The Department of Corporations, like many state and federal agencies, does not observe a strict separation of powers. Indeed, the Department performs quasi-legislative functions in the form of rule making, prosecutorial (executive) functions in the form of investigation and advocacy and quasi-adjudicative functions in the form of making decisions. The combination of prosecutorial and adjudicative functions within a single agency is typical of many, if not most state and federal agencies. Nonetheless, it raises an obvious due process concern. The California Administrative Procedure Act addresses this concern in Government Code Section 11425.30 which specifies how an agency's administrative functions must be separated form it investigative, prosecutorial and advocacy functions.
The First District Court of Appeal addressed these issues in an opinion issued last week involving the California Public Employees' Retirement System. City of Pleasanton v. CalPERS, 2012 Cal. App. LEXIS 1220 (Nov. 29, 2012). In that case, the city initiated an administrative appeal challenging a determination by CalPERS. The hearing was held before an administrative law judge (ALJ) under the auspices of the Office of Administrative Hearings. CalPERS was represented at the hearing by one of its senior staff lawyers. The ALJ issued a proposed decision in favor of CalPERS. Under the APA, the agency may, among other things, accept or reject a proposed decision. Cal. Gov't Code § 11517. When the matter was set for hearing before the CalPERS Board of Administration, the CalPERS' staff submitted a a memorandum that not surprisingly recommended that the Board adopt the proposed decision. The question for the Court of Appeal was whether due process was denied because the same CalPERS staff attorney that represented CalPERS in the hearing before the ALJ signed the memorandum. The Court of Appeal, in an opinion by Justice Sandra L. Marguiles, said "no":
In sum, due process in the handling of an administrative appeal does not in general preclude the advocate for the agency staff‘s position from communicating with and making recommendations to the agency decision maker or the decision maker‘s advisors about the substance of the matter as long as (1) no part of the communication is made ex parte, (2) the administrative appellant is simultaneously afforded at least the same opportunity to communicate with the decision maker as the staff advocate, and (3) the decision maker is not subject to the advocate‘s authority or direction.
The moral of the story is that both the agency head and the ALJ may be hearing from the same attorney.