STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

JULIE V. DE BAUCHE, Claimant

TRADE ACT DECISION
Hearing No. 01403962GB


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the position of the claimant, and it has reviewed the evidence submitted to the ALJ and the materials in the department's file. Based on its review, and for the reasons stated with more particularity in the Memorandum Opinion which is attached hereto, the commission makes the following:

ORDER

The decision of the administrative law judge is set aside, and this matter is remanded to the department for a new hearing before and decision by a different administrative law judge.

Dated and mailed September 6, 2002
debauch . tpr : 110 :  PC 729 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

/s/ Laurie R. McCallum, Commissioner


MEMORANDUM OPINION

Background --

This case arises out of a claim by Julie V. De Bauche for certain training benefits under the Trade Act of 1974, 19 U.S.C. § 2101 et seq. These training benefits are among the type of benefits referred to as "Trade Adjustment Assistance", or "TAA".

De Bauche was eligible for benefits under the Trade Act as a result of the fact that she had been separated from employment due to lack of work with an employer, Paragon Electric, which had been certified by the U.S. Department of Labor as having been adversely affected by foreign competition. Working with De Bauche, Sandra Destree, a TAA Coordinator with the Manitowoc office of Wisconsin Job Service, developed a plan for a training program for De Bauche, in the Machine Tooling Techniques program at Northeast Wisconsin Technical College ("NWTC") in Green Bay. In July, 1999, De Bauche and the department entered into a "Training Contract" providing for payment of De Bauche's tuition and expenses for 36 weeks of studies in that program.

De Bauche began studies in the NWTC Machine Tooling Techniques program in the fall semester of 1999, and she continued in it during the spring semester of 2000. The 36-week period initially provided for in the Training Contract ended in mid-May, 2000; at that time the Training Contract was amended to extend it by 10 weeks in order to allow De Bauche to finish a class which had not been completed at that time.

The Machine Tooling Techniques program at NWTC is a 2-year program which leads to an Associate Degree. Apparently when the TAA training program was being developed for De Bauche, Destree believed that by virtue of either previous experience or previous classwork De Bauche would be considered to have satisfied some of the coursework requirements of the NWTC program. However, after all of the weeks of training provided for in the Training Contract (as amended) had been completed, De Bauche had not satisfied all of the course requirements for the Associate Degree offered to students who complete the Machine Tooling Techniques program. This was apparently a result of the fact that De Bauche had not actually been granted sufficient transfer credit based on earlier coursework to satisfy enough of the requirements of the Machine Tooling Techniques program to allow her to complete it in the period provided for under the TAA Training Contract.

De Bauche then became re-employed, taking a job with Lindquist Machine Company in September, 2000. She worked there until late April, 2001, at which time she was laid off. At that point, De Bauche contacted the department and requested approval for additional weeks of TAA-funded training. The department issued an Initial Determination finding that De Bauche was not entitled to such additional training because she had "already completed an approved training program through TRA", (1)   and De Bauche filed a request for hearing.

The commission's conclusion that the decision of the ALJ must be set aside and the matter remanded for new proceedings, involves and is based upon events which occurred during the hearing process which resulted from De Bauche's request for a hearing. These events are described below.

The Hearing Process --

Pursuant to notice, hearing was held before an administrative law judge (ALJ) on April 2, 2002. Testimony was taken on that day from De Bauche, who was there in her capacity as the claimant and appellant. Testimony was also taken from Thomas McMillan, a career counselor and TAA coordinator with the Fox Valley office of Wisconsin Job Service, and the author of the Initial Determination which had denied De Bauche's request for additional training benefits. McMillan's participation in the hearing was the result of a request for his presence which originated inside the department's Fox Valley Hearing Office, by way of a "Witness Request" form. This form was directed to Gretchen Wendt, an employee of the department located at its main offices in Madison.

At the close of the April 2 hearing, the ALJ indicated that she believed that it might be necessary to have testimony taken from Sandra Destree, the TAA Coordinator who had been involved with the development of De Bauche's training program, and the ALJ stated that she might schedule further hearing in the matter for that purpose.

The ALJ did in fact subsequently direct that further hearing be held. She also initiated, by way of a "Rescheduled Hearing Information For Further Testimony" form, a request to have Sandra Destree present at the hearing to testify. This form was dated April 2, 2002. Thereafter, on April 19, 2002, another "Witness Request" form issued out of the department's Fox Valley Hearing Office, directed to Sandra Destree, requesting her to be available to testify at a rescheduled hearing on May 6. In addition, another "Witness Request" form was issued by the Fox Valley Hearing Office on April 19, directed to Bonnie Klika, Registrar of Northeast Wisconsin Technical College, requesting her to be available to testify at a rescheduled hearing on May 6.

At the continued hearing held on May 6, testimony was taken from Klika, Destree, and De Bauche. The hearing was closed on that date, without any indication by the ALJ that any further hearing was contemplated.

Subsequently, while the case was pending before her for decision, the ALJ had certain e-mail contacts with two other persons concerning the case. (2)  These began with a May 15, 2002 e-mail from the ALJ to Dan Bond, under the subject line "TAA Question". Dan Bond is the State TAA Coordinator for Wisconsin Job Service. As such, he is in the same administrative unit (3)  as McMillan and Destree, albeit at a higher level. In her e-mail, the ALJ indicated, among other things, that she had a case pending before her involving "TAA/TRA", describing in some detail the circumstances presented in De Bauche's case, and posing a number of questions about the department's handling of De Bauche's request for training benefits, the options available under De Bauche's training contract, and the way in which the applicable law might apply to the situation.

The ALJ initially received an automated reply from Bond's e-mail account indicating that he was out of the office. She thereupon sent a copy of her original e-mail to Tom Mund, who is the State TRA Coordinator for Wisconsin Job Service, soliciting his help in answering her questions.

On that same day (May 15), Mund responded with an e-mail to the ALJ. In this e-mail he indicated that he believed her questions concerned TAA rather than TRA and that Dan Bond would therefore be the best person to respond to her questions; however, he also provided some thoughts about the questions the ALJ had posed. Among other things, Mund told the ALJ that "[w]orkers can receive up to 104 weeks of training, they are not necessarily 'entitled' to 104 weeks of training". He also told her that "[f]rom my perspective, if her training goal was to become employed, then the Trade program succeeded when she became re-employed".

On May 20, Bond responded to the ALJ's initial e-mail message to him. In this e-mail, Bond gave the ALJ his views on how the case ought to be decided. Among other things, Bond told the ALJ that "[t]he key here is whether she completed an approved training contract. If she completed what was in her approved training contract then she is no longer eligible". He also opined that there might be a basis for allowing the contract to be modified and extended, if the 36 week program had initially been intended to get her a degree.

Thereafter, on June 6, the ALJ issued her decision. In that decision, she concluded that De Bauche had completed the terms of the approved training contract, and that for that reason she was no longer eligible for any training under the original certification of her employer Paragon Electric. She also noted that "[w]hile claimants are allowed a maximum of 104 weeks of training, that is not an absolute entitlement". She also wrote:

It was determined that based on the claimant's experience and schooling that 36 weeks of training in the machine tool program would achieve the desired skill level and occupational goal of her becoming more employable. It was not intended for her to receive a certificate or diploma. In fact, after the training she did obtain other employment as a machinist . . . Therefore, the 36-week program did achieve the desired goal of her becoming more employable.

The fact that the ALJ had been in communication with Bond and Mund concerning the merits of the case, as described above, was not disclosed in the ALJ's decision.

De Bauche thereupon filed a petition for commission review. In this petition, she asserted, among other things, that the ALJ

...took three months to answer this and still she totally misses the point. [She] must have gone behind my back and contacted Manitowoc Job Service without granting me the opportunity to respond because none of the issues described in her determination were discussed.

It was in the course of the commission's review that the e-mail contacts between the ALJ and Tom Mund and Dan Bond were noted in the file.

Discussion --

There is no statute or rule which expressly prohibits ALJs in Unemployment Insurance cases from engaging in ex parte contacts. (4)   However, this is not dispositive, because the matter is of constitutional dimensions. It is a denial of fundamental due process for a hearing officer to have undisclosed contacts with third parties concerning the merits of a matter pending before that hearing officer. Such undisclosed contacts deprive the parties of the opportunity to know of and to be heard on the evidence and arguments against them. See, Ramaker v. State, 73 Wis. 2d 563, 569, 243 N.W.2d 534 (1976). Due process in an administrative proceeding is a question of the presence or absence of "fair play," State ex rel. Richey v. Neenah Police & F. Comm., 48 Wis. 2d 575, 580, 180 N.W.2d 743, 746 (1970), and courts have recognized that fair play includes the right to be heard upon the probative force of the evidence adduced by both sides and upon the law applicable thereto. Bituminous Casualty Co. v. ILHR Department, 97 Wis. 2d 730, 734, 295 N.W.2d 183, 186 (Ct. App. 1980), quoting Richey, 48 Wis. 2d at 580, 180 N.W.2d at 746.

The commission believes that what occurred in this case constituted a clear violation of the fundamental due process standard that ex parte contacts should be avoided.

The commission would initially note, that it believes that in the circumstances presented here, the department must be viewed as having been a "party" to the proceedings which were pending before the ALJ. The department had issued the Initial Determination which held that De Bauche was not eligible for the additional training benefits she was seeking. The focus of the hearing was on De Bauche's claim that the determination had been in error and should be reversed. The department has the statutory authority to seek commission review of decisions of ALJs which reverse the department's determinations, see Wis. Stat. § 108.09(6)(a); this authority was presumably granted in recognition of the fact that the department is interested in the outcome of such proceedings.

In addition, there is in this case the circumstance, that all of the witnesses other than De Bauche appeared at the hearing at the initiative of someone other than De Bauche -- and the only potential "someone", is the department. McMillan, an agent of the department who had issued the Initial Determination, appeared at the hearing and gave testimony concerning his decision to deny benefits. Significantly, the department's "Witness Request" form concerning McMillan indicated that it was necessary to have him present to testify, not as to whether the claimant was eligible, but to testify regarding "why claimant not eligible" (emphasis added). Destree, also an agent of the department, appeared at the hearing and gave testimony which was clearly adverse to the position being taken by De Bauche. (5)   As is noted above, records in the department's administrative file make it clear that these witnesses, as well as NWTC Registrar Bonnie Klika, appeared at the hearing pursuant to a process entirely internal to the department, in which various forms were filled out and processed to ensure the attendance of certain witnesses. Such a degree of participation in the presentation of evidence in a proceeding at very least creates the definite appearance, that the party working to present that evidence is interested in the outcome of the proceeding.

[The commission acknowledges that it is the nature of the proceedings before ALJs of the department, and of the obligations imposed on the ALJs by the department's administrative rules, see, Wis. Admin. Code § DWD 140.15(2), that ALJs themselves may find it necessary to participate in the presentation of evidence, even to the extent of arranging for the presence of and the calling of witnesses on their own motion. Indeed, in this case it is clear that Sandra Destree ended up a witness because the ALJ arranged for her to be called, and it also appears possible that the ALJ was involved in the decision that McMillan and Klika should be witnesses. This is in itself not objectionable (although the commission would note, that it would arguably be beneficial to the parties' perception of fairness if the role of the ALJs and their office in obtaining the presence of witnesses at hearing was more transparent). However, in this particular case the evident role of the ALJ and her office in obtaining hearing testimony from certain witnesses is problematic because of the clear indication that the ALJ also was involved in obtaining information from other department representative outside of the context of the hearing.]

Clearly, it is improper for a tribunal before which a matter is pending to have undisclosed communication with a party to the matter or with an agent for that party. However, and in addition to this, the commission concludes that the ALJ's undisclosed contacts with Mund and Bond were of concern as ex parte communications even if the department is not considered to have been a "party".

At least in the context of the judiciary, it is clear that ex parte contacts extend to contacts with "third parties". In re Judicial Disciplinary Proceedings against Hon. Louise M. Tesmer, 219 Wis. 2d 709, 723-34, ¶¶ 33-35, 580 N.W.2d 307 (1998).  In Tesmer, the Wisconsin Supreme Court unequivocally rejected the argument, that the prohibition of ex parte communications only applied to contacts with a party (or their representative). On the contrary, the Court held, "[t]here is ample authority . . . that a judge's private, undisclosed communication with persons outside the judicial system is improper." The Court's discussion of this issue bears consideration at some length:

¶33. Focusing on the portion of SCR 60.01(10) that states the need for a judge's adherence to rules of fair play, Judge Tesmer argued that the prohibition of private communications designed to influence a judge's decision set forth in that rule is to be interpreted as limited to communications that would pose a threat to fair play, that is, communications with persons interested in the matter. It is her position that the only communications that threaten fairness are those with interested parties and that give one side an advantage in a contested matter. Thus, she contended, her communications with an "objective and disinterested professor" did not threaten fair play and were not prohibited by the rule.

¶34. We find no merit to that argument. The rule, by its terms, prohibits private communications designed to influence a judge's decision, and it is the element of privacy that impinges on fairness. The fundamental fairness to be zealously guarded and scrupulously adhered to implicates the basic principle of American justice cited by the dissenting panel member: "That the parties will present their case to the judge, who will decide their dispute under the law and on the facts of the case." A corollary to that principle is that persons outside the judicial system have no place in a judge's decision making.

¶35. That is not to say that a judge may not seek independently the advice of an expert on the state of the law applicable to a particular proceeding. Our current rules specifically authorize such communication but require that the judge notify the parties in the pending proceeding, inform them of the information received, and afford them the opportunity to respond to it. Yet, expert advice on legal issues from a person outside the judicial system is not equitable to an outside person's direct involvement in the discussion of outcomes of dispositive motions and the development of rationales to support them. The latter poses a significant threat, actual or potential, to the fairness of the proceeding. The panel majority rightly concluded that SCR 60.01(10) is not limited to improper influences on a judge's decision; it extends, in the majority's words, "to 'well- intentioned' influence such as that offered by Professor McCormack."

219 Wis. 2d at 723-24. The commission believes that similar considerations ought to guide the analysis of ex parte communication issues involving ALJs of the department. In re Tesmer would suggest that ALJs of the department, while they may permissibly solicit the views of others within their own "judicial system" concerning the merits of cases pending before them, should not involve persons outside of that system in their decision making.

Based on the considerations discussed above, the commission concludes that the ALJ's undisclosed contacts with Mund and Bond were indeed ex parte communications of a kind which definitely should not have occurred.

The best construction which can be put upon the matter, is that Mund and Bond were uninterested third parties. Even under this best construction of the nature of these events, however, the e-mail contacts were still improper ex parte communications, because Mund and Bond were outside of the circle of colleagues in the adjudicatory process with whom the ALJ might have properly discussed the case. In re Tesmer. The worst construction of these events -- which is, unfortunately, the one the commission finds to be more fitting given the facts -- is that Mund and Bond were not uninterested third parties, but were instead agents of a party interested in the proceedings (the department). This creates, at the very least, the definite appearance of a potential for improper influence. In addition, other factors exist which exacerbate that situation. Mund and Bond both worked in positions at a higher level in the same administrative structure in which some of the witnesses called by the department (McMillan and Destree) were themselves employed. Worse yet, there are indications in the file that De Bauche had in fact had contacts with Bond during an early period in which she was attempting to get the department to agree with her request for additional training benefits, and that some degree of conflict apparently arose between them. (6)

There is also no question but that the contacts involved the merits of the case pending before the ALJ. She did not merely write with a general question about legal issues arising under the Trade Act; rather, she described the case in specific detail, indicating among other things the disposition which was made by the Initial Determination, and she identified it as a case which was pending before her for decision. She asked for responses to specific factual and legal questions, and her message (including its statement that she was "hoping you could help me") made it clear that the ALJ was soliciting the responses in order to help her arrive at a decision on the merits of the case.

The Wisconsin Supreme Court has said:

"Clearly, it is improper for an administrative agency, when acting in a quasijudicial capacity, to base a decision or finding upon evidence or information obtained without the presence of and notice to the interested parties, and not known to them prior to the decision."

State ex rel. Cities Service Oil Company v. Board of Appeals, 21 Wis.2d 516, 539, 124 N.W.2d 809, 821 (1963). The Court has also made the following observations about ex parte contacts by administrative hearing officers:

Before concluding our review of this case, we feel compelled to comment on the ex parte communication initiated by the hearing examiner for the second proceeding. While a hearing examiner is not a judge, he or she performs many of the functions of a judge. Since judges are to be neutral and detached decision makers, we believe hearing examiners should meet the same standard.

In attempting to maintain the appearance, as well as the actuality of neutrality, there has long existed a distaste for ex parte communications while a case or hearing is pending. This concept has been codified in standard ten of Wisconsin's Code of Judicial Ethics, 36 Wis.2d 252, 258, 153 N.W.2d 873, 876 (1967), which reads:

"10. A judge should always bear in mind the need of scrupulous adherence to the rules of fair play. He should not permit private interviews, arguments, briefs or communications designed to influence his decision. He should not act upon ex parte applications unless the necessity for prompt action is clearly shown, granting relief only when fully satisfied that the law permits it and the emergency requires it."

In the instant case we have the rather unusual situation of an ex parte communication not from an attorney to the hearing examiner, but from the hearing examiner to the attorney. This is equally improper under standard ten of the Code of Judicial Ethics, supra. Thus, while Gibson may not have been prejudiced by the ex parte communication initiated by the hearing examiner, this court considers such conduct by one acting in a quasi-judicial capacity to be improper. This type of communication should be strictly avoided.

State ex rel. Gibson v. DHSS, 86 Wis. 2d 345, 354-55, 272 N.W.2d 395 (1978). The commission believes that these observations by the Court are valid as applied to administrative law judges of the Department of Workforce Development.

The commission's Order --

When courts have been called upon to review decisions of administrative agencies which have been infected by ex parte contacts, they have generally followed the rule that an improper ex parte communication is not reversible error unless the contact was prejudicial to a material degree. Seebach v. Public Service Commission, 97 Wis. 2d 712, 721, 295 N.W.2d 753, 759 (Ct. App. 1980).

Material error occurs when a party not notified of an ex parte communication is prejudiced by the inability to rebut facts presented in the communication and where improper influence upon the decision-making appears with reasonable certainty.

Id. See also, State ex re. Irby v. Israel, 100 Wis. 2d 411, 425, 302 N.W.2d 517, 525 (Ct. App. 1981) (even if there was evidence of an ex parte communication, it would constitute material error only if party was "prejudiced by an inability to rebut the facts communicated and if improper influence on the decision maker appears with reasonable certainty to have resulted").

It has also been noted, specifically in the context of administrative decisionmaking by the department and the commission, that there is a presumption that the decisionmaker is impartial and is insulated from the improper influence of an ex parte communication, and that to overcome this presumption a party must show that the error was probably prejudicial to a material degree in order to prove a violation of due process. Dane Co. Hospital and Home v. LIRC and Holly, 125 Wis. 2d 308, 317, 371 N.W.2d 815 (Ct. App. 1985).

However, it is important to note that these articulations of standards by which decisions are made on how to address ex parte contacts, have arisen in the context of judicial review; that is, situations in which a court is exercising its authority to review the decision of an administrative agency. The relationship between the commission and the ALJs of the department, however, is different from the relationship between a reviewing court and an administrative agency. The authority possessed by the commission in respect to the case is significantly greater than that possessed by a reviewing court in a judicial review situation; as has long been recognized, the commission does not act as an appellate body, but upon its powers in an original proceeding. State v. Industrial Commission, 233 Wis. 461, 465, 289 N.W. 769 (1940). Under its authority in Wis. Stat. § 108.09(6)(d), the commission

may affirm, reverse, modify or set aside the decision on the basis of the evidence previously submitted, may order the taking of additional evidence as to such matters as it may direct, or it may remand the matter to the department for further proceedings.

Thus, whether or not the commission would be strictly required to consider the ex parte contacts found to have occurred in this case to have been prejudicial and thus reversible error, it is a different question whether the commission has the authority to decide that in view of those contacts the decision should be set aside and the matter remanded for further proceedings. The commission concludes, that it does have that authority, and that it is appropriate to exercise it here.

The commission has, on occasion, responded to claims of unfair procedures at the hearing level by pointing out that it conducts an independent, de novo review in each case and that therefore even if there was some problem with how the administrative law judge handled the case, it is cured by the fact that the commission has substituted its independent judgment in the matter. See, e.g., McGee v. RFDF Inc. (LIRC, Nov. 18, 1999). The commission is not inclined to adopt that approach in this case, however, because the nature of the improper conduct is too stark and the apparent potential for undue influence which the facts suggest casts too great a shadow on the case.

The problem has in great part to do with the fact that, while the commission can (and does) conduct an independent review, it is ultimately the administrative law judge who decides what evidence enters into the record which the commission must rely upon. Here, the very active role played by the ALJ in making such decisions is evident: it was she who decided that the hearing would be continued because it was necessary to have testimony from Destree, and it appears likely that the ALJ also had a hand in deciding that it was necessary to have testimony from McMillan and Klika. However, while the ALJ evidently felt it important to obtain information and guidance from Dan Bond, she did not exercise her authority to schedule another day of hearing at which he would be asked to appear; rather, she contacted him and obtained his input ex parte. Of course, were the commission to attempt to proceed to decide the merits of the case itself, on the theory that the ex parte contact was harmless error and that it was conducting a completely independent review, it could not take into consideration the information which the ALJ received in her communications with Bond and Mund. In that case, though, the commission would be deciding a case on the basis of a record which the ALJ herself clearly felt was inadequate for her to decide the case, as evidenced by her decision to seek more input (from Bond, ex parte). The situation strikes the commission as one in which it cannot comfortably assure the parties that it believes it has cured the effect of the improper conduct by carrying out its own review.

The commission does not doubt that the ALJ who presided over this matter could, if requested to do so, conduct a new hearing and issue a new decision according full and fair consideration to the position being taken by De Bauche upon the merits. It has however directed that this matter be assigned to a different administrative law judge upon remand, solely in order to ensure that there will not even be the appearance of any influence from outside of the record on the decisionmaking process. In this respect, the following observations made by Court of Appeals Judge Gartzke in State v. Rochelt, 165 Wis. 2d 373, 381, n. 4; 477 N.W.2d 659 (1991), are germane:

In the author's view, a trial may appear to be fair in fact, but the parties, their attorneys or an appellate court may wonder whether appearance reflects reality. Much is left in every trial to the discretion of the judge. Discretionary rulings may be made in such a way that they will not be reversed but may have been motivated by conscious or unconscious bias. The problem of appearance versus reality exists in every case, even if the judge avoided an act giving the appearance of partiality. Still, if such an act occurs it may raise or reinforce a doubt never to be dispelled. That is one reason why the author believes "[t]he Due Process Clause 'may sometimes bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties. But to perform its high function in the best way, "justice must satisfy the appearance of justice".' " Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 825 (1986).

For the foregoing reasons, the commission concludes that remanding this matter for re-hearing before a different ALJ is the best way in which to ensure that the proceedings in this matter will not only be fair in substance, but will also satisfy the appearance of justice.


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Footnotes:

(1)( Back ) Another type of benefit provided under the Trade Act, is "Trade Readjustment Allowances", or "TRA", benefits. This is a weekly cash benefit paid to replace lost income from employment and to assist displaced workers in covering day-to-day expenses. In fact, no TRA benefit entitlement issue was presented in this case.

(2)( Back ) These e-mails were printed out, evidently by the ALJ, and included in the administrative case file maintained by the department.

(3)( Back ) Wisconsin Job Service, which is part of the Department of Workforce Development.

(4)( Back ) There is such a prohibition for hearing examiners acting under Ch. 227. See, Wis. Stat. § 227.50.

(5)( Back ) It is worth noting, that in the synopsis of the proceedings ("Commission Review Notes") prepared by the department from the hearing tapes to summarize the evidence given at the hearing, the testimony of both McMillan and Destree appears under headings which state, "Thomas McMillan, For The Department" and "Sandra Destree, For The Department" (emphasis added).

(6)( Back ) According to Ex. 4, De Bauche had at one earlier point been involved in a telephone conversation with Dan Bond about her request for additional training, which ended when he hung up on her.


uploaded 2002/09/13