedural due process protections or whether it can be saved by reading those protections into the questioned statute.

The notion of “totality of safeguards,” also introduced into delegation analysis by Justice Williams, is likewise not properly included in delegation analysis and is actually tied to procedural due

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process. The theory espoused is that an improper statutory delegation can be saved if there is a sufficient set of procedural protections in its application. This approach has the same defect as does the procedural due process analysis.

Political accountability, another theory presented by Justice Williams in Seaman and subsequent cases, is likewise not an aspect of delegation law under separation of powers. Justice Fitzgerald was the leading opponent of this assertion. The action of the Legislature in passing a statute satisfies any political accountability needed. Implementation of a statute by a politically accountable bureaucracy is not a proper aspect of delegation analysis.

Application of the Adequate Standards Test

Measuring Device

The decision in Seaman included an excellent and instructive example of the application of the adequate standards test. The decisions in Seaman, Blue Cross & Blue Shield of Michigan v. Governor, and In re Certified Opinion, Midwest Institute of Health, PLLC all teach the need to identify in the statute a measuring device or some standard against which to measure an implementing agency’s exercise of authority to determine if it comports with legislative intent. The presence of a measuring device allows consideration of whether an agency’s action exceeds or is less than what a statute allows or requires that agency to do, and it permits a determination to be made regarding an action’s consistency with legislative intent.

Incorporation by Reference

Although the issue is subject to some debate, adequate standards can be incorporated by reference, either expressly or impliedly. The outside reference need not be to government standards, although it can be. Further, the reference can be to a word, term, or standard with a secondary meaning, which in turn incorporates further detailed standards.

Other Delegation Principles

An administrative agency in the executive branch cannot be given true judicial powers, nor can a judicial body be given true executive

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branch powers. A proper delegation can empower an agency to make rules which impose criminal penalties that will be enforced by criminal prosecutions, so long as that power is authorized by an underlying statute. Sub-delegation of power within the executive branch is permitted, if the delegating official retains ultimate responsibility for the exercise of the power or if specifically permitted by statute. If the statute specifically requires that a particular public official exercise the power, however, that power cannot be subdelegated.

Delegation of a purely governmental power to a private entity is unconstitutional. But legislation can constitutionally involve incorporation of standards of private organizations and implementation through procedures which involve private organizations.

Ten Steps to Successful Delegation Analysis 1. Identify and read the relevant underlying statutes. 2. Identify the specific powers granted to the relevant agency. 3. Examine the underlying statute for an overriding statement of purpose or policy. 4. Look for a measuring device in the statute. 5. In challenging, structure an argument around the specific provisions describing the agency’s power to act and note the absence of appropriate statutory language to channel or control the exercise of the power given to the agency. 6. Offer alternative language that might have made the statute clearer or structured the agency’s discretion more tightly. 7. Review the case law in light of the foregoing analysis. 8. If relevant case precedents can be found, offer examples of statutes that were struck down. 9. Discuss the possible consequences of upholding the statute in question, particularly where those subject to it are left facing uncertainty or are in danger of violating the statute no matter what they do. 10. Use the results of the delegation analysis to structure the course of action in the particular matter at hand, particularly regarding whether the agency action in question is consistent with statute’s requirements

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Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 2 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Argo Oil v. Atwood, 274 Mich. 47, 264 N.W. 285 (1935) Blue Cross & Blue Shield of Michigan v. Governor, 422 Mich. 1, 367 N.W.2d 1 (1985) Chesapeake & Ohio Railway Co. v. Public Service Commission, 59 Mich. App. 88, 228 N.W.2d 843 (1975) Coffman v. State Board of Examiners in Optometry, 331 Mich. 582, 50 N.W.2d 322 (1951) House Speaker v. Governor, 443 Mich. 560, 506 N.W.2d 190 (1993) In re Certified Opinion, Midwest Institute of Health, PLLC v. Governor, 506 Mich. 332, 958 N.W.2d 1 (2020) Milford v. People’s Community Hospital Authority, 380 Mich. 49, 155 N.W.2d 835 (1968) Osius v. St Clair Shores, 344 Mich. 693, 75 N.W.2d 25 (1956) Ranke v. Corporations & Securities Bureau, 317 Mich. 304, 26 N.W.2d 898 (1947) Seaman v. Department of Natural Resources, 396 Mich. 299, 240 N.W.2d 206 (1976) Soap and Detergent Association v. Natural Resources Commission, 415 Mich. 728, 330 N.W.2d 346 (1982)

Constitutions United States Constitution, Articles I, II, and III Michigan Constitution 1963, Articles III, IV, V, and VI Official Record, Constitutional Convention 1961

Statutes Commercial Fishing Law, M.C.L. 308.1b Executive Organization Act, M.C.L. 16.101 et seq. Emergency Powers of the Governor Act, M.C.L.10.31 et seq.

Executive Orders Executive Order No. 1991-31

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CHAPTER III: AGENCY ACCESS TO INFORMATION

Introduction

Information is the lifeblood of the modern administrative agency. Most agencies could not perform their regulatory functions without receiving information from and about those whom they regulate. Modern decisions, such as Chesapeake & Ohio Railway Co. v. Public Service Commission, demonstrate the awareness of the courts to the importance of access to information in the regulatory process. Analysis of the legal issues surrounding agency access to information starts, as usual, with an examination of an underlying statute. Agencies still must receive the power to acquire information through a legislative grant, but the power need not be explicit in every situation. Generally, as the means of access become more intrusive, the need for express authority becomes more pronounced. Conversely, the less intrusive a government action, the more likely that the power will be found to be implied by the legislative scheme or administrative function delegated to an agency.

Information-gathering takes three major forms: (1) required records and reports, (2) inspections, and (3) subpoenas. Constitutional considerations are present when the information sought, obtained, or compelled is incriminating or when an agency seeks to physically intrude on the property of those from whom the information is sought. The first and third forms of informationgathering have federal Fifth Amendment implications; the second form has federal Fourth Amendment implications. The Michigan Constitution has nearly identical protections in its Article I. As a result, federal law controls Michigan law more extensively in this area than in any other area except, possibly, due process.

The power of an agency is executive power, not judicial power, meaning that limitations which are found in judicial situations are not always relevant in situations dealing with agency access to information. The powers of an agency to acquire information are investigatory or inquisitorial functions. When subpoenas are issued in support of these agency functions, the limitations on judicial subpoenas do not necessarily apply. The closest judicial comparison for investigatory subpoenas is to those of a grand jury rather than to litigation between parties, according to United States v. Morton Salt Co.

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Requirement to Keep Records and Provide Information

In General

The United States Supreme Court declared in Shapiro v. United States that “no investigatory power can be effective without the right to insist upon the maintenance of records.” Agencies must have information to carry out their delegated responsibilities, and much of the information they receive is from those whom they regulate. A great deal of this information is freely and willingly supplied without an agency request, such as that from lobbyists and public interest groups. However, the bulk of the information is supplied because an agency requires that those subject to its authority provide the agency with such information.

An agency may mandate that the regulated entity do any or all of the following: (1) retain the records which it creates in the ordinary course of business, such as receipts, invoices, and ledgers; (2) create and maintain certain new records, such as records of all discharges of pollutants; and (3) create and submit to the agency reports, such as annual reports and audits. An agency’s power to gather information from an individual is somewhat narrower than its power to gather information from an entity. The variety of such requirements and their volume is extensive and constitutes the bulk of what is commonly referred to as “red tape.” In administrative parlance, this red tape is referred to as “required records.”

Required Records in Michigan

Michigan statutes authorizing agencies to require that records be kept and that reports be submitted are legion. While no Michigan case has explicitly addressed the concept or the existence of a required records doctrine, countless cases have reviewed and upheld statutes which expressly or impliedly impose recordkeeping requirements. Chesapeake & Ohio Railway Co. is an example; another is People v. Barnes, which used a statutory recordkeeping requirement to justify, in part, an inspection of an automobile salvage yard. The concern presented by such statutes is that they mandate the creation and maintenance of records that can then be used as evidence in administrative, civil, and criminal proceedings.

Although Michigan case law is negligible regarding the required records doctrine, federal case law that applies to Michigan controls. That case law is based on the Fifth Amendment of the United States

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Constitution, although Michigan’s Constitution has identical language in Article I that would lead to the same result. When the issue is directly addressed in Michigan, it is highly likely that the federal law regarding required records will be adopted in Michigan explicitly and in its entirety.

Federal Required Records Doctrine

Federal law is clear that agencies can be empowered to require regulated persons or entities to retain, create, submit, or make available for inspection records that reflect activity that is a suitable focus of government regulation. The most common justification is that such records are simply not protected by the federal Fifth Amendment, as summarized in Shapiro v. United States: “[t]he principle applies . . . to records required by law to be kept in order that there may be suitable information of transactions which are the appropriate subjects of governmental regulation and the enforcement of restrictions validly established. There, the privilege, which exists as to private papers, cannot be maintained.”

Required records are not protected by the Fifth Amendment and may be used as the basis not only of administrative action, but of criminal prosecutions as well. The leading federal cases are Shapiro and Marchetti v. United States, which recognized that “records required to be kept” are public records not protected by the Fifth Amendment. The doctrine applies whether the records are corporate or individual. In fact, the records of corporations and other artificial entities are not protected at all by the Fifth Amendment, according to Paramount Pictures Corporation v. Miskinis and United States v. White. Further, the only person entitled to assert the privilege is the one who possesses that privilege; if records in the possession of one person are actually those of another person, the possessor may not assert the privilege to avoid their production, even if incriminated by those records.

Shapiro and Marchetti together created a three-part test to determine if records were within the federal required records doctrine and therefore unprotected by the Fifth Amendment: (1) are the records of the same kind that are “customarily kept” in this type of activity? (2) do the records have a public aspect? And (3) do the records “involve an essentially noncriminal and regulatory area of inquiry” rather than one inherently suspect of criminal activity? Comparing the underlying facts of any recordkeeping provision to the facts in Shapiro, which involved price regulations, to those in

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Marchetti, which involved gambling, is a useful analytical device to determine which are public records within the federal required records doctrine.

The effect of finding that records are “required,” and therefore public, is that they are not subject to the protections of the federal Fifth Amendment and must be produced regardless of their incriminatory nature. They can be used against their authors in a criminal prosecution, as well as in any civil or administrative proceeding.

Inspections

In General

Another way in which agencies acquire information is through physical inspections of premises and of the locations at which regulated activity is conducted. Inspection power must be granted to an agency through an underlying statute, but apparently can be implied, according to the Michigan Court of Appeals. Inspections are important in many regulatory schemes, some of which control particular industries and some others of which address particular problems. Inspections involve routine visits to the sites of regulated or licensed businesses but can be undertaken without advance notice to the businesses.

Inspections are very often connected to the licensing function of administrative agencies, operating as a source of information on whether an activity is being conducted in compliance with the requirements of the applicable statutes and administrative rules, as well as in conformity with the restrictions or conditions imposed on the license. Inspections of hospitals, nuclear plants, and liquor licensees are examples. However, inspections also support more generalized public health, safety, and welfare considerations and may be required even if licensing is not an aspect of the activity. Inspections of workplaces for safety rule compliance and of buildings for housing code violations are examples.

An inspection is a form of a search and is subject to the restrictions imposed by both the state and federal constitutions. Two major considerations are present in the constitutional context: (1) is the inspection considered to be an unreasonable search—in other words, is a search warrant required in order to conduct the inspection? and (2) if a warrant is required, do the normal probable

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cause requirements associated with police searches for evidence apply?

Federal Case Law

In 1967, the United States Supreme Court determined in Camara v. Municipal Court and See v Seattle that routine administrative inspections were subject to the Fourth Amendment protection against unreasonable searches and seizures. The Court rejected the argument that all such inspections were inherently reasonable. However, the Court articulated a probable cause standard for warrants that allowed such inspections without the normal requirements of particularity, both in describing a specific place to be searched and in articulating a basis for believing that evidence of a particular violation would be found. The Court ruled that so long as there were “reasonable legislative or administrative standards for conducting an area inspection, the warrant would issue.

In 1970, the Court announced in Colonnade Catering Corp. v. United States, and in 1972 confirmed in United States v. Biswell, that in some circumstances inspections without warrants were not unreasonable. This concept created an exception to the warrant requirement for such “pervasively regulated” businesses as liquor purveyors and gun dealers. A few years later, in Marshall v. Barlow’s, Inc., the Court reinforced the distinction between the need for warrants for routine general administrative searches, such as the Occupational Safety and Health Act, and the absence of a need for warrants to inspect pervasively regulated business. In Barlow’s, Inc., the Court confirmed that a probable cause requirement for inspection warrants remained, but at a reduced level of particularity now relabeled as “administrative probable cause.” This version focused on whether the search was part of an overall administrative plan derived from neutral sources.

Nearly ten years passed until the United States Supreme Court in New York v. Burger reinforced the distinction between warrantless inspections for “closely regulated” businesses, which had a “reduced expectation of privacy,” and other administrative inspections where a warrant based on administrative probable cause was required. Warrantless inspections of closely regulated business required that three conditions be present: (1) that there be a “substantial” government interest, that warrantless inspections be necessary to further the regulatory scheme, and that there be a constitutionally adequate substitute for a warrant in the inspection process.

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Dow Chemical Co. v. United States established that a warrant is not required to “search” open or public areas. Both the United States and Michigan courts have recognized an emergency aid exception and Michigan at least has recognized a community caretaker exception, according to People v. Brzezinski. While holding that government-compelled urine samples are searches, both the United States (in Skinner v. Railway Labor Executives’ Association and Michigan (in Middlebrooks v. Wayne County) have allowed exceptions through balancing. And both courts have agreed frequently that prisoners are unprotected from administrative searches.

Michigan Case Law

Michigan’s cases involving inspections closely parallel the federal cases. The leading Michigan case is Tallman v. Department of Natural Resources, which accepted the pervasively regulated business exception to the warrant requirement articulated in the federal case law. While the concept of administrative probable cause was not at issue in Tallman, the Michigan Supreme Court pointedly approved of that standard. In Keeler Brass Co. v. Department of Labor, the Michigan Court of Appeals had previously adopted the probable cause standard established in Barlow’s, Inc. as the appropriate standard to apply to administrative searches.

Tallman was decided after the federal decisions discussed earlier, but before the decision in Burger. The decisions in the two cases are essentially consistent, with the major difference being that the Burger decision established a two-tiered analysis to determine whether a warrantless search is permitted, while the Tallman case applied a balancing test involving nearly the same factors to make that decision. Using the separate approaches, the two cases reached the same conclusion that if the place to be searched is part of a pervasively or closely regulated business or industry, a search without a warrant is not unreasonable. Both courts agreed that the length of time of regulation is a factor in determining pervasiveness, but not controlling, according to Donovan v. Dewey in the United States Supreme Court and Gora v. City of Ferndale in Michigan’s Supreme Court.

In 1985, a Michigan Court of Appeals case relying on Tallman, People v. Barnes, precisely anticipated the result in Burger. Both cases dealt with the regulation of junk dealers and both involved inspections by police officials and subsequent criminal charges. In all

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likelihood, Michigan’s Supreme Court will make the slight alteration necessary to embrace Burger fully and to abandon the balancing aspect in the Tallman articulation.

Subpoenas

In General

Agencies may have the power to issue subpoenas in their adjudicative process or in support of their regulatory function. Michigan does not have a major leading case on agency subpoena law, although it has many cases dealing with particular aspects of the agency subpoena process. Except for constitutional considerations, federal law is not controlling, but can be persuasive at times.

Agencies have no inherent power to issue subpoenas, even in contested case hearings. Michigan’s courts have been reluctant to infer that power with the exception of one case, Vance v. Ananich. The Michigan Administrative Procedures Act is not an independent grant of subpoena power even for contested cases, a circumstance which can put non-agency parties in a disadvantageous position. Despite some decisions limiting the use of subpoenas, such as Monty v. Warren Hospital Corp. and Truel v. City of Dearborn, the state courts remain generously disposed to upholding agency regulatory subpoenas, as demonstrated by In re Petition of Attorney General for Investigative Subpoenas. United States v. Morton Salt Co. long ago brought home the point that evidentiary limitations do not apply, saying “it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite, and the information sought is reasonably relevant.” This is sometimes described as requiring that the record sought be germane to a lawful area of inquiry. But subpoenas can be challenged as overly broad, where the test is reasonableness.

Types of Subpoenas

Agency subpoenas can be issued in conjunction with contested cases or other adversarial proceedings, generally referred to as adjudicatory subpoenas or as part of an agency’s regulatory powers and not in connection with any contested proceeding, generally referred to as investigatory or investigative subpoenas. Each type has distinct characteristics and parameters. The powers to issue either type are independent from one another. According to Michigan Department of Social Services v. Arden, the power to issue one kind

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of subpoena does not limit the power to issue the other, assuming the power to issue both. And Kazor v Department of Licensing and Regulatory Affairs, Bureau of Professional Licensing, held that if an agency has been given the power in one section of a statute to issue subpoenas in its discretion, a separate provision granting mandatory power to issue subpoenas does not limit the agency’s discretion.

As with judicial subpoenas, administrative agencies can be empowered to compel either testimony (ad testificandum) or the production of documents (duces tecum). For adjudicatory subpoenas, Michigan courts tend to follow the model of Michigan judicial subpoenas and the court rules. But the judicial model is not applied to investigative (or investigatory) subpoenas, where restrictions are not based on judicial notions of relevance but on the more permissive concept of inquisitorial power.

Limitations, Exemptions, and Privileges

Keeping in mind that both statutes and judicial cases treat adjudicatory and investigatory subpoenas differently, a statute can restrict the access to subpoenas (1) by limiting through specific privileges, (2) by limiting the subject matter regarding which subpoenas may issue, and (3) by naming the officials within an agency to whom the power to issue subpoenas is given. A statute may require that an agency seek a subpoena from a court, rather than issue it directly, as the Supreme Court decided in Attorney General v. Bruce. Enforcement of a subpoena does not lie within the agency that issues a subpoena. That agency must ask a court to order compliance with the subpoena, then seek to use the court’s contempt powers if compliance is not forthcoming. However, refusal to obey a subpoena can have indirect consequences, such as forming the basis for an action to revoke a license for failure to comply with the conditions of licensure. Federal law requires that challenges to an agency’s authority to proceed must first be made at the agency level, not in a court under Endicott Johnson Corp. v. Perkins and Myers v. Bethlehem Corp. (see generally exhaustion of remedies in Chapter 10), but Michigan law seems to allow for early judicial challenge, according to Clark Equipment Co. v. Department of Treasury.

The request for production of documents which have no Fifth Amendment protection, including “required records,” cannot be opposed on Fifth Amendment grounds. In general, artificial entities have no Fifth Amendment protection since the privilege applies only to natural persons. Only the person who has the privilege can assert

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it. A possessor must provide the subpoenaed records of third persons, even though the records are incriminating to the possessor compelled to provide them.

Constitutional Considerations

As noted, no Michigan case has presented the opportunity to review comprehensively the subpoena power of administrative agencies. Nor has a Michigan case explored comprehensively the constitutional limitations on subpoena power. But Michigan is likely to follow the leading federal cases when presented with the opportunity to do so, as it has in other Fifth Amendment situations.

One case is instructive, although it dealt with judicial discovery, not a subpoena. Paramount Pictures Corp. v. Miskinis applied a three-question test in the context of objection to compelled production of documents over a Fifth Amendment objections: (1) “Are the documents records of the organization rather than those of an individual who has possession of them?” and (2) “Does the custodian hold the records in a representative, rather than a personal capacity?” If the answer is yes to both questions, and the organization is a corporation, then no further inquiry is required and the records are not protected. But if the organization is of some other form, a third question must be asked: “[d]oes the organization have an established institutional identity which is recognized as an entity apart from its individual members?” Regarding the third question, the Miskinis Court agreed with the United States Supreme Court decision in Bellis v. United States that the size of the entity is not controlling.

Much of what was presented in Miskinis is relevant to questions raised by agency duces tecum subpoenas, including the three questions. Analysis of any assertion of the privilege against selfincrimination should begin with an analysis of whose records are involved. If the owner of the records is protected by a privilege, the possessor cannot provide the records, but must honor the privilege. To that analysis, the required records doctrine should be added, because those records are not protected by the Fifth Amendment, according to Shapiro v. United States. Miskinis, being a discovery case, did not involve records required to be kept by an administrative entity.

Subpoenas generally present no Fourth Amendment or Michigan Article I concerns because there is neither a search or a seizure involved. Rather, refusal results only in a compulsory process for the enforcement of the subpoena through the courts. Because subpoenas

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do not involve searches, there is no need for probable cause for a subpoena to be issued, according to United States v. Morton Salt Co.

Immunity Provisions

As the decision in Shapiro v. United States illustrates, immunity provisions may be incorporated in subpoena statutes. These provisions have two general forms: “transactional” immunity and “use” immunity. The transactional form immunizes the person to whom immunity is granted from prosecution for any transaction, matter, or thing revealed by a relevant response to compelled evidence. The use form prohibits not prosecution, but the use of the compelled evidence or its fruits in any subsequent prosecution; an independent source can provide the bases of prosecution despite the use immunity.

Immunity provisions are rarely automatically invoked. They do not apply to required records, which are not protected by the Fifth Amendment. The person compelled to provide the record must be the one with the privilege, and the record must be that of the person, who must then specifically refuse to provide the record and do so by invoking the privilege against self-incrimination. Immunity must then be granted under the provisions of the underlying statute, at which point the evidence sought must be provided. According to People v. Parsons, only then is immunity in place. A grant of immunity, in effect, removes the danger of self-incrimination because the threat of prosecution is eliminated. The difference between transactional and use immunity comes into play here. Some caution is in order since immunity can only be granted when the privilege against selfincrimination is asserted, and immunity is specifically granted.

Fifteen Steps to Successful Analysis of Agency Access to Information Cases 1. Read the underlying statute to identify both general authorities to undertake the activity and the specific terms and limits of the agency’s power. 2. Check both federal and Michigan cases, since the federal cases that are not controlling may be adopted or supplemented by Michigan decisions. 3. Search for cases applying the specific statute under which the agency purports to act.

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4. Determine the nature of the documents sought and apply the three-part Shapiro-Marchetti test. 5. For inspections, check the underlying statute for both authority and restrictions, and consider if there is authority, if a warrant is required, and what will constitute probable cause for a warrant. 6. Determine whether the required records doctrine applies under Colonnade Catering, Biswell, and Barlow’s; if not, consider the level of probable cause required for a warrant under the Camara and See cases. 7. Use Burger and Tallman to determine If the required record doctrine applies. 8. Be sure to compare carefully these cases to the situation at hand. 9. If information is subpoenaed, check the underlying statute for agency authority. 10. Identify if the subpoena was issued regarding a specific case or on a general basis. 11. Assure that the subpoena meets the statutory constraints. 12. Remember that agencies must seek judicial orders to enforce their subpoenas. 13. Review the case law on subpoenas. 14. Be wary of immunity provisions, particularly to determine if any immunity is transactional or use. 15. Consider whether the situation first requires the assertion of a

Fifth Amendment privilege.

Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 3 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Anonymous v. Attorney Grievance Commission, 430 Mich. 241, 422 N.W.2d 648 (1988) In re Anonymous Attorney, 439 Mich. 404, 487 N.W.2d 104 (1992) Attorney General v. Bruce, 422 Mich. 157, 369 N.W.2d 826 (1985)

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Bellis v. United States, 417 U.S. 85, 94 S. Ct. 2179, 40 L. Ed. 2d 678 (1974) Camara v. Municipal Court, 387 U.S. 523, 87 S. Ct. 1727, 18 L. Ed. 2d 930 (1967) Chesapeake & Ohio Railway Co. v. Public Service Commission, 59 Mich. App. 88, 228 N.W.2d 843 (1975) Clark Equipment Co. v. Department of Treasury, 394 Mich. 396, 230 N.W.2d 548 (1975) Coffman v. State Board of Examiners in Optometry, 331 Mich. 582, 50 N.W.2d 322 (1951) Colonnade Catering Corp. v. United States, 397 U.S. 72, 90 S. Ct. 774, 25 L. Ed. 2d 60 (1970) Cross Co. v. United Auto, Aircraft and Agr. Implement Workers of America, 377 Mich. 202, 139 N.W.2d 694 (1966) Donovan v. Dewey, 452 U.S. 594, 101 S. Ct. 2534, 69 L. Ed. 2d 262 (1981) Dow Chemical Co. v. United States, 476 U.S. 227,106 S. Ct. 1819, 90 L. Ed. 2d 226 (1986) Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 63 S. Ct. 339, 87 L. Ed 424 (1943) Gora v. City of Ferndale, 456 Mich. 704, 576 N.W.2d 141 (1998) Kazor v. Department of Licensing and Regulatory Affairs, Bureau of Professional Licensing, 327 Mich. App. 420, 934 N.W.2d 54 (2019) Keeler Brass Co. v. Department of Labor, 93 Mich. App. 599, 286 N.W.2d 874 (1979) Marchetti v. United States, 390 U.S. 39, 88 S. Ct. 69719 L. Ed. 2d 889 (1968) Marshall v. Barlow’s, Inc., 436 U.S. 307, 98 S. Ct. 1816, 56 L. Ed. 2d 305 (1978) Michigan Department of Social Services v. Arden, 81 Mich. App. 210, 265 N.W.2d 91 (1978) Middlebrooks v. Wayne County, 446 Mich. 151, 521 N.W.2d 774 (1994) Monty v. Warren Hospital Corporation, 422 Mich. 138, 366 N.W.2d 198 (1985) Myers v Bethlehem Corporation., 303 U.S. 41, 58 S. Ct. 459, 82 L. Ed. 638 (1938) New York v. Burger, 482 U.S. 691, 107 S. Ct. 2636, 96 L. Ed. 2d 601 (1987) Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 66 S. Ct. 494, 90 L. Ed. 614 (1946)

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Paramount Pictures Corporation v. Miskinis, 418 Mich. 708, 344 N.W.2d 788 (1984) People v. Barnes, 146 Mich. App. 37, 379 N.W.2d 464 (1985) People v. Brzezinski, 243 Mich. App. 431, 622 N.W.2d 528 (2000) People v. Parsons, 142 Mich. App. 751, 371 N.W.2d 440 (1985) In re Petition of Attorney General for Investigative Subpoenas, 274 Mich. App. 696, 736 N.W.2d 594 (2007) See v. City of Seattle, 387 U.S. 541, 87 S. Ct. 1737, 18 L. Ed. 2d 943 (1967) Shapiro v. United States, 335 U.S. 1, 68 S. Ct. 1375, 92 L. Ed. 1787 (1948) Skinner v. Railway Labor Executives’ Ass’n, 489 U.S. 602, 109 S. Ct. 1402, 103 L. Ed. 2d (1989) Tallman v. Department of Natural Resources, 421 Mich. 585, 365 N.W.2d 724 (1984) Truel v. City of Dearborn, 291 Mich. App. 125, 804 N.W.2d 744 (2010) United States v. Biswell, 406 U.S. 311, 92 S. Ct. 1593, 32 L. Ed. 2d 87 (1972) United States v. Morton Salt Co., 338 U.S. 632, 70 S. Ct. 357, 94 L. Ed. 401 (1950) United States v. White, 322 U.S. 694, 64 S. Ct. 1248, 88 L. Ed. 1542 (1944) Yance v. Ananich, 145 Mich. App. 833, 378 N.W.2d 616 (1985)

Constitutions United States Constitution, Amendments IV, V, and XIV Michigan Constitution 1963, Article I

Statutes Michigan Administrative Procedures Act of 1969, M.C.L. § 24.273

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CHAPTER IV: RULES AND RULEMAKING

Introduction

Rules are the embodiment of “red tape.” To some, they represent all that is wrong with government, from “treating people like numbers” to hamstringing private enterprise with needless bureaucratic requirements. To others, rules are protection against bureaucratic exercises of discretion; they make us a government of laws rather than of the individual preferences of governmental leaders. Rules are the most visible form of government administrative action, since they are collected and published in a manner similar to statutes.

In addition to the authority of agencies to make rules, the courts have addressed the nature and definition of rules, the various types of rules and their effects, the role of rules in the development of policy, and the judicial review of rules for validity. The Michigan APA sets forth procedures which must be followed by agencies when engaged in rulemaking, as well as when they publish guidelines.

Authority

Michigan case law has long recognized that the Legislature can confer rulemaking authority on an administrative agency, provided that adequate statutory standards restrict the actual exercise of that authority. In Coffman v. State Board of Examiners in Optometry, the Michigan Supreme Court reviewed the statutory authority requirement required for an agency to make rules. The underlying statute in Coffman expressly granted to the agency the authority to make rules. The issue centered around the agency’s authority to impose requirements through rules that were more restrictive than the requirements in the underlying statute. The Court held that the agency’s action was not an “arbitrary abuse of discretion.” However, the Court of Appeals took a less expansive view of an agency’s power in Sterling Secret Service, Inc. v. Department of State Police.

Coffman contained dictum which supported the position that rulemaking authority can be implied from the statutory scheme, stating that “‘the authority of an administrative board or officer * * * to adopt reasonable rules and regulations which are deemed necessary to the due and efficient exercise of the powers expressly granted cannot be questioned. This authority is implied from the power granted.’ “The Court was citing quoting from Ranke v.

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Corporation and Securities Commission, which in turn quoted from California cases. ,

Later, McKibben v. Corporation and Securities Commission supported the need for liberal construction of a statute in order to effectuate the legislative purpose, including the implied power to promulgate rules. Some years later, Clonlara, Inc. v. State Board of Education, saw the Supreme Court supporting the notion that rulemaking power can be implied, but rejecting the argument that all grants of regulatory power implied the power to make rules.

Nature, Definition, Types and Effects of Rules

Nature of Administrative Rules

The importance of administrative rules in the constellation of agency powers cannot be overstated. An agency rule is the functional equivalent of a statute. It states public policy, has broad general effect, applies to future conduct, and need not be developed on an evidentiary basis. When being applied to a person, like in the case of a statute, the policy it embodies is not subject to evidentiary challenge. The issue in challenges to rules is usually limited to whether the rule itself was violated. When a rule is reviewed by a court, many of the presumptions and principles of statutory interpretation and construction are followed. While it is not truly legislative, the promulgation of rules by an agency is quasilegislative activity afforded great deference by the courts.

Definition of Rule

The Michigan Administrative Procedures Act includes a definition of a rule, then defines what a rule is not through an extensive list of exceptions. The APA defines a rule as: “. . . an agency regulation, statement, standard, policy, ruling, or instruction of general applicability that implements or applies law enforced or administered by the agency, or that prescribes the organization, procedure, or practice of the agency, including the amendment, suspension or rescission thereof . . .” [The APA includes a mistaken reference to “the law” here; this is the former language.] The APA currently lists 18 items that are not included as rules. The federal definition is similar, but (1) specifically recognizes that a rule can be of particular effect, (2) provides that a rule has future effect, (3) includes ratemaking (one of the 18 items not included in Michigan), (4) covers statements that interpret law, and (5) contains no list of

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items not covered. The federal APA defines rulemaking as, “the agency process for formulating, amending or repealing a rule,” a definition not included in the Michigan APA.

Agencies may mislabel items or use them improperly, too often confusing items that are not rules with those that are not and applying to persons policy statements that are not rules as if they are rules. An agency’s label may be helpful in determining an agency’s intention regarding an item, but is not controlling. An objective approach is required in determining what policy statement is a rule.

An agency action is a rule if (1) an agency has the statutory authority to make a rule, (2) the action fits the definition of a rule, (3) the agency intended to create a rule, and (4) the agency followed the appropriate APA procedures in promulgating a rule. How an agency uses a policy statement can be helpful in determining whether it is a rule, but usage is not controlling; how a policy statement is used cannot convert a document that is not a rule into a rule. That usage may be an invalid agency action, but that action cannot make something that never was a rule into one.

An agency cannot promulgate valid substantive rules except through the APA-required rulemaking procedures, so any purported rules that have not gone through that procedure cannot be rules, cannot be substantive, and cannot have the force and effect of law. That is the lesson of Michigan Farm Bureau v. Bureau of Workmen’s Compensation. If an agency attempts to give unpromulgated material the force and effect of law, that action is unlawful and invalid. That is the lesson of Detroit Base Coalition for the Human Rights of the Handicapped v. Department of Social Services. If an agency does not have rulemaking authority, it cannot make rules. That is the lesson of Clonlara, Inc. v. State Board of Education.

Types of Rules

Administrative law generally recognizes four types of rules: substantive (sometimes called legislative), procedural, interpretive (sometimes called interpretative), and housekeeping (sometimes called internal). Neither the federal nor the Michigan APA defines any of these.

Substantive rules establish a standard of conduct which implements law enforced or administered by an agency and have binding effect on individual rights and obligations. They have the force and effect of law. Michigan case law often refers to these as “legislative” rules.

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Procedural rules establish the method by which an agency will execute its designated functions regarding the contact it has with persons and describe the procedures, practices, forms, applications, guidelines, instructions and other requirements which persons must follow or use in the contact they have with an agency. Procedural rules also have the force and effect of law. Both substantive and procedural rules also bind the agency which adopts them.

Interpretive rules express the formal opinion of an agency of another rule or of a statute which interpretation the agency intends to follow in the execution or administration of its designated functions. Generally, interpretive rules bind the agency that adopts them, but not any other person.

Housekeeping rules describe the internal organization, operation, management, and practices of an agency, including instructions or guidelines that employees must follow in the exercise and scope of their functions.

The Michigan APA definition of rule applies to only two of the four types—substantive and procedural. Housekeeping rules apparently fall under the items that are not rules according to Section 7(g) “an intergovernmental, interagency, or intra-agency memorandum, directive, or communication that does not affect the rights of, or procedures and practices available to, the public.”

The situation regarding interpretive rules is a little more complex. Unlike its federal counterpart, the Michigan APA definition does not mention the word “interprets.” And it specifically excludes from the definition of rule in section 7(h) “a form with instructions, an interpretive statement, a guideline, an informational pamphlet, or other material that in itself does not have the force and effect of law but is merely explanatory.” Michigan’s APA definitional structure includes in Section 3(7) “guidelines,” which are “an agency statement or declaration of policy which the agency intends to follow, which does not have the force or effect of law, and which binds the agency but does not bind any other person.”

Clonlara added confusion by describing agency procedures not promulgated through rulemaking as “interpretive” rules, defining those rules as any rule issued without exercising delegated legislative power to make policy through rules, then holding that these procedures were “invalid” rules. [The dissent in Clonlara argued that the perceived effect of such statements of policy converted them to rules.] However, Clonlara, is contrary to the decision in Michigan

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Farm Bureau, which held that such actions were not rules at all under the Michigan APA definition.

The concept of a guideline in Michigan is very close to that of an interpretive rule in the federal system. The Clonlara case does not reconcile the confusion between guidelines and interpretive rules in Michigan, but implies that they are not the same. But the compliance procedures in Clonlara underwent neither the procedures required to promulgate a rule nor the procedures required to adopt a guideline. And the Court in that case did not identify what procedures, if any, might apply if an agency wanted to adopt an interpretive rule.

Effect of Rules

Substantive rules have the force and effect of law—they are very much the equivalent of statutes. Procedural rules are rules of the game, binding both the agency and public as players of the game. Interpretive rules and guidelines bind the agency, but not the public. Housekeeping rules bind only the agency and its employees and create no private rights or obligations.

Policy Development and the Use of Rules

Two significant issues in Michigan cases focus on rules in the development of public policy: one is whether an agency may enforce its underlying statute in the absence of passing rules first, particularly where the statutory language seems to mandate the promulgation of rules; the other is whether an agency can choose to make policy through orders, usually proceeding through contested case hearings, rather than through rulemaking—a concept often described as “agency choice of mode of action” or “rule versus order.”

Several cases focus on the agency development of policy through orders. Michigan Life Insurance Co. v. Commissioner of Insurance demonstrated that a new interpretation of a statute can be made during a contested case adjudication. Michigan State Chamber of Commerce v. Secretary of State showed that an agency can use its adjudicatory power to make policy in a case, even though that policy was first enunciated in statements outside the hearing context and without benefit of the rulemaking process.

The Supreme Court addressed the issue of statutory language that seems to mandate rules first in West Bloomfield Hospital v. Certificate of Need Board. The Court held that the failure of an agency to comply with a rule-passage requirement should not

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prohibit that agency from enforcing the statute in an adjudication, because doing so would frustrate the overriding purpose of the legislation.

One complication of the debate over how an agency develops public policy or how it articulates an agency’s interpretation of an underlying statute—through rules or orders—is that public policy supports both choices. In Detroit Automobile Inter-Insurance Exchange v. Commissioner of Insurance, the Court of Appeals agreed with the federal judicial view that agencies may choose to articulate policy by rule or by order in the agency’s informed discretion. But other panels of that court seem to ignore this position. One major justification for rejecting the rules-first approach is that an agency need not and cannot anticipate every conceivable situation through rulemaking before enforcing its underlying statute. Further, once rules are developed through rulemaking, they can only be changed through rulemaking, which may itself frustrate legislative intent, according to American Way Life Insurance Co. v. Commissioner of Insurance.

As Michigan Farm Bureau demonstrated, many pronouncements by agencies may have the appearance of binding effect, but only rules actually bind those subject to them in the same manners as statutes. Other pronouncements may not be legally binding but can have the practical effect of restricting or intimidating those to whom they are directed. The courts have not always been careful in analyzing the distinction between legal and practical effect, but Clonlara made it clear that policy statements, not made in rule form, do not have the force of law, that an agency must apply the statute and not the statement, and that the practical effect of a statement does not make it a rule. Interpretive statements have value, since they serve to guide or reveal an agency’s views, yet they do not create or destroy private rights. Still, an agency’s use of such statements as if they were rules is improper. And an agency cannot use such statements to later its rules, as shown in Detroit Base Coalition.

Rulemaking Procedure

The Legislature has reacted to the finding of the Supreme Court in Blank v. Department of Corrections that legislative approval of agency rules—a step in the promulgation of a rule that was formerly required by the APA— violated the separation of powers provisions of the Michigan Constitution. After seeking and failing to find ways to keep itself involved in the actual approval of rules, the Legislature

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has imposed procedural requirements on the processing of rules, mainly on the Governor and the office charged with the executive rulemaking oversight. These impose burdens on the very agencies that the Legislature empowers to make rules, but create no new public rights.

After Blank, although the Michigan APA is complicated by one of the nation’s most complex rulemaking procedures, the six other basic procedural elements remain the same and apply to all rulemaking— (1) notice, (2) hearing, (3) approvals, (4) adoption, (5) promulgation, and (6) publication. This contrasts with the federal system, which has separate procedures for “informal” or “notice and comment” rulemaking and for “formal” rulemaking, depending on the language of the underlying statutory provision empowering rulemaking. Few Michigan cases even mention the overall process; the APA does not define “rulemaking,” but does define “processing of a rule” as the action regarding a rule that includes the rules adoption (also defined as the formal action of an agency establishing a rule) and ending with its promulgation.

Notice

Rulemaking begins with a detailed notice of rulemaking which must include: (1) timely notice, (2) the statutory authority for the rule, (3) the time and place of the hearing on the rule, (4) the manner of submitting views to the agency, (5) the terms of substance of the proposed rule, (6) a description of the subject and issues related to the rule, (7) the proposed effective date of the rule. Notice must be made as required in the underlying statute or in three newspapers of general circulation, as well as in the Michigan Register and through the Internet.

Hearing

A public hearing follows the notice. This hearing is not an evidentiary proceeding, but is legislative in nature. Statutes imposing additional requirements are rare. Either the head of the agency or someone knowledgeable about the rules must attend and participate in the discussion of the proposed rules. Those attending are allowed to present data, viewpoints, questions, and arguments. Exceptions to the notice and hearing phase are permitted for rules of agency organization and methods, for rescinding obscure rules, and for emergency rules.

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Approvals

With the finding that the Legislature’s approval role was unconstitutional, as predicted in the earlier edition of this Primer, the remaining approval is that of the Legislative Service Bureau, which must approve all rules as to form, classification, and arrangement.

Adoption

An agency must adopt approved rules. Adoption is “the step in the processing of a rule consisting of the formal action of an agency establishing a rule before its promulgation.”

Promulgation

An agency must promulgate a rule, which is “that step in the processing of a rule consisting of the filing or the rule with the Secretary of State. This must occur not less than 15 session days after adoption.

Publication

The rules are published in the Michigan Administrative Code or a quarterly supplement. Publication makes the rules effective unless the rule itself establishes an earlier effective date, which can be no earlier than 15 after promulgation.

Summary—Failure to follow the Michigan APA rulemaking procedure renders the rules invalid, meaning that they are not rules at all. A challenge to the notice and hearing requirements must be made within two years. In all instances, a challenger must show material prejudice resulting from the procedural defect, particularly when the method of judicial review is a petition for review under Chapter 6 of the APA. Once promulgated, presumptions attach that the rule was adopted correctly and that a published rule is a true copy of the approved rule.

These rulemaking provisions do not apply to guidelines, which are subject instead to the procedural requirements of Chapter 2 of the Michigan APA. The guideline procedures include notice, comment, and adoption by the agency.

Validity of Rules

Setting aside the quarrels about definition and whether invalid rules are really rules, only rules that are valid can affect the rights of

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a person. Rules can be reviewed for validity on three grounds— constitutionality, improper procedure in their formulation, and content that is substantively incorrect. A fourth threshold ground is that an agency has at least implied authority to issue rules. Absent authority, an agency’s purported rules are at best some sort of interpretive statement or, arguably, interpretive rules.

Constitutionality

Challenging rules because they are unconstitutional is the oldest and most difficult basis on which to prevail. Although not wellarticulated in the cases, these challenges generally have a substantive due process context, which has been articulated as “[the regulations . . . are valid so long as they are not unreasonable or arbitrary. If any doubt exists as to their invalidity, they must be upheld.” Perhaps better is this: “If a real and substantial relationship exists between regulations enacted pursuant to a state’s police power and the health, safety, morals, or general welfare of the public, the regulations will be upheld unless they ‘needlessly * * * invade property or personal rights as protected by the Constitution * * *.’ “ Improper delegation sometimes gets mixed in, but that notion is actually about the underlying statute, since it is based on an improper transmittal of power by the Legislature to an executive branch agency.

Procedural Impropriety

A rule adopted in violation of the Michigan APA is invalid (or not a rule at all), at least for a period of two years as to failure to comply with the APA’s notice and hearing provisions. The two-year limit does not apply to the other procedural requirements. This principle is the key which prevents an agency from using material not adopted and promulgated by an agency as if it is a rule. An agency cannot use a pronouncement to “short-cut” evidentiary proofs in a contested hearing unless the pronouncement has undergone the rulemaking process.

Substantive Content Validity

A test for substantive validity slowly evolved in Michigan, but has no theoretical justification, at least as so far articulated in a case. In its present form, it retains some of its substantive due process roots, but has taken on aspects of statutory construction principles. In addition to the rationality aspect articulated in Toole v. Michigan

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State Board of Dentistry, the Michigan Supreme Court has also stated that the test for the validity of rules is whether they have “a proper relationship to the act.” That language, which is from Coffman v. State Board of Examiners in Optometry goes beyond Toole’s rationality test and its stated presumption of constitutionality, adding an element of statutory construction analysis independent of constitutional considerations.

In Luttrell v Department of Corrections, the Supreme Court adopted the three-part test first stated by the Court of Appeals in Chesapeake & Ohio Railway Co. v. Public Service Commission: “ ‘(1) whether the rule is within the subject matter covered by the enabling statute; (2) if so, whether it complies with the underlying statutory intent; and (3) if it meets the first two requirements, when [sic] it is neither arbitrary nor capricious.’ “This test was adopted without cited authority or other explanation in both Luttrell and Chesapeake & Ohio Ry.

This seems to be a more articulate version of the Toole decision. The first part of this test is a version of the “scope” of the statute concept, which basically looks to see if the rule went beyond the scope of the statutory authority granted, rather than whether the rule went beyond the minimum requirements set out in an underlying statute. The second part is a summarization of the principles of statutory construction used to determine whether any action comports with legislative intent. Included within the principles are the usual rules of statutory construction, the presumption of validity, and deference to an agency interpretation of its authorizing underlying statute. The third test uses the concepts of arbitrariness and capriciousness in a context often very close to the constitutional rationality test.

A rule’s validity is not determined by reviewing the factual basis for its adoption, despite some authority to the contrary. The rationality test usually suffices regarding whether rules have a valid basis in fact—if there is any rational set of facts that would sustain a rule, the court must assume that those were the facts which the agency had in mind when adopting a rule. Thus, no evidentiary basis is needed for rulemaking. According to People v. Soule, the question of facts considered by an adopting agency cannot be tried over by the courts. As to emergency rules, the Court of Appeals has stated that the issue is whether an adopting agency lacked a substantial basis for its finding that the public interest required promulgation” of an emergency rule.

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Ten Steps to Successfully Analyzing Agency Rules and Rulemaking 1. Consider whether the agency action asserted by the agency is a rule by definition, and review the Michigan APA exemptions to the definition of rule to see if the policy in question is exempt from the rule definition. 2. Identify the statutory authority for the rule and confirm that the rule in question is consistent with the authority granted. 3. Check to see if there are rules that might apply, even though not asserted as applicable by the agency. 4. Compare the language of the rule to the language of the underlying statute to determine if the rule is valid under Michigan case law. 5. Review the rule as published in the Michigan Administrative Code, then review the application of the rule to the facts of the case at hand to determine if the rule is being used as intended under the particular fact setting. Compare the effect the agency claims the rule has to the nature of the rule and legislative intent. 6. Review the cases that have previously applied the rule, including a comparison of the facts and interpretation in those cases to those in the present case. 7. Consider whether the rule violates any constitutional protection, including substantive due process and the rule’s reasonableness. 8. Review the history of the rule’s publication to determine if all procedural requirements in both the underlying statute and the Michigan APA have been met. 9. If an agency asserts that no rule applies, determine if it is attempting to enforce a policy announced in some other form as if it is a rule. 10. Keep in mind that even if a rule or policy is unenforceable, the conduct may still violate the underlying statute and be subject to agency enforcement.

Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 4 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer,

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T.M. Cooley Law Review, Volume 12:21 (1995) Bienenfeld, Michigan Administrative Law (2d ed. 1991)

Cases American Way Life Insurance Co. v. Commissioner of Insurance, 131 Mich. App. 1, 345 N.W.2d 634 (1983) Blank v. Department of Corrections, 462 Mich. 103, 611 N.W.2d 530 (2000) Blank v. Department of Corrections, 222 Mich. App. 385, 564 N.W.2d 130 (1997) Clonlara, Inc. v. State Board of Education, 442 Mich. 230, 501 N.W.2d 88 (1993) Coffman v. State Board of Examiners in Optometry, 331 Mich. 582, 50 N.W.2d 322 (1951) Detroit Base Coalition for the Human Rights of the Handicapped v. Department of Social Services, 431 Mich. 172, 428 N.W.2d 335 (1988) Detroit Automobile Inter-Insurance Exchange v. Commissioner of Insurance, 119 Mich. App. 113, 326 N.W.2d 444 (1982) Luttrell v Department of Corrections, 421 Mich. 93, 365 N.W.2d 74 (1984) McKibben v. Corporation and Securities Commission, 369 Mich. 69, 119 N.W.2d 557 (1963) Michigan Farm Bureau v. Bureau of Workmen’s Compensation, 408 Mich. 141, 289 N.W.2d 699 (1980) Michigan Life Insurance Co. v. Commissioner of Insurance, 120 Mich. App. 552, 328 N.W.2d 82 (1982) Michigan State Chamber of Commerce v. Secretary of State, 122 Mich. App. 611, 322 N.W.2d 547 (1983) People v. Soule, 238 Mich 130, 213 N.W. 195 (1927) Ranke v. Corporation and Securities Commission, 317 Mich. 304, 26 N.W.2d 898 (1947) Sterling Secret Service, Inc. v. Department of State Police, 20 Mich. App. 502, 174 N.W.2d 298 (1969) Toole v Michigan State Board of Dentistry, 306 Mich. 527, 11 N.W.2d 229 (1943) West Bloomfield Hospital v. Certificate of Need Board, 452 Mich. 515, 550 N.W.2d 223 (1996).

Constitutions Michigan Constitution 1963, Article III, IV, V, and VI

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Statutes Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.224 to 24.228 (guidelines) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.231 to 24.266 (rules)

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CHAPTER V: INFORMAL ADJUDICATION AND DUE PROCESS

Introduction

The due process clauses of the federal (U.S. Const. Amend. V and XIV) and Michigan (Const. 1963, art I, § 17) constitutions impose procedural requirements on administrative agencies when making certain decisions, both saying that the government cannot “deprive [any] person of life, liberty, or property, without due process of law.” The basic question is whether agency action that results in taking liberty or property provides notice and the opportunity for hearing. When the answer is yes, the focus then turns to the extent of the hearing required and its timing. If the constitutions do not require notice and opportunity for hearing, the relevant decision-making procedures are determined by underlying statutes, agency rules, and customs within an agency.

Michigan’s Constitution also provides that “[t]he right of all individuals, firms, corporations and voluntary associations to fair treatment in the course of legislative and executive investigations and hearings shall not be infringed.” Although not much judicial scrutiny of this provision has taken place, the Court of Appeals applied a dictionary definition of “investigation” in Carmacks Collision, Inc. v. City of Detroit.

The Michigan Administrative Procedures Act does not provide procedures for all decisions, only for contested cases. The Michigan APA does not define “agency action,” “order,” or “adjudication,” unlike its federal counterpart. Of necessity, a definitional framework must be created to identify when due process controls agency action and when the Michigan APA applies.

Orders and Adjudication

Adjudication can be considered to be, as defined in the federal APA, the “agency process for the formulation of an order,” an “order” being “the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making, but including licensing.” Orders are made in quasi-judicial or adjudicative, rather than quasilegislative settings. Orders usually affect only one or a few individuals, while rules tend to apply generally. Orders tend to apply general principles to specific facts involving individuals, while rules tend to involve policies and to control future conduct.

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These differences in part explain why adjudication is subject to due process controls and rulemaking is not. Historically, this distinction was crucial in determining whether a person affected by government action was entitled to an evidentiary hearing in the course of that action. According to the leading federal cases, Londoner v. Denver and Bi-Metallic Investment Co. v. Colorado, if the action involved adjudicative facts a hearing was required, but if it involved legislative facts, a hearing was not required. Michigan’s Supreme Court rejected the need for a due process hearing in the rulemaking setting in Sherwin v. State Highway Commissioner.

In Michigan, those “adjudications” by state agencies made in situations where the APA contested case procedures apply— generally those where an underlying statute requires an evidentiary hearing or where the action of a state agency involves a deprivation of a due process interest—are the equivalent of federal “formal” adjudication. All other adjudications are “informal.” Contested cases in Michigan include those required by due process, but not the formal adjudications in the federal system, because Michigan’s definition says “required by law,” while the federal APA definition uses the more restrictive “required by statute.” This distinction was picked up by a state prisoner in Lawrence v. Department of Corrections, which held that the APA applied to state agency hearings required by due process. An underlying statute or the APA itself can modify or eliminate contested case coverage, as the Michigan Supreme Court observed in Walen v. Department of Corrections.

Final orders [or decisions] developed where no hearing is required by due process or statute are the result of “informal” adjudications. Procedures controlling such decisions vary considerably and are largely those required by an underlying statute, agency procedural rule, or the customs and practices of particular agencies.

Note that the word “hearing” is not included in the definitional structure, because it has so many manifestations that it is not sufficiently precise to be useful. Although the word appears frequently in statutes and judicial decisions, it should not be considered a word of art in due process analysis. And the unfortunate decision in Michigan Association of Home Builders v. Director of Department of Labor & Economic Growth, which coined the new definition of “non-contested case” incorporating both informal adjudication and the outcome of rulemaking, should be used with caution, if at all.

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General Concepts

In adjudicatory situations, the concern is basically with the impact of procedural due process. Unfortunately, the due process law in Michigan is badly confused, due mainly to the failure of Michigan courts to differentiate properly among three constitutional considerations: (1) separation of powers, (2) substantive due process, and (3) procedural due process. These concepts also are mistakenly intertwined with notions of “fairness,” which may in turn create confusion of fair process with fair outcome. See Walters v. National Association of Radiation Survivors.

Most modern due process cases have dealt with the procedures used in agency decision-making, the analysis focusing on whether the procedures used by agencies have been adequate to protect the important interests covered by the due process clause. That focus is properly denominated “procedural’ due process. “Substantive” due process examines whether the activity subject to agency action is a legitimate area of governmental control at all. It examines the reach of governmental power, rather than the manner in which an agency power is executed. Separation of powers analysis concentrates on whether one branch of the government has improperly given its powers to another branch or wrongfully assumed the powers of another branch, and has nothing to do with due process except in the most abstract sense.

What has brought these considerations together in Michigan cases has been the concept of adequate “standards.” Although the standards concept is appropriately tied to delegation or separation of powers analysis, the use of the word “standards” in substantive due process cases—as a device for identifying precisely the nature and extent of the power given to an agency—has led to an unfortunate blurring of the two constitutional considerations. Also, procedural and substantive due process have been confused, sometimes with reference to the failure of a statute to provide adequate “standards” to give a regulated person sufficient notice of prohibited conduct. The failure of the courts to recognize that the word standards can be used in different contexts and the judicial inability to maintain the conceptual frame of reference have led to almost indecipherable due process law in Michigan. The source of much of the confusion is Milford v. People’s Community Hospital Authority.

Michigan’s due process law is confused because the courts have not always kept the principles of due process—both substantive and procedural—distinct from one another and from other legal

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principles. That confusion can be avoided by careful analysis of the challenged agency action and keeping the conceptual issue clear.

Fundamentals of Due Process

The due process language in Michigan’s Constitution is identical to that in the federal Constitution. Michigan courts have resisted adding procedural requirements to those identified in the federal cases. Older federal and state decisions which adopted the “privilege” doctrine were swept aside in the due process revolution of the 1960s and 1970s in favor of protected interests and entitlement analysis. No generalized notion of fairness overrides the requirement that the new fundamentals be met.

Due process requirements exist only when certain criteria are present: there must be (1) a “deprivation” of a (2) “person’s” protected “interest” in life, liberty, or property, (3) by “governmental or state action.” When such deprivations occur, they must satisfy procedural due process requirements, which are determined by the peculiar circumstances of each action, normally through some form of balancing of interests. The “persons” protected by this clause are broadly defined; about the only type of entity that the courts have treated as having no due process rights is municipal corporations.

The deprivation must be of a person’s protected due process interest, according to City of Livonia v. Department of Social Services, and a general governmental action, such as passing a statute or promulgating a rule does not constitute a deprivation. In Shavers v. Attorney General, the Michigan Supreme Court held that “[t]he protections of the due process clause can only be invoked when there has been state action,” but the nature of state action has not been clearly defined by the case law. The courts have on occasion needlessly confused the law on deprivation under the due process clause with the law on “takings” under the just compensation clause.

Only the opportunity for due process protections is protected; due process rights can be waived by the affected person. The rule of prejudicial error for procedural failures also applies.

Due Process Interests and the Right to Hearing

Due process analysis is actually an exploration of three topics or questions; (1) Is there a right to hearing at all? (2) If so, what should be the scope of that hearing? (3) When should that hearing take place

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in relation to the governmental action that constitutes the deprivation of the protected interest?

Generally, due process interests involved in administrative agency action are liberty or property interests; these interests are not created by the constitutions, but by “existing rules or understandings.” The modern cases have abandoned the “legal” formalisms and regarded the legal definition of liberty and property as too technical. The more recent cases have replaced these older formulations with a two-fold examination of the nature of the interest at issue and of the person’s connection to that interest.

The analysis has become mainly an issue of determining first— by a rather definitional approach—whether a protected interest is involved and, second, whether the person’s relationship with that interest is an expectation or an entitlement. Board of Regents of State Colleges v. Roth and Perry v. Sindermann are the federal cases which abolished the old approach that distinguished between rights and privileges, rejected the technicalities of legal forms in favor of the two-fold analysis, and adopted a definitional consideration which focused on the nature of the interest rather than its weight. The Michigan Supreme Court in its decisions in Bundo v. City of Walled Lake and Bisco’s, Inc. v. Liquor Control Commission adopted all aspects of the Roth/Perry analysis. Bundo and Bisco’s became the leading cases in Michigan.

The Michigan Supreme Court said in Williams v. Hofley Manufacturing Co. that a protected interest does not come from the Constitution, but from “an independent source such as state law— rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.” Property interests recognized as protected by due process in federal and Michigan cases include public employment, licenses, and government benefits, as well as such others as a cause of action, worker’s compensation benefits, a claim against the government, real estate subject to a claim, and real and personal property. Some states have also found that certain interests are not “property” within the meaning of the due process clause, such as the interest in parking along a public highway. Liberty interests recognized by Michigan and federal cases include numerous aspects of prison confinement and, at least arguably, reputation.

Even though the nature of an interest itself may satisfy the definition of property or liberty, the person alleging a due process violation must demonstrate a sufficient relationship to that interest. In

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Roth, the Supreme Court described the necessary relationship: “[t]o have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must, instead, have a legitimate claim of entitlement to it.” Narrowly stated, the due process clause protects entitlements, not expectations. Characterization of the interest itself as property or liberty is important, but the characterization of the relationship of the person to the interest may be even more important in a successful argument that a due process interest has been deprived.

Although cases occasionally hint of a tendency to balance in determining whether a right to hearing exists—that is, they consider the weight of the interest and not just its nature—the approach established in both the federal courts and Michigan is to follow a definitional approach. Whether some property interests could be considered de minimus has not been addressed.

Scope of Due Process Hearings

“Due process . . . is a flexible concept that varies with the particular situation.” Michigan law seems to adopt the federal notion that what process is due should be evaluated by balancing the interest of the person and the government in light of the nature of the decision which must be made. In the absence of clearly controlling precedent, this flexible approach requires that a determination be made regarding the value of each hearing procedure, crossexamination for instance, within the circumstances of each case.

Federal cases have created a spectrum of due process protection dependent upon the interests involved and the nature of the decision at issue. The case demonstrating the greatest amount of protection is Goldberg v. Kelly, which involved welfare benefit termination; the United States Supreme Court gave the least protections to students given short school suspensions in its decision in Goss v. Lopez.

The major factors to be considered generally are stated as the nature of the governmental function, the private interest affected, and the circumstances or nature of the decision. However, over time a five-factor analysis applied in Mathews v. Eldridge, which was used to determine the timing of a hearing rather than its scope, has become the common articulation of the balancing required to determine scope. The five factors are: (1) the nature of the private interest involved, (2) the governmental interest involved, (3) the risk of erroneous action using the existing procedures, (4) the value of proposed additional safeguards, and (5) the burden imposed on the

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government by the additional safeguards. These are applied to evaluate both the specific procedures which might be used and the overall scope of any due process hearing.

Many cases have explored the availability of familiar procedures in administrative decision-making, including the Administrative Procedures Act itself. One of the two fundamental safeguards when due process does require a hearing is that there be some kind of notice. Although the actual articulation of the notice requirement has varied from “some kind” to “timely written notice,” the cases make it clear that notice need not be the equivalent of judicial fact-pleading. The second fundamental safeguard is that there must be an opportunity for some kind of hearing, but not one in which the rules of evidence apply, even in contested cases. Various evidentiary practices, such as cross-examination, often are found to be required in particular circumstances. Discovery has specifically been rejected as a due process constitutional right in administrative proceedings. The right to counsel is often excluded or limited.

Particular emphasis has been placed on the fairness of the administrative tribunal system. That system has been upheld, as has the use of hearing officers. Final decisions must be made on the record at these hearings, either from a transcript of the proceedings or based on a proposed or recommended decision of a presiding officer. Agencies must conform to the procedural requirements in their underlying statute and the agency’s own procedural rule, although there is debate whether the failure to do so violates due process or only administrative law principles. Apparently, a statute cannot limit procedural due process rights, even if the statute which established the right to a hearing contains the limitations on the scope or timing of that hearing.

Matters of individual bias are handled much as matters involving the judiciary, but the dangers of institutional bias and the combination of functions have led to case law which imposes a requirement of a “fair trial in a fair tribunal.” The general test is that the decision-makers can be disqualified or the agency structure itself found to violate due process “where experience teaches that the probability of actual bias . . . is too high to be constitutionally tolerable.” That probability exists where (1) there is a pecuniary interest in the outcome, (2) there is personal abuse of the decisionmaker by a party, (3) the decision-maker and a party are enmeshed in other matters, and (4) there has been prior contact as accuser, investigator, fact-finder, or initial decision-maker, all well-

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summarized in Crampton v. Secretary of State. However, the combination of functions within the agency itself is not disqualifying, for instance where the initial contact is on a probable cause basis and the final decision rests on a preponderance of evidence standard. Michigan has adopted a central panel system for the employment of hearing officers to counter institutional bias.

A confusing line of cases in Michigan features a notion of “rudimentary” due process, which states that there are absolute minimum procedures in any due process case. However, even in the very case in which this version of minimal due process was adopted by the Michigan Supreme Court, Bundo v. City of Walled Lake, the Court balanced away one of the so-called rudiments, leaving the issue as to whether there is a minimum due process requirement in doubt.

Timing of Due Process Hearings

The leading federal case on the timing of due process hearings— that is, whether a deprivation must take place after a hearing or is allowed before a hearing is provided—is Mathews v. Eldridge. The United States Supreme Court in Mathews set forth the five-factor balancing test to determine the timing of a hearing, but that test has proven to be so valuable that it serves not only as the best test for timing analysis, but as a test to determine the appropriate scope of hearing, as discussed in the previous section.

Timing involves consideration of the impact on a protected interest when the government makes the deprivation first and then provides a hearing. In situations where the government acts in an emergency, the courts have eschewed the balancing test in favor of an analysis of the emergency circumstances justifying prehearing deprivation. In other settings, a balancing takes place and a determination is made which justifies proceeding without a prior hearing, or imposing limited prehearing procedures, or requiring what amounts to a full-blown, pre-deprivation adversarial hearing. Even when no pre-deprivation procedures are required, a postdeprivation hearing will be required, except possibly for emergencies. Only if no protected due process interest is deprived at all can action occur without offering a hearing at some time; and where a pre-termination hearing of a limited nature is used, there must be a full hearing at some point. What is not required is that there be two due process hearings.

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Like with federal cases, Michigan case law has also recognized that some circumstances warrant action prior to hearing. When an agency does act without a prior hearing, the Michigan Supreme Court in Craig v. City of Detroit imposed a requirement that the subsequent hearing be expedited.

Ten Steps to Successful Michigan Due Process Analysis 1. Identify the agency action that is to be challenged. 2. If the action is that of a legislative body, the challenge will be either for improper delegation or lack of substantive due process. 3. If the argument is that legislative authority was improperly delegated to an administrative agency, the test is whether there are not adequate standards in the challenged statute in violation of the Constitution’s separation of powers provisions. 4. If the argument is that legislative authority was improperly exercised by the Legislature itself, the test is whether the challenged statute is rationally related to the police powers of the state, in violation of substantive due process. 5. If the argument is that the administrative action amounts to a taking of real property, the appropriate protection is found in the Constitution’s just compensation clause, rather than its due process clause. 6. If the action to be challenged is a rule, and the agency followed the APA-required procedures in promulgating the rule, the rulemaking process satisfies whatever procedural due process the Constitutions might impose, and the challenge must be made on other grounds. 7. If the agency action is an order which applies an underlying statute or rule to a person, the Constitution guarantee minimal due process for a person deprived of a protected liberty or property interest by state action, with a focus on the nature of the interest affected by the agency action and the relationship between the interest and the person. 8. If no protected interest is involved, or a person’s relationship to the interest is not one of entitlement, the procedures in the adjudication are determined by the underlying statute, the

Administrative Procedures Act, if applicable, and the relevant agency rules, rather than by due process.

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9. If a person is deprived of a protected interest to which the person is entitled, the person is entitled to notice and an opportunity for hearing, and the procedures for that hearing are determined by balancing. 10. In general, both the timing and scope of a due process hearing are determined by balancing the following factors: (1) the nature of the private interest involved, (2) the governmental interest involved, (3) the risk of erroneous deprivation using the agency’s existing procedures, (4) the value of proposed additional safeguards, and (5) the burden imposed on the government by the additional safeguards.

Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 5 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Abbott v. Howard, 182 Mich. App. 243, 451 N.W.2d 597 (1990) Bell v. Burson, 402 U.S. 535, 91 S. Ct. 1586, 29 L. Ed. 2d 90 (1971) Bi-Metallic Investment Co. v. Colorado, 239 U.S. 441, 36 S. Ct. 141, 60 L. Ed. 372 (1915) Bisco’s, Inc. v. Liquor Control Commission, 395 Mich. 706, 238 N.W.2d 166 (1976) Board of Curators v. Horowitz, 435 U.S. 78, 98 S. Ct. 948, 55 L. Ed. 2d 124 (1978) Board of Regents of State Colleges v. Roth, 408 U.S. 564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972) Bohannon v. Sheraton-Cadillac Hotel, Inc., 3 Mich. App. 81, 141 N.W.2d 722 (1966) Bundo v. City of Walled Lake, 395 Mich. 679, 238 N.W.2d 154 (1976) Cafeteria & Restaurant Workers Union v. McElroy, 367 U.S. 886, 81 S. Ct. 1743, 6 L. Ed. 2d 1230 (1961) Carmacks Collision, Inc. v. City of Detroit, 262 Mich. App. 207, 684 N.W.2d 910 (2004)

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Case v. Liquor Control Commission, 314 Mich. 632, 23 N.W.2d 109 (1946) City of Livonia v. Department of Social Services, 423 Mich. 466, 378 N.W.2d 402 (1985) Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S. Ct. 1487, 84 L. Ed. 2d 494 (1985) Craig v. City of Detroit, 397 Mich. 185, 243 N.W.2d 236 (1976) Crampton v. Secretary of State, 395 Mich. 347, 235 N.W.2d 352 (1975) In re Del Rio, 400 Mich. 665, 256 N.W.2d 727 (1977) Dickerson v. Warden, Marquette Prison, 99 Mich. App. 630, 298 N.W.2d 841 (1980) Dow v. State, 396 Mich. 192, 240 N.W.2d 450 (1976) Ewing v. Mytinger & Casselberry, 339 U.S. 594, 70 S. Ct. 870, 94 L. Ed. 1088 (1950) Gibson v. Berryhill, 411 U.S. 564, 93 S. Ct. 1689, 36 L. Ed. 2d 488 (1973) Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) Goss v. Lopez, 419 U.S. 565, 95 S. Ct. 729, 42 L. Ed. 2d 725 (1975) Greenholtz v. Inmates of Nebraska Penal & Correctional Complex, 442 U.S. 1, 99 S. Ct. 2100, 60 L. Ed. 2d 688 (1979) Greer v. John E. Green Plumbing & Heating, 75 Mich. App. 451, 255 N.W.2d 17 (1977) Hodel v. Virginia Surface Mining Association, 452 U.S. 264, 101 S. Ct. 2352, 69 L. Ed. 2d 1 (1981) Johnson v. Mississippi, 403 U.S. 212, 91 S. Ct. 1778, 29 L. Ed. 2d 423 (1971) Kent County v. Department of Social Services, 149 Mich. App. 749, 386 N.W.2d 663 (1986) Lawrence v. Department of Corrections, 88 Mich. App. 167, 276 N.W.2d 554 (1979) Londoner v. Denver, 210 U.S. 373, 28 S. Ct. 708, 52 L. Ed. 1103 (1908) Mathews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976) Michigan Association of Home Builders v. Director of Department of Labor & Economic Growth, 481 Mich. 496, 750 N.W.2d 593 (2008) Michigan State Employees Association v. Department of Mental Health, 421 Mich. 152, 365 N.W.2d 93 (1984)

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Milford v. People’s Community Hospital Authority, 380 Mich. 49, 155 N.W.2d 835 (1968) Morrissey v. Brewer, 408 U.S. 471, 92 S. Ct. 2593, 33 L. Ed. 2d 484 (1972) In re Murchison, 349 U.S. 133, 75 S. Ct. 623, 99 L. Ed. 2d 942 (1955) Napuche v. Liquor Control Commission, 336 Mich. 398, 58 N.W.2d 118 (1953) National Independent Coal Operators’ Association v. Kleppe, 423 U.S. 388, 96 S. Ct. 809, 46 L. Ed. 2d 580 (1976) North American Cold Storage Co. v. City of Chicago, 211 U.S. 306, 29 S. Ct. 101, 53 L. Ed. 195 (1908) Perry v. Sindermann, 408 U.S. 593, 92 S. Ct. 2694, 33 L. Ed. 2d 570 (1972) Rochester Community Schools Board of Education v. State Board of Education, 104 Mich. App. 569, 305 N.W.2d 541 (1981) Rockwell v. Crestwood School District Board of Education, 393 Mich. 616, 227 N.W.2d 736 (1975) Shavers v. Attorney General, 402 Mich. 554, 267 N.W.2d 72 (1878) Sherwin v. State Highway Commissioner, 364 Mich. 188, 111 N.W.2d 56 (1961) Turner v. Washtenaw County Road Commission, 437 MIch. 35, 467 N.W.2d 4 (1991) United States v. Morgan, 313 U.S. 409, 61 S. Ct. 999, 85 L. Ed. 1429 (1941) Viculin v. Department of Civil Service, 386 Mich. 375, 192 N.W.2d 449 (1971) Walen v. Department of Corrections, 443 Mich. 240, 505 N.W.2d 519 (1993) Walters v. National Association of Radiation Survivors, 473 U.S. 305, 105 S. Ct. 3180, 87 L. Ed. 2d 220 (1985) Wayne County Sheriff’s Department v. Michigan Labor Relations Board, 23 Mich App. 309, 178 N.W.2d 512 (1970) Williams v. Hofley Manufacturing Co.,430 Mich. 603, 424 N.W.2d 278 (1988) Williams v. Mayor of Baltimore, 289 U.S. 36, 53 S. Ct. 431, 77 L. Ed. 1015(1933) Withrow v. Larkin, 421 U.S. 35, 95 S. Ct. 1456, 43 L. Ed. 2d 712 (1975) Wolff v. McDonnell, 418 U.S. 539, 94 S. Ct. 2963, 41 L. Ed. 2d 935 (1974)

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Zinermon v. Burch, 494 U.S. 113, 110 S. Ct. 975, 108 L. Ed. 2d 100 (1990)

Constitutions U.S. Constitution, Amend. V and XIV Michigan Constitution, Article I, § 17, Article X, Section § 2 Official Record, Constitutional Convention 1961

Statutes Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.271 to 24.287 (contested cases) Federal Administrative Procedures Act, §§ 551(6), (7), (13) (definitions)

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CHAPTER VI: FORMAL ADJUDICATION AND CONTESTED CASES

Introduction

Chapter 4 of the Michigan Administrative Procedures Act applies only in those settings which are contested cases. A contested case is the equivalent of the type of adjudication known as “formal” in the federal administrative procedural system. The Michigan APA does not create a right to hearing. Rather, it supplies the procedures that must be followed for administrative hearings when evidentiary hearings are required by law.

Generally, the Michigan APA covers three aspects of hearings: (1) prehearing matters, (2) the conduct of the evidentiary portion of hearings, and (3) the decision-making process that follows the close of proofs. Underlying statutes and agency rules can add procedural requirements that go beyond those in the APA. The sequence of the particular procedures identified in the contested case chapter does not always follow the chronological sequence of events that occur in the typical agency hearing, so these procedures should be considered and applied within their context in the administrative hearing process. Many cases have discussed particular aspects of the APA contested case hearing procedures, but no case offers an overview of these Chapter 4 procedures.

Applicability of the Michigan Administrative Procedures Act

Statutory Invocation

An underlying statute can explicitly invoke the contested case provisions by identifying the APA by name, by reference to the contested case chapter, or by reference to the citation for the APA. The contested case provisions are often invoked by statute to guide agency decision-making even though due process would not require a hearing under the circumstances, such as for many initial licenses. Due to the definition of contested case in the APA, a direct invocation of the contested case provision need not appear in a statute in order to make the contested case chapter applicable. Statutes should be read carefully to insure that the specific APAinvoking language in a statute applies to the particular type of decision involved.

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Statutory Exemption

The APA itself includes in § 115 specific exemptions from the coverage by the contested case provisions, including, among others, worker’s disability compensation proceedings, some prisoner cases, driver operator’s license cases, unemployment compensation hearings, and some social welfare matters. Also, the APA definition of “agency” excludes coverage for agencies in the legislative and judicial branches, the governor, agencies controlling higher education, the civil service commission, and certain associations of insurers. Specific statutory exemption is also possible. Implied exemption can be based on legislative history, as was at least implied in Hanselman v. Wayne County Concealed Weapons Licensing Board.

Invocation by Definition

When the APA is not directly invoked, definitions in the APA are of paramount importance. The definitions of “agency” and “contested case” are key in determining whether the contested case provisions of the APA apply to particular decision-making.

Definition of Agency

Administrative agencies which are “state” agencies are covered by the APA unless exempted. An agency is defined in the Michigan APA as “a state department, bureau, division, section, board, commission, trustee, authority or officer, created by the constitution, statute, or agency action.” This definition is subject to exclusions.

Three leading Michigan Supreme Court decisions have explored the APA definition of agency. Advisory Opinion re Constitutionality of P.A. 1966, No. 346 distinguished between state and private agencies, requiring an examination of an agency’s characteristics, relations, and functions to determine whether it was an instrumentality of state government. Hanselman v. Wayne County Concealed Weapons Licensing Board applied the Advisory Opinion test to distinguish between state and local agencies, emphasizing that the overall characteristics, relations, and functions must be considered, rather than certain specific attributes. League General Insurance Co. v. Michigan Catastrophic Claims Association stressed that to be a covered agency, it must be both a “state” agency and that it must be created by the constitution, statute, or agency action, holding that mere creation by statute and involvement of state official

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is insufficient to meet a four-part test that case be derived from these three cases: (1) Was the agency in question created by the Constitution, statute, or agency action? (2) If so, is it a public rather than a private agency; that is, does it have a public purpose and do public work according to its overall characteristics, meaningful relationships, and manifested functions as they relate to the public purpose? (3) If so, is it a state rather than a local agency; that is, does it evidence dominant and pervasive state control, again referring to its characteristics, relations, and functions? (4) Is it exempt from coverage by the terms of the APA?

Definition of Contested Case

The APA defines a contested case as a “proceeding, including rate-making, price-fixing, and licensing, in which a determination of the legal rights, duties, or privileges of a named party is required by law to be made by an agency after an opportunity for an evidentiary hearing.” The word “proceeding” is not defined, but must be a determination of legal rights, duties, or privileges. The APA exempts some decisions from coverage through the definition of agency and specific actions identified in § 115.

In Lawrence v. Department of Corrections, the Court of Appeals held that Michigan’s definition of contested case included those situations in which due process requires that a state agency hold a hearing (at least if due process requires some sort of evidentiary hearing). Thus, the scope of a due process hearing by a state agency will be covered by application of Chapter 4 of the APA rather than by the due process in either the balancing or rudimentary scope requirements. This does not happen with federal formal adjudication because the invoking language is “by statute” rather than “by law.” The Legislature reacted to Lawrence by making this situation one of the exemptions to coverage.

Statutory Construction and Applicability in Particular Situations

Whether the contested case provisions apply remains subject to the rules of statutory construction used by Michigan courts in interpreting Michigan statutes. Michigan courts have construed the APA language and underlying statutes to exclude coverage of decisions which are legislative in nature, applications for initial licenses, some rate-making proceedings, and numerous other situations.

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Parties and Intervention

The APA defines “person” as “an individual, partnership, association, corporation, governmental subdivision, or public or private organization of any kind other than the agency engaged in the particular processing of a rule, declaratory ruling, or contested case.” “Party” is defined as “a person or agency named, admitted, or properly seeking and entitled of right to be admitted as a party in a contested case.” These definitions and their relationship to standing have received little judicial attention. Four sources identify who a party in a contested case can be: underlying statutes, due process, the APA itself, and agency rules.

The concept of intervention in administrative hearings is closely tied to the definition of party. The APA includes no direct reference to the right to intervene; that right, akin to intervention in judicial proceedings and with aspects of standing as well, must come from interests identified in relevant statutes. A competitor’s standing to intervene in an administrative hearing was recognized in Kassab v. Acho. Situations may exist which require that an agency offer a “comparative” hearing in which competitors for an exclusive or limited benefit or license appear together, according to Huron Valley Hospital, Inc. v. State Health Facilities Commission, a Michigan version of the federal Ashbacker doctrine.

Prehearing Procedures and Powers of Hearing Officers

Notice and Answer

Formality in pleadings is decidedly not an aspect of the administrative hearing process. Although the cases sometimes use confusing terminology, the Michigan APA does not operate on a complaint and answer system. All that due process requires is that a party be given adequate and timely notice of the matter under consideration, which the APA notice provision does. In at least some circumstances, the key is not what is noticed but what is fairly litigated before the agency.

The APA sets no specific minimum or maximum time for notice. Under § 71(2), a notice must contain the date, hour, and place of hearing; a statement of the nature of the hearing; a statement of legal authority; a statement of jurisdiction; a reference to the particular sections of the statutes and rules involved; and short and plain

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statement of the matters asserted. The APA also allows for a rehearing using the same notice requirements.

No method of service is mentioned in the APA, but it is usually done by first-class mail in the absence of directions in an underlying statute or applicable procedural rules of the agency or the central hearing system. Answers are permitted but not required, although an agency may require that an answer be filed.

See Michigan Administrative Law, § 6:18, for a general discussion of statutes of limitation, a topic that remains unclear in administrative law. A proposed test can be found at the end of that discussion.

Summary Proceedings

Because the APA uses a notice system rather than formal complaints, summary proceedings are not contemplated in the APA. But § 72(1) allows a hearing to proceed to a decision in the absence of a party who has received notice when the party fails to appear, a practice found to meet due process in Board of Education of Rochester Community Schools v. Michigan State Board of Education and Atkins v. Department of Social Services.

Counsel

The APA does not directly provide for a party to have the assistance of counsel, but clearly contemplates that counsel will be present. The custom of allowing counsel is widespread.

Public Hearings

Hearings are open and generally subject to the Open Meetings Act. Both the hearing and deliberation phases of the contested cases must be open, even though the OMA would not seem to apply to the deliberations and decision by an individual hearing officer or to those of an agency headed by a single individual. A statute can permit closure of a hearing in certain circumstances, such as teacher tenure cases and some of those involving patient abuse.

Presiding Officers

In 2005, a Governor’s executive order created a central hearing panel system. This order and its successors did not alter the hearing procedures except regarding the selection and appointment of hearing officers. Some exceptions to this change exist, particularly for the

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constitutionally-created agencies and hearings conducted by the Secretary of State. Statutes can exempt other agencies proceeding in particular matters from coverage. Otherwise, the APA still governs, but practitioners should check the administrative rules that now govern central panel administrative hearings.

Under § 79 of the APA, “[a]n agency, [one] or more members of the agency, a person designated by stature or [one] or more hearing officers designated by the agency to handle contested cases, shall be presiding officers in contested cases.” The use of hearing officers was common in APA hearings and would remain so in cases not covered by the central panel system. Occasionally, an agency or one or more members of its governing board would preside and still could. The APA terminology is “presiding officer,” but the title of the presiding officer by agency custom or civil service designation may be “hearing officer” or, as is the case with the centralized system, “administrative law judge.” The title is irrelevant in determining the presiding officer’s powers.

Section 80(1) lists the powers of presiding officers, who can: administer oaths and affirmations, sign and issue subpoenas to compel attendance and to provide documents, or order depositions, regulate the course of the proceedings, issue continuances, order the submission of briefs, direct the parties to appear and to confer to simplify issues, and award costs and fees. Although these powers in some respects are similar to those of a trial court judge, a presiding officer has neither equitable nor contempt powers.

The APA recognizes that agency decisions are “institutional” in nature and that the presiding officer is not likely to be the person or body with the ultimate authority granted by an underlying statute. Under § 79 and due process considerations, according to Crampton v. Department of State, presiding officers, agency heads, and agency members may be disqualified for personal bias and other legally disqualifying grounds. The doctrine of necessity may prohibit a disqualification that would leave no authorized decision-maker. A presiding officer can be replaced at any time, absent a showing that it would result in substantial prejudice to a party. Section 82 of the APA prohibits ex parte contacts between a decision-maker and a person or party on issues of fact and a party or party representative on issues of law.

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Discovery

Discovery and prehearing practice are very limited. Subpoenas are available under APA § 73 only if an underlying statute authorizes them. The APA does not mention discovery and few agencies provide for discovery in their rules, although agencies may informally permit considerable access to an agency “file.” Section 74(2) requires an agency to make available reports and statements of witnesses and other records, although the context arguably implies that the access is available only after the witness has testified. Section 72(4) requires that the authors of documents used in evidence be made available for cross-examination. Depositions may be used at the discretion of a presiding officer. The Freedom of Information Act may offer some relief from the absence of discovery, but it does not constitute an adequate substitute, because it does not allow the creation of evidence, is not controlled by the presiding officer in a case, and is enforceable only in an independent judicial proceeding.

Hearing Procedures

The Administrative Procedures Act clearly contemplates a relatively informal hearing process and provides only limited and general requirements. With the centralized hearing system in place, however, there are more detailed procedural rules. The APA does not mention either opening or closing statements, but they are commonly allowed. Arguably, § 72(3), which mandates oral argument on issues of law and fact, constitutes authority for opening and closing arguments, if requested.

The APA is surprisingly silent regarding both the burden of proof and the burden of going forward. In the absence of an underlying statute or procedural rule, the common practice is to place the burden on the proponent of the order and to use the preponderance of evidence standard. The order of proofs is often altered to suit the convenience of the parties, especially in hearings that will require several days.

The rules of evidence in contested cases are relaxed, according to § 75: “. . . the rules of evidence as applied in a nonjury civil case in circuit court shall be followed as far as practicable, but an agency may admit and give probative effect to evidence of a type commonly relied upon by reasonably prudent men in the conduct of their affairs.” The same section empowers an agency to prohibit the introduction of irrelevant, immaterial, or unduly repetitious evidence.

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Objections must be stated in the record to be preserved. Section 72(3) allows a party to present evidence and argument on issues of fact, § 72(4) permits cross-examination, and § 72(4) permits rebuttal. Section 78 allows for stipulations, including to dispose of a contested case.

A decision must be based on the evidence in the record and on inferences which can be drawn from that evidence. The record may include evidence taken by official notice under § 78, a broader version of judicial notice that recognizes the expertise of agencies in the subject matter at issue. The record may be expanded by the agency on review of a presiding officer’s proposal for decision, but a practitioner should be wary of this practice and be sure that it is done overtly and correctly.

Decision Procedures

The Administrative Procedures Act recognizes that agencies proceed by what is known as institutional decision-making. This concept recognizes that although the “head” of an agency makes the ultimate decision, others will participate in the actual conduct of the hearing. The actual hearing participation by the head of an agency will be absent or limited in most situations.

A presiding officer, now usually assigned from outside the agency through the central panel, conducts the prehearing and hearing processes. The hearing is normally followed by a presiding officer’s “proposal for decision,” a form of recommendation which can, in the absence of challenge by the parties, become the final decision in that contested case. Under § 81, the head of an agency can eliminate the proposal for decision process by presiding at the hearing or reading the entire record before making a final decision, both alternatives being uncommon in practice. If a decision is not adverse to a party other than the agency, a proposal for decision is not required, although this, too, is uncommon.

If challenges are forthcoming, the head of the agency retains all the powers that the agency originally had. The agency head is required to make the correction decision and should not defer to the presiding officer. The agency head may take additional evidence, which is not commonly done, and make its own interpretation of the facts presented, but is subject to a somewhat unclear limitation that the agency head must consider the presiding officer’s findings in making its own, particularly on matters involving the credibility of witnesses.

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Section 85 governs the requirements of final decisions, but should be read in conjunction with § 81. Both a proposal for decision and the final decision must contain findings of fact and conclusions of law. The parties are allowed to submit proposed findings and conclusions and to make exceptions to the proposal for decision. Findings of fact cannot be stated in conclusory or statutory terms, but must incorporate sufficient findings of underlying facts, so that the actual facts on which the decision rests are identifiable. Because the APA allows for the introduction of evidence that does not meet the rules of evidence, yet provides that the final decision must rest upon competent, material, and substantial evidence, some confusion has arisen over whether the preponderance of evidence must be constituted of “legally” admissible evidence—this requirement is known as the “legal residuum” rule in general administrative law parlance. The better view is that it need not.

Final decisions are shaped by the scope of judicial review to some extent—judicial review being available only after the decisionmaking process in an agency is completed. That review is usually limited to the record made before the agency. Review of agency contested cases is not de novo, and incorporates concepts of judicial deference and the allocation of resources. Generally, courts do not make an independent assessment of the facts in agency records, but instead determine if the factual conclusions of an agency are reasonable in light of the whole evidence in the agency record.

Twenty Steps in Successful Contested Case Analysis

This list is taken from Michigan Administrative Law, §§ 6:91 and 6:92. The list is written in the context of representing a client involved with an agency action, but works with little adjustment if representing an agency. 1. Determine if the APA contested case provisions apply by checking the underlying statute and whether due process requires an evidentiary hearing. 2. Check for specific exclusions in the statute and the APA, which exempts certain agencies from the contested case provisions. 3. If the underlying statute is silent regarding the applicability of the APA, determine if the action involves a state agency per the APA definition of “agency.” 4. If a state agency is involved, determine if the APA “contested case” definition is satisfied.

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5. If a state agency is involved and an evidentiary hearing is required by statute or due process, the definition is satisfied and the contested case procedures apply. Then, review the administrative rules that apply. 6. Make sure that the person involved fits the APA definitions of

“person” and “party.” 7. Review the notice of hearing to determine the nature of the subject matter involved and the action sought to be taken, comparing that to the language of the underlying statute. 8. Be aware that an answer need not be filed, but consider filing one to help narrow the issues where advantageous. 9. File an appearance to ensure receipt of all correspondence and to control contact between the agency and the party. 10. Appear at the scheduled hearing, because an agency can proceed in the absence of a party given proper notice. 11. Consider the prehearing provisions of the APA, and ask for a prehearing conference if none is available. 12. Find out if the agency has procedural rules beyond the APA basics, as well as checking the central panel hearing rules. 13. Obtain the information which the agency must make available in the hearing process under the APA, and consider the possible use of a Freedom of Information request. 14. Determine which party has the burden of proof and the burden of going forward. 15. Attempt to narrow the issues through stipulations of fact or law. 16. Determine the agency’s evidentiary practices, as well as those established in the central panel rules. 17. Review the APA hearing and decision-making procedures in the central panel rules. 18. Become generally familiar with the particular agency’s decision-making process. 19. Attempt to structure the record in light of the nature of the agency decision process. 20. Be familiar with the judicial review of contested case decisions, particularly that the judicial review will be limited to the record made before the agency.

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Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 6 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Advisory Opinion re Constitutionality of P.A. 1966, No. 346, 380 Mich. 554, 158 N.W.2d 416 (1968) Ansell v. Department of Commerce, 222 Mich. App. 347, 564 N.W.2d 1997 (on remand) Aquilina v. General Motors Corp., 403 Mich. 206, 267 N.W.2d 923 (1978) Ashbacker Radio Corp. v. Federal Communications Commission, 326 U.S. 327, 66 S. Ct. 148, 90 L. Ed. 108 (1945) Atkins v. Department of Social Services, 92 Mich. App. 313, 284 N.W.2d 794 (1979) Black v. Department of Social Services, 195 Mich. App. 27, 489 N.W.2d 983 (1992) Bunce v. Secretary of State, 239 Mich. App. 204, 607 N.W.2d 372 (1999) Champion’s Auto Ferry v. Public Service Commission, 231 Mich. App. 699, 588 N.W.2d 153 (1998) Crampton v. Secretary of State, 395 Mich. 347, 235 N.W.2d 352 (1975) In re Del Rio, 400 Mich. 665, 256 N.W.2d 727 (1977) Department of Community Health v. Risch, 274 Mich. App. 365, 733 N.W.2d 403 (2007) Ghidotti v. Barber, 459 Mich. 189, 586 N.W.2d 883 (1998) Grievance Administrator v. August, 438 Mich. 296, 475 N.W.2d 256 (1941) Hanselman v. Wayne County Concealed Weapons Licensing Board, 419 Mich. 168, 351 N.W.2d 544 (1984) Henderson v. Memphis Community School District, 57 Mich. App. 770, 226 N.W.2d 725 (1975) Huron Valley Hospital, Inc. v. State Health Facilities Commission, 110 Mich. App. 236, 312 N.W.2d 422 (1981)

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Kassab v. Acho, 125 Mich. App. 442, 336 N.W.2d 816 (1983) Lawrence v. Department of Corrections, 88 Mich. App. 167, 276 N.W.2d 554 (1979) League General Insurance Co. v. Michigan Catastrophic Claims Association, 435 Mich. 338, 458 N.W.632 (1990) Manuel v. Gill, 481 Mich. 637, 753 N.W.2d 48 (2008) Maxwell v. Department of Environmental Quality, 264 Mich. App. 567, 692 N.W.2d 68 (2004) McBride v. Pontiac School District, 218 Mich. App. 113, 553 N.W.2d 646 (1996) (on remand0 Michigan Canners and Freezers Association v. Agricultural Marketing and Bargaining Board, 416 Mich. 706, 332 N.W.2d 134 (1982), rev’d on other grounds, 467 U.S. 461 (1984) Midland Township v. State Boundary Commission, 401 Mich. 641, 259 N.W.2d 326 (1977) Northwood Apartments v. City of Royal Oak, 98 Mich App. 721, 296 N.W.2d 639 (1980) Professional Plaza, LLC v. City of Detroit, 250 Mich. App. 473, 647 N.W.2d 529 (2002) In re Public Service Commission for Transactions Between Affiliates, 252 Mich. App. 254, 652 N.W.2d 1 (2002) Rehabilitation Center, Inc. v. Blue Cross & Blue Shield of Michigan, 93 Mich. App. 357, 287 N.W.2d 236 (1979) Retirement Homes of Detroit Annual Conference of United Methodist Church, Inc. v. Sylvan Township, 92 Mich. App. 560, 285 N.W.2d 375 (1979), rev’d on other grounds, 416 Mich. 340, 330 N.W.2d 682 (1982) Rochester Community Schools Board of Education v. State Board of Education, 104 Mich. App. 569, 305 N.W.2d 541 (1981) Scullion v. State Board of Law Examiners, 102 Mich. App. 711, 302 N.W.2d 290 (1981) In re Sprint Communications Co., L.P., Complaint, 234 Mich. App. 22, 592 N.W.2d 825 (1999) Stokes v. Chrysler, LLC, 481 Mich. 266, 750 N.W.2d 129 (2008) 13-Southfield Associates v. Department of Public Health, 82 Mich. App. 678, 267 N.W.2d 483 (1978) Tomczik v. State Tenure Commission,175 Mich. App. 495, 438 N.W.2d 642 (1989) Vomvolakis v. Department of Treasury, 145 Mich. App. 238, 377 N.W.2d 309 (1985)

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W. A. Foote Memorial Hospital v. City of Jackson, 262 Mich. App. 333, 686 N.W.2d 9 (2004) White v. Revere Copper & Brass, Inc., 383 Mich. 457, 175 N.W.2d 774 (1970) Wolverine Power Cooperative v. Department of Environmental Quality, 285 Mich. App. 548, 777 N.W.2d 1 (2009)

Constitutions U.S. Constitution, Amend. V and XIV Michigan Constitution, Article I, § 17

Statutes Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.203 and 24.322 (definitions) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.271 to 24.287 (contested cases) Federal Administrative Procedures Act, §§ 551(6), (7), (13) (definitions) Executive Orders and Agency Rules Executive Order 2005—1 Executive Order 2005—26 Executive Order 2019-06 Executive Order 2019-13 R. 792.10101 et seq.

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CHAPTER VII: LICENSING

Introduction

The governmental function which best embodies the modern concept of administrative law is licensing. Individuals are most often directly affected by licensing among all the forms of government activity, other than taxation. Although licensing is performed by federal and local administrative bodies, state agencies are the most frequent licensors of public activity.

Legislatures often turn to licensing when they believe that certain standards of practice or performance are needed to protect the public. Licensing can be a form of limiting competition, so those engaged in particular occupations, professions, or activities often seek to secure licensing of the field—sometimes even hoping to raise qualifications for newcomers, while exempting current practitioners from the new requirements. While licensing has its own unique characteristics, it is controlled by the general principles of administrative and constitutional law.

Nature, Authority, and Constitutionality

Substantive due process consideration applies to licensing, both in regard to the subject matter covered and the means authorized in a statute to exercise that power. As stated in Gora v. City of Ferndale, an “individual’s right to engage in business is subject to the state’s authority, pursuant to its historic police powers, to enact laws protecting the public health, safety, welfare, and morals. Licensing is the most active form of implementing the police power of the state— the power to regulate public health, safety, welfare, and morals—a concept which the Supreme Court of Michigan characterized as “incapable of being defined and subjected to limitations in the abstract” in G. F. Redmond & Co. v. Michigan Securities Commission.

Licensing, particularly revocation of a license, is not an exercise of true judicial power and has legislative roots. Today, it is considered to be an exercise of executive power. That power is provided to agencies through legislative delegation in a statute which must have adequate standards, according to Department of Natural Resources v. Seaman. Analysis for adequate statutory standards can have both substantive due process and separation of powers aspects, but the focus is usually on whether a statute has improperly delegated

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legislative power to an executive branch entity—a separation of powers consideration. Procedural due process comes into play when the statute is applied, as when a license is revoked.

Definitions

The Michigan Administrative Procedures Act defines both license and licensing. According to Section 5(1): “ ‘License’ includes the whole or a part if an agency permit, certificate, approval, registration, charter, or similar form of permission required by law, but does not include a license required solely for revenue purposes, or a license or registration issued under [the Motor Vehicle Code].” Section 5(2) defines licensing: “ ‘Licensing’ includes agency activity involving the grant, denial, renewal, suspension, revocation, annulment, withdrawal, recall, cancellation, or amendment of a license.” These definitions and the related APA provisions apply only to licensing activities of state agencies.

As is the case with other concepts, the label placed (or not placed) on an activity can be inaccurate. A determination that something is or is not a license may itself be the focus of a controversy (see Westland Convalescent Center v Blue Cross & Blue Shield of Michigan) or the determination that something is a license may affect the procedures relevant to an agency decision. Courts, not just agencies, on occasion may fail to recognize the proper label. A franchise, defined as a “right . . . granted for a consideration,” is not a license, according to Arnold Transit Co. v. City of Mackinac Island.

Not all activity affecting a license is licensing. Statutes and rules often affect licenses without the application of procedures which would be available in licensing. The distinction is similar to that which distinguishes legislative from adjudicative action in due process analysis.

Licensing Procedures

Right to Hearing

A frequent issue is whether a licensing decision must be made on the basis of some sort of agency hearing. As the cases demonstrate, the answer depends on the relevant underlying statute and due process analysis. Many of the leading cases have involved licenses and the issue of whether there was a need for a hearing, as was the focus in Bundo v. City of Walled Lake.

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Because due process does not provide a right to hearing in the absence of an entitlement, initial licensing does not include a right to hearing unless an underlying statute provides for one, as shown in 13-Southfield Associates v. Department of Public Health. The procedures in the absence of a hearing are established by whatever other requirements there may be an underlying statute, agency procedural rules, and agency practices and customs. The APA is not an independent source for a hearing, according to Kelly Downs, Inc. v. Racing Commission, but in many instances underlying statutes make initial licensing by state agencies subject to the contested case requirements of the APA.

Actions by state agencies to revoke, suspend, or restrict licenses, as well as the refusal to renew an existing license, are covered by the contested case provisions of the APA. Even if an underlying statute does not provide for a hearing, these actions will constitute a deprivation of a due process-protected property interest requiring a contested case hearing, according to Lawrence v. Department of Corrections (assuming that due process balancing calls for an evidentiary hearing). The same will not be true of local licensing actions, which will be governed by due process considerations and requirements in local agency statutes, ordinances, and rules, not by the APA.

Licenses usually have an expiration date, but the APA makes that date flexible. Section 91(2) provides that upon a timely renewal application the expiration date is extended to the date on which the decision on the renewal application is made and that if the renewal is denied, it is further extended until the time for seeking judicial review expires.

Compliance Procedure Rights

One aspect of licensing that is often misunderstood is that the overriding purpose of regulation is to assure that minimum standards of performance are met. Licensing procedures are only secondarily related to punishment, although various sanctions are nearly always incorporated into licensing statutes and are considered a valid exercise of governmental police power.

The aim in the routine case is to assure continued attainment of at least minimal performance, not to revoke the license or to punish the offender. Accordingly, the APA in Section 92 provides a relatively informal compliance process which normally precedes hearings and the imposition of sanctions: “[b]efore the commencement of

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proceedings for suspension, revocation, annulment, withdrawal, recall, cancellation, or amendment of a license, an agency shall give notice . . . to the licensee of facts or conduct which warrant the intended action.” Then this section provides that “[t]he licensee shall be given an opportunity to show compliance with all lawful requirements for retention of the license.” This allows an offending licensee to correct conditions, practices, or mistakes which might otherwise be the basis for suspension or revocation. While the process contemplated is informal, it retains sufficient formality that licensees are aware that the normal give and take and negotiation regarding whether the licensee is meeting the terms of the license, as well as meeting the related conditions and rules, are at an end.

Michigan case law has elaborated on the requirements of the APA compliance process, dividing it into distinct compliance and hearing segments. Rogers v. Board of Cosmetology held that the APA included a four-step system in license revocation proceedings, which can be summarized as: “(1) Personal or written notice to the licensee, stating facts or conduct that constitute violations or warrant any intended action; (2) Informal opportunity to show compliance with licensing requirements; (3) In the absence of compliance, notice of hearing satisfying APA Section 71; and (4) Contested case hearing.”

The compliance procedure is not required when the conduct demonstrates willful disregard of the requirements and conditions of licensing, or if future compliance would not adequately reflect severity or nature of the past violation. Nor is the compliance opportunity required in emergency situations that justify immediate suspension of a license to protect the public. In such situations, the license can be summarily suspended and a hearing must follow promptly. The better view is that the compliance process should be available in renewal settings.

Fifteen Steps to Successful Licensing Analysis 1. Determine if a license and licensing by definition are involved—does the activity in question include any form of permission required by law and does the agency action involve an application for, denial of, renewal of or revocation or suspension of a license. 2. Review the underlying statute to determine whether the agency has licensing power and, if so, what limitations and requirements are imposed on the agency in the application of that power.

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3. Analyze the statute to identify the requirements imposed on the applicant for a license and on licensees who receive one. 4. Assuming a license is involved, review the terms and conditions of the license and the nature of the agency’s action in regard to the license. 5. Consider the police power involved, substantive due process requirements, and separation of powers implications of the statutory scheme. 6. Check the underlying statute and the agency rules to determine if either requires a hearing as part of the licensing process, even if the application is for an initial license. 7. If the statute (or a rule) does not call for a hearing and the application is for an initial license, recognize that there is no right to a hearing under due process, since there is no property interest in an initial license. 8. Where there is no right to hearing, determine the controlling procedures in an application for an initial license by referring to the underlying statute and the agency’s procedural rules, if any. 9. Conclude whether the agency action involves either renewal of a license or a significant restriction on an existing license; then consider whether due process would invoke the APA contested case provisions, if the underlying statute does not invoke APA contested case coverage. If the contested case provisions apply, see the steps recommended in Chapter 6. 10. Confirm that the license is still valid. 11. Check to see if the compliance opportunity provisions of the

APA were or will be met. 12. Examine the nature of the conduct in question, or the conditions alleged to exist, which assertedly violate the terms of the license. 13. Review the basis used to justify an emergency suspension of a license. 14. Compare the penalty or sanction imposed or proposed by the agency with its authority in the underlying statute. 15. Consider the use of a stay or injunction during judicial review of an agency action regarding an existing license.

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Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 7 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995) Bienenfeld, Michigan Administrative Law (Ann Arbor: Institute of Continuing Legal Education)

Cases Arnold Trans Co. v. City of Mackinac Island, 99 Mich. App. 266, 297 N.W.2d 904 (1980) Belanger & Sons, Inc. v. Department of State, 176 Mich. App. 59, 438 N.W.2d 885 (1989) Berlin & Farro Liquid Incineration, Inc. v. Michigan Department of Natural Resources, 80 Mich. App. 490, 264 N.W.2d 37 (1978) Bessinger v. Department of Corrections, 142 Mich. App. 793, 371 N.W.2d 868 (1985) Bio Tech, Inc. v. Department of Natural Resources, 235 Mich. App. 77, 596 N.W.2d 633 (1999) Bois Blanc Island Township. V. Natural Resources Commission, 158 Mich. App. 239, 404 N.W.2d 719 (1987) Borman’s, Inc. v. Liquor Control Commission, 37 Mich. App. 738195 N.W.2d 316 (1972) Bundo v. City of Walled Lake, 395 Mich. 679, 238 N.W.2d 154 (1976) Calvert v. Lapeer Circuit Judges, 442 Mich. 409, 502 N.W.2d 293 (1993) Cameron v. Secretary of State, 63 Mich. App. 753, 235 N.W.2d 38 (1975) City of Detroit v. Mashlakjian, 15 Mich. App. 236, 166 N.W.2d 493 (1968) City of Livonia v. Department of Social Services, 423 Mich. 466, 378 N.W.2d 402 (1985) Consumer & Industry Services v. Greenberg, 231 Mich. App. 466, 586 N.W.2d 560 (1998) DeHart v. Board of Podiatry, 97 Mich. App. 307, 293 N.W.2d 806 (1980)

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Delly v. Bureau of State Lottery, 183 Mich. App. 258, 454 N.W.2d 141 (1990) Department of Natural Resources v. Seaman, 396 Mich. 299, 240 N.W.2d 206 (1976) Downriver Nursing Associates v. Department of Public Health, 193 Mich. App. 594, 484 N.W.2d 748 (1982) Epps v. 4 Quarters Restoration LLC, 498 Mich. 518, 872 N.W.2d 412 (2015) G.F. Redmond & Co. v. Michigan Securities Commission, 222 Mich. 1, 192 N.W. 688 (1923) Gargagliano v. Secretary of State, 62 Mich. App. 1, 233 N.W.2d 159 (1975) Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964) Gora v. City of Ferndale, 456 Mich. 704, 576 N.W.2d 141 (1998) Hanson v. Michigan State Board of Registration in Medicine, 253 Mich 601, 236 N.W.2d 225 (1931) Harkins v. Department of Natural Resources, 206 Mich. App. 317, 520 N.W.2d 653 (1994) Heckler v. Day, 467 U.S. 104, 104 S. Ct. 2249, 81 L. Ed. 2d 88 (1984) Kassab v. Acho, 125 Mich. App. 442, 336 N.W.2d 816 (1983) Kelly v. Liquor Control Commission, 131 Mich. App. 600, 345 N.W.2d 697 (1993) Kelly Downs, Inc. v. Racing Commission, 60 Mich. App. 539, 213 N.W.2d 443 (1975) Kennedy v. State Board of Registration in Medicine, 145 Mich. 241, 108 N.W. 730 (1906) Krohn v. Michigan Board of Medicine, 98 Mich. App. 129, 296 N.W.2d 57 (1980) Lawrence v. Department of Corrections, 88 Mich. App. 167, 276 N.W.2d 554 (1979) M & S, Inc. v. Attorney General, 165 Mich. App. 301, 418 N.W.2d 441 (1987) Marrs v. Board of Medicine, 422 Mich. 688, 375 N.W.2d 321 (1985) Matter of Grimes, 414 Mich. 483, 326 N.W.2d 380 (1982) Michigan Intra-State Motor Tariff Bureau, Inc. v. Public Service Commission, 200 Mich. App. 381, 504 N.W.2d 677 (1993) Nelles v. Bartlett, 5 Mich. App. 47, 145 N.W.2d 795 (1966) Nicholas v. Secretary of State, 74 Mich. App. 64, 253 N.W.2d 662 (1977)

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Northwestern National Casualty Co. v. Insurance Commissioner, 231 Mich. App. 483, 586 N.W.2d 563 (1998) People v. Keeth, 193 Mich. App. 555, 484 N.W.2d 761 (1992) Pontiac Food Center v. Department of Community Health, 282 Mich. App. 331, 766 N.W.2d 42 (2008) Prawdzik v. City of Grand Rapids, 313 Mich. 376, 21 N.W.2d 168 (1946) Richardson v. Jackson County, 432 Mich. 377, 443 N.W.2d 105 (1989) Rogers v. Board of Cosmetology, 68 Mich. App. 751, 244 N.W.2d 20 (1976) Rogers v. Board of Education, Trenton Public Schools, 61 Mich. App. 682, 233 N.W.2d 141 (1975) Ron’s Last Chance, Inc. v. Liquor Control Commission, 124 Mich. App. 179, 333 N.W.2d 502 (1983) Roseland Inn, Inc. v. McClain, 118 Mich. App. 724, 325 N.W.2d 551 (1982) Rucker v. Michigan Board of Medicine, 138 Mich. App. 209, 360 N.W.2d 154 (1984) State Board of Dentistry v. Blumer, 78 Mich. App. 679, 261 N.W.2d 186 (1977) State Employees Association v. Department of Mental Health, 421 Mich. 152, 365 N.W.2d 93 (1984) Tally v. City of Detroit, 54 Mich. App. 328, 220 N.W.2d 778 (1974) T. D. N. Enterprises, Inc. v. Michigan Liquor Control Commission, 90 Mich. App. 437, 280 N.W.2d 622 (1979) 13-Southfield Associates v. Department of Public Health, 82 Mich. App. 678, 267 N.W.2d 483 (1978) Triantafillou v. Michigan Liquor Control Commission, 322 Mich. 670, 34 N.W.2d 471 (1948) Walen v. Department of Corrections, 443 Mich. 240, 505 N.W.2d 519 (1993) Weber v. Orion Township, 136 Mich. App. 689, 358 N.W.2d 576 (1984) Westland Convalescent Center v. Blue Cross & Blue Shield of Michigan, 414 Mich. 247, 324 N.W.2d 851 (1982) Wozniak v. State Board of Examiners in Optometry, 23 Mich. App. 630, 179 N.W.2d 210 (1970)

Constitutions U.S. Constitution, Amend. V and XIV

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Michigan Constitution, Article I, § 17

Statutes Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.205(a) and (b) (definitions) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.271 to 24.287 (contested cases) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.291 and 24.292 (licensing procedure)

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CHAPTER VIII: METHODS AND COURT OF JUDICIAL REVIEW OF AGENCY ACTION

Introduction [Special thanks to student Marco Menezes (now retired-Judge Menezes), who undertook the original research which forms the basis for a portion of this discussion.]

This chapter focuses on how and where judicial review of agency action can be obtained. Judicial review methods—or forms of action—answer the question of “how” a person subject to or threatened by agency action selects a judicial vehicle to review that action. The focus is on identifying the appropriate procedures to invoke judicial review. The “where” question is essentially jurisdictional—in what court can or must judicial review take place; the forum of review is directly tied to the method of review and the underlying statute controlling the agency action. Scope of review provisions answer the question of “how much” a court will review an agency action; that is, how far will a reviewing court go in substituting its judgement for that of an agency. The scope of judicial review, discussed in the next chapter, is largely determined by the underlying statutes and the method or review, but constitutional considerations also apply.

Four additional judicial review doctrines, with jurisprudential and constitutional underpinnings, shape the availability of judicial review of agency action. “Who” questions are essentially those involving standing—or who among those persons possibly desiring to seek judicial review of agency action is empowered to do so. “When” questions relate to the timing of judicial review in relation to the agency action and are addressed by the doctrines of ripeness, finality, and exhaustion of administrative remedies. “What” questions consider which outcomes and embodiments of action undertaken by an agency are subject to judicial review and include the doctrines of finality and exhaustion of administrative remedies. A second “where” question considers whether a court or an agency should initially decide certain types of cases—a complex issue called the doctrine of primary jurisdiction.

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Sources of Judicial Review Methods

The method of review is determined by consideration of several alternatives: 1. Through the underlying statute which authorized an agency action (or which created an agency; or 2. Under Chapter Six of the Michigan Administrative Procedures Act; or 3. Via Section 631 of the Revised Judicature Act; or 4. By actions for declaratory relief under Sections 63 and 64 of the APA; or 5. Pursuant to an array of other provisions under the RJA and the Michigan Court Rules [in general these item (5) methods are referred to by the author as “non-statutory” to differentiate them from review under an underlying statute’s judicial review provisions].

The starting place for analysis is to determine the nature of the action undertaken by a state or local administrative agency for which review is sought, then to consider the underlying statute. If the statute is silent—if it does not address the matter of judicial review of action it authorizes—the APA or the RJA may provide the method. If these alternatives are not applicable, the non-statutory methods may apply. Assuming that authority to proceed in court is found among these choices, the procedural provisions of the Michigan Court Rules must be followed.

Constitutional Right to Judicial Review

Two major provisions in the Michigan Constitution seem to guarantee a right to judicial review of certain types of agency action, but apparently do not. Article VI, section 28, which provides for judicial review of judicial or quasi-judicial decisions of state and local administrative agencies, requires statutory implementation because it was found not to be self-executing in Viculin v Department of Civil Service. Thus, while it did not provide a method of review, it supplied the minimum scope of review to be applied when a method of review was found. The subsequent decision of the Supreme Court in Midland Cogeneration Venture Ltd. Partnership v. Naftaly undermined the clarity of Viculin, at least to some extent.

Article VI, section 13 gives the circuit courts superintending control over inferior tribunals, which includes administrative

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tribunals. Whether this section is self-executing remains an open question, but Villa v. Fraser Civil Service Commission arguably could be read to say that it is.

Statutory Methods of Judicial Review

Underlying Statutes

The underlying statute which authorizes an agency to act is the primary source of judicial review of a particular agency action. When an underlying statute provides for judicial review, it must be followed regarding its timing, method, court, and (to some extent) scope of review provisions. In some instances, another statute related to a particular agency may contain general review provisions broadly applicable to actions undertaken by that agency. Or a comprehensive statutory code may contain a review provision elsewhere in that code which applies to actions taken under a different code provision.

In the absence of controlling language in an underlying statute, two other statutes are important.

Revised Judicature Act

A generic statutory method of review is found in section 631 of the Revised Judicature Act. This method applies to final decisions, orders, or opinions of state—not local—agencies where review is not provided by law. This provision allows review of informal adjudication by many state agencies, although strangely does not apply to state agencies lacking rulemaking power. The method of judicial review in section 631 of the RJA is an appeal. Jurisdiction is in the circuit court and venue in the appellant’s place of residence (but not place of business) or in Ingham County. The appeal must be filed within 21 days of the agency action. Because the RJA does not mention scope of review, the “how much” question is answered by the Constitution’s Article VI, Section 28, according to Viculin.

Administrative Procedures Act

The Administrative Procedures Act discusses two vehicles for judicial review.

1. If the decision of an agency to be challenged was made in a contested case proceeding, the method of judicial review under section 102 of the APA—in the absence or inadequacy

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of an underlying statutory provision—is a petition for review in the circuit court. Venue is in the place of residence or business of the petitioner or in Ingham county. The petition must be filed within 60 days of the notice of the decision. The scope of judicial review is determined by the factors listed in the APA itself and by Article VI, section 28 of the

Constitution. 2. Under section 63 of the APA, agencies may issue declaratory rulings to determine the applicability “to an actual state of facts of a statute” or rule order of the agency. Declaratory rulings issued by agencies are reviewed judicially as if they were decisions in contested cases.

According to section 64 of the APA, declaratory judgments regarding the validity or applicability of a rule under made may be obtained in circuit court. Venue is the same as for petitions for review of a decision in a contested case. This section includes an exhaustion requirement (See section 63) which applies only to challenges regarding the applicability of a rule. Exhaustion is not required if the challenge is to the validity or applicability of a statute or of an order of the agency.

Challenges of the applicability of validity of rules can await agency enforcement of the rule by an agency; the affected party is not mandated to take the initiative. An agency is not mandated to provide a declaratory ruling; despite the holding to the contrary in Human Rights Party v. Michigan Corrections Commission an agency’s failure to provide a ruling does not create a duty to offer a contested case hearing. Section 64 is nothing more than an exhaustion of administrative remedies provision regarding the applicability of a rule; the judicial review available in all other respects is an action for declaratory judgment outside the APA.

Non-Statutory Judicial Review

For ease of characterization certain methods of review are described as non-statutory, although the method actually may be provided by a statute. In one sense this means that the review method is not included in the relevant underlying statute; that is, in the statute which authorized the agency to act. In another sense, the reference is historical—it refers to methods or review which evolved from common law writs or from court rules, although they may today have a statutory form. In large part, these methods of review are governed

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by the Michigan Court Rules. Availability of another adequate remedy, which is very often found in an underlying statute, normally precludes the use of all non-statutory remedies except declaratory judgment and habeas corpus.

Declaratory Relief

Judicial declaratory relief may be sought outside the context of the APA per Michigan Court Rule 2.605. This device, often used in pre-enforcement settings to challenge agency rules and to halt threatened administrative agency action, is generously provided under Michigan law. Although an actual controversy must exist, harm to the party seeking relief may be entirely prospective, according to Shavers v. Attorney General.

Injunction

Injunctive relief may be sought per Michigan Court Rule 3.310. Injunctions are often sought in conjunction with requests for declaratory relief, usually with the purpose to prevent an agency from acting against the person seeking relief until a legal controversy regarding the threatened action is settled. In this context the injunctive relief sought is preliminary. As articulated in Michigan State Employees Association v. Department of Mental Health, the test for issuance of a preliminary injunction balances: 1. The possible harm to the public interest if the injunction issues’ 2. Whether the possible harm to the plaintiff if no injunction issues outweigh the harm to the opposing party if an injunction is granted; 3. The likelihood that the plaintiff will prevail on the merits; and 4. Whether the prospective harm to the plaintiff will be irreparable if no injunction issues.

Superintending Control

Superintending control under Michigan Court Rule 3.302 implements the circuit court’s jurisdiction to supervise inferior tribunals when those tribunals have a clear legal duty to act regarding the party seeking relief. “Administrative agencies acting in a . . . quasi-judicial capacity are inferior tribunals,” according to Fort v. City of Detroit. Arguably, the scope of review when a circuit court exercises this power would be governed by Article VI, Section 28 of

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the Michigan Constitution. But there is a good argument that the standard should be that which governed the review action of the court from which superintending control took control.

Mandamus

Mandamus can be issued by a circuit court to require a public official to perform a clear legal duty owed to a person with a clear legal right to its performance. This method is not available if the action challenged was judicial in nature, both because superintending control may be the appropriate vehicle or because discretion is involved. A duty to make a decision may exist, even though there is no duty to render a particular outcome.

Certiorari

Certiorari requires that a lower court provide the record of a proceeding before it for consideration by a higher court. Because of the provision for superintending control, certiorari is rarely used today.

Habeas Corpus

Under Michigan Court Rule 3.303 habeas corpus is used to challenge the wrongful detention of a person. Although not commonly invoked regarding administrative agency decisions, it can sometimes be used in cases involving the administrative decisions of the Department of Corrections regarding prisoners.

Ten Steps to Successful Identification of Court and Method 1. Determine the nature of the administrative agency action to be challenged through judicial review, whether that action has taken place or will take place in the future 2. Review the underlying statute related to the challenged action to determine if it contains provisions regarding judicial review. If so, those provisions must be followed. 3. Check any general authorizing statute for the agency to determine if it contains judicial review provisions. If so, those provisions must be followed. 4. If a state agency took action under the contested case provisions of the Administrative Procedures Act, and there is no specific review provision in the underlying statute,

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Chapter 6 of the APA makes the method a petition for review filed in a circuit court. 5. If a state agency with rulemaking authority is involved, there is no judicial review provision in the underlying statute, and the action was not the result of a contested case, judicial review by appeal to a circuit court is available under Section 631 of the Revised Judicature Act. 6. If the object of review is the applicability of a rule promulgated by a state agency, the challenger must first present a request for a declaratory ruling to the state agency.

The challenger may also request a declaratory ruling regarding the applicability of a statute or a previous order of the agency. If granted, a declaratory ruling may be reviewed as if it were a decision in a contested case. If denied, the challenger may seek a declaratory judgment in court. 7. If a person seeks to resolve a legal controversy before complying with an agency’s enforcement of its power, a declaratory judgment under Michigan Court Rule 2.605 can be sought—-subject to the requirement to file a request for a declaratory ruling with the agency if the controversy involves the applicability of a rule. 8. If a person seeks to restrain threatened agency action, an action for an injunction under Michigan Court Rule 3.310 can be filed, often in conjunction with an action for a declaratory judgment. 9. If the underlying statute, the APA, the RJA, and declaratory and injunctive relief are not applicable, the challenger should consider using the extraordinary forms of review— superintending control, mandamus, certiorari, and habeas corpus as set forth in the court rules and the RJA. 10. Once the method of judicial review is selected, the challenger should consult the court rules to determine the particular procedures to be followed and to determine the appropriate judicial jurisdiction and venue.

Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 8 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer,

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T.M. Cooley Law Review, Volume 12:21 (1995) 25 Michigan Law Revision Commission Annual Report (1990) Bienenfeld, Michigan Administrative Law (Ann Arbor: Institute of Continuing Legal Education)

Cases Arthur Land Co. LLC v. Otsego County, 249 Mich. App. 650, 645 N.W.2d 50 (2002) Blue Cross & Blue Shield of Michigan v. Commissioner of Insurance, 155 Mich. App. 723, 400 N.W.2d 638 (1986) Carleton Sportsman’s Club v. Exeter Township, 217 Mich. App. 195, 550 N.W.2d 867 (1996) Dabrowski v. Secretary of State, 201 Mich. App. 218, 506 N.W.2d 10 (1993) Davenport v. City of Grosse Pointe Farms Board of Zoning Appeals, 210 Mich. App. 400, 534 N.W.2d 143 (1995) Davis v. Department of Corrections, 251 Mich. App. 372, 651 N.W.2d 486 (2002) Department of Consumer Industry Services v. Shah, 236 Mich. App. 381, 600 N.W.2d 406 (1999) Eckstein v. Kuhn, 160 Mich. App. 240, 408 N.W.2d 131 (1987) Fort v. City of Detroit, 146 Mich. App. 499, 381 N.W.2d 754 (1985) General Electric Credit Corp. v. Northcoast Marine, Inc., 402 Mich. 297, 262 N.W.2d 660 (1978) Houston v. Lack, 487 U.S. 266, 108 S. Ct. 2379, 101 L. Ed. 2d 245 (1988) Human Rights Party v. Michigan Corrections Commission, 76 Mich. App. 204, 256 N.W.2d 439 (1977) Insurance Institute of Michigan v. Commissioner, Financial & Insurance Services, Department of Labor & Economic Growth, 280 Mich. App. 333, 761 N.W.2d 184 (2008) J & P Market, Inc. v. Liquor Control Commission, 199 Mich. App. 646, 502 N.W.2d 374 (1993) Jackson v. Director of Department of Corrections, 329 Mich. App. 422, 942 N.W.2d 645 (2019) In re Parole of Johnson, 235 Mich. App. 21, 596 N.W.2d 202 (1999) Johnson v. Robison, 415 U.S. 361, 94 S. Ct. 1160, 39 L. Ed. 2d 389 (1974) Katt v. Insurance Bureau, 200 Mich. App. 648, 505 N.W.2d 37 (1993)

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Keenan v. Department of Corrections, 250 Mich. App. 628, 649 N.W.2d 133 (2002) In re Complaint of Knox, 255 Mich. App. 454, 660 N.W.2d 777 (2003) Lawrence v. Department of Corrections, 88 Mich. App. 167, 276 N.W.2d 554 (1979) Living Alternatives for Developmentally Disabled, Inc. v. Department of Mental Health, 207 Mich. App. 482, 525 N.W.2d 466 (1994) Lowell R. Fisher, D.O. v. W.A. Foote Memorial Hospital, 261 Mich. App. 727, 683 N.W.2d 248 (2004) M & S, Inc. v. Attorney General, 165 Mich. App. 301, 418 N.W.2d 441 (1987) Martin v. Stine, 214 Mich. App. 403, 542 N.W.2d 884 (1995) Michigan Bear Hunters Association v. Michigan Natural Resources Commission, 277 Mich. App. 512, 746 N.W.2d 320 (2007) Michigan Intra-State Motor Tariff Bureau, Inc. v. Public Service Commission, 200 Mich. App. 381, 504 NW.2d 677 (1993) Michigan State Employees Association v. Department of Mental Health, 421 Mich. 152, 365 N.W.2d 93 (1984) Michigan Waste Systems v. Department of Natural Resources, 147 Mich. App. 729, 383 N.W.2d 112 (1985) Midland Cogeneration Venture Ltd. Partnership v. Naftaly, 489 Mich. 83, 803 N.W.2d 674 (2011) Midwest Energy Co-op. v. Michigan Public Service Commission, 268 Mich. App. 521, 708 N.W.2d 147 (2005) Morales v. Michigan Parole Board, 260 Mich. App. 29, 676 N.W.2d 221 (2003) Northwestern National Casualty Co. v. Insurance Commissioner, 231 Mich. App. 483, 586 N.W.2d 563 (1998) O’Connell v. Director of Elections, 316 Mich. App. 91, 891 N.W.2d 240 (2016) O’Connor v. Oakland County Sheriff’s Department, 169 Mich. App. 790, 426 N.W.2d 816 (1988). Prime Time International Distributing, Inc. v. Department of Treasury, 322 Mich. App. 46, 910 N.W.2d 683 (2017) Priority Health v. Commissioner of Office of Financial and Insurance Services, 489 Mich. 67, 803 N.W.2d 132 (2011) In re Project Cost & Special Assessment Roll for Chappel Dam, 282 Mich. App. 142, 762 N.W.2d 192 (2009) Robertson v. City of Detroit, 131 Mich. App. 594, 345 N.W.2d 695 (1983)

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Schommer v. Director, Department of Natural Resources, 162 Mich. App. 110, 412 N.W.2d 663 (1987) Shavers v. Attorney General, 402 Mich. 554, 267 N.W.2d 72 (1978) South Dearborn Environmental Improvement Association, Inc. v. Department of Environmental Quality, 316 Mich. App. 265, 891 N.W.2d 233 (2016) South Dearborn Environmental Improvement Association, Inc. v. Department of Environmental Quality, 502 Mich. 349, 917 N.W.2d 603 (2018) Stackhouse v. Stackhouse, 193 Mich. App. 437, 484 N.W.2d 723 (1992) State Board of Education v. Houghton Lake Community Schools, 430 Mich. 658, 425 N.W.2d 80 (1988) SuperX Drugs Corp. v. Michigan Board of Pharmacy, 233 F. Supp 705 (W.D. Mich. 1964) Taylor v. Secretary of State, 216 Mich. App. 333, 548 N.W.2d 710 (1996) Teddy 23, LLC v. Michigan Film Office, 313 Mich. App. 557, 884 N.W.2d 799 (2015) 13-Southfield Associated v. Michigan Department of Public Health, 82 Mich. App. 678, 267 N.W.2d 483 (1978) Triplett v. Deputy Warden, Jackson Prison, 142 Mich. App. 774, 371 N.W.2d 862 (1985) Turner v. Washtenaw County Road Commission, 437 Mich. 35, 467 N.W.2d 4 (1991) Viculin v. Department of Civil Service, 386 Mich. 375, 192 N.W.2d 449 (1971) Villa v. Fraser Civil Service Commission, 57 Mich. App. 754, 226 N.W.2d 718 (1975) Walen v. Department of Corrections, 443 Mich. 240, 505 N.W.2d 519 (1993) Walker-Bey v. Department of Corrections, 222 Mich. App. 605, 564 N.W.2d 171 (1997) Wayne County Prosecutor v. Parole Board, 210 Mich. App. 148, 532 N.W.2d 899 (1995)

Constitutions Michigan Constitution, Article VI, §§ 13 and 28

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Statutes Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.263 and 24.264 (declaratory rulings and declaratory judgments) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.301 to 24.306 (petitions for review) Revised Judicature Act, MCL §§ 600.615, 600.631, 600.1615, and 600.4401 Federal Administrative Procedures Act, 5 U.S.C.A. § 701(a)(1)

Court Rules MCR 2.602(a) MCR 2.605 MCR 3.302 MCR 3.302(C) MCR 3.303 MCR 3.305(A)(2) MCR 3.305(B)(2) MCR 3.305(C)-(E) MCR 3.310 MCR 7.101 to 7.123 (appeals generally) MCR 7.101(B)(1) MCR 7.103(B)(1) MCR 7.104(A) MCR 7.105(B)(1) MCR 7.105(B)(2) MCR 7.206(B) MCR 7.206(D)

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CHAPTER IX: SCOPE OF JUDICIAL REVIEW OF ADMINISTRATIVE AGENCY ACTION

Introduction

Scope of judicial review focuses on the relationship between courts and agencies. The foremost question is “how much” a reviewing court will substitute its judgment for that of an agency. The controlling factors are the Michigan Constitution, underlying statutes, the Administrative Procedures Act, and the methods of judicial review which are used to get a matter before a court. To an extent, jurisprudential doctrine also controls the intensity of judicial review of agency action. Because Michigan’s case law is confused, care should be exercised to assure that a case which applies a particular scope of review, or describes that scope, is actually an accurate assessment of the proper scope.

Constitutional Scope of Review

The major constitutional provision is Article VI, Section 28 of the Michigan Constitution, which provides that the scope of review is “whether such final decisions, findings, rulings, and orders are authorized by law; and, in cases in which a hearing is required, whether the same are supported by competent, material and substantial evidence on the whole record.” The covered decisions must be judicial or quasi-judicial in nature, described in Turner v. Washtenaw County Road Commission as those “applying as it does a general rule to the particular facts of a particular situation.”

Article VI, Section 28 includes all administrative adjudications, formal and informal, state and local, but does not cover legislative or quasi-legislative actions, such as rules. The provision applies only to final outcomes, but the words “decision,” “finding,” “ruling,” “order,” and “administrative” have not been considered judicially. The Constitution supplies a minimum scope of review; an underlying or applicable statute can require more. The authorized by law provision applies to all agency adjudications; the substantial evidence provision applies only to judicial review of administrative hearings, meaning that it applies during review of all formal adjudications and those governed by due process.

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Authorized by Law as Constitutional Scope of Review

Whether a decision was authorized by law is sometimes the only available scope of review of agency action. For instance, review of informal adjudication by state rulemaking agencies, where no statutory review provision is available, can make Revised Judicature Act Section 631 the only review method available. But this method has no scope of review language, so where no hearing was involved the constitutional authorized by law standard is all that is available. The meaning of the term “authorized by law” should be whether the decision under review was within the authority of the agency; that is, within its power to act or jurisdiction. However, judicial decisions have treated this standard as if it means “procedurally correct,” or “an error of law,” or not based on “substantial evidence,” or the “adoption of wrong principles,” or as covering “questions of law,” or “contrary to law, or “lawful,” or “unreasonable,” or “no abuse of discretion,” or “arbitrary,” none of which are correct.

Substantial Evidence as Constitutional Scope of Review

The substantial evidence test applies in addition to the authorized by law provision to those adjudications in which a hearing is required. The leading Michigan case, Michigan Employment Relations Commission v. Detroit Symphony Orchestra, is a direct adoption of both the APA substantial evidence standard and of the federal interpretation of the substantial evidence standard in Universal Camera Corp. v. National Labor Relations Board.

The substantial evidence test applies to an agency’s findings of fact and embodies the concept of judicial deference to agency factfinding. The review undertaken by a court under this test is not de novo—that is, not an independent assessment of the facts by the court—but is rather a review of the whole record as created at the agency hearing. The test considers whether an agency finding is reasonable in light of the whole record, including where the preponderance of evidence fell, even if the court disagrees with the finding. In reaching its conclusion regarding the reasonableness of the agency’s factual conclusions, the reviewing court must consider the evidence on both sides, including the evidence that does not support the findings of the agency. The hearing officer’s opinion is part of the record, and, although not evidence, must be considered by the agency head during agency review and by a reviewing court. The agency head does not have to agree with the hearing officer’s

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decision, but must consider it and explain the basis of disagreement, particularly on matters of credibility. A reviewing court can consider the relative merits of the two-agency decision-makers, as demonstrated in Detroit Symphony Orchestra.

Constitutional Scope of Review of Worker’s Compensation Cases

The constitutional standard in worker’s compensation cases, as set forth in Article VI, Section 28, is much more deferential to agency fact-finding than is the general standard in that section, providing that the findings of fact “shall be conclusive in the absence of fraud.” But the Michigan Supreme Court interpreted that to mean if supported by “any competent evidence,” which the Court of Appeals embellished by declaring that the findings were “conclusive in the absence of fraud if supported by any competent, material and substantive evidence.” These opinions are erroneous because the Constitution explicitly makes the competent, material and substantial evidence standard inapplicable by establishing that fact-finding in worker’s compensation review cases is conclusive in the absence of fraud in the sentence immediately following the recitation of the general substantial evidence standard. The Supreme Court further eroded the constitutional standard when it applied the federal concept known as the jurisdictional facts doctrine to what it called jural facts, making review of at least some factual findings de novo.

Constitutional Scope of Review in Certain Property Tax Cases

Judicial review in property tax valuation or allocation cases under Article VI, Section 28 of the Constitution is limited to “fraud, error of law or the adoption of wrong principles. The Supreme Court converted that standard into the general substantial evidence test in the second Fisher-New Center Co. v. Michigan State Tax Commission case, reversing a holding it made in the first appearance of Fisher-New Center that the review was more limited in these cases. It did so by asserting, contrary to the Constitution’s plain language, that a decision based on other than substantial evidence was both an “error of law and [an] adoption of wrong principles.” Other than property tax matters involving valuation or allocation, the general substantial evidence scope of review properly applies to property tax cases.

Together with the worker’s compensation decisions, the Michigan courts seem to operate under the view that courts have

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inherent power to review agency action, including at least a minimal review of agency fact-finding. Their reasoning is fallacious.

Administrative Procedures Act Scope of Review

Chapter 6 of the Administrative Procedures Act applies to judicial review of decisions made in contested cases, as well as to review of declaratory rulings issued by agencies. An underlying statute can make the APA judicial review provisions available where they otherwise would not be. Section 106 of the APA recognizes that an underlying statute can provide a different scope of review, even if the balance of the APA Chapter 6 judicial review provisions apply.

Section 106(1) empowers a reviewing court to “hold unlawful and set aside a decision or order in a contested case, while Section 106(2) allows the court to “affirm, reverse or modify the decision or order or remand the case for further proceedings.” In order to obtain relief under either section, the petitioner must show that the petitioner’s substantial rights have been violated.

The APA includes six grounds which constitute a broad scope of judicial review of contested cases, although the intensity or depth of review varies among the different standards.

Violation of Constitution or Statute

Under the first APA standard, a reviewing court can set aside agency action that violates the constitutions or a statute. As to constitutional issues there is little apparent deference to agency interpretations (except arguably to interpretations made by agencies established in the Constitution itself). As to statutes, an agency’s construction of an underlying statute is entitled to “considerable weight,” under the frequently cited and often ignored precedent in Magreta v. Ambassador Steel Co. The courts remain the final arbiters of the meaning of constitutional and statutory provisions. The general standard of constitutional construction is the plain or ordinary meaning standard; with statutes the plain or unambiguous language standard is the most commonly used, followed by the search for legislative intent.

Excess of Jurisdiction or Authority

Under the second APA judicial review standard, a court looks to see if an agency action is in excess of the agency’s jurisdiction or authority. This provision seems to contemplate whether the agency

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action was ultra vires. Arguably, this is the equivalent of the “authorized by law” provision in the Constitution’s Article VI, Section 28.

Unlawful Procedure

The third APA standard is whether the decision was made upon unlawful procedure resulting in material prejudice. The cases have been somewhat inconsistent in their consideration of the material prejudice aspect, but the Court of Appeals has successfully demonstrated the proper application of this standard of judicial review.

Substantial Evidence

The fourth APA standard is the main standard for review of agency fact-finding—whether the action is “[n]ot supported by competent, material and substantial evidence on the whole record.” The leading case is Michigan Employment Relations Commission v. Detroit Symphony Orchestra (discussed previously in the context of the constitutional substantial evidence standard). The Supreme Court observed that the delegates used the substantial evidence standard from the then-current APA as the basis for the standard used in Article VI, Section 28.

According to the Court, review under this provision is of the whole record, not just the evidence favoring the agency decision under review, and it emphasized three points: (1) the standard contemplates “a thorough review of the administrative decision, a review which considers the whole record—that is, both sides of the record—not just those portions of the record supporting the findings of the administrative agency.” (2) the Court instructed that “[a]lthough such a review does not attain the status of de novo review, it necessarily entails a degree of qualitative and quantitative evaluation of evidence considered by an agency.” (3) the Court concluded this passage with recognition that “[s]uch review must be undertaken with considerable sensitivity in order that the courts accord due deference to administrative expertise and not invade the province of exclusive administrative fact-finding by displacing an agency’s choice between two reasonably differing views.”

The test is one of reasonableness of the decision in light of the facts, not one of “rightness” in the reviewing court’s view. The reviewing court should not substitute its judgment for that of the

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agency on the findings of fact. The preponderance of evidence test applies to the ultimate decision at the agency level; at the judicial level, the issue is whether the agency could reasonably have found that the preponderance was as it did, not whether the reviewing court would have found otherwise regarding the preponderance. This often leads to the erroneous judicial observation that substantial evidence is a lower standard than a preponderance of the evidence. It is not—in fact it is not even relevant to the issue, which is whether an agency could reasonably have found that the preponderance was what it declared it to be. The key is recognizing the proper functions of the agency and the reviewing courts.

In Detroit Symphony Orchestra, the crucial issue involved credibility of the witnesses. The Supreme Court held that its thorough review of the whole record supported the hearing officer’s conclusion, not the conclusion of the agency that had overturned the hearing officer’s decision. The Court found wanting the explanation offered by the agency for its determination.

The analysis of what constitutes substantial evidence is aided by keeping in mind the context: the substantial evidence test is used by courts in reviewing facts found by an agency, but the test is not used by an agency in finding facts. The most common articulation of the nature of substantial evidence is that it is “evidence [which] a reasonable mind might accept as [sufficient] to support a conclusion,” and consists of “more than a mere scintilla of evidence” but may be “somewhat less than a preponderance of the evidence.” Careless use of the quoted words and a misunderstanding of the purpose of the test have led to some confusion about the importance of substantial evidence in an agency’s fact-finding and decisionmaking. When an agency determines the facts, the evidentiary burden is the preponderance of evidence and an agency must decide on what it finds the evidence to be—it must make the correct decision. The reviewing court defers to agency fact-finding under the substantial evidence test, at least to the degree that the reviewing court determines only if the decision by the agency as to where the preponderance fell was reasonable in light of all the evidence.

Arbitrary, Capricious, or Abuse of Discretion

The fifth APA standard is really three standards: was the agency action “[a]rbitrary, capricious, or clearly an abuse of unwarranted exercise of discretion.” Despite the fact that these words have established meanings according to decisions of the Michigan

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Supreme Court, there is a decided tendency among lower courts and lawyers to apply them intuitively and, too often, collectively.

Arbitrary means “without adequate determining principle . . . [f]ixed or arrived at . . . by caprice, without consideration or adjustment with reference to principles, circumstances, or significance, . . . decisive but unreasoned.”

Capricious means “apt to change suddenly; freakish; whimsical; humorsome.”

“Abuse of discretion” has had an evolving meaning. According to the older cases, it means that the decision of an agency was “so palpably and grossly violative of fact and logic that it evidences not the exercise of will but perversity of will, not the exercise of judgment but defiance thereof, not the exercise of reason but rather of passion or bias.” This formulation makes this standard one of considerable deference to an agency. The more recent formulation has softened the standard, allowing courts greater leeway to overturn agency judgments: if a decision falls outside the range of principled and reasoned options, it is an abuse of discretion. Although this standard applies to review of contested case decisions, its best use is the review of informal adjudications, where its primary function is to explore the application of the law to the facts, rather than to review the fact-finding itself, especially where there is no hearing record.

Error of Law

The sixth APA standard is whether a decision was “[a]ffected by other substantial and material error of law.” The cases do not clarify this standard, which seems best suited to questions of statutory construction or situations where statutes other than an agency’s underlying statute affect an agency’s decision. In instances where the agency action may be short of that which a statute requires, review under this standard seems preferable to review under the statutory authority standard.

Fact-Finding Responsibilities under the APA

Judicial review of factual determinations by agencies should reflect both the nature of administrative decision-making and the relative roles of agencies and courts. The more feely a court substitutes its judgment for that of an agency, the more it assumes an executive role and departs from its judicial function.

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At an administrative hearing, the hearing officer applies the preponderance of evidence standard to the record presented. The hearing officer’s obligation is to reach correct or “right” result, based on the whole record, as to which side prevails under the normal civil standard of the burden of proof.

The agency, on review of the hearing officer’s decision, also applies the preponderance of evidence standard, again on the whole record. The Section 81(3) of the APA says that “[o]n appeal from or review of a proposal of decision the agency, except as it may limit the issue upon notice or by rule, shall have all the powers which it would have if it had presided at the hearing.” Still, if the agency decides to reach a different result, it should explain reasons for reaching that outcome.

The circuit court (or the first reviewing court) applies the substantial evidence test. It determines if the decision of the agency is reasonable in light of the whole record, including the evidence on both sides. It does not reach what it may view as the “correct” or “right” result, but must sustain the agency decision if there is substantial evidence to support it, even if it disagrees with the outcome. Thus, it is more difficult for a court to overturn an agency decision under the substantial evidence standard than under the “clearly erroneous” standard of review, which allows reversal where the reviewing court has the firm and definite conviction that a mistake has been made. A decision can be reasonable, but mistaken, so under the clear error standard, a reasonable—but mistaken— decision can be judicially reversed, while a decision based on substantial evidence cannot.

The subsequent reviewing courts should review the decision of the preceding court, not that of the agency, but there is a decided tendency to the contrary. The second reviewing court should apply the clearly erroneous test to the decision of the first court. If the case gets to an even higher third court, the third court should review the decision of the second court for clear error (or to determine if the second court misperceived or misapplied the proper standard of review).

Scope Of Review Under Other Methods

Underlying statutes have a wide variety of scope provisions, but many have none at all. Statutory provisions must satisfy, but may exceed, the constitutional minimum requirements. The scope of review under Section 631 of the Revised Judicature Act is supplied

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by the Constitution, at least for state agencies with rulemaking power.

Each non-statutory method of review—declaratory judgment, injunction, superintending control, mandamus, certiorari, and habeas corpus—has its own scope, usually defined by the terms of its availability as a method of review of agency action. These have related procedural requirements articulated in the court rules or the provisions of the RJA.

Special Review Considerations

Judicial Review of Rules

No case provides a comprehensive overview of judicial review of agency rules, but three lines of inquiry have evolved. First, a constitutional review standard similar to substantive due process analysis is applied in some cases: do the rules have a rational relationship to an underlying statute or are they reasonable? Second, a general test for the substantive validity of rules is applied: “(1) whether the rule is within the subject matter covered by the enabling statute; (2) if so, whether it complies with the underlying legislative intent; and (3) if it meets the first two requirements, when it is neither arbitrary nor capricious.” Third, a rule may be set aside if it is not based on proper rulemaking procedure.

Judicial Review of Local Action

The scope of judicial review of local agency action is controlled primarily through the provisions in underlying statutes and through the non-statutory methods of review. Article VI, Section 28 of the Constitution applies to local action, but the Administrative Procedures Act and Section 631 of the Revised Judicature Act do not.

De Novo Judicial Review

Judicial review de novo has two different forms: (1) review de novo, which limits judicial review to the record made before an agency, but empowers a court to make an independent assessment of the facts and reach an independent decision; and (2) trial de novo, which authorizes a complete, new judicial trial on the merits. Review de novo means that the reviewing body restricts its consideration to the record made in the agency hearing, but makes its own decision on

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what the facts add up to. Trial de novo means the matter is tried anew in court as if it had not been heard previously by the agency.

The Michigan Constitution contains a trial de novo provision for appeals from decisions made by the Michigan Civil Rights Commission. The Supreme Court incorrectly interpreted this provision in Walker v. Wolverine Fabricating & Manufacturing Co., declaring that this provision meant the same as review on the record under the substantial evidence test. Some repair work on this unfortunate decision was undertaken by the Court in Department of Civil Rights ex rel. Johnson v. Silver Dollar Cafe.

Clearly Erroneous as a Standard of Judicial Review

Occasionally, an underlying statute invokes the clearly erroneous standard of judicial review. A decision is clearly erroneous if the reviewing court on review of “the entire evidence is left with the definite and firm conviction that a mistake has been committed.” This standard is commonly used by courts when reviewing the factfinding of a lower court in a civil matter. Beason v. Beason demonstrated that the clearly erroneous standard is a more rigorous, less deferential, form of judicial review than is the substantial evidence standard, because it is a test of “rightness,” rather than one of reasonableness. Unfortunately, the Supreme Court equated this test with de novo review, a scope of review that provides no sense of deference for an agency decision. The confusion probably results from the origins of the clearly erroneous test of judicial review by a superior court of the findings of a lower court; when it is applied to judicial review of agency findings, it moves into the executive branch arena making separation of powers a consideration.

Judicial Review of Mixed Questions of Law and Fact

An unusual standard of review applies to the so-called mixed question of law and fact test, a federal concept that is undeveloped in Michigan. Application of law to established facts does not present a mixed question of law and fact, which is only presented when the legislative body intended for an agency to have a law-defining function. An example is where the law allows an agency to determine what is an unfair labor practice without particularly describing the conduct that might be barred. In this setting, the situation is the application of a statute to specific facts, particularly where the ultimate fact (unfair labor practice) is to be drawn from particular

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underlying or basic facts (making punitive assignments of duties). This situation presents a form of legislative intent analysis. The key is whether the legislative body intended for the agency to implement the statute on a case-by-case basis, in which case great deference should be provided to the agency decisions. Of course, this can lead to concerns about impermissible delegation of power.

Ten Steps to Successful Identification of Proper Scope of Judicial Review 1. Remember that the scope of judicial review is closely tied to the method of review, which will also govern the proper court to undertake review. 2. Examine and follow any judicial review provisions in the underlying statute authorizing the administrative action which will be the focus of judicial review. 3. Be aware that as to matters of law, the general rules of statutory construction apply, but that an agency’s interpretation of its underlying statute is entitled to some deference. 4. Consider that as to matters of fact the substantial evidence test is the most common standard of the scope of judicial review of agency fact-finding where an evidentiary record was made. 5. Consider that as to matters of fact the arbitrary, capricious, or abuse of discretion tests are the most common standards of judicial review of agency fact-finding where the decision does not rest on an evidentiary record. 6. Determine if the Administrative Procedures Act was applicable to the agency action; if so, follow its six standards of the scope of review unless otherwise directed by the underlying statute. 7. If the underlying statute and the APA do not provide a method or scope of review, determine if such review is available under the Revised Judicature Act, which implements the constitutional scope of review in Article VI,

Section 28. 8. If the underlying statute, the APA, or the RJA do not provide a method of review, determine if such review is available through the non-statutory methods, each of which contains its own scope of review. 9. Compare the scope of review found in all statutes and methods of review to the minimum requirements of Article

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VI, Section 28 of the Michigan Constitution, which requires that all covered actions be authorized by law and that those involving a hearing also be supported by substantial evidence. 10. Consider the powers of the court reviewing the agency action and of those courts to which further appeal might be taken, especially regarding review of an agency’s fact-finding.

Sources

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 9 (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995) 25 Michigan Law Revision Commission Annual Report (1990)

Cases Aquilina v. General Motors Corp., 403 Mich. 206, 267 N.W.2d 923 (1978) Beason v. Beason, 435 Mich. 791, 460 N.W.2d 207 (1990) Boyd v. Civil Service Commission, 220 Mich. App. 226, 559 N.W.2d 342 (1996) Bundo v. City of Walled Lake,395 Mich. 679, 238 N.W.2d 154 (1976) Chesapeake & Ohio Railway Co. v. Michigan Public Service Commission, 59 Mich. App. 88, 228 N.W.2d 843 (1975) Department of Civil Rights ex rel. Johnson v. Silver Dollar Cafe, 441 Mich. 110, 490 N.W.2d 337 (1992) Deziel v. Difco Laboratories, Inc., 394 Mich. 466, 232 N.W.2d 146 (1975) Fisher-New Center Co. v. Michigan State Tax Commission, 381 Mich. 713, 167 N.W.2d 263 (1969) National Labor Relations Board v. Hearst Publications, 322 U.S. 111, 64 S. Ct 851, 88 L. Ed. 1170 (1944) Hitchingham v. Washtenaw County Drain Commission, 179 Mich. App. 154, 445 N.W.2d 487 (1989) Luttrell v. Department of Corrections, 421 Mich. 93, 365 N.W.2d 74 (1984) Magreta v. Ambassador Steel Co., 380 Mich. 513, 158 N.W.d 473 (1968)

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Marrs v. Board of Medicine, 422 Mich. 688, 375 N.W.2d 321 (1985) Michigan Employment Relations Commission v. Detroit Symphony Orchestra, 393 Mich. 116, 223 N.W.2d 283 (1974) Northwestern National Casualty Insurance Co. v. Insurance Commissioner, 231 Mich. App. 483, 586 N.W.2d 563 (1998) People v. Babcock, 469 Mich. 247, 666 N.W.2d 231 (2003) Regents of the University of Michigan v. Michigan Employment Relations Commission, 389 Mich. 96, 204 N.W.2d 218 (1973) Sterling Secret Service, Inc. v. Michigan Department of State Police, 20 Mich. App. 502, 174 N.W.2d 298 (1969) 13-Southfield Associated v. Michigan Department of Public Health, 82 Mich. App. 678, 267 N.W.2d 483 (1978) Toole v. Michigan State Board of Dentistry, 306 Mich. 527, 11 N.W.2d 229 (1943) Turner v. Washtenaw County Road Commission, 437 Mich. 35, 467 N.W.2d 4 (1991) Tuttle v. Department of State Highways, 397 Mich. 44, 243 N.W.2d 244 (1976) Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 71 S. Ct. 456, 95 L. Ed. 2d 456 (1951) Viculin v. Department of Civil Service, 386 Mich. 375, 192 N.W.2d 449 (1971) Villa v. Fraser Civil Service Commission, 57 Mich. App. 754, 226 N.W.2d 718 (1975) Walker v. Wolverine Fabricating & Manufacturing Co., Inc., 425 Mich. 586, 391 N.W.2d 296 (1986)

Constitutions Michigan Constitution, Article VI, §§ 13 and 28

Statutes Michigan Administrative Procedures Act of 1969, M.C.L. § 24.281 (proposal for decision) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.263 and 24.264 (declaratory rulings) Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.301 to 24.306 (petitions for review) Revised Judicature Act, MCL § 600.631

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CHAPTER X: AVAILABILITY OF JUDICIAL REVIEW OF ADMINISTRATIVE AGENCY ACTION

Introduction

Doctrines controlling the availability of judicial review— standing, ripeness and finality, exhaustion of administrative remedies, and primary jurisdiction—are largely jurisprudential in nature, although most have their foundation in constitutional principles. The policies which underlie all four concepts are similar—they assure that only real controversies reach courts, they define the relationship between courts and agencies, they reinforce the administrative function, they conserve judicial resources, and they maintain the separation of powers between the executive and judicial branches.

Standing is a “who” question. Ripeness is both a “when” and a “what” question, as is the exhaustion of administrative remedies. Finality has aspects of both ripeness and exhaustion of remedies, and in some contexts is a part of standing as well. Primary jurisdiction is a “where” question. Some of the doctrines have been incorporated into the APA and underlying statutes. The underlying statute is an analytical focus for all the doctrines, regardless of any special mention of them in that statute. Except when considering exhaustion, the Michigan cases tended to follow the federal law, even though it is not binding. That all changed in a 2010 Michigan Supreme Court decision that led Michigan’s standing law away from the federal approach. The relationship among the concepts is discussed in Michigan Administrative Law, §§ 10:1 and 10:2.

Standing

Standing in General

Standing in administrative cases addresses “who” should be able to challenge an action, here an administrative action. This doctrine assures that a party seeking judicial review is sufficiently interested in the outcome of a case to assure the required adverseness. Care should be taken to separate the question of who is a proper party from questions addressed by other availability of judicial review doctrines and from issues regarding the merits of a case, as well as from whether a legal question is justiciable. In Michigan, standing has been the most volatile of the reviewability concepts, if not in all of administrative law.

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Administrative law standing principles are the same as those in any other standing case; the difference in administrative cases is the impact of an underlying statute and the nearly universal involvement of a government agency in some aspect of a controversy. In addition to standing established through underlying statutes, Michigan’s Administrative Procedures Act provides for standing (as well as exhaustion of remedies and finality) in section 101: “When a person has exhausted all administrative remedies available within an agency, and is aggrieved by a final decision or order in a contested case, whether such decision is affirmative or negative in form, the decision or order is subject to direct review by the courts as provided by law.”

Although this provision is limited to challenges regarding contested cases, Kassab v. Acho held that the persons seeking review need not have been a party in the contested case at issue.

Function of Standing

The purpose of standing is not to predict the likelihood of success on the merits of a case, but to insure sufficient controversy in matters before courts; the party seeking judicial review must have a substantial interest and a personal stake in the outcome. Those asserting injury caused by the violation of a statute must show an injury different from that of the citizenry at large. Courts will not accept collusive, friendly, or advisory lawsuits, because such suits fail to satisfy the case or controversy requirement.

Judicial Tests for Standing

Because the foundation of the standing doctrine is (arguably) constitutional and (clearly) jurisprudential, and because U.S. Const. Art. III does not apply to the states, the federal case law is not binding on Michigan courts. Nonetheless, Michigan standing decisions closely paralleled those of the United States Supreme Court, at least until relatively recently. Despite the long-time absence of a leading, unifying decision by the Michigan Supreme Court, the Michigan decisions have shown acceptance of the federal cases and evidenced a propensity to follow the federal reasoning.

The Supreme Court attempted to clarify the conceptual underpinnings of Michigan standing law in Lee v. Macomb County Board of Commissioners, a 2001 decision emphasizing that constitutional considerations of separation of powers was the law of Michigan. But in 2010, a majority of the Supreme Court in Lansing

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Schools Education Association v. Lansing Board of Education at least temporarily ended the tendency to follow federal standing law, overturning Lee and other cases relying on Lee on the basis that the standing doctrine in Michigan is prudential, not constitutional. The Court emphasized that the Michigan and federal Constitutions are not identical and that “there is no support in either the text of the Michigan Constitution or in Michigan jurisprudence, however, for recognizing standing as a constitutional requirement or for adopting the federal standing doctrine.” This case resumed the long battle over standing law in Michigan, perhaps overstating the demise of the influential role of federal standing decisions. After a decade, no member of the Court remains, but given the intensity of the battle leading up to this case it is likely to resume. Meanwhile, the historic cases are appropriately discussed, because many situations meet both the Lansing Schools Education Association and the Lee test. And a Phoenix may arise from the recent standing ashes.

After Lee the Michigan law followed federal law, requiring that a party seeking standing must demonstrate that: (1) the party asserting standing, or a person whom the party legitimately represents, has personally suffered in fact some actual or threatened injury to an economic or other substantial interest, as a result of the putatively illegal conduct of the defendant; (2) the interest injured is one which is arguably within the zone of interests to be protected or regulated by a statute or constitutional guarantee which is relevant to the controversy; (3) the injury asserted fairly can be traced to the challenged action; and (4) the injury asserted is likely to be redressed by a favorable decision on the merits of the case. This summary, developed by the editor, remains applicable in federal cases and is helpful in analyzing Michigan’s standing elements, even if not currently fully applicable to cases in the Michigan courts.

Under the Lansing Schools Education Association formulation, “a litigant has standing whenever there is a legal cause of action,” which occurs if (1) it meets MCR 2.605 in actions for a declaratory judgment or (2), in the court’s discretion, if the litigant has standing due to a “special injury or right” or a “substantial interest” that “will be detrimentally affected in a manner different from the citizenry at large” or (3) “if the statutory scheme implies that the Legislature intended to confer standing on the litigant.”

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Nature of Injury or Detrimental Effect

A major focus in the cases is on the nature of injuries sufficient to establish standing. The injury asserted by the party seeking review need not be economic, the injury need not be to a legal right, and the injury need not have yet occurred. However, the injury must be to the person asserting standing, must be directly traceable to the challenged agency action, and the remedy sought must redress the injury.

Representational Standing

A proper representative may assert the standing of another, an approach justified based on cost, convenience, and avoidance of a multiplicity of lawsuits. The representative must be an appropriate litigation representative. The factors in making that determination are the purpose of the representing organization, its authority to bring suit in the name of its members, the interests involved in the controversy, and effect of the challenged action on the members. An organization with its own injury can have standing in its own right. The difficulty with this concept appears to be with its inconsistent application by the courts.

Taxpayer, Citizen, and Public Official Standing

The test for taxpayer standing was stated in Menendez v. City of Detroit: “prerequisite to a taxpayer’s right to maintain a suit of this character against a unit of government is the threat that he will sustain substantial injury or suffer loss or damage as a taxpayer, through increased taxation and the consequences thereof.” The injury to the taxpayer must be separate from the injury to other taxpayers.

The test for standing of citizens for statutory violations is similar to that for taxpayers, according to Alexander v. City of Norton Shores and Waterford School District v. State Board of Education: “a private citizen has no standing to vindicate a public wrong or enforce a public right where he is not hurt in any manner differently from the citizenry at large.” Michigan’s Constitution gives standing to taxpayers regarding violations of the Headlee Amendment, which protects against restrictions of certain state-imposed spending obligations. And the Revised Judicature Act and the court rules provide a limited form of taxpayer standing in true tax cases, but these do not cover incidental expenditures of tax dollars.

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Public officials can bring lawsuits consistent with their public duties.

Ripeness and Finality

Ripeness and Finality in General

Ripeness concerns a “when” question—when should a court review an administrative agency action. The question is not whether there will be judicial review of an agency’s action, but the timing of that review. Finality is both a “when” question—agency can be reviewed when it is final— and a “what” question—what can be reviewed is final agency action. Finality and ripeness contemplate that a court should not consider an action or threatened action of an agency prematurely. Courts consider only controversies, which do not exist in the absence of final agency action.

Normally, only final agency action is subject to judicial review; preliminary or uncertain matters should not be reviewed because they lack sufficient adversity. Only agency action embodied in some formal or official version is reviewable; agency opinions and other nonbinding action should not be subject to review. In this sense, the concept of finality is an aspect of ripeness—is a controversy ready for judicial review.

By comparison, exhaustion of administrative remedies examines whether a procedure remains available within an agency which the affected person may invoke to challenge an agency’s current position or decision. Finality is an aspect of exhaustion of remedies, because a decision of an agency is not final if it is subject to further review within the agency at the behest of the person seeking to challenge it. Ripeness looks to whether the agency has completed its action and examines whether the action is then ready for judicial review. Even unquestionably final agency action may not be judicially reviewable under the ripeness doctrine, which may require that judicial review be delayed until an agency attempts to apply the final action in some manner, such as when an agency enforces a rule. The ripeness doctrine provides context and sharpens a controversy.

Context of Ripeness Issues

The common context where ripeness issues arise is when an agency has taken a final policy position in an agency action, but a person has not yet violated that policy, a context often referred to as pre-enforcement. Review of agency rules prior to their application to

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a person is frequently the setting for pre-enforcement review. The usual method of judicial review in a pre-enforcement setting is an action for a declaratory judgment, often in combination with an action for an injunction.

Test for Ripeness

Ripeness is a judicial doctrine with aspects which are both constitutional (requirement of an actual case or controversy) and jurisprudential (avoidance of premature expenditure of judicial resources). Michigan has almost no cases discussing ripeness as a concept, a consequence due in part to the generous availability of declaratory relief. Michigan courts have shown a propensity to follow federal case law in nearly all aspects of availability of judicial review, including the limited consideration of ripeness and finality, so the well-developed federal law can safely be followed.

The leading federal case is Abbott Laboratories v. Gardner, an example of judicial review of a rule (a final agency action) before its application in an agency enforcement proceeding. Abbott set forth a two-part test to identify cases which are ripe for judicial review: (1) is the issue fit for judicial review? (2) Will there be hardship on the party if review is denied at the time sought?

Both aspects must be satisfied for the matter to be ripe; no balancing of one part of the test against the other is involved. Fitness of the issue focuses on whether the case involves purely legal issues, the absence of any need to develop facts during any judicial review, and both the formality and finality of the challenged action. Hardship looks for a costly dilemma—usually costly compliance with an arguably illegal or ultra vires agency action on the one hand or the risk of criminal penalties and civil costs on the other. Hardship, however, is not simply the burden imposed by the threatened action, but that imposed by delay in the judicial review if the review is denied at the time when it is requested.

Exhaustion of Administrative Remedies

Exhaustion in General

Exhaustion presents another “when” question related to the timing of judicial review—when can judicial review of agency action be had. But exhaustion also has a “what” aspect—only final agency action is subject to judicial review. The general rule is that any available administrative remedy within an agency must be exhausted

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before judicial review can be sought. If there is some further challenge within the agency available to the person seeking judicial review, the decision is not final and therefore not reviewable. If the agency has completed its action and no administrative remedy is available, but judicial review is sought before an agency applies that action to an individual, such as an attempt to review a rule before its enforcement against an individual, the doctrine involved is ripeness, not exhaustion. Primary jurisdiction differs from exhaustion in that with exhaustion issues there is no question that the original agency alone has original subject matter jurisdiction, while original subject matter jurisdiction lies both in an agency and a court when the primary jurisdiction situation arises.

Function of the Exhaustion Doctrine

Numerous policies underlie the exhaustion doctrine. A number of functions of the exhaustion doctrine were discussed by Justice Brennan in Judges of the 74th Judicial District v. Bay County, including”: (1) preservation of the separation of powers and functions of the three branches described in the Michigan Constitution, (2) conservation of judicial resources, (3) use of agency expertise, (4) protection of the administrative functions or public policy purpose, and (5) development of a factual record for judicial review.

Application of the Doctrine

The exhaustion doctrine has been considered in a wide variety of circumstances and in a confusingly inconsistent manner. Although Michigan courts are split, the weight of authority is that exhaustion is jurisdictional rather than jurisprudential. Clearly, however, it is not— the courts have discretion to take a case despite the existence of an administrative remedy and do so frequently through the well-known exceptions to the doctrine.

An agency remedy must be available to require its exhaustion, so identification of an administrative remedy, usually found in an underlying statute but sometimes created by agency rules, is the key to application of the doctrine. Michigan’s Administrative Procedures Act incorporates an exhaustion requirement, but that provision does not require that a request for an administrative rehearing be made before seeking judicial review unless specifically so provided in an underlying statute.

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Exceptions to the Doctrine

Exceptions to the exhaustion requirement abound, including those on the list which follows: 1. Absence of agency authority. According to K Mart Corp v. Department of State, a person can challenge an “agency’s authority or power to bring the administrative proceeding against him, he may obtain leave for judicial review of the agency’s authority.” This decision perhaps conflicts with Judges of the 74th Judicial District v. Bay County, which required exhaustion despite a claim of lack of authority—a determination consistent with the federal position established in Myers v. Bethlehem Shipbuilding Corp. A possible reconciliation of the two Michigan cases, suggested by the author, is to eliminate the exhaustion requirement in situations in which the lack of authority is apparent without factual development. Some case law authority now exists for this approach. See Michigan Administrative Law, § 10:32. 2. Equitable injunctive relief. The Michigan Supreme Court held in Consumers Power Co. v. Public Service Commission, that exhaustion of administrative remedies is not required if the party can show irreparable harm and the absence of another available remedy. 3. Purely declaratory relief. The Michigan Supreme Court held in Judges of the 74th Judicial District that there is no requirement to exhaust administrative remedies “where the relief is purely declaratory and the facts are undisputed.” The basis for seeking declaratory judicial relief often is tied to the validity of agency rules, or to the agency’s lack of authority (as in Judges of the 74th Judicial District, or to the asserted unconstitutionality of the agency action. 4. Inadequate administrative remedy. According to several cases, exhaustion of administrative remedies is not required if such remedies are inadequate. Often, the inadequacy is that the case involves a form of relief which the agency cannot provide under its statute, such as damages. 5. Pure legal issue. Michigan cases have at least implied, as did Judges of the 74th Judicial District, that questions dealing with pure legal issues fall within the exceptions to the exhaustion requirement. This exception would not apply when agency expertise is necessary for the proper interpretation of a statute.

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6. Presence of cumulative remedies. Several cases hold that the presence of cumulative remedies justifies an exception to the exhaustion requirement. The remedies can be created by statutory or common law; their presence often injects exhaustion consideration in Michigan in situations that would be analyzed under the primary jurisdiction doctrine in the federal system. 7. Pure constitutional issue. According to the Michigan

Supreme Court in Durant v. State, this exception is available where there are no facts at issue and the constitutional issue is unavoidable. 8. Vain and useless (or futile) act. The Michigan Court of

Appeals held in Association of Little Friends, Inc. v. City of

Escanaba that the “failure to exhaust administrative remedies is excused where appearance before the board of review would be futile.” This exception applies where a uniform past application of policy can be readily established. 9. Predisposition of decision-maker. The Michigan Court of

Appeals held in Michigan Waste System, Inc. v. Department of Natural Resources that “exhaustion of administrative remedies is not required where the administrative decision maker is predisposed to rule against the aggrieved party.” In order to invoke this exception the party must demonstrate sufficient evidence of prejudgment. And it should not apply when the agency’s challenged position has been judicially upheld uniformly. 10. Delay. In Sears v. Department of Treasury, the Court of

Appeals held that an agency cannot rely on its own lack of diligence to avoid judicial review. 11. Pending criminal proceedings. The Michigan Supreme Court held in Michigan State Employees Association v. Civil Service

Commission that the requirement to exhaust is stayed while criminal proceedings are pending.

Courts review agency action with a presumption of regularity and proper exercise of power by agencies, so emotional appeals are not sufficient. In general, when judicial review would not undermine the policies which justify the exhaustion requirement, the courts tend to hear the case despite the availability of the agency remedy. Many of the exceptions to the doctrine are founded on the basis that there will be no interference with the administrative role. But these cases all

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present issues about whether the exhaustion of remedies is a jurisdictional issue. See Michigan Administrative Law, § 10:30; see §§ 10:31 to 10:42 for additional discussion about the exceptions.

Primary Jurisdiction

Primary Jurisdiction in General

Primary jurisdiction is a “where” question—where or in what forum should a controversy first be considered. The doctrine applies when there is concurrent original subject matter jurisdiction in both a court and an administrative agency. The usual overlap is between a common law cause of action and a regulatory scheme or program established by statute that does not abolish the common law right and places implementation in the hands of an administrative agency. If a common law action is abolished and entirely replaced by a statutorily-created administrative regulatory scheme, the agency empowered by the scheme has exclusive jurisdiction and the doctrine of primary jurisdiction plays no role in determining where a plaintiff can proceed.

Exhaustion of administrative remedies differs from primary jurisdiction in that there is no question of an agency’s original jurisdiction. The exhaustion doctrine prohibits a party’s attempt to get judicial review of an agency action before using all the procedures available in the agency. The concept of primary jurisdiction is jurisprudential and can be invoked on a court’s own motion. It can also be invoked as a defense by a party to litigation and by an agency intervening in a lawsuit. Caution is advised in reading and citing cases which use the term “primary jurisdiction,” because there is both mislabeling and confusion in the case law, which has often used the term to describe exclusive jurisdiction, preemption, overlapping jurisdiction, abstention, exhaustion of remedies, standing, statutory control of the method of judicial review, collateral estoppel, and res judicata. Federal primary jurisdiction cases are not controlling, but clearly served as the model for Michigan decisions.

Function of Doctrine of Primary Jurisdiction

Primary jurisdiction serves to assure uniformity and consistency of approach in resolving a particular problem. Primary jurisdiction also enhances the potential to use the expertise of an agency and to take advantage of agency resources in solving problems and in

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providing suitable remedies, particularly those remedies beyond the traditional powers of courts. While all these considerations have been recognized in Michigan, see particularly Attorney General v. Diamond Mortgage Co., Rinaldo’s Construction Corp. v. Michigan Bell Telephone Co., and Bank v. Michigan Education AssociationNEA, the most important is the need for uniformity.

Exceptions to the Doctrine of Primary Jurisdiction

Federal cases recognize an exception to the application of the doctrine where the regulatory action does not require administrative expertise to determine specialized facts, an exception which Michigan apparently follows. In addition to the “no specialized facts” exception, Michigan courts sometimes identify an exception if the concurrent administrative remedy would be inadequate (or at least they do not apply the doctrine when that is the case). Also, if there is insufficient consistency of the issues to be considered in the agency and judicial contexts, the Michigan courts will claim an exception from the primary jurisdiction doctrine. Both of these Michigan positions are apparently inconsistent with federal law.

Limitations on Application of Primary Jurisdiction Doctrine

Attorney General v Diamond Mortgage seemed to limit the doctrine to situations which involved industries that are heavily regulated, but that was not so with White Lake Improvement Association v. City of Whitehall, nor was it the case in Bank v. Michigan Education Association-NEA, which involved a labor relations dispute. The heavily regulated industries identified in Diamond Mortgage were common carriers and utilities. The doctrine has not been applied in Michigan civil rights cases, where the remedies are treated as cumulative. Neither the limitation to heavily regulated industries, nor the exception for coverage of civil rights matters is justified.

Courts have discretion to invoke the doctrine, subject to review by higher courts for clear error in doing so. The doctrine has a “black hole” effect, since cases dismissed on the basis of primary jurisdiction and referred to administrative agencies are seldom seen again. In addition, there may be difficulty in forcing an agency to act after the judicial action is dismissed. A court may retain jurisdiction, avoiding statute of limitation problems while the agency considers the matter. If the court does not retain jurisdiction, the agency action

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taken ultimately will be subject to judicial review in nearly all cases, although few cases demonstrate this. The collateral estoppel and res judicata effects of the doctrine have not been addressed in Michigan, but the general law of each probably applies.

Steps to Successful Availability of Judicial Review

Standing 1. Check the underlying statute to see if it provides for judicial review of the agency action in question. 2. See whether the underlying statute species who may or may not challenge an agency decision. 3. Identify the injury that has occurred or will occur as a result of the agency action or inaction. 4. Describe how the injury affects the plaintiff. 5. If the claim is that the action violates provision in a statute, rule, or the Constitution, explain the relevance of the provision to the challenged agency action, including the identity of the interests protected or regulated by the provision. 6. Consider how the agency action or decision caused the injury and how the action violates the provision governing the interest asserted. 7. Connect the proposed remedy to the injury. 8. Consider the current and historical standing requirements and apply this four-part test to demonstrate that: (1) the party asserting standing, or a person whom the part legitimately represents, has personally suffered in fact some actual or threatened injury to an economic or other substantial interest, as a result of the putatively illegal conduct of the defendant; (2) the interest injured is one which is arguably within the zone of interests to be protected or regulated by a statute, rule, or constitutional guarantee which is relevant to the controversy; (3) the injury asserted fairly can be traced to the challenged action; and (4) the injury asserted is likely to be redressed by a favorable decision on the merits of the case. 9. Establish that a plaintiff who represents others has authority to do so through an agreement with those others. 10. Follow the special rules for standing of public officers, taxpayers, and citizens.

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Finality and Ripeness 1. Identify the agency action to be challenged. 2. Determine if the underlying statute, rules, or agency practices require further agency process available to or used by the agency in the development of the police to be challenged. 3. Check to see if the same sources provide further agency process available to a party. 4. Be sure to differentiate the doctrines of finality and ripeness from standing, exhaustion of administrative remedies, and to consider the issue of primary jurisdiction as well (remembering that finality aspects relate to both ripeness and exhaustion. 5. When considering whether a case is ripe for judicial review, describe the fitness of the issues for judicial review. 6. Also regarding ripeness, describe the hardship to the party if judicial review is delayed until enforcement by the agency. 7. Review the declaratory judgment and injunction provisions of the court rules and examine the Sections 63 and 64 of the

Administrative Procedures Act.

Exhaustion of Administrative Remedies 1. Define or characterize the agency action which has occurred, or is threatened, or is desired. 2. Consider the result desired or the remedy sought by the person affected. 3. Review the underlying statute and relevant agency rules to discover the remedies which are available or required. 4. Compare the available administrative remedy to the desired remedy. 5. Consider whether pursuit of the administrative remedy is the most expedient alternative. 6. If the desire is to avoid the agency, consider the exceptions to the exhaustion doctrine. 7. Avoid arguing conclusions when asserting that a remedy need not be exhausted.

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Primary Jurisdiction 1. Identify if there is a cause of action in a court, such as for breach of contract or tort. 2. Consider that if the cause of action is based on a statute enforced in court, it is more likely that any issue will involve interpreting the statute regarding the appropriate judicial jurisdiction than it will involve any question of primary jurisdiction. 3. Assuming that there is a cause of action in a court, consider whether there is any statute related to the subject matter of the lawsuit. 4. If there is a related statute, determine if it abolished the common law remedy and provided the only basis for a challenge, whether the statute places jurisdiction in a court or in an agency. 5. Understand that the doctrine of primary jurisdiction applies whenever a court and an administrative agency have concurrent original subject matter jurisdiction. 6. Remember that the purpose of the primary jurisdiction doctrine is to assure the orderly and sensible coordination of the work of agencies and courts. 7. Review the fundamental premises which underlie this doctrine and allow a court to refuse to hear a case which it otherwise would unquestionably handle: to uphold the functions of an administrative agency, to promote uniformity and consistency, to take advantage of the expertise and resources which repose in the agency, and to conserve judicial resources. 8. Be aware that the doctrine can be applied even if the judicial and administrative actions are not identical, so long as there are issues important to the judicial remedy which are under the special competence of an agency. 9. Keep the doctrine separate from the other availability of review doctrines and functions; review any cases selected for advocacy to assure that they have not mislabeled or misunderstood the doctrine of primary jurisdiction. 10. Be sure to ask a court to consider retaining jurisdiction pending agency action, if the court applies the doctrine, particularly if there will be a statute of limitations or other complications resulting from the delay in judicial action.

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Sources for Standing

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 10, Part I (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Alexander v. City of Norton Shores, 106 Mich. App. 287, 307 N.W.2d 476 (1981) In re Annexation of Territory in Larkin Township, 146 Mich. App. 29, 379 N.W.2d 460 (1985) Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970) Barlow v. Collins, 397 U.S. 159, 90 S. Ct. 832, 25 L. Ed. 2d 192 (1970) Block v. Community Nutrition Institute, 467 U.S. 340, 104 S Ct. 2450, 81 L. Ed. 2d 270 (1984) Electro-Tech, Inc. v. H.F. Campbell Co., 443 Mich. 57,445 N.W.2d 61 (1989) Flast v. Cohen, 392 U.S. 83, 88 S. Ct. 1942, 20 L. Ed. 2d 947 (1968) Glen Lake-Crystal River Watershed Riparians v. Glen Lake Association, 264 Mich. App. 523, 695 N.W.2d 508 (2004) Human Rights Party v. Michigan Department of Corrections, 76 Mich. App. 204, 256 N.W.2d 439 (1977) Inglis v. Public School Employees Retirement Board, 374 Mich. 10, 131 N.W.2d 54 (1964) Kassab v. Acho, 125 Mich. 442, 336 N.W.2d 816 (1983) Killeen v. Wayne County Road Commission, 137 Mich. App. 178, 357 N.W.2d 851 (1984) Lansing Schools Education Association v. Lansing Board of Education, 487 Mich. 349, 792 N.W.2d 686 (2010) Lee v. Macomb County Board of Commissioners, 464 Mich. 726, 629 N.W.2d 900 (2001) Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992) Menendez v. City of Detroit, 337 Mich. 476, 60 N.W.2d 319 (1953) Michigan License Beverage Association v. Behnan Hall, Inc., 82 Mich. App. 319, 266 N.W.2d 808 (1978)

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Muskegon Building & Construction Trades v. Muskegon Area Intermediate School District, 130 Mich. App. 420, 343 N.W.2d 579 (1983) National Wildlife Federation v. Cleveland Cliffs Iron Co., 471 Mich. 608, 684 N.W.2d 800 (2004) Sierra Club v. Morton, 405 U.S. 727, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972) Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 96 S. Ct. 917, 48 L. Ed. 2d 450 (1976) Shavers v. Attorney General, 402 Mich. 554, 267 N.W.2d 72 (1978) St. Johns-St. Luke Evangelical Church, United Church of Christ v. National Bank of Detroit, 92 Mich. App. 1, 283 N.W.2d 852 (1979) United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973) Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 102 S. Ct. 752, 70 L. Ed. 2d 700 (1982) Warth v. Seldin, 422 U.S. 490, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975) Waterford School District v. State Board of Education, 98 Mich. App. 658, 296 N.W.2d (1980) White Lake Improvement Association v. City of Whitehall, 22 Mich. App. 262, 177 N.W.2d 473 (1970)

Constitutions U.S. Const. Art. III Michigan Constitution, Article IX, § 25-34

Statutes and Court Rules Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.301 to 24.306 (petitions for review) Revised Judicature Act, MCL § 600.2041 MCR 2.201 MCR 2.605

Sources for Ripeness and Finality

Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 10, Part II (Thomson Reuters) 2021 Edition

240 W. MICH. U. COOLEY LAW REVIEW [Vol. 37:1

LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

Cases Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967) Department of Social Services v. Emmanuel Baptist Preschool, 434 Mich. 380, 455 N.W.2d 1 (1990) Detroit Base Coalition for Human Rights of the Handicapped v. Department of Social Services, 431 Mich. 172, 428 N.W.2d 335 (1988) Electro-Tech, Inc. v. H.F. Campbell, 433 Mich. 57, 445 N.W.2d 61 (1989) Hendee v. Putnam Township, 486 Mich. 556, 786 N.W.2d 521 (2010) Lake Angelo Associates v. Township of White Lake, 198 Mich. App. 65, 498 N.W.2d 1 (1993) Michigan State Chamber of Commerce v. Secretary of State, 122 Mich. App. 611, 332 N.W.2d 547 (1983) Paragon Properties Co. v. City of Novi, 452 Mich. 568, 550 N.W.2d 772 (1996) Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S. Ct. 3108, 87 L. Ed. 2d 126 (1985)

Constitutions U.S. Const. Art. III Michigan Constitution, Article VI

Statutes and Court Rules Michigan Administrative Procedures Act of 1969, M.C.L. §§ 24.263 and 24.264 (declaratory rulings and declaratory judgment) MCR 2.605

Sources for Exhaustion of Administrative Remedies Texts and Treatises LeDuc, Michigan Administrative Law, Chapter 10, Part III (Thomson Reuters) 2021 Edition LeDuc, Michigan Administrative Law: Abridged Edition, A Michigan Administrative Law Primer, T.M. Cooley Law Review, Volume 12:21 (1995)

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Cases Association of Little Friends, Inc. v. City of Escanaba, 138 Mich. App. 302, 360 N.W.2d 602 (1984) Attorney General v. Diamond Mortgage Co., 414 Mich. 603, 327 N.W.2d 805 (1982) Baumgartner v. Perry Public Schools, 309 Mich. App. 507, 872 N.W.2d 837 (2015) Bennett v. City of Royal Oak School District, 10 Mich App. 265, 159 N.W.2d 245 (1968) Castro v. Dryden Farms, Inc., 79 Mich. App. 633, 263 N.W.2d 22 (1977) Cicotte v. Damron, 345 Mich. 528, 77 N.W.2d 139 (1956) Compton Sand & Gravel Co. v. Dryden Township, 125 Mich. App. 383, 336 N.W.2d 810 (1983) Consumers Power Co. v. Public Service Commission, 415 Mich. 134, 327 N.W.2d 875 (1982) Craig v. City of Detroit Police Department, 397 Mich. 185, 243 N.W.2d 236 (1976) Detroit Automobile Inter-Insurance Exchange v. Commissioner of Insurance, 125 Mich. App. 702, 336 N.W.2d 860 (1983) Durant v. State, 413 Mich. 862, 317 N.W.2d 854 (1982) Guiles v. University of Michigan Board of Regents, 193 Mich. App. 39, 483 N.W.2d 637 (1992) Hayes v. Regents of University of Michigan, 53 Mich. App. 605, 220 N.W.2d 91 (1974) Huggett v. Department of Natural Resources, 232 Mich. App. 188, 590 N.W.2d 747 (1998) International Business Machines v. Department of Treasury, 75 Mich. App. 604, 255 N.W.2d 702 (1977) Jackson v. City of Flint, 191 Mich. App. 187, 477 N.W.2d 489 (1991) Judges of the 74th Judicial District v. Bay County, 385 Mich. 710, 190 N.W.2d 219 (1971) K Mart Corp v. Department of State, 127 Mich. App. 390, 339 N.W.2d 32 (1983) L & L Wine and Liquor Corp. v. Liquor Control Commission, 274 Mich. App. 354, 733 N.W.2d 107 (2007) Michigan State Employees Association v. Civil Service Commission, 406 Mich. 313, 279 N.W.2d 530 (1979)