COURT OKS DECLARATORY CHALLENGE ON AGENCY'S QUASI-LEGISLATIVE ACTION

June 29, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

In a fight between a school board and an oversight panel, the Illinois Appellate Court reviewed the nuances of administrative review; common-law certiorari; the difference between quasi-judicial and quasi-legislative conduct; and using a claim for "declaratory judgment" as a method for attacking administrative action. East St. Louis School District 189 Board of Education v. East St. Louis School District 189 Financial Oversight Panel, No. 5-03-0305 (5th Dist., May 27).

East St. Louis School District 189 wanted to enter into a contract with architectural firm Kennedy and Associates Inc.
The Financial Oversight Panel for District 189 killed the KAI deal with Directive 03-1(a).

Attempting to revive the contract, the school board filed a complaint for declaratory judgment, accusing the Oversight Panel of being arbitrary and capricious.

The St. Clair County Circuit Court -- concluding that the school board was not limited to the common-law writ of certiorari -- held a trial on the board's claim and reversed the Oversight Panel. But the Illinois Appellate Court reversed the Circuit Court.

Here are some highlights of Justice Thomas M. Welch's opinion (with various opinions not noted in the quoted text):

"The parties agree that the Administrative Review Law does not apply to decisions made by the Oversight Panel because the statute creating and empowering the Oversight Panel does not so provide. If the statute creating or conferring power on an administrative agency does not contain an express reference to the Administrative Review Law and provides for no other form of review, then common-law certiorari is a general method for reviewing the action of agencies and tribunals exercising administrative functions.

"Where a final administrative decision has been rendered and the circuit court may grant the relief that a party seeks within the context of reviewing that decision, the circuit court has no authority to entertain independent actions regarding the actions of an administrative agency.

"However, we agree with the trial court that certiorari is a wholly inappropriate vehicle for the type of relief sought by the school board in this case because the Oversight Panel was not acting in a quasi-judicial role in rejecting the contract with KAI and issuing its Directive 03-1(a) and there is no final administrative decision of the Oversight Panel for review.

"The common-law writ of certiorari provides an avenue of appeal from an action by a court or other tribunal exercising quasi-judicial functions. Quasi-judicial proceedings are designed to adjudicate disputed facts in a particular case. Quasi-judicial hearings concern agency decisions that affect a small number of persons on individual grounds based on a particular set of disputed facts that have been adjudicated.

"It is only in this type of proceeding that a sufficient record is developed in the administrative agency to allow review by a writ of certiorari. The purpose of the writ is to have the entire record of the inferior tribunal brought before the court to determine, from the record alone, that the inferior tribunal proceeded according to the applicable law.

"Therefore, generally, judicial review of an agency action can only occur where there has been a final agency determination, which usually follows some sort of adversarial proceeding involving the parties, a hearing on the controverted facts, and an ultimate disposition rendered by an impartial fact finder.

"Administrative agencies can also act in a quasi-legislative manner, which actions are not subject to review by a writ of certiorari. Quasi-legislative proceedings are designed to promulgate policy-type rules or standards and involve general facts affecting everyone.

"No individual rights are at stake in a quasi-legislative proceeding. A hearing conducted in a quasi-legislative proceeding is intended to be an information-gathering forum in pursuit of legislative facts, rather than an adversarial adjudication of the rights of the individual.
"Quasi-legislative actions of an administrative agency can be reviewed in a declaratory judgment action if it is alleged that the action is unlawful.

"The action of the Oversight Panel in rejecting the KAI contract and issuing its Directive 03-1(a) is more akin to a quasi-legislative action than it is to a quasi-judicial action. There was no adjudicatory hearing held to determine individual rights or disputed facts. Indeed, there was no hearing at all on the disputed facts raised in the school board's complaint for declaratory relief and injunction.

"Accordingly, there is an insufficient record on which a reviewing court could base a determination regarding the propriety of the Oversight Panel's action. In a case such as this, review by a writ of certiorari is wholly inappropriate.

"Our position is also supported by the definition of 'administrative decision' contained in section 3-101 of the Administrative Review Law: ' "Administrative decision" or "decision" means any decision, order or determination of any administrative agency rendered in a particular case, which affects the legal rights, duties or privileges of parties and which terminates the proceedings before the administrative agency.' 735 ILCS 5/3- 101.

"Although, as the parties agree, this statute does not apply to the case now before us, we believe that we can still gain guidance from its language.

"The rejection by the Oversight Panel of the KAI contract and the issuance of its Directive 03-1(a) neither affects the legal rights, duties or privileges of the parties, that is, the school board and/or its individual members, nor terminates the proceedings before the administrative agency.

"The proceedings before the administrative agency will only terminate when the school board complies with Directive 03-1(a) or when disciplinary actions for its failure to comply are initiated and concluded. Only at that point will there be a decision of the Oversight Panel which affects the legal rights, duties, or privileges of the parties and terminates the proceedings before the administrative agency. Only at that point will there be a record sufficient for the Circuit Court to review. Only at that point will administrative review of the Oversight Panel's final decision be appropriate and available.

"Accordingly, we conclude that the trial court did not err as a matter of law in holding that this action was not one for administrative review and in holding a de novo evidentiary trial."

The Oversight Panel also argued that the St. Clair County Circuit Court "erred in finding that the panel acted arbitrarily and capriciously in rejecting KAI as a party to the proposed contract with the school board. The parties dispute the appropriate standard of review. The Oversight Panel, clinging to its argument that this is an administrative review proceeding, argues that our review should be de novo, and the school board argues that we should review the trial court's decision for an abuse of discretion.

"Because we have found that this action is one for declaratory relief, we will apply the abuse-of-discretion standard. While the grant or denial of declaratory relief is discretionary, the trial court's exercise of discretion is not given the same deference as it is in other contexts. Instead, it is subject to an independent, searching review. Its findings of fact will not be disturbed unless they are against the manifest weight of the evidence.

"The trial court found that the Oversight Panel had acted arbitrarily and capriciously and that its actions were invalid and unenforceable. After having carefully reviewed the record on appeal, we find the trial court's findings of fact to be contrary to the manifest weight of the evidence and its decision to be an abuse of discretion.

"Agency action is arbitrary and capricious if the agency (1) relies on factors that the legislature did not intend for the agency to consider, (2) entirely fails to consider an important aspect of the problem or (3) offers an explanation for its decision which runs counter to the evidence before the agency or which is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

"The standard is one of rationality. The scope of review is narrow and the court is not, absent a clear error of judgment, to substitute its own reasoning for that of the agency."

After reviewing the evidence, Welch concluded:

"The Oversight Panel's decision rejecting a proposed contract between the school board and KAI was not arbitrary and capricious, but was a reasoned decision based on information the panel had regarding repeated and continuing problems the district had with KAI in the past and the possibility of those problems arising in the future to the financial detriment of the school district.

"The trial court's decision to the contrary is not only against the manifest weight of the evidence but is an abuse of the trial court's discretion. Accordingly, we reverse the trial court's judgment declaring that the Oversight Panel acted arbitrarily and capriciously in rejecting the proposed contract with KAI."

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