1. Administrative Law_ALJ decision_judicial review_standard
The standard of superior court review for an administrative law judge's final decision
issued pursuant to N.C.G.S. § 150B-36(c) is that stated in N.C.G.S. § 150B-51(b).
2. Administrative Law_failure to prosecute contested case_findings_supported by
evidence
There was substantial evidence to support an administrative law judge's findings
concerning petitioners' failure to prosecute their case (resulting in dismissal by the ALJ).
3. Administrative Law_dismissal of contested case_authority_no error of law
Dismissal of a contested case is drastic but within the plain language of the ALJ's
statutory and regulatory power, and there was no error of law in the ALJ's dismissal in this case.
The errors cited by petitioners concerned inapplicable regulations, were not prejudicial, or
involved actions not required of the ALJ.
Attorney General Roy Cooper by Assistant Attorney General
Elizabeth L. Oxley, for respondent-appellee.
Allen and Pinnix, P.A., by M. Jackson Nichols and Angela Long
Carter, for petitioner-appellant.
ELMORE, Judge.
Lisa Lincoln and her childcare company Honeybees Creative
Center (petitioners), appeal from the dismissal of a contested case
brought against the Nutrition Division of North Carolina Health and
Human Services (respondent) for its determination that petitionershave not complied with federal law regarding reimbursement for low
cost school meals.
Respondent is charged with administering the Child and Adult
Care Food Program, financed by the United States Department of
Agriculture. In order to receive reimbursement money from
respondent, petitioners must comply with all the federal
requirements for funds. Respondent audited petitioners' records
for the program and found that they were in noncompliance; many
required records were missing and others did not coincide. As a
result, respondent demanded repayment of $60,279.45, representing
the amount respondent had paid out to petitioners during the period
of noncompliance.
On 24 June 2003, petitioners filed for a contested case
hearing to dispute the money owed. This was after petitioners had
received a letter from one of respondent's employees informing them
that an informal process of resolution might be available.
Petitioners served notice of the filing on the author of the
letter; however, this individual was not respondent's listed agent
for service of process.
On 25 June 2003, the parties received notice that the Office
of Administrative Hearings (OAH) had assigned Judge Augustus B.
Elkins (the ALJ) to hear the contested case. The notice also made
reference to a possible forthcoming order for prehearing
statements. In accordance with N.C. Admin. Code tit. 26, r. 3.0104
(June 2004), and on the same day, the ALJ filed an order giving
both parties thirty days to file and serve prehearing statements. Respondent complied with the order, submitting its pretrial
statement and other required documentation supporting its claim.
Petitioners failed to respond within thirty days, and in fact
filed nothing more after the petition for the contested case
hearing. On 20 October 2003, respondent filed a motion to dismiss
the contested case for petitioners' failure to respond to a court
order and failure to properly effect service of process. The ALJ
sent petitioners notice of his order giving them ten days to file
objections to the motion to dismiss. No response was received.
The contested case was scheduled for hearing on 3 November 2003.
On 22 October 2003, respondent filed a request to continue the
hearing along with a request for the ALJ to hear its motion to
dismiss. The next day the ALJ sent notification that he had
continued the case and a new hearing date would be set. On 13
November 2003, the ALJ granted respondent's motion to dismiss,
citing the facts that petitioners had failed to prosecute their
case, other sanctions had been considered, and dismissal was
appropriate.
On 15 December 2003, nearly six months after their initial
filing, petitioners filed a petition for judicial review in Wake
County Superior Court, requesting review of the final decision of
the ALJ dismissing the case. Petitioners took exception to
findings 2 and “3” (actually numbered 4 in the ALJ's order) and
argued that the order violated all six grounds listed in N.C. Gen.
Stat. § 150B-51(b). On 10 May 2004, after reviewing the whole
record, the trial court entered its order affirming the findingsand conclusions of the ALJ and also determining that the ALJ's
decision was not arbitrary or capricious. Petitioners filed notice
of appeal to this Court.
[1] Neither party has briefed the appropriate standard of
review this Court should apply when reviewing an order of the
superior court, sitting in appellate capacity, that reviewed a
final decision of an administrative law judge issued pursuant to
N.C. Gen. Stat. § 150B-36(c) (2003). Since we are reviewing a
“review proceeding” in the superior court and petitioners are
appealing pursuant to N.C. Gen. Stat. § 7A-27, we will apply N.C.
Gen. Stat. § 150B-52 (2003):
A party to a review proceeding in a superior
court may appeal to the appellate division
from the final judgment of the superior court
as provided in G.S. 7A-27. The scope of
review to be applied by the appellate court
under this section is the same as it is for
other civil cases.
Id. See also N.C. Dep't of Env't & Natural Res. v. Carroll, 358
N.C. 649, 658, 664, 599 S.E.2d 888, 894, 898 (2004) (stating
section 150B-52 is applicable to appellate review of a superior
court decision). Recently, our Court has previously characterized
the standard of review called for by this statute in at least two
ways. In Diaz v. Division of Soc. Servs., the Court described the
review contemplated by section 150B-52 as:
whether there was competent evidence to
support the trial court's findings of fact and
whether its conclusions of law were proper in
light of such facts. Findings of fact by the
trial court in a non-jury trial . . . are
conclusive on appeal if there is evidence to
support those findings. A trial court'sconclusions of law, however, are reviewable de
novo.
166 N.C. App. 209, 211, 600 S.E.2d 877, 879 (2004) (quoting Shear
v. Stevens Building Co., 107 N.C. App. 154, 160, 418 S.E.2d 841,
845 (1992)), Medina v. Division of Social Servs., 165 N.C. App.
502, 505, 598 S.E.2d 707, 709 (2004). Yet, in Hardee v. N.C. Bd.
of Chiropractic Exam'rs, 164 N.C. App. 628, 633, 596 S.E.2d 324,
328, disc. review denied, 359 N.C. 67, 604 S.E.2d 312 (2004), we
characterized the operable standard of review under this statute
slightly differently, noting that it involved a twofold
determination: “(1) determining whether the trial court exercised
the appropriate scope of review and, if appropriate, (2) deciding
whether the court did so properly.” Id. (citing Eury v. N.C.
Employment Security Comm., 115 N.C. App. 590, 597, 446 S.E.2d 383,
387-88 (1994)).
Our appellate court's principal cases discussing the standard
of review have dealt with review of a final agency or board
decision that the superior court reviewed, see Carroll, 358 N.C. at
652, 599 S.E.2d at 890; Mann Media, Inc. v. Randolph Cty. Planning
Bd., 356 N.C. 1, 565 S.E.2d 9 (2002); Capital Outdoor, Inc. v.
Guilford Cty. Bd. of Adjust., 355 N.C. 269, 559 S.E.2d 547 (2002)
(per curiam) (adopting the dissent in 146 N.C. App. 388, 392, 552
S.E.2d 265, 268 (2001)); ACT-UP Triangle v. Commission for Health
Services, 345 N.C. 699, 483 S.E.2d 388, (1997); Shackleford-Moten
v. Lenoir Cty. DSS, 155 N.C. App. 568, 572 S.E.2d 767 (2002);
Amanini v. N.C. Dept. of Human Resources, 114 N.C. App. 668, 443
S.E.2d 114 (1994), not the review of a final decision of an ALJissued pursuant to N.C. Gen. Stat. § 150B-36(c) that has no agency
or board action.
(See footnote 1)
Nonetheless, consistent with this case law, when reviewing an
order from a superior court acting in an appellate capacity, our
scope of review is restricted to evaluating the trial court's order
for errors of law. Shackleford-Moten, 155 N.C. App. at 572, 573
S.E.2d at 770 (citing ACT-UP Triangle, 345 N.C. at 706, 483 S.E.2d
at 392). “[A]n appellate court's obligation to review for errors
of law, see N.C.G.S. §§ 7A-27(b), 150B-52, N.C.R. App. P. 16(a),
'can be accomplished by addressing the dispositive issue(s) before
the agency and the superior court' and determining how the trial
court should have decided the case upon application of the
appropriate standards of review.” Carroll, 358 N.C. at 664-65, 599
S.E.2d at 898 (quoting Capital Outdoor, Inc. v. Guilford Cty. Bd.
of Adjust., 146 N.C. App. 388, 392, 552 S.E.2d 265, 268 (2001)
(Greene, J., dissenting)). Although these cases deal with ourstandard of review of contested cases reaching a final agency
decision, we find it authoritative for cases arising from section
150B-36(c) as well. Further, although the superior court's scope
of review regarding an ALJ's final decision issued pursuant to
section 150B-36(c) does not fall precisely within the plain
language of any provision of N.C. Gen. Stat. § 150B-51, we
determine, as the superior court did here, that the standard of
review is that stated in section 150B-51(b).
[2] Here, the dispositive issue on review to the superior
court and on appeal to this Court is whether the ALJ erred in
dismissing petitioners' contested case pursuant to section 150B-
36(c)(3) for failure to prosecute. This issue requires both a
factual inquiry as well as a legal inquiry; to that extent we will
review the ALJ's findings of fact under the whole record test and
its conclusions of law de novo in order to determine if the
superior court erred. See Carroll, 358 N.C. at 659, 599 S.E.2d at
894-95. We hold that the superior court should have affirmed the
ALJ's order under section 150B-51(b) and thus find no errors of law
in the superior court actually doing so.
The ALJ found that, after filing a petition for a contested
case on 24 June 2003, petitioners filed nothing until 15 December
2003 despite receiving several orders from the ALJ to file and
serve prehearing statements and other responses to motions. The
ALJ further found that:
2. Petitioner, by failure to respond through a
Prehearing Statement or respond to
Respondent's motion, despite orders by the
[ALJ], has appeared . . . to have abandonedinterest in this contested case. By
Petitioner's failure to set forth its version
of the facts and other items as required by
the Prehearing Statement or respond to
Respondent's motion, [sic] appears to concur
with Respondent's assertions.
[3.] The [ALJ] has considered actions less
drastic for disposing of this contested case
and determines that less drastic actions will
not suffice. The lack of meaningful response
to the Office of Administrative Hearings
prohibits even an examination by the ALJ of
excusable neglect by Petitioner. Therefore,
no less drastic action other than disposing of
this case by dismissal would be effective in
ensuring compliance with the Orders of the
[ALJ] and would best serve the interests of
justice.
After a thorough review of the record we conclude that there is
substantial evidence in the record to support the ALJ's findings.
Petitioners argue that there was no evidence supporting a finding
that their failure to respond was anything other than mere delay.
We cannot agree; petitioners filed nothing in this contested case,
they did not merely delay filing of the requested documents.
Accordingly, having found substantial evidence supporting the ALJ's
findings, we will review the dismissal for errors of law.
[3] Despite petitioners' arguments to the contrary, we discern
no errors of law in the ALJ's order. The ALJ's order in this case
was quite thorough, citing numerous cases and noting that its
decision was pursuant to N.C. Admin. Code tit. 26, r. 3.0114(a)
(June 2004) and N.C. Gen. Stat. § 1A-1, Rule 41(b). Dismissal of
a contested case is admittedly a drastic sanction, but one within
the plain language of the ALJ's statutory and regulatory power to
sanction a party for failure to comply with an order. The administrative code provides that “[i]f a party fails . .
. to comply with an interlocutory order of an administrative law
judge, the administrative law judge may . . . [d]ismiss or grant
the motion or petition[.]” N.C. Admin. Code tit. 26, r. 3.0114(a)
(June 2004). Additionally, the administrative code also provides
that the Rules of Civil Procedure “shall apply” to contested cases.
N.C. Admin. Code tit. 26, r. 3.0101(a) (June 2004). Rule 41(b) of
the Rules of Civil Procedure allows a court to dismiss an action
“[f]or failure of the plaintiff to prosecute or to comply with
these rules or any order of court[.]” N.C. Gen. Stat. § 1A-1, Rule
41(b) (2003). This Court has reversed orders of dismissal under
Rule 41(b) if the order did not include findings that plaintiff's
delay was deliberate and less drastic sanctions were unavailable.
See Page v. Mandel, 154 N.C. App. 94, 102, 571 S.E.2d 635, 640
(2002); Wilder v. Wilder, 146 N.C. App. 574, 578, 553 S.E.2d 425,
428 (2001). Here though, the ALJ's order included all the
necessary findings to support a legal conclusion of dismissal.
But, petitioners contend that the trial court erred in
affirming the ALJ's order because the Notice of Hearing did not
comply with N.C. Gen. Stat. § 150B-23(b) (2003), which states:
The parties to a contested case shall be given
a notice of hearing not less than 15 days
before the hearing by the Office of
Administrative Hearings. If prehearing
statements have been filed in the case, the
notice shall state the date, hour, and place
of the hearing. If prehearing statements have
not been filed in the case, the notice shall
state the date, hour, place, and nature of the
hearing, shall list the particular sections of
the statutes and rules involved, and shallgive a short and plain statement of the
factual allegations.
Id. The notice of hearing filed in this case did not list the
statutes and rules involved or give a short and plain statement of
the facts, but those details were not necessary. According to the
plain language of the statute, those details are only necessary if
prehearing statements have not been filed. Here, an order was
issued for prehearing statements, to which respondent replied, and
the notice of hearing was in accordance with prehearing statements
having been filed. We cannot agree with petitioners that the ALJ
should be required to issue a notice of hearing as if he had not
ordered that the prehearing statements be filed and, indeed, the
only party dealing with the OAH had filed its prehearing statement.
Next, petitioners argue that since the final decision of the
ALJ was not served via certified mail, it was improper, an error of
law, and the trial court should have reversed. We disagree.
Petitioners argue that since N.C. Gen. Stat. §§ 150B-36(b3) and
150B-42(a) require an agency to mail its final decision certified
mail, absent a statute of exemption, the ALJ's final decision
should be mailed in the same manner. There is no support for that
deductive logic since the plain language of those statutes applies
to agencies, not the OAH. However, the administrative code does
state that “[a] copy of a final decision issued by an
administrative law judge shall be served on each party in
accordance with G.S. 150B-36.” N.C. Admin. Code tit. 26, r. 3.0131
(June 2004). There is only one sentence dealing with service
listed within section 150B-36, and although addressed in thestatute to an agency, it states that service shall be “personally
or by certified mail addressed to the party at the latest address
given by the party . . .” N.C. Gen. Stat. § 150B-36(b3) (2003).
In order to give the administrative code section any validity, the
final decision must be served personally or by certified mail.
Here it was not. Yet we cannot hold that this violation prejudiced
petitioners' substantial rights in any way; petitioners do not deny
receiving a copy of the final decision and received full judicial
review of the decision in superior court. See N.C. Gen. Stat. §
150B-51(b)(3) (2003) (reversal, modification, or remand are
available “if the substantial rights of the petitioners may have
been prejudiced because . . . [the decision was] [m]ade upon
unlawful procedure[.]”).
Lastly, based mainly on the fact that petitioners were
proceeding pro se, they argue that the ALJ's decision was arbitrary
and capricious and a violation of due process. We find these
contentions wholly without merit; the ALJ's order was well reasoned
and followed all applicable law in determining whether to dismiss
petitioners' contested case. Petitioners argue that the OAH should
have sent additional requests for prehearing statements, as
evidenced in other contested cases they cite. While laudable in
the child support cases cited by petitioners, nothing in the
statutes or regulations requires this action, especially in a
contested case against a childcare company allegedly owing over
$60,000.00 in reimbursement money from a federal program requiringthe recipient to, among other things, keep accurate business
records.
In conclusion, we have reviewed the superior court's order for
errors of law as required by N.C. Gen. Stat § 150B-52 and
interpreted by Carroll and Capital Outdoor, Inc. We hold that the
superior court did not err in affirming the ALJ's order dismissing
petitioners' contested case for failure to prosecute.
Affirmed.
Judges McGEE and CALABRIA concur.
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