Husband and wife business owners sold corporate shares to several buyers for cash consideration, prompting the Arizona Corporation Commission’s Securities Division to send the owners a cease and desist order, alleging that the owners needed to cease sale of unregistered securities.
As part of the Commission’s hearing process, one Administrative Law Judge (ALJ) presided over the evidentiary hearing but a different ALJ reviewed the record and drafted a Recommended Opinion and Order. After the Commission and superior court affirmed the order, the owners appealed to the Court of Appeals, arguing (among other things) that the hearing process violated due process because the drafting ALJ, rather than the presiding ALJ, drafted the Opinion.
The Court affirmed. The Court held that the Commission’s hearing process did not violate the owners’ due process rights. First, the Court emphasized that the Commission is not bound by the Recommended Opinion. It further explained that nothing in the plain language of A.R.S § 41-1061.F.6 requires that the presiding ALJ—and only the presiding ALJ—draft the opinion. Moreover, the Commission’s rule A.A.C. R14-3-110.B allows a division of duties among ALJs to promote efficiency. This process does not violate due process because the owners received fair notice (the cease and desist order) and a meaningful opportunity to be heard (they were represented by counsel, submitted answers and objections, presented evidence, and participated in hearings and arguments).
Thus, the Court closed the book on the reoccurring question of whether it is a violation of due process for the Commission to direct one ALJ to preside over a hearing and another ALJ to draft the Recommended Opinion.
Judge Gass authored the opinion, in which Judges Winthrop and Cruz joined.
Posted by: Payslie M. Bowman