Can a Tennessee regulatory board approve a settlement between an agency and a regulated party in a contested case if an intervenor refuses to sign on?

Subject

Opinion No. 11-06, Regulatory Board's Authority to Approve Settlement in Absence of Intervenor Approval, January 11, 2011

Plain-English summary

The Secretary of State asked whether, in a Tennessee contested case under the Uniform Administrative Procedures Act (UAPA), an intervenor can hold up a settlement between the agency and the regulated party simply by refusing to sign. The AG said no.

Once intervention has been granted under Tenn. Code Ann. § 4-5-310(a) or (b), the intervenor becomes a party with a right to participate, but that right does not extend to a veto over a settlement between the original parties. A regulatory board can approve a settlement agreement between the agency and the regulated party over the intervenor's objection. The board's role in that situation is heightened: instead of rubber-stamping the deal, the board must make an independent assessment of the settlement on its merits and decide whether it is reasonable and whether the public interest is protected.

The opinion drew a clear line on what the settlement cannot do. Even though the original parties may settle their own dispute, they cannot stipulate away the rights of the intervenor. The board's approval of the settlement cannot dispose of the intervenor's claims and cannot impose obligations on the intervenor without the intervenor's consent. The intervenor's own claims, if properly raised, survive the settlement and may be litigated.

The AG worked through the Tennessee intervention framework (which closely mirrors § 4-209 of the Model State Administrative Procedure Act of 1981), the Wood v. Metropolitan Nashville court of appeals decision recognizing the balance between public participation and the rights of the parties, and the West Virginia Supreme Court's decision in Halstead v. Dials, which laid out the dominant administrative-law rule. The U.S. Supreme Court's civil-litigation analog in Local No. 93 v. City of Cleveland (478 U.S. 501) supplied the same principle for federal consent decrees and was treated as persuasive.

Currency note

This opinion was issued in 2011. 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.

Common questions

What does an intervenor get out of being admitted to a contested case if it cannot veto a settlement?

Intervenors get the rights of a party: to present evidence, to cross-examine, to take discovery, and to have their objections to a proposed settlement heard at any approval stage. They also keep their own claims alive against the agency or the regulated party. What they do not get is a veto. The intervenor's role is to make sure the merits of the settlement are tested, not to choose the outcome.

What standard does the regulatory board apply when an intervenor objects?

An independent-assessment standard. The board must consider the proposed settlement on its merits, with attention to the public interest and applicable legislative directives. If the board finds the settlement just and reasonable in light of those factors, it may confirm the agreement even without the intervenor's authorization. Halstead v. Dials, 391 S.E.2d 385, 389 (W. Va. 1990), framed the rule the AG adopted.

What can the settlement not do to an objecting intervenor?

It cannot dispose of the intervenor's claims, and it cannot impose duties or obligations on the intervenor. If the settlement attempted to do either, the intervenor's claims would still be live and could be litigated, and any provision purporting to bind the intervenor would be ineffective as to the intervenor.

Where does this rule come from in Tennessee law?

Tennessee's intervention statute, Tenn. Code Ann. § 4-5-310, is closely modeled on § 4-209 of the Uniform Law Commissioners' Model State Administrative Procedure Act of 1981. The Tennessee Court of Appeals in Wood v. Metropolitan Nashville & Davidson County Government, 196 S.W.3d 152, 159 (Tenn. Ct. App. 2005), described the intervention rules as "designed to strike a balance between public participation in an administrative proceeding and the rights of the parties." The AG borrowed the rule from out-of-state authority because no Tennessee case had squarely addressed the question of settlement over an intervenor's objection.

Is there a federal analog?

Yes. In Local No. 93, Intern. Ass'n of Firefighters v. City of Cleveland, 478 U.S. 501, 528-29 (1986), the U.S. Supreme Court held that "while an intervenor is entitled to present evidence and have its objections heard at the hearings on whether to approve a consent decree, it does not have power to block the decree merely by withholding its consent." The same case stressed the corollary: settling parties cannot dispose of a third party's claims or impose obligations on a non-consenting third party. The AG treated this as persuasive for the administrative setting.

Could the board impose conditions on the intervenor that limit how much intervenor objections can derail the case?

Yes, under Tenn. Code Ann. § 4-5-310(c). The administrative judge or hearing officer may impose conditions on the intervenor's participation, including limiting participation to specific designated issues, limiting use of discovery and cross-examination, and requiring multiple intervenors to combine their presentations. Those conditions can be imposed at the time intervention is granted or at any later time.

Background and statutory framework

Tenn. Code Ann. § 4-5-310 governs intervention in contested cases under the UAPA, Tenn. Code Ann. §§ 4-5-101 et seq. Section 4-5-310(a) sets out the "intervention as of right" criteria: a timely written petition with copies to all parties at least seven days before the hearing, facts demonstrating that the petitioner's legal rights, duties, privileges, immunities, or other legal interest may be determined in the proceeding (or that the petitioner qualifies as an intervenor under any provision of law), and a determination by the administrative judge that the interests of justice and the orderly and prompt conduct of the proceedings will not be impaired. Section 4-5-310(b) lets the agency separately grant intervention "upon determining that the intervention sought is in the interests of justice and shall not impair the orderly and prompt conduct of the proceedings."

Tenn. Comp. R. & Regs. 1360-04-01-.12(2) supplies a four-factor framework for deciding whether to grant a petition for intervention: whether the petitioner's interest could be practically impaired by the disposition of the case; whether the petitioner's claim and the main case share a question of law or fact; whether the prospective intervenor's interests are already adequately represented; and whether admitting a new party would render the hearing unmanageable or interfere with the interests of justice and the orderly and prompt conduct of the proceedings.

The UAPA defines "contested case" broadly under Tenn. Code Ann. § 4-5-102(3) and defines "party" under § 4-5-102(8) as "each person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party." Once admitted as an intervenor, a participant counts as a party.

On the settlement question, the AG borrowed from Halstead v. Dials, 391 S.E.2d 385 (W.Va. 1990), which stated the rule that has since been widely adopted by treatises and other state courts:

[O]nce intervention has been granted in an administrative proceeding, the original parties may not stipulate away, by a consent order or otherwise, the rights of the intervenors. As a corollary to this rule, an administrative agency may approve settlement of a contested case or entry of a consent decree even though some of the parties, including intervenors, do not concur in the agreement. Where there are objections to the settlement or decree, the agency is required to make an independent assessment of the agreement on its merits. If the agency determines that the agreement is just and reasonable, with due consideration given to the public interest and to applicable legislative dictates, it may confirm the settlement or enter the consent order without the authorization of the dissenting parties.

The AG cited the equivalent treatise rule at 2 Am. Jur. 2d Administrative Law § 304 (2010), and reinforced the result with the Supreme Court's reasoning in Local No. 93 v. City of Cleveland.

Citations

• Tenn. Code Ann. §§ 4-5-101 et seq. (Uniform Administrative Procedures Act)
• Tenn. Code Ann. § 4-5-102(3) (contested case definition)
• Tenn. Code Ann. § 4-5-102(8) (party definition)
• Tenn. Code Ann. § 4-5-310 (intervention in contested cases)
• Tenn. Code Ann. § 4-5-310(a) (intervention as of right)
• Tenn. Code Ann. § 4-5-310(b) (discretionary intervention by agency)
• Tenn. Code Ann. § 4-5-310(c) (conditions on intervenor's participation)
• Tenn. Comp. R. & Regs. 1360-04-01-.12(2) (intervention factors)
• Model State Administrative Procedure Act § 4-209 (Uniform Law Commissioners, 1981)
• Wood v. Metropolitan Nashville & Davidson County Government, 196 S.W.3d 152 (Tenn. Ct. App. 2005)
• Tofias v. Energy Facilities Siting Bd., 757 N.E.2d 1104 (Mass. 2001)
• Cortland Glass Co. v. Angello, 752 N.Y.S.2d 741 (App. Div. 2002)
• West Chester Area Sch. Dist. v. Collegium Charter Sch., 812 A.2d 1172 (Pa. 2002)
• Halstead v. Dials, 391 S.E.2d 385 (W.Va. 1990)
• Local No. 93, Intern. Ass'n of Firefighters, AFL-CIO C.L.C. v. City of Cleveland, 478 U.S. 501 (1986)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2011/op11-006.pdf

Original opinion text

January 11, 2011

Opinion No. 11-06

Regulatory Board's Authority to Approve Settlement in Absence of Intervenor Approval

QUESTION

Under the Uniform Administrative Procedures Act, codified in Tenn. Code Ann. §§ 4-5-101 et seq., may a board approve a settlement agreement or agreed order reached between an agency and the regulated party if an intervenor who is granted a petition to intervene under Tenn. Code Ann. § 4-5-310 refuses to agree?

OPINION

An intervenor in a contested case proceeding under the Uniform Administrative Procedures Act cannot block a settlement agreement between an agency and a regulated party merely by withholding its consent to the settlement agreement. A regulatory board may approve a settlement agreement between an agency and a regulated party over the objection of an intervenor if it determines that the settlement is reasonable and the public interest is protected. The settlement agreement cannot, however, dispose of the claims of the non-settling intervenor or impose obligations on the non-settling intervenor without the intervenor's consent.

ANALYSIS

Tenn. Code Ann. § 4-5-310 governs intervention in contested cases under Tennessee's Uniform Administrative Procedures Act ("UAPA"), Tenn. Code Ann. §§ 4-5-101 et seq. Tenn. Code Ann. § 4-5-310(a) provides that the administrative judge or hearing officer shall grant one or more petitions for intervention if three conditions are met:

(1) The petition is submitted in writing to the administrative judge or hearing officer, with copies mailed to all parties named in the notice of the hearing, at least seven (7) days before the hearing;

(2) The petition states facts demonstrating that the petitioner's legal rights, duties, privileges, immunities or other legal interest may be determined in the proceeding or that the petitioner qualifies as an intervenor under any provision of law; and

(3) The administrative judge or hearing officer determines that the interests of justice and the orderly and prompt conduct of the proceedings shall not be impaired by allowing the intervention.

In addition to the administrative judge's authority to grant petitions for intervention under subsection (a), Tenn. Code Ann. § 4-5-310(b) allows the agency to grant one or more petitions for intervention "upon determining that the intervention sought is in the interests of justice and shall not impair the orderly and prompt conduct of the proceedings." If a petitioner qualifies for intervention under Tenn. Code Ann. § 4-5-310(a) or (b), "the administrative judge or hearing officer may impose conditions upon the intervenor's participation in the proceedings, either at the time that intervention is granted or at any subsequent time." Tenn. Code Ann. § 4-5-310(c). The conditions that may be imposed by the administrative judge include:

(1) Limiting the intervenor's participation to designated issues in which the intervenor has a particular interest demonstrated by the petition;

(2) Limiting the intervenor's use of discovery, cross-examination and other procedures so as to promote the orderly and prompt conduct of the proceedings; and

(3) Requiring two (2) or more intervenors to combine their presentations of evidence and argument, cross-examination, discovery and other participation in the proceedings.

Id. Tenn. Comp. R. & Regs. 1360-04-01-.12(2) provides that the following factors shall be considered in deciding whether to grant a petition for intervention:

(a) Whether the petitioner claims an interest relating to the case and that he or she is so situated that the disposition of the case may as a practical matter impair or impede his ability to protect that interest;

(b) Whether the petitioner's claim and the main case have a question of law or fact in common;

(c) Whether prospective intervenor interests are adequately represented;

(d) Whether admittance of a new party will render the hearing unmanageable or interfere with the interests of justice and the orderly and prompt conduct of the proceedings.

The UAPA defines "contested case" as follows:

"Contested case" means a proceeding, including a declaratory proceeding, in which the legal rights, duties or privileges of a party are required by any statute or constitutional provision to be determined by an agency after an opportunity for a hearing. Such proceeding may include rate making; price fixing; granting of certificates of convenience and necessity; the making, review or equalization of tax assessments; the granting or denial of licenses, permits or franchises where the licensing board is not required to grant the licenses, permits or franchises upon the payment of a fee or the finding of certain clearly defined criteria; and suspensions of, revocations of, and refusals to renew licenses. An agency may commence a contested case at any time with respect to a matter within the agency's jurisdiction[.]

Tenn. Code Ann. § 4-5-102(3). "'Party' means each person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party[.]" Tenn. Code Ann. § 4-5-102(8).

The intervention provisions of Tenn. Code Ann. § 4-5-310 are substantially similar to the intervention provisions contained in § 4-209 of the Uniform Law Commissioners' Model State Administrative Procedure Act of 1981 ("Model Act").¹ In the comment to § 4-209 of the Model Act, the Commissioners explain the distinction between subsections (a) and (b) as follows:

The distinction between subsections (a) and (b) deserves emphasis. If a party satisfies the standards of subsection (a), the presiding officer shall grant the petition to intervene. In situations not qualifying under subsection (a), the presiding officer may grant the petition to intervene upon making the determination described in subsection (b).

Paragraph (a)(2) confers standing upon a petitioner to intervene, as of right, upon demonstrating that the petitioner's "legal rights, duties, privileges, immunities, or other legal interests may be substantially affected by the proceeding . . ." However, paragraph (a)(3) imposes the further limitation, that the presiding officer shall grant the petition for intervention only upon determining that "the interests of justice and the orderly and prompt conduct of the proceedings will not be impaired by allowing the intervention."

The presiding officer is thus required to weigh the impact of the proceedings upon the legal rights, etc. of the petitioner for intervention, paragraph (a)(2), against the interests of justice and the need for orderly and prompt proceedings, paragraph (a)(3).

Model Act § 4-209, Comment (emphasis in original).

The Tennessee Court of Appeals has explained that Tenn. Code Ann. § 4-5-310 and Tenn. Comp. R. & Regs. 1360-04-01-.12(2) "are designed to strike a balance between public participation in an administrative proceeding and the rights of the parties." Wood v. Metropolitan Nashville & Davidson County Government, 196 S.W.3d 152, 159 (Tenn. Ct. App. 2005). "The rights of the parties counterbalances the drive to let all interested persons participate." Id. (citing 2 CHARLES H. KOCH, JR., ADMINISTRATIVE LAW AND PRACTICE § 5.20[3], at 45-46 (2d ed. 1997)). "Accordingly, intervention in administrative proceedings is not of right, and administrative agencies have substantial discretion to grant or deny intervention." Id. (citing Tofias v. Energy Facilities Siting Bd., 435 Mass. 340, 757 N.E.2d 1104, 1109 (2001); Cortland Glass Co. v. Angello, 300 A.D.2d 891, 752 N.Y.S.2d 741, 743 (2002); West Chester Area Sch. Dist. v. Collegium Charter Sch., 571 Pa. 503, 812 A.2d 1172, 1186 (2002)).

The question presented to us presupposes that a petition to intervene has been granted under Tenn. Code Ann. § 4-5-310(a) or (b). Once intervention has been granted, we are asked whether a regulatory board can approve a settlement agreement between an agency and a regulated party, even though the intervenor refuses to agree to the terms of the settlement agreement. We believe that the rule governing settlement of contested cases over the objection of an intervenor is correctly stated in Halstead v. Dials, 391 S.E.2d 385 (W.Va. 1990):

[O]nce intervention has been granted in an administrative proceeding, the original parties may not stipulate away, by a consent order or otherwise, the rights of the intervenors. As a corollary to this rule, an administrative agency may approve settlement of a contested case or entry of a consent decree even though some of the parties, including intervenors, do not concur in the agreement. Where there are objections to the settlement or decree, the agency is required to make an independent assessment of the agreement on its merits. If the agency determines that the agreement is just and reasonable, with due consideration given to the public interest and to applicable legislative dictates, it may confirm the settlement or enter the consent order without the authorization of the dissenting parties.

391 S.E.2d at 389. See also 2 Am. Jur. 2d Administrative Law § 304 (2010) ("Although it is required to make an independent assessment of a proposed settlement agreement upon the objection to the agreement by intervenors, an administrative agency may approve the settlement of a contested case or an entry of a consent decree even though some parties, including intervenors, do not concur in the agreement.").

In the context of civil litigation, the United States Supreme Court has similarly stated:

It has never been supposed that one party, whether an original party, a party that was joined later, or an intervenor, could preclude other parties from settling their own disputes and thereby withdrawing from litigation. Thus, while an intervenor is entitled to present evidence and have its objections heard at the hearings on whether to approve a consent decree, it does not have power to block the decree merely by withholding its consent. . . . Of course, parties who choose to resolve litigation through settlement may not dispose of the claims of a third party, and a fortiori may not impose duties or obligations on a third party, without that party's agreement. A court's approval of a consent decree between some of the parties therefore cannot dispose of the valid claims of nonconsenting intervenors; if properly raised, these claims remain and may be litigated by the intervenor. And, of course, a court may not enter a consent decree that imposes obligations on a party that did not consent to the decree.

Local No. 93, Intern. Ass'n of Firefighters, AFL-CIO C.L.C. v. City of Cleveland, 478 U.S. 501, 528-29 (1986) (internal citations omitted).

Based on the foregoing, we believe that a regulatory board can approve a settlement agreement between an agency and a regulated party in a contested case proceeding under the UAPA over an intervenor's objection. The board must make an independent assessment of the settlement agreement on its merits. If the board determines that the settlement agreement is reasonable and the public interest is protected, the board may approve the settlement agreement over the intervenor's objection. The board's approval of the settlement agreement cannot dispose of the claims of the non-settling intervenor or impose obligations on the non-settling intervenor without the intervenor's consent.

ROBERT E. COOPER, JR.
Attorney General and Reporter

BARRY TURNER
Deputy Attorney General

R. MITCHELL PORCELLO
Assistant Attorney General

Requested by:
The Honorable Tre Hargett
Secretary of State
State Capitol
Nashville, Tennessee 37243-0305