Arizona Court of Appeals Division One Holds That an Administrative Law Judge’s Denial of an Evidentiary Hearing to Address Allegedly Fraudulent Testimony Is an Abuse of Discretion.

This case addresses whether an administrative law judge must hold an evidentiary hearing when, after a matter has been resolved, a party comes forward with evidence of fraud.  A majority of a panel of the Court of Appeals held that an administrative law judge abused her discretion when she denied an evidentiary hearing in these circumstances.  One judge of the three-judge panel disagreed and dissented.

On a slow day at work, a mechanic at a car repair shop brought in one of his personal guns and cleaned it in the shop.  While working on his gun, he shot himself in the eye with one of the gun parts.  He then filed for workers’ compensation and argued that his injury was compensable because his employer knew about him cleaning his gun, even though it had nothing to do with his job.

The Industrial Commission of Arizona held a hearing before an administrative law judge.  Several people from the car repair shop testified at the hearing.  The testimony conflicted.  The injured employee testified that the store manager, assistant store manager, and several other employees saw him cleaning the gun.  The store’s manager testified that he did not know about the gun until after the injury.  The administrative law judge heard other conflicting testimony from employees and management, as well. 

After hearing this testimony, the administrative law judge did not believe that auto mechanics were allowed to work on guns at the workplace.  She determined that the injured employee’s testimony was not credible.  As a result, she held that the injury was noncompensable under Arizona’s workers’ compensation regime. 

The injured employee moved for another evidentiary hearing.  In support of his motion, he supplied an affidavit from another employee at the repair shop.  The affidavit stated that he and everyone else on duty at the time of the injury knew about the gun, and that the manager who testified at the first hearing later stated that he was not truthful at the first hearing.  The administrative law judge considered the motion, the new affidavit, and the whole file, and denied the motion for an additional hearing. 

The Court of Appeals accepted special action review of that denial.  In an opinion authored by Judge Howe and joined by Judge Orozco, the Court of Appeals held not only that the administrative law judge had the authority to grant an additional hearing, but also that she abused her discretion in denying the hearing. 

Although the injured employee’s request for a hearing ordinarily would be untimely because it came after the close of the initial hearing, the matter may be reopened when a party alleges that evidence at the hearing is fraudulent.  Thus, the administrative law judge had discretion to hold another hearing.  The majority also noted that the credibility of the manager was dispositive in the case because it directly contradicted the injured employee’s testimony.  The administrative law judge relied on the manager’s testimony to find that the injured employee was not credible.  As a result, a majority of the panel held that the employee had a right to a hearing to consider whether the manager had given fraudulent testimony.

Judge Thumma dissented.  He expressly agreed with the majority that the administrative law judge had discretion to hold an additional hearing.  He also noted that perhaps the administrative law judge should have held the hearing.  But he explained that under the deferential abuse-of-discretion standard the Court must apply to this decision, the administrative law judge did not abuse her discretion in denying the hearing.