Opinion ID: 1153836
Heading Depth: 1
Heading Rank: 6

Heading: procedural due process and the csf

Text: (7a) Petitioner asserts that the bar has erroneously arrogated to itself unbridled and unreviewable discretion in distributing awards from the CSF and, in its regulations and practice, has failed to comport with minimum applicable standards of due process. The bar responds that CSF payments are a matter of grace and it has sole discretion to make such payments, but that some judicial review is appropriate. Moreover, it asserts that no vested rights were created by the Legislature when it authorized the bar to create a fund to compensate injured clients, further demonstrating the inapplicability of due process requirements. Business and Professions Code section 6140.5 specifically authorizes the establishment of a fund to relieve or mitigate pecuniary losses caused by the dishonest conduct of those active members of the bar. Payment is to be discretionary and the bar is free to prescribe applicable regulations and conditions for payments. We conclude that the Legislature did not intend the bar's powers to be limitless and that the bar's exercise of discretion is reviewable to assure conformance to the purposes of the fund and to avoid the potential for arbitrary or discriminatory decisions. Essentially, petitioner is insisting that once he has demonstrated eligibility, he is entitled to an award from the CSF in the amount that he has requested. However, the bar is statutorily entrusted with full power to prescribe and determine under what circumstances reimbursement will be made from CSF money. The present regulations define reimbursable losses (Rules Proc. of State Bar, rule 671), but they reserve to the bar the sole and final authority to determine whether and to what extent any application for reimbursement shall be granted ( id., rule 681 A). It therefore appears that there is nothing approaching an entitlement to any sum, at least until the bar has decided that reimbursement should be made and has set the amount. The fact that petitioner is not entitled to a specific sum is not, however, dispositive. Although the Legislature granted to the bar discretion to administer the fund, it did not insulate the bar's decisions from review. In Manjares v. Newton (1966) 64 Cal.2d 365 [49 Cal. Rptr. 805, 411 P.2d 901], a school board argued that because it was granted discretion by the Education Code to decide whether transportation should be supplied to students, its decisions on the subject were conclusive. Speaking for the court, Justice Mosk succinctly responded: The board is, in effect, claiming that whenever an administrative body has been granted discretionary powers, the manner in which it exercises that discretion is beyond judicial review. This argument is clearly untenable. That mandate will lie whenever an administrative board has abused its discretion is a rule so well established as to be beyond question. (64 Cal.2d at p. 370.) The requirements of due process, as has long been reiterated, are not inflexible. ( Civil Service Assn. v. City and County of San Francisco (1978) 22 Cal.3d 552, 560-561 [150 Cal. Rptr. 129, 586 P.2d 162]; see also Mathews v. Eldridge (1976) 424 U.S. 319, 334-335 [47 L.Ed.2d 18, 32-33, 96 S.Ct. 893].) While courts have dispensed with the distinction between rights and privileges (see Goldberg v. Kelly (1970) 397 U.S. 254, 262-263 [25 L.Ed.2d 287, 295-296, 90 S.Ct. 1011]), the federal courts have continued to focus on the differences between expectancies and entitlements. Thus, in Board of Regents v. Roth (1972) 408 U.S. 564, 577 [33 L.Ed.2d 548, 561, 92 S.Ct. 2701], the high court explained that To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. In analyzing whether protectable interests exist, the Constitution is not the source of such interests. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law  rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. ( Ibid.; see also Perry v. Sindermann (1972) 408 U.S. 593, 602-603 [33 L.Ed.2d 570, 580-581, 92 S.Ct. 2694].) California has expanded upon the federal analytical base by focusing on the administrative process itself. Thus, in Civil Service Assn. v. City and County of San Francisco, supra, 22 Cal.3d 552, we held that civil service employees upon whom short suspensions had been imposed for disciplinary reasons were not entitled to full procedural presuspension protection of the kind provided before termination of employment. (See Skelly v. State Personnel Bd. (1975) 15 Cal.3d 194 [124 Cal. Rptr. 14, 539 P.2d 774].) In reaching this result, we observed that While appellants may not in fact have been deprived of a salary earned but only of the opportunity to earn it, they had the expectancy of earning it free from arbitrary administrative action. [Citation.] This expectancy is entitled to some modicum of due process protection. ( Perry v. Sindermann, supra, 408 U.S. 593, 599-603 [33 L.Ed.2d 570, 578-581].) (22 Cal.3d at p. 564.) We concluded that those interests would be sufficiently protected by procedures followed during the suspension or reasonably thereafter which apprise the employee of the proposed action, the reasons therefor, provide for a copy of the charges including materials upon which the action is based, and the right to respond either orally or in writing, to the authority imposing the discipline.... ( Ibid. ) The next year, we specifically instructed that courts must evaluate the extent to which procedural protections can be tailored to promote more accurate and reliable administrative decisions in light of the governmental and private interests at stake rather than relying on whether or not the state limits administrative control over a statutory benefit or deprivation by the occurrence of specified conditions; ... ( People v. Ramirez (1979) 25 Cal.3d 260, 267 [158 Cal. Rptr. 316, 599 P.2d 622].) After reviewing federal precedent, we held that the due process safeguards required for protection of an individual's statutory interests must be analyzed in the context of the principle that freedom from arbitrary adjudicative procedures is a substantive element of one's liberty. [Citation.] ( Id., at p. 268.) No firm rule can be established to ascertain what protections are necessary in a particular situation. Rather the relief to be afforded depends upon balancing the various interests involved. (8) Generally, the dictates of due process necessitate considering (1) the private interest that will be affected by the official action, (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards, (3) the dignitary interest in informing individuals of the nature, grounds and consequences of the action and in enabling them to present their side of the story before a responsible governmental official, and (4) the governmental interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. [Citation.] ( People v. Ramirez, supra, 25 Cal.3d at p. 269.) Thus we must look to and weigh the various interests at stake before deciding what procedures are constitutionally required. (7b) Following the approach of Ramirez, we inquire whether the present procedures adequately assure that the bar, having elected to exercise the discretion conferred upon it by the Legislature, will exercise that discretion in a nonarbitrary, nondiscriminatory fashion. We conclude that in order to comport with due process requirements applicants must be afforded an opportunity to be heard and respond to the bar's determinations and the bar must issue sufficient findings to afford review. (9) The opportunity to be heard is a fundamental requirement of due process. ( Stanson v. San Diego Coast Regional Com. (1980) 101 Cal. App.3d 38, 45 [161 Cal. Rptr. 392]; see Perry v. Sindermann, supra, 408 U.S. at p. 603 [33 L.Ed.2d at p. 580].) However, there is no precise manner of hearing which must be afforded; rather the particular interests at issue must be considered in determining what kind of hearing is appropriate. A formal hearing, with full rights of confrontation and cross-examination is not necessarily required. (See People v. Ramirez, supra, 25 Cal.3d at p. 275.) What must be afforded is a `reasonable' opportunity to be heard. ( Anderson Nat. Bank v. Luckett, 321 U.S. 233, 246 [88 L.Ed. 692, 704, 64 S.Ct. 599, 151 A.L.R. 824]; Drummey v. State Bd. of Funeral Directors, 13 Cal.2d 75, 80 [87 P.2d 848]; CEEED v. California Coastal Zone Conservation Com. [(1974) 43 Cal. App.3d 306, 329 (118 Cal. Rptr. 315)].) ( Stanson v. San Diego Coast Regional Com., supra, 101 Cal. App.3d at p. 45.) (7c) Viewing the nature of the governmental and private interests at stake here, we conclude that the bar is not required to hold a formal hearing, but is required to give petitioner and other applicants an opportunity to respond to the bar's proposed disposition of the request for reimbursement. As noted in the description of the present rules, an applicant is entitled to present information in support of his claim at the time he makes his request, but he is not entitled to any further information until the bar makes its final decision. While in this case the bar afforded petitioner a rehearing of sorts by inviting and then considering a request for reconsideration, the rules in fact state that the bar's decision shall be final and no further consideration shall be given by the State Bar to said application or another based upon the same facts. (Rules Proc. of State Bar, rule 685.) While the bar may permit an applicant to have a more active role in the proceedings, nothing requires it to do so under the present system. [7] In short, the rules do not give an applicant any right to respond to the bar's or the attorney's assertions. We do not prescribe the exact form that the hearing may take. The bar may fully utilize the disciplinary proceedings which frequently occur simultaneously with CSF proceedings to satisfy hearing requirements. Alternatively, it may provide a separate procedure for written or oral responses to its actions. (See Civil Service Assn. v. City and County of San Francisco, supra, 22 Cal.3d at p. 564.) The goal it must achieve, however, is to afford applicants a reasonable opportunity to raise objections to the particular action the bar desires to take. (See Horn v. County of Ventura, supra, 24 Cal.3d 605, 619.) (10a) As we have described, petitioner does not have a right to an award from the CSF. The bar is free to exercise its discretion and to set any guidelines it sees fit which advance the legislative policy behind the CSF. Nonetheless, an applicant may be entitled to relief `if the announced grounds for [the bar's decision have] been patently arbitrary or discriminatory.' ( People v. Ramirez, supra, 25 Cal.3d at p. 269, quoting Cafeteria Workers v. McElroy (1961) 367 U.S. 886, 898 [6 L.Ed.2d 1230, 1238, 81 S.Ct. 1743].) The existing procedures do not require the bar to announce grounds in a manner which would permit judicial review. (11) We have previously stressed that a findings requirement serves to conduce the administrative body to draw legally relevant sub-conclusions supportive of its ultimate decision; the intended effect is to facilitate orderly analysis and minimize the likelihood that the agency will randomly leap from evidence to conclusions. [Citations.] ( Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506, 516 [113 Cal. Rptr. 836, 522 P.2d 12]; 2 Davis, Administrative Law Treatise (1958) § 16.05, p. 444; see B. & O.R. Co. v. Aberdeen & R.R. Co. (1968) 393 U.S. 87, 92 [21 L.Ed.2d 219, 224, 89 S.Ct. 280].) Requiring findings also assists a reviewing court in following the agency's mode of analysis and the parties in deciding whether and on what basis review should be sought. They additionally serve to persuade the parties that administrative decision-making is careful, reasoned, and equitable. ( Topanga, supra, at p. 517.) The bar concedes some review is appropriate. Some findings are necessary to make that review meaningful. Rules of Procedure of the State Bar, rule 687 E, which provides that [u]pon order of the review department directing payment from the fund, the order, the application for reimbursement, the formal pleadings, transcripts, exhibits, findings, conclusions and recommendations in the client security fund proceeding shall be available for public inspection ..., implies that a record, findings, conclusions, and recommendations exist. On closer inspection, this implication proves misleading. First, absent from the rule is any requirement for documentation if there is no order from the review department directing payment. In addition, the bar has not offered such documentation here. Our review of the Rules of Procedure of the State Bar reveals that the review department, final arbiter of CSF decisions, is apparently not required to make findings or enunciate conclusions. The letters to petitioner from the bar announcing its conclusions are completely barren of any information other than conclusory statements that petitioner's loss first was not and then was deemed reimbursable. No other findings or record of review department proceedings is provided. (10b) While the bar is not required to make findings as formal as those required of a court (see Mahdavi v. Fair Employment Practice Com. (1977) 67 Cal. App.3d 326, 335 [136 Cal. Rptr. 421]; McMillan v. American Gen. Fin. Corp. (1976) 60 Cal. App.3d 175, 183 [131 Cal. Rptr. 462]), it must provide information sufficient to apprise interested parties and the courts of the bases for the administrative action. ( San Francisco Ecology Center v. City and County of San Francisco (1975) 48 Cal. App.3d 584, 596 [122 Cal. Rptr. 100]; Topanga Assn. for a Scenic Community v. County of Los Angeles, supra, 11 Cal.3d at pp. 515-517.) The procedures already in existence in disciplinary proceedings may well provide the basis for formulating appropriate hearing and findings mechanisms. [8] The purpose of due process in this context is to assure that the bar acts within its discretion, i.e., in a nondiscriminatory and nonarbitrary manner. (Cf. Perry v. Sindermann, supra, 408 U.S. at p. 597 [33 L.Ed.2d at p. 577] [government may not deny benefit to person on basis that infringes his constitutionally protected interests].) We therefore find it appropriate to order the bar to reformulate its regulations pursuant to its authority under Business and Professions Code section 6140.5 and in light of the discussion above. [9] We believe that the bar, with this guidance, will be in the best position to comply with the announced requirements of due process. It is intimately acquainted with the resources at hand, and its interests essentially are not adverse to those of petitioner and other applicants who form the class of persons the CSF is aimed at assisting. Finally, we decline to decide whether the bar's award to petitioner was improperly decided because we have no basis on which to evaluate the bar's determination. Instead, we remand petitioner's application to the bar for such further consideration as may be appropriate following reformulation of the bar rules. We express no view on the merits of petitioner's claim.