Lopez v. U.S.

• Decision Date: 31 October 2000
• Docket Number: No. Civ 97-1303 BB/KBM.,Civ 97-1303 BB/KBM.
• Citation: 129 F.Supp.2d 1284
• Parties: Andrew Leo LOPEZ, Plaintiff, v. UNITED STATES of America, et al., Defendants.
• Court: U.S. District Court — District of New Mexico

129 F.Supp.2d 1284

Andrew Leo LOPEZ, Plaintiff, v. UNITED STATES of America, et al., Defendants.

No. Civ 97-1303 BB/KBM.

United States District Court, D. New Mexico.

October 31, 2000.

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Andrew Leo Lopez, Albuquerque, NM, plaintiff pro se.

Paula M. Junghans, Louise P. Hytken, Joseph A Pitzinger III, U.S. Department of Justice, Tax Division, Dallas, TX, for USA, defendants.

MEMORANDUM OPINION

BLACK, District Judge.

This case is a consolidated action containing two distinct parts. The first is Plaintiff's appeal, under the Administrative Procedures Act ("APA"), of an administrative decision disbarring him from practice before the Internal Revenue Service ("IRS"). The second is Plaintiff's lawsuit against the United States and a number of other Defendants, arising out of the circumstances surrounding his disbarment. Upon order of this Court, the two actions have been consolidated. This opinion addresses both the administrative appeal and the federal Defendants' amended motion to dismiss Plaintiff's amended complaint (Doc. 82). Also outstanding is a motion by the non-federal Defendants to preclude Plaintiff from acting pro se in this matter (Doc. 73). However, since the non-federal Defendants have been dismissed from this case, their motion is moot and will be denied. In addition, Plaintiff has filed a motion entitled Motion for Rulings Necessary to Properly Adjudicate Appeal (Doc. 91). This motion concerns the burden of proof that should have been applied by the administrative law judge below. As such, the motion is inextricably intertwined with the merits of Plaintiff's appeal, and a separate ruling on the motion is not necessary. After considering the submissions of the parties and the applicable law, the Court will affirm the administrative agency decision. The Court will also grant Defendants' motion to dismiss.

Administrative Appeal

Standard of Review for this Court: The initial decision disbarring Plaintiff from practicing before the IRS was issued by an administrative law judge ("ALJ"), following a hearing. Plaintiff appealed that decision to the Secretary of the Treasury Department. The Secretary upheld the ALJ's decision, and Plaintiff filed an appeal of the Secretary's decision in the United States Court of Appeals, District of Columbia Circuit. That appeal was transferred to this Court for review and decision. The Secretary's decision is reviewed under § 706 of the APA. See Trimmer v. United States Dep't of Labor, 174 F.3d 1098, 1102 (10th Cir.1999). Consequently, that decision will be set aside only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Id. Factual determinations made by the administrative agency will not be disturbed unless they are not supported by substantial evidence. Id. Under the substantial-evidence standard, this Court cannot displace the agency's choice between two fairly conflicting views of the evidence, even if this Court might have made a different choice had the matter been before the Court de novo. Id. Since the Secretary's decision is in agreement with, and based in part on, the ALJ's credibility determinations, that decision is entitled to great deference. Id. However, matters of law decided by the Secretary are reviewed de novo, giving deference to the Secretary's interpretation of any governing statutes or regulations where that interpretation is reasonable. Id.

Burden of Proof Below: Plaintiff argues the ALJ applied the wrong burden of proof, deciding the case under a preponderance-of-the-evidence standard rather than a clear-and-convincing-evidence standard. Plaintiff contends the latter standard should have been applied because the result at stake, the loss of his ability to practice his livelihood, was important enough to trigger the higher burden. Defendants counter that not only is Plaintiff's argument wrong, but that it does not matter what burden of proof was proper, because the ALJ stated he would render the same decision under either standard. Since this issue involves a legal question, the Court addresses it de novo.

Plaintiff's argument is contrary to Supreme Court authority. In Steadman v. Securities Exchange Comm'n, 450 U.S. 91, 101-103, 101 S.Ct. 999, 67 L.Ed.2d 69 (1981), the Supreme Court held that the preponderance-of-the-evidence standard applies to SEC disciplinary proceedings. The Supreme Court so held despite the fact the SEC had permanently prohibited Steadman from practicing his profession. This aspect of Steadman was recognized by the Supreme Court in Herman & MacLean v. Huddleston, 459 U.S. 375, 390, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (noting that Steadman mandated the use of the preponderance standard even where severe consequences, such as permanent prohibition from practicing one's profession, are at stake). See also Benjamin v. Bureau of Alcohol, Tobacco, & Firearms, 1993 WL 280397 (9th Cir.1993) (under Steadman, preponderance of evidence is standard even when sanction results in loss of occupation). Moreover, the Secretary's decision in this case does not completely prohibit Plaintiff from practicing his profession as a CPA, but merely restricts his ability to do so by preventing him from appearing before the IRS. Therefore, the Court finds the ALJ correctly applied the preponderance-of-the-evidence burden of proof.

Denial of Discovery: Plaintiff contends the administrative proceedings violated his right to due process because he was not allowed to conduct all the discovery he wanted prior to the hearing. The parties did exchange a number of documents, and depositions were taken of at least two witnesses who were not personally in attendance at the hearing. However, the ALJ did not permit Plaintiff to depose other witnesses, and Plaintiff maintains he was therefore unable to properly prepare for the hearing and to cross-examine these witnesses. He argues the Secretary's decision should be reversed and remanded for a new hearing, due to the alleged violation of due process.

Contrary to Plaintiff's argument, there is no general constitutional right to discovery in an administrative proceeding. See Kelly v. United States Environmental Protection Agency, 203 F.3d 519, 523 (7th Cir.2000). The Tenth Circuit has suggested that, where a complete denial of discovery can be shown to have caused clear prejudice, a due-process violation might result. See Sims v. Nat'l Transp. Safety Bd., 662 F.2d 668, 671-72 (10th Cir.1981). The Sims case does not help Plaintiff in this case, however, for two reasons. First, Plaintiff was not denied all discovery. Instead, by order of the ALJ, he was provided with most, if not all, of the documents the government planned to introduce at the hearing. (Dec. 6, 1993 order by ALJ, Vol. VI of administrative record). Plaintiff's complaint, therefore, concerns mainly his inability to depose the government's witnesses prior to the hearing. Plaintiff had ample time to prepare for the hearing and ample notice of the charges leveled against him. The Court therefore finds the discovery provided to Plaintiff was sufficient to meet the requirements of due process.

The second reason the Sims suggestion does not apply in this case is Plaintiff's failure to specify how he was prejudiced by the partial denial of discovery. It is not enough to simply allege generally, as Plaintiff has done, that he was prejudiced. Plaintiff has the burden of demonstrating specifically how the lack of depositions prior to the hearing prevented him from adequately preparing for the hearing. He has not done so. The Court's review of the transcript of the hearing shows Plaintiff mounted a vigorous defense against each charge. There is no indication that any of the testimony given by the witnesses was a surprise to Plaintiff, or that he was unable to effectively cross-examine those witnesses, despite his general claims to the contrary. In sum, Plaintiff has not demonstrated the type of actual, specific prejudice that would cause this Court to find the administrative proceedings did not comport with due process.

Alleged Bias of ALJ: Plaintiff maintains the ALJ was biased against him and the case should be remanded to a different ALJ for decision. The Court finds Plaintiff has failed to demonstrate the existence of such bias. As Plaintiff knows, the type of bias that would disqualify a judge must arise from an extrajudicial source, rather than the judge's exposure to the facts of the case. See Andrew Leo Lopez v. Behles, 14 F.3d 1497, 1501 (10th Cir.1994). Adverse rulings alone are insufficient grounds for disqualification, see id., and such rulings are the only basis Plaintiff has presented for disqualification. Finally, the Court's review of the administrative record has turned up no evidence of the ALJ's supposed bias. The ALJ refused to admit evidence proffered by the government and ruled against the government on the merits of some of the charges. These are not the actions of a biased judge. This ground for reversal will be rejected.

Constitutionality of Regulations: Plaintiff maintains that certain regulations found in 31 C.F.R. § 10 are unconstitutionally vague, and requests that this Court strike them. No argument or authority has been presented for this proposition, and there is no explanation of how these provisions impact on the administrative appeal before this Court. The Court therefore does not address Plaintiff's argument.

Merits: The Secretary found Plaintiff engaged in "disreputable conduct" as defined in 31 C.F.R. § 10.51 (1999). This finding was based on the ALJ's factual determinations as well as the ALJ's conclusion that Plaintiff had engaged in three different types of disreputable conduct. The first example of disreputable conduct found by the ALJ was that Plaintiff participated in evading or attempting to evade Federal tax, or the payment thereof, by counseling clients to pay other creditors with funds which had...