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Are Administrative Rulings Binding in Later Cases? (Dec. 8, 2014)

Administrative agencies abound, especially in California. If you have a case before a California administrative agency, you may wonder: Will the decision of the agency—either for or against you—be binding in a later proceeding in a court of law or before another agency?

This question relates to a legal doctrine called preclusion. Preclusion comes in two forms. The first is res judicata, which precludes (or prevents) the re-litigation of claims argued and decided in prior proceedings. Second, collateral estoppel precludes the re-litigation of issues argued and decided in prior proceedings. For this reason, res judicata is known as claim preclusion and collateral estoppel as issue preclusion.

Both preclude a court or agency from re-deciding a claim or issue that has already been decided. This promotes fairness, by preventing a losing party from getting another bite at the apple. It also preserves resources, which would be wasted if a court or agency duplicated the effort of a prior proceeding.

Preclusion is an important issue for the business community, especially employers. Say, for example, you fire an employee for misconduct. The employee seeks relief against you before a California administrative agency, which issues a ruling that you wrongfully terminated the employee. Does the administrative ruling bind you if the employee later sues you in state court for wrongful termination, such that you automatically lose on that issue?

It depends. Ordinarily, whether a prior administrative ruling is binding in a later court proceeding depends on whether the elements of collateral estoppel are satisfied and whether the prior administrative proceeding had a “judicial character.” The elements of collateral estoppel are:

1. (1) “the issue sought to be precluded from re-litigation must be identical to that decided in a former proceeding”;
2. (2) “this issue must have been actually litigated in the former proceeding”;
3. (3) “it must have been necessarily decided in the former proceeding”;
4. (4) “the decision in the former proceeding must be final and on the merits”; and
5. (5) “the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.”

Basurto v. Imperial Irrigation Dist., 211 Cal. App. 4th 866, 877–78 (2012).

The California Supreme Court has held that collateral estoppel may apply to an administrative ruling where “an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate . . . .” People v. Sims, 32 Cal. 3d 468, 479 (1982) (internal quotation marks omitted; emphasis added). According to the high court, indicia of administrative proceedings undertaken in a “judicial capacity” include:

• • “a hearing before an impartial decision maker”;
• • “testimony given under oath or affirmation”;
• • “a party’s ability to subpoena, call, examine, and cross-examine witnesses, to introduce documentary evidence, and to make oral and written argument”;
• • “the taking of a record of the proceeding”; and
• • “a written statement of reasons for the decision.”

Pac. Lumber Co. v. State Water Res. Control Bd., 37 Cal. 4th 921, 944 (2006) (citing Sims); accord Basurto, 211 Cal. App. 4th at 878–79.

If the court decides that all the elements of collateral estoppel are met and that the prior administrative hearing was judicial in character, the prior administrative ruling may bind you. If the court decides that at least one element of collateral estoppel was missing, or that the prior administrative hearing was not judicial in character, the prior administrative ruling may not bind you.

Significantly, if the prior administrative ruling was issued in the unemployment insurance context, the prior administrative ruling likely will not bind you. The Unemployment Insurance Code provides, in relevant part, that administrative rulings from the California Unemployment Insurance Appeals Board “shall not be conclusive or binding in any separate or subsequent action or proceeding, and shall not be used as evidence in any separate or subsequent action or proceeding, between an individual and his or her present or prior employer brought before an arbitrator, court, or judge of this state or the United States . . . .” Cal. Unemp. Ins. Code § 1960 (emphases added). The reason for this law, as recognized by California courts, is that the amount of money at stake in an unemployment insurance hearing is often small and that the California legislature intended such hearings to be speedy, informal, and inexpensive. Mahon v. Safeco Title Ins. Co., 199 Cal. App. 3d 616, 622–23 (1988); see also Kurz v. Syrus Systems, LLC, 221 Cal. App. 4th 748, 763–64 (2013); Pichon v. Pac. Gas & Elec. Co., 212 Cal. App. 3d 488, 503–04 (1989).

But, a word of caution here: Findings made in state unemployment compensation proceedings may be admissible in federal court, even if they’re not admissible in state court. At least one federal court has been willing to admit a ruling by the California Unemployment Insurance Board in a Title VII action brought against an employer. The court explained that the California “legislature cannot purport to make binding pronouncements of [state] law concerning what evidence may be privileged or otherwise inadmissible in a federal court action involving claims based on federal law.” Baldwin v. Rice, 144 F.R.D. 102, 106 (E.D. Cal. 1992) (emphases added). But see Bradshaw v. Golden Road Motor Inn, 885 F. Supp. 1370, 1373–1375 & n.4 (D. Nev. 1995) (questioning Baldwin’s reasoning and holding that a Nevada agency’s decision regarding an employee’s eligibility for unemployment benefit under state law was not admissible in a federal discrimination case).

Folks, the point here is that issues related to California administrative agencies can be tricky. If you have a case before such an agency, watch out. The outcome may well have consequences far beyond the immediate case at hand.

I have made this blog available for educational purposes only, not to provide specific legal advice. By using this blog, you understand that there is no attorney–client relationship between you and me. This blog should not be used as a substitute for independent legal advice from a licensed professional attorney in your state.