Opinion ID: 3170648
Heading Depth: 3
Heading Rank: 1

Heading: Erroneous procedural deprivation

Text: {21} In examining the potential risk of erroneous deprivation, we look to the procedures as a whole. See In re Comm’n Investigation Into 1997 Earnings of U.S. West Commc’ns, Inc., 1999-NMSC-016, ¶ 26, 127 N.M. 254, 980 P.2d 37 (citations omitted). To prevent erroneous deprivation in the administrative context, due process requires “‘reasonable notice and opportunity to be heard and present any claim or defense’.” Rayellen Res., Inc. v. N.M. Cultural Props. Review Comm., 2014-NMSC-006, ¶ 20, 319 P.3d 639 (citation omitted); see also Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 31-14, 70 S.Ct. 652, 94 L.Ed 865 (1950) (requiring that an adjudication for deprivation of property “be preceded by notice and opportunity for hearing appropriate to the nature of the case”). However, “constitutional due process does not require an agency to afford a petitioner all elements of a traditional judicial proceeding.” Archuleta, 2005-NMSC-006, ¶ 32 (citing Miller v. County of Santa Cruz, 796 F. Supp. 1316, 1319 (N.D. Cal. 1992), aff'd, 39 F.3d 1030 (9th Cir. 1994)). {22} Because Garduño did not challenge the substantive determination that she was ineligible for benefits, this is not the usual procedural due process case involving a prehearing deprivation of benefits. Garduño does not argue that she was deprived of her benefits by a lack of process provided in the hearing. The essence of her deprivation is that she continued to receive the benefits during the ongoing appeals process unaware of her employer’s appeal for 130 days and that she was actually incurring a debt. According to Garduño, “[d]ue process requires prompt notice with the opportunity to be heard at a meaningful time and in a meaningful manner.” She points to an alleged deficiency in notice and hearing and argues that she should have received an earlier notice and hearing. {23} We are therefore called to assess the significance of prompt notice and disposition of first-level appeals on a claimant’s interest in unemployment benefits when the initial determination found the claimant eligible and the claimant received benefit payments through the first level of administrative appeal. The New Mexico Unemployment Compensation statute provides that upon appeal by any party of a initial determination of eligibility, the Department must provide a “reasonable opportunity for a fair hearing.” NMSA 1978, Section 51-1-8(D) (2013, amended in 2015). The Department’s regulations 7 further provide that “[o]nce an initial determination is made and payment of benefits is begun, payments shall not be stopped without prior notice and an opportunity to be heard . . . .” 11.3.300.308(E) NMAC (1/1/2003). {24} Notice is important to due process because the “right to be heard has little reality or worth unless one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest.” Mullane, 339 U.S. at 314. “Due process does not require the same form of notice in all contexts; instead, the notice should be appropriate to the nature of the case.” Rayellen, 2014-NMSC-006, ¶ 19 (internal quotation marks and citations omitted). Put simply, we must determine whether the notice was “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane, 339 U.S. at 314 (citations omitted). {25} The goal of the Unemployment Compensation Law, and the importance behind unemployment benefits, centers around promptly providing support for the innocent workers who have become unemployed through no fault of their own. See Section 51-1-3. The Court of Appeals in Millar observed that this system “necessarily results in some payments being made upon an initial determination of eligibility that are subsequently overturned. As a result, the [Department] advises the claimant that if the appeal decision is against him, he will be required to repay the benefits received.” 2013-NMCA-055, ¶ 8. {26} We agree with the Court of Appeals in Millar that “prompt payment is not the only consideration of procedural fairness to a claimant[;] prompt notice of benefits being in jeopardy must be [considered] as well.” 2013-NMCA-055, ¶ 17. However, the importance in avoiding administrative delay is of less significance where the initial determination is one of eligibility and the claimant is receiving payments during the appeal process. Here, the claims examiner’s initial determination concluded that Garduño was eligible, and she continued to receive benefits until the ALJ’s determination following the hearing at the first level of appeal. We do not hold that any claim of late notice of an appeal or any late timing of the hearing cannot result in a due process violation. Instead, our holding requires weighing a claimant’s deprivation of an important private interest, such as unemployment benefits, relative to procedures used in such a deprivation. See Welch v. Thompson, 20 F.3d 636, 639 (5th Cir. 1994) (requiring that if there is a deprivation, “we must determine whether the procedures relative to that deprivation were constitutionally sufficient.” (citation and footnote omitted)). {27} In New Mexico, the distinguishing factor used to determine whether there was or was not a violation of due process rights depends on whether the defective notice deprived the claimant of the ability to participate in the proceeding. See Franco v. Carlsbad Mun. Schs., 2001-NMCA-042, ¶¶ 6, 14, 130 N.M. 543, 28 P.3d 531 (holding that a notice recommending termination of an employee to the board without notice to the employee of employee’s right to attend and dispute the claims violated due process), recognized in Lobato v. N.M. Env’t Dep’t, 2012-NMSC–002, ¶ 13, 267 P.3d 65. There is at least one instance when eventual 8 notice was deemed constitutionally sufficient in the administrative context because claimant was not deprived of an opportunity to be heard by participating in the proceeding. In Uhden v. N.M. Oil Conservation Comm’n a lessee of oil and gas interests provided notice by publication of two adjudications purporting to increase well spacing on a landowner’s property, which the landowner did not receive, and subsequently the landowner did not attend or participate in the hearing. 1991-NMSC-089, ¶¶ 4,5, 112 N.M. 528, 817 P.2d 721. However, three months later the lessee notified the landowner of two resulting orders and retained subsequent royalty payments to offset the overpayments. Id. ¶ 5. The landowner filed an application for a hearing to obtain relief from the two orders. Id. The landowner attended and participated in that hearing and a third order was issued denying her application for relief. Id. ¶ 5. In the subsequent appeal to this Court, we declared the first two orders void reasoning that service by publication in that context violated due process requirements of reasonable notice. Id. ¶ 13. As to the third order, this Court stated, “We do find that Uhden eventually had notice and an opportunity to be heard on the issue of spacing . . . . ” Id. The Court determined that eventual notice coupled with the ability to participate in the proceedings met the requirements of due process. See Id. ¶¶ 10, 13. {28} Even though Garduño did not receive notice of her employer’s appeal for 130 days, we cannot conclude that the risk of erroneous deprivation of unemployment benefits is unnecessarily high as a consequence of the procedures utilized by the Department. In this case, the Department completely adhered to the protocols outlined in the Unemployment Compensation statutes and accompanying regulations as described in Millar, including not ceasing payments without prior notice and an opportunity to be heard. See Millar, 2013-NMCA-055, ¶¶ 7-9; see also 11.3.300.308(E) NMAC (1/1/2003) (“Once an initial determination is made and payment of benefits is begun, payments shall not be stopped without prior notice and an opportunity to be heard.”) The erroneous deprivation that Garduño alleges would occur during the delay in the decision of a second-tier appeal which could reverse the initial determination. But prior to and during the appeal, Garduño was receiving her benefits and was deprived of nothing. Moreover, during the appeals process, Garduño was afforded abundant process that included a hearing and opportunities to obtain counsel, present evidence, and confront and cross-examine adverse witnesses. 2. Probable value of earlier notice or of additional or substitute procedural safeguards {29} We next examine any possible value of the additional safeguards proffered by Garduño. Garduño argues that she should have received an earlier notice and hearing. Inherent in this question is whether the outcome would have been different if the Department had provided the additional process Garduño requests. Cf. State ex rel. Children, Youth & Families Dep’t v. Christopher B., 2014-NMCA-016, ¶ 7, 316 P.3d 918 (“[I]n order to show a denial of due process, we do require the [claimant] to ‘demonstrate that there is a reasonable likelihood that the outcome might have been different[]’ had the denied procedure been afforded.” (Third alternation and emphasis in original) (internal quotation marks and citation omitted)). 9 {30} Garduño relies on Waters-Haskins v. Human Services Department, Income Support Division to argue that DWS’s late notice of the pending appeal amounted to “a false representation or concealment of material facts,” which implied “‘representations that are contrary to the essential facts to be relied on, even when made innocently or by mistake’.” 2009-NMSC-031, ¶ 24, 146 N.M. 391, 210 P.3d 817 (citation omitted) (holding that because the agency clearly knew of claimant’s ineligible status but continued to pay her food stamp benefits for eight years while the claimant had no way of knowing she was ineligible, the agency was estopped from later attempting to recoup the paid benefits). In that case, this Court applied a theory of equitable estoppel, an issue which Garduño does not argue on appeal. Further, the Waters-Haskins holding is not dispositive because Garduño was made aware of the possibility of appeal and of the possibility of having to pay back benefits should she lose on appeal. The notice to Garduño stated, “If your employer challenges a decision allowing benefits to you and the appeal decision is against you, you will be required to repay those benefits.” Garduño appears to be making an equitable estoppel argument couched in procedural due process; however, because Garduño did not cross-appeal the Court of Appeals’ adverse equitable estoppel determination, the issue is not before us. {31} Here, the delayed notice of appeal Garduño received is more analogous to the eventual notice received in Uhden. Despite the delay, Garduño still received notice of the hearing and appeal prior to the hearing, and the delay did not prevent Garduño from attending and participating in the DWS appeal hearing. See 11.3.500.10(A)(1) NMAC (1/1/2003). At the appeal hearing, the ALJ heard testimony from Garduño, the store manager, an employee, and the store’s loss prevention investigator; and the ALJ considered evidence consisting of written statements, policies, receipts, and surveillance video. Like Uhden, Garduño was not deprived of an opportunity to be heard on the issue of repayment of unemployment benefits. {32} The Minnesota Court of Appeals considered a due process argument similar to Garduño’s and added another element requiring notice of the interest at stake. In Schulte v. Transportation Unlimited, Inc., a discharged employee received notice of a hearing requested by his employer to challenge the unemployment benefits he had already received. 354 N.W.2d 830, 831 (Minn. 1984). Because the employee was reemployed before the hearing and was not informed of the potential requirement of repayment upon reversal of the initial decision to award benefits, the employee did not attend the hearing. Id. at 831-32. The Minnesota Court held that the notice was “affirmatively misleading” and resulted in a denial of due process because it failed to communicate the interest at stake. Id. at 835; see also Dilda v. Quern, 612 F.2d 1055, 1057 (7th Cir. 1980) (holding a due process violation for lack of notice of the possible decrease in a food stamp allotment because notice did not meaningfully inform persons so they could protect their interest)). {33} Garduño’s case is more like cases from the Court of Appeals of Minnesota that distinguish Schulte where the Court ultimately held that there was no constitutional violation when the employee did participate in the hearing. See Comm’r of Nat. Res. v. Nicollet Cty. Pub. Water/Wetlands Hearings Unit, 633 N.W.2d 25, 30 (Minn. Ct. App. 2001) (affirming 10 an appellate denial of the appellant’s due process claim based on constitutionally valid notice of the hearing because the appellant knew the potential consequences of a reversal of the initial decision and participated in the appeal with counsel); see also Aubin v. Family Dollar, Inc., No. A14-0483, 2014 WL 6724937, at -5 (Minn. Ct. App. Dec. 1, 2014) (holding that online system of appeals did not violate due process rights because it “was not affirmatively misleading” and it adequately explained the “potential consequences” of failing to file a timely appeal (citations omitted)); Koch v. Sheldahl, No. A03-1562, 2004 WL 1878786, at  (Minn. Ct. App. Aug. 19, 2004) (determining that employee was not entitled to notice of consequences of losing an unemployment benefits appeal until she received notice that the employer had, in fact, appealed and concluding that when faced with the decision of whether to participate in the appeal, the employee also had notice of the consequences of losing an appeal thus there was no due process violation). In Garduño’s case, like the Nicollet case, the late notice did not prevent Garduño from participating in the appeal hearing. The facts also indicate that Garduño, like Nicollet was given notice of the potential consequences of losing an appeal. Garduño’s participation in the appeal hearing coupled with her notice of the potential consequences was not “affirmatively misleading.” {34} Even though Garduño was unaware of her employer’s appeal for a substantial time, Garduño’s argument overlooks that the notice of claim determination dated March 12, 2010 stated that “[i]f your employer challenges a decision allowing benefits to you and the appeal decision is against you, you will be required to repay those benefits.” Further, the August 3, 2010, notice of hearing the Department mailed to Garduño informed Garduño of the issues to be addressed, including the issue of whether she left her employment without good cause or was discharged for misconduct. The notice contained references to the legal and regulatory bases related to those issues. The notice included information required by the regulations meant to inform Garduño of the issues to be addressed so she could prepare for the hearing. See 11.3.500.9(D) NMAC; 11.3.500.9(D)(1), (3) NMAC. {35} We are not persuaded that there was probable value to Garduño’s proffered additional procedural protection in receiving earlier notice. The requested additional procedures would not have changed the outcome of the final eligibility determination. Garduño was discharged from employment for her own misconduct, and no amount of time would have permitted her to show otherwise. Indeed, before the district court, Garduño’s counsel acknowledged that the Department’s eligibility decision was probably correct. Additionally, Garduño cannot prove that earlier notice would have led to a smaller overpayment debt where, even after she received actual notice of the appeal, she continued to collect benefits voluntarily increasing the risk that she would have a higher overpayment debt. {36} There would be no added value in a speedier notice and hearing where it would not have afforded additional protections from an erroneous deprivation of the continuation of benefits or from a wrongful order to repay benefits. The Court of Appeals in this case failed to view the process as a whole by focusing on the lack of a specific type of notice and not considering the abundant process and safeguards afforded to Garduño. Accordingly, the late 11 notice did not violate due process. {37} We also note that the Department has the legal right to recoup overpaid benefits, even those benefits mistakenly overpaid by the Department. See, e.g., Ellender v. Schweiker, 575 F. Supp. 590, 593, 600 (S.D.N.Y. 1983) (“We do not question the Government’s legal right to collect back all legitimate overpayments of [Federal Supplemental Social Security Income] benefits from recipients who are presently able to repay their debts after they obtain their full [Social Security] checks.”); see generally Section 51-1-38 (describing a claimant’s liability for unemployment benefit overpayment). C. The Government’s interest includes the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement entails {38} The third factor of the Mathews test is “the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.” Mathews, 424 U.S. at 335. Mathews described this factor as a consideration of “the public interest” which includes “the administrative burden and other societal costs” associated with providing the proposed additional procedural safeguards. Id. at 347. In discussing this test, Mathews looked both to the financial burden on the administration and to the effect the costs of additional procedures for undeserving recipients may have on deserving recipients. Id. at 347-48. The Department argues that the government’s interest at issue here is in recouping benefits erroneously paid to claimants who did not deserve them. We disagree. The added procedural safeguards Garduño requests are more timely notice and hearing. Thus, we must determine the added burden on the Department to provide a more timely notice and hearing. It appears to us that the added burden of notifying claimants of an employer’s appeal sooner is minimal. Significantly, the Department does not contest our conclusion. In fact, at oral argument before this Court, the Department stated that claimants are currently provided with notice of appeal and an appeal hearing much sooner than occurred in Garduño’s case. {39} While the private interest in the continuation of benefits is important, there is a very low risk of erroneous deprivation under the procedures utilized by the Department. The interest in the continuation of benefits was attenuated where Garduño received benefits through the first level of administrative appeal. Unemployment benefits hearings must comport with due process and be conducted in such a manner as to ascertain the substantial rights of parties; fundamental fairness is the essence of due process. More specifically, a claimant is entitled to a full, fair, and impartial hearing which conforms to the fundamental principles of due process and which includes the right to confront and cross-examine witnesses. In this case, the Department provided and Garduño received adequate notice and a fundamentally fair, full, and impartial hearing.