Nightlife Partners, Ltd. v. City of Beverly Hills

Opinion

The City of Beverly Hills (City) appeals from an order granting Nightlife Partners, Ltd.; Entertainment Associates of L.A., Inc.; Déjá Vu Showgirls of Beverly Hills, LLC and Déjá Vu Consulting, Inc. (collectively Petitioners), a new administrative hearing. There is substantial

On June 28, 2001, Petitioners’ administrative appeal was heard by David R. Holmquist (Holmquist), an attorney and City’s risk manager. At the beginning of the hearing, Holmquist stated that he had never presided over such a hearing before, and then announced that “Seated next to me is Assistant City Attorney, Terence Boga, [who] will be advising me and assisting me as necessary in these proceedings.” Boga being otherwise occupied as Holmquist’s adviser, City’s advocate at the hearing was William Litvak, an attorney hired for that purpose.

Boga sat next to Holmquist throughout the hearing, and the two men conferred from time to time, apparently in connection with evidentiary rulings and legal issues. Such communications were not transcribed by the reporter. Petitioners unsuccessfully objected both to the fact that the hearing officer was a city employee, and to Boga’s role as the hearing officer’s adviser.

During the hearing, Holmquist ruled, among other things, that (1) it was irrelevant that the form City provided to Petitioners did not require the documents that City subsequently held were required so as to conclude that their absence rendered the application incomplete, and (2) Petitioners were not allowed to present evidence of deliberate discrimination against adult entertainment businesses by showing that, of all the permitted businesses in City, only such adult entertainment businesses (of which Petitioner’s cabaret was allegedly the only one) were required to go through the same process to renew a permit as to obtain an initial permit.

Holmquist rendered a decision denying Petitioners’ appeal on September 5, 2001. Under City’s municipal code, Petitioners could not appeal Holmquist’s decision to any further administrative body. Therefore, on November 21, 2001, Petitioners filed a petition in the superior court for a writ of administrative mandate directing City to set aside the denial of the permit and to issue the required permit. The petition alleged, in relevant part, that the hearing was unfair, the hearing officer made improper evidentiary rulings, and that the procedures followed were unfair and violated Petitioners’ rights to procedural due process.

In a declaration submitted in opposition to the petition, Holmquist declared that the opinion he rendered was his alone, and had been made

In contrast, at the beginning of the hearing, Holmquist announced on the record that he was inexperienced, and would be advised and assisted during the hearing by Boga. This announcement, in and of itself, was sufficient evidence to support the trial court’s conclusion that Boga did, in fact, advise and assist Holmquist. In addition, Holmquist’s otherwise detailed declaration in opposition to the petition entirely failed to respond to Petitioners’ allegations that Boga had counseled and advised him during the hearing. This omission in the face of such allegations created an inference that, in fact, Boga actually did advise and assist Holmquist during the hearing. (Evid. Code, § 1221 [evidence of a statement offered against a party is not made inadmissible by the hearsay rule if the statement is one of which the party, with knowledge of the content thereof, has by words or other conduct manifested his adoption or his belief in its truth]; see also Alicia R. v. Timothy M. (1994) 29 Cal.App.4th 1232 , 1239 [ 34 Cal.Rptr.2d 868 ] [party failed to respond to an assertion of any obviously relevant fact, for example, a representation of the party’s annual income offered in connection with appropriate child support, is made, despite an opportunity and motive to do so].) “ ‘This rule of evidence rests on that universal principle of human conduct, which leads us to repel an unfounded imputation, or claim . . .’[;] ... the weight to be given the evidence depending upon how provocative the situation is to speech and how significant is the silence. [Citations.]” (Baldarachi v. Leach (1919) 44 Cal.App. 603 , 606-607 [ 186 P. 1060 ], citations omitted; see also Nungaray v. Pleasant Valley etc. Assn. (1956) 142 Cal.App.2d 653 , 666-667 [ 300 P.2d 285 ] and cases cited there [failure to deny the truth of a statement may constitute an admission by silence].)

While it is true that normally “ ‘ “the review of administrative proceedings ... is confined to the issues appearing in the record of that body as made out by the parties to the proceedings” ’ ” (Green v. Board of Dental Examiners (1996) 47 Cal.App.4th 786 , 792 [ 55 Cal.Rptr.2d 140 ], italics omitted; § 1094.5, subd. (a)), it is also true that “ ‘ “additional evidence, in a proper case, may be received.” ’ ” (Green v. Board of Dental Examiner, supra, 47 Cal.App.4th at p. 792, italics omitted; § 1094.5, subd. (e).) As the United States Supreme Court in Citizens to Preserve Overton Park v. Volpe (1971) 401 U.S. 402 , 420 [ 91 S.Ct. 814 , 825, 28 L.Ed.2d 136 ] (Overton), noted when it refused to limit review to the administrative record, “since the bare record may not disclose the factors that were considered or the Secretary’s construction of the evidence . . . [|] [t]he [trial] court may require the administrative officials who participated in the decision to give testimony explaining their action.” While the particular factor favoring the admission

That this admission of such extrinsic evidence is permissible when the issue is whether the hearing was fair or not is manifested by section 1094.5, subdivision (e), which provides that the trial court may admit evidence that could not have been produced at the administrative hearing, and may itself take such evidence into consideration, rather than remanding the matter to the administrative tribunal, in cases in which it is authorized by law to exercise its independent judgment on the evidence. Where, as here, the issue is whether a fair administrative hearing was conducted, the independent judgment test does apply (City of Fairfield v. Superior Court, supra, 14 Cal.3d at p. 776), and the court is empowered to render its independent judgment on the basis of the administrative record plus such additional evidence as may be admitted under section 1094.5, subdivision (e). (City of Fairfield v. Superior Court, supra, 14 Cal.3d at p. 776; Toyota of Visalia, Inc. v. New Motor Vehicle Bd. (1987) 188 Cal.App.3d 872 , 881 [ 233 Cal.Rptr. 708 ].)

While it is error, in the absence of a proper preliminary foundation showing that one of the exceptions noted in section 1094.5, subdivision (e) applies, for a trial court to permit the administrative record to be augmented with extrinsic evidence (Toyota of Visalia, Inc. v. New Motor Vehicle Bd., supra, 188 Cal.App.3d at p. 881), on the other hand, if one of the exceptions clearly applies, then it may be an abuse of discretion to refuse to admit relevant evidence. (Pomona Valley Hospital Medical Center v. Superior Court (1997) 55 Cal.App.4th 93 , 101 [ 63 Cal.Rptr.2d 743 ]; Armondo v. Department of Motor Vehicles (1993) 15 Cal.App.4th 1174 , 1180 [ 19 Cal.Rptr.2d 399 ].) The test is whether there has been a manifest abuse of discretion. (Armondo v. Department of Motor Vehicles, supra, 15 Cal.App.4th at p. 1180.)

Here, the issue was whether there had been procedural fairness during the hearing, specifically, whether Holmquist was biased and/or advised and assisted by Boga during the hearing. In such cases of administrative mandamus, the trial court may consider evidence not presented at the administrative hearing if the evidence addresses the petitioner’s claim that he or she

Holmquist’s declaration was directly related to whether the hearing was fair. Furthermore, the trial court was required to exercise its independent judgment to decide such issue, and, under section 1094.5, subdivision (e), was empowered to admit relevant and admissible evidence on such issue. We therefore conclude that the trial court abused its discretion by refusing to admit Holmquist’s declaration.

Accordingly, there is substantial evidence to support the trial court’s conclusion that, in addition to taking an active and significant part in the renewal application process, Boga also appeared and participated in the administrative review of the denial of that application by advising and assisting Holmquist, the hearing officer.

3. The Hearing Violated Petitioners’ Procedural Due Process Rights .

The protections of procedural due process apply to administrative proceedings (Ric hardson v. Perales (1971) 402 U.S. 389 , 401 [ 91 S.Ct. 1420 , 1427, 28 L.Ed.2d 842 ]); the question is simply what process is due in a given circumstance. (Morrissey v. Brewer (1972) 408 U.S. 471 , 481 [ 92 S.Ct. 2593 , 2600, 33 L.Ed.2d 484 ]; see Logan v. Zimmerman Brush Co. (1982) 455 U.S. 422 , 428-429 [ 102 S.Ct. 1148 , 1153-1154, 71 L.Ed.2d 265 ].) Due process, however, always requires a relatively level playing field, the “constitutional floor” of a “fair trial in a fair tribunal,” in other words, a fair hearing before a neutral or unbiased decision-maker. (Bracy v. Gramley (1997) 520 U.S. 899 , 904-905 [ 117 S.Ct. 1793 , 1797, 138 L.Ed.2d 97 ]; Withrow v. Larkin (1975) 421 U.S. 35 , 46 [ 95 S.Ct. 1456 , 1464, 43 L.Ed.2d 712 ] (Withrow).)

a. Due Process in Administrative Proceedings

Just as in a judicial proceeding, due process in an administrative hearing also demands an appearance of fairness and the absence of even a probability of outside influence on the adjudication. In fact, the broad applicability of administrative hearings to the various rights and responsibilities of citizens and businesses, and the undeniable public interest in fair hearings in the administrative adjudication arena, militate in favor of assuring that such hearings are fair. As one commentator recently noted, “ ‘[inescapably, administrative law and the administrative state impinge upon the public

While the thrust of such commentary appears to be related to state-wide administrative agencies, administrative hearings at the local level, for example, before municipal and county boards, commissions and hearing officers, also have the same potential of impacting significant rights and of being the first level of adjudicatory review. (See, e.g., Salkin, Judging Ethics for Administrative Law Judges: Adoption of a Uniform Code of Judicial Conduct for the Administrative Judiciary, supra, 11 Widener J. Pub. L. at p. 10 & in. 10, noting that during the 2001 Annual Meeting of the American Bar Association (ABA), the ABA’s house of delegates passed resolution 101B. That resolution urged state and local governments to require that administrative judiciary members be accountable under provisions similar to the ABA Model Code of Judicial Conduct.)

b. Impact of the Administrative Procedure Act

Thus, although California’s Administrative Procedure Act (APA) (Gov. Code, §§ 11340-11529) does not apply to hearings before local, as opposed to state, administrative agencies (see, e.g., Tucker v. San Francisco Unified School Dist. (1952) 111 Cal.App.2d 875 , 883 [ 245 P.2d 597 ]), to the extent citizens generally are entitled to due process in the form of a fair trial before a fair tribunal, the provisions of the APA are helpful as indicating what the Legislature believes are the elements of a fair and carefully thought out system of procedure for use in administrative hearings. (Tucker v. San Francisco Unified School Dist., supra, 111 Cal.App.2d at p. 883.)

One of the basic tenets of the California APA, as well as the Model State Administrative Procedure Act, various state administrative procedure acts, and the federal Administrative Procedure Act is that, to promote both the appearance of fairness and the absence of even a probability of outside influence on administrative hearings, the prosecutory and, to a lesser extent, investigatory, aspects of administrative matters must be adequately separated from the adjudicatory function. (2 Am.Jur.2d (1994) Administrative Law,

c. Howitt v. Superior Court

California courts, too, recognize that the combination of prosecutorial and adjudicative functions is the most problematic combination for procedural due process purposes. (See, e.g., Howitt v. Superior Court (1992) 3 Cal.App.4th 1575 , 1585 [ 5 Cal.Rptr.2d 196 ] (Howitt).) As the court in Howitt, noted, a prosecutor, by definition, is a partisan advocate for a particular position or point of view. (Ibid.) Such a role is inconsistent with the objectivity expected of administrative decision makers. (Ibid.) Accordingly, to permit an advocate for one party to act as the legal adviser for the decision maker creates a substantial risk that the advice given to the decision maker will be skewed (ibid.), particularly when the prosecutor serves as the decision maker’s adviser in the same or a related proceeding. Then, “[t]o allow an advocate for one party to also act as counsel to the decision-maker creates the substantial risk that the advice given to the decision-maker, ‘perhaps unconsciously’ as we recognized in Civil Service Commission v. Superior Court [(1984)] 163 Cal.App.3d [70,] 78, fn. 1 [ 209 Cal.Rptr. 159 ], will be skewed.” (Ibid.) Thus, an agency’s staff counsel may prosecute a case before the agency when an independent hearing officer presides over the contested case hearing, if the prosecutor plays no role in the agency’s deliberations. (Id. at p. 1586.) So, too, two lawyers from the same office could serve in dual capacities—one as prosecutor and one as legal adviser to the administrative agency— as long as they were effectively screened from each other. (Ibid.) However, it is improper for the same attorney who prosecutes the case to also serve as an adviser to the decision maker. (Ibid.)

The Howitt court did recognize that administrative procedures may depart, to some extent, “from the pure adversary model of a passive and disinterested tribunal hearing evidence and argument presented by partisan advocates,” and yet still comply with constitutionally mandated due process when

However, a problem arises once an administrative agency “chooses to utilize the adversary model in large part but modifies it in a way which raises questions about the fairness of the resulting procedure.” (Howitt, supra, 3 Cal.App.4th at p. 1581.) Thus, when both the agency and the citizen are represented by counsel at a formal hearing before a supposedly neutral decision maker who has not participated in the initial factfinding process of the agency’s investigation and prosecution of a matter, and then, “in the midst of this seemingly adversary system,” the same lawyer who represented the agency as advocate also advises the hearing officer with regard to its decision affecting that agency, “[t]he mental image comes to mind of a hearing in which [the agency’s lawyer, while representing the agency,] raises an objection and then excuses himself from counsel table to consult with the [hearing officer] as to whether the objection should be sustained.” (Id. at p. 1582.) What makes this scenario objectionable is that the “advocacy and decision-making roles are combined.” (Id. at p. 1585, italics omitted.)

Here, this same objectionable overlapping of the role of advocate and decision maker occurred when Boga acted as both an advocate of City’s position and as adviser to the supposedly neutral decision maker. It is true that the official role of City’s advocate during the review of City’s decision to deny the application was filled by Litvak, not Boga. However, Boga had been City’s advocate in connection with the decision to deny the application. Thus, Boga’s presence as Holmquist’s adviser was the equivalent of trial counsel acting as an appellate court’s adviser during the appellate court’s review of the propriety of a lower court’s judgment in favor of that counsel’s client. It requires no citation of authority exactly on all fours with this fact pattern in order to justify the conclusion that Boga’s role as adviser to the decision maker violated petitioners’ right to due process. There was a clear appearance of unfairness and bias. This was sufficient to support the trial court’s ruling.

d. Authorities Cited by City Are Distinguishable

The cases cited by City for the proposition that Boga’s dual roles comported with due process are distinguishable, because they do not involve this

In 12319 Corp. v. Business License Com., supra, 137 Cal.App.3d 54 , Los Angeles County required businesses to obtain a permit as a condition to offering entertainment of any sort. The plaintiff operated a nightclub, and under the ordinance, was required to obtain a permit from the business license commission. After numerous citizen complaints, the county sheriff filed an accusation against the plaintiff with the commission, and sought revocation of its business license. The sheriff’s department was represented in legal matters by the office of the county counsel.

The revocation hearing was held before the business license commission, which was advised as to legal matters by Deputy County Counsel Tolnai. Tolnai did not act as an advocate for the plaintiff or the sheriff. However, he did assist the commission at one point by making sure that there was an adequate foundation for admission of a piece of documentary evidence that supported revocation. The plaintiff’s license was revoked, so the plaintiff appealed the revocation to county’s license appeals board, one member of which appeals board was required to have been designated by the office of the county counsel. The appeals board affirmed the revocation, and the plaintiff filed a petition for a writ of administrative mandamus, contending, among other things, that the facts made out a prima facie case of bias and conflict of interest against the office of the county counsel.

After losing at the trial court, the plaintiff appealed that decision, and the appellate court affirmed, concluding that the plaintiff had failed to offer any facts supporting its assertion of bias and prejudice or its suggestion that the various functions performed by the county counsel’s office were not properly insulated from one another. (12319 Corp. v. Business License Com., supra, 137 Cal.App.3d at p. 61.) Tolnai had represented the commission in a neutral role as its legal adviser while the commission considered evidence from the plaintiff as well as from the sheriff. Then, after the commission determined to revoke the plaintiffs license, Tolnai appeared before the appeals board to seek to uphold the commission’s decision—something he would have done regardless of whether that decision was for or against the plaintiff. (Id. at pp. 61-62.) The appellate court held that fact that Tolnai assisted with the examination of a witness did not effect a forfeiture of the

The fact that different members of the county counsel’s office each had a role in representing the prosecution before the commission, another role as legal adviser to the commission, or a third role as designator of a member of the board did not, in the absence of any facts to support the nightclub’s assertion of bias or prejudice or lack of insulation of the various functions performed by the county counsel’s office, constitute a prima facie case of bias or conflict of interest on the part of that office. Moreover, the appearance of a deputy county counsel before the board as an advocate against the nightclub after representing the commission in a neutral role did not establish a conflict of interest, in view of the fact that Tolnai’s duty was to render neutral legal assistance to the commission and then to seek to uphold its decision before the board, regardless of whether that decision was for or against the nightclub.

Here, the roles of advocate for the agency and adviser to the decision maker were not insulated by being performed by different attorneys from a large office. Boga acted as both advocate for the initial denial of the renewal application, and then as adviser to the decision maker on the appeal of the decision for which he had advocated.

In BreakZone Billiards v. City of Torrance, supra, 81 Cal.App.4th 1205 , the plaintiff sought a conditional use permit (CUP) to change the nature of its business from a youth-oriented billiard parlor to a much larger, adult-oriented facility that would sell alcoholic beverages. (Id. at pp. 1219-1220, 1248.) The city’s planning commission approved the CUP, but one member of the city council appealed the commission’s decision to the entire council as a whole, which considered the application de novo, and denied it. The plaintiff filed a petition for a writ of administrative mandamus, contending, among other things, that campaign contributions to the council members from his lessor (who had an interest in disapproval of his permit application) triggered a Government Code section 1090 violation. The trial court denied the petition (BreakZone, at p. 1220), and the plaintiff appealed. On appeal, among its other contentions, the plaintiff urged that the city attorney had improperly advocated on behalf of the city council member who had filed the appeal from the planning commission’s grant of the CUP.

In Kloepfer v. Commission on Judicial Performance, supra, 49 Cal.3d 826 , 833, the California Supreme Court held that the commission’s combination of investigative and adjudicatory functions did not constitute a denial of due process. The commission’s staff conducted the initial investigation, but once formal proceedings were instituted, the prosecutorial function shifted to examiners from the Office of the Attorney General. Members of the commission then considered the evidence presented by both sides before making a decision.

Thus, in Kloepfer, there was no allegation or evidence that there had been any combination of the functions of advocacy and adjudication in the same agency, let alone in the same attorney. Furthermore, additional insulation between the commission’s investigatory and adjudicatory roles is provided by the mandated procedure whereby the commission is never the final decision maker, even if the judge fails to take any steps to appeal the commission’s decision. Under this procedure, not only does the commission hear the recommendation of special masters appointed by the California Supreme Court before it makes its own decision, but then the commission itself simply recommends appropriate discipline to the Supreme Court. It is the California Supreme Court which is the final decision maker; it is required to independently review the evidence and assess its weight and relevance before pronouncing the final decision. As the court in Kloepfer pointed out, such a procedure avoids an unacceptable risk of bias either on the part of the commission, or on the part of the court as ultimate decision-maker. (Kloepfer v. Commission on Judicial Performance, supra, 49 Cal.3d at pp. 834-835.)

Here, in contrast, there was a confounding of the functions of advocacy and adjudication—a situation always fraught with more problems that when

Conclusion

The hearing here, at which Boga, City’s advocate for the initial denial of the renewal application, acted as legal adviser to the hearing officer reviewing that denial, violated Petitioners’ rights to due process. Accordingly the trial court did not err by ordering that City grant petitioners a new hearing.

However, to adequately protect Petitioners’ due process rights, the trial court’s order for a new trial should be modified to direct that the new hearing must be conducted by someone other than Holmquist, given that his role as a neutral arbitrator has been compromised in a manner which, practically speaking, cannot be undone. In addition, the order should also provide that the new hearing must be conducted in a manner consistent with the views expressed in this opinion—for example, the hearing officer should not be, nor be advised by, anyone who has served as City’s advocate in this or any related case (e.g., Nightlife Partners, Ltd. v. City of Beverly Hills (U.S. Dist. Ct. case No. CV 98-10266 RAP)).

Disposition

The order appealed from is modified as follows. At the end of the second full paragraph on page 2 of the order, the following language shall be inserted:

Such new hearing shall not be conducted by David R. Holmquist, nor by any person who has served as City’s advocate in this or any related case (e.g., Nightlife Partners, Ltd. v. City of Beverly Hills (U.S. Dist. Ct. case No. CV 98-10266 RAP)). Moreover, the hearing officer shall not be advised by any person who has served as City’s advocate in this or any related case (e.g., Nightlife Partners, Ltd. v. City of Beverly Hills, (U.S. Dist. Ct. case No. CV 98-10266 RAP)).

Klein, P. J., and Aldrich, J., concurred.