National Council on Compensation Insurance v. New Mexico State Corp. Commission

SCARBOROUGH, Chief Justice, dissenting.

I respectfully dissent. We are concerned here with the question of procedural due process. The notice given to NCCI was inadequate and thus deprived NCCI of due process under law. Written notice of the public hearing provided for an “informal public hearing * * * to receive written and oral comments of interested persons concerning proposed workmen’s compensation rate increases.”

Before the start of the hearing, Victor Marshall, attorney for NCCI, addressed Commissioner Serna about NCCI’s understanding of the nature of the hearing. The following dialogue is contained in the record:

MR. MARSHALL: Before we start, my understanding, based on the notice is that this is an informal hearing to receive comments from anyone who wants to speak in this case. It is also my understanding that this is to be an informal procedure not bound by the usual rules of evidence and testimony, so on and so forth. Is that correct?

MR. SERNA: That is correct, Mr. Marshall. If there is any comment that is to be made today that anybody wishes not to be put under oath, that’s fine. I can’t imagine anybody who wants to make any statement that is not truthful, though. Unless you have an objection, Mr. Marshall—

MR. MARSHALL: No, I have no objection. I just wanted the nature of the proceeding clarified.

After the proceedings had commenced and despite this discussion between Mr. Marshall and Mr. Serna about the nature of the hearing, Mr. Serna declared the rate hearing to be formal.

MR. SERNA: We are going to proceed as if this is a formal rate hearing. So with that in mind, Mr. Marshall, you may proceed.

Mr. Marshall then made a timely objection to the inadequacy of notice and to the designation of the proceedings as a formal hearing. His objections are preserved in the record.

MR MARSHALL: Thank you. Mr. Chairman and members of the Commission, my comments and objections on that point [proceeding as if it was a formal rate hearing] are in the record so I will just proceed.

Mr. Marshall’s objection was sufficient to preserve NCCI’s right to this appeal. See Wolfley v. Real Estate Comm’n, 100 N.M. 187 , 668 P.2d 303 (1983); Duke City Lumber Co. v. New Mexico Envtl. Improvement Div., 101 N.M. 301 , 681 P.2d 727 (Ct.App.1983); rev’d 101 N.M. 291 , 681 P.2d 717 (1984), on remand 102 N.M. 8 , 690 P.2d 451 , (1984) cert. quashed 101 N.M. 741 , 688 P.2d 778 (1984).

The majority characterizes the transformation of the hearings as a “change in format.” An abrupt change from an informal to a formal hearing cannot afford a party the procedural protections required by due process of law. Nowhere in the written notice was Marshall or NCCI advised that the informal or even the formal rate hearing would result in a ruling on the merits of the NCCI claim. There was no indication that formal testimony was to be taken, only that “comments of interested persons” would be heard. Contrary to the views of the majority, Jones v. New Mexico State Racing Comm’n, 100 N.M. 434 , 671 P.2d 1145 (1983) does not support the proposition that NCCI was afforded due process with respect to notice. The oral notice at the hearing that transformed the hearing from an informal one to a formal one lacks the specificity required to give NCCI reasonable notice required by due process. “It is well settled that the fundamental requirements of due process in an administrative context are ‘reasonable notice and opportunity to be heard and present any claim or defense.’ ” Id. at 436 , 671 P.2d at 1146 (citing McCoy v. New Mexico Real Estate Comm’n, 94 N.M. 602, 614 , 614 P.2d 14, 16 (1980)). It is generally recognized that the notice must be sufficiently in advance of the hearing to afford a party a reasonable opportunity to prepare an answer, defense, or to summon witnesses. See McCoy, 99 N.M. at 603, 614 P.2d at 15 .

At the very minimum, due process of law contemplates that litigants must be notified they are facing a ruling on the merits of the respective claim and issues raised by the parties. In this case, the opportunity to present exhibits was never mentioned in the notice. Witnesses, other than “interested persons” were not mentioned. In fact, the list of witnesses who testified reveals that few experts testified. Witnesses included the Governor, NCCI’s two witnesses, three state senators, various individuals representing corporations, and members of the public. The thirty public witnesses were afforded three minutes each to testify. In this case, notice of informal proceedings was certain to mislead any attorney who would then be unprepared to present a formal case because of the inherent procedural and evidentiary differences between formal and informal hearings. See Savina Home Indus, v. Secretary of Labor, 594 F.2d 1358 (10th Cir. 1979).

Formal hearings differ from informal hearings in that formal hearings contain procedural safeguards that informal ones do not. Formal rules of procedure and evidence are used during formal hearings, witnesses are cross-examined, and exhibits introduced. Matter of Protest of Miller, 88 N.M. 492, 496 , 542 P.2d 1182, 1186 (Ct. App.1975), reh’g denied, cert. denied, 89 N.M. 5 , 546 P.2d 70 (1975).

After concluding that notice was sufficient, the majority states that “[t]he ‘informal format’ designation cannot be construed to have limited the subject matter or significance of the proceedings.” The facts set forth in the opinion do not fully develop the issue, but when the record is viewed in its entirety, I must conclude that the statement is wrong. Both the subject matter and the significance of the proceedings were limited by the written notice and the understanding of the participants that there would be only an informal public hearing “to receive written and oral comments of interested persons.” Such was the perception of NCCI in calling only two expert witnesses. Although some exhibits were received in evidence, they were not entered in the fashion required for a formal hearing, as was indicated by Mr. Marshall’s objection:

MR. MARSHALL: If we could just note for the record that these exhibits are being handed to us for the first time as they are being given to the witness. MR. SERNA: The record will so note that.

MR. MARSHALL: I would like to note while we have a lull, this entire line of questioning, all these questions would be objectionable if we were proceeding under strict rules of procedure and evidence. * * *

MR. CARLSON: I would like to ask Mr. Marshall what the basis of his objection is for the record.

MR. MARSHALL: Leading, assumes facts not in evidence. Assumes facts without substance. Basically, attempts to have the lawyer testify rather than the witness. Lack of foundation for — a lack of preliminary foundation for each and every one of the questions that has been asked. Assuming hypotheticals not supported by any evidence in the record.

Clearly, although Commissioner Serna declared the hearing to be a formal one, proper formal procedures were not observed.

The gravity of the proposed actions dictates that there should not have been merely an informal hearing, and that adequate notice of the formal hearing should have been afforded all the parties. However, nothing in this dissent should suggest what result the State Corporation Commission should reach after a full hearing on the merits is afforded to the appellant. This case should be reversed and remanded to the State Corporation Commission with instructions to afford NCCI a hearing on the merits of its claims and defenses.

STOWERS, J., joins in dissent.