Are members of the Boards of Trustees of NC's two main public-employee retirement systems prohibited under G.S. § 150B-35 from having ex parte communications with the Director of the Retirement Systems Division or with petitioners about issues of fact or law in pending contested cases, and what sanctions follow a violation?

Plain-English summary

State Treasurer Harlan E. Boyles, in his capacity as chair of the Boards of Trustees for the Teachers' and State Employees' Retirement System and the NC Local Governmental Employees' Retirement System, asked the AG two questions about ex parte communications in pending contested cases. First, are communications between board members and the Director of the Retirement Systems Division (or between board members and petitioners) about issues of fact or law in a pending case prohibited under G.S. § 150B-35? Second, if so, what sanctions can be imposed?

Senior Deputy AG Ann Reed and Assistant AG Alexander McC. Peters answered: yes, the prohibition applies to both kinds of communications; and the sanctions are not statute-specific but are real (decisions set aside as biased, money damages under 42 U.S.C. § 1983, removal from office for willful conduct).

The framework. Article 3 of NC's Administrative Procedure Act in Chapter 150B governs contested cases. A person aggrieved by a determination of the Director may petition for a contested-case hearing in the Office of Administrative Hearings. G.S. § 150B-23. After an evidentiary hearing, the administrative law judge issues a recommended decision with proposed findings of fact and conclusions of law (G.S. § 150B-23 through § 150B-34). That recommended decision and the official record then go to the appropriate retirement board, which makes the final agency decision. G.S. § 150B-36. The board may accept the recommendation in whole or part, or reject it. "It is, then, ultimately the province of the board, not the administrative law judge, to determine the facts in a contested case and to determine how the law is to be applied to those facts." Jarrett v. N.C. Department of Cultural Resources, 101 N.C. App. 475 (1991).

G.S. § 150B-35 is the ex parte rule:

Unless required for disposition of an ex parte matter authorized by law, neither the administrative law judge assigned to a contested case nor a member or employee of the agency making a final agency decision in the case may communicate, directly or indirectly, in connection with any issue of fact, or question of law, with any person or party or his representative, except on notice and opportunity for all parties to participate.

The AG read the rule to reach board members from commencement of the contested case forward. The Director, while not literally a party, is the source of the determination that formed the issues to be resolved on appeal, so communications between the Director and board members about those issues fall squarely within the rule. Petitioners are the actual parties on the other side, so communications with them are even more clearly covered.

Due process layer. The AG anchored the analysis in due process, drawing heavily on the NC Supreme Court's decision in Crump v. Board of Education, 326 N.C. 603 (1990). Crump held that a teacher was deprived of due process when one or more school board members conducting the administrative hearing against him were biased against him before the hearing began. The Crump court drew on US Supreme Court precedent (In re Murchison, 349 U.S. 133 (1955)) and federal appellate decisions about the impartiality required of administrative adjudicators (Berkshire Employees Ass'n v. NLRB, 121 F.2d 235 (3d Cir. 1941); NLRB v. Phelps, 136 F.2d 562 (5th Cir. 1943)). The principle: an administrative tribunal that adjudicates rights must be impartial, and bias known beforehand can support a due process challenge. Crump went further and affirmed a money-damages award against the defendant school board under 42 U.S.C. § 1983.

What that means for retirement-board practice. The AG translated the framework into practical guidance:

• Board members must refrain from discussing matters of fact or law in a pending contested case with the Director, the Director's employees or representatives, the petitioner, or the petitioner's representatives.
• The Director and petitioners should not distribute information about a pending contested case to board members, and board members should not receive such information, except for the record on appeal, legal briefs or memoranda submitted by the parties, scheduling information (time and place of hearing), and similar factual information that does not touch the merits.
• The AG noted approvingly that the Director already sent all board members and petitioners notice when a contested case was filed, reminding them of the ex parte prohibition.

Sanctions. G.S. § 150B-35 does not specify sanctions for violations. The AG identified three downstream consequences:

1. Decisions tainted by ex parte communications can be set aside on judicial review as biased, under the Crump framework.
2. Board members who violate the rule can face money damages under 42 U.S.C. § 1983 for the due-process violation, just as the school board did in Crump.
3. Willful violations by state officials can constitute "good cause" for removal from office.

The combination is more than nominal. A board member who has off-record conversations with a petitioner or with the Director about a pending case puts the agency's decision at risk of judicial reversal, exposes the board (and potentially individual members) to civil rights damages, and risks removal proceedings.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

G.S. § 150B-35 is still in force as the basic ex parte rule for NC administrative contested cases. The case law foundation (Crump and the federal due-process precedents it relied on) remains good law as a matter of constitutional doctrine. Specific application to retirement-system board adjudications should be checked against the current Chapter 150B procedures (which have been amended multiple times since 1994, especially with respect to APA contested case workflow and the role of the Office of Administrative Hearings) and any later AG opinions or court decisions. The basic message of the opinion (board members must avoid off-record communications about pending cases) reflects a durable principle of administrative due process.

Common questions

Q: Why is the Director's communication treated as ex parte, when he is not formally a party?
A: Because the Director's determination is what triggered the contested case. The petitioner is appealing the Director's decision, so the Director is functionally the opposing position in the dispute even if the statutory caption does not list him as a "party." The AG read the rule to reach communications with anyone whose position the board is being asked to evaluate, not just literal parties.

Q: What kinds of communications are NOT prohibited?
A: The record on appeal (transmitted through normal channels), legal briefs and memoranda submitted by the parties to the board, scheduling information (when and where the hearing is), and similar factual information that does not touch the merits. The rule's exception for "ex parte matters authorized by law" covers narrow procedural moves (emergency relief, scheduling) that by their nature do not involve all parties.

Q: Why does ex parte contact with one side undermine the decision even if the board would have ruled the same way?
A: Because due process is about the appearance and reality of an impartial tribunal, not just about whether the outcome would have been the same with full procedural rights. If a board member has discussed a pending case with one side, the other side has been deprived of the opportunity to respond to what was said. The decision is suspect on that procedural ground alone, even if the substantive outcome was correct on the record.

Q: What did Crump v. Board of Education actually award?
A: A teacher who had been the subject of a school-board administrative proceeding alleged that several school-board members were biased against him before the hearing began. The NC Supreme Court held that the bias deprived him of due process and that he could recover under 42 U.S.C. § 1983. The court affirmed a monetary award against the defendant school board. The case is the leading NC authority for the proposition that biased administrative tribunals can result in money damages, not just decision reversal.

Q: What should a board member do if a party tries to start an ex parte conversation?
A: Decline, end the conversation, and document what was said (so the record is clear that the board member did not participate substantively). The board member should also notify the agency's general counsel (or the AG's office assigned to the agency) so that the parties can be informed of the attempted contact, which gives all parties the chance to address it on the record. The risk of inadvertent ex parte contact is real; the response should be transparency.

Q: Does this opinion apply to other state boards beyond the retirement systems?
A: G.S. § 150B-35 is a general APA provision and applies to any agency making final agency decisions in contested cases under Article 3 of Chapter 150B. The 1994 opinion is framed for the retirement boards but its reasoning is general. Most state agencies adjudicating contested cases under the APA face the same prohibition and the same Crump-based downstream consequences for violations.

Background and statutory framework

NC's Administrative Procedure Act in Chapter 150B was substantially restructured in the 1980s to bring administrative adjudication closer to a court-like model. The Office of Administrative Hearings took over the evidentiary-hearing function from agency staff, with administrative law judges issuing recommended decisions that the substantive agencies then convert into final agency action. The structure is intended to provide procedural fairness at the hearing stage (separating the adjudicator from the agency) while preserving the agency's substantive expertise at the final-decision stage.

The ex parte rule in G.S. § 150B-35 is the procedural safeguard for the final-decision stage. The agency board members making the final decision are not as separated from the substantive program as the ALJ is, but they cannot supplement the record with off-the-record conversations. The information they decide on must be the record information that all parties have had a chance to address.

The 1994 opinion is a useful primer for board members new to APA adjudication. It frames the ex parte rule as a procedural requirement, anchors it in due process, identifies the real-world sanctions for violations, and gives practical guidance about what communications are and are not allowed. Any state agency board doing APA contested-case work would benefit from internalizing the same framework.

Citations

• Chapter 150B of the General Statutes (NC Administrative Procedure Act)
• N.C.G.S. § 150B-23 (petition for contested case hearing)
• N.C.G.S. § 150B-23 through § 150B-34 (contested case hearing procedures; ALJ recommended decision)
• N.C.G.S. § 150B-35 (ex parte communications prohibited)
• N.C.G.S. § 150B-36 (final agency decision)
• 42 U.S.C. § 1983 (federal civil rights damages for due-process violations by state actors)
• Crump v. Board of Education, 326 N.C. 603, 392 S.E.2d 579 (1990) (bias of administrative tribunal denies due process; 42 U.S.C. § 1983 damages award affirmed against school board)
• In re Murchison, 349 U.S. 133 (1955) (a fair tribunal is a basic requirement of due process)
• Jarrett v. N.C. Department of Cultural Resources, 101 N.C. App. 475, 400 S.E.2d 66 (1991) (board is ultimate fact-finder in contested case)
• Berkshire Employees Association v. NLRB, 121 F.2d 235 (3d Cir. 1941) (impartial tribunal is essential to administrative adjudication)
• NLRB v. Phelps, 136 F.2d 562 (5th Cir. 1943) (impartiality applies as strictly to administrative adjudicator as to court judge)

Source

• Landing page: https://ncdoj.gov/opinions/ex-parte-communications-under-the-administrative-procedure-act-2/

Original opinion text

June 30, 1994

The Honorable Harlan E. Boyles
Chairman
The Boards of Trustees of the Teachers' and State Employees' Retirement System and the North Carolina Local Governmental Employees' Retirement System
Albemarle Building
325 North Salisbury Street
Raleigh, North Carolina 27603-1385

Re: Advisory Opinion: Ex Parte Communications under the Administrative Procedure Act. G.S. § 150B-35.

Dear Mr. Boyles:

We are writing in reply to your request for our opinion regarding ex parte communications between members of the Boards of Trustees of the Teachers' and State Employees' Retirement System and the North Carolina Local Governmental Employees' Retirement System ("boards") and the Director of the Retirement Systems Division, Department of State Treasurer, ("Director") or between those boards and persons having contested cases pending before the boards ("petitioners").

The issues that you have presented are as follows: (1) Are ex parte communications relating to a contested case pending before the boards, including communications concerning matters of fact, between the Director or petitioners and members of the boards prohibited by G.S. § 150B-35? (2) If such communications are prohibited, what sanctions may be imposed for violating the prohibition?

The Administrative Procedure Act

Article 3 of the Administrative Procedure Act (APA), Chapter 150B of the General Statutes, is applicable to contested cases pending before the boards. If a party believes that he or she has been aggrieved by a determination of the Director, that person may petition for a contested case hearing in the Office of Administrative Hearings. G.S. § 150B-23. After an evidentiary hearing, the administrative law judge assigned to the case will issue a recommended decision containing proposed findings of fact and conclusions of law. G.S. § 150B-23 to § 150B-34. This recommended decision is then forwarded along with the official record of the contested case to the appropriate board, which makes the final agency decision. G.S. § 150B-36. The board making the final agency decision may accept the recommended decision in whole or in part, or may reject the recommended decision. It is, then, ultimately the province of the board, not the administrative law judge, to determine the facts in a contested case and to determine how the law is to be applied to those facts. Jarrett v. N.C. Department of Cultural Resources, 101 N.C. App. 475, 400 S.E.2d 66 (1991).

G.S. § 150B-35 addresses the issue of ex parte communications. That statute provides: Unless required for disposition of an ex parte matter authorized by law, neither the administrative law judge assigned to a contested case nor a member or employee of the agency making a final agency decision in the case may communicate, directly or indirectly, in connection with any issue of fact, or question of law, with any person or party or his representative, except on notice and opportunity for all parties to participate.

This general statutory prohibition applies to members of the boards in contested case matters and begins upon commencement of the contested case. While the Director is not, strictly speaking, a party to the contested case, his determination forms the issues of fact and of law that must ultimately be resolved by the boards.

It is clear that the General Assembly, in enacting G.S. § 150B-35, intended that Article 3 administrative hearings should conform to due process requirements of fairness. This subject was succinctly addressed by a majority of the North Carolina Supreme Court in Crump v. Board of Education, 326 N.C. 603, 392 S.E.2d 579 (1990). There, in finding that the plaintiff was deprived of due process when one or more members of a school board which conducted an administrative hearing involving charges against the plaintiff were biased against the plaintiff prior to the hearing, the Court said: [W]henever a government tribunal, be it a court of law or a school board, considers a case in which it may deprive a person of life, liberty or property, it is fundamental to the concept of due process that the deliberative body give that person's case fair and open-minded consideration. "A fair tribunal is a basic requirement of due process." Id., page 613 (citing and quoting In re Murchison, 349 U.S. 133 (1955)) . . . . "[I]f the administration of public affairs by administrative tribunals is to find a place within the present framework of our government it is essential that it proceed, on what may be termed its judicial side, without too violent a departure from what many generations of English-speaking people have come to regard as essential to fair play. One of these essentials is the resolution of contested questions by an impartial tribunal." Id., page 619, quoting Berkshire Employees Association, Etc. v. National Labor Relations board, 121 F.2d 235 at 238-39 (3d Cir. 1941) . . . . "[A] fair trial by an unbiased and non-partisan trier of the facts is the essence of the adjudicatory process as well when the judging is done in an administrative proceeding by an administrative functionary as when it is done in a court by a judge. Indeed, if there is any difference, the rigidity of the requirement that the trier be impartial and unconcerned in the result applies more strictly to an administrative adjudication where many of the safeguards which have been thrown around court proceedings have, in the interest of expedition and a supposed administrative efficiency, been relaxed." Id., page 622, quoting National Labor Relations board v. Phelps, 136 F.2d 562, 563 (5th Cir. 1943). Crump v. Board of Education, 326 N.C. at 613.

Thus, the General Assembly, through legislation appearing in G. S. Chapter 150B, has sought to prevent bias in administrative hearings, while the Supreme Court, in Crump, has determined that a deprivation of due process by a biased tribunal can result in a compensable injury under 42 U.S.C. § 1983, and has affirmed a monetary award against the defendant school board. Id., pages 623-25.

Contested cases before the boards are almost invariably adversarial in nature. It is, therefore, axiomatic that the boards should hear matters on appeal from decisions of the Director and on recommended decisions from an administrative law judge only (i) after notice and opportunity for all parties to be present, (ii) upon a complete record, and (iii) without any prior consideration or preconceived determination of the matter. Given the concern of both the legislative and judicial branches that administrative hearings be fair and impartial, it is our opinion that ex parte communications between the Director or petitioners, concerning an issue which is the subject of a contested case, and the boards, which are to ultimately rule on the issue, can raise substantial questions concerning the impartiality of the boards with regard to its proceedings and decisions. These questions, in turn, can lead to legal challenges to the boards' decisions on the grounds of bias, which could result in those decisions being set aside by the courts and, possibly, in the award of monetary damages against the boards.

It is our view, therefore, based on the foregoing, that both statutory and case law mandate against ex parte communications between the Director or petitioners and any member(s) of the boards with regard to a pending contested case. It is our opinion that when a contested case has been initiated, members of the boards must refrain from discussing matters of fact or matters of law regarding the contested case with the Director or his employees or representatives or with the petitioner or the petitioner's representatives. The Director and petitioners should also refrain from distributing, and the board members should refrain from receiving, any information on a contested case except the record on appeal and any legal briefs or memoranda submitted by the parties, information relating to the time and place of the hearing, and similar factual information not touching on the merits of the case. We note with approval that the Director currently sends all board members and petitioners notice of initiation of a contested case at the time that the petition is filed. This notice reminds board members and parties of the prohibition against ex parte communications.

Sanctions

There are no sanctions specifically directed toward violation of the prohibition against ex parte communications. Board members who engage in ex parte communications, however, may find their decisions attacked in a Crump-type proceeding and themselves subject to monetary damages. Moreover, willful efforts on the part of a State official to engage in prohibited ex parte communications may constitute good cause for removal from office.

We trust that we have addressed your concerns, but if we may be of further assistance, please let us know.

Ann Reed
Senior Deputy Attorney General

Alexander McC. Peters
Assistant Attorney General